IslamicFinance.de

Press Release

LONDON, April 29, 2009--In the spring of 2009, uncertainty remains the dominant theme for insurance companies and banks across the Gulf Cooperation Council (GCC) region, as it does internationally, Standard & Poor's Ratings Services noted in a report, titled "Insurance Markets In Saudi Arabia In The Wake of Regulatory Restructuring And The Global Economic Downturn."

Even within the GCC, however, Standard & Poor's detects a widespread belief that the Kingdom of Saudi Arabia (KSA) and its financial institutions have been less affected by the downturn than most of its neighbors, and that recovery will likely come more quickly there than elsewhere. Meanwhile, the ongoing flow of Initial Public Offerings (IPOs) on the Tadawul Stock Exchange in Riyadh in 2009--including the April IPOs of insurers Al Rajhi, Weqaya, ACE Arabia, and AXA Cooperative to raise a cumulative Saudi Arabian riyal 260 million (approximately $69 million) of new capital--indicate that Saudi investors still have considerable liquid assets with which to support attractive business propositions.

High Financing Costs May Crimp Future Issuance Of Project And Infrastructure Sukuk In The Gulf

LONDON, April 28, 2009--The global slowdown, along with local macroeconomic factors, appears to have curtailed the anticipated growth of sukuk (including those for infrastructure and project finance) in the Gulf region, says a report published by Standard & Poor's Ratings Services titled "Islamic Sukuk Come Of Age In Infrastructure And Project Finance." What's more, investor appetite for these instruments may continue to be adversely affected by the high costs of financing, predominantly local investor appeal, a real estate downturn, hydrocarbon prices, and accounting issues.

Dubai Islamic Bank's shareholders agreed Monday to increase its capital by 3 billion dirhams (USD 816 mn) over five years. The bank said in an emailed statement that shareholders at a general assembly also agreed to convert an 3.75 billion-dirham deposit from the Ministry of Finance into Tier 2 capital.

Abu Dhabi-based Dolphin Energy has signed USD 3 bn of loans that will part refinance a USD 3.45 bn debt facility maturing in July, it is also finalising an Islamic tranche worth about USD 500 mn and is preparing to launch a bond worth USD 500 mn to USD 1 bn.

Dear Reader,

Just reading an article how much the UAE economy needs the small and medium sized companies and how much difficulties they face to be financed by banks:

http://www.business24-7.ae/articles/2009/4/pages/26042009/04272009_46940...

One issue I missed in this article:

Not a word mentions the role of cooperative / mutual banks or the saving & loans; both financial institutions, which are non profit by its bylaws but dedicated to their members or region. This sector has about 50 % of the total banks balance sheet in my home country Germany, where small and medium sized companies are the backbone of the economy.

So, what is missing in the GCC desperately is setting up cooperative banks and regional saving banks - both can be done Islamically.

The Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) will seek a mandate from its trustees to examine the degree of sharia financial products' compliance with its 40 standards, its secretary-general, Mohamad Nedal Alchaar, said according to Liau Y-Sing from Reuters.

Lack of common standards makes it difficult to sell products across borders, while possibly enhancing innovation.

Dubai real estate developer Deyaar will launch a series of funds of up to AED 1 bn to buy distressed debt, including its own, as it looks to boost returns for shareholders, reports John Irish on Reuters.

Its first AED 500 million fund is about 60-70 % subscribed by a mix of local and overseas investors and would buy back properties on which investors have defaulted from Deyaar's own portfolio according to the CEO, Giebel.

Deyaar will rent out the units to provide cash flow for the company before selling them once the Dubai property market recovers.

The UAE’s two largest Islamic home finance companies will need to secure adequate funding before they can re-start lending, the chairman of Tamweel. Both firms have been funded by banks on short term maturities, a business model, which does no longer work.

The whole-sale "mega bank" initiated by Saleh Kamel, Chairman of Dallah Albaraka Group shall be situated in Bahrain and is going to fundraise this year reported Shakir Husain in Gulf News. The bank should be business even outside the Muslim regions.

