Shuaa profits dampened by Dubai stock market decline

Profits at Shuaa Capital slowed in the second quarter after Dubai equities plummeted 10 per cent during the period, affecting the lender’s proprietary investment income.

Gains from investment in Shuaa-managed funds dropped to Dh1 million in the quarter ended June 30, compared with Dh17.8m in the first quarter of this year, consolidated financial statements for the first half of the year released yesterday showed.

Sheikh Maktoum Hasher Al Maktoum, the executive chairman of Shuaa Capital, cited “the volatile operating environment towards the end of the second quarter” even as first-half net profits bounced back to Dh14.4m from a loss of Dh4.6m a year earlier.

The Dubai Financial Market General Index lost 10 per cent of its value in the second quarter after a sell-off triggered by investor concerns over the outlook of the builder Arabtec. The chief executive, Hasan Ismaik, resigned and hundreds of staff were laid off at the Dubai contracting heavyweight, which had a market capitalisation of Dh18.1 billion as of yesterday.

Revenues at Shuaa slowed to Dh52m in the quarter ended June 30, compared with Dh64m in the quarter previous. Net profit declined to Dh6.2m from Dh8.2m.

Proprietary income aside, Shuaa's underlying businesses performed well in the first half of the year as a result of increased fees and commission income from its investment banking and capital markets units, along with its lending and asset-management businesses.

“During the first six months of the year, the investment banking team worked on a number of public and private transactions, the most prominent public transaction being the US$200 million Emirates Reit initial public offering. In March, Shuaa was awarded a mandate to manage Able Logistic Group’s public share sale,” Shuaa said yesterday.

“The team continues to work on a number of high-profile mandates and is expected to realise further revenue upside from the execution of its strong deal pipeline, driven by increased market and IPO activity.”

Shuaa’s earnings report follows Bank of Sharjah, which last month revealed a decline in non-interest income in the second quarter from “unrealised revaluation losses on the investment portfolio due to the sharp declines witnessed by the UAE stock markets, exacerbated by margin trading”.

Bank of Sharjah said its “management believes that those declines are temporary, and markets will adjust during the third quarter, when operating income will resume its upwards trajectory”.

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