Gulf News

GCC Islamic banks to outperform their conventional peers

According to ratings agency Moody’s, Islamic banks across the GCC are expected to outperform their conventional peers in the year ahead. Credit fundamentals have improved due to better underwriting practices and higher profitability. Along with their strengthening franchise, GCC Islamic banks have achieved sustainable improvements in their credit risk profiles. Their cost of risk is expected to stabilise at current levels driven by improvements in asset quality and risk management practices. Whereas these banks had to incur high provisioning charges on their loans and investments in the past, these charges have fallen to levels below those of conventional peers. New investments in distribution channels and technology could add to the costs. GCC Islamic banks are still making considerable investments in building their branch network and technology because they are younger and are more focused on reaching retail customers.

Richest 1% to own two-thirds of world's wealth by 2030: new study

As the wealthy continue to accumulate money faster than average income earners, the rich-poor divide will only widen over the next few years. According to the latest research by the UK’s House of Commons, in 12 years' time more than two-thirds of the world’s wealth will be in the hands of just 1% of the population. The remaining 99% have seen their wealth grow at a lower pace of only 3% per year. There are no similar analysis to determine the rich-poor divide within the UAE, but Dubai is increasingly becoming a magnet for the world’s wealthy. According to Knight Frank’s Wealth Report, the population of ultra-high-net-worth individuals (UNHWIs), each owning at least $30 million in assets, is expected to jump by 60% by 2026. Dubai is home to the highest concentration of millionaires and multi-millionaires and UNHWIs for any city in the Middle East.

DIEDC to collaborate with #Turkmenistan bank

The Dubai Islamic Economy Development Centre (DIEDC) signed a Memorandum of Understanding (MoU) with The State Bank for Foreign Economic Affairs of Turkmenistan (TFEB) to exchange knowledge, experience and best practices in Islamic economy. The MoU was signed by Sultan Bin Saeed Al Mansouri, UAE Minister of Economy and chairman of DIEDC, and Rahimberdy J. Jepbarov, chairman of TFEB. The centre aims to organise workshops and training courses and share professional research. In addition, the two parties have set up a joint committee to oversee the collaboration. Al Mansouri said this partnership between DIEDC and TFEB would strengthen synergies between the two countries. He further highlighted sukuk as an effective tool to finance projects in infrastructure, education and health care, as well as in other vital sectors of the economy.

GCC sovereigns, GREs to drive #sukuk supplies in 2018

Growth in global sukuk issuance is expected to remain muted this year although issuance volumes are likely stable. Moody’s Senior Analyst Nitish Bhojnagarwala expects sukuk issuances to remain broadly stable between $90-$100 billion in 2018, again driven largely by sovereigns. Although the financing needs of sovereigns, banks and corporates in the GCC have decreased in recent months due to higher oil prices, these issuers are expected to continue to support the industry. Sukuk market activity is also supported by specialised multilateral entities, such as quasi-sovereigns, central banks and supranational entities, including the Islamic Development Bank (IDB), the International Liquidity Management Corporation (IILM) and the Arab Petroleum Investments Corporation (APICORP). Moody’s estimate that total sovereign sukuk volumes will remain stable in 2018 although some of the large issuances in 2017 may not be repeated in 2018, driving a marginal decline in the overall value.

GCC’s alternative equity funding set to grow

A major type of alternative equity investment is through venture capital (VC) and private equity (PE), which represent an ownership stake in a private company. With the assistance of VC and PE, some companies may grow and become public companies through initial public offerings (IPOs). In 2017, the UAE and Saudi Arabia led IPO activity in the GCC, with five listings in the UAE, four in Saudi Arabia, three in Oman and one in Qatar. Much of the activity has been in the region's relatively new Real Estate Investment Trust (REIT) market. IPO activity in the region has been focused mainly on large state-owned enterprises, while public equity markets are still classified as ‘frontier’ and ‘emerging’. Throughout the region there is a growing ecosystem of economic free zones, business incubators, co-working spaces, conferences and awards for start-up companies. There is no doubt that the level of VC and PE activity will continue to grow in the region just as the public markets will continue to evolve.

Sharjah Govt issues $1b #sukuk

The Government of Sharjah has issued a $1 billion (Dh3.67 billion) dollar sukuk on a 10 year maturity. The lead arrangers for the issue were Sharjah Islamic Bank, Dubai Islamic Bank, HSBC and Standard Chartered. Walid Al Sayegh, Director-General of Sharjah Finance Department, pointed out that the timing behind the issuance makes this the first sovereign sukuk issued in 2018 in the region. It is also the largest sukuk issuance by the government of Sharjah, which previously carried out two issuances. Al Sayegh said that the revenue from these sukuk would be used for infrastructure projects, as well as urban and financial development of Sharjah.

