IslamicFinance.de

Retail-focused Islamic banks in GCC countries have strong liquidity coverage ratios (LCRs) due to their large base of core retail customer deposits and low reliance on market-sensitive wholesale funding. According to Moody’s, retail deposits in 2015 comprised around 67% of Islamic banks’ customer deposits for the three GCC countries, compared to 40 for conventional banks. Islamic banks in GCC countries have become systemically important and continue to increase their market penetration, outpacing conventional banks. Sustained lower oil prices continue to reduce the flow of deposits and could lead to a gradual weakening of the LCR metrics for both Islamic and conventional banks.

A Dubai-based subsidiary of Islamic investment bank GFH Financial Group has sold its remaining 18 % stake in English football club Leeds United, ending nearly 4 years of Middle Eastern involvement in the club. GFH Capital sold the stake to Eleonora Sport, operated by Italian businessman Massimo Cellino. Eleonora now owns 100 % of the club, Leeds United said.

GFH bought Leeds United in December 2012 but within months began looking for new investment in the club, and in 2014 Cellino bought a majority stake in it. GFH Financial did not reveal the price at which it sold its remaining stake but said the deal would reflect positively on its financials and liquidity for 2016. Crippled during the global credit crisis in 2008, GFH Financial went through several debt restructurings but has resumed expanding in the financial services sector. In August it signed a memorandum of understanding to buy most of Bahrain's Bank Al Khair.

If we look back at the emergence of the Muslim Lifestyle markets as a global phenomenon, we can see an interesting pattern developing. From 2004 - 2007, Malaysia was the epicenter of the Halal movement, bringing the terms ‘Halal market’ and ‘Halal industry’ into the global business vocabulary. Bidding to become a global Halal hub, the development of their Halal food sector made Malaysia a role model for other countries looking to position themselves in this fast-growing marketplace. Abdalhamid David Evans, Founder, HalalFocus.net/ImaratConsultants.com, will be speaking about this topic at the Muslim Lifestyle Expo 2016 in Event City, Manchester on the 30 October 2016.

The overall profitability of Takaful industry is under strain largely because the industry has yet to break into some of the most profitable lines of business that are dominated by conventional payers, according to rating agency Standard & Poor’s.
“In our view, the takaful sector is underperforming, especially in the UAE, because it lacks the advantages of conventional insurers, which are often larger and benefit from better economies of scale. They have more-established distribution mechanisms and so their revenue generation is less dependent on intermediaries,” said Emir Mujkic, Associate Director, Finance Services of Standard & Poor’s.
The crowded UAE and other Gulf Cooperation Council insurance markets often suffer from overcapacity, which can often trigger aggressive price wars. “In our opinion, Islamic insurance companies require considerable capital investment to become established, yet relatively new companies often come under pressure to generate profits and deliver healthy returns to their investors,” said Mujkic.

Emaar Properties has mandated Standard Chartered Bank as Sole Global Coordinator of its new US dollar Sukuk. Bank ABC, Dubai Islamic Bank, Emirates NBD Capital, First Gulf Bank, Mashreq, National Bank of Aub Dhabi, Noor Bank, Standard Chartered Bank and Union National Bank are mandated as Joint Lead Managers to arrange investor meetings in Asia, the Middle East and Europe commencing on 4 September 2016. USD 2 billion Trust Certificate Issuance Programme may follow subject to market conditions. FCA/ICMA stabilization applies.

Dubai-based Emirates Islamic Bank has priced a $250 million tap of an existing Islamic bond issued in May. The tap was priced at 170 basis points over midswaps, the order book was worth $706 million. The 'new' deal is a copy of an existing bond with the same terms and conditions. Emirates Islamic's tap came off a $750 million five-year sukuk issued on May 23. That deal was priced at 220 bps over midswaps and carried a coupon of 3.542 percent. Chief Executive Jamal bin Ghalaita said the cash would support the bank's long-term growth and development plans. The new offering was arranged by Bank ABC, Dubai Islamic Bank, EMCAP and Standard Chartered.

