IslamicFinance.de

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.

A group of Saudi Arabian lenders has rejected an invitation from Ahmad Hamad Algosaibi & Brothers Co. to attend a meeting next month to discuss their claims on $5.9 billion of debt. The banks have no interest in attending the meeting proposed, according to a letter to Algosaibi from a law firm representing the unnamed Saudi lenders. The letter, dated April 3, didn’t give a reason why the banks don’t want to attend. Algosaibi and billionaire Maan al-Sanea’s Saad Group missed payments on at least $15.7 billion of debt in 2009 in the Middle East’s biggest default, as the global financial crisis froze credit markets and asset prices slumped. The two family holding companies, which are related by marital ties, have been locked in legal disputes ever since.

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.

In a statement to the Bahrain Bourse, Al Salam Bank-Bahrain noted the increase in its authorised share capital to BHD 250 million and in its issued and paid up share capital to BHD 214,093,075. The bank’s share capital has been increased as part of its acquisition of BMI Bank, approved by shareholders at EGM on 8 October 2013 and following the obtaining of the required regulatory approvals.

Jaiz Bank has increased its investment portfolios by N7.5bn within the last two years. The investments represent an increase of 380 per cent from the N1.9bn in January 2012 to the current N9.4bn. In terms of profitability, the bank grew its total earnings by more than 750 per cent during the year. Jaiz has expanded its operation from just 3 branches to 13 branches since 2012. It plans to operate in every state capital of Nigeria before the fifth year of operation. In December, 2013, the bank submitted its application for a National Banking License to the Central Bank of Nigeria. Hopes are that this will come through before the end of the second quarter.

RAM Ratings said the Malaysian Islamic banking industry’s assets have almost doubled in the last five years, expanding to RM423bil as at end-February 2014 and accounting for 21% of the banking system’s assets. Gross financing continued to outpace deposits last year. In terms of asset quality, RAM said the the Islamic banking system’s gross impaired-financing (GIF) ratio stood low at 1.4% as at end-February 2014. RAM noted Islamic banks in Malaysia are well capitalised, with common-equity tier-1, tier-1 and total capital ratios of 12.5%, 12.5% and 14.7%, respectively, as at end-February 2014. The gradual derecognition of Basel II securities as qualifying capital, besides being an alternative source of long-term funding, will support the issuance of Basel III-compliant capital instruments for Islamic banks in Malaysia.

Abu Dhabi Islamic Bank (ADIB) is the latest lender after JPMorgan, Citi and Standard Chartered to expand business in Iraq as the oil-rich country boosts crude production and rebuilds its infrastructure. ADIB plans to open a branch in Basra before the end of the year after it opened a branch in Erbil in October. The lender’s expansion in Iraq is part of a larger strategy to grow its international network, which includes branches in the United Kingdom, Egypt, Qatar, Saudi Arabia and Sudan. Iraq’s economy is expected to grow by 6.3 per cent this year, up from 3.7 per cent growth last year. The country raised its crude oil production by 530,000 barrels per day (bpd) last month to 3.6 million bpd. However, Iraq remains a fragile state and security risks can never be understated.

The loan book of Saudi banks is expected to grow at pace of 12% in 2014. The increased proportion of younger population in Saudi Arabia can result in demand for personal financing to grow robustly. The UAE’s banking sector indicates strong loan growth led by retail and consumer banking and improved profitability. In Oman, lending slowed in 2013, but is expected to improve in 2014 and can even reach 10%. Kuwait bank lending is expected to pick up in 2014 after investment firms cut debt and government implements projects. In Bahrain further consolidation is expected this year after a spree of tie-ups in 2013. Qatar’s banking system remains profitable. The Qatar Central Bank has also come out with guidelines for implementing capital adequacy and liquidity under Basel III in 2014 and Qatari banks will adhere to it.

Islamic banking in Oman is growing at a slower pace than expected and requires new legislation and stronger public awareness of the industry to flourish, Bank Nizwa CEO Jamil El Jaroudi said. He added that there is also a skills shortage in the Omani market. The legal and regulatory framework in Oman supports the launch of the Islamic banking industry but further development of legislature is needed for the sector to mature. Bank Nizwa, Oman's first independent Islamic bank, started operations in January 2013 and raised OMR 60 million in an initial public offering of 40% of its shares in May 2013. Jaroudi said the bank had no plans to issue new sukuk, or Islamic bonds. He said the bank planned to launch Internet banking services and other shariah-compliant products.

Noor Bank on Monday reported a net profit of Dh255 million for 2013, up from Dh76 million for the year ended 2012. Last year, Noor Bank’s total assets rose 29 per cent to Dh23.2 billion, compared with Dh18 billion, at the beginning of the year. While the total customer financing increased by 32 per cent to Dh14.3 billion, banks’ customer deposits increased by 33 per cent to Dh18.6 billion in 2013. The bank is strongly capitalised with a capital adequacy ratio of 17.6 per cent and has a coverage ratio of almost 100 per cent. With a strong wholesale and retail deposit base, the bank is abundantly liquid. In 2013, Noor Bank launched its trade and SME brand, Noor Trade, and more than doubled financing to SMEs.

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.

