IslamicFinance.de

State-owned Islamic Bank of Thailand plans to increase its capital by 7.11 billion baht (US$234.9mil) and issue a 5 billion baht sukuk, the country's first-ever Islamic bond. The bank plans to issue the 5billion-baht subordinated sukuk to increase its capital ratio. Last year, bank officials said the sukuk would have a likely maturity of 5 years and the bank would appoint Malaysia's CIMB Bank to handle the deal, targeting domestic and institutional investors in Malaysia and Hong Kong. The bank expects to raise 927 million baht in capital this month and 6.2 billion baht in the fourth quarter. The bank, rated BBB by Fitch, also wants to seek investors to establish a presence in the Middle East in the next three years, while increasing its domestic network of branches to 130 from 106 now. It hopes this strategy will help it to return to profit this year and help the country's Islamic financial sector grow.

According to World Bank, on an average, annual housing need in Pakistan is 1.1 million units which require an annual funding of around Rs3.3 trillion per year. While conventional banks/DFIs are stepping away from the housing finance, the share of Islamic banks and HBFC is surging. The gross house loans of Islamic banks grew year-on-year by 15 percent as of December 2012. Among Islamic banks, Meezan Bank, Burj Bank and BankIslami remained the major growth propellers. Islamic housing finance instruments are attractive to the consumers because of the co-ownership nature of the contract instead of borrowing and lending. Besides, with the purchase of share consistently, the rental amount is gradually reduced every month. Facilitating Islamic banks to extend loans coupled with the suggested development of secondary mortgage market is expected to buttress the housing finance in Pakistan.

Indonesia's Bank Muamalat plans to sell more than 30% by July through an initial public offering and private placements, Chief Executive Arviyan Arifin told reporters Wednesday. Shareholders of the country's first Shariah-compliant lender sought to sell part of their stake in 2011 and 2012 through private placement but couldn't agree on the price. The remaining shares will be offered through private placement. Bahana Securities said Muamalat's shares will be offered in a price range of IDR625-IDR975 each.

Although Islamic banking has been gaining worldwide popularity in recent years, it still faces considerable challenges in raising profitability. Last year, a record US$144 billion worth of new Sukuk, or Islamic bonds, were issued worldwide and experts believe 2013 is likely to be another record year of issuances. Besides wholesale banking, there are opportunities in Islamic wealth management, especially in centres like Singapore. According to Ernst & Young, the largest markets for Islamic banking in asset terms are Saudi Arabia, Malaysia, United Arab Emirates, Kuwait and Qatar. However, most Islamic banks have not been as profitable as their conventional banking counterparts. Experts said this could be because of a weak risk culture, lack of scalability and poorer asset quality.

Emirates Islamic Bank has launched a range of special Shari'a compliant offers for commercial vehicle, machinery and equipment financing especially designed for the small and medium enterprise sector (SME). The programme is part of the bank's long term strategy to support companies in the SME sector. Under SME Vehicle financing, the bank will offer small businesses, finance for new commercial vehicles starting at 4% profit rate (flat) and at 5% flat rate for used vehicles. Similarly, under Machinery and Equipment category, finance will be offered starting at 5.25% flat rate for new machinery & equipment and 6.25% flat rate for used ones. The bank already provides financing solutions aimed at helping businesses manage cash flow, asset acquisition and expansion requirements.

The Office of Foreign Assets Control (“OFAC”) recently announced that it removed Iraq’s Elaf Islamic Bank from its Part 561 List. According to a 2012 New York Times article, Elaf had been named to the list because it had facilitated transactions worth millions of dollars with sanctioned Iranian banks and has objected to the Central Bank of Iraq’s allowing Elaf to continue to attend its U.S. dollar currency auctions. OFAC now says that Elaf has offered its mea culpa, frozen the accounts it holds for the Export Development Bank of Iran (“EDBI”) and begun reducing its overall exposure to the Iranian financial sector. The Elaf development appears to be a victory on paper as a non-U.S. person agreed to terms with the U.S. government over its dealings with Iran apparently occurring exclusively outside the United States. One can only wonder about how the United States will monitor Elaf’s frozen accounts or any of its future dealings with Iranian banks.

