Gulf News

Family businesses offer strategic investment opportunities for Middle East HNWIs

Nearly 60 per cent of the world’s family-run businesses are struggling to find external finance to fund investment with 58 per cent of family businesses currently seeking external financing to fund their investment plans, according to KPMG. Despite family businesses creating more than 70 per cent of the global GDP, many say they find their fund-raising options limited and finding the right strategic investment partner can pose a challenge. KPMG has identified one possibly underutilised route for investment with the involvement of high-net-worth individuals (HNWIs), many of whom have family business experience as well as significant investment capital. According to the Survey, the top priorities of HNWIs and family owned businesses align, meaning that family businesses and HNWIs could prove to be highly compatible partners.

Islamic Development Bank set to raise $1.5b sukuk

Jeddah-based Islamic Development Bank set the size of its five-year sukuk issue at $1.5 billion while tightening the pricing to the low end of its previous guidance. Final pricing was given at a spread of 10 basis points over mid-swaps; previous guidance was in the range of 10 to 12 bps, and initial price thoughts were 15 bps. The order books were approaching $2 billion. Books closed at 1000 GMT on Thursday. The AAA-rated IDB had mandated CIMB, Deutsche Bank, First Gulf Bank, GIB Capital, HSBC, Maybank, Natixis, National Bank of Abu Dhabi, and Standard Chartered Bank as joint bookrunners to arrange the sukuk sale. The IDB is looking to increase its issuance of sukuk, partly to raise its profile among international investors and to secure similar pricing levels to other development banks.

Empower secures $127.8m loan from Dubai Islamic Bank

Empower, the district cooling company, has secured a $127.8 million (Dh469.4 million) loan from Dubai Islamic Bank (DIB). The loan facility, to be paid back over half yearly instalments over five years, will be used to fund Empower’s district cooling area in Dubai’s Business Bay area. Empower said that the loan is a cost-effective measure to sustain company growth. The loan is the first Islamic financing facility taken out by Empower.

Global takaful contribution expected to reach $20b by 2017

GCC’s gross takaful contribution is estimated to reach around $8.9 billion (Dh32.6 billion) in 2014 from an estimated $7.9 billion in 2013, according to the Ernst &Young report, Global Takaful Insights 2014. The report forecasts a continued double-digit growth momentum of the global takaful market of approximately 14 per cent from 2013 to 2016 and expects the industry to reach $20 billion by 2017. Saudi Arabia will likely remain the core market of Islamic insurance business. According to EY, among the GCC countries, competition, operational issues and the lack of qualified talent continue to be impediments. The industry needs to re-examine its strategies, operations and regulations in order to gear itself up for further growth and a sustainable ecosystem.

SMEs offer huge opportunities for Islamic banks

As more and more conventional banks are now discovering, the Small and Medium Enterprise (SME) sector provides a huge opportunity for increasing profitability and diversifying risks. Less well known is that a large number of SMEs, especially in the Middle East and North Africa (Mena) region, would prefer to deal with Islamic banks rather than conventional ones. These SMEs are often unable to access banking services, since few Islamic banks have stepped up to the challenge of catering to their needs. Once Islamic banks have put in place the requisite infrastructure and capabilities, there is little doubt that the SME sector will be able to provide them with a profitable and sustainable revenue stream.

GFH acquires Texas properties worth $75m

Gulf Finance House has announced the acquisition of two multi-family residential properties in Houston, Texas, as part of the Diversified US Residential Portfolio, which the bank has recently agreed to acquire. The properties — located in Houston, and Atlanta — have an overall occupancy of 94 per cent, and nearly 1,300 apartments. They have been selected due to their proximity to the large infrastructure assets in the cities, and are expected to benefit from the economic recovery in the US. The total size of the assets is $75 million (Dh275.4 million).

Kuwait’s Burgan Bank to meet investors ahead of potential Tier 1 bond

Kuwait’s Burgan Bank has chosen banks to arrange meetings with investors ahead of a potential issue of a capital-boosting bond. The lender will hold roadshows in Asia, the United Arab Emirates and Europe from Sept. 4, with a bond issue that enhances the bank’s Tier 1 capital ratio to follow, subject to market conditions. Should the US dollar-denominated bond issue happen, it will have a perpetual lifespan and be of benchmark size. Burgan Bank’s chief executive, Eduardo Eguren, said in March that the lender wanted to raise its capital before the end of the year to help it comply with Basel III guidelines, with perpetual bonds a potential route. The investor meetings will be arranged by HSBC as global coordinator and Citi, JPMorgan and National Bank of Abu Dhabi as lead managers.

