Bank of Sharjah H1 profit jumps 35%, but Lebanon sale remains unresolved

A stronger first half for Bank of Sharjah

Bank of Sharjah delivered a notably stronger set of first-half numbers, with net profit rising 35% year on year to AED 361.9 million for the six months ended 30 June 2026.

The main driver was the core lending operation. Net interest income - the difference between interest earned and interest paid - climbed 45% to AED 464.7 million. That more than offset weaker fee, foreign exchange and investment income.

The balance sheet also expanded quickly. Net loans and advances reached AED 36.50 billion, up 20% from the end of 2025, while total assets increased 10% to AED 53.21 billion.

That growth gives investors a clear earnings story. However, it also raises questions about funding, concentration and how asset quality develops after such a substantial increase in lending.

Key figures

Metric	H1 2026	H1 2025 or year-end 2025	Change
Net profit	AED 361.9 million	AED 268.3 million	Up 35%
Profit before tax	AED 393.9 million	AED 295.3 million	Up 33%
Net interest income	AED 464.7 million	AED 319.5 million	Up 45%
Operating income	AED 544.7 million	AED 453.3 million	Up 20%
Profit per share	AED 0.121	AED 0.090	Up 34%
Net loans and advances	AED 36.50 billion	AED 30.44 billion	Up 20% from year-end
Customer deposits	AED 33.45 billion	AED 31.51 billion	Up 6% from year-end
Total assets	AED 53.21 billion	AED 48.37 billion	Up 10% from year-end

The second quarter also finished strongly. Three-month net profit rose from AED 152.2 million to AED 210.8 million, an increase of around 39%.

Lending growth powers net interest income

Gross loans and advances rose to AED 38.35 billion from AED 32.29 billion at the end of December. The increase was concentrated in overdrafts and bills discounted, while commercial loans were broadly stable.

Loans to customers resident in the UAE increased to AED 33.64 billion from AED 27.82 billion. Non-resident lending rose more modestly to AED 4.71 billion.

The higher loan book helped lift interest income by 14% to AED 1.32 billion. Interest expense increased by just 2% to AED 853.5 million, allowing net interest income to grow much faster than either line individually.

This is the clearest positive in the announcement. Bank profitability can be particularly sensitive to the spread between lending income and funding costs, and Bank of Sharjah produced a much wider net contribution during the period.

There was also some help from credit provisions. The bank recorded an AED 8.1 million net impairment reversal, compared with a charge of AED 16.1 million in the same period last year. An impairment reversal means the bank reduced previously recognised provisions for expected credit losses.

Management said no material deterioration in asset quality had been observed following reviews of sectors including hospitality, real estate, trading, contracting and logistics. It also reported no material business continuity disruption during the period.

Not every income line improved

The headline profit increase was strong, but the supporting revenue mix was uneven.

Net fee and commission income fell 37% to AED 48.1 million. Exchange profit declined 28% to AED 12.9 million, while investment income dropped 62% to AED 15.1 million.

Personnel expenses increased 20% to AED 94.7 million, although total operating income grew quickly enough to absorb the higher cost base. Other expenses rose slightly to AED 54.0 million.

Commercial banking generated net profit of AED 308.0 million, up sharply from AED 129.9 million. By contrast, investment and treasury profit fell to AED 96.1 million from AED 176.1 million. The result was therefore increasingly dependent on commercial banking and net interest income rather than investment returns.

Funding growth lagged lending growth

Customer deposits rose 6% to AED 33.45 billion, but this was considerably slower than the 20% increase in net lending.

The gap was supported partly by higher wholesale funding. Deposits and balances due to banks increased 33% to AED 4.85 billion. Repo borrowings rose 71% to AED 3.40 billion. A repo, or repurchase agreement, is borrowing secured against financial assets, usually bonds.

Bank of Sharjah had pledged bonds with a fair value of AED 3.88 billion against repo borrowings, compared with AED 2.23 billion at the end of 2025.

Cash used in operating activities was AED 2.93 billion, primarily reflecting the AED 6.06 billion movement in loans and advances. Cash and cash equivalents ended the period at AED 209.3 million, down from AED 2.70 billion at the start of the year. The bank's cash-equivalent calculation includes deductions for certain bank deposits and repo borrowings, so this should not be read in isolation as a conventional cash balance.

Even so, the combination of rapid loan growth and increased wholesale borrowing is worth monitoring. Investors will want to see whether customer deposits catch up and whether lending growth continues without weakening credit quality.

Auditor highlights the unresolved Lebanon disposal

The largest specific uncertainty remains Emirates Lebanon Bank S.A.L., Bank of Sharjah's wholly owned Lebanese subsidiary.

The business remains classified as held for sale at AED 844.8 million. It has been in this category since April 2023, meaning the planned disposal has already taken much longer than the usual one-year period contemplated by the accounting standard.

Grant Thornton said geopolitical conditions meant the sale had not been completed and that it was impractical to obtain an updated valuation as at 30 June 2026. The auditor included an emphasis of matter, drawing attention to the issue, but did not modify its review conclusion.

Management reported gradual improvement in Lebanon's political and economic environment and said multiple credible potential buyers had signed confidentiality agreements and remained in structured discussions. However, completion is still subject to regulatory approvals and market conditions. A timetable and expected sale proceeds were not disclosed.

The subsidiary's results were considered immaterial and were not included in the interim financial statements.

For investors, the positive is that discussions are continuing and management remains committed to a disposal. The negative is that the valuation cannot currently be refreshed and there is still no certainty over timing or completion.

Other points investors should watch

Related-party loans and advances increased to AED 10.63 billion from AED 5.11 billion at the end of 2025. Related-party cash deposits also rose to AED 12.12 billion, while related-party investments in securities increased to AED 5.66 billion.

These figures do not by themselves establish a problem, but the scale and rapid movement make the related-party disclosures important to follow in future reports.

Shareholders approved an AED 195 million cash dividend for the 2025 financial year, equal to 6.5% of paid-up share capital. An interim dividend or updated dividend policy was not disclosed.

Management also provided no explicit profit, lending or margin guidance for the full year.

The investor takeaway

Bank of Sharjah's first half showed strong momentum where it matters most for a commercial bank. Net interest income expanded sharply, profit rose by more than a third and the impairment result moved from a charge to a reversal.

The trade-off is a faster-growing balance sheet funded partly through higher bank and repo borrowing. Fee and investment income weakened, related-party balances increased substantially and the Lebanese disposal remains unresolved.

The next results will need to show whether the bank can preserve its stronger interest earnings while keeping funding and credit risks under control. Progress on the Lebanon sale would also remove a long-running source of accounting uncertainty, but no completion date has been disclosed.