GCC

Islamic banks defy market challenges in 2017

Islamic banks made big gains in financing growth and profitability in 2017 while keeping their operating costs and cost of risks under control. Dubai Islamic Bank (DIB), reported a net profit Dh4.5 billion for 2017, up 11% compared to 2016. Total income increased to Dh10.19 billion, up 18% compared to Dh8.63 billion for 2016. Net revenue for 2017 amounted to Dh7.68 billion, an increase of 14% compared with Dh6.76 billion in 2016. DIB Managing Director, Abdullah Al Hamli, says the UAE continues to be one of the leading Islamic finance markets, with assets now reaching around $150 billion, a 7% growth this year. Emirates Islamic reported a net profit of Dh702 million, up 565% compared to 2016. Decline in operating costs and impairments boosted net profits last year. Sharjah Islamic Bank (SIB) reported a full-year 2017 net profit of Dh477.7 million compared with Dh462.9 million in 2016.

Emirates picking eight banks to arrange US$1b #sukuk: sources

Emirates airlines has mandated eight banks to manage a sukuk sale to raise about US$1 billion. Mandated banks include HSBC, Standard Chartered, Citigroup, BNP Paribas, Emirates NBD, Dubai Islamic Bank, Abu Dhabi Islamic Bank and Noor Bank. Emirates will join a list of regional issuers seeking funding before expected increases in US interest rates push up borrowing costs. Emirates typically raises financing each year from a combination of commercial loans, operating leases and export credit agency backed facilities. It last sold a bond in 2015, when it raised US$913 million from a 10-year sukuk to pay for four Airbus A380-800s. Emirates signed a deal last week for 36 additional Airbus SE A380 aircraft, handling the aircraft manufacturer the first orders for the model in more than two years.

Al Madina #Takaful names new CEO

#Oman's Al Madina Takaful announced the appointment of Usama Al Barwani as chief executive officer (CEO). Al Barwani was the acting CEO. He was one of the key people involved in transforming the company from a traditional insurance company into Oman’s first takaful insurance company. With a strong track-record of success, the company was recently awarded the Best Arab Company in the insurance category and he was also the recipient of the Best Arabian 100 CEO Award. Al Barwani has a degree in Strategic Management and Leadership ED (CMI) and has a Post Graduate Diploma in HRM in Information System Management and Education (CABA, Canada).

Dubai Islamic Economy Development Centre enrols as observer member of Responsible Finance & Investment Foundation

The Dubai Islamic Economy Development Centre (DIEDC) has enrolled as an observer member of the Responsible Finance & Investment (RFI) Foundation. DIEDC and the RFI Foundation will collaborate towards the common goal of shifting the focus of the financial sector from accumulating wealth to supporting equitable, inclusive, and sustainable growth. As a member, DIEDC gains access to the RFI Foundation’s research and its diverse network. Abdulla Mohammed Al Awar, CEO of DIEDC, said by joining the RFI Foundation, the efforts of the two entities integrate to identify universal principles that guide responsible finance. Blake Goud, CEO of the RFI Foundation, welcomed DIEDC as an observer member. He added that DIEDC was a valuable addition to the RFI Foundation’s member community that includes multilaterals organisations, commercial banks and asset managers.

Dana Gas #Sukuk Talks Stall as It Seeks 15% Discount on Buyback

Talks to resolve a dispute between Dana Gas and its sukuk holders broke down after the company proposed a 15% cut on some of the debt. The United Arab Emirates-based energy company suggested buying back about $200 million at 85 cents to the dollar, and rolling over the rest into new securities with a profit rate of 4%. In June, Dana Gas announced it no longer considers its sukuk compliant with Shariah standards. It has since missed profit payments in July and didn’t repay two $350 million mudarabah bonds due Oct. 31. Dana applied to set aside a Nov. 17 judgment that went against it because the company couldn’t participate in the trial. If its application is unsuccessful, Dana Gas will appeal against the judgment. If the appeal is successful, the issue will be reheard by the English High Court over a three-day period from Jan. 30.

#Saudi Arabia asks banks for proposals to refinance $10bn loan, raise more debt

Saudi Arabia has asked banks for proposals to refinance its $10 billion international syndicated loan. The refinancing of the loan, which was raised in 2016, will include a repricing of the facility and the extension of its maturity to 2023 from 2021. An Islamic finance tranche using a murabaha structure will be added to the loan. Fahad al-Saif, president of the debt management office, said the plans were a step towards Saudi Arabia's ambition of establishing a prominent position in international debt markets as part of its economic reforms. The country's $10 billion syndicated loan in early 2016 was followed later that year by a $17.5 billion debut bond issue, the largest bond ever sold by an emerging market issuer.

Islamic #FinTech in 2018

2018 may prove to be a pivotal year for Islamic finance stakeholders and their approach to FinTech. Potential areas where FinTech is likely to have an impact on Islamic finance are remittances, takaful, investment advisory services and online trading. Commentators see FinTech as an opportunity to provide genuine Islamic-compliant alternatives to the traditional banking model. In December 2017, KFH Bahrain, Al Baraka Banking Group and Bahrain Development Bank announced the establishment of a company dedicated to research and development in the Islamic-compliant FinTech sector. Operated by the Bahraini bank consortium, ALGO Bahrain will open in February 2018 and will be the largest dedicated FinTech hub in the Middle East and Africa. Bahrain FinTech Bay is operated by Singapore-based fintech incubator FinTech Consortium.

