Dubai: Bank of Sharjah Group announced a combined net loss of 666 million dirhams for the year 2020 after allocating large allocations to its Lebanese branch Emirates Bank S.A.L.
The application of the effect of hyperinflation on the Lebanese operations in accordance with international accounting standards resulted in the bank sliding into a consolidated loss.
On application of AED 842 million as the effect of hyperinflation in addition to other discounts, the Group recognized a net loss of AED 666 million and a total comprehensive loss of AED 724 million against a positive equity component of AED 879 million.
The effect of hyperinflation
The International Monetary Fund has classified the high-inflation Lebanese economy for the purposes of applying IAS 29 and for the re-transfer of foreign operations in accordance with IAS 21 and its effects on the consolidated financial statements for the year ending December 31, 2020.
As a result, the Group was required to apply IAS 29 and IAS 21 for financial reporting in hyperinflationary economies to its subsidiary, Emirates Bank and Lebanon PJSC.
Since October 2019, the group’s operations in Lebanon have continued to record unprecedented events stemming from political and economic turmoil.
The group said it complied with Circular No. 13129 issued by the Banque du Liban on November 4, 2019, calling for a 20% increase in property rights before June 30, 2020.
Strong balance sheet
The group said the balance sheet remains strong, with total assets reaching 36.14 billion dirhams, reflecting an increase of 14 percent year-on-year and total equity of 3.17 billion dirhams, reflecting an increase of 5 percent.
The Group continues to have high asset quality and other robust metrics that remain intact as a result of a firm commitment to maintaining a structured and focused approach to lending, repayment and financing.
Liquidity remains comfortable and has a strong capital position, with a customer deposit base of 23.67 billion dirhams, which reflects an increase of 11 percent for the year, with the loan-to-deposit ratio of 82 percent at the end of 2020.