Sharjah, UAE: Bank of Sharjah P.J.S.C today announced the results of the year ended 31 December 2019. The following Management Discussion and Analysis include financial results for Bank of Sharjah and its subsidiaries, together referred to as the “Group”.
The Bank’s UAE operations have generated a Net Profit of AED 163 million for 2019 against AED 130 million for 2018. However, as a result of the exceptional situation in Lebanon, unrealized non-cash provisions were called for on the Bank’s subsidiary, Emirates Lebanon Bank SAL (“ELBank”) leading to a net loss of AED 488 million.
The unrealized losses represent AED 274 million goodwill impairment, out of which AED 185 million is denominated in Lebanese Liras at the official LBP rate and AED 377 million towards Expected Credit Losses (“ECL”) on limited exposure in Sovereign Bonds and balances maintained with Banque Du Liban (“BDL”), while it is expected that this ECL will be amortized as per expected BDL guidelines, over five to ten years with effect from 2020 onwards and depending on compliance with Circular No. 13129, dated 4 November 2019, calling for the increase by 20% of the equity of Lebanese banks prior to 30 June 2020. It should be noted that Bank of Sharjah has complied fully with the above Circular.
By end June 2020, the LBP was trading above 6,000 to the USD and accordingly the bank has hedged its position and Q2 Group results are expected to recover around 50% of the losses imposed as at 31 December 2019.
Based on the above, we believe that the attention of our shareholders and market participants should be drawn to the change in market conditions in Lebanon and the expected issuance of a circular by BDL to have ECL constituted starting 2020 and over five years. Goodwill impairment has been hedged in Q2 2020 benefiting from the significant decline of the local currency against the USD.
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© Press Release 2020
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