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A Sept. 15, 2017 file photo of Arif Naqvi, chief executive officer of Abraaj Capital Ltd. Image Credit: Bloomberg

Dubai

Shuaa Capital recorded losses of Dh24.9 million for the first quarter of 2019 as expenses more than doubled and from its exposure to the now-bankrupt Abraaj. The losses are in comparison to Dh11.7 million in profits recorded for the same period last year.

Shuaa said its corporate division alone recorded a loss of Dh21.2 million “due to provisions relating to its legacy investment in an Abraaj-controlled fund and higher financing costs”.

The financial services firm confirmed in a statement that it is still progressing with its potential merger with Abu Dhabi Financial Group (ADFG), and that it is now going through final stages. Shuaa will then be seeking regulatory and shareholder approvals, it said. The combined entity will continue to operate as a publicly-listed company.

In late March, Shuaa said that it had commenced talks with ADFG for a possible merger, but said there was no certainty that the discussions will result in a deal. The two parties then mandated advisers to help. JP Morgan was appointed by ADFG to advise, while UBS and Linklaters were mandated to advise Shuaa, sources told “Gulf News”.

If completed, the merger will be the latest in a series of consolidations in the UAE banking industry, with the last one happening earlier this month when Abu Dhabi Commercial Bank merged with Union National Bank and then acquired Al Hilal Bank.

On Shuaa’s financial performance, Fawad Tariq Khan, the company’s CEO, said the first quarter reflected a “mixed results of the business”. “Our core operating businesses of investment banking, capital markets, and asset management continue to grow in profitability, while certain one-off provisions and higher financing costs dragged our overall results into a loss,” he said.

Shuaa’s total revenues in the quarter reached Dh55.4 million, up 67 per cent year-on-year mainly on the back of higher fees and commission income, which nearly tripled. The capital markets division saw profits of Dh2.7 million, compared to a Dh1.7 million loss in the first quarter of 2018. Its investment banking division recorded Dh1.1 million in profits, from a Dh600,000 loss a year earlier.

Asset management saw a Dh3.1 million loss from a profit of Dh4.1 million in the first quarter of last year. Shuaa said this was driven by a one-off impairment of Dh4.2 million “following a change in revenue recognition standards for performance fees”.

The lending division recorded Dh4.4 million in losses, compared to a profit of Dh2.2 million a year ago.