According to Bloomberg Intelligence, banks in the United Arab Emirates may go through a second wave of consolidation as lenders seek to improve profitability. Bloomberg analyst Edmond Christou said the absence of common shareholders and a lack of cross-Emirate deals have so far hindered transactions. Abu Dhabi Islamic Bank and Commercial Bank International are among lenders that have under-performed in some areas and could benefit from commercially driven mergers. Most bank mergers in the UAE have so far been driven by common shareholders, making it easier for deals to be completed. Dubai Islamic Bank approved a plan this week to proceed with the acquisition of smaller rival Noor Bank, both of which are controlled by Dubai’s main holding company.
Muscat Securities Market (MSM) has announced a list of Shari’ah-compliant companies for the first quarter of 2018. Acording to ONA, these firms business and financial behaviour conformed to the requirements of Islamic Shari’ah according to the rules approved by the Accounting and Auditing organisation for Islamic Financial Institutions.
The Gulf Islamic Investments, a Islamic financial services company based in the UAE, has revealed the acquisition of nearly one million square feet of logistics facilities on behalf of its investors, at the price of 144 million US-Dollar. The two state of the art logistics centres, are located in Dortmund Germany, and serves as key logistics centre of Amazon supplying goods to 29 other facilities. These newly built facilities are leased out to Amazon on a long-term lease that cannot be cancelled with regular rental uplifts linked to Germany CPI.
A London High Court judge will decide on Friday whether to continue proceedings on the validity of $700 million sukuk issued by Dana Gas. United Arab Emirates producer Dana Gas started proceedings in June to have its sukuk declared invalid and unlawful because of changes in the interpretation of Islamic finance. A last-minute injunction obtained by some shareholders prevented Dana Gas from participating in the trial. High Court judge George Leggatt on Tuesday adjourned the trial and decided to reserve judgement until Friday. The outcome of the trial could have significant repercussions for sukuk issuers and investors worldwide, as it could set a precedent for other issuers. The case is being disputed in UK and UAE courts because while the purchase undertaking is regulated by English law, the mudarabah agreement underlying the sukuk structure is regulated by UAE law.
Islamic finance is exploring green bonds in order to develop Sharia-compliant financial products to invest in climate change solutions. Green Sukuk are Sharia-compliant investments in renewable energy and other environmental assets. Over $30bn worth of green bonds were issued in the second quarter of 2017. Issuance from emerging markets has jumped from $2.3bn to $9.2bn year-on-year versus 16% a year ago. Malaysia has the opportunity and ambition to be a leader in this space on the premise that Malaysia is already a leader in Islamic finance. Another active player on this front is the United Arab Emirates (UAE), which launched the Green Finance and Investment Support Scheme to promote green projects. Green Sukuk is a good model to finance sustainable infrastructure as well as help bridge the gap between conventional and Islamic finance. The most important challenge for Sukuk is gaining acceptance by international investors due to lack of standardisation and legal enforceability risk. Other challenges of green Sukuk include investor’s awareness, demand for energy supply, government support and demand for energy financing.
The stock markets in the United Arab Emirates look likely to trade softly as they reopen on Monday after the Eid holidays, although Abu Dhabi's Dana Gas might just rise sharply after it reached an agreement on overdue payments from the government of Kurdistan.
The markets in the UAE are the only ones open in the Gulf. Others, like Egypt, will pick up trading later this week. There is no fresh, major corporate news in the UAE except Dana's settlement, which will see Kurdistan immediately pay Dana's consortium $1 billion, including $400 million that will be used for investment in the region. Dana will receive 35 percent of the money. In addition to Dana's share of the $600 million payment, "Future benefits to Dana Gas should be much larger, given the massive resource potential of the two fields, Khor Mor and Chemchemal. Dana Gas's share of 2P reserves in the two fields amounts to close to 1 billion barrels of oil equivalent, with huge upside", said Allen Sandeep, head of research at Cairo-based Naeem Brokerage. He continuid: "Overall, we view this as a major positive development for Dana Gas."
The standoff between Dana Gas PJSC and its bondholders carries on after the company that’s trying to void $700 million of its own debt was said to believe investors may even have to pay the company.
Dana Gas says a court battle with holders of the Islamic securities, or sukuk, may see it having to return less than 10 % of the amount it borrowed. In a second scenario, it believes creditors may have to pay it as much as $150 million, and that the case may last more than 10 years. The Gas company had announced plans to restructure the debt in May, this week retracted an offer to replace the bonds and is pursuing a resolution in court. It said in June the debt was no longer Sharia-compliant. Investors questioned the validity of the claim since neither sukuk regulations nor UAE laws governing the matter have changed since they were issued in 2013.
