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KFH research limited: Sovereign and Quasi-Sovereign issuers drive global primary sukuk market in 1Q-2014

According to the newly released report “Global Sukuk Report 1Q2014” by Kuwait Finance House Research Limited (KFHR), the global sukuk market saw a modest volume of USD31.14bln in new sukuk issuances in 1Q2014, a drop of 15.2% as compared to 4Q13. The drop in issuance volume stems from a noteworthy slowdown in the GCC sukuk issuances in 1Q14. Consistent with the trend over past several quarters, the primary sukuk market was led by sovereign and quasi-sovereign issuers who collectively accounted for 81% of the global primary sukuk market issuances in 1Q14. As an outlook for 2014, the sovereign sukuk sector is of much stakeholder interest this year. As a result, despite the modest primary market momentum in 1Q14, the global primary sukuk market is expected to once again surpass the USD100bln mark in new sukuk issuances this year.

Iranian official confirms execution for bank fraud to proceed

Iran's Chief Auditor Nasser Seraj announced that there is no truth to rumours that a death sentence issued in the so-called $3-billion fraud case will be withdrawn. Seraj indicated that the authorities are continuing to trace the assets of Amir Khosravi, adding that the investigation is proceeding well. The case came to light in 2011, and 39 defendants were accused of using forced documents to obtain credit from banks to buy state-owned companies. Four people were sentenced to death for the charge of "corruption on earth" including Amir Khosravi, and others were sentenced to prison terms of up to 25 years. Mohammad Reza Khavari was the CEO of the country's largest bank, Melli Bank, and he remains a major suspect in this case, having fled to Canada as soon as the investigation became public.

Saudi Arabia-based Weqaya Takaful outlook revised to negative by S&P

Standard & Poor's Ratings Services has affirmed at 'BBB' its insurer financial strength and counterparty credit ratings on Saudi Arabia-based Weqaya Takaful Insurance and Reinsurance Co. (Weqaya) but the outlook is negative. The affirmation reflects S&P’s view that despite a comprehensive net loss of Saudi Arabian riyal (SAR) 90.7 million ($24.2 million) for 2013 Weqaya's new senior management is taking appropriate remedial action. Consequently, policyholder confidence will be maintained and Weqaya will continue to enjoy both a satisfactory business risk profile, and at least a lower adequate financial risk profile. The negative outlook reflects S&P's belief that senior management at Weqaya must continue to work quickly and effectively to reinforce capital and earnings.

Investigating Islamic Finance In Nigeria

In Nigeria, the practice of Islamic finance was introduced in 1992 by the former Habib Bank (Bank PHB, and now Keystone Bank). The profile of this type of banking was again raised between 2008 and 2009 when Nigeria joined the Islamic Financial Services Board (IFSB). Later, the CBN issued framework dated January 13, 2011 to regulate Islamic finance in Nigeria. In July, 2011 the CBN granted licence to Stanbic IBTC Bank to operate an Islamic banking window and subsequently to Sterling Bank in 2013; the CBN had earlier granted approval for the establishment of Jaiz Bank to operate as the first full-fledged Islamic bank in Nigeria. In sum, for Nigeria to benefit from Islamic finance, the governing laws and regulations must be written and subject to interpretation and analysis.

Saudi Islamic bank giant losing ground as its profit slides

Al Rajhi Bankk is losing ground to peers in Saudi Arabia, its home market, as slowing credit growth and intensifying competition for retail customers weigh on earnings. The world’s biggest Islamic bank said this week that first-quarter profit fell 17% from a year earlier, its third quarter of declining earnings. Lending growth in the three months slowed to 7% from 19% in the same period of 2013. That compares with 30% for Bank Albilad and 11% for Samba Financial Group. Profit at the Riyadh-based bank is slowing even as the Saudi economy is poised to grow 4.2% this year, because rival banks are increasingly turning their attention to retail customers as new labour laws stifle construction projects. Construction lending accounted for 7.7% of total bank loans in 2013.

The IFSB announces the speakers for its 11th Annual Global Summit

The 11th IFSB Annual Global Summit, themed "New Markets and Frontiers for Islamic Finance: Innovation and the Regulatory Perimeter", will be held in Mauritius. The session topics which reflect the importance of the Summit theme include: Global Overview of the Islamic Financial Services Industry (IFSI): Outlook and Policy Developments; Legal and Regulatory Environment of Islamic Finance; Sukuk, Market Development and Regulation, The Role of Islamic Finance in Economic Development: Promoting Financial Inclusion, Sustaining Innovation, Expanding the Regulatory Perimeter - Striking a Balance; Panel Discussion on "New and Emerging Islamic Finance Jurisdictions: Opportunities and Challenges Ahead. Global players and thought leaders from among the regulators and market players of the Islamic financial services industry have confirmed their participation.

