IslamicFinance.de

The first UK-Bahrain Islamic Finance Summit was held in London and highlighted the importance of co-operation in the area of educational and training development in Islamic finance. The BIBF presented a paper on that topic, saying that a million professional Islamic finance jobs are expected to be created worldwide by 2020. The paper highlighted several trends and facts within the Islamic financial sector. It also highlighted that this has produced a paradigm shift from an educational standpoint in Organisation of Islamic Co-operation countries and will generate multiple specialised training opportunities for human capital development within the sector. The BIBF team also participated in many panel discussions during the event, focusing on investment, education, and regulation.

Iran's Bank Mellat filed an application for a judicial review against the UK Government in the Administrative Court on 16 April 2014. In its final ruling last June, the UK Supreme Court found that by imposing domestic sanctions against Bank Mellat, the UK Government acted both “unlawfully and irrationally”. Following the UK Supreme Court decision, Bank Mellat had asked the UK Government to withdraw its 2010 listing proposal to the EU Council. It was hoped that this may have been sufficient to convince the EU Council to give up on its own sanctions against the bank. However, the UK Government has refused to withdraw the proposal. The UK Government has also now applied for permission to intervene in support of the EU Council’s appeal against the first European Court decision.

With the support of the government to develop Islamic finance in Turkey, Turkish and foreign investors are becoming more and more aware of Islamic financing methods and products in Turkey. The main legislation regulating Islamic banking in Turkey is the Banking Law No. 5411 (the "Banking Law"). Regulated under the same legal framework, participation banks must establish their own financing models approved by shariah scholars, to the extent it is in compliance with Turkish laws. Due to lack of specific regulations on Islamic finance, financing offered by participation banks has its own obstacles. Despite legal and practical issues yet to be resolved, Turkey is determined to increase its standing in the Islamic finance market.

Turkey’s Finance Minister Mehmet Simsek said the government wants more foreign lenders to apply for operating licenses as the country’s pool of potential bank acquisition targets shrinks. The focus on licenses comes after Industrial & Commercial Bank of China Ltd. announced last month that it was buying Tekstilbank AS and Qatar Islamic Bank said on March 26 that was nearing the end of exclusive talks to buy a stake in Asya Katilim Bankasi AS. (ASYAB). While the acquisition field narrows, Turkey’s regulator said it will look favorably on applications for banking licenses as the government encourages foreign investment.

London-based European Islamic Investment Bank (EIIB.L) will propose a capital reduction plan next month to enhance returns for its shareholders, after the firm swung back into profit in the 2013 financial year. EIIB will seek shareholder approval for the plan, which could potentially take the shape of a share buyback or a tender offer, during its annual general meeting in June. The firm posted a pre-tax operating profit of 1.5 million pounds in 2013, compared to a 10.1 million pounds loss a year earlier. Under its 2012-2016 strategy, EIIB is restructuring its business by exiting higher-risk private equity investments, seeking more stable income streams such as asset management and advisory services under its EIIB-Rasmala brand.

Albaraka Turk takes up sukuk baton after Turkiye Finans. Albaraka Turk has picked arrangers as it aims to follow participation bank peer Turkiye Finans's recent return to the dollar sukuk market. But one investor warned that Albaraka may find its deal more challenging. Albaraka Turk is looking to issue up to $500m of five year paper and has asked BNP Paribas, Emirates NBD, QInvest and Standard Chartered to manage the sale. Albaraka filed to the Istanbul Bourse, but leads could not confirm the mandate or say if a roadshow will follow.

The Banking Regulation and Supervision Agency (BDDK) approved expansion requests from Bank Mellat last month in light of the U.S. and the UN Security Council loosening economic sanctions. Afterwards, applications from the Iranian banks Pasargad and Tejarat to set up shop in Turkey were approved by the Ministry of Foreign Affairs. Bank Mellat has operated in Turkey through its three branches in Izmir, Istanbul and Ankara. Turkey and Iran have reportedly come to an agreement allowing an increase in banking transactions between the two countries. Earlier this year, Turkish Prime Minister Recep Tayyip Erdogan made a visit to Iran aimed at strengthening economic ties between the neighboring countries.

London-based RiverCrossing Capital Partners, a new Islamic investment firm, has launched its first product, a U.S. real estate fund, as part of a plan to offer non-traditional asset classes to institutional investors in the Gulf. The firm will develop asset-based funds with a non-cyclical nature, chairman Mohammed Abdulmalik said. RiverCrossing's first fund will have a target investment horizon of five years and focus on medical offices, self-storage facilities and senior and student housing in the United States, he added. RiverCrossing aims to raise $45 million in the first tranche of its Alternative Real Estate U.S. Fund this quarter, reaching a total of $125 million with a second tranche in the next 12 to 18 months.

King & Spalding advised Turkiye Finans Katilim Bankasi A.S. in relation to the issuance of US$500 million senior unsecured certificates due 2019, listed on the Irish Stock Exchange. The certificates are issued through TF Varlik Kiralama A.S., a Turkish incorporated asset leasing company. Rizwan H. Kanji led the team handling the Turkiye Finans issuance. He was assisted by senior associate Lidia Kamleh. The joint lead managers on the transaction were Citigroup Global Markets Limited, EmiratesNBD, HSBC and QInvest. Co-managers Dubai Islamic Bank and Commercial Bank International were advised by Clifford Chance LLP.

Turkiye Finans has completed a $500m bond issue. The issue is rated -/-/BBB and its maturity is April 24, 2019. The issue/fixed reoffer price is 100 with a profit rate of 5.375%. The spread at reoffer was 363.4bp over mid-swaps. The bonds were launched on Tuesday April 15, payment date is April 24. Joint bookrunners are Citi, Emirates NBD, HSBC, QInvest.

