Gulf News

GCC wealth management demand grows as expatriates stay longer

The average length of expatriates stay in GCC countries, counting in all major expatriate groups such as Western, Arab and Indians, exceeds 10 years and this group forms a major target market for asset managers, according to Invesco’s sixth annual Middle East Asset Management Study. The Invesco survey of asset managers showed that contrary to popular belief, the average stay of various expatriate groups in GCC countries are longer, with non-resident Indians (NRIs) exceeding 15 years. In summary, there was a strong consensus that the number of GCC-based retirees would increase from all expatriate segments if GCC governments changed the immigration rules and encouraged retirees.

Islamic banks to benefit from Iran’s opening up

As the Iranian economy opens up for business, regional Islamic banks are likely to benefit most as the country’s banking system is governed by Sharia, according to Moody’s. According to the Central Bank of Iran, the country’s banks and other financial institutions held 15,901 trillion Iranian Real ($558 billion) in total assets as of May 2015. Given the sheer size of the banking system and the country’s financing needs, Moody's expects a major boost to sukuk volumes, said Khalid Howladar, senior credit officer at Moody’s. However, Sharia harmonisation across jurisdictions would likely remain difficult, he added. Iran's banking sector is the largest contributor to the global total of Islamic banking assets estimated to account for 45 per cent of $1.2 trillion market.

Dubai’s Noor Bank to help arrange Indonesian sukuk

Noor Bank is looking to Indonesia, Turkey and other international markets to escape tougher competition at home and take advantage of a booming global Sharia-compliant finance industry. Thus, Noor Bank plans to help arrange a sukuk or Islamic private placement on behalf of the Indonesian government, with the Dubai-based Islamic finance institution also underwriting part of the deal. Officials declined to specify the amount of the new sukuk but said it would be dollar based and would include other underwriters. The issue will help strengthen Indonesia's forex reserves and help Bank Indonesia maintain the stability of its exchange rate, Finance Minister Bambang Brodjonegoro said.

Caution is the watchword among bankers

Bankers expect the overall profitability to be moderate this year while top-line growth is expected to be significantly lower, while factors such as improved recoveries, stronger collateral values and lower provisions could continue to boost their bottom lines. Non-performing loans (NPLs) and provision figures for the first two quarters confirm this argument. For Emirates NBD (ENBD), during the first half, the impaired loan ratio improved to 7.4 per cent from 7.9 per cent at the end of 2014. For Mashreq, NPLs remained stable at Dh2.8 billion in June 2015, leading to NPLs to gross loans ratio of 3.7 per cent at the end of June 2015.

Margin, scale issues to hit smaller Islamic insurance players

The enhanced regulatory environment across GCC is expected to result in a surge in costs associated with the implementation of the regulations impacting the profitability of takaful players hard, especially the smaller players. According to S&P profitable insurance companies in the GCC region tend to rely on group medical business or policies that provide significant commission income from reinsurers. Only a few major local insurers can access this profitable commercial business; the smaller players, including the takaful companies, do not have a track record of servicing such contracts and lack the capacity to do so. This leaves all the small players in the region, including takaful companies, reliant on retail business sourced from agents charging high commissions.

Guidance seeks to link Islamic investors in Asia, Mideast

Guidance Financial Group, a wholly-owned subsidiary of Malaysia-based Capital Guidance, wants to link the vast Islamic investment opportunities between the Middle East and Asia, Dr Hasnita Hashim, chief executive officer of Guidance Investments, said. If appropriately linked these two regions can deliver strong value for investors while making innovative investment opportunities and ethical funding bases on Sharia principles available across both the regions, she said. In the GCC and wider Middle East region, the company has plans to replicate the success of its US residential mortgage business targeted at primary mortgage customers and institutional investors seeking secondary market asset pools. The company is already involved in providing primary mortgages through Dar Al Tamleek in Saudi Arabia.