Standard & Poor's Ratings Services has lowered its long-term counterparty credit rating on Jordan Islamic Bank (JIB) to 'BB-' from 'BB' and affirmed the short-term counterparty credit rating at 'B'; the outlook is negative. The rating action follows S&P's downgrade of Jordan in May 2012. As per their methodology, the ratings on JIB are capped at the level of Jordan's long-term foreign currency sovereign credit rating, because it is the bank’s country of domicile. This mainly reflects JIB’s material exposure to domestic sovereign risk, which indirectly accounts for a significant portion of JIB's earning assets and equity. JIB is considered to be "moderately strategic" to its parent group, Bahrain-based Al Baraka Banking Group. However, JIB does not benefit from any notches of parent support because of the constraint imposed by the foreign currency sovereign ratings.

London-based Gatehouse Bank is considering applying for two or three licences in Malaysia in universal banking, investment banking, and or, wealth management to expand its business in Asia. The bank, which recently commenced operations in Malaysia via a representative office in Kuala Lumpur, would closely discuss licensing options with the Securities Commission and Bank Negara, according to chief representative of Gatehouse Bank in Malaysia Richard Thomas. The establishment of the representative office will be the first step in a two-year larger strategic plan to apply for a full-fledged licence. In these two years, the bank will conduct and collect research as well as analyses of the risks and rewards of investing in Asia.

KPMG has submitted its recommendations for amending the country's tax law to the Ministry of Finance. The recommendations aim to ensure that Islamic financial institutions are on a level playing field with their conventional counterparts. According to Ashok Hariharan, partner and head of Tax for KPMG in Oman, the recommendations aim to ensure that Islamic financial institutions are put in neither an advantageous nor a disadvantageous position compared to its conventional peers. The recommendations of the international audit firm will circulate among different ministries and agencies to finalise the amendments. Apart from the Ministry of Finance, the Ministry of Legal Affairs Majlis A'Shura will also look into the KPMG report and put forward their recommendations. If everything goes well, the amendments will be announced sometime towards the end of the year.

KFH-Research issued a report stating that participation banks (Islamic banks) in Turkey form 5.2% of banking assets and will reach 10% by 2018, since those banks surpass the rest of the banking sector and have steady financing growth over 20% per year. The report noted that KFH-Turkey is first in deposits, and that participation banks are highly demanded and offer a wide array of products. There are currently four participation banks in Turkey, which are Albaraka Turk, Kuveyt Turk, Turkiye Finans, and Bank Asya. The low penetration rate of participation banking should ensure that its significant growth will continue over the coming years. Continuous measures and initiatives taken by the Turkish government as well as the large Muslim population will drive the participation banking sector to grow in the longer term.

BMI Bank , the Bahrain based associate of Bank Muscat , has announced that they have agreed in principle in favour of a merger with Al Salam Bank, an Islamic Bank incorporated in Bahrain. The completion of the transaction, including final share-swap ratio, is subject to satisfactory due-diligence as well as regulatory and shareholder approvals, Bank Muscat said in posting on the website of the Muscat Securities Market. Bank Muscat has a shareholding of 49 per cent in BMI bank.

The Turkish government has announced it will be seeking to tap into the $1 trillion Islamic financial industry. Stronger Islamic banks would enable Turkey to attract more cash from the Gulf and Asia, where the appetite for Sharia-compliant products far outstrips the existing supply. This could potentially make Istanbul a regional financial hub. For now, Europe still accounts for the lion's share of trade with Turkey's financial institutions and wider economy. But with Europe still in the grip of financial woes, the Turkish economy is diversifying and looking at alternative markets in the Middle East or North Africa. The development of Islamic finance could become an increasingly useful instrument in that strategy.

The Islamic Development Bank's Board of Governors (BoG) has approved to more than triple the Bank's authorized capital to 100 billion Islamic Dinars (about US$150 billion) from 30 billion. The BoG also increased the Bank's subscribed capital from 18 billion to 50 billion Islamic Dinars. The capital increase reflects the Bank's strong balance sheet and the growing economic development needs of its 56 member countries. The Bank also announced it will immediately tap the public market with a US$1 billion offering of sukuk. The five-year offering is rated Triple A by each of the three major bond rating agencies (Standard & Poor's, Moody's and Fitch), and will be dually listed on the London Stock Exchange and Bursa Malaysia. The Bank has been designated as a Zero Risk Weighted Multilateral Development Bank by the Basel Committee on Banking Supervision and the Commission of the European Communities.

