Dubai-based firm's investment banking, asset management, capital markets, lending and brokerage units benefited from an improvement in the UAE’s economic fortunes.
Shuaa Capital, the Dubai-based investment bank that was crippled by the financial crisis of 2008, yesterday reported a second consecutive quarterly profit for the first time in five years after its focus on lending and asset management bore fruit amid an improvement in the UAE’s economic fortunes.
Net income in the third quarter increased to Dh3.6 million compared to a loss of Dh13.9m in the same period the previous year, Shuaa said. Revenues increased 57 per cent to Dh54.8m from Dh34.9m.
The investment bank has not had an annual profit gain since 2008.
“We are encouraged to see higher quality fee and interest income generation during the quarter, which now accounts for 75 per cent of quarterly revenue,” said Sheikh Maktoum Hasher Al Maktoum, the executive chairman of Shuaa Capital. “The economic recovery in the UAE balances our revenue expectations for the year and unlocks Shuaa’s operating leverage in our market facing businesses.”
Lending to small and medium-sized enterprises (SMEs) in the Emirates and Saudi Arabia has boomed as the firm focuses on generating revenue from lending after a restructuring that closed its retail brokerage division down in 2011 amid a drought of initial public offerings and thin trading volume.
Shuaa’s loan book to SMEs almost doubled at the end of the third quarter to Dh814m from Dh495m in the same period the previous year, it said.
Shuaa’s asset management division nearly doubled its profit to Dh4.7m as investors flooded back to regional markets. Shuaa’s two main funds, Arab Gateway Fund and Emirates Gateway Fund, had outperformed their benchmarks year to date, increasing 27.3 per cent and 57.5 per cent respectively, the bank said.
The firm, which has embarked on a series of cost reductions, has reduced its cost to income ratio to 76 per cent from 134 per cent in the same period the previous year.
“We are maximising our effort to deliver a number of ongoing strategic initiatives and work streams across all aspects of the business,” Sheikh Al Maktoum said. “We will stay focused on cost control and balance sheet management and remain committed to achieving our earnings guidance for this year.”
Shares of Shuaa, which are up 64 per cent year to date, dropped 2.2 per cent yesterday to 90 fils.