Shuaa Capital returns to profit

Shuaa Capital, the UAE's largest investment bank, returned to profit with a 37 per cent rise in second-quarter net income.

Shuaa Capital, the UAE's largest investment bank, has returned to profit with a 37 per cent rise in second-quarter net income helped by returns on its investment securities. The earnings lifted the bank to its highest close in a month on the Dubai Financial Market yesterday. Shuaa's second-quarter net profit advanced to Dh91.7 million (US$24.9m) from Dh67.1m in the same period a year ago. "We are very pleased that we have turned the corner after three very difficult quarters," said Iyad Duwaji, the chief executive of Shuaa. "The financial industry is a cyclical one and the downturn in this cycle has been the most severe in the past 80 years. "Nonetheless, we remain positive on the outlook for our industry and Shuaa's position as a market leader." Investment banks across the Gulf region have struggled to maintain profit growth after the global financial crisis. Share prices have taken a beating since last fall, hurting investment banking activity, with some regional financial institutions defaulting on debts. In June, Shuaa ended its long dispute with the Dubai Banking Group (DBG), a company owned by the Dubai Government, over a Dh1.5 billion convertible bond. It agreed to give DBG a 48.4 per cent stake in the firm. Shuaa said its net income from investment securities advanced fivefold to Dh95.8m compared with Dh17.4m in the second quarter of last year. Fee businesses remained profitable, contributing Dh53.1m. Net operating income posted a slight decline, to Dh169.1m from Dh176.6m last year. "What is significant is that the net operating income has stabilised this quarter from a loss of Dh159.4 in the first quarter of this year," said Ali Khan, the managing director at Arqaam Capital in Dubai. "With operating income becoming stable and the DBG issue resolved, current valuations of Shuaa stocks are very attractive." Shuaa said earnings per share for the period rose to Dh0.086 from Dh0.067 in the same period last year. The bank's asset management division saw profits almost double to Dh2.6m in the second quarter of this year from Dh1.77m in the first quarter. But it was 95 per cent lower than last year when the bank reported a second-quarter profit of Dh56.6m. Shuaa's investment banking business posted a loss of Dh2.38m for the period under review, compared with a profit of Dh3.55m a year earlier. "This reflects a very quiet period for primary issuance across equity markets, the division's principal business line," it said in the statement. The firm's brokerage unit posted a profit of Dh7.2m in the second quarter, against a loss of Dh1.33m in the first quarter and a profit of Dh16.38m a year earlier. The Gulf Finance Corporation, a fully owned unit of Shuaa Capital, recorded a profit of Dh5.19m, down 55 per cent compared with Dh11.44m in the second quarter of last year. Shuaa shares rose 1.9 per cent to close at Dh1.62 yesterday. [e-mail]