Dubai's Shuaa Capital swings to small profit

Strength in asset management business, cost cuts help investment bank post AED0.6m Q2 profit
Dubai's Shuaa Capital swings to small profit
By Reuters
Tue 26 Jul 2011 10:22 AM

Investment bank Shuaa Capital eked out a small second-quarter net profit on Tuesday, helped by aggressive cost cuts and strength in its asset management business.

Shuaa, which took companies like port operator DP World to the market, posted a profit of AED0.6m ($163,354.2) for the second quarter, compared with a loss of AED56.6m in the same period last year. The results included a AED27.7m of gains on other investments and cost cuts amounting to AED62.8m, it said in a statement to the bourse.

An HSBC analyst estimated that the company would post a loss of AED29m in the quarter, according to a poll by Reuters.

Shuaa's second-quarter revenues stood at AED35.7m, up from 33 million in the comparable period a year ago.

The company, one of the Gulf Arab region's largest investment banks, was hit hard by the global financial downturn as impairments related to troubled assets erased profits. Shuaa has been shedding risky assets from its investment portfolio after Dubai's property crash and asset bubble.

In the first quarter, Shuaa said it would cut 10.7 percent of its staff, or 39 jobs, to reduce costs following the regional turmoil which hit its quarterly results.

"It is reasonable to expect that with an improvement in market conditions, we will generate further momentum with our clients, build market share and start executing investment banking mandates," said Sameer Al Ansari, chief executive of Shuaa Capital.

But the company said it saw strength in the second quarter, with its asset management business posting a 48 percent increase in asset under management to AED959m as compared to AED649m in the year-ago period.

Investment banking segment remains under pressure as Shuaa's traditional strength of arranging initial public offerings have come to a virtual standstill in the region.

That division posted a loss of AED2.5m in the second quarter, although narrower than the AED2.8m loss it recorded in the same period in 2010.

In April, Shuaa said its Chief Financial Officer David Deards had resigned effective April 5.

Shuaa's shares rose 5.3 percent to AED1 in early Dubai trade. They have lost 24 percent of its value so far this year.

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