IslamicFinance.de

A number of Saudi insurance firms have been loss-making for years because of severe competition in the market, where large companies with capital of some SR1 billion ($267 million) dominate small firms capitalized at around SR200-SR400 million, which find it hard to compete. That's why Saudi Arabian Monetary Agency (SAMA) would welcome mergers among local insurance companies as long as they were positive for all parties, said Governor Fahad Al-Mubarak. He said SAMA was working hard with the managements of insurance firms to study their internal situations and develop restructuring plans so they could return to profitability.

The Islamic banking industry in Saudi Arabia is set to achieve $683 billion of Shariah-compliant assets by 2019, according to EY’s World Islamic Banking Competitiveness report. A strong demand from customers, both retail and corporate, has led to significant growth in Islamic banking in Saudi Arabia resulting in 54 percent of all financing being Shariah-compliant in 2013. Overall, the size of Islamic banking assets in Saudi Arabia has nearly doubled from 2009-2013. One in three of the positive sentiments analyzed in the kingdom were about branch experience, indicating that customers were generally satisfied in this area of service. While online and mobile banking services has taken off well in Saudi Arabia, it’s sustainability remains a cause of concern.

According to the recently released “Global wealth management outlook 2014-15: New strategies for a changing industry” by Strategy&, the GCC has been the most consistent of the emerging markets, recording growth of 16 percent or more each year since 2010 and doubling total private wealth from $1.1 trillion to $2.2 trillion for an overall compound annual growth rate (CAGR) of 17.5 percent. The UAE led the GCC countries with 25 percent CAGR, followed by Oman (21 percent) and Bahrain (18 percent), which grew from much smaller bases. Not surprisingly, high-net-worth individuals (HNWIs) continue to account for the largest chunk of the region’s wealth at 41 percent.

In celebration of Global Money Week (GMW), SEDCO Holding Group is organizing the Second Financial Dignity Summit under the theme — Money and business — on March 17, in King Abdulaziz University (KAU). The summit will encompass several activities around financial dignity to raise awareness about saving and budgeting. The week-long summit has already simultaneously begun on March 10, during GMW. The summit agenda includes presentations by local successful entrepreneurs. During the summit, 5 shortlisted candidates for the Riyali Young Entrepreneurs’ award will be presenting their projects for a chance to win a substantial financial prize.

Gulf Finance House (GFH), the Bahraini Islamic investment firm, plans to make a $230 million sukuk issue this year to help it fund acquisitions of two to three regional companies. The bank sold $170 million of convertible sukuk murabaha last year to raise money for the investments, Ahmed Khalil Al-Mutawa said. The paper was converted into equity in the same year. In addition to the funds raised through sukuk last year and this year, the rest of the money needed for the acquisitions is likely to come from bank borrowing. Al-Mutawa said that the companies targeted by GFH focused on asset and wealth management and were based in Saudi Arabia, Bahrain and Dubai. The deals, which involve taking controlling stakes, should be closed by the end of the second quarter, he said. He did not give further details.

The Kingdom joined the rest of the world in observing International Anti-Corruption Day on Tuesday to raise awareness about the importance of making Saudi Arabia a corruption-free country. The Anti-Corruption Day is observed by the United Nations every year on Dec. 9 in order to highlight the evils of corruption and its negative impact on government systems globally. To mark the occasion, Nazaha, Saudi national anti-corruption commission, hosted a forum. A seminar entitled “The role of medial and cultural institutions in maintaining integrity and fighting corruption” was organized by Nazaha on the sidelines of the event.

Under the sponsorship of Alinma Bank, the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) held its Shariah standards hearing session in Riyadh. Participating in the event were Shariah-finance professionals from Alinma Bank, AAOIFI and other financial and research institutions from Saudi Arabia and abroad. Attendees discussed, debated and made comments on draft policies related to deposit and repurchase agreements. The meeting was the first time AAOIFI held for its Shariah standards hearing session outside Bahrain, and the move to Saudi Arabia represented an attempt on AAOIFI’s part to expand its activities and cooperation.

EY’s latest report, Global Takaful Insights 2014, forecasts a continued double-digit growth momentum of the global takaful market of approximately 14 percent from 2013 to 2016 and expects the industry to reach $20 billion by 2017. The Gulf Cooperation Council (GCC) countries and Association of Southeast Asian Nations (ASEAN) markets are likely to maintain their current growth path in the next five years, subject to their economic growth. Saudi Arabia will likely remain the core market of Islamic insurance business, commanding approximately half (48 percent) of the global contributions. With strong competition from conventional incumbents, takaful operators are likely to continue their struggle in the medium term, although some will look at alternative customer segments and explore merger options.

Saudi Arabia’s central bank has published new consumer lending regulations which give it the power to cap retail lending at individual banks and limit the fees that banks can charge. The rules could dent profit growth at banks, especially those that rely heavily on retail activity. The regulations, published on the Saudi Arabian Monetary Agency’s (SAMA) website, state that SAMA may, at its discretion, impose a restriction on a creditor under which its consumer financing portfolio may not exceed a specified percentage of its total financing portfolio. They also state that all fees, costs and administrative services charges collected by banks must not exceed either 1 percent of the financing amount or SR5,000 whichever is lower.

Some shariah-compliant banks are removing the word “Islam” from their names — a sign of both the potential of Islamic finance to grow, and the obstacles to it becoming mainstream. The changes are part of the banks’ plans to expand. They aim to move well beyond a relatively small group of customers who stress religious permissibility, to a much larger customer base for whom pricing and service quality are key. This approach could help Islamic banks establish themselves globally. Name changes can also help Islamic banks expand in markets where regulation limits their branding options.

