What Shuaa Capital's results tell us about the state of hiring in the Middle East

If Shuaa Capital is generally considered a bellweather for investment banking prospects in the GCC, there are reasons for concern.

The firm's shares took a beating today after reporting its Q4 and full year results yesterday evening, posting a loss of AED223.6m for the year. This does, however, represent a huge improvement on 2009, when the bank slumped to a loss of AED529.8m.

This shouldn't come as a huge surprise. Even as recently as January this year the bank was talking about the need to rebuild its reputation after its over-extending itself before the financial crash of 2008 and a series of financial scandals, including an alleged share manipulation.

But, as a long-term major player the GCC, when Shuaa reports, the regional financial sector takes note.

What does it tell us about job prospects?

Investment banking hiring is unlikely to pick up

In a nutshell, Shuaa's results demonstrate that, despite some improvement, investment banking activity remains subdued in the region. It was in the red by AED3.2m, which is an improvement on a loss of AED8.2m in 2009, but still bad.

Capital market activity remains anemic, with IPO level in particular remaining depressed throughout 2010, according to PricewaterhouseCoopers research. While the situation looks better in the debt markets, there's still little evidence that banks are looking to recruit.

Brokerage woes continue

Shuaa's securities division occupies a top five position within on most of the major regional borses, so the fact that it's posted a loss of AED10.3m (compared to a profit of AED16.6m in 2009) shows the woeful state of the brokerage market.

With trading activity weak, and fees harder to come by, the sector faces another challenging year and further redundancies could be on the cards.

Shuaa's appointment of Walid Shihabi as head of its brokerage unit in July last year signals an appetite to shake things up in the division, however.

Asset management competition is growing

Shuaa's asset management division's profits dropped from AED30.4m in 2009 AED5.1m this year, with the firm battling investor redemptions throughout 2010. It did, however, point to a renewed interest in the final quarter, and some recent moves by international firms in the region suggest the sector is growing.

Russell Investments yesterday unveiled plans to set up an office in Dubai, and this follows a similar move by T. Rowe Price in January and recent hires by Franklin Templeton Investments, Emirates NBD and the National Bank of Abu Dhabi.

As international firms expand their regional footprint, expect opportunities to emerge.

Private equity is looking slightly better

Shuaa's AED8.3m profit in its private equity division was definitely a positive, with the firm citing a significant sale of its stake in the Rotana Hotel Management Corporation.

It would be wrong, however, to suggest that the industry is out of the woods. Private equity firms are still sitting on a large amount of capital, and facing a lack of quality regional deals. Hiring may pick up this year, but it's from a very low base.

Saudi remains a hot spot

The Saudi operation of Shuaa has grown throughout 2010, and the bank says it "continues to represent a key part of the group's growth plans for 2011".

Shuaa is not alone. As we've pointed to previously, local banks are beginning to build their teams again, while expansion plans were announced by the likes of Barclays Capital, JP Morgan and Deutsche Bank in the latter part of 2010.