x Abu Dhabi, UAEWednesday 24 January 2018

Shuaa Capital announces job cuts and closes retail brokerage

Shuaa Capital announces 29 job cuts and replaces its finance director as the Dubai-based investment bank seeks to turn around its fortunes.

Shuaa Capital has cut a tenth of its workforce and replaced its finance director as the investment bank's cost-cutting plan begins.

The Dubai investment bank said it would lay off 29 of its 312-strong workforce as it closes its retail brokerage to focus on big institutional clients.

"Shuaa is determined to manage the process in a controlled manner and reduce business disruption as much as possible," the company said.

The bank also replaced Paul Kelly, its finance director, appointing Houssem ben Haj Amour, Shuaa's former head of accounting and formerly of Société Générale and Arthur Andersen, the defunct global accounting firm.

The bank's shares, which have lost 52 per cent since the start of the year, rose 3.4 per cent following the announcement, to 60 fils each.

Shuaa Capital had not until now announced details of the second round of layoffs since May. The bank reported a quarterly loss for the third quarter of Dh156.2 million (US$42.5m) last month.

The bank has not reported a full-year profit since 2007, and has lost money during eight out of the past 12 quarters.

Shuaa had been forced to change its strategy as a result of a lengthy slump in trading activity on the Emirates' exchanges, which shows little sign of ending, said Michael Philipp, the chief executive of Shuaa Capital, who was appointed in October to retool the bank's business.

"Markets have been challenging for the entire industry in 2011, and we expect conditions to be much of the same for the next few quarters," he said.

Losses from Shuaa's brokerage division alone totalled Dh38.7m in the third quarter of this year. A rising tide of bad debts also resulted in higher provisioning.

Shuaa Capital faces a tough few years as it attempts to refocus its operations, said Ankur Shah, the director of equity research at Arqaam Capital. "It'll be really tough for them to transition away from the brokerage model," he said.

Although the move towards asset management was a good idea, established private banks such as Julius Baer and Bank Sarasin-Alpen would present strong rivals to Shuaa in this market, Mr Shah added.

"To distinguish yourself, you need to build a reputation, which takes years, rather than quarters," he said.

The collapse in October of MF Global, which was discovered to have traded using at least $1.2bn of clients' money, was also making many potential customers think twice about the investment houses they work with, he added.

Middle East investment banks have lurched through the global financial crisis, with Kuwait's Global Investment House, once among the biggest in the region, finding its return to health bogged down by multiple debt restructurings.

Job cuts have taken place this year at banks including HSBC, Nomura and Barclaysas international lenders are forced to reduce their costs.

It has been a "painful time for stock markets," said the head of research at one securities company, which is also seeking to reduce staff numbers, who wished to remain anonymous.

With stockbrokers struggling to turn a profit, about half of the UAE's brokerages closed their doors in the past year alone.

HSBC Middle East and Rasmala Investment Bank both shut their retail brokerages this year.


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