Around 80 percent of nonoil GDP within the Middle East region is accounted for by family-owned business groups. Typically, these privately-owned organizations span multiple business, are vertically integrated, own sizable real estate portfolios and their operational control is still maintained by the original founding family member or the second generation. Family-owned businesses in the Middle East face a range of challenges that affect not only the success of the business itself, but also the professional and personal goals of their owners and their stakeholders at large. Deloitte's Private Client Services practice (PCS) is a private client-focused practice that offers bespoke and region-specific solutions in the area of family governance, succession planning and generational change, wealth management, tax structures and exit strategies.

UK-based retail lender Islamic Bank of Britain (IBB) plans to broaden its product range to win business both locally and across Europe, aided by the backing of its new Qatari shareholder Masraf Al-Rayan. IBB is developing its commercial property business to widen fee-based income as it aims to post a profit for the first time, newly-appointed CEO Sultan Choudhury said. Masraf Al-Rayan in February injected 75.8 million pounds ($129 million) into IBB to support its expansion plans. The bank's property finance business has doubled in size in the last year, which could allow IBB to expand later into Europe, said Choudhury, adding its retail operations would remain focused in the UK. IBB also aims to buy some of the 200 million pounds of sukuk that the British government will issue this week.

The Islamic Corporation for the Development of the Private Sector (ICD) and the Bank of Tokyo-Mitsubishi UFJ (Malaysia) Berhad (BTMUM) have signed a memorandum of understanding (MoU) to form a joint strategic collaboration to tap opportunities in the Islamic finance industry. Khaled Al-Aboodi, ICD’s CEO and general manager, and Naoki Nishida, BTMUM CEO, inked the MoU at BTMU headquarters in Tokyo. The parties intend to leverage each other strengths and expertise especially to expand its Islamic finance activities in the ICD member countries. Khaled Al-Aboodi said the agreement will strengthen and deepen the ICD’s relationship with its non-traditional partners from the Pacific region especially to promote cross-border investment in ICD member states.

The Bank of England is studying ways to increase the number of Shariah-compliant assets that Islamic financial institutions can use in their liquidity buffers. Currently, sukuk issued by the AAA-rated Islamic Development Bank are the only assets that meet the central bank’s criteria for use in the liquidity buffers of the 22 Islamic financial institutions operating in Britain. In addition to reducing risks, expanding the eligible list could improve growth prospects for the industry and remove a potential entry barrier to the sector. The Bank of England’s proposal is in line with the approach of Basel III global banking regulations, which allow sukuk issued by high-rated sovereigns to be included in the liquid assets buffer without a haircut. Sukuk issued by sovereigns with lower credit ratings and other non-financial issuers could also be eligible, subject to haircuts and caps.

Saudi investment bank NCB Capital has appointed Sarah Al-Suhaimi as CEO and member of the board subject to CMA approval. Tariq Linjawi, who had been acting CEO, is leaving the firm having successfully managed the organization through a transition period. Al-Suhaimi joins, following CMA approval, from Jadwa Investment where she was head of asset management and CIO, managing over SR17 billion of assets in public and private equity, real estate and fixed income. Sarah is the vice chairperson of the advisory committee to the CMA and is a graduate of King Saud University, with a Bachelor of Administrative Science degree in accounting.

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.

The Islamic Development Bank (IDB) celebrated its 40th anniversary with a reception for consuls general organized with the Ministry of Foreign Affairs, Makkah region, at the bank's headquarters in Jeddah on Wednesday. IDB President Ahmed Muhammad Ali said this was the start of planning for the next 10 years after consulting member states and Muslim communities in nonmember countries. The bank's board of governors would discuss the program of action at its next meeting in June. Ali said the bank prioritizes projects in the least developed member countries, and projects in education. IDB’s commitment to help boost economic growth is evident from the rise in total financing from $8.3 billion in 2011 to $9.8 billion in 2012, an 18.4 percent increase.

As part of its ongoing commitment to support Saudi sports, Bank AlJazira is geared up to kick off its new sports marketing campaign “support with passion,” which will be launched on Dec. 1. Through this campaign, Bank AlJazira will reveal the new set of club-themed credit cards that will carry colors and logos of 7 Saudi football clubs which have the widest fan base. This credit card will give the fans of Saudi football clubs a practical tool to express their passion and support for the club they admire in a unique way. The new campaign from Bank AlJazira will feature Al-Fateh, Al-Shabab, Al-Nasr, Al-Ahli, Al-Ettifaq, Al-Ittihad and Al-Wehda clubs. Fans now can browse various sets of designs for each card, with the opportunity to get incentives rewards and attractive awards in addition to star-related and club-official items.

Qatari lender Barwa Bank expects a sharp increase in its 2013 net profit, driven mainly by billions in infrastructure spending by the Gulf state and growth in its debt advisory and asset management business. The unlisted lender is awaiting regulators' approval a public floatation as part of two share sales planned to raise more than 2.05 billion riyals. It posted a profit of 345 million riyals ($94.75 million) for 2012, a 41 percent increase from the previous year. Moreover, Barwa Bank, through its fully-owned investment banking arm, The First Investor (TFI), plans to partner with local investors in Qatar to invest in the healthcare sector. The bank also manages a Shariah-compliant Gulf equities fund, with 113 million riyals in assets. The fund has returned 19 percent to investors since inception in late 2012.

Bank AlJazira was granted the Ideal Institution in Support of Social and Developmental Action Award at a special ceremony held during the 30th meeting of GCC Council of Ministers of Social Affairs, organized recently in Bahrain. Nabil bin Dawood Al-Hoshan, CEO of Bank AlJazira, received the award from Bahraini Minister of Social Development Fatima bin Mohammed Al-Balooshi. The award comes after the bank was nominated by the Saudi Ministry of Labor and Social Affairs, in recognition of its efforts and programs in social responsibility.