DUABI: Dubai-based Shuaa Capital, the investment bank undergoing a broad restructuring, is expanding its profitable credit finance business Gulf Finance Corp (GFC) into Saudi Arabia and may offer a stake in the unit to new investors.
"It is the only business that makes money," Chief Executive Michael Philipp said in an interview on Tuesday.
"We are starting Saudi immediately. The investment will come from outside shareholders. I can bring brand new money at the Abu Dhabi and Saudi level. It is probably hundreds of millions of dollars," Philipp said.
The company, which helped float ports operator DP World several years ago, is setting up a sharia-compliant credit or lending business in Saudi Arabia based on the UAE model and plans to build an overall lending platform in the Gulf region, Philipp said.
Gulf Finance, which offers credit and financing for small and medium sized enterprises in commercial and consumer markets, contributed a net profit of 10.6 million dirhams ($2.89 million) in the third quarter last year, compared to 6.5 million dirhams in Q3 2010.
Shuaa named former Credit Suisse banker Michael Philipp as its new chief executive in October, replacing Sameer Al Ansari. Philipp is shifting the bank’s focus away from retail brokerage to institutional clients and SME credit financing.
Shuaa Capital doesn’t expect major investment writedowns in the fourth quarter of 2011 and later in 2012, its chairman said.
"We were prudent to take write downs in Q3 so there will be no overhangs in 2012," Sheikh Maktoum bin Hasher Al Maktoum told Reuters at the interview.
"There could be some minor write downs in Q4 but they’re negligible," he added.
Shuaa swung to a third-quarter net loss of 156 million dirhams ($43 million) as slumping global markets hit volumes and forced the investment bank into provisions and asset revaluations.
One of the Arab world’s largest investment banks and once a symbol of the sector’s potential in the region, Shuaa was hit by the 2008 global financial downturn, with asset impairments erasing profits. Its stock has fallen 63 percent in the last year.
Shuaa’s chairman ruled out any plans to increase the capital of the company or delist shares from the Dubai financial market.
"We are over capitalized. We have $350 million of cash. What do you need more capital for?" he said.
"There are no plans to delist. It’s not even on the table. We have nothing to hide."
Shuaa, which fired close to 60 employees by the end of December, plans to lay off another 70 with the majority relating to the retail brokerage business, bringing down overall staff strength to around 100. That number will exclude 80 employees at its GFC unit, Philipp said.
"We should go down 130 people and hire 25-30 people client facing people at a later stage," he said, adding that the company will retain an institutional brokerage service.
"Our worst performing business is the retail brokerage business. We have to get rid of it," Philipp said.
Shuaa Capital had said last month that the entire cost-cutting program, which will take weeks to complete, will have a "significant" positive impact on its profits going forward.
"The decision has been made, there’s no thinking about it," Philipp said.