Withdrawal: Islamic insurers agree to out-of-court settlement

After waging a legal battle with the regulator as well as conventional insurers for almost two years, Islamic insurance companies have finally agreed to an out-of-court settlement of the longstanding dispute over controversial Takaful Rules 2012. General and family Takaful companies will withdraw their constitutional petition against the SECP, 23 insurance companies and the federation of Pakistan within this week, thus allowing conventional insurers to run Shariah-compliant insurance business through parallel window operations. The SECP is said to have agreed to the Takaful players’ suggestion that conventional insurance companies should be required to maintain separate capital accounts for the two lines of business.

Pakistan mulls $5.6b sukuk sales this year

Pakistan looks set to end a year-long drought in sovereign sukuk issuance to support its goal of doubling Sharia-compliant banks' market share by 2020. The government may offer as much as Rs542 billion ($5.6 billion) of local-currency sukuk in 2014, including notes backed by a highway and an airport. That compares to one sale of Rs43 billion in 2013. Lenders including MCB Bank and National Bank of Pakistan, are converting branches to respond to rising demand for banking that complies with the religion's ban on interest, which now has a market share of 10 per cent. The Rs323 billion of sovereign sukuk outstanding is less than a third of the amount of Sharia-compliant bank assets.

Source: 

http://www.timesofoman.com/News/32476/Article-Pakistan-mulls-$5%206b-sukuk-sales-this-year

Limitless said to seek delay on installment of US$1.2 billion debt

Limitless LLC, the Dubai-based developer, has reportedly asked creditors to defer the first installment on its $1.2 billion restructured debt until the end of 2015. The company has offered banks 200 million dirhams ($54 million) toward the $400 million amortization due in December. Limitless, which was put under the management of state-controlled developer Nakheel PJSC in 2010, has requested postponement of payment for a year. The company is revising business plans and will approach lenders about the debt maturing in 2014, its chairman Ali Rashid Lootah said. Options include sale of land in Jebel Ali, he added. Seemingly, the company reached an arrangement that would give lenders a profit rate equivalent to interest of 175 basis points over the London interbank offered rate and may extend payment by five years.

Turkiye Finans rallies on break after beating guidance

Turkiye Finans navigated challenging markets on Tuesday to price its $500m five year sukuk inside guidance at 5.375%. After what one investor termed a “sluggish” start, the deal achieved a $1.4bn order book and rallied from par on the break to 100.125/100.375. Turkiye launched as tensions mounted again between Russia and Ukraine. The Russia 4.875% ’23 bond has fallen three points since the start of the week and equity markets are down. Despite this, the Turkish participation bank tightened its guidance from 5.5% and almost doubled its book.

Report from the Third World Forum on Governance

The Brookings-Zaostreno “World Forum on Governance” was held in Prague on April 9 – 11, 2014. There were sessions on prosecutorial initiatives and the role of judges, police and prosecutors in countering corruption and a consideration of transnational instruments such as treaties, courts and international organizations. But there were also sessions on fighting corruption with social media and the relationship between government reform efforts and corruption control. In addition there was an emphasis on the corporate side and on how to include the private sector in the fight against corruption. This year’s Forum had a broad perspective to include government reform as a means of getting at the underlying incentive structures in public sector corruption.

GULF FINANCE HOUSE PLANS SUKUK ISSUE

Bahrain-based Gulf Finance House (GFH) plans to issue a sukuk or arrange new debt facilities of up to $500 million. The funds raised will be used to restructure the current liabilities, develop projects and for acquisitions of new businesses. The announcement follows ordinary and extraordinary general meetings of the bank yesterday, with the board getting authorisation from shareholders to determine the final structure of the sukuk or the debt facilities. GFH chairman Dr Ahmed Al Mutawa said that the bank reported a net profit of $6.3 million, reduced operating cost by 20 per cent and successfully restructured debt last year. Additionally, the shareholders approved the appointment of eight new members to the board for three years. The auditors and the Sharia supervisory board have been reappointed for the year.