Dubai Islamic Bank weighs capital-raising in 2018 -CEO

Dubai Islamic Bank (DIB) plans to raise capital in 2018 to help support an expected double-digit rise in loan growth. DIB's CEO Adnan Chilwan said the bank was considering options including a rights issue and an issue of Islamic bonds. The final decision will be subject to regulatory approvals. The bank is now targeting loan growth of between 10 and 15% in 2018, the same target it set for 2017.

Exclusive: Weeks of talks fail to resolve Dana Gas #sukuk dispute - sources

Weeks of talks between UAE energy firm Dana Gas and some local holders of a disputed $700 million sukuk have failed to reach an agreement. Last year, Dana refused to redeem $700 million of maturing Islamic bonds, arguing they were no longer valid under United Arab Emirates (UAE) law because of changes in Islamic financial practice. The move shocked the global Islamic finance industry, as some investors worried it could set a precedent for other sukuk issuers. Dana proposed to swap its sukuk, but creditors rejected the proposal, saying the terms were unfavorable. The case moved to UAE and British courts. Legal proceedings in both countries are continuing, but in November a British court ruled in favor of Dana’s creditors.

#Emirates said to seek $1bn #sukuk to diversify funding

Dubai's Emirates airline plans to raise as much as $1bn through sukuk before higher US interest rates push up borrowing costs. A spokeswoman said the company was constantly seeking diverse sources of funding, including bank finance, operating leases, Islamic financing, sukuk and bonds. Governments in the Gulf oil-exporting countries borrowed from international bond markets at a record pace in 2017 as they sought to cover budget deficits worsened by low oil prices. Saudi Arabia raised $21.5bn through sukuk and other bonds, followed by Abu Dhabi’s $10bn issue and Kuwait’s $8bn fundraising. Emirates raised $913mn through a sukuk issue with a 10-year lifespan in 2015. Proceeds funded the acquisition of four Airbus A380-800s, the world’s largest passenger aircraft. Airbus recently questioned the future of the A380, in case Emirates does not place a crucial order for new airplanes.

#Qatar witnessing robust momentum in #fintech, says Sheikh Abdulla

According to Qatar Central Bank (QCB) Governor Sheikh Abdulla bin Saoud al-Thani, Qatar is witnessing a robust momentum in fintech. The country is opening up increasing opportunities for digital payments, money management, lending, loyalty and rewards, remittances, investments and advisory services. Sheik Abdulla said the QCB’s recently launched new strategy would need to ensure that fintech firms are enhancing the financial system. Although there have been some success stories, he said banks and insurance companies in the region have been slow to embrace innovation. The fintech industry in Qatar remains very small, but it has seen a few startups such as Hasalty. As a mobile application, Hasalty improves financial literacy for children supported by the Qatar Business Incubation Centre.

The First Investor acquires another #German asset

The First Investor (TFI) Qatar, a subsidiary of Barwa Bank Group has acquired a new office building in Frankfurt. The asset is another unique blend to TFI Euro Income Fund, which was launched in 2017 with sharia compliant stature. Europe continues to provide excellent investment and business environments given low inflation and low interest rate regime. TFI is keen to pursue its investment strategy with the aim to help clients achieve their objectives in a very challenging business environment. By that, TFI will soon launch another UK Income Fund and a US Income Fund together with many investment opportunities during 2018.

#Qatar’s QR25bn worth #sukuk to mature soon

Almost half of Qatar’s outstanding sukuk, worth of over QR25bn, will mature in 2018. With the ongoing growth of Shariah-compliant institutions, new issuances are vital. If no sukuk are issued in the country to replace the maturing ones, Shariah-compliant investors might look to other sukuk investments outside Qatar. According to the joint research of Qatar Financial Centre (QFC), Thomson Reuters and Islamic Research and Training Institute (IRTI), retail sukuk remains an untapped segment in most of the countries in GCC. Qatar can capitalise on selling sukuk to the retail market to promote both the primary and secondary capital market. Financial institutions have been leading corporate issuance in the GCCIn Qatar, Ezdan Holding Group is the only corporation outside financial institutions to issue sukuk. Ijarah continues to be the most popular sukuk structure in Qatar. However, Qatari corporate sukuk have all been issued based on wakalah structure, which has been gaining popularity in the recent years.

Head of Islamic finance body AAOIFI resigns

The head of the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) has resigned. Hamed Hassan Merah presented his resignation after more than three years and the board of trustees accepted it. As a complex organisation with 200 institutional members from across 45 countries, the AAOIFI had been slow to respond to issues relating to conflicts of interest and product standardisation. Under Merah, the AAOIFI tackled such issues head on, launching a review of its accounting, auditing and sharia standards. In November, Merah said AAOIFI would now prioritize wider adoption of its standards by engaging national regulators in key markets, including Turkey and Malaysia. Saudi Arabia’s central bank joined AAOIFI as an institutional member in October 2017.