Bahrain’s Khaleeji Commercial Bank and unlisted Bank Al Khair have dropped their plan to merge after failing to agree on terms. The primary reason for this decision is due to the non-agreement on the structure and the valuation of the deal. The two lenders had been in talks since June last year. The decision to call off the merger was reportedly mutual and the two banks will continue to maintain a close business relationship. Mergers in the Gulf banking sector are rare as powerful local shareholders are often unwilling to give up controlling positions except for vastly inflated valuations.

Asset growth rates at Islamic banks in Qatar have dropped to just above those of their conventional peers, cutting a large lead which the industry held in previous years and suggesting the impact of a regulatory ban on Islamic windows is fading. Islamic banking assets grew 12.2 percent in 2013 to 218.8 billion riyals ($60 billion). That was only marginally faster than 11.2 percent growth posted by conventional banks during the same period. Before the ban of Islamic windows, they captured 54.6 billion riyals of assets. Since Qatar's ban took effect at the end of 2011, Islamic banks have added 57.5 billion riyals of assets to their balance sheets. This suggests that if Islamic banks absorbed the assets from the Islamic windows in their entirety, their growth excluding this factor has been minimal.

The State Bank of Pakistan (SBP) has allowed MCB Bank to commence due diligence of Burj Bank Limited for proposed acquisition of its 55 percent share. The management of MCB Bank disclosed to its shareholders that the central bank has given an approval to the bank for conducting a detailed due diligence of the bank to invest in new and existing shares along with additional investment by Islamic Corporation for Development of Private Sector. MCB Bank is conducting due diligence of Burj Bank Limited from March 18, 2014. Burj Bank is operating with 75 branches countrywide, but it is facing some financial complications and failed to meet SBP's minimum capital requirement of Rs 10 billion by end-2013.

Islamic banks are required to reclassify their deposits into Islamic deposits and investment accounts under the Islamic Financial Services Act 2013 (IFSA). To do so, they are given a two-year transition period until June 30, 2015. Bank Negara Malaysia (BNM) said Islamic banking institutions will engage with their customers in providing information and clarification on the differences between the Islamic deposit and investment account products as well as the options available to them to either retain their placements in Islamic deposit or migrate to investment accounts. During the transition period, all lslamic deposits accepted under IBA will continue to be protected by Perbadanan Insurans Deposit Malaysia while the Islamic banks will also ensure that the customers' rights are protected.

Khaleeji Commercial Bank (KHCB), a Bahrain-based Islamic retail bank, has completed due diligence on a proposed merger with Bank Alkhair, a Bahrain-based Islamic wholesale bank. KHCB shareholders were told by chairman Dr Fuad Al Omar that the matter was under discussion and no decision had been taken yet. When compared with 2012 levels, the bank's total assets grew by 14.6 per cent to BD542.2 million last year with the consumer finance portfolio increasing by 66.7pc. However, the provision of an aggregate amount of BD17.7m in impairment provisions and marked to market losses resulted in net loss of BD19.2m. Dr Al Omar said the bank continued to improve its profitability with increase in revenue from core operations and control of costs. On future plans, he said KHCB would launch new products based on customer needs.

The board of Bahrain-based Ithmaar Bank has initiated several measures aimed at reducing costs this year. The initiatives include a combination of increased revenue, improved margins and cost reductions across Ithmaar Group which are expected to result in savings in the range of $25-$35 million annually. The bank now plans to leverage existing resources and share information technology systems and infrastructure between Ithmaar Bank in Bahrain and its subsidiaries, mainly Faysal Bank (FBL) in Pakistan. Moreover, the lender has identified areas to reduce costs, including staff and other overheads, and now wants to realise the full potential of these cost synergies through rationalisation of human resources and IT infrastructure.

Dubai’s government will consider establishing the world’s first fully Shariah-compliant export-import bank to promote the emirate’s foreign trade. The bank would provide financing to companies involved in trade while helping them to reduce their risks and gain market access, the Department of Economic Development said in a statement without giving details of the proposed institution’s structure or financing. Noor Investment Group will advise on the project, the department added, but did not give a time frame. Last month the Export-Import Bank of Malaysia said it had issued the world’s first US dollar-denominated Islamic bond issue from an export-import bank; the $300mn, five-year sukuk attracted $3.2bn of investor orders.

Standard Chartered Bank sees great potential for Islamic banking in Kenya with only two percent penetration to the total banking business. Standard Chartered Bank’s Global Head of Islamic Banking Wasim Saif says with the population of Muslims being 10 percent in the country Islamic banking could grow to a double digit number in the next five years. That's why the bank launched its Islamic banking offering in Kenya under the brand name Saadiq. Saadiq becomes the first market of Standard Chartered’s African footprint for Islamic banking, and is considered a platform to enter in other African markets that include Tanzania, Uganda, and Nigeria in two to three years. The new window will offer Shariah compliant products that include personal banking, home financing, as well as business and corporate banking.

Japan’s three-biggest lenders have won licenses to offer Islamic banking services in Malaysia. Sumitomo Mitsui Banking Corp Malaysia Bhd obtained approval to operate in the Southeast Asian nation on February 10. The lender expects to provide foreign-currency financing to local companies in the form of Murabaha and commodity. Bank of Tokyo-Mitsubishi UFJ Malaysia Bhd offers Islamic loans and guarantees among its services after obtaining approval in 2008, while Mizuho Financial Group Inc provides Shariah trade financing since getting a license in 2012. Japanese entities have also chosen Malaysia as a place to raise funds via the Islamic debt market.