Welcoming the golden age of the Islamic economy

Some countries have realised this opportunity regarding Islamic finance and are preparing for the golden age. More ports are being built in the Middle East to handle increase transshipment and trade, including Halal trade. According to the Global Islamic Economy 2014-2015 report by Thomson Reuters and Dinar Standard, the Islamic clothing and footwear industry alone will increase 82 per cent to $484 billion (Dh1.7 trillion) by 2019 from 2013. The big constraint is the lack of institutions educating the Muslim populace on how to deliver for such services and develop such industries. This lack of talent pipeline will impact the ability of product innovation, organic expansion and at the very base level providing of services to an expanded populace. The industry needs to come together to set up various international qualification boards to tackle this issue.

Taking the regional sukuk market to the next level

Looking forward, market conditions should continue to support growth but we also need to consider what structural changes will add depth to the GCC market and assist it in moving to the next level. To date key drivers of the sukuk market growth have included the need for banks’ to prudently manage funding risks and address changing regulatory requirements. Non-bank issuers have followed suite to diversify their funding sources and access cheaper financing. The current trend of influential factors should continue to be supportive for the GCC sukuk market. However, there are additional factors that must be addressed like improved public disclosure by issuers, improving investor knowledge and sukuk market liquidity.

‘Vicious’ debt cycle ends badly for many

Over the years, there have been a number of cases involving suicides due to the inability to settle debts. Defaulters can end up in jail over bounced cheques, lose their jobs, have their visas blocked, and taken to criminal and civil court. In the face of the impending consequences, the defaulters sometimes resort to extreme measures. Many debtors who are stuck in a rut are nevertheless determined to settle their dues. Their biggest concern is that due to the rigid bank rules, they are effectively unable to find a middle road till the time their issue is resolved. Many who have little financial literally and lived a credit card swipe-happy life end up in a continuous state of shock, weighed down by interest and other charges.

Ajman Bank starts transactions on Nasdaq Dubai Murabaha platform

Nasdaq Dubai said on Monday Ajman Bank has begun transacting on the its Murabaha Platform, which facilitates the provision of streamlined Sharia-compliant financing services. Ajman Bank’s initial activity on the platform has enabled it to meet the needs of customers throughout the country, the bourse said in a statement. Since it was officially launched in April 2014, the Nasdaq Dubai Murabaha platform has completed a total of more than Dh46.5 billion of transactions and is playing a growing role in Dubai’s expansion as the global capital of the Islamic Economy.

Insurance regulation gains traction in GCC

While the Takaful industry across the GCC is experiencing strong progress, development of a supervisory framework varies substantially between the constituent countries. The UAE, Bahrain and Oman — and the autonomous financial hubs of DIFC and QFC — have introduced regulations specifically for the Takaful market. Kuwait and Qatar (outside the QFC), do not have an explicit rule book for governing the market. Saudi Arabia has a common legislation applicable to both conventional and Takaful companies. The Kingdom prescribes the cooperative model for all insurance companies, which has a few variations from the Takaful model followed in other parts of the world.

Hong Kong Sharia finance goals elusive as second sukuk readied

The Hong Kong Monetary Authority announced plans this week to sell $1 billion (Dh3.67 billion) of five-year sukuk, the same size and tenor as its debut issue in September that drew $4.7 billion of bids. Those notes last yielded 2.06 per cent, almost the same as the rate at issue and about twice the level of the government’s similar-maturity non-Islamic securities. While the city government’s AAA- rating will ensure demand, Hong Kong is unlikely to host any corporate offers in the next one to two years as sukuk is seen as an “exotic instrument”. The main objectives of Hong Kong selling sukuk are to demonstrate that the legal framework for issuance in the city is widely accepted internationally and to attract more issuers and investors to the local market.

Credit insurance: Al Hilal, Euler Hermes sign distribution deal

Al Hilal Takaful, the insurance subsidiary of Al Hilal Bank, signed a distribution agreement in Abu Dhabi with Euler Hermes, a trade credit insurance company. The collaboration is expected to position Al Hilal to deliver better credit insurance solutions, and secure a stronger position in the takaful market. It will also allow Euler Hermes to enhance its presence in Abu Dhabi. The partnership allows Al Hilal Bank’s Abu Dhabi customers access to a range of trade credit insurance solutions for business-to-business trade receivables offered by Euler Hermes.