Azerbaijan’s IBA plans stand-alone Islamic banking unit

International Bank of Azerbaijan (IBA), 50.2% owned by Ministry of Finance, is preparing to launch a separate sharia-compliant banking unit as the former Soviet state prepares an Islamic banking law slated for next spring. A stand-alone unit would allow IBA to more than quadruple its Islamic financing business in the country. IBA has thus far extended $180 million of Islamic financing in the country; after legislation is passed, this could increase to as much as $750 million within a year. IBA also wants to create a strong domestic Islamic banking platform for use with its subsidiaries in Russia, Georgia and Qatar. IBA has hired Bahrain-based consultancy Shariyah Review Bureau to help in the design of several projects.

Post crisis Islamic banks must revise business model

Six years after the economic crisis there is still much cynicism and anger directed at the conventional banks. People across the globe have a hunger for a more ethical, transparent and robust financial system. This has opened a window of opportunity for Islamic banks to emerge as a values-driven alternative to conventional banks. However, Islamic Bank deposits are minuscule compared to those held by conventional banks. Few can dispute that the lack of standardisation has held back Islamic finance. But there is a far more fundamental issue that today’s Islamic banks need to address: Catching up with new trends. Unless Islamic banks clearly define their differences from conventional banks, in moral and value terms, and are easily understood by Muslims and non-Muslims, the promise that Islamic banking can offer the world a better way of banking will have no more substance than a mirage in the desert.

Turkiye Finans raises $252m in Malaysia sukuk debut

Turkish lender Turkiye Finans Katilim Bankasi has raised 800 million ringgit ($252.21 million; Dh922.5 million) from an Islamic bond in Malaysia, its first issuance from a 3 billion ringgit programme announced last month. The issuance by Turkiye Finans, in which Saudi Arabia’s National Commercial Bank is the largest shareholder, is the first ringgit-sukuk done in Malaysia by a Turkish issuer. Proceeds from the five-year sukuk will fund general corporate purposes and working capital requirements, according to HSBC Amanah Malaysia Bhd. HSBC Amanah and Standard Chartered Saadiq Bhd are jointly advising the Turkish bank.

UAE Islamic banking assets crossed $95b in 2013

The UAE is emerging as a serious player in the Islamic banking market with total Islamic banking assets growing to about $95 billion (Dh348.9 billion) in 2013 compared to $83 billion in 2012, according to a report by Dubai Chamber of Commerce and Industry based on a recent study by Ernst and Young. The report shows that the compound annual growth rate (CAGR) for Islamic banking assets in the UAE is expected to be about 17 per cent over the period 2013-2018. The Dubai Chamber report, however, points out that many Islamic retail banks suffer from lower profitability than the conventional banks, mainly due to higher expenses attributed to complex products, lengthy process steps and more interfaces.

Middle East’s wealthy keen on business growth than wealth management

Growing their business remains the primary and dominant goal for high net worth business owners in the Middle East, according to a recent study on the wealth management needs and preferences of high net worth (HNW) business owners in Asia, Africa and the Middle East. The report by Standard Chartered Private Bank and Campden Wealth Research showed that 82 per cent of Middle East based high net worth business owners surveyed have already internationalised their businesses, implying the need for international banking services that support the geographic reach and growth of these businesses. Increasing market share is the top growth objective (82 per cent) of participants, followed by increasing production capacity (65 per cent) and international expansion (58 per cent).

Takaful: Specific regulations to improve insurance penetration

Some GCC regulators have recently proposed a host of new takaful-specific regulations that are expected to boost the market access of these companies. Many of the new regulations relate to the implementation of more stringent corporate governance requirements such as board level investment committees, internal audit departments and approved actuaries. Transparency, a key deficiency in the GCC insurance markets, will also improve with periodic (quarterly, bi-annual and annual) and early warning reporting. In many GCC countries, authorities have sought to protect consumer rights through the mandatory purchase of certain insurance covers. The increasing regulation of the insurance market is expected to help to stabilise the market's volatility and further encourage market growth.

