Financial Institutions

Al Rajhi ahead of major international banks in market value

According to a survey published originally by the newspaper Al Qabas it results that Al Rajhi Bank with its market value of USD 22.4 bn was ahead of leading global banks, including: Morgan Stanley with USD 20.88 bn, Deutsche Bank with USD 13.83 bn, Barclays with USD 11.58 bn, Royal Bank of Scotland (RBS) with USD 10.93 bn and Citibank with USD 10.63 bn.

Moody's: Islamic Banks Not Unduly Challenged by Oil Price Drop and Crisis

According to Moody' s worldwide fall in oil prices and the global economic crisis has affected the Islamic finance industry, but the institutions' accumulated liquidity and capital will help them withstand these pressures.

According to Moody's, the drop in oil prices poses two key challenges for the Islamic finance industry. "Firstly, there is still a vital link between oil prices and Islamic banks as most of the latter operate in hydrocarbon-exporting economies. As they face increasingly limited funding sources, Islamic banks will find it more difficult to grow going forward. Secondly, oil liquidity has been a major driver of the disintermediation process in the Islamic finance industry. With reduced oil liquidity, not only have sukuk issuances been slowing sharply, thereby depriving Islamic banks of much-needed long-term funding, but pricing on such instruments has been distorted," says Anouar Hassoune, a Moody's Vice-President/Senior Credit Officer and co-author of the report.

Shamil Bank income above USD 66.8 mn

Shamil Bank said that it had made USD 66.8 mn in total income for last year. The bank's net profit last year amounted to USD 22.8 mn, while Q4 last year, the bank sustained $16.3 million in losses.

Over the year, commodity Murahabas (bank placements) increased significantly from $424 million to $1.043 billion. The bank's Murabaha Financing (loans and advances) activities also increased from $807m to $1.048 billion.

ABC Islamic registers USD 26 mn net profit

Bahrain-based ABC Islamic Bank announced a net profit of $25.6 million for last year. Gross operating income was USD 33.8 mn which, excluding an exceptional USD 32.8 mn capital gain in 2007 arising from the partial disposal of a sukuk investment, represented a 34 % increase over the previous year. It posted a net profit of USD 50.9 mn in 2007.

S&P: Rated Gulf Islamic Banks And Takaful Companies Resilient In Global Market Dislocation But Facing Risks

Press Release

PARIS, February 27, 2009--Gulf Islamic financial institutions and takaful companies are feeling the repercussions of the current global financial market disruption less than most of their conventional counterparts because Sharia law prohibits interest-based financial products, according to a new report by Standard & Poor's Ratings Services.

"IFIs didn't invest in the structured products that have hampered many conventional banks' financial profiles and performance," said Standard & Poor's credit analyst Mohamed Damak in the report, titled Rated Gulf Islamic Financial Institutions And Takaful Companies Have Shown Resilience To Global Market Dislocation, But They Are Not Risk Immune. "And most IFIs should be equipped to weather the financial downturn and keep the effects on their financial profiles at manageable levels."

S&P: Islamic financial institutions suffer from real estate credit exposure

Islamic financial institutions (IFIs) face a significant hit on profits if real estate prices continue to fall in the Middle East according to ratings agency S&P. IFIs' direct exposure to real estate assets in 2008 reached 20 % of total loans, making them vulnerable to an ongoing correction, especially in Dubai.

Unlike their conventional counterparts, IFIs remained immune to price falls in structured products, which prompted write-downs all over the world, the report said.

Dubai Islamic Bank posts USD 471 mn profit for 2008

Andy Sambidge reported on 25 February in Arabianbusiness that Dubai Islamic Banking reported only a small decline in net profit in 2008, AED 1.73 bn (USD 471 mn) in net profit for 2008. DIB’s total assets as of December 31, 2008, stood at AED 84.6 bn, up slightly compared to the end of the same period in 2007.

DIB’s full-year results reflected total impairment provisions of AED 521 million (including writedowns on its investment portfolio) and mark-to-market losses on equity investments of AED 277 million. The majority of these were recorded in the fourth quarter of the year, one of the primary reasons impacting profitability during the last quarter of 2008.

The Board of directors of Dubai Islamic Bank has proposed a cash dividend of 25 percent and bonus share of five percent for 2008.

Emirates NBD in healthy condition according to CFO

The debt level of Emirates NBD is small and manageable according to analysis given by its CFO, Sanjay Uppal.

USD 1.6 bn medium-term debt is maturing, USD 500 mn has been paid in January already, and the total balance sheet is UDD 76 bn. According to Sanjay Uppal there are no plans to raise capital by selling any of its assets or going for restructuring its debt and sees the exposure to real estate at comfortable levels.

Emirates NBD has an Islamic window.

Moody's negative on Qatar banks

Martin Morris reported on 23 February in Arabianbusiness that Moody's, says the fundamental credit outlook for the Qatari banking system is negative, reflecting expectations of a weakening in operating conditions.
In its new Banking System Outlook on Qatar the agency examines the likely future direction of fundamental credit conditions in the industry over the next 12 to 18 months. It does not represent a projection of rating upgrades versus downgrades.

Negative factors evaluated are the asset quality, impacted by property lending and the reduced profitability also impacted by stock market developments. The direct impact of the financial crisis has however so far been limited.