Emirates to meet investors ahead of possible #sukuk issuance

Emirates airline mandated local and international banks to arrange a global investor roadshow ahead of a possible sukuk issuance. The carrier mandated Citi and Standard Chartered Bank as global coordinators and joint lead managers, alongside BNP Paribas, HSBC, J.P. Morgan, Abu Dhabi Islamic Bank, Dubai Islamic Bank, First Abu Dhabi Bank, Emirates NBD Capital, and Noor Bank as joint lead managers. Proceeds from the issuance will be used for general corporate purposes. Emirates did not disclose the size of the possible sukuk, but said it will be of benchmark size. The company has tapped the debt capital markets with four issuances since 2011 raising over $3.65 billion, over 50% of which has been from sukuk. The most recent aircraft order was for 36 Airbus A380s worth $16 billion and was made in late January. Delivery of the aircraft will begin in 2020.

GFH joins as a founding partner in #Bahrain’s #fintech hub

GFH Financial Group said its recent partnership with Bahrain Fintech Bay (BFB) as a founding partner will drive innovation and create opportunities for growth. The partnership reflects GFH’s strategy to strengthen the integration of Fintech in the region. According to GFH Financial Group's CEO Hisham Alrayes, GFH provides new entrants access to a sophisticated network and gives advice on how to reach regional and international capital and markets.

#Saudi Arabia expands $10b loan #refinancing to $16b, adds Islamic tranche

Saudi Arabia is expanding the refinancing of a $10 billion international loan to raise $16 billion. The kingdom is introducing a significant Islamic tranche to the transaction, supporting Saudi Arabia’s goal of becoming the leading centre for Islamic finance. A $16 billion facility would be one of the largest syndicated loans ever extended in emerging markets. The kingdom raised the original $10 billion loan from 14 core banks in 2016, in what was its first jumbo transaction after a slump in international oil prices. A further dollar debt issuance is also planned, which could be marketed over the next few weeks.

Dar Al Arkan meets bond investors for non-deal roadshow

Saudi Arabian real estate developer Dar Al Arkan met fixed income investors last week for a non-deal roadshow. The aim of the meeting was to update investors on the company’s business, so no concrete bond issue plan was discussed. The roadshow was held last week in Dubai and arranged by Emirates NBD. Dar Al Arkan issued $500 million (Dh1.8 billion) of sukuk last April with a profit rate of 6.875% per annum. It also has $450 million of sukuk due in June this year, $400 million of sukuk due in 2019 and a further $500 million of sukuk, those issued last year, maturing in 2022.

Tapping the Islamic banking potential in Africa

Africa represents a huge untapped market for Islamic Banking. The demand for Sharia-compliant products in Africa has been growing for both Muslims and non-Muslims. Most countries such as Senegal, Uganda, Morocco, Kenya, Gambia and Nigeria have already reformed banking laws to allow the setting up of Islamic institutions. While there is a large demand for Islamic Banking, the availability of Islamic Wealth Management Products is still relatively small, leaving a large opportunity for UAE banks. At Noor Bank, for example, each international client is assigned a dedicated relationship manager and customer service officer. Going forward, the African market holds great potential for the UAE Banking sector. Latest forecasts indicate that Africa’s GDP will grow to 3.7% in 2018, according to the African Development Bank.

What the world’s central banks are saying about #cryptocurrencies

Nine years since the birth of Bitcoin, central banks around the world are increasingly recognising the potential upsides and downsize of digital currencies. The American Federal Reserve’s investigation into cryptocurrencies is in its early days. Chairman Jerome Powell said in 2017 that technical issues with the technology remain and governance and risk management would be critical. He added that there were meaningful challenges to a central-bank cryptocurrency and privacy issues could be a problem. The UAE Central Bank has warned about the risks of using digital currencies as a medium of exchange for now, amid mounting risks like massive volatility, speculation and money laundering. The European Central Bank (ECB) has repeatedly warned about the dangers of investing in digital currencies. According to Bank of England (BoE) Governor Mark Carney, technology based on blockchain shows great promise in enabling central banks to strengthen their defences against cyber-attacks and overhaul the way payments are made.

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.

#Venezuela to issue oil-backed #cryptocurrency in ‘coming days’

President Nicolas Maduro announced that Venezuela would issue 100 million units of an oil-backed cryptocurrency known as the petro. Maduro said that the petro would be backed by 5 billion barrels in the Ayacucho block of the Orinoco Oil Belt. Based on the latest price of the country’s oil basket, the total issue would be worth about $5.9 billion. Maduro believes the cryptocurrency will help the South American country challenge the tyranny of the dollar, economic war and US-led financial persecution. Over the past year, the US Treasury Department has blacklisted numerous top-ranking officials, including Maduro and many of his ministers. Home to the world’s largest crude reserves, Venezuelan oil output fell to a 14-year low last July. Maduro didn’t comment on whether Venezuela bondholders would be paid with petros. At the start, the petro will be obtained through auctions or direct allocation by the country’s Cryptocurrency Superintendent.

