Moody's Investors Service

GCC Islamic asset managers stay resilient

According to Moody's Investors Service, net inflows into some large Islamic funds in the GCC countries have remained positive despite weaker markets and lower oil prices. The ratings agency said it expects growth in Islamic assets under management to slow between 2% and 4% this year. According to the Global Islamic Finance Markets Report, Shariah-compliant assets represent a significant portion of total banking assets of the GCC. While in the Middle East and North African region, Islamic banking assets represent 14% of total banking assets, in the GCC this market share crossed the 25% threshold. Globally, Islamic finance assets are expected to grow at a compound annual growth rate of 5.5% to hit $3.4 trillion during the next five years. Malaysia and Saudi Arabia are the largest Islamic financial service in the world, accounting for almost two-thirds of Islamic assets under management between them.

Moody's and IFN team up on global Islamic finance expertise

Moody's Investors Service (Moody's) and Islamic Finance news (IFN) have announced their collaboration to provide insights and analysis for Islamic finance worldwide. IFN readers will gain access to Moody's exclusive content covering Islamic finance, ranging from sukuk issuance trends in Gulf Cooperation Council (GCC) countries to the latest trends in Islamic banking. Moody's is a global integrated risk assessment firm that empowers organizations to make better decisions. IFN is the leading Islamic finance news and solutions provider in the world, housing the largest pool of Islamic finance-related articles and coverage.

DIB Tier 1 Sukuk (3) Ltd. -- Moody's announces completion of a periodic review of ratings of Dubai Islamic Bank PJSC

Moody's Investors Service (Moody's) has completed a periodic review of the ratings of Dubai Islamic Bank (DIB).
Dubai Islamic Bank's A3 long-term Issuer ratings are derived from the bank's ba2 standalone baseline credit assessment and a five notch systemic support uplift based on Moody's view of a very high likelihood of government support from United Arab Emirates (rated Aa2), in case of need. DIB's ba2 BCA reflects the bank's solid profitability, deposit-funded balance sheet, and healthy liquidity reserves. These strengths are moderated by Moody's expectation of downside pressure on the bank's solvency in the 12-18 months on the back of lower oil prices, reduced investor confidence and the coronavirus-induced disruption.

Turkish Islamic banking set for fast growth after slow start

According to Moody's Investors Service, Turkey's Islamic banking assets are set to double within 10 years from a low level as government initiatives drive growth in the sector. Turkey's Islamic finance sector currently is smaller than other large Muslim countries. The main reason is the relatively small number of Islamic banks and their limited distribution networks within Turkey. Islamic banks are called participation banks in Turkey and are regulated by the Banking Regulation and Supervision Agency (BRSA). They are required by law to become a member of the Participation Banks Association of Turkey (PBAT). Between 2014 and 2015 the Turkish government established two new state-owned participation banks and a new one in 2019. Turkey's ambition is to establish Istanbul as a global financial center. It aims to raise the share of financial services in Turkish GDP to 6% by 2023 from 3% at the end of 2018.

#Turkey's Islamic banking assets expected to double in 10 years - Moody's

According to Moody's Investors Service, Turkey's Islamic banking assets are expected to double in the following 10 years as a result of government initiatives and new regulation that push the sector's expansion. With just over 5.8% of banking assets at the end of September, Turkey's Islamic finance sector is currently smaller than other large Muslim countries. Evolving regulation and supervision, as well as plans to equalise tax treatment for equivalent financial activities of commercial and Islamic finance institutions are expected to boost the sector. Turkey established three new state-owned Islamic banks from 2015 to 2019. Furthermore, the state-funded $2.6 billion (2.36 billion euro) International Financial Centre in Istanbul (IIFC) is scheduled to open in 2023.

Global #sukuk issuance to equal $130bln in 2019

According to Moody's Investors Service, the value of global sukuk issuance is expected to increase by 6% to reach $130 billion in 2019. That forecast can be ascribed to the increase in sukuk activity in Saudi Arabia and Malaysia, which manifested by the issuance of $87 billion sukuk in the first six months of 2019. Moody’s senior vice president Nitish Bhojnagarwala expects second-half volumes to moderate to around $43 billion, though Malaysia and Gulf Cooperation Council countries will continue issuing regularly. Key Islamic finance markets are working on adjusting their funding mix to support a long-term growth in sukuk volumes. As awareness towards the risk of climate change increases, the green sukuk market is expected to grow further.

Moody’s upgrades AHB Sukuk Company Ltd.’s #sukuk programme to (P)A1 and its USD500 million senior note to A1 following guarantee by Abu Dhabi Commercial Bank

Moody's Investors Service upgraded to (P)A1 from (P)A2 the provisional foreign currency senior unsecured MTN rating of AHB Sukuk Company Ltd. The AHB Sukuk Company is a special-purpose vehicle established in the Cayman Islands by Al Hilal Bank. Moody's also upgraded to A1 from A2 the backed senior unsecured rating on AHB Sukuk Company Ltd.'s outstanding USD500 million senior unsecured note due 19 September 2023. The outlook on AHB Sukuk Company Ltd.'s senior unsecured note remains stable. The upgrades are driven by the issuance on 2 July 2019 by Abu Dhabi Commercial Bank (ADCB) of a guarantee covering AHB Sukuk Company Ltd.'s sukuk programme and its USD500 million senior note, and follows ADCB's acquisition of Al Hilal Bank on 1 May 2019.

