Shuaa Expects to Narrow Loss as Dubai Investment Bank Cuts Costs

Shuaa Capital PSC, the Dubai-based investment bank that posted five consecutive quarters of losses, expects to narrow loss this year as it cuts costs.

The estimated loss will be between 40 million dirhams ($11 million) and 60 million dirhams and it will be between a profit of 6 million dirhams and a loss of 18 million dirhams next year, the company said in a statement today. Shuaa posted a loss of 294 million dirhams last year, according data compiled by Bloomberg.

Shuaa, owned 48 percent by Dubai Banking Group, has moved away from retail brokerage and scaled back research operations after markets in its home base declined and losses mounted. The bank plans to increase lending to small and medium-sized businesses and high net worth individuals to improve profit margins and reduce swings in earnings, it said last month.

Third-quarter loss narrowed to 14 million dirhams from 156 million loss a year earlier, while total revenue rose to 35 million dirhams from 16 million dirhams. Expenses dropped to 48 million dirhams from 93 million dirhams.

“The third quarter results prove that we took the right decisions to reduce our cost base against the uncertain market environment, exit non-core businesses and investments, focus on liquidity management, and reduce the volatility in our asset base,” Executive Chairman Sheikh Maktoum Hasher Al Maktoum said in the statement.

Shuaa has exited retail brokerage operations in Saudi Arabia, Egypt, Jordan and Turkey and also cut jobs in its corporate functions as it seeks to return to profit. Former ABN Amro banker Colin Macdonald replaced Michael Philipp as chief executive officer in April.

“Management will seek to continue to drive down operating expenses” toward a target cost-to-income ratio of 75 percent by the end of 2014 and return on equity of 4.4 percent in 2014 and 7.5 percent in 2016, according to the statement today.

The shares gained 8.7 percent this year compared with a 20 percent advance for the benchmark DFM General Index.

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