Finance House buying CAPM to fast-track banking licence

Finance House is set to take full control of CAPM Investment in a move that should fast-track the bank's efforts to secure an investment banking licence.

CAPM, an asset management, investment banking and brokerage firm based in Abu Dhabi, wound down last year amid sluggish markets and faltering deal volumes.

Finance House, an Abu Dhabi-listed bank, was able to win the support of CAPM's shareholders for a sale with an agreement to pay a premium of 5 to 10 per cent of the company's current value, said Yasser Geissah, a former chief executive of CAPM.

"They have submitted an offer to the shareholders, which was discussed at the general assembly," he said. "We took the decision to wind down and sell everything last year and we discussed this with the shareholders."

The absence of a firmer recovery and "lack of clarity in the financial market" had convinced the company's management that it was better to sell, Mr Geissah added.

"The management and the board decided to stop the operations and cut their losses," he said. "We didn't want to incur more losses waiting for the market to recover."

The deal will allow the bank to pursue wealth management, asset management and investment banking advisory functions, said a person with knowledge of the matter. Finance House is said to have been in discussion with the Central Bank previously about being granted an investment banking licence.

"The company doesn't have employees," the person said. "It was just buying the licence, really."

CAPM received two offers for its business, the person added, stopping short of naming the other bidder. A Finance House spokesman declined to comment on the deal.

Finance House had a net profit of Dh63.8 million (US$17.3m) last year, a decline of 44.5 per cent from 2010.

The company's shares fell 3.8 per cent in trading yesterday to Dh3.27 each.

The UAE's financial markets have struggled to recover from the aftermath of the global downturn and Dubai's debt crisis of 2009-2010.

Traded values plunged to a fraction of their pre-crisis level, forcing about half of the UAE's brokerages out of business last year and convincing many international banks to wind down their brokerage divisions.

Meanwhile, the Dubai Financial Market General Index lost 79.3 per cent of its value from peak to trough.

However, since bottoming out in January, the UAE's indexes have staged a sharp recovery, with Dubai's market up 27.5 per cent.

Investment banking has also staged a recovery in the region, with Gulf debt sales during the first quarter double the amount raised during the corresponding period a year earlier, according to data from Bloomberg.

Bond sales worth $11.9bn so far this year compare with $6.3bn last year.

As market volumes show signs of recovery, ADS Securities, a forex and commodity trading house based in Abu Dhabi, said it had applied for a stock trading licence.

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