Shuaa Capital, the Dubai investment bank, reported its first profit in seven quarters on a reduction in money set aside to cover bad debt at its SME financing unit as well as cost-cutting.
The bank said it registered a profit for the first three months of this year of Dh24.8 million compared with a loss of Dh27.5m in the same period last year. Shuaa last reported a profit in the second quarter of 2015.
Shuaa’s revenue for the period was Dh31.8m, down from Dh45.5m a year earlier and general and administrative expenses fell to Dh22.8m from Dh33m.
Its small and medium-sized enterprise lending arm, Gulf Finance, made a significant reduction in provisions amid write-offs and more stringent asset-backed loans. As a result, money set aside to cover bad loans fell to Dh1.9m versus Dh34m in the same period last year. The unit posted a profit of Dh8.7m in the first quarter compared to a loss of Dh11.7m in the same quarter last year.
“Shuaa Capital is steadily implementing the necessary steps to return the business to the path of sustainable profitability,” said Jassim Alseddiqi, the chairman of Shuaa and the chief executive of its biggest shareholder, Abu Dhabi Financial Group.
“We are pleased with the strong start to the year and the solid progress made to date, but we also recognise that there is still more work to do and more challenges ahead. Our focus for the coming quarters is to build on these foundations by addressing any remaining legacy issues while capturing new opportunities both in the UAE and abroad.”
Mr Alseddiqi told reporters in Dubai after the earnings were released on Tuesday that it was studying a number of acquisitions including a listed financial services firm in the GCC that he would not name. The investment bank is also about to launch a 1 billion Saudi riyals (Dh979.43bn) real estate fund, the details of which will be revealed in the coming weeks, he said. Shuaa is also intensifying efforts to boost its share of underwriting initial public offerings, a line of work that it was active in before facing financial woes that limited its activities.
The new Abu Dhabi-based owners of Shuaa Capital said in February that their strategy to breathe life into the struggling Dubai investment bank would focus on growing assets under its management, leveraging its balance sheet and increasing its business in Saudi Arabia and Egypt. It has taken big hits from Gulf Finance in recent years as the collapse in the price of oil in the summer of 2014 put pressure on the ability of SMEs to pay back debt. That led to a write-off of more than half of Gulf Finance’s lending portfolio, the chairman said.
Elsewhere outside the Gulf, Shuaa has a licence to operate in Egypt but is yet to have a presence there, and is looking at potential cross-border investment banking deals once its operations are up and running.
The Dubai Banking Group in June agreed to sell its 48.36 per cent stake in Shuaa to ADFG, an alternative investment company with US$5 billion in assets.
In March, Shuaa said it would acquire two financial services firms from one of ADFG’s units.
Its shares closed down 0.6 per cent on Tuesday on the DFM.
mkassem@thenational.ae
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