x Abu Dhabi, UAEFriday 28 July 2017

Back to black for Shuaa Capital for first time in five quarters

After a tough period, the UAE financial giant is profitable again and looking to push on after suffering large investment losses and other setbacks over the past two years.

Shuaa Capital, the UAE's largest investment bank, swung back to profit in the first quarter after reporting losses in four of the last five quarters. The turnaround came as the bank pledged a new beginning after suffering large investment losses and other setbacks over the past two years.

"We have an optimistic outlook going into the second quarter," said David Deards, the company's chief financial officer. The bank's Dh19.5 million (US$5.3m) profit is a turnaround from a Dh202.2m loss in the first three months of last year. Profits were boosted by the recovery of Dh37.7m from its "legacy portfolio", which included "gains from its property book and liquid funds", Mr Deards said. The bank said its asset management activities had improved "noticeably" and earned Dh8.3m, against an Dh11.2m loss in the same period a year earlier.

The Dh27.9m in fees that Shuaa earned in the first three months was flat from a year earlier. Ali Khan, a director at Arqaam Capital, an investment bank in Dubai, said: "It is very welcome to see the bank back in the black. But remember, a Dh20m profit is not really significant enough to change your view on the sector, let alone on the bank. The IPO [initial public offering] window has to open up again for them to make money from underwriting and other corporate deals," he said.

Mergers and acquisition activities, however, remained subdued. The bank earned Dh500,000, against a loss of Dh5.2m in the same quarter last year. Sameer al Ansari, the chief executive of Shuaa, said the bank's first IPO this year "is still on target and we are hoping to make an announcement in the next couple of weeks. Many companies across the UAE are looking at IPOs." In March, he said the bank had mandates for three IPOs, several mergers and other deals.

Mr Deards said he was hopeful the bank would continue to "successfully wind down its legacy portfolio". Last year, the bank was severely hurt by investment losses. It lost Dh530m on the back of investment impairment charges of Dh312m and provisions of Dh210m. The large investment write-downs came on top of previous setbacks including a $1m fine for alleged trading irregularities and a drawn-out wrangle over convertible bonds that resulted in the loss of some of the bank's independence.

Dubai Banking Group, a financial arm of the Government-owned Dubai Holding, is now the bank's single largest shareholder. Shuaa started the year with the aim of refocusing its activities on asset and fund management, and is looking at launching three new funds this year, it said yesterday. Shuaa has also pledged to exit investments made with the bank's own capital in the next 12 to 18 months. By the end of last year, the bank had halved its proprietary portfolio to Dh1.2 billion.

Major investments left on its book include a 48 per cent stake in Kuwait's Al Kout Industrial Projects and Septech, a water treatment and desalination company. At the end of last year, the bank's liabilities stood at Dh1.15bn, of which about Dh300m was short-term bank debt. @Email:uharnischfeger@thenational.ae