Kuwait’s CBK gets approval to raise up to 120m dinars via bonds

Commercial Bank of Kuwait has received regulatory approval to issue up to 120 million dinars ($425.8 million) of bonds, as it prepares to convert into an Islamic bank. In April, CBK shareholders approved both the issuance of the subordinated bonds and plans to convert the lender into a full-fledged Islamic bank. The bonds will comply with Basel-III rules. While CBK said its conversion would not be immediate, it would leave Kuwait with only four local conventional banks and could help tip the Islamic banking industry’s market share above an estimated 40 per cent. CBK is not the first to convert into an Islamic bank, with Boubyan and Al Ahli having done so previously.

Standard Chartered Saadiq opens Islamic Banking Centre in UAE

Standard Chartered Saadiq, the Islamic banking division of Standard Chartered Bank, opened its first dedicated Islamic Banking Centre in the UAE at the Al Khalidiya Branch in Abu Dhabi. The launch of Saadiq Islamic Banking Centre comes in response to the increasing demand for Islamic banking service, the bank said. Standard Chartered has the largest retail distribution network among international banks operating in the UAE with 11 branches, five Electronic Banking Units and more than 90 ATMs and Cash Deposit Machines spread across the country. Standard Chartered Saadiq is the only international bank offering Sharia-compliant retail banking services in the UAE.

Saudi’s Al Rajhi Capital to launch first sukuk fund

The investment banking arm of Saudi Arabia’s Al Rajhi Bank has received regulatory approval for its first mutual fund that will invest in sukuk. Interestingly, Al Rajhi has never raised money through a sukuk issue itself. The fund, in the pipeline since 2012, has reportedlly been prompted by a growing number of client inquiries about investing in sukuk. Sukuk issuance in Saudi Arabia rose to the equivalent of $15.2 billion through 20 deals last year, compared to $11.2 billion through 18 deals in 2012. However, a number of the kingdom’s sharia scholars view trading in sukuk as outright trading of debt, which is banned by Islamic principles.

Saudi Telecom issues debut $533m Sukuk

Saudi Telecom Company has issued a debut Islamic bond worth 2 billion Saudi riyals ($533.3 million) after receiving good demand. The 10-year Islamic bond carries a floating profit rate of 70 basis points over three-month SIBOR and was offered under its newly established 5 billion Saudi riyals private placement sukuk program. The debut Sukuk issuance of STC was almost two times oversubscribed. J.P. Morgan Saudi Arabia, NCB Capital Co. and Standard Chartered Capital Saudi Arabia were joint arrangers of the sukuk program as well as joint managers on the debut issue.

Sameer Al Ansari joins Eureeca as board director

Eureeca, a crowd investing platform offering a global solution for growth businesses to raise finance, announced that Sameer Al Ansari has joined the company as a Board Director. Al Ansari is the founder of PE Plus, and the former chairman of Dubai International Capital, and CEO of Shuaa Capital. Al Ansari, who also sits on the boards of Dubai International Financial Centre Authority; Hawkamah Institute of Corporate Governance; and Cedrus Bank, is the company’s sixth board member.

Reoriented Dubai Islamic Bank ready for a new phase of balance sheet growth

Dubai Islamic Bank (DIB) has completed a five-year consolidation from 2009 to 2013 and has charted a plan for strong balance sheet growth in 2014-16 period. DIB’s first quarter figures vouch for its growth momentum. While the bank reported a 111 per cent increase in net profit to Dh636.6 million in the first quarter of 2014, the bank’s total assets increased by 6.9 per cent to Dh121.1 billion from the end of 2013. Key themes for this year are to grow both consumer and wholesale banking business achieving return on assets of about 1.7 per cent with a return on equity of 15 to 17 per cent. Improved profitability is targeted through growth in financing book and redeployment of liquidity from low earning assets to higher earning assets.

Islamic finance body IIFM eyes first sukuk standard

The Bahrain-based International Islamic Financial Market (IIFM) will develop its first standard contract template for sukuk, and aims to double the number of its standards as early as next year. A standard for leasing-based sukuk will be developed first by the IIFM to help harmonise industry practices, said chief executive Ijlal Ahmad Alvi. The move comes after a consultation meeting in Dubai this week which identified a need for guidelines covering the ijara sukuk structure as a priority. A work group will also study other common sukuk structures such as mudaraba, wakala and musharaka, as well as convertible and exchangeable sukuk. The ijara sukuk standard could be ready by the end of this year at the earliest.

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