x Abu Dhabi, UAEMonday 22 January 2018

Shuaa Capital to cut more jobs

Shuaa Capital prepares for "significant" job losses as it overhauls its brokerage division and bad debts rise.

Shuua Capital announced losses for the third quarter of Dh156.2 million (US$42.5m) on Thursday, down from a profit of Dh190,000 during the same period last year. Andrew Parsons / Bloomberg News
Shuua Capital announced losses for the third quarter of Dh156.2 million (US$42.5m) on Thursday, down from a profit of Dh190,000 during the same period last year. Andrew Parsons / Bloomberg News

Shuaa Capital says it will axe more jobs and shrink its brokerage business.

The news sent the shares of the country's biggest investment bank tumbling to an eight-year low.

The bank, which has not made a yearly profit since 2007, said it was seeking "a recalibration of budgets and a significant headcount reduction" at its underperforming brokerage division.

The share price of the company, which is based in Dubai, fell 7.3 per cent to 69 filson the Dubai Financial Market.

The investment bank on Thursday announced a third-quarter loss of Dh156.2 million (US$42.5m), down from a profit of Dh190,000 for the same period last year.

"Shuaa Securities' retail business has been running at a net loss for the past two years," the bank said.

"Shuaa Capital's board of directors has resolved and will seek approval from regulators to implement its strategic plan to shift away from retail brokerage and focus predominantly on serving institutional clients and high-net worth individuals."

The bank did not disclose how many of its 312 employees face redundancy. But the layoffs are the second round of cuts at Shuaa Capital this year, after 39 job losses, or about 10 per cent of its workforce, announced in May.

Redundancies have mounted in the UAE's financial services sector this year, even after Dubai cemented its position as the Gulf's financial services hub as international lenders withdrew from Bahrain.

Banks including Deutsche Bank, Credit Suisse and Nomura have scaled back operations in the UAE, while about half of the UAE's brokerages have ceased operating in the past year.

A persistent slump in trading on the Emirates' stock exchanges has had a chilling effect on brokerages in the UAE, with Rasmala Investment Bank and HSBC Middle East both closing their retail brokerages this year to target institutional investors instead.

The volume of trading on the Dubai Financial Market in October was just 3.8 per cent of the peak volume reached during November 2007.

The change of tack at Shuaa Capital comes as Emirates NBD, the UAE's biggest bank, consolidates its investment banking and financial advisory divisions under its Emirates NBD Capital unit.

A company spokesman confirmed the move, adding that the bank had appointed Mohammed Wajid Kamran, its general manager of international banking and debt capital markets, to head the unit.However, he declined to comment on whether any job losses were planned as part of the move.

Shuaa Capital last delayed the release of its third-quarter financial statements, citing the effects of the bank's strategic decisions on its financial statements.

It reported a fall in revenue of 68.4 per cent to Dh16.3m, while bad-debt provisions totalling Dh34.5m pushed operating expenses 61 per cent higher to Dh93.2m. Shuaa Capital also reported losses on investments worth Dh79.2m.

The bank, which has reported a loss for eight of the past 12 quarters, replaced its chairman in April in an attempt to reverse its fortunes.

The move was followed by the appointment last month of Michael Philipp as chief executive. Mr Philipp is a former head of Credit Suisse's business in Europe, the Middle East and Africa.

"We are already working on streamlining our operating model to significantly lower our cost base and [on] a number of related initiatives, including the repositioning of underperforming businesses," Mr Philipp said.

Shuaa Capital is 48.3 per cent indirectly owned by Dubai Holding, the investment conglomerate owned by Sheikh Mohammed bin Rashid, the Vice President of the UAE and Ruler of Dubai.