JPMorgan Chase & Co. dropped Al- Rajhi Bank, the world’s largest Shariah-compliant lender, as a correspondent banking client amid a push to improve risk controls. The relationship with the bank ended Dec. 31 because JPMorgan couldn’t get enough information on where payments in dollar-clearing services for Al-Rajhi had originated. JPMorgan said it cut off the service to about 500 foreign lenders last year as regulators press the world’s biggest banks to verify that transactions are used for legitimate business. The crackdown seeks to halt funds tied to money laundering, terrorism and countries covered by economic sanctions. The two banks haven’t been cited by U.S. regulators for involvement in illegal money transfers.
The National Commercial Bank (NCB) has successfully placed its SR5 billion 10 non-call 5-year subordinated Tier II capital sukuk offering. The transaction represents NCB's debut of local riyal issuance and its inaugural Tier II capital offering. Interest from the investor community generated a 2.1x oversubscribed orderbook exceeding the initial target issuance size of SR4 billion, allowing the transaction to be upsized to SR5 billion without impacting the final pricing of the sukuk. NCB's issuance was priced at 6-month SIBOR+110bps. The issuance proceeds will be used to further support NCB's growth plans across the various business segments of the bank.
Bahrain-based Gulf Finance House has announced its fourth-quarter net profit has more than doubled due to revenue derived from investments. The investment firm made a net profit of $5.2 million in the three months to Dec. 31, up from $2.5 million in the prior-year period. However, for the 2013 full year, GFH's net profit fell 37.2 percent to $6.3 million. This decline came despite a 20 percent reduction in operating costs, as the firm continued to aggressively cut expenses in the wake of a number of debt restructurings in recent years. GFH, through its Dubai-based subsidiary GFH Capital, agreed to sell 75 percent of Leeds United to Italian Massimo Cellino earlier this month.
An independent legal entity should oversee the way in which Islamic financial institutions certify they are following sharia principles, Kuwait’s central bank governor Mohammad Al-Hashel said. Currently, boards of sharia scholars at financial institutions rule on whether activities and products follow religious principles. They are also involved in audits that determine whether the institutions are operating in a compliant manner. At the same time, the scholars are on the payroll of the Islamic banks which they vet, an arrangement contrary to good governance. The growing role of Islamic finance in some national economies is now prompting government watchdogs to pay more attention to the sector. The creation of an independent legal body could see scholars independently reviewing the work of their peers. Establishing the body would involve challenges but it could take its cues from the conventional financial auditing profession.
DIFC-based investment bank Alpen Capital has advised Dubai Investment Park Development Company LLC (DIPDC) on its $300 million debut Sukuk offering. Alpen Capital also advised DIPDC on its Ratings ahead of the Sukuk offering. The landmark transaction is structured as a Wakala Sukuk and issued through a special purpose vehicle (DIP Sukuk Limited). The issue was oversubscribed 13 times. DIPDC was able to price the Sukuk with a yield of 4.291 per cent (equivalent to a spread of 265bps over five-year USD Mid-Swaps) on the back of an order book that peaked at over $4 billion. Al Hilal Bank, Citigroup, Dubai Islamic Bank PJSC and Emirates NBD Capital acted as Joint Lead Managers and Joint Bookrunners.
Bahrain-based Islamic lender Al Baraka expects at least 15 percent growth in net profit this year as its business recovers across a region hit by the Arab Spring unrest. The growth will also be fuelled by the company's entry into the Moroccan and Libyan markets and expansion in Tunisia. In Syria, where the bank has 10 branches, it has not been able to expand operations since the 2011 start of the civil war. The bank's fast growing 30-branch Algerian subsidiary has now captured nearly 5 percent of the country's foreign trade business and plans are under way for further expansion. The lender hopes to expand its global branch network from a current 480 to around 560 branches by end of 2014, with half of the 84 new branches opened in Turkey and Pakistan. The focus of expansion remains fast growth areas in the Middle East and Asia such as Pakistan and Indonesia because the Gulf is overbanked.
