Dubai Shuaa Capital plans to cut a further 55 jobs in the first half of 2012 after its full-year net loss widened amid a difficult economic backdrop for local brokerages.
The Dubai-based investment bank made a net loss of Dh293.8 million for 2011, a 31.3 per cent increase over its 2010 loss of Dh223.7 million. Shuaa said the new wave of redundancies would primarily affect employees working in its retail brokerage division.
The company has already closed its retail operations in Jordan and Egypt, as well as downsizing in Riyadh and Abu Dhabi. Shuaa's net loss, however, did narrow in the fourth quarter to Dh111.9 million from Dh186.7 million in the year-before period. The bank's share price gained 13.42 per cent to Dh0.769 at the close on the Dubai Financial Market (DFM) Monday.
New management
"It is not a surprise that more job cuts are in the offing. Shuaa have a new management structure in place so, if anything, I probably expected more cleaning of the house," Robert McKinnon, chief executive officer at ASAS Capital, said.
"The brokerage industry is following the same trend as it has done for the past 24 months. Even if volumes were maintained at current levels — 410 million shares were traded yesterday — there is still only room for around 10 brokers in the UAE; volumes would have to increase around five to eight times what they are now, if not more, for all the brokerages in the country to survive," he added.
McKinnon says only commercial banks with retail operations, such as Shuaa, are likely to survive the current economic climate with dozens of brokerages having closed their doors or reduced their headcount in recent months.
Offsetting losses
"Commercial lenders can absorb the costs involved with other portions of their business. They will continue to offer a brokerage service as they look to gather assets but unlike independent brokerages they do not have to make money from that product line to survive," McKinnon said.
Dubai's benchmark index slumped 17 per cent in 2011 compared with a 20 per cent drop in the MSCI Emerging Markets Index. Also, the number of "active and functioning" brokerages in the UAE has dropped 42 per cent since the end of 2008 to 57, according to the Securities and Commodities Authority.
Solid balance sheet
Shuaa said yesterday its balance sheet remained solid with total assets of Dh1.6 billion, including Dh340.2 million in cash, adding a large portion of its 2011 loss — Dh115.1 million — was due to restructuring costs related to its brokerage.
"In a year of ongoing turmoil, our small and medium enterprise fin-ance business remained highly profitable," Michael Philipp, Shuaa's CEO, said in a statement to the DFM.
"The realigned asset management business reported a profit, an increase in assets under management and generated outperformance for our clients. We have materially reduced our overall cost run-rate and our portfolio risk to a level that makes us less vulnerable to market volatility and allows us to prosper when markets improve," he added.
