GCC

Dubai`s credit situation

Rachel Ziemba analysis the credit situation of Dubai on 17 February on RGEmonitor observing that in recent weeks CDS spreads on the debt of Dubai’s largest State-linked vehicles like Dubai Holding etc shot up dramatically after Abu Dhabi announced a unilateral recapitalization of its banks. The cost to buy prrotection on the 1 year bond has doubled since late January and now stands at 1073bps. This is deemed linked to the previous market opinion that Abu Dhabi would support Dubai, while the recent step to just re-capitalise their own banks caused some doubts. The property bust in Dubai goes on with severe consequences.

The full report shows an excellent overall summary of the situation. It can be accessed via the link "source" below.

Islamic International Foundation for Economics & Finance, KSA aims to establish new standardising body

Islamic International Foundation for Economics & Finance in Saudi-Arabia aims to set up a committee of senior Islamic scholars in the kingdom by 2010 to help standardise Islamic banking edicts in Saudi-Arabia. The foundation is in the early talks with Sharia scholars and hoped to “institutionalise” Islamic rulings within a year, according to Mr Al-Zamil.

Yousef Abdullah al-Zamil is the foundation`s assistant secretary general.

Rumour: Dubai Islamic Investment Group may sell stake in Maybank

Malaysia's top lender, Maybank, said it was not in talks to buy Dubai Islamic Investment Group's stake in Bank Islam, a deal that would have created the largest sharia compliant bank in the Asia-Pacific region. Dubai Islamic Investment Group, which is part of Dubai Group, was interested in selling its 40 percent stake in unlisted Bank Islam to Maybank Islamic, the banking sources added. Approached to comment on whether it was selling its stake, Dubai Group said that it "is a long-term strategic investor" in Bank Islam.

Borse Dubai may only get half the finance it seeks

Haris Anwar reported on 17 February on Bloomberg that Borse Dubai Ltd. may get half of the USD 2.5 bn it sought to refinance a one-year loan used for the purchase of Swedish exchange operator OMX AB as lenders tighten credit for the emirate amid concern over its ability to repay. The facilty has to pay according bankers 325 basis points over the LIBOR, with an additional 125 basis-point fee and 75 basis-point margin if the lenders allow for a one-year extension. HSBC Holdings Plc is leading the syndication for Borse Dubai. The financing will have a portion compliant with Islamic restrictions.

Gulf Finance House (GFH) has approved a cash dividend of USD 52.56 mn

Gulf Finance House (GFH) has approved a cash dividend of USD 52.56 mn for last year. This is equivalent to 20 % of the par value of the paid-up capital. In addition a further 20 % will be paid in the form of bonus shares. This has been driven by strong end of year profits of USD 291mn.

Industrial Development Bank becomes Jordan Dubai Islamic Bank

Dubai Islamic Bank (DIB) announced the official re-launch of Jordan-based Industrial Development Bank (IDB) following the completion of a private placement of 26 million shares of IDB, valued at USD 100 mn. As part of the re-launch, IDB has been transformed into an Islamic financing institution to be known as Jordan Dubai Islamic Bank (JDIB).

The parties involved in the private placement transaction include Jordan Dubai Financial (JD Financial), the investment arm of Jordan Dubai Capital, DIB and Dubai International Capital. The private placement was valued at JOD 2.750 per share, based on the pricing equation adopted by the bank's Shareholders General Assembly, wherein the strategic partner, Mesc Investment, covered the entire placement.

Fixed Income market seen as important to Gulf growth

Sean Davidson wrote on 13 February in Business 24/7 about the importance of an active sovereign bond market to strengthen Gulf monetary policies allowing for an integrated market for local currency government bonds where the central, local and forweign banks, individuals and other institutional investors can participate - a matter which plenty of economists agree to.

The UAE government has indicated plans to issue conventional bonds and sukuk in the near future with maturities of up to 30 years.

S&P Placed Kuwaiti Banks On CreditWatch Negative On Large Exposure To Investment Companies

Press Release

Various Kuwaiti Banks Placed On CreditWatch Negative On Large Exposure To Investment Companies

LONDON (Standard & Poor's) Feb. 16, 2009--Standard & Poor's Ratings Services said today that it placed its 'A-' long-term counterparty credit ratings on Kuwait Finance House and Commercial Bank of Kuwait on CreditWatch with negative implications. At the same time, the 'A-2' short-term counterparty credit ratings on these banks were affirmed. Furthermore, Standard & Poor's placed its 'BBB+/A-2' long- and short-term counterparty credit ratings on Al Ahli Bank of Kuwait and Burgan Bank on CreditWatch with negative implications. At the same time, Standard & Poor's commented on its CreditWatch placement of Kuwait-based Gulf Bank. The 'A-/A-2' long- and short-term counterparty credit ratings on Gulf Bank remain on CreditWatch with negative implications, where they had been placed on Oct. 27, 2008.

Islamic Securitization - The Right Way Forward?

Heiko Hesse, Andreas Jobst and Juan A. Sole published on RGEmonitor on 13 February an analysis regarding Islamic Securitization and the grown interest for Islamic finance during the financial crisis.

Islamic finance is driven by the general precept of extending religious doctrine in the shari’ah to financial agreements and transactions. Predatory lending, deteriorating underwriting standards, and a series of incentive problems between originators, arrangers, and sponsors, of which all have infested the conventional securitization process, belie fundamental Islamic principles.

