Arabian Business

Islamic banking penetration in the #UAE hits new high

According to the Islamic Banking Index by Emirates Islamic, Islamic banking penetration in the UAE has reached its highest level for five years. The survey showed that three out of five respondents now have at least one Shari’a compliant product. The perception of Islamic banks has improved steadily from 26 percent in 2015, with significant improvements in key areas relating to technology and customer service. However, knowledge or awareness of Islamic banking terminology has not seen clear improvement since 2015. The 2019 edition of the Islamic Banking Index indicates that the sector continues to widen its appeal to an increasing number of both Muslim and non-Muslim customers.

London VC Hambro Perks to invest in 'two to three' Islamic startups

The UK hosted its first halal startup pitch event in mid-June, when five prominent Islamic SMEs met with investors to showcase their wares. Prominent Islamic SMEs at the 'Smart Capital Startup Pitches' event included VIP halal travel firm Serendipity Tailormade, Muslim lifestyle platform Salam Planet and halal e-commerce site OneAgrix. The event was hosted by London-based venture capital firm Hambro Perks, who plans to invest this year in "two or three" of the start-ups that featured at the pitch event. Hambro Perks managing director Ali Qaiser said rapidly growing populations in emerging markets offer ripe regions for halal technology products and services. The company made its first investment when it funded British Muslim dating app MuzMatch. Qaiser expects halal tourism to take off. He also expects to see massive growth in the 'gamification' of Islamic lifestyles, such as apps to help prayer rituals and maps for Hajj pilgrimage.

Why a second #merger wave may hit #UAE lenders

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.

Abu Dhabi Islamic Bank gets nod for $270m rights issue

Shareholders of Abu Dhabi Islamic Bank (ADIB) have approved proposal for a rights issue of AED1 billion ($270 million) by offering 464 million new shares. Shareholders also approved the issuance of a $750 million sukuk and the repayment of its $1 billion sukuk issued in 2012. Khamis Buharoon, ADIB vice chairman and acting CEO, said the bank will continue to focus on expanding its retail business, providing market-leading digital banking services, while capturing opportunities across corporate, transaction and correspondent banking. ADIB reported a 3% increase in net profit for the first half of 2018, which reached AED 1.16 billion.

#Bahrain's GFH Financial Group pays off $200m #sukuk

GFH Financial Group has paid the entire amount of its $200 million sukuk, which was originally drawn in 2007. The facility has now been settled with a recent payment of an outstanding amount of $34 million. With this repayment, GFH said it frees up further assets pledged under the sukuk for potential disposal or exit. In 2008, GFH had financing liabilities in excess of $1 billion compared to $125 million today. According to Chairman Jassim Al Seddiqi, with its prudent approach to managing liabilities, strong cash generation and levels of liquidity, GFH continues to be better placed than ever to deliver value and further build its business lines.

Mortgages set to boost lending at #Saudi banking giant Al Rajhi

A jump in mortgages and a recovery in Saudi Arabia’s economy may help Al Rajhi Bank to reverse a decline in lending. According to CEO Steve Bertamini, higher government spending and faster economic growth amid higher oil prices should help the revival. Home loans have risen as much as 6% this year and there are 450,000 Saudis eligible to purchase a home under one of the government programs. Saudi Arabia’s new housing project announced in February includes an 18 billion riyal ($4.8 billion) loan-guarantee program to boost access to funding and 12.5 billion riyals to support down-payments. Al Rajhi Bank in July reported an 18% rise in second-quarter profit to 2.57 billion riyals. According to Bloomberg economists, Saudi Arabia’s economic expansion will accelerate to 1.6% this year from 0.9% in 2017.

#UAE private wealth forecast to grow to $590bn by 2022

According to the Boston Consulting Group (BCG), private wealth in the UAE saw positive growth between 2016 and 2017 of 8% and this growth is projected to remain steady over the next five years. Private wealth is expected to reach $590 billion in investable assets by 2022. The main drivers were the bull market environment in all major economies and the significant strengthening of most major currencies against the dollar. While offshore share is expected to decline over the next five years from 30% in 2017 to 24.1% in 2022, it will continue to grow to reach $140 billion in the UAE in the same period. The report also showed that personal wealth in the Middle East rose by 11% to $3.8 trillion in 2017, a significant increase compared with the rate for the previous five years.

#Kuwait bank in #merger talks to create $92bn Islamic lender

Kuwait Finance House (KFH) is seeking to hold talks with Bahrain's Ahli United Bank (AUB) for a potential merger. This would create an Islamic lender with about $92 billion of assets, six months after negotiations broke down. KFH sent a letter inviting Ahli United to sign a memorandum of understanding and a non-disclosure agreement to start valuation studies. The deal may provide a boost to debt-laden Bahrain, as the country struggles to cope with lower oil prices. According to Joice Mathew, the head of equity research at United Securities, the integration of business could be challenging because of the geographical dispersion of their assets and combination of Islamic and conventional banking.

New Saudi bankruptcy law 'tries to find balance' between investor and creditor interest

Saudi Arabia’s new bankruptcy law will come into effect in late August and aims to attract foreign and domestic investment in private businesses. The new law is designed to outline bankruptcy proceedings and will offer protection to creditors and embattled companies seeking to conduct their affairs without fear of asset seizure. According to lawyer Dario Najm, an associate in Ahmad bin Hezeem & Associates, the new law allows indebted corporations to maintain their operations while gradually settling their debts. Creditors and debtors will enter into agreements on debt payment schedules. When implemented, the law will be the sole regulation covering bankruptcy, effectively replacing previous rules passed in 1996.

Gulf banking transparency on the rise - study

Non-credit ratings agency Sigma Ratings found that Gulf countries outperform many Latin American and European countries in transparency and compliance. Among the most transparent banks in the region are Emirