Standard Chartered still expanding, Shuaa Capital stems losses
The quarterly results of two major players in the Middle East make for interesting reading. Standard Chartered is continuing to expand its wholesale banking division in the face of tough conditions, while Shuaa Capital is still licking its wounds and cutting costs but insists the worst is over.
Standard Chartered saw bad loans in its Middle East wholesale banking unit swell to $313m for the first half of this year, from just $4m in the same period in 2008. In spite of this, income in the Middle East grew by 29% year on year, primarily driven by wholesale banking.
Within this division, the UAE drove a 79% increase in revenues for the Middle East and South Asia region. This includes financial markets, corporate advisory, lending and project and structured trade finance. Perhaps not surprisingly, operating expenses rose to $267m (a 29% increase year on year) as it continued to bolster its team and pay out bigger bonuses.
But across the group, it doesn't look great for Standard Chartered's Middle East employees, with expenses in the UAE shrinking by 4% due largely to headcount reduction.
On the face of it, Shuaa Capital's second quarter results were relatively positive. Net profit reached Dh91.7m ($24.9m), which was a 37% uptick year on year. This should, theoretically, draw a line under what has been a torrid nine months for the firm, during which it posted a Dh197.9m Q1 loss and at one point was asked to consider closing.
But the headline figure masks poor performance in most divisions. In investment banking, for instance, it posted a Dhs2.38m loss, compared to a Dhs3.55m profit in the second quarter of 2008. Year on year, profits were also down 95% in asset management, 56% in brokerage and 55% in its Gulf finance division.
Shuaa's i-banking division has a primary focus on equity capital markets, a sector which has been particularly barren this year, but the bank insists its working on some additional mandates.
It was only a stellar quarter for its private equity division (profits up 115%, to Dh4.87m on 2008) and a 27% reduction in operating expenses that seemed to flatter the results.
This focus on cost-cutting is reflected by the 21 redundancies it announced in December (or 9% of its staff) and the further 12 it laid off in March.
Shuaa's CEO, Iyad Duwaji, says the firm has "turned the corner" after three difficult quarters, but a lack of senior appointments this year suggests its unlikely to start hiring lower down the ranks any time soon.