GCC Banking Sector to Witness Mergers Worth Nearly $1 Trillion

The GCC banking sector is undergoing major consolidation phase with 20 banks negotiating mergers and acquisitions with an estimated $1 trillion worth of assets. The UAE leads the pack with highest number of mergers both in terms of value and volume. Currently, six mergers and acquisitions are being negotiated or underway in the UAE banking worth sector worth $625.25 billion followed by two M&As in Saudi Arabia worth $256 billion and one each in Kuwait and Oman. According to Moody's Investors Service, the recent merger and acquisition drive will help the sector by easing overcapacity and boosting profitability. Moody's Senior Analyst Ashraf Madani says that slow growth and subdued credit demand in the region are the biggest drivers of consolidation.

Islamic finance set to extend growth, says Moody’s

According to Moody's Investors Service, the growth of the Islamic finance sector will continue to outstrip that of conventional assets across core Islamic finance markets. Islamic banking penetration in the Gulf Cooperation Council (GCC) increased to 45% of the total banking market, as of September 2017 from 31% in 2008. Moody's Senior Analyst Nitish Bhojnagarwala, said the Islamic finance sector would be supported by governments, as well as by continued demand for Islamic products from individuals. Another growth factor will be Islamic insurers' penetration into Southeast Asia and North Africa. Sukuk issuances grew 17% in 2017 to $100 billion, driven largely by GCC sovereigns. A similar level of issuance is expected in 2018, although the recent recovery in oil prices could lower financing needs for some sovereigns. Corporate and asset-backed sukuk activity was muted in 2017 because of more attractive conventional market opportunities and Moody's expects the same for 2018.

Moody's, global #sukuk issuance to top $ 95 billion in 2017

According to Moody's Investors Service, the global sukuk market will continue to rebound from a sharp drop in volumes in 2015. Analysts estimate that total sukuk issuance will reach around $95 billion by the end of this year, after more than $85 billion in 2016, including more than $50 billion of sukuk issuance by sovereigns. Moody's Vice-President Christian de Guzman expects that sovereign sukuk issuance volumes will continue to grow in 2018 as governments look to diversify their financing mix and satisfy the liquidity needs of Islamic retail banks. Sovereigns issued more than $40 billion of sukuk in the first eight months of the year. This represents a 50% increase compared to the same period last year. In 2017, market growth was driven by Saudi Arabia with a total issuance of $17 billion. Other countries with large fiscal deficits, such as Oman and Bahrain, will also contribute to the market's expansion.

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http://www.ansamed.info/ansamed/en/news/sections/economics/2017/12/11/moodys-global-sukuk-issuance-to-top-$-95-billion-in-2017_b2f9d1b9-3864-4cd5-bdcc-470d2947670a.html

Moody's: Islamic Development Bank benefits from strong capital, prudent risk management

According to Moody's Investors Service, Islamic Development Bank's (IsDB) credit strengths include a strong capital base, prudent financial and risk management policies. The bank's liquidity level is solid, which supports its Aaa rating and stable outlook. Moody's analyst Mathias Angonin said the weighted average rating of IsDB's shareholders is lower than other Aaa-rated development banks, but its 57 members are strongly committed to the organisation. This support is reflected in continued capital increases. The bank's paid-in capital rose to ID 5.1 billion at end-2016, from ID2.7 billion in 2007, and an additional ID 2.4 billion is expected over the next 10 years. Credit challenges include a risky operating environment as well as lower oil prices and the risks from geopolitical tensions. Nonetheless, its operational assets continue to perform well, with a very low level of impairment.

Moody's granted licence to conduct credit #rating activities in the Kingdom of #Saudi Arabia

The Capital Market Authority (CMA) authorised Moody's Investors Service to conduct credit rating activities in the Kingdom of Saudi Arabia. Managing Director Monica Merli welcomed the announcement, emphasizing the Kingdom's increasing prominence in the debt capital markets. Saudi Arabia is a key market for Islamic finance, an area in which Moody's is recognised as a global thought leader through ratings, research and speaking engagements at leading conferences. The Kingdom completed the world's largest ever inaugural Sukuk issuance at $9 billion in April 2017, a transaction rated A1 by Moody's. Moody's currently rates 140 issuers and 92 debt programmes across the Middle East, including leading coverage in rating Islamic financial institutions and Sukuk.

Moody's: Shariah-compliant #investment accounts at #Malaysian banks to continue growing

According to Moody's Investors Service, the growth of shariah-compliant investment accounts at Malaysian banks will remain strong over the next three to five years. Moody's Vice President, Simon Chen, said Malaysian banks have strong incentives to promote the growth of such investment accounts because they provide capital benefits. He added that concerns also exist over the untested state of loss-sharing mechanisms in the accounts. The robust growth of shariah-compliant investment accounts in Malaysia began in July 2015 following the implementation of the Islamic Financial Services Act 2013. By February 2017, these accounts had grown to RM74.2 billion, or 13%, of total banking system liabilities. On the question of risk, Moody's said that a significant loss event to test the resilience of this regime has yet to occur.