Global Islamic Insurance Industry Still Struggling to Build Scale

At the 9th annual world Islamic insurance conference in Dubai, the emphasis, as usual, was on the industry’s seemingly limitless expansion potential. True, takaful business worldwide increased at around 8% to $19 billion in 2012, with plenty of room for the sector to expand. However, the current takaful industry is very fragmented with few players that can claim to be pan-regional, let alone global players. That in itself adds to the lack of global accountancy, corporate governance and procedural standards. There are currently few signs of heightened mergers and acquisitions activity in the takaful sector, indicating the issue of scale is not one that will be addressed in the near future.

Bank Islam still keen on Indonesia market

Bank Islam Malaysia Bhd has reiterated its interest in the Indonesian Islamic banking market despite previous attempts at penetrating the world’s largest Muslim country seeing a dead-end. Managing director Datuk Seri Zukri Samat said Indonesia possessed tremendous prospects as the country, with a population of 240 million, is still underserved in the Islamic banking sector. Islamic banking penetration in Indonesia is about 3% to4%, whereby Malaysia is between 23% and 24%. There is a huge Muslim population in Indonesia but Islamic banking penetration is very low, certainly there is a lot of business opportunity there, he said.

GÜLENIST BANK'S SUPPOSED MERGER SCRUTINIZED

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.

The IFSB's 6th Seminar Legal Issues Discussed Innovation in Sukuk Securitisation and Islamic Hedging Instruments: Developments and Challenges

The Islamic Financial Services Board (IFSB) successfully organised the 6th IFSB Seminar on Legal Issues in the Islamic Financial Services Industry (IFSI), themed "Innovation in Sukuk Securitisation and Islamic Hedging Instruments: Developments and Challenges" on 25 March 2014 in Brunei Darussalam. This Seminar is a part of the IFSB seminar series on legal issues in the Islamic financial services industry. Speakers shared their insights on the legal challenges faced by asset securitisation and Sukuk structuring. Moreover, discussions focused on the need for establishing international standards governing transactions of Islamic hedging instruments in order to reduce the legal uncertainty. In the last session, speakers discussed the Shari`ah governance structure and the role of Shari`ah supervisory boards in assisting the innovation and development of these evolving markets.

US$14 billion Sukuk issuance in December, 120 billion for 2013

Fears that the Fed’s taper will cause interest rates to rise further has triggered a wave of issuance during the 4Q13 (up 68.5% q-o-q) with issuers looking to take advantage of cheaper funding rates. Total Issuance volume for 2013 came in at USD119.7bln, 8.7% less than in 2012. Malaysia accounted for the largest share of the sukuk market during the month with 72.8% of the issuance total. December saw new issuances from a number of jurisdictions such as the UK, Yemen and Singapore, which collectively accounted for 1.8% of issuance volume. Qatar, Saudi Arabia and the UAE continue to witness strong growth this year with further issuances amounting to USD1.5bln, USD1.1bln and USD750mln respectively during the month.

Maybank issues 1.5 bln ringgit sukuk

Maybank Islamic Bhd, a unit of Malaysia's Malayan Banking Bhd, has raised 1.5 billion ringgit ($458.65 million) with its first Basel III-compliant Islamic bond. The sukuk has a tenure of 10 years and was priced at 4.75 percent. It was oversubscribed by 2.9 times and increased in size from an initial plan for one billion ringgit. It is the first issuance under a 10 billion ringgit subordinated sukuk programme announced by the bank in March.

Saudi Electricity’s sukuk issue oversubscribed

The Saudi Electricity Co (SEC) has successfully managed to price and allocate two global sukuk, worth $2.5bn (SR9.37bn). The bonds were reportedly issued in two separate tranches: The first is a $1.5bn 10-year bond at a rate of 4% and the second is a $1bn 30-year note at 5.5%. Subscription to the bonds reached $12.5bn, or five times of the required fund.

Mashreq Al Islami launches new Sharia Compliant equity fund in MENA region

Mashreq’s Islamic banking division, Mashreq Al Islami, has launched its flagship Islamic Equity Fund, Al Islami Arab Tigers Fund. The fund will facilitate investment in a diversified portfolio of growth and dividend stocks in the MENA region. The Al Islami Arab Tigers Fund will invest in listed equities of companies that comply with Shariah law values. Mashreq fund manager Reda Gomma said that given the spending spree by MENA governments to upgrade their infrastructure, corporate earnings are poised to grow substantially over the medium to long term. Al Islami Arab Tigers is a well regulated fund and is a good opportunity for investors to benefit from growing economies in the Middle East, Gomma added.

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