IslamicFinance.de

KFH-Research issued a report that stated that Iran's Islamic banking assets contributed 42.7% of the total global Islamic banking assets in 2012, followed by PGCC (34.1%) and Malaysia (10.0%). The report expected that Islamic banking will continue to grow in the PGCC region during this year, and that it will manage to enter new markets worldwide, driven by growth factors and increasing demand. Islamic banking assets are expected to reach USD 1.5 trillion by end of this year with an accumulative growth rate of up to 20%. Islamic banking represents the largest market share (80.3%) in the Islamic finance total assets.

Dubai Islamic Bank announced the successful pricing of a $1bn Tier 1 Capital-eligible issuance, with a perpetual (non-call 6) maturity. The issuance carries a profit rate of 6.25%, which represents the best yield ever achieved by a GCC bank on public Tier 1 transaction. The transaction was allocated to investors across the Middle East (38%), Asia (29%), Europe (29%) and US Offshore (4%). In addition, the types of accounts were also well balanced, with Banks (33%), Private Banks (32%), Fund Managers (29%), Hedge Funds (5%) and Other (1%) investors anchoring the orderbook. Dubai Islamic Bank, Emirates NBD Capital, HSBC, National Bank of Abu Dhabi and Standard Chartered Bank acted as Joint Lead Managers on the offering.

Bank Islam Malaysia targets its financing segment to grow about 20 per cent to 25 per cent this year. Its Director of Business Development Khairul Kamarudin said the target would be achieved through the introduction of four new products related to technology and microfinancing. He added that all the products will be novelty to the market. However, the bank has not obtain any regulatory approvals yet. Khairul said the bank is also targeting to reduce further its non-performing loan (NPL) ratio and to increase its retail deposits by 15 per cent this year.

Last April the Qatari government signed a memorandum of understanding with the Islamic Development Bank and Saudi Arabia's Dallah Albaraka Group to establish an international Islamic bank with initial capital of $1 billion. Finance Minister Youssef Kamal, however, has not given details about the timing, ownership or other aspects of the new institution but said it would be set up soon.

Growth in the Muslim population throughout the emerging markets of Middle East and North Africa and Asia (MENA) is a key reason behind increasing demand for Islamic banking services. Especially sub-Saharan Africa offers growth opportunity for Shariah-compliant finance. Ja’iz Bank for example, Nigeria’s first Islamic bank, has witnessed growth in customer base, assets and branch network. The future of non-interest banking in Nigeria is bright. The Central Bank of Nigeria (CBN) has launched Liquidity Management Instruments to assist non-interest banks to be able to manage their liquidity while National Insurance Commission (NAICOM) has, in collaboration with Ja’iz, designed an Islamic cooperative kind of insurance called Takaful. Similarly, other institutions and commissions are mulling how to come up with non-interest-based bonds for financing infrastructure.

The National Bank of Bahrain (NBB) and a local pension fund will buy a 51.6-percent stake in Bahrain Islamic Bank. As part of the deal, NBB and Social Insurance Organization Asset Management Company, a unit of pension fund Social Insurance Organization, will each take a 25.8-percent stake in Bahrain Islamic for 72 fils per share. Based on Bahrain Islamic’s total outstanding shares, the value of the deal is about 34.9 million dinars ($92.57 million). The transaction will provide NBB an opportunity to expand into Islamic banking.

The Waqf Fund recently held a roundtable discussion themed, "Shariah and corporate governance issues in SPV governance," in Bahrain. The meeting was attended by a select group including lawyers, professional firms and Shariah scholars. Central Bank of Bahrain's Hana Al Murran made a presentation highlighting the regulatory and legal issues with special purpose vehicles (SPVs). Among others, the key issues highlighted were: mechanism to safeguard investors' interest, Shariah governance and compliance, mechanism and type of fee charged to investors, reporting frequency and transparency, and due diligence.

The National Bank of Bahrain (NBB) is likely to acquire the loss-making Bahrain Islamic Bank (BisB) and give itself an Islamic finance arm. NBB’s chairman Farouk Almoayyed said that the acquisition is a business opportunity as his bank does not have an Islamic banking operation. They are confident that it will do well under their management, he added. Last year, BisB, the first Islamic bank in Bahrain, posted a net loss of BD36 million ($94.95 million). NBB however is looking strong and is keen to move into the Islamic market.

Falcon Private Bank is planning to launch a fund early next month that will invest in global sukuk.The fund will be offered to the bank’s clients and could grow to $500 million, according to Zafar Khan, Falcon’s Mena chief executive. There is alreade substantial demand from the bank's clients for global sukuk investments, he added. He also considers the yields of the past two years dislocated and the current yields more realistic to the underlying risk.

Ernst & Young signed a working agreement with Accounting and Auditing Organization for Islamic Financial Institutions ( AAOIFI ) to assist in Sharia certification of Core Banking Systems (CBS) used by Islamic banks. On the back of this mandate, Ernst & Young is launching its new Advisory Solution, CBS Sharia Assessment, to assist international and regional technology firms. The certification programme will assess CBS services to ensure that they conform to the approved global Sharia and accounting standards.