The bank's founders will contribute USD 1 bn in equity and USD 10 bn will be raised by offering shares to the public. Another USD 200 bn is planned to come from sukuk issuance and investment funds.

Among the main shareholders will be the Islamic Development Bank (IDB), the Jeddah-based multilateral lending agency, Dallah Albaraka Group, Kuwaiti Real Estate Bank and another 10 banks. There are two possible names being considered for the bank, which are Al Imar and Al Istikhlaf.

Al Baraka Banking Group said it planned to enter the French market to tap into Western Europe's largest Muslim community reported Will Waterman in Arabianbusiness. Further Al Baraka's units in North Africa are planning tie-ups with French partners to "establish Islamic banking in France", it said in a statement on the Nasdaq Dubai, where it is also listed. However no legal agreements have been finalised

A new report released today by management consultancy Arthur D. Little entitled “Islamic Finance Comes of Age” has identified a surge in activity around Islamic finance as a promising opportunity for the global financial services industry as it emerges from the current recession. With Islamic finance assets currently standing at USD 800 bn, Arthur D. Little expects this figure to surge to as much as USD 4 trillion in the next six years, representing a major opportunity for Western financial institutions looking to develop new partnerships and global markets.

The report can be downloaded after free registration at: http://www.adlittle.com/islamic_finance

Four Saudi insurance firms launched on Saturday initial public offerings to raise a total SAR 260 mn. Axa Cooperative Insurance Co and Wiqaya Takaful Insurance and Re-insurance Co will offer a 40 % stake, or 8 mn shares each. Ace Arabia Cooperative Insurance Co will also offer a 40 % stake equivalent to 4 mn shares, while Al Rajhi Company for Cooperative Insurance will offer 30 %, or 6 mn shares.

Sukuk trading is about to start this year in Saudi according to the chairman of the capital market authority, Dr Abdulrahman Al Tuwaijri.

Arcapita had raised more than two-thirds of a USD 400 mn rights issue from existing shareholders and hoped to conclude the deal by the end of this month according to the CEO. Arcapita has a number of deals ahead, such as 2 acquisitions in Asian infrastructure or real estate sectors, buying up the assets from the Australian power investment firm Babcock & Brown Power and a USD 3.5 bn residential real estate project in Qatar with Kuwait's Al-Imtiyaz Investment.

Armen Papazian said he was named to the post head of Islamic finance by UBS Investment Bank 2-1/2 weeks ago with a global mandate to hire staff and design innovative products and as sign of commitment, that UBS believes in the growth sector.

The hedge fund platform Al Safi set up by Barclays Capital is planning Private Equity funds, reported Pratima Desai and Cecilia Valente on Reuters.

A lack of legislation is seriously hampering domestic issues of Sukuk in Kuwait, forcing companies to go abroad, Abdulkader Thomas, president of consultancy Shape Financial Corp said to Ulf Laessing and Raissa Kasolowsky published on Reuters. A ministerial decree allowing sukuk issued in 2007 was not adequate for the market to flourish, Thomas said. Saudi Arabia would also have to overhaul its legislation for its sukuk market to function more effectively.

Gulf Finance House plans to launch a GBP 50 mn UK commercial property fund and a USD 50 mn Sukuk fund in the GCC. The USD 50 mn sukuk fund, to launch in the next two weeks pending regulatory approval, would focus on government, quasi-government, or very stable GCC issues, reported Ulf Laessing and Raissa Kasolowsky on Reuters.

Unicorn Investment Bank consider mergers in the Gulf, and acquisitions of about USD 2 bn in the Gulf, Europa and Asia. It plans a Sukuk Al Ijara about USD 425 mn in Q3 to fund its expansion reported Ulf Laessing and Raissa Kasolowsky on Reuters. Current targets are two Gulf firms, retail banks in Pakistan, India and Malaysia and one in Britain or continental Europe. Unicorn received also a license in Malaysia for a new set up.

Plans announced last September to issue USD 1.5 bn Sukuk by the end of 2008 had been postponed due to market conditions.

Ernst & Young released a report saying that the takaful market may reach USD 7.7 bn contributions by 2012, compared to USD 2.5 bn in 2006 and USD 3.4 bn in 2007.