IslamicFinance.de

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.

A sharia-compliant tradeable security backed by gold will be launched in Dubai next week, Reuters has reported.

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.

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.

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.

Fitch Ratings released that the recent announcement of a USD 20 bn bond programme is improving the overall liquidity which will be positive for government-linked corporates facing the need to refinance maturing debt at a time when the impact of regional economic conditions, especially in the construction and property sector, are becoming increasingly negative.

Official figures put Dubai government and state-owned corporate debt at USD80 bn, of which Fitch estimates that around USD11 bn of foreign currency debt matures during 2009. Last week Borse Dubai raised USD2.5 bn in financing, and received an equity injection of USD1 bn from its shareholder, Investment Corporation of Dubai, to refinance an aggregate USD3.8 bn loan (part of the 2009 maturities).

Mr. Siddiqui joined Thomson Reuters from Dow Jones, where he was Global Director for their Islamic Market Indices at Thomson Reuters he is appointed Rushdi Siddiqui to lead its Islamic Finance business.

Thomson Reuters, which has been active in the Middle East, Africa and South East Asia since 1865, has strong Islamic Finance assets covering leading content, news, analytics and trading capabilities. In this newly created role, Mr. Siddiqui will be utilizing these assets and working closely with Islamic finance and banking professionals including fund managers, treasury, financial hubs, regulators, stock exchanges, central banks, Takafol (insurance) entities, Halal industry, intra-OIC (57 Muslim countries), trade, investment, as well as others to strengthen and grow this business.

Basil Moftah is Managing Director for Thomson Reuters in the Middle East and Africa.

Moody's Investors Service said on Monday the Dubai's government's USD 20 bn 5-year, 4 % bond programme could support debt ratings of Dubai companies that were placed under review for a downgrade earlier this month. If there are no restrictions on how Dubai uses bond proceeds this could support Moody's ratings of Emaar, DP World, DIFC Investments, Dubai Holding Commercial Operations Group, Dubai Electricity and Water Authority and the Jebel Ali Free Zone. Moody's had said it could lower its debt and Islamic bond, or sukuk, ratings for the six firms, all linked to the Dubai government, by as much as two notches each. The review is due shortly.

Earlier the month the law firm Ashurst announced the formation of their Islamic finance restructuring team. Now Lovells advertises to their prospective clients being a "global player in Business Restructuring and Insolvency". It seems that supply follows demand due to the ongoing crisis.

According to a survey by Capintro Partners reported in the Hedge Fund Review a majority of conventional Middle East investors (55%) expect to decrease their allocation to hedge funds in 2009 while 14% expect to increase allocations and 31% plan no change in their allocation.

The top three regions investors favour in 2009 included emerging markets (25%), the US (24%) and Asia, excluding Japan (22%).

Over half (54%) said they use structured products regularly or periodically. Of those who use them, the majority (57%) said they made use of capital guarantee products while under a quarter (23%) said capital/risk management requirements were the main use with only 11% giving leverage as the main usage.

Text based on: http://www.hedgefundsreview.com/public/showPage.html?page=841318

Full study under linked under source.

According to a report of Global Investment House more than 100 Sukuk equivalent to more than USD 38 bn are awaiting issuance if markets recover.

DIB Capital, a 100 % subsidiary of Dubai Islamic Bank, sees the long term prospect as strong for the Sukuk market according to Nadeem Lodhi, head of capital markets and syndications. Also they are planning to launch a Sukuk fund.

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.

The US subsidiary of Emaar Properties, John Laing Homes, has sought Chapter 11 bankruptcy protection due to sharp decline in home sales.

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.

Borse Dubai Limited announced today that it has successfully signed a USD 2.5 bn Term Facility to refinance the aggregate USD 3.8 billion Term Credit Facility used to fund investments into NASDAQ OMX. The multicurrency syndicated facility matures in one year and carries a one-year extension option, at the discretion of Borse Dubai. The facility has a conventional and Islamic tranche, and pays 325 basis points p.a over the London interbank offered rate (Libor).

The participating banks include Bank of Baroda, Dubai Islamic Bank PJSC, Emirates Bank International PJSC, HSBC Bank plc, Industrial and Commercial Bank of China (Asia) Limited, ING Bank N.V., London Branch, Intesa Sanpaolo - Dubai Branch, National Bank of Abu Dhabi PJSC, Skandinaviska Enskilda Banken AB (publ), The Bank of Tokyo-Mitsubishi UFJ Ltd. and Union National Bank, majority of whom are existing Borse Dubai financing firms.

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.

Rachel Ziemba analysis the credit situation of Dubai on 17 February on RGEmonitor observing that in recent weeks CDS spreads on the debt of Dubai’s largest State-linked vehicles like Dubai Holding etc shot up dramatically after Abu Dhabi announced a unilateral recapitalization of its banks. The cost to buy prrotection on the 1 year bond has doubled since late January and now stands at 1073bps. This is deemed linked to the previous market opinion that Abu Dhabi would support Dubai, while the recent step to just re-capitalise their own banks caused some doubts. The property bust in Dubai goes on with severe consequences.

The full report shows an excellent overall summary of the situation. It can be accessed via the link "source" below.

Islamic International Foundation for Economics & Finance in Saudi-Arabia aims to set up a committee of senior Islamic scholars in the kingdom by 2010 to help standardise Islamic banking edicts in Saudi-Arabia. The foundation is in the early talks with Sharia scholars and hoped to “institutionalise” Islamic rulings within a year, according to Mr Al-Zamil.

Yousef Abdullah al-Zamil is the foundation`s assistant secretary general.

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.

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.