Islamic #insurers to #refocus on profitable segments

Improving insurance profitability is expected to result in Islamic insurance players refocusing their sectors. According to Moody’s analyst Mohammad Ali Londe, the motor and medical insurance sector have benefited most from the recent premium rate increases in Saudi Arabia and UAE. Therefore, Moody's expects Takaful operators to refocus their underwriting and servicing operations on these lines. Previously, weak underwriting results in the core medical and motor lines forced Takaful insurers to widen their product offerings. GCC Takaful insurers’ results for the first nine months of 2017 reveal that underwriting profitability has improved in most countries. In UAE, motor premium rates rose in 2017 as a result of the country’s new unified motor policy which provides standardised coverages. The improvement in Takaful insurers’ underwriting profitability has started to reverse the previous deterioration in their capital adequacy.

Digitisation, it’s all in the family

Emirates Islamic is targeting balance sheet growth and improved profitability along with digitisation. According to Deputy CEO Wasim Saifi, these objectives are complementary. The speedier technology adoption comes naturally due to the bank's close links with Emirates NBD, a technology leader in consumer banking in the UAE. As a subsidiary of Emirates NBD, it has access to all the innovations the parent company adopts. Emirates Islamic has upgraded its core banking platform and introduced an improved mobile banking app with 25 new services. Emirates Islamic is the first and only Islamic Bank in the UAE to support both Apple Pay and Samsung Pay. As part of the new product roll out, the bank has launched QuickRemit to India and will launch the service to Pakistan and other remittance corridors soon.

Dana Gas shares fall 4.17% on London #sukuk ruling

Dana Gas share prices fell 4.17% following Friday’s English High Court ruling against Dana Gas and in favour of bondholders. Danas said it plans to appeal the decision by the London court that declared the company’s $700 million sukuk valid and enforceable. Friday’s ruling was made in Dana Gas’s absence from the court. Dana Gas had earlier refused to repay debt owed to investors for two mudaraba sukuk worth $350 million each. The latest ruling does not mean that Dana Gas has to pay bondholders just yet, with another hearing in a UAE court scheduled for December 25.

Dana Gas profit boosted by financial settlement with Kurdistan Regional Government

Dana Gas reported a steep rise in third-quarter profit, benefiting from a $1 billion payment as part of a settlement agreement with the Kurdistan Regional Government (KRG). The agreement boosted Dana’s third-quarter earnings and net profit for the nine-month period ending on September 30, which amounted to $125 million against $26 million during the same period one year earlier. The settlement led to a reversal of the provision for payments to the KRG, with the balance of unpaid receivables booked to new petroleum costs. The company is at the centre of a legal dispute after having refused to redeem $700 million in outstanding Islamic bonds claiming they are no longer sharia compliant. It has started legal actions in UK and UAE courts to avoid redeeming the sukuk. Dana claimed being confident pursuant to independent legal advice of prevailing in its interpretation of the outcome.

#UAE’s Dana Gas leaves maturing #sukuk unpaid but no default declared

Dana Gas will not redeem $700 million (Dh2.57 billion) of its sukuk, as the dispute on the validity of the sukuk drags on in British and UAE courts. Dana claims changes in the interpretation of Islamic finance over recent years means the securities are no longer Sharia-compliant and have become unlawful in the UAE. The case is closely watched by the global Islamic finance industry because some investors think it could set a precedent for other sukuk issuers. Dana asked the Sharjah court for an early hearing date for an appeal which would allow it to participate in the London court case. Proceedings in London are expected to resume by Nov. 13, a ruling on the case could be issued on that date or shortly afterwards.

Dubai Economy launches Sharia-compliant #smart #programme

Dubai Economy in partnership with Dar Al Tawreeq has launched a Sharia-compliant smart programme to offer receivables finance to suppliers dealing with government entities in Dubai. Dubai Economy is the first government entity to offer such a financing option to suppliers. Faster payment will support businesses in growing sustainably and maintaining cash flows. Businesses working with government entities can use the smart software developed by Dar Al Tawreeq to ensure liquidity by obtaining financing on their invoices. The programme also provides easy access to on-demand working capital for businesses at no additional cost. The programme was launched by Khalid Al Kassim, Assistant Director General in Dubai Economy and Haitham Al Refaie, CEO of Tawreeq Holdings. The programme emphasises the principle of public-private partnership adopted by Dubai in its evolution into an Islamic Economy Capital.

Syndicate content