Turkiye Finans navigated challenging markets on Tuesday to price its $500m five year sukuk inside guidance at 5.375%. After what one investor termed a “sluggish” start, the deal achieved a $1.4bn order book and rallied from par on the break to 100.125/100.375. Turkiye launched as tensions mounted again between Russia and Ukraine. The Russia 4.875% ’23 bond has fallen three points since the start of the week and equity markets are down. Despite this, the Turkish participation bank tightened its guidance from 5.5% and almost doubled its book.

Bank Asya, known for its close ties to the controversial Gülen Movement announced last month that it would sign a merger agreement with Qatar Islamic Bank (QIB). After announcing the prospective merger, Bank Asya's share in BIST, Turkey's stock market, rallied and increased by nearly 60 percent in one week. However, officials at the Banking Regulation and Supervision Agency (BDDK) said they have not received any formal merger application from Bank Asya executives. Authorities said that Bank Asya is looking for assurances from the BDDK that the agency will approve the merger, otherwise the Qatari bank may not be willing to sit down at the negotiating table again. Whether or not the merger happens, the speculative news has negatively affected small investors.

BLME, Europe's largest Islamic bank, has been selected to co-lead the Islamic Development Bank (IDB) US$1.5 billion five-year Sukuk. The bank's representative office in Dubai was appointed in to handle the issuance. DB Sukuk is the largest ever Islamic bond issued from the AAA rated supranational lender in 2014. It is also the largest Sukuk issuance BLME has been appointed to act as co-lead manager on to date. The IDB issued 16 Sukuk in London since 2005 which raised around US$7 billion. It has a US$ 313 million programme listed in Malaysia and has raised 700 million ringgit since 2008 via three Sukuk. BLME listed on NASDAQ Dubai in October 2013, and announced a strong performance for the full year on 3rdMarch 2014.

Britain could become the first truly global Islamic finance centre if the government sets its mind to attracting infrastructure investment, according to Gatehouse Bank’s chairman Fahed Faisal Boodai. He estimates the industry is worth $1.5 trillion, and the sector is growing at around 20 per cent per year. Chancellor George Osborne is raising £200m with a sharia-compliant bond, the bank alone expects to buy £30m to £40m of the sukuk, and predicts bids for the debt to run into the billions of pounds. However, one problem is finding investment opportunities which meet stringent sharia standards. More certainty is needed if the government wants to unlock Islamic investment into infrastructure on the grand scale needed.

The EIIB-Rasmala has closed the second tranche of FWU Group’s US$100 million sukuk al-wakala programme. The second tranche of the programme has closed for US$40 million. The former is acting as the lead arranger and bookrunner for FWU’s sukuk al-wakala programme. The FWU sukuk has been assigned the investment grade credit rating BBB- by Fitch and is being issued in amortizing tranches, each with a term of five years. The first tranche of the programme previously closed for US$20 million in October 2013. Distributions are made quarterly to investors on a fully amortizing basis and the profit rate is 7% per annum. The sukuk will fund, in a fully Sharia’a-compliant manner, a set of retakaful transactions for one of FWU’s five main subsidiaries, Atlanticlux.

UK Universities Minister David Willetts has launched a 12-week consultation period on Shari’ah compliant student loans with the aim of getting more Muslim students into higher education in the UK. The Department for Business, Innovation and Skills (BIS) has been developing a model alternative finance product which would be Shari’ah-compliant and could potentially be offered alongside traditional loans. This model finance product has been developed by experts in Sharia-compliant finance and has received preliminary approval from the Islamic Bank of Britain’s Sharia supervisory committee. The consultation seeks to determine whether the alternative finance model identified would be acceptable to anyone who might be deterred from the conventional system.

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.

Qatar Islamic Bank (QIB) has entered into exclusive discussions to acquire a stake in Turkey’s Bank Asya. QIB is seeking to finalise the transaction within the next few months, subject to obtaining the required regulatory approvals. The Qatari bank did not say what stake it might buy or disclose any other details. Bank Asya had said earlier it had started talks on a strategic partnership with QIB and planned to complete the process soon. It gave no further details. The Islamic bank has been in focus since state-owned companies and institutional depositors have reportedly withdrawn 4 billion lira ($1.8 billion), or some 20 percent of the bank’s total deposits. Bank Asya said it had weathered the mass deposit withdrawals and was not at risk.

Dubai-based Souq.com, an Arab e-commerce site, has secured a $75 million investment from Naspers, a South African media organization. Besides, Silent Herdsman, which produces wearables for cows, has received £3M ($4.9 million) in funding. Moreover, Waltham, MA-based Actifio, which provides copy data virtualization to customers, has gained $100 million in an oversubscribed investment round. Software defined storage company Amplidata has realized an $11 million investment led by Intel Capital and Singapore sovereign wealth fund GIC has pumped about $63 million into U.K.-based energy tech company Intelligent Energy Holdings. Moreover, there have been several Mergers & Acquisitions, including Palo Alto Networks buying cybersecurity startup Cyvera.

Premier of Bermuda, Craig Cannonier, and Finance Minister Bob Richards are in London this week to lead efforts to bring Islamic finance business to the Island. The pair will attend the Global Islamic Finance and Investment Group (IFIG) Conference and speak to a number of industry stakeholders. The objective of the IFIG Conference is to highlight the necessary regulatory frameworks for Islamic finance and to outline strategies for successful international collaboration. In addition, the Premier is due to meet with UK Government Minister Mark Simmons of the Foreign and Commonwealth Office and representatives of the UK Treasury. Bermuda has already established partnerships with the main financial centres in a range of Muslim countries and has signed double taxation agreements with Qatar and Bahrain.