Al-Salam Bank Bahrain in early merger talks with Bahrain Saudi Bank

The two institutions are in the early stages exploring the possibility of a business combination through a share exchange with ASBB issuing shares to BSB shareholders. The combination is subject to approvals by the Boards and shareholders of both the institutions and regulators in Bahrain and Dubai it was revealed.

Dubai Gets USD 10 bn Bailout to Ease Debt

Chip Cummins discussed in the Wall Street Journal on 23 February that the United Arab Emirates said Sunday it will spend USD 10 bn to bail out Dubai. The Emirate of Dubai financed much of its recent growth with international borrowing, and a big chunk of that debt comes due this year. The Dubai government said in a statement Sunday it would issue USD 20 bn long-term bonds, and that the first installment of USD 10 bn was fully subscribed by the U.A.E.'s central bank. The bond will be unsecured, fixed-rate paper, yielding 4% a year, with a five-year maturity.

BKME sees tough 2009, to turn Islamic in 2010

The Bank of Kuwait and Middle East (BKME) expects 2009 to be difficult due to a global crisis but has no exposure to troubled investment firms and will turn an Islamic bank in January 2010. BKME, owned by Bahrain's Ahli United Bank, saw Q4 net profit fall by 89.5 % to 965,000 dinars compared to KWD 9.23 mn in Q4 of 2007, according to Reuters calculations based on financial data.

Rumour: Dubai Islamic Investment Group may sell stake in Maybank

Malaysia's top lender, Maybank, said it was not in talks to buy Dubai Islamic Investment Group's stake in Bank Islam, a deal that would have created the largest sharia compliant bank in the Asia-Pacific region. Dubai Islamic Investment Group, which is part of Dubai Group, was interested in selling its 40 percent stake in unlisted Bank Islam to Maybank Islamic, the banking sources added. Approached to comment on whether it was selling its stake, Dubai Group said that it "is a long-term strategic investor" in Bank Islam.

Borse Dubai may only get half the finance it seeks

Haris Anwar reported on 17 February on Bloomberg that Borse Dubai Ltd. may get half of the USD 2.5 bn it sought to refinance a one-year loan used for the purchase of Swedish exchange operator OMX AB as lenders tighten credit for the emirate amid concern over its ability to repay. The facilty has to pay according bankers 325 basis points over the LIBOR, with an additional 125 basis-point fee and 75 basis-point margin if the lenders allow for a one-year extension. HSBC Holdings Plc is leading the syndication for Borse Dubai. The financing will have a portion compliant with Islamic restrictions.

EONCAP Islamic Bank Bhd is eyeing 8 % growth in financing

EONCAP Islamic Bank Bhd is eyeing an 8 % growth in financing despite the economic slowdown. The bank has deposits and financing worth RM 4.3 bn and RM 4.8 bn respectively.

Gulf Finance House (GFH) has approved a cash dividend of USD 52.56 mn

Gulf Finance House (GFH) has approved a cash dividend of USD 52.56 mn for last year. This is equivalent to 20 % of the par value of the paid-up capital. In addition a further 20 % will be paid in the form of bonus shares. This has been driven by strong end of year profits of USD 291mn.

University Bank Receives the American Bankers Association's Community Bank Award for 2009

University Bank was nationally acknowledged by the American Bankers Association for its innovative programs to increase homeownership opportunities at the American Bankers Association's National Conference for Community Bankers in Phoenix, Ariz. on Feb. 17.

The selection committee lauded University Bank for its innovative programs such as home financings for Muslim customers. Muslims are much less likely to be homeowners on average due to religious prohibitions on the payment or receipt of interest. University Bank designed a program to meet these needs, which has so far resulted in over USD 50 mn of financings for the purchase of homes by Muslim customers of the bank.

Floatation of Bank Mellat faces difficult market environment

Fredrik Dahl and Parisa Hafezi reported on 18 February in Forbes about the floatation of a 5 % stake in Bank Mellat, Iran. Market environment was not supportive with a fall of 30 % of share prices since last August.

A Tehran Stock Exchange (TSE) official said investors bought 340 million, or around 52 percent, of the 655 million Bank Mellat shares on offer, and suggested the price had been set too high in view of the difficult market conditions.

Iran's economy is dominated by the state but the government has been seeking to speed up privatisations after the constitution was changed to encourage the sale of assets.

Iran is privatizing banks

Iran plans to offer 5 % of Bank Mellat to private investors to study the demand and interest from buyers. Bank Mellat, Iran's second-largest bank after state-owned Bank Melli, is estimated to have a share of around 15 % of the country's banking industry.

It is said two other state banks - Tejarat and Saderat - were next in line to be partly sold off.

Industrial Development Bank becomes Jordan Dubai Islamic Bank

Dubai Islamic Bank (DIB) announced the official re-launch of Jordan-based Industrial Development Bank (IDB) following the completion of a private placement of 26 million shares of IDB, valued at USD 100 mn. As part of the re-launch, IDB has been transformed into an Islamic financing institution to be known as Jordan Dubai Islamic Bank (JDIB).

The parties involved in the private placement transaction include Jordan Dubai Financial (JD Financial), the investment arm of Jordan Dubai Capital, DIB and Dubai International Capital. The private placement was valued at JOD 2.750 per share, based on the pricing equation adopted by the bank's Shareholders General Assembly, wherein the strategic partner, Mesc Investment, covered the entire placement.

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