Bahrain Islamic Bank to hire Standard Chartered’s Bahrain CEO

It was reported that Standard Chartered PLC’s Chief Executive Officer for Bahrain, Hassan Jarrar, is leaving to head Bahrain Islamic Bank BSC. Standard Chartered confirmed his departure. Jarrar served as CEO of its Bahrain unit since November 2011, and was earlier the head of origination and client coverage for the lender’s wholesale banking unit in the UAE. Jarrar’s departure comes amid a shake-up in top management at the London-based lender after profit slumped. Chairman John Peace, CEO Peter Sands, Asia head Jaspal Bindra and Viswanathan Shankar, head of Europe, Middle East, Africa and Americas, are all leaving the bank.

Sharjah Islamic Bank plans dollar-based sukuk

Sharjah Islamic Bank plans to launch a dollar based sukuk, and will hold meetings with fixed income investors on March 5. The bank plans to meet investors in Asia and Europe, it said in a statement on the Abu Dhabi Securities Exchange. Abu Dhabi Islamic Bank, Dubai Islamic Bank, Emirates NBD Capital, and HSBC will act as be arranging meetings on SIB’s behalf.

Call for Arab world 'Marshall Plan' at Davos 2015

A call for a 'Marshall Plan' in the Arab world was made at the start of the 2015 World Economic Forum in Davos. One speaker outlined his idea to have a fund to invest in large and small economic projects across the Arab world. The investment would come from Arab sources. There's tons of capital in the area, he said. Several other attendees agreed that such a fund can go ahead without the political stability. However, there are also dangers in the region, like having no change for decades and suddenly dramatic change. The long tradition of strong men and weak states has led to the hollowing out of the nation state and these issues are now coming to the fall.

Flydubai lists $500 million sukuk on Nasdaq Dubai

Nasdaq Dubai said on Wednesday flydubai listed its $500 million (Dh1.8 billion) sukuk on its exchange. This is the 18th Sukuk to have listed on Nasdaq Dubai since the beginning of 2014. The emirate is one of the three largest venues in the world for Sukuk listings, with current nominal value on its two exchanges totalling $24.05 billion. The sukuk saw a geographic distribution of 64 per cent to Middle East accounts, 25 per cent to European accounts, 7 per cent to Asia, and 4 per cent to US offshore.

Dubai’s DIFC Investments sets final guidance on $700m sukuk

DIFC Investments, the investment arm of Dubai’s financial free zone, has set final guidance for a $700 million (Dh2.57 billion) 10-year sukuk in the range of 185 to 190 basis points (bps) over midswaps on Tuesday, according to lead arrangers. Pricing has tightened with investor orders topping $3 billion, lead arrangers said. Earlier on Tuesday, the sukuk had been marked at 195 bps plus or minus 5 bps over midswaps. On Monday, it was marked initially at the very low 200s over the same benchmark. Dubai Islamic Bank, Emirates NBD, Noor Bank and Standard Chartered are arranging the sale.

Kuwait Finance House’s September net profit falls 10 per cent

Kuwait Finance House (KFH) said its net profit fell 10.2 per cent in the third quarter to September. It fell to 35.5 million Kuwaiti dinars in the third quarter compared to 39.2 million in the same quarter last year. Total assets jumped to 17.1 billion dinars in the third quarter as against 14.7 billion dinars in the same period last year. The company’s financing income, which contributed to 76 per cent of its revenues, jumped the most by 35 per cent to 185 million dinars. However, investment income fell by 66 per cent to 24 million dinars. Total deposits reached 10.9 billion Kuwaiti dinars, up 7.5 per cent compared to December 2013. Chairman Hamad Al-Marzouq said that the achieved results come amid major changes taking place in the bank.

DIFC introduces new fund to target wealthy investors

The Dubai International Financial Centre has launched the Qualified Investor Fund (QIF) targeting wealthy investors. It requires a registration process of 48 hours. QIFs offer a short time to market solution for asset managers. The DIFC houses over 400 regulated entities and over a 1,000 companies with over 80 firms managing assets and over 2,000 funds marketed from the DIFC.

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