Dubai-headquartered investment bank Shuaa Capital is aiming to tap the debt markets for approximately AED200-300m ($54.5-80m) in the next six months, as part of medium to long-term borrowing programme.
The bank is looking to increase its leverage in order to fuel revenue growth in its lending business, says Maktoum Hasher Al-Maktoum, executive chairman of the bank, speaking to reporters on 11 May, following the release of the banks first quarter results.
Over the course of the next 24 months Shuaa Capital wants to increase its debt ratio from 0.23 to 1:1.
We are the least leveraged financial institution in the UAE that I know of, he says.
What Shuaa needs today is leverage. [Our low leverage ratio] shows there is a lot of opportunity in Shuaa, but if we get to 1 to 1 then it will be massive, Al-Maktoum says, adding that the UAE Central Bank authorises the bank to increase its leverage up to a ratio of 1:5.
Al-Maktoum says it has not yet been decided what form the borrowing will take and is considering options such as bonds, sukuks, convertible bonds and straight conventional loans. The bank is currently in talks with commercial lenders.
Al-Maktoum says borrowing conditions are more favourable now than compared to when the bank attempted to raise money last year.
Commercial banks were reluctant to work with the investment bank in 2013 as Shuaa had yet to post full-year profits. Shuaa was severely affected by the financial crisis in 2009 and completed a restructuring process that ended in 2012.
We tried last year but commercial lending was very tight. Lenders wanted to make sure the company was fully turned around, Al Maktoum says, adding that they wanted to see fully-audited results.
Shuaas first quarter 2014 results record a net profit of AED8.2m, marking the fourth consecutive quarterly profit. The Q1 results are also an improvement on the net loss of AED5.9m recorded in the first quarter last year and a 118 per cent increase on the profit of AED3.8m generated in the fourth quarter of 2013.