Barwa Bank has appointed Khalid al Subeai as Chief Executive Officer at its wholly-owned investment banking subsidiary, The First Investor QSC (TFI). He is responsible for driving TFI's strategy and day-to-day management. Prior to joining Barwa Bank, Al- Subeai has held several leadership positions within the Finance sector in Qatar. Under his leadership, TFi is looking to expand and develop its investment banking franchise.

Due to complete management failure, two state-controlled banks, the SME Bank and the Islamic Bank of Thailand, are now dealing with bad loans in excess of 80 billion baht. This management failure is collective, whether it be the executives and directors of the two banks, the political leadership which appointed both or the Finance Ministry officials tasked with supervising the institutions. The problems at the institutions are conflicts in terms of policy direction, internal fraud and corruption and management inefficiency at the board, senior executive and staff levels. The public didn't create the troubles at these banks, but now must shoulder the cost of fixing them.

Masraf Al Rayan got the approval by its extra ordinary general assembly to acquire an important share in a commercial bank in Libya. It now needs the nod of the Qatari and Libyan authorities before it can be a reality. The acquisition of the anonymous Libyan bank is part of the Masraf Al Rayan’s plan to pursue diverse investment opportunities. According to director Dr Hussain Ali al-Abdulla of Al Rayan, the Libyan bank is poised to be converted into an Islamic bank. Moreover, Masraf Al Rayan continues its efforts to acquire a large share in Islamic Bank of Britain.

In recent years the GCC financial service regulators have given importance to corporate governance and have come up with rules and regulations to implement the same. Qatar Central Bank (QCB), Qatar Financial Centre ( QFC) and The Saudi Monetary Agency are among the institutions that provided principles of corporate governance. Regulation in the GCC region has been strengthened to promote risk governance and financial stability in the financial services sector. Corporate governance promotes financial stability and can attract foreign direct investment, support the development of the bond market and encourage the production of more high quality research.

Oman's Capital Market Authority (CMA) is encouraging consolidation in the country’s crowded financial sector, aiming in the long term for local banks to build a regional presence in the Gulf region. There are now 18 banks in the sultanate, whereas Oman’s three largest lenders account for approximately two-thirds of banking assets. According to Abdullah Salem Al Salmi, CMA’s executive president, the crowded field could lead to cutthroat competition, which would be unhealthy for the market and cause new entrants to struggle. However, he did not specify any ways in which the CMA might encourage consolidation.

Bank Nizwa is going to request the Central Bank of Oman (CBO) for allowing the bank to get relaxation in deploying funds in overseas markets for a certain period, until Sharia-compliant products are available within the domestic market. Dr Jamil Jaroudi, Chief Executive Officer of Bank Nizwa said there are restrictions in the new law that do not allow Islamic banks to achieve their full potential. The law for sukuk and takaful need to be issued, and the banking regulations have to be adjusted in order to attract Islamic investment, he added. The CBO needs to frame regulation for short-term instruments, which will allow Islamic banks to deploy their excess liquidity.

Qatar Islamic Bank (QIB) has charted out a five-year global investments strategy to help anchor the Bank’s position as an Islamic financial institution of international stature. According to the Bank Chairman Sheikh Jassim bin Hamad bin Jassim bin Jabor Al Thani, QIB seeks innovation and diversification of its credit portfolio, support for small and medium enterprises, expansion of foreign investments, and maximisation of total profits. QIB recorded a net profit of QR1.24bn for the year 2012. Growth was also registered in other financial positions, such as total assets, customer deposits and total income.

The Islamic Bank of Thailand has experienced deposit runs due to worries about its financial stability. The state-controlled bank reported some 5 billion baht worth of withdrawals over the past two weeks following reports of its weakening financial status. The government is now to move quickly to reassure the public the bank will have full government support. Prawat Uttamote, a Pheu Thai party list MP and deputy chairman of the border affairs committee said the bank's restructuring plan estimates that 50% of the bad loans or 12 billion can be recouped within the next two years. Therefore, the bank is in no imminent danger, he added. Prime Minister Yingluck Shinawatra separately stressed that deposits in the banking system are fully protected under the Deposit Protection Agency.

Qatar-based Barwa Bank arranged $863mn of notes in 2012, and is therefore the eighth-biggest underwriter out of 25 for GCC sukuk. Barwa Bank chief executive officer Steve Troop said that there was a space for an institutional Islamic bank to focus on sukuk. Barwa Bank which started operations in the third quarter of 2009 will wait until releasing first-half results before pursuing a credit rating. Moreover, it is preparing to sell shares in an initial public offering and is being advised by QInvest.

Political tensions after the Arab Spring still weigh on Bahrain's banking industry which is deterring some investment and inflows of money, and making it harder for Bahrain to compete with other centers such as Dubai. However, a mass exodus of financial firms from Bahrain has not happened and local banks are proving resilient. Moreover, Bahraini authorities have mounted an active campaign to persuade financial institutions to stay in the country. The central bank of Bahrain has also been active in recent months in trying to strengthen financial institutions, asking them to increase capital, encouraging revenue diversification and, in some cases, merge. Nevertheless, the future health of Bahrain as a banking market will not be assured as long as the political unrest continues.