The Islamic Corporation for the Development of the Private Sector (ICD), Aktif Bank and Ijarah Management Company (IMC) have signed a Shareholders Agreement for Joint Strategic Collaboration. Aktif Bank has entered into the Turkish leasing sector by acquiring 32% shares of Haliç Finansal Kiralama (Haliç Leasing) and is planning to primarily fund the growth of SMEs in Turkey. Haliç Leasing will be able to raise the long term funds locally and internationally via Sukuk issuances thanks to extensive knowledge of Aktif Bank on capital markets. CEO of Aktif Bank, Serdar Sümer, said that instead of increasing the number of branches, the bank focuses on diversifying its products and alternative distribution channels. CEO of ICD, Khaled Al Aboodi, said that Haliç Leasing will be the eleventh Islamic leasing company that ICD has invested.
Fitch Ratings has assigned Kuveyt Turk's proposed US dollar-denominated sukuk certificates an expected 'BBB(EXP)' rating. The expected rating is in line with Kuveyt Turk's Long-Term Issuer Default Rating (IDR) of 'BBB', which has a Negative Outlook. The issuer is KT Kira Sertifikalari Varlik Kiralama (KKSVK), which is wholly owned by Kuveyt Turk. The documentation includes a negative pledge provision that is binding on Kuveyt Turk, as well as financial reporting obligations, covenants, Kuveyt Turk event (including cross default) and change of control clause. Certain aspects of the transaction will be governed by English law while others will be governed by Turkish law.
According to Savings Deposit Insurance Fund (TMSF) Chairman, Sakir Ercan Gül, Bank Asya's shareholders need to wait until the end of the bank's liquidation process to receive their remaining funds. Gül said the process of paying deposits would not be immediately initiated and the finalization of the liquidation process would be delayed. The law regarding deposits grants a three-month period for payments, which will expire this month. There are nearly TL 2 billion ($653 million) worth of deposits in the bank, including TL 950 million worth of insured deposits. If the bank has any remaining funds after the liquidation process, these will be distributed to the bank's shareholders in accordance with the percentage of their shares. According to Gül, the bank is now hovering between bankruptcy and liquidation.
The 47th anniversary of the Organization of Islamic Cooperation (OIC) was celebrated on Saturday in Istanbul. The event was organized by the Research Center for Islamic History, Art and Culture (IRCICA). Halit Eren, general director of IRCICA, said the organization had two main goals, one to restore Islamic cultural heritage in Muslim regions in war and the other to struggle with radicalism. Eren said the OIC works on projects to restore the historical structure in the walled city of Jerusalem and in war-torn Syria. OIC General Secretary Iyad bin Ameen Madani was the main speaker of the organization. In his speech, Madani said the OIC made important steps in social, cultural, economic, technologic and educative domains.
Turkey’s biggest casual dining chain, Big Chefs, sold a minority share to an internationally backed private-equity firm, a sign that resilient consumer demand is drawing some investors to the country, despite July's failed coup rattling the economy. Meanwhile, leading Turkish ice-cream maker Mado is in advanced discussions with Bahrain-based Venture Capital Bank to sell a sizable minority stake, said Mr. Kotan, who is advising the Kahramanmaras-based deserts-and-food company.
Turkey’s Saving Deposits Insurance Fund (TMSF) has probed more than 1.6 mn bank accounts because a number of public institutions wanted to learn whether any of their employees had an account with Bank Asya. The bank was linked to the controversial Gülen movement, which was believed to be the mastermind behind the failed July 15 coup attempt. In line with these probes, some 700,000 people have been searched since the end of 2013. When suspending public officials after the failed coup attempt, one of the main criteria under consideration was whether they were a Bank Asya customer and if they had made financially suspicious banking transactions. Turkish regulators canceled the banking license of Islamic lender Bank Asya on July 24.