#Saudi bank #merger presses ahead after delays

The proposed merger of Saudi British Bank (SABB) and Alawwal Bank has been delayed but not derailed. The two banks announced in April that they had agreed to start talks, but progress has since faltered because of the complexity of the deal. Progress on the SABB-Alawwal merger has taken longer than expected because the regulatory environment for bank acquisitions in Saudi Arabia is relatively untested. Meanwhile, dozens of princes, high officials and senior businessmen were detained in November in a corruption crackdown. Among those was SABB vice chairman Khalid Bin Abdullah al-Mulhem. Almost all banks in Saudi Arabia were affected by the crackdown when authorities ordered the freezing of more than 2,000 accounts across the sector. A merged Alawwal and SABB would rank as the third-largest bank in Saudi Arabia with assets of $77.6bn, behind National Commercial Bank and Al Rajhi Bank.

Finance Minister: #Qatar's Islamic Banks is the third largest contributor to global growth in Islamic Banking

According to Qatar's Finance Minister Ali Shareef Al Emadi, Qatar's Islamic Banking sector is the third largest contributor to global growth in Islamic banking. At the 4th Doha Islamic Finance Conference, the Minister called for continued growth in the Islamic finance sector through concerted efforts to confront financial risks. The Minister noted that Islamic finance accounts for 50% of banking services in the GCC, where most GCC citizens prefer Sharia-compliant banking services. More and more international universities are adopting programs in Islamic finance, including the Master of Islamic Finance at Hamad bin Khalifa University in Qatar. The rapid growth of electronic financial transactions have brought new challenges requiring further cooperation, coordination and discussion. New products require the development of clear frameworks. Al Emadi added that increasing transparency in this field will help Shariah scholars to identify the correct structures and it will enable banks to make these products more attractive.

Sharjah Islamic Bank issues #Sukuk to raise $72.47m

Sharjah Islamic Bank (SIB) has successfully completed the issuance of Dh266.8 million worth of Sukuk convertible into equity of the bank to the Sharjah Social Security Fund (SSSF). SIB chairman Abdul Rahman Al Owais announced that income generated from the bank’s dividends will be used for uplifting social activities in the emirate. The Ruler of Sharjah nominated an entity engaged in endowment activities to subscribe to Sukuk equal to 10% of SIB’s capital and converting it into equity for the bank at a nominal value of Dh1 each. Al Owais expects that the capitalisation ratios will be strengthened by around 100 bps with the issuance of this capital. He added that by virtue of this exercise, SIB’s shared capital has increased from Dh2,668,050,000 to Dh2,934,855,000.

#Bahrain-headquartered investment firm buys controlling stake in Mentor-based MC Sign

Bahrains's Arcapita has acquired 75% interest in Mentor-based signage and lighting services firm MC Sign. The deal is worth more than $100 million. Atif A. Abdulmalik, Arcapita's CEO, said the company was well positioned to acquire market share in a highly fragmented industry that is dominated by locally-focused, sub-scale service providers. Arcapita's investment in MC Sign reflects the firm's global presence, with offices in Bahrain, Atlanta, London and Singapore. The investment firm has been active in the Middle East too. In October 2017, the firm partnered with Bahrain's sovereign wealth fund Mumtalakat to acquire 90% stake in Abu Dhabi's NAS United Healthcare Services. This was preceded by another deal through which Arcapita acquired logistics assets worth $150 million in Dubai.

Global #sukuk issuance jumps 45.3% to $98bn in ’17: S&P

According to Standard & Poor’s (S&P), global sukuk issuance increased 45.3% year-on-year to $97.9bn in 2017. This performance was primarily driven by good liquidity conditions in the Gulf Cooperation Council (GCC) countries. S&P head of Islamic Finance, Dr Mohamed Damak said the outlook for sukuk in 2018 looked uncertain. He added that tighter global liquidity conditions, mounting geopolitical risks and slow progress on the standardisation of Islamic finance products would continue to hold the market back. The US Federal Reserve is expected to increase rates by 75 basis points. Central banks in the GCC countries would probably mirror such an increase due to the peg of their currencies with the US dollar. Regarding retail sukuk, the agency believes that development of this part of the market necessitates a specific regulatory framework. Retail sukuk issuance has been successful in some countries where authorities provided a tax incentive to drain a portion of the savings toward this market.

#Qatar needs to develop regulatory framework to cement Islamic finance lead: QFC

According to a Qatar Financial Center (QFC) study, Qatar needs to reform interbank liquidity management to study leakages from Islamic banks through interbank finance. Moreover, there is also a need to develop a regulatory framework and promote green bonds and sukuk. So far Qatar has led the world in ensuring in the authenticity of Shariah-compliant bank assets with Qatar Central Bank and the QFC Regulatory Authority requirements separating Islamic and conventional banks. To ensure this segregation, there should be a review of interbank markets to limit flows from Islamic banks to conventional ones in their liquidity management operations using 'Murabaha'. The report also stressed the role of a centralised guidance on fit and proper criteria for Shariah scholars and promoting Fintech development.

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