Shuaa Capital, the largest domestic investment bank in the Emirates, posted a net loss of Dh577.4 million (US$157.2m) in the last three months of last year, according to a statement by the firm yesterday. This compares with a net profit of Dh213m during the same reporting period last year. Combined with losses booked in previous quarters, the result in the last quarter of the year brought the annual net loss to Dh948.5m.
"2008 was a challenging year for the financial services sector worldwide, for the regional capital markets and for Shuaa Capital," said Majid Saif al Ghurair, the chairman of Shuaa. "We witnessed major dislocations in the second half of 2008 that resulted in a significant drop in income for the company. As a result, we have taken significant steps to reduce our exposure to the market and we have realigned our base in core business lines to mitigate these risks in the future."
He added that the firm had marked down assets "as prudently as possible" and taken steps to cut costs "across all areas as challenging market conditions persist". During the past four months, the firm has cut staff by 9 per cent, or 21 people, and struggled to settle a dispute over a convertible bond that would entitle government-affiliated Dubai Group to a 32 per cent equity stake in the company. "While we have shrunk by one third in 2008, erasing significant gains made over the past few years, we remain well capitalised and well placed to navigate our way through these difficult times," said Iyad Duwaji, the chief executive of Shuaa, emphasising that the company was solvent, cash flow was positive in its core businesses and that the firm held a healthy cash position.
"The losses we are reporting are book losses that resulted from the sharp fall in asset prices over the past few months," he added. The earnings report states that the "reduction in earnings experienced by [Shuaa] primarily represents investment in write-downs related to the year ended Dec 31 2008 and are unlikely to be repeated in future years". The firm suffered a Dh284m mark-to-market reduction and took Dh153m in impairment charges and its share of operating losses from its investments in associate companies, according to the report. The earnings report also stated that the firm's investment banking division "was deeply impacted by the challenging market conditions", with operating income declining Dh21m and the division recording a net loss of Dh5.3m.
Shuaa, which did not leverage its principal investments according to the report, plans to focus on key growth markets this year, primarily including Saudi Arabia. Before the results were announced, Shuaa shares fell 2.8 per cent on the Dubai Financial Market yesterday to close at Dh1.02, down 84.4 per cent on a year ago. @Email:firstname.lastname@example.org