Central Bank issued a notificaiton in May this year about mis-selling of investments. The UAE‘s largest Sharia-compliant lender, Abu Dhabi Islamic Bank, has welcomed efforts by the central bank to clamp down on unscrupulous sales of investment plans to UAE expats It said, the reputation of the industry as a whole had been damaged by dishonest brokers.
“More regulation is a good thing and we work very closely with the central bank” and other wealth management institutions who wish to improve their services, said Daffer Luqman of Abu Dhabi Islamic Bank. “At the end of the day the reputation of the business affects everybody. If an institution does a bad job of promoting or marketing a service it affects the whole industry so it’s very important that this business is regulated, that it’s regulated effectively and that everybody plays by the rules.”
According to sources, the Saudi Arabia’s Islamic Development Bank has asked banks for proposals to arrange a U.S. dollar-denominated sukuk. The bank in Jeddah is a regular issuer of international Islamic bonds. The new sukuk, possibly with a five-year maturity, could be issued in the next month or two. The deal will probably have a size of between $1 - $1.5 billion. Banks were given a deadline of July 26 to respond to IDB’s request.
Meraas Holding, a real estate developer in Dubai owned by the UEA government, issued a $400 million sukuk last week. It was sold privately to a select group of investors, according to sources. The Islamic bond has a five-year maturity and is at par with a 5.112 % yield on May the 26th and traded at one to 1.5 points above par shortly after that. Emirates NBD, Noor Bank and Standard Chartered jointly coordinated the transaction and served as bookrunners along with Dubai Islamic Bank, Sharjah Islamic Bank and Warba Bank.
Meraas is the parent company of the leisure and entertainment company DXB Entertainment, which owns 4 theme parks and a water park in UAE capital. It has been said, that a new entity has been set up which will manage billions of dollars of development projects for Meraas Holding and Dubai Holding. Dubai Holding is the investment vehicle of Dubai ruler Sheikh Mohammed bin Rashid al-Maktoum. Raed Kajoor Al Nuaimi, formerly chief executive of DXB Entertainment, has been appointed to lead the new management company.
The new Index will contain 98 Sukuk from 61 issuers that will have a current market value of over $90 billion. The Emirates NBD Markit iBoxx USD Sukuk index captures sovereign, sub-sovereign and corporate Sukuk from emerging and developed markets and will contain investment grade, sub investment grade and unrated securities. They will all offer a broad representation of the global Sukuk universe and provide combining transparency, multi-dimensional analysis, independence and flexibility, it will provide an accurate and objective benchmark for Islamic finance investors.
Developed by Emirates NBD Group in collaboration with IHS Markit, the Emirates NBD Markit iBoxx USD Sukuk Index is a market-cap weighted index dedicated to capturing the performance of the Sukuk market. It will be used for benchmarking, risk and performance analysis and as an underlying for tradable products. In order to meet the growing demand for Shari'ah-compliant solutions, it is envisaged that the Index will be utilised by a range of institutions including asset managers, banks, pensions and sovereign wealth funds and ETF issuers.
Dana Gas and its partners are looking at recovery for damages of at least $26.5 billion from Iraq’s self-governing Kurdish region for all delays in oil and natural gas projects. Dana Gas is based in the UAE and its partners in the venture named Pearl Petroleum, filed a petition in May at a federal court in Washington, DC, seeking “recognition and enforcement” of awards in a London arbitration case. The petition is part of a legal process that may allow Pearl Petroleum to seize Kurdish assets if the Kurds don’t pay awards decided in arbitration.
According to the Kurdish Energie Minister stated, the Kurdistan Regional Government “considers that the claimants’ approach in the arbitration is unconstructive and unnecessarily escalates the dispute. It will continue vigorously to pursue its rights and defend its position in all appropriate forums.”
Dana Gas and partners are pursuing claims in the London Court of International Arbitration against the Kurdish Regional Government for damages related to delays they say were caused by the Government in developing the projects.
A strategy centre that was tasked to implement a strategy for Dubai to become a global hub for the Islamic economy can report that progress was made on about 75 % of its initiatives to this date.
The Dubai Islamic Economy Development Centre, that was set up in 2013, stated yesterday it had held a board meeting on Tuesday which was attended by Sultan Al ¬Mansouri, the Minister of Economy as well as the chairman of the centre, to discuss these achievements.
The centre identified key sectors for developing three segments of Dubai‘s Islamic economy: Islamic finance, halal products and Islamic lifestyle including culture, art, fashion and family tourism.