The global financial crisis as well as the political unease over the last few years have led to weaker performances in Bahrain's banking sector, particularly wholesale banks. Along with banks in other markets, Bahrain-based banks have de-risked their balance sheets, concentrating on more stable sources of funding and reducing their exposure to riskier sectors. Besides, there have been a number of bank mergers in Bahrain recently. However, Bahrain has a more limited shock- absorption capacity compared to other GCC countries, like a budget highly sensitive to oil prices, a weak non-oil revenue base and modest fiscal reserves. Moreover, the political situation remains uneasy. As with other GCC institutions, the stronger Bahrain-based banks are widening their reach in other markets.
An independent legal entity should oversee the way in which Islamic financial institutions certify they are following Sharia principles, Kuwait’s central bank governor Mohammad Al Hashel has said. Currently, boards of Sharia scholars at financial institutions rule on whether activities and products follow religious principles and they are also involved in audits. At the same time, the scholars are on the payroll of the Islamic banks which they vet, an arrangement contrary to good governance. The growing role of Islamic finance in some national economies is now prompting government watchdogs to pay more attention to the sector. Clear and specific professional frameworks for the duties and responsibilities of Sharia authorities and their audit function are needed.
Kuwait's takaful firms are still struggling in a crowded market that faces cut-throat competition. This has led to stagnant growth and persistent losses for takaful firms operating in Kuwait, raising doubts about the sector's long-term viability. In a market with 32 insurers, takaful firms say they are at a disadvantage to their conventional peers which have built solid customer bases and amassed large financial surpluses. Kuwaiti takaful firms posted a combined 47.4 million dinars ($167.7 million) in premiums in 2012, an 18.7 percent share of the total. However, many companies in the sector have failed to post consistent profits. Furthermore, the takaful sector lacks a dedicated supervisory body, leaving an opening for negative competitive practices. In the meantime, looking abroad may be the only good option for the Kuwaiti takaful firms which can afford it.
Abu Dhabi Islamic Bank has reported a net profit of Dh1.45 billion for 2013, up 20.7 per cent compared to Dh1.20 billion in 2012. The profit for the fourth quarter of 2013 increased by 41.4 per cent to Dh343.3 million. The Board of Directors recommended the distribution of 30.66 per cent cash dividends and 26.87 per cent bonus shares for 2013. Total assets have passed an important milestone and are now Dh103.2 billion, increasing by 19.8 per cent in 2013. Moreover, ADIB maintained its position as one of the most liquid banks in the UAE. ADIB Securities increased net profit for 2013 by 416.6 per cent to Dh29.7 million. With regard to Burooj, the Group’s real estate investment subsidiary, there was a reduction of commitments by a net Dh775 million vs 2012.
NCB Capital has joined hands with Jeddah-based SEDCO Development Company to launch the AlAhli SEDCO Residential Development Fund, a public close-end Shariah-compliant investment opportunity. The fund provides investors with capital growth by purchasing land plots in Jeddah for development, construction and sale of residential apartments targeting the middle income segment of the population. Minimum subscription is SR50,000 and the fund aims to have an internal rate of return of 10 percent per year. The new fund has been created to address the shortage of reasonably affordable residential accommodation for middle and upper income home buyers.
National Commercial Bank has mandated its own banking arm, NCB Capital, as well as that of Gulf International Bank and the Saudi Arabian units of HSBC and JP Morgan to arrange a local currency sukuk. The sukuk will enhance the bank's Tier 2 - or supplementary - capital and will have a ten-year lifespan with an option of the bank redeeming the instrument after five years. The size of the issue has yet to be determined. NCB's chairman was quoted in October as saying the bank was planning to issue a capital-boosting sukuk worth up to 4 billion riyals ($1.07 billion).
This month, Oman's insurer Al Madina Takaful converted itself from a conventional insurer to a takaful company. It changed its conventional insurance clients to takaful policies after a customer education process, reportedly without client exits or other problems. In the next two years, the firm plans to add up to seven new branches to its network of three, and distribute products via Islamic banks, a practice known as bancatakaful. Two new firms could soon follow in Al Madina's footsteps: Takaful Oman Insurance and Oman United Insurance. However, their entry could crowd the market further and add to pressure on profitability. The Capital Market Authority (CMA) has yet to publish its final rules on takaful, while an insurance law is still in the draft stage.
