Investment bank Shuaa Capital, which earlier this year announced that it would be shedding about 11 per cent of its staff strength, has said that it plans further, “significant” job cuts as financial losses mounted in the third quarter of 2011.
While the investment bank had in May this year announced that it would slash 39 jobs – amounting to 10.7 per cent of its workforce – to help generate Dh30m in annualised savings and counter a Dh26.3m loss in the first quarter of the year, its losses have since mounted (Dh181.9m for the first nine months of the year), and the company will have to aggressively axe costs to remain above water.
The investment bank said the latest cost-cutting measures include “a significant headcount reduction, which is primarily related to repositioning the brokerage business and associated operational and administrative expenses” besides a reduction of administrative expenses, the amalgamation and further alignment of departments and a recalibration of budgets.
“Consistent with disclosures made earlier this year, Shuaa Capital has initiated a systematic rightsizing and revenue enhancement program to improve its operational efficiency and adapt its cost structure to the tough business climate. Shuaa said in its Q3 results statement that “the company has decided to enter phase two of the cost reduction program which will see further rightsizing measures.”
The investment bank which also operates a brokerage business announced wider losses of Dh181.9m for the first nine months of the year as volumes on local and regional bourses “have fallen to all-time lows as investors have dramatically reduced equity trading,” Shuaa said.
“It has become increasingly clear that even the largest securities firms in the UAE, despite market consolidation, are unable to generate profit in retail brokerage and a number of players have withdrawn from the market,” it said.
“The financial services industry witnessed extraordinary market disruptions in September and significant changes to the competitive landscape. These events led to a very difficult operating environment, predominantly in the brokerage business. In the face of these adverse market conditions, the company has taken a prudent approach to provisions as well as its non-core asset valuations,” it said in the statement.