The minister said: "Dubai and the UAE are instrumental in raising awareness about the culture of Islamic economy worldwide and boosting global interest in adopting its principles. The Islamic economy ¬strategy adopted by Dubai and the wider UAE is truly unique in its ability to foresee economic changes, offer secure investment options and utilise bonds to finance major projects across the globe."
Katharine Budd, the chief executive and co-founder of Now Money, a Dubai-based fintech start-up, explains how fintech works.
This is a new financial services phenomenon. While nowadays you might be able to operate your bank account from a website or mobile app, but the systems behind these online user interfaces have barely changed since they were implemented in the 1970s. The international payment transfer system Swift still runs on the telephone systems. This means that no matter how nice the front-end website your account is on, the transactions displayed are still run off legacy systems, which can lead to legacy issues such as delays in processing transactions and potentially losing the transaction in the system altogether.
New start-ups are innovating where banks are stagnating and are cooperating with regulators and cybersecurity experts and developing new technology. These organisations have become know as “fintechs” and their purpose can range from offering customers alternative ways to bank, usually through mobile, to using advanced analytics to provide investment recommendations.
Dubai-based building company Drake & Scull said it breached financial covenants in relation to a sukuk syndicated facility and other bank facilities in 2016. The company incurred an annual loss 815.3 million dirhams ($222.01 million) last year as low oil prices and an economic slowdown hit the construction sector in the Gulf region. Drake & Scull was not able to comply with reporting requirements requested for a conditional waiver and therefore, breached financial covenants. These loans are now overdue on their principal and interest payments, and they are technically payable on demand.
Dubai Financial Market (DFM) said it has officially published the final version of its Standard on Hedging against Investment and Finance Risks. This standard is the newest addition to DFM’s Sharia-compliant standards, which include Standard on Stocks and Standard on Sukuk issued in 2007 and 2014. The key amendments and add-ons to the draft of the standard are adding two types of risks, property risk and reputational risk. The amendment also emphasises the admissibility of the penalty clause only in Istisna, supply contracts and labour-lease contracts, excluding the contracts that result in a monetary debt owed by the debtor. It also emphasises the admissibility of the third-party guarantee in contracts of partnerships, Mudaraba and agency in investment, provided no link is made between this guarantee and the contract of partnership or Mudaraba.
On March 15 Abu Dhabi Islamic Bank appointed Khamis Buharoun as acting CEO. The appointment of acting CEO Khamis Buharoun is in context of CEO Tirad Marouf Al Mahmoud's medical leave.
The Arab Regulators Conference, hosted by the Arab Monetary Fund, took place on 8-9 March in Abu Dhabi. The two-day conference was an opportunity for regulators to engage in an open dialogue on how to strengthen the development of corporate governance across the region. The conference was attended by over 160 delegates from 17 different countries from both the regulatory and the private sectors. Abdullatif Al Othman, Chairman of Saudi Arabian Industrial Investments (SAIIC) highlighted the importance of corporate governance. He urged attendees to adopt the highest international standards of corporate governance, to help move the region from frontier markets to emerging markets to developed markets. This year, board diversity and women’s role on the board were also widely discussed as were governance trends and best practices.
Bahrain's GFH Financial Group may merge with Dubai-based Shuaa Capital, GFH said in a statement. A web of ties between GFH and Shuaa began forming last year. In May, Abu Dhabi Financial Group (ADFG) and GFH said they were jointly setting up an Islamic bank called ADCorp with initial capital of $100 million. In November, ADFG bought a 48.36% stake in Shuaa, which has a market capitalisation of about $535 million. In December, Shuaa bought 14% of Bahrain's Khaleeji Commercial Bank for $25 million. GFH owns 47% of Khaleeji. On Sunday, Shuaa said it would acquire Integrated Capital and Integrated Securities, both controlled by ADFG. Integrated Capital owns 11.74% of GFH. ADFG officials did not respond to requests for comment about the possible merger.
A low-income housing policy will be introduced in Dubai, to provide housing units for individuals earning low income and renovate some old areas in the emirate. The Crown Prince of Dubai HH Sheikh Hamdan bin Mohammad bin Rashid Al Maktoum approved the policy. It will classify low-income people into Emiratis and non-Emiratis, including expats and workers, in strategic sectors in Dubai. The policy will also include families’ income levels, place of residence, and public benefits and will compare them with requirements and the extent of challenges families are facing. Sheikh Hamdan approved two main programmes. The first one aims to cooperate with real estate developers in order to provide housing units for low-income families while the second aims to refurbish some old areas in Dubai.