Emirates Islamic, the sharia-compliant arm of Dubai's largest bank Emirates NBD (ENBD), has laid off more than 100 people to adjust to a cooler economy. Growth in much of the United Arab Emirates (UAE) has slowed this year because of low oil prices. Earlier this year, Emirates Islamic cut around 200 jobs. Most of the latest jobs to go were in the department servicing small and medium-sized enterprises (SMEs). Chief Executive Shayne Nelson said the bank continued to focus on cost control. The bank had already made cuts in April when it made around 100 people redundant from its subsidiary Emirates Money to save costs. National Bank of Ras Al Khaimah said in January it would cut up to 250 jobs, while Abu Dhabi-based First Gulf Bank and the UAE operations of HSBC have reduced their headcounts since late 2015.

Sharjah Islamic Bank will begin investor meetings on Aug. 29 for a potential benchmark U.S. dollar-denominated sukuk issue. The meetings will be held in Asia and Europe and the issue would be subject to market conditions. Bank ABC, Dubai Islamic Bank, Emirates NBD Capital, HSBC, KFH Capital, Maybank, Noor Bank, QNB Capital and Standard Chartered will arrange the meetings.

According to Fitch Ratings the inclusion of sukuk in major bond indexes would be a significant boost for the product, but initiatives to harmonise standards and improve transparency remain key to its long-term development. Reuters reported that JP Morgan would include eight sovereign and corporate sukuk in various bond indexes from 31 October. This may encourage issuers to supply index-eligible sukuk and support secondary market liquidity. However, Fitch Ratings believes the sukuk market's growth rate will be determined by two factors. Firstly, product-specific initiatives around regulation of sukuk issuance, which have been noteable in some jurisdictions, but have not always been harmonised across jurisdictions. Secondly, the broader attempts to deepen the investor base and improve transparency in the relevant capital markets. Sukuk issuance from key markets in 1H16 rose 11% from a year earlier to USD21.74bn, representing 30% of total issuance. Overall, Fitch expects this year's sukuk issuance to at least match 2015 issuance of around USD32bn.

Having cleared all of its historical debts, Nakheel confirmed talks are on with banks to tap 'cheap' funds for its ongoing and future projects. But there is no intention to seek such funds through another sukuk or via a share offer. Nakheel is now completely off debts, having paid off Dh4.4 billion to trade creditors via a sukuk. It had in 2014 paid off Dh7.9 billion to its banking lenders, four years before they were due. Nakheel Chairman Ali Rashid Lootah said he is hopeful of netting a new funding agreement before the year end. The funds can come in handy with Nakheel’s existing roster of projects. This includes a mega-mall, with an estimated development cost of Dh4 billion plus.

#UAE based National Bonds has started providing financial planning tips and tools via its website. The new financial planning section offers valuable information in both Arabic and English to help customers achieve their financial objectives. Topics cover planning for retirement and children’s education, debt management, investment solutions, takaful and estate planning. In addition, the website offers practical financial planning tips on goal setting, cash management and budgeting, financial health, and the rule of 72. The portal also includes online calculators for accurately computing expenses, commitments and budgets. Mohammed Qasim Al-Ali, CEO of National Bonds, said the new online tool will save time and effort for those looking for simple and straightforward financial planning.

Al Hilal Bank's new CIO Gopi Krishnan is calling on fintech CEOs to get in touch and collaborate. Krishnan moves from another regional bank, Qatar Islamic Bank (QIB), where he was CIO since 2012. Prior to that, he was with BankMuscat International as programme director in charge of transformation, enterprise project management office and group integration. Al Hilal Bank offers Islamic banking services in the retail, corporate, wholesale, treasury and investment segments. Its core operations are underpinned by the T24 banking platform supplied by Temenos.

Equitable Financial Solutions (EFSOL), Australia's largest, international Islamic finance company has announced the establishment of its Dubai office at Emirates Towers. EFSOL is actively pursuing its Middle-East expansion strategy, following the successful establishment of its ASEAN office based in Singapore. Usman Siddiqui, Managing Director of EFSOL said the new Dubai office will give investors access to the company's superior products and returns. He is confident that the EFSOL team will boost their financial products' offerings in key areas of Islamic finance.

