Shuaa Capital on Thursday reported a net loss for the third quarter as it booked higher provisions on its SME loan book amid weakening economic sentiment in the UAE.
Third-quarter revenue and net loss were Dh34.3 million and Dh28.6m, respectively, compared with revenue of Dh71.8m and a net profit of Dh26.2m in the same period last year, the financial services company said.
Total expenses grew to Dh61.5m in the period from Dh45.9m a year earlier “mainly because of a rise in provisions related to the SME lending division”. Interest income for the third quarter rose 31 per cent year-on-year to Dh42.1m from Dh32m, but net fees and commissions more than halved to Dh9.2m from Dh19.4m last year.
“Difficult market conditions in combination with macroeconomic uncertainty created a volatile operating environment during the third quarter,” said Abdul Rahman Al Hareb, Shuaa’s chairman.
Non-oil sector activity in the UAE fell in September, with the rate of expansion at a three-and-a-half-year low, according to Emirates NBD’s purchasing manager’s index data. The price of oil has dropped more than 50 per cent since summer highs last year.
At its Gulf Finance unit, profit fell to Dh2.8m compared with Dh9.7m a year earlier amid “signs of a deceleration in the UAE’s SME sector over the past quarter”, Shuaa said.
Last month, a survey released by Gulf Finance showed that sentiment among small and medium enterprises soured in the third quarter as the lower oil price impacted payment collection, new orders and access to finance.
“The SME segment in the UAE is experiencing the effects of the economic slowdown, which impacts performance of the sector as a whole,” Shuaa said.
Mr Al Hareb said that Shuaa would keep “consolidating its position as a … company driven by recurrent revenue generated from the SME lending and asset management divisions” backed by fund performance, investment banking and capital markets activities.
Profit at the asset management division fell to Dh1.5m in the quarter from Dh9m a year earlier, as no performance fees were recorded. Their two funds, Emirates Gateway and Arab Gateway, outperformed their respective benchmarks in the quarter but were down 8.9 per cent and 12.1 per cent, respectively. The MSCI GCC Countries Index was down over 14 per cent during the period, Bloomberg data showed.
As of September 30, Shuaa’s total assets stood at Dh1.7 billion, up slightly from Dh1.6bn in the fourth quarter of last year.
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