Shuaa Capital, the region's leading financial services institution, yesterday said its first quarter net profit dropped 10 per cent to Dh67.1 million compared to Dh74.5 million in the same period last year.

The bank said its first quarter operating income rose by 21.9 per cent to Dh176.6 million compared to Dh144.9m in the first quarter of 2007.

First quarter net profit attributable to Shuaa shareholders stood at Dh67.1 million, up 13.9 per cent on the last quarter of last year.

Iyad Duwaji, Chief Executive Officer of Shuaa Capital, said: "I am pleased with our overall performance given difficult market conditions regionally and globally. We remain confident that fiscal 2008 will be another successful year for Shuaa. Although the performance during the first quarter partially reflected the poor performance and unusual volatility in capital markets, our annuity fee business generated the second strongest quarter in the company's history."

In comparison to the first quarter last year, Shuaa's annuity fee business recorded growth of 73.1 per cent to Dh119.5 milslion against Dh69 million in the first quarter of last year.

The bank said assets under management increased by 121.8 per cent year-on-year to Dh6.7 billion against Dh3bn in Q1 2007.

The bank said the net profits were primarily offset by difficult market conditions affecting the principal investment division and by the substantial increase in personnel expenses, which were driven by a sharp rise in number of staff, as well as performance related benefits.

The bank increased its headcount by 93.8 per cent to 498 at the end of June 2008 from 257 last year.

Kerim Mitri, Deputy CEO of Shuaa Capital, said: "Our diversified and balanced business model helped us maintain solid operating income growth and deliver a sizeable net profit. Shuaa's capital position is strong and we have deployed resources to invest in high-margin, high-profit businesses while we control our growth efficiently across regional markets. We also remain confident that the GCC will continue to serve as a safe haven for smart investors – both foreign and domestic."

The bank said its year-on-year client's funds under management rose by 110.6 per cent to Dh15.6 billion.

On the Dubai Financial Market, Shuaa Capital fell 6.15 per cent to Dh6.10 yesterday, its lowest close since January 22.

The stock has lost 28 per cent in just six weeks.