Dubai Islamic Bank (DIB) closed an approximately AED 3.2 bn ($860 mn) rights issue, thereby increasing the bank’s share capital to AED 4.9 bn from AED 3.9 bn as of March 2016. According to Moody's this capital increase is credit positive for DIB because it replenishes reserves and enhances loss-absorption. Moody’s estimates that DIB’s consolidated tangible common equity to risk-weighed-assets ratio will improve to around 12.3% from 9.8% as of March 2016. The new capital will also increase the bank’s reported Tier 1 capital ratio to 18.1% from 15.6%. The additional capital will support the bank’s solvency in the context of continued balance sheet expansion.

A Riyal denominated Sukuk has been issued by the Saudi International Petrochemical Company. The company announced the successful completion of the issuance amounting to SAR 1.0 bn on June 16, 2016. The Sukuk was priced at 235 bps over six months SAIBOR for tenor of five years maturing on June 16, 2021. Riyadh Capital and NCB Capital helped to arrange the private issuance.
In the hard currency space, the Commercial Bank of Qatar issued a Eurobond which achieved the tightest spread for a MENA financial institution this year, conventional or Sukuk.
Whilst the issuance was not a Sukuk, demand for bond indicates strong investor appetite, a good sign of market demand which is likely to be tested with several large planned issuances post Ramadan. Most eagerly anticipated is a potential sovereign issuance by Saudi Arabia, as well as by Aramco, the Saudi national oil giant.

Conyers advised DP World on the recent establishment of a sukuk program comprising up to US$3 billion of sukuk certificates to be listed on the Nasdaq Dubai, as well as the successful first drawdown of US$1.2 billion thereunder. Linklaters advised the joint lead managers and bookrunners, who included Citigroup, Dubai Islamic Bank, Deutsche Bank, HSBC, Barclays, Emirates NBD, First Gulf Bank, J.P. Morgan Securities, National Bank of Abu Dhabi and Société Générale. Fawaz Elmalki and Oliver J. Simpson of Conyers’ Dubai office advised on the matter.

Abu Dhabi's Al Hilal Bank acquired $225MM RegS floating rate note Sukuk at 3mL+160bps under its $2.5 billion existing Trust Certificate Issuance Program. This trade marks the return to senior unsecured dollar Sukuk market since 2013 by an Abu Dhabi financial institution. CEO of Al Hilal Bank, Khaled Abdulla Alkhoori, said this was the first Islamic private placement in the UAE. The bank aims to work towards raising funding for medium term to enhance its funding profile.

Dubai’s Meydan Group has obtained Dhs 1bn ($272m) of Islamic financing partly through an issue of Islamic bonds and partly from a term financing facility. The money will help to strengthen Meydan’s capital structure, diversify its investor base and support new projects. Despite the regional economic slowdown Dubai is continuing to invest heavily in its tourism and real estate industries. Abu Dhabi Islamic Bank coordinated and structured Meydan’s financing. Three other UAE banks – Al Hilal Bank, Sharjah Islamic Bank and Ajman Bank – were also involved.

Abu Dhabi government-owned Al Hilal Bank has raised $225 million by privately placing Islamic bonds. The issue, maturing in January 2019, was priced at the three-month London interbank offered rate plus 160 basis points. It was the first unsecured U.S. dollar sukuk issue by an Abu Dhabi bank since 2013. CEO Khaled Abdulla Alkhoori said the bank aims to work towards raising funding for the medium term to enhance their funding profile. The issue was the second tranche of the bank's $2.5 billion notes programme. In the first tranche, Al Hilal raised $500 million of five-year debt in 2013.

Emirates Islamic Bank has made two donations of Dh2 million and Dh50,000 to inmates of Dubai Police’s Punitive and Correctional Establishments. The Dh2 million was allocated from the Zakat accounts to help inmates who are incarcerated for financial issues. The other donation, that of Dh50,000, was allocated from the charity accounts to pay for plane tickets for needy inmates.