Developer of Istanbul financial hub Burak Kutlug says the coup and the conflicts are strictly short-term concerns in Turkey. The property market remains a magnet for investors from the Middle East or other Islamic countries. In recent years, Turkey has been going all out to pull in such investors, particularly through legislations such as the "reciprocity law", whereby anyone who commits to a certain level of funding gets to have citizenship rights. According to a survey by CBRE of the living factor in major cities, Istanbul has seen its real estate recording 25% annual growth. Kutlug believes there’s still headroom for Istanbul prices to grow. The city’s all-round development with the new airport expansion and Eurasia tunnel will more than ensure that.
Islamic Development Bank (IDB) President Ahmad Mohamed Ali Al Madani has said they are ready to support Turkey to maintain the country's stable investment environment in the wake of the July 15 coup attempt. Al Madani said that the Turkish government has continued to promote domestic and foreign investments by boosting the liquidity of its markets to minimize short-term risks since the coup attempt. He noted that the establishment of the Sovereign Welfare Fund (SWF) is an extremely important development as it will help the government transfer its achievements to strategically important sectors. Al Madani remarked that Turkey will maintain its 3 to 4% growth rate despite its dependency on foreign energy.
Islamic entities known as participation banks offer bonds with potentially greater upside and more stability than standard government debt. According to a recent report from Standard & Poor’s, participation banks doubled their share of the country’s overall banking assets to about 5% between 2005 to 2015. Turkish President Recep Tayyip Erdogan’s support for further integration of Islamic law into all walks of life means participation banks are likely to grow. The system’s assets could reach some $300 billion by 2025, according to the Participation Banks Association of Turkey.
Islamic International Rating Agency (IIRA) has reaffirmed the ratings of Kuveyt Turk Participation Bank (KTPB) at "AA(tr)/A1+(tr)" on the national scale. Ratings on the international scale have also been reaffirmed, with foreign currency rating at "BBB-/A3" and the local currency rating at "BBB/A3". Outlook on the assigned ratings is "Stable". Ratings of KTPB are underpinned by its strong institutional ownership, which is led by Kuwait Finance House. The impact of regional instability on Turkey’s banking industry has been manageable so far. However, the industry may face challenges in the coming periods.
Kuveyt Türk Katilim Bankasi has closed the first half of 2016 with a net profit of TRY 256 million with an increase by 24.4% compared to the same period last year. The bank's total assets have reached 44,1 billion increasing by 4.9% and its shareholders equity has reached TRY 3.7 billion increasing by 8%. Ufuk Uyan, the CEO of Kuveyt Türk, said the bank added 30 new branch offices to its network throughout 2016. Kuveyt Türk aims at becoming one of the top three banks opening the highest number of branch offices in the banking sector.
According to Group CEO Mazin Saad Al-Nahedh, the market share of Kuwait Finance House-Turkey (KFH-Turkey) accounts for 37% of the participation banking in Turkey. The total assets of participation banks as percentage of the total assets of banks in Turkey account for 5-6% and is expected to surge. Growth rates in KFH-Turkey have outpaced the rates in Kuwait, Bahrain and Malaysia. Noting that all Kuwaiti banks were strongly capitalised, Al-Nahedh mentioned that KFH Group’s own capital adequacy ratio surpassed 17% as of end Q1. Commenting on Kuwaiti sovereign debt issuances to Islamic banks, he said that KFH’s share of the debt was 50 per cent, mirroring its market share among Islamic banks in Kuwait.
Turkish regulators have cancelled the banking license of Islamic lender Bank Asya. The Turkish Banking Regulation and Supervision Agency’s decision (BDDK) came after the Turkish Deposit Insurance Fund (TMSF) temporarily suspended Bank Asya’s banking operations on July 18. According to the TMSF the sale of the bank did not attract any bids on July 15. The tender was for the sale of a minimum 183.6 million A group shares, amounting to 51% of the bank. Bank Asya is affiliated with Fethullah Gulen, who the Turkish authorities accuse of heading a clandestine 'parallel state' to undermine the Turkish government.
The Savings Deposit Insurance Fund (TMSF) announced that the operations of Bank Asya will be temporarily frozen. According to the official announcement, the decision was made by the Fund Council in accordance with Article 107 of the Banking Law. The tender for the sale of Bank Asya's shares was scheduled for Friday and TMSF announced that no bid had been offered for the tender. Although shares were planned to be opened to transactions following the bank's sale, Bank Asya's shares are now closed for transactions. Bank Asya is believed to be the main financial institution for the controversial Gülen Movement, which is accused of large-scale cheating and nepotism.
