(MENAFN- Khaleej Times) Investment bank Shuaa Capital aims to grow both organically and inorganically and hopes to post a Dh100 million-plus profit this year, a senior official said.
Speaking to Khaleej Times in an interview, Fawad Tariq Khan, CEO of Shuaa Capital, said the bank will continue to exit its non-core assets and focus on its core business such as investment banking, asset management and capital markets.
"Given the interconnectedness in the region, it doesn't make sense to be UAE-focused only. We decided from a strategic perspective that the UAE, Egypt and Saudi Arabia will be the primary markets for us. However, we will also continue looking at other countries as well such as Kuwait. The whole idea is to exit non-core assets, start expanding into new markets and grow both organically and inorganically," he said.
"In Kuwait, we are working to enter the market by acquiring Amwal International Investments, a publicly-listed company that has licences both from the Central Bank of Kuwait and the Capital Markets Authority [CMA]. We have received approval from the central bank and are going through approval from the CMA. Once that comes through, the intention is to launch a voluntary acquisition offer," Khan said.
Shuaa already owns a minority stake - around 8 per cent - in Amwal. Based on last week's share price, Amwal Investments' market cap was in excess of Dh150 million.
Amwal had said in a statement to the Kuwaiti bourse in January 2018 that Shuaa intended to take a 75 to 100 per cent stake in the Kuwaiti investment bank. Moreover, the Dubai-listed company is also in talks with the regulator in Bahrain to offer its market-making service there.
Six mandates
The Dubai-based investment bank has a mandate of up to five to six potential initial public offerings (IPOs), Khan said, adding that there will be consolidation in the GCC insurance sector, given the number of insurance companies.
"We are working on the listing of Etihad Reit. We are also working with five to six other clients that may pursue IPOs or other capital market activities," he added.
"I think we are also going to see a lot more cross-border mergers and acquisitions [M & As] because the UAE might have an expertise in one area but Saudi Arabia in a different area, so you may start seeing more cross border M & A activity. That's why we chose to be in the UAE and grow to Saudi and Egypt."
Asset-backed lending
Despite an increase in revenues, Shuaa Capital's profit in the first quarter of 2018 fell from Dh24.8 million in Q1 2017 to Dh11.7 million. Khan hopes that the bank will exceed last year's Dh74 million profit and post over Dh100 million profit in 2018.
Going forward, the investment bank will focus on high quality revenue that has lower provisions and the lending book will depend only on asset-backed lending.
"Our intention is to exceed last year's target. When comparing Q1 2017 with Q1 2018, Q1 2017 was the first quarter when a new management had come in and there were a lot of exits and one-offs that we were able to achieve in terms of write-backs. Another important thing is that when you look at our revenue side, our interest income in Q1 2018 of Dh8 million was less than interest income in Q1 2017. That is because Shuaa had a large lending book. As we were getting repaid, rather than redeploying it to go for more interest income, we focused heavily on deleveraging. Last year, we repaid almost Dh160 million of debt. By next month, we will not have any bank debt outstanding," Khan said.
"So, that massive deleveraging was part of strategy because I wanted to ensure that we have sufficient cash flow for Shuaa's expansion. We have repaid the debt taken against the company's lending book. Shuaa's lending book will purely focus on asset-backed lending. In the past, we were a doing a lot of SME lending. We would rather take high quality revenues that have lower provisions going forward. That is one of the reasons that you saw a change in Q1 2018 profit versus Q1 2017 profit," he added.
He added that the changes and growth strategy introduced last year are coming to fruition this year. "In 2018, our intention is to beat what we had last year."
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