Bank of Sharjah posts slide in net profits

What's Down: Bank of Sharjah's profits fall and its management warn of a challenging year, even as rival lenders in the northern emirates race ahead.

Bank of Sharjah reported a sharp fall in net profits in the first quarter and warned of a "challenging" year ahead as it set aside further provisions to cover bad debts.

One of the biggest banks in the Northern Emirates, the bank's profits fell 25.4 per cent to Dh56.7 million compared with the same period last year.

"In a challenging environment, the bank considered it prudent to raise further general provisions to meet the unexpected, starting from the first quarter of the year rather than waiting for year-end results," said Varouj Nerguizian, the bank's executive director and general manager.

Banks in the Northern Emirates that escaped the impact of Dubai's debt crisis have attempted aggressive expansions recently.

Lenders including RAKBank, National Bank of Fujairah and the rival lender United Arab Bank in Sharjah have all grabbed market share from Dubai's banks, which are still suffering after the crisis of 2009 left them to grapple with a mountain of bad debts.

But although some lenders outside Dubai and Abu Dhabi have been able to capitalise on the weakness of bigger banks with new loans, Bank of Sharjah reported modest lending growth of 2.3 per cent during the quarter to Dh12.3bn. That is more than can be said for some banks in Dubai that have sold loan books to shrink their balance sheets rapidly, but a far cry from the 12.1 per cent growth recorded during the quarter at United Arab Bank, which missed out on Dubai's boom.

Bank of Sharjah, which has reported a slide in profits for each of the past three years, tripled charges from bad debts during the quarter to Dh60.1m, the sixth consecutive quarter of rising provisions.

Despite the lower bottom line, the bank's operating profits improved, with investment income - typically considered to be a one-off - of Dh9.8m up from a loss of Dh3.7m last year. Bank of Sharjah's shares were unchanged in trading yesterday, having fallen 18.3 per cent since the start of the year to Dh1.60 each.

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