The Turkish Deposit Insurance Fund (TMSF) announced it would temporarily suspend operations in Bank Asya, which is closely associated with the cleric Fethullah Gulen. Turkish President Recep Tayyip Erdogan blamed Gulen and his supporters for the coup attempt on Friday in which more than 200 people have been killed. The coup attempt was suppressed by early Saturday as 103 army generals and admirals were detained. The arrests now amount to a third of the country’s top military officials.
For over three decades Turkish governments did not dare speak the name Islamic banking for fear of being branded radical. These institutions were officially named special finance houses, profit-and-loss banks, interest-free banks and more recently, participation banks. Now Islamic finance public policy is elevated to a pivotal position in the official management of the Turkish economy.
Ankara has recently embarked on a wholesale restructuring of its participation banking sector, which has seen the entry of three new banks including Ziraat Participation Bank, Halk Participation Bank and Vakif Bank. This brings the total number of participation banks in Turkey to seven including the four established ones, Kuveyt Turk Participation Bank, Albaraka Turk Participation Bank, Turkiye Finans and Asya Bank. Ankara is also keen in making Turkey a leading proponent of Islamic finance and developing Istanbul into an international financial centre.
The tender for the sale of Bank Asya is set to take place on July 14. Turkish Deputy Prime Minister Nurettin Canikli stressed the importance and the magnitude of the sale, as Bank Asya was subject to financial maladministration by the previous management. While sunken credit totaled TL 2.2 billion ($750 million), credit volume in September 2015 reached TL 6.5 billion. The bank's capital dropped to TL 1.2 billion in 2015. Upon inspection of the actual amount of sunken credit, Bank Asya's cumulative losses totaled TL 1.6 billion.
The Islamic Financial Services Board (IFSB), The World Bank Group (WBG) and the Republic of Turkey have organised a joint conference focusing on the takaful sector. This conference, themed "Realising the Value Proposition of Takaful Industry for a Stable and Inclusive Financial System" was held in Istanbul on May 30-31, 2016. The Keynote Address was delivered by Ramazan Ulger, President of the Turkish Insurance Association and Ozgur Koc from the Association of Participation Insurance. Mr. Ulger highlighted that there are 60 insurance companies and one reinsurance company operating in Turkey. He suggested for the takaful industry to develop a wider range of products to address the needs of individuals. Ozgur Koc reiterated the country's vision to establish Istanbul as an Islamic financial centre.
According to Standard & Poors recent government initiatives will spur momentum for Turkey’s fast-growing Islamic banking market. Islamic banks in the country have doubled their share of overall banking assets over the past decade to roughly 5% or $42.2 billion at year-end 2015. The annual volume of sukuk issuance in the country increased nearly 20-fold over the same period, growing from $100 million in 2010 to almost $2bn by year-end 2015. Credit analyst Mohamed Damak said Turkish Islamic banks’ market share is expected to double to more than 10% by year-end 2025.
Issuance of Sukuk is up all around the world, up on last year, due to current economic factors and the goodwill for the instrument among global investors
The good news on the Sukuk front is continuing. The proportion of Sukuk bond issuance hit a record in the first quarter of 2016 in the main markets for this form of finance, said Fitch Ratings. According to Fitch’s data, there is a clear upwards trend in use of Shari'ah-compliant borrowing as more countries create legal frameworks to support issuance and as issuers try to attract a broader investor base, including Islamic finance investors.
Total new Sukuk issuance in the Gulf Cooperation Council, Malaysia, Indonesia, Turkey, Singapore and Pakistan was around $11.1 billion in the first quarter of 2016, with a maturity of 18 months. Issuance was up 22% from the fourth quarter of 2015 and 21% from a year earlier, while non-Sukuk bond issuance of $17.1 billion was down 23% quarter on quarter and 45% year on year. Sukuk represented 39.3% of total bond and Sukuk issuance in these countries during the quarter—the highest proportion in the past eight years.