UPDATE 1-Dubai bank Shuaa to focus on lending to reverse losses

Wed Oct 3, 2012 5:34am EDT

* Says to commit half of balance sheet to credit business

* Shuaa to continue to cut costs going forward

* Investment bank expects to incur loss for 2012

* Shuaa shares have plunged 93 pct from 2008 peak (Adds details, background, chairman quotes)

By Mirna Sleiman

DUBAI, Oct 3 (Reuters) - Dubai-based investment bank Shuaa Capital will focus more on growing its lending business as part of a new strategy aimed at turning around losses which have mounted since the global financial crisis.

Shuaa, which has had three chief executives in the past year, expects to deploy half its balance sheet in the Shuaa Credit business by 2013, as it seeks to provide capital to the region's growing private sector, its executive chairman said on Wednesday.

The bank, which also runs an asset management division, is hoping that the strategy shift will return the bank to "positive territory" in 2013 and consistent profitability thereafter. It expects a loss in 2012.

"Our growth engine going forward will be Shuaa Credit. We expect revenue from credit to grow to 47 percent in 2012 and 68 percent in 2013," Sheikh Maktoum bin Hasher al-Maktoum, a member of Dubai's ruling Maktoum family, told reporters in Dubai.

One of the Arab world's largest investment banks and once a symbol of the sector's potential in the region, Shuaa is among a group of regional investment firms struggling to stay afloat after excessive debt and declining portfolios led to losses.

It has cut jobs and slashed operating costs in the wake of a sharp drop in investment banking and brokerage revenues, a mainstay for the bank during the boom years.

The investment bank's shares are down 93 percent from a 2008 peak. The stock has fallen 24 percent in the past year but is up 9.2 percent year-to-date.

"Results in 2012 won't be in the profit area but a significant improvement from previous years," Al-Maktoum said.

The company, which helped float ports operator DP World several years ago, made a second-quarter net loss of 15.9 million dirhams ($4.3 million) for the three months to June 30, as it continued its restructuring efforts and booked one-off costs associated with the process.

Shuaa expects its cash outflows to fall to 3.5 million dirhams per month by the end of the financial year, from 4.3 million per month by the end of the first half of 2012.

Operating expenses are expected to reach 42.5 million dirhams a quarter, including its credit finance unit Gulf Finance, for the remainder of 2012 and 2013, the company said.

Group operating expenses were 44.7 million dirhams in the second-quarter.

Shuaa, which has gone through several top-level management changes since the 2008 financial crisis, in April named Colin MacDonald, a former ABN Amro banker, as its new chief executive, replacing Michael Philipp.

Its shares rose 3.7 percent in thin trading on the Dubai bourse on Wednesday. (Writing by Dinesh Nair; Editing by Helen Massy-Beresford)

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