Even though the global economy may be in slowdown mode, the UAE’s meteoric growth shows no sign of abating. A report by Bank of Sharjah (BOS) illustrates this positive trend further: high oil prices and the growth in non-oil sectors have seen a huge flood of liquidity into the region. With total GDP growth in the UAE estimated at an impressive 8.5 per cent in 2007, at 21 per cent, growth in non-oil sectors accounted for 65 per cent of the UAE’s economy.
Founded in 1973 by the Government of Sharjah, late Mubarak Al Hassawi and Banque Paribas, 20 per cent stake each. BOS was the first Bank in Sharjah to offer its shares to the public, with an initial capital of AED15 million in 1973. Banque Paribas, one of Europe’s top financial organisations, remained a shareholder and source of advice from the beginning until 2002.
The Management always followed a conservative policy and concentrates on corporate banking and investments, including project finance, structured and IPO lending, Private Banking, and SME banking.
Thanks to sound strategic planning, today BOS is at the forefront of new developments and opportunities as it has been since the beginning. Through steady and successful expansion, the BOS now has branches in Abu Dhabi as well as Dubai, and more recently has started operations in Al Ain in 2007. Offering a wide portfolio of commercial, investments, retail and private banking solutions.
The departure of Banque Paibas has by no means hindered the growth of BOS. “Bank of Sharjah has performed consistently well over the past decade,” offers general manager, Varouj Nerguizian. “Net profits for 2007 were AED404 million - an increase of 26 per cent compared to AED320 million in 2006. The Bank also registered an additional profit of AED56 million in shareholder’s equity, up 10 per cent from the year before.” Total assets grew by 29 per cent to AED10.8 billion in 2007, from AED 8.3 billion the previous year.
For the benefit of shareholders, the Bank split the nominal value of each share, first to AED10 in 1999, then to AED1 in 2003. In 2004, BOS shares were listed on the Abu Dhabi securities market.
New avenues
In the meantime, BOS remains in an excellent position to reap the benefits of the multi-million dollar infrastructural developments by financing the comprehensive development of infrastructure in the Emirate of Sharjah.
The expansion of Sharjah Airport, infrastructural road developments estimated at AED1.5 billion, and the Hamrya power plant desalination project, the first phase of which is valued at AED560 million. Aimed at both business investors and tourism is Sharjah Marina, a development of freehold projects, hotels and restaurants, at a cost of AED15 billion.
“Our expansion initiative falls within the Bank’s strategy to tap into growing UAE markets and support our clients’ activities,” Nerguizian continues. “As a result, the Bank has evolved to becoming the largest financial institution in Sharjah, in terms of both capital and equity.” It is also the only bank in Sharjah to receive a top rating from Fitch, an international rating agency. The Fitch assessment measures aspects such as financial performance, sustained growth, asset quality, liquidity and asset capitalisation.
BOS aims to stay primarily within the corporate banking segment, investment and private banking, and intends to gradually build its franchise throughout the Middle East region and chose Lebanon as a platform for the future Levant operations.
As to investments Bank of Sharjah invests in strategic segments such as Oil and Gas, Telecommunication, Real Estate and Financial Services.
In January 2008, Dubai’s Real Estate Regulation Authority (RERA) authorised Bank of Sharjah to operate Escrow accounts (funds deposited under the trust of a neutral third party) for property developers registered with RERA. Escrow legislation aims to curb real estate malpractices and offer greater transparency, providing both buyers and developers peace of mind in their property transactions.
Looking to the future, continued expansion remains high on the agenda. In July 2007, the Bank acquired the Lebanese Banque de la Bekaa SAL, providing it with the license to continue its wide range of banking activities in Lebanon. The transaction represents Bank of Sharjah’s first significant banking acquisition outside its home market. The Bank is in the process of acquiring the operations of Banque Nationale de Paris Intercontinentale, Beirut which will be finalized during 2008.
“This will be instrumental in the bank building and strengthening its franchise throughout the Middle East - and our continued expansion from thereon”, asserts Nerguzian.
Generating growth
In March 2006 BOS was the first in the UAE to issue 500 million convertible bonds at a nominal value of AED1. On maturity in March 2008, the bonds were transferred into shares by paying a premium of AED2 per share.
On 17 March 2008, 395 bondholders converted their bonds into shares. A total of 487,472,086 bonds, this represented 97.5% of bonds originally issued. The capital of the Bank after the conversion stands at AED1,737,472,086, excluding the AED12,527,914 worth of bonds not converted.
Through this successful conversion, the Bank’s total equity has reached AED3.5 billion, positioning Bank of Sharjah among the UAE’s best performing financial institutions. The new equity will further support the Bank’s expansion plans and help its organic growth while maintaining its significant capital base.
Since its inception Bank of Sharjah has delivered extremely high cash returns to its shareholders, says Ahmed Abdulla Al Noman, chairman of the board, and every cash capital contribution inclusive of premiums has been returned to shareholders within a very short span of three years.