Lebanon’s provisions destroy the Bank of Sharjah group’s profits in the first quarter

Sharjah: Bank of Sharjah Group reported a consolidated net profit of Dh89 million in the first quarter before making hyperinflationary provisions for its Lebanon subsidiary Emirates Lebanon Bank SAA (ELBank).

Lebanon has been witnessing unprecedented events resulting from political and economic unrest since October 17, 2019.

While reporting on the Q1 2020 outcome, the bank had to recalculate the accounts of its Lebanese subsidiary, taking into account the hyperinflationary conditions prevailing in Lebanon.

According to the International Monetary Fund’s (IMF) inflation forecasts, the Lebanese economy is considered hyperinflationary for the application of IAS 29. [International Accounting Standards] and for the translation of foreign operations in accordance with IAS 21.

In line with the above accounting standards, the bank applied Sh211 million as a hyperinflation effect and recognized a consolidated net loss of Dh122 million and a total comprehensive loss of Dh111 million against a positive equity component of Dh265 million.

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Resilient UAE operations

The bank said that the UAE operations, despite the challenging environment, are showing resilient performance supported by the solid fundamentals of the Bank.

The Group’s balance sheet remains strong, with total assets at the end of the first quarter of 2021 at Dh37,09 billion compared to Dh36,14 billion at the end of 2020.

The Group continues to enjoy high asset quality and other robust benchmarks that remain healthy due to the strict adherence to a disciplined and focused approach to lending, recovery and financing.

The Group continues to enjoy comfortable liquidity and a solid capital position with a customer deposit base of D 24.05 billion at the end of the first quarter of 2021, compared to 23.67 billion DH at the end of 2020.

Lebanon misery

Bank of Shajah Group fully complies with circular no. 13129 of Banque du Liban (BDL), dated 4 November 2019, with the call for the 20 percent increase in the equity of Lebanese banks before 30 June 2020. However, the audit of accounts must be done by ELBank, the earnings are significant erosion adapted for the loss of purchasing power of Lebanese pound.

The non-monetary items of the balance sheet, income statement, statement of other comprehensive income and cash flow statement, ELBank, are also adjusted for inflation.