Moody's: #GCC Islamic banks more profitable than conventional peers for second year running in 2017

According to Moody's Investors Service, the profitability of Islamic banks' in the Gulf cooperation Council (GCC) region will outpace that of their conventional peers for the second consecutive year in 2017. Islamic banks will maintain stronger margins in 2017, primarily as a result of their low funding costs, which reflect their reliance on stable current and savings account balances. Islamic banks also tend to have higher asset yields, given their focus on retail and the real estate related lending. Moody's expects that Islamic banks will retain a margin advantage of about 40 basis points over conventional banks in 2017. Moody's analyst Nitish Bhojnagarwala says conventional banks will continue to beat Islamic peers in terms of cost efficiency. Islamic banks are investing in branch network expansion, while conventional banks have already established their branch networks.

Moody's assigns (P)B3 to #Pakistan's sovereign #sukuk

Moody's Investors Service has today assigned a provisional (P)B3 rating to the proposed US dollar Trust Certificates to be issued by The Third Pakistan International Sukuk Company. The (P)B3 rating reflects Moody's view that the sukuk certificate holders will effectively be exposed to the sovereign credit risk incorporated in the government's issuer rating. Payment obligations represented by the securities are ranked pari passu with other senior, unsecured debt issuances of the Government of Pakistan. The rating for the Government of Pakistan captures moderate economic strength, structurally large fiscal imbalances, a high government debt burden and high susceptibility to political event risks.

Moody's: Islamic banks' strong liquidity profiles driven by retail strengths and government sukuk availability

Moody's Investors Service says that the liquidity coverage ratios of Islamic banks in key Asian and GCC countries highlight sound liquidity profiles and broad compliance with Basel III regulatory requirements.
"In the report, we highlight that a key driver of LCR performance is the funding profile of banks and, in this context, over-reliance on corporate deposits and unsecured wholesale funding means higher potential liquidity pressures," says Simon Chen, a Moody's Vice President and Senior Analyst. "However, banks with a greater proportion of retail deposits that are considered more 'sticky', typically display stronger LCRs," adds Chen.

Qatar’s new insurance instructions credit positive: Moody’s

The recent instructions issued by the Qatar Central Bank (QCB) for insurers operating in Qatar are credit positive. These instructions are related to licensing, regulations and controls, risk management, accounting and actuaries reports. The instructions include prudential requirements and took effect this month. Insurers that will benefit from the new law include the largest Qatari insurance groups: Damaan Islamic Insurance Company, Qatar Insurance Company, Qatar General Insurance & Reinsurance Company, Doha Insurance Company, Al Khaleej Takaful Group and Qatar Islamic Insurance Company.

Moody's downgrades Saudi banking system to negative

Saudi Arabia's banking sector is to feel the brunt of cheap oil and the resulting government spending cuts, according to a new report by Moody's. The credit rating agency has downgraded the banking industry from stable to negative as GDP growth is predicted to slow to just 1.5 per cent in 2016, more than half of the previous year. As a result, the agency has predicted loan growth to slow down to between 3 per cent and 5 per cent for 2016, down from from 8 per cent in 2015 and 12 per cent the year before. Asset risk is also expected to rise as a result of the deteriorating operating environment. Meanwhile, capital buffers are likely to remain solid with the sector's average tangible common equity (TCE) ratio remaining broadly stable.

Moody's places on review for downgrade 8 government-related issuers in GCC countries

Moody's Investors Service has placed on review for downgrade the ratings of eight government-related issuers (GRIs) based in GCC countries. These issuers are: Emirates Telecommunications Grp Co PJSC, Industries Qatar Q.S.C., International Petroleum Investment Company, Mubadala Development Company, Qatar Petroleum, Saudi Basic Industries Corporation, Saudi Electricity Company, Saudi Telecom Company. Moody's also placed on review for downgrade the ratings of Qatari Diar Finance Q.S.C. (QDF) and the ratings on the notes issued by 1MDB Energy Limited (1MDBEL). Today's actions follow the placement on review for downgrade of the sovereign ratings of Saudi Arabia, Qatar, the United Arab Emirates and the emirate of Abu Dhabi on 4 March 2016.

Moody's holds its first Banking and Islamic Finance Workshop in Bahrain

Moody's Investors Service will hold its first Banking and Islamic Finance Workshop in Bahrain on Wednesday 2nd of September. The workshop will focus on Bahrain's banking sector amid low oil prices and global headwinds. It ill kick-off with a presentation from Jean-Francois Tremblay, Associate Managing Director, Financial Institutions Group, surrounding key global developments within credit markets. The workshop will also provide Moody's assessment of the local operating environment and the creditworthiness of banks in Bahrain and the rest of the region. In addition, the workshop will also discuss the latest developments in the Islamic Finance sector as well as growths trends and liquidity management challenges.

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