The Indonesian government is planning to establish a Shariah-compliant bank in order to manage Rp 40 trillion ($4 billion) worth of Indonesian hajj funds. State-Owned Enterprises Minister Dahlan Iskan said the establishment of the bank will support the implementation of a new policy issued by the Ministry of Religious Affairs obliging hajj funds to be managed exclusively by Shariah banks.Dahlan said the government wants to support the development of Shariah banking in Indonesia with the new bank since the sector controls only 4.9 percent of market shares in Indonesia’s banking industry, The government has stakes in four lenders that run their own Shariah units. None of these banks, however, focus solely on Shariah banking.

The majority of Muslim-Canadians strive to lead productive lives and contribute positively to their country. The rising profile of the “Islamic banking” industry is one of these ways. However, Islamic financial instruments are often very similar to interest-based lending, leading some to criticize it as dishonestly advertised for profit, or to promote Islam. The sector’s supporters say it provides a means by which people can bank in accordance with their values by avoiding lending at very high interest rates or providing funding to activities they are religiously and/or ethically opposed to. Canada’s Islamic banking sector is still relatively small compared to that of other Western countries, but it is likely it will continue to see growth in the coming years given the rising population of Canadian Muslims, which now number nearly one million.

The Department of the Treasury has lifted sanctions against the Elaf Islamic Bank in Iraq following the bank’s significant and demonstrated change in behavior. On July 31, 2012 the Treasury Department imposed sanctions under the Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010 (CISADA), against Elaf Islamic Bank for knowingly facilitating significant transactions and providing significant financial services for the U.S. and EU-designated Export Development Bank of Iran (EDBI). Following the CISADA finding, Elaf immediately began an intensive course of action to stop the conduct that led to the CISADA sanction. Now, U.S. financial institutions are once again permitted to open or maintain correspondent accounts or payable-through accounts in the United States for Elaf Islamic Bank.

The listed vehicle for Bank Islam Malaysia, BIMB Holdings is looking at several options to expand through overseas penetration and local expansion. According to Bank Islam Malaysia managing director Datuk Zukri Samat, the bank is still pursuing plans of expansion to Indonesia through a strategic partner with broad experience. As a fully fledged Islamic bank, the task is more challenging, he said. Moreover, the bank is also extending the time for its discussions with the Dubai Financial Group over the 30.5% stake in Bank Islam to the end of the months, said BIMB group managing director Johan Abdullah.

Indonesia’s proposed Shariah megabank would improve industry awareness, lower costs and help the bank compete to win plantation, mining and infrastructure business. Combining the Islamic units of the government-held lenders is the most feasible of three options being considered by the State-Owned Enterprises Ministry. The other two options being considered are setting up a new state-owned Islamic lender or converting an existing government-held bank into a Shariah-compliant operation. It is possible the government could proceed with more than one of the choices. The ministry is currently in discussions with Bank Indonesia and will present a finalized proposal to the State-Owned Enterprises Ministry by the end of May. Government approval is expected by the end of the year.

The International Monetary Fund’s (IMF) latest review of Bahrain points out that the size of the financial sector remains a key structural vulnerability of the banking sector. Stress tests indicate that the large wholesale segment is resilient to credit shocks, but there are pockets of vulnerabilities in the retail segment, particularly in Islamic banks because of their concentrated exposures to local and regional real estate. Risks in vulnerable banks could be ameliorated by the buildup of additional capital cushions through earnings retention. Planned adoption of the Basel III capital and liquidity frameworks, the designation of domestically systemically-important financial institutions, and moving the existing deposit insurance scheme to a pre-funded system should be considered.

Bahrain-based Al Baraka Banking Group (ABG) announced net income increased by 15 per cent to $66 million, and total operating income by 16 per cent to $233 million in the first quarter of 2013 compared to the same period of 2012. Total assets increased by 2 per cent and amounted to $19.5 billion. Total deposits including equity of investment accountholders grew by 2 per cent while total financing and investments remained unchanged at the end of March 2013 as compared with the end of December 2012. According to the group's CEO Adnan Ahmed Yousif, the good results are due to the bank's initiatives like introducing more innovative products, expanding the branch network of ABG subsidiary units, and entering new markets as well as modernizing and developing the group's infrastructures.