Lebanese unit weighs on Bank of Sharjah
UAE operations generate net profit of Dh163m, up 25%
Bank of Sharjah Group yesterday announced its results for full year 2019 following nearly six month delay caused by audit dealys related to its fully owned Lebanese Subsidiary Emirates Lebanon Bank SAL (ELBank).
The bank for the first time in its history reported a consolidated net loss of Dh488 million in 2019 arising from provisions made in Lebanon on account of impairments of EL Bank resulting from sharp depreciation on the value of Lebanese Pound, sovereign debt default and some disputed provisions.
Despite the losses in Lebanese subsidiary, the bank’s UAE operations continued to generate solid profits with a net profit of Dh163 million for full year 2019, up 25 per cent compared to Dh130 million reported in 2018 year-end.
Provisions
“The Bank of Sharjah Group’s net losses last year came from provisions made on our Lebanese subsidiary, EL Bank. While a portion of it represents goodwill impairment the remaining is on provisions made on sovereign bonds and balances maintained with Banque du Liban,” Varouj Nerguizian, CEO of Bank of Sharjah told Gulf News in an interview.
The unrealised losses reported for 2019 represent Dh274 million goodwill impairment, out of which Dh185 million is denominated in Lebanese currency at the official LBP rate.
A major chunk of the reported Group losses constitute Dh377 million towards Expected Credit Losses (ECL) as per the IFRS 9 reporting standards on limited exposure in sovereign bonds and balances maintained with Banque du Liban (BDL), Lebanon’s central bank. Lebanon defaulted on its sovereign bonds in March this year.
The provisions made on expected credit losses from sovereign bond holdings and reserves will be amortised as per expected BDL guidelines.