Last year was one to forget for many Gulf investment banks as asset values collapsed and investments soured. Shuaa Capital is one of them. The largest investment bank in the UAE will be glad to see the back of a year in which its net loss was Dh529.8 million. An optimistic take on the results would note that its latest annual loss was actually smaller than in 2008, when it was Dh889.6m, and its fourth-quarter loss was also less by comparison.
The market, however, took a different view. The share price fell 7.4 per cent yesterday to Dh1.24, its biggest drop in more than two months, after Shuaa announced its full-year results on Saturday. "There is nothing to point to any short-term catalyst to drive Shuaa Capital's stock higher," said Ali Khan, the managing director at Arqaam Capital in Dubai. "Its recurring revenue stream is under pressure as assets under management have dropped."
Further, Mr Khan noted, the profits generated by the relatively healthy brokerage, finance and private equity divisions are being eroded by increased write-downs and provisions. It was a turbulent year for Shuaa, with a loss in the first quarter followed by a return to profit in the second quarter, helped by returns on its investment securities. Charges for investments in associated companies dragged Shuaa to another loss in the third quarter.
The fourth-quarter loss of Dh154.3m, announced on Saturday, was an improvement on its Dh577.4m loss in the same period in 2008. Other events added to the 31-year-old bank's woes last year. Shuaa became embroiled in a legal wrangle with Dubai World, the emirate's investment unit, while it also ceded a 48 per cent stake to the government-owned Dubai Banking Group. For Shuaa shareholders, however, there are some signs that the dark clouds could be clearing soon. The bank moved to bolster its cash position by Dh153m during the year and cut its short-term liabilities by Dh892.7m. The return to profitability of its brokerage and private equity segments in the latest quarter is also reason to believe this year will be better. It can hardly get much worse.