Noor Takaful, the Islamic insurance arm of Noor Investment Group, announced on Tuesday that the company’s CEO Parvaiz Seddiqi has stepped down from his role. Seddiqi is the founder member of Noor Takaful. The company also announced that Andrew Greenwood has been named acting CEO. Noor Takaful offers general and family Islamic products to cater to individual and corporate customer segments.
Bahrain's central bank will release a new regulatory framework for takaful this quarter. Bahrain already has takaful-specific rules but the regulatory refom could help it grab a larger chunk of the sector. The new rules, developed after two years of consultations with the industry, cover the operations and solvency of takaful firms. They are expected to increase takaful firms' ability to distribute surpluses to policy holders and dividends to shareholders. In addition, the new rules require financial reporting by takaful firms annually rather than once every three years, restrict the use of performance fees, and introduce the concept of earmarked assets. In December, the central bank formally combined existing rules for issuing and listing financial securities, including sukuk, in an effort to make the process more efficient.
For many years we see in the media experts believing in inflation and even hyper inflation. However, in the same time we face proponents warning against deflation. So far we all noticed.
Only a about a week ago I read an article by Myret Zaki clarifying that unfortunately inflation and deflation co-exists.
Myret Zaki's thesis is that we face inflation on financial markets, and deflation in the real economy (in French):
http://www.bilan.ch/myret-zaki/redaction-bilan/inflation-et-deflation-co...
In my view there is a general major shift in the price matrix and I still try to figure the magnitude and implications thereof. It is a bit irritating as at University we learned about neutrality of money:
http://en.wikipedia.org/wiki/Neutrality_of_money
This means any extra supply will increase prices equally, 5 % more money, all prices going up 5 %. Pretty plausible at first hand. However, it seems it does not work in reality any more (or never did).
Saudia's investment banking and asset management firm Anfaal Capital has announced the outsourcing of the Shari'a Supervisory function to Shariyah Review Bureau (SRB). As the new Shari'a Advisor, SRB will oversee and supervise the firms Shari'a Compliance needs from Product structuring to Fatwa issuing, and from stock screening to periodical Shari'a Audits. By having a team of shariah scholars and experts, SRB has the ability to deliver speedy solutions to the business while maintaining the level of Shariah standards. This in turn is expected to contribute to Anfaal's business growth and to meet the needs of the firm's stakeholders.
Dar Al Takaful has announced today that it has opened a new managed investment account with Daman Investments.
According to Mr. Saleh Al Hashmi, Managing Director of Dar Al Takaful, Daman Investments is one of the most venerable companies in the MENA Investment Arena and this is the start of a mutually beneficial business relationship. Mr. Shehab Gargash, Managing Director of Daman Investments, said that Dar Al Takaful is a respected Islamic Insurance company and opening this new managed account demonstrates their confidence in his firm's abilities to manage money in the UAE economy. Dar Al Takaful’s account will be managed under a Shari’ah compliant investment mandate.
In 2007, Bank Aljazira's conversion into the first fully sharia-compliant institution in Saudi Arabia was complete.This transformation required changes to BAJ's infrastructure, offerings and legal environment, among other aspects. Moreover, investments in product development as well as branch and ATM networks were made. The bank simultaneously increased its paid-up capital to SAR 3bn, which came entirely from the bank’s profits. In order to ensure compliance with all sharia banking and financing principles; this led to the formation of a Sharia Advisory Board, which is composed of a number of scholars specialised in sharia-compliant banking. Besides, BAJ launched a SAR 100m programme named Khair Aljazira Le Ahl Aljazira which aims at providing financial support to various charitable societies.
The Islamic Bank of Britain (IBB), the UK’s only wholly Sharia compliant retail bank, has been acquired by Al Rayan (UK), the UK subsidiary of Masraf Al Rayan (MAR). The acquisition follows a cash offer made on 28 November 2013 for which MAR received over 95 per cent of valid shareholder acceptances, together with approval of the Prudential Regulation Authority for MAR to take control of IBB. MAR considers the acquisition an opportunity to expand its footprint and introduce its range of products to a fertile market with potential for continued growth. It will also enable Masraf Al Rayan to offer its existing Gulf-based customers additional services as they expand their activities into the UK.