The article linked in the source relates the characteristics of this form of securitization to calls for enhanced disclosure and standardization, ratings agency reforms, and better transparency of origination and underwriting practices in conventional structured finance. In particular, it assesses the potential of conflicts of interest (which became apparent in the U.S. subprime mortgage crisis) to contaminate the integrity of the securitization process if it were conducted in compliance with shari’ah principles.

BKME achieves KD 51.4 mln in profits in 08

Bank of Kuwait and the Middle East (BKME) achieves KD 51.4 mn in profits in 2008 versus KD 48.2 mn in 2007 with a 6.6 % increase as compared to the last year.

The conversion of BKME into Islamic Sharia will be completed within the coming months as per the timeframe approved by Central Bank of Kuwait.

Hamad Abdulmohsin Al-Marzouq is the Chairman and Managing Director of BKME.

Islamic Project Finance in the Gulf States

Justin Dargin, Harvard University, Cambridge, Mass. wrote in Oil & Gas Financial Journal about the Islamization of project finance in the Gulf states saying that although Islamic financial instruments currently make up a small proportion of global finance, they actually experienced an annual 15% growth from 2005 to 2008, with the energy-producing Gulf nations in the Middle East responsible for much of the increase.

Islamic finance now reached the heavy industry of oil and gas, petrochemicals and manufacturing, with SABIC officially promoting it. However, regional Islamic banks are not widely involved in this business, only Al Rajhi and Bank AlJazira so far.

The conducted transactions may evidence a flight from the endlessly leveraged financial products that brought about the economic crisis to what is actually a more orthodox set of asset-backed and asset-based products, integral to Islamic finance. The author shows in the original article a substantial number of cases and details.

UAE banking outlook negative according to Moody's

Rebecca Bundhun reported on 14 January in Arabianbusiness that Moody's sees the fundamental credit outlook for the UAE banking system as negative, as it comes under strain from falling property prices and tightening liquidity conditions. Moody’s Investors Service said on Wednesday its prediction covered the next 12 to 18 months and reflects the number of bank loans given to 'opportunistic' developers, who would struggle to repay them as the property market undergoes a correction.

John Tofarides is a Moody's analyst.

Bahrain Islamic Bank receives first rating from Moody`s

Martin Morris reported on 10 February on Arabianbusiness that Moody's Investors Service, has assigned Baa1 long-term and Prime-2 short-term local and foreign currency issuer ratings and a D+ bank financial strength rating (BFSR) to Bahrain Islamic Bank. (BisB). The rating outlook is stable.

Yields in the Gulf rising strongly

Soren Billing reported on 10 February in Arabianbusiness that credit default swaps for Mideast lenders have risen substantially led by Bahrain, spreads have widened by 174.2 basis points (bps) in the last three months, followed by Saudi Arabia (114.8 bps), Abu Dhabi (96.7 bps) and Qatar at (70 bps), Corporates in the region have been hit even harder. The CDS spreads on Dubai based companies range between 600 bps and 1,100 bps, which is significantly higher than on Abu Dhabi based corporations, which range between 250 bps and 400 bps. The yield on Nakheel’s Sukuk that matures on Dec. 14 this year reached 41.9 % from 27.7 % a month ago.

Kuwaiti investement banks, firms may merge under rescue plan

Kuwaiti banks or investment firms may have to merge if they want to obtain state help under a USD 5 bn (Dh18bn) rescue plan, a bill devised by the central bank said. Under the plan, the central bank will also decide which investment firms will qualify for aid depending on whether the firm is able to continue its business and has a "good" solvency.

Venture Capital Bank Achieves USD 47 mn Net Profit

Venture Capital Bank Achieves USD 47 mn net profit and recommends 10 % cash dividends and 5 % bonus shares to its shareholders. The bank maintained a capital adequacy rate of 43 %, which is higher than the minimum requirements by the Central Bank of Bahrain's 12%.

Source: 

http://www.zawya.com/Story.cfm/sidZAWYA20090207084444/Bahrain:%20Venture%20Capital%20Bank%20Achieves%20$%2047%20Million%20Net%20Profit

Sharjah Islamic Bank profit drops 23 %

Sharjah Islamic Bank released that its profits declined 23 % to AED 231.59 mn in 2008, down from AED 301.83 mn in 2007.

Capital Management House (CMH) increased profits to Dh 52.8 mn

The Bahrain-based Islamic investment company Capital Management House (CMH)said its net income increased to USD 14.4 mn (Dh 52.8 mn) last year compared to USD 5.6 mn a year ago. The firm's board recommended 16.6 % stock dividend. Asset under management have grown to reach USD 105.9 mn and the equity base USD 128.8 mn.

GBCorp income rises 8.1 % to USD 53.1 mn

Global Banking Corporation (GBCorp), the Bahrain-based Islamic investment bank, said its total income in 2008 increased 8.1 % to USD 53.1 mn compared to USD 49.2 mn for the previous year. Its net profit reached USD 21.2 mn. Total assets reached 93 % to USD 455.9 mn against USD 236.2 mn for the previous year. The bank had USD 723 mn worth of fund under its management.

The Islamic Bank of Asia aims for expansion

The Islamic Bank of Asia, majority owned by DBS is looking for acquisition opportunities in Malaysia and Indonesia, although it is also keen on Saudi Arabia, the UAE and Kuwait. The Islamic Bank of Asia currently focuses on commercial banking, corporate finance, capital market and wealth management services. The step towards Malaysia and Indonesia targets the retail markets.

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