Shuaa Capital, the UAE's largest investment bank by market capitalisation, announced a decline in net profits of nearly 10 per cent for the three months ending in June, citing deteriorating global economic conditions and rising spending on personnel and business expansion. Shuaa, founded in Dubai in 1979, reported declines in net profit in four of its seven business lines for the first quarter of this financial year. Investment banking profits fell 27.6 per cent from the same quarter last year, principal investments recorded a 116.1 per cent drop, and the bank's corporate division reported a 520 per cent slide in profits.
The bank's asset management division, meanwhile, was its brightest spot, notching a rise in net profits of 3,507 per cent, to Dh50.5 million (US$13.74m), from the same quarter a year ago, as fees collected and assets under management surged. "The GCC remains one of the sweet spots in the world for global investors," said Oliver Schutzmann, Shuaa's head of investor relations. "Opportunities elsewhere have dried up, and investors are looking to the GCC to invest. They need someone who has a long track record, and we have that."
At the core of Shuaa's asset management division is a series of "gateway" funds through which investors can gain exposure to the broad GCC and to markets in individual countries. These funds, led by the company's flagship Arab Gateway Fund, have proven popular - especially among foreign institutional investors. These investors account for about 70 per cent of the Dh2.67 billion the division has under management, which is part of an overall asset pool of Dh6.7bn that has grown 121.8 per cent in the past year.
Growth for operating income was also strong, with total figures increasing nearly 22 per cent, to Dh176.6m from the same quarter a year ago. But profits from that income were dragged down by declining global financial markets and spending on Shuaa's ambitious expansion plans. The company has increased its staff in recent months from 257 to 498, both by acquiring businesses and hiring new personnel. It launched a subsidiary in Saudi Arabia earlier this year, and acquired brokerage businesses in Egypt, Jordan, Kuwait and Turkey. In February, it acquired a 20 per cent stake in Orion Holding, a financial services firm, and took charge of some of its brokerage business in the UAE in a deal worth more than $50m (Dh184m).
"I am pleased with our overall performance, given difficult market conditions regionally and globally," Iyad Duwaji, Shuaa's chief executive, said yesterday. "We remain confident that fiscal [year] 2008 will be another successful year for Shuaa Capital." Shares of Shuaa, which are listed on the Dubai Financial Market, ended trading yesterday at Dh6.1 a share, down 6.15 per cent for the day. Shuaa stock is down by about 30 per cent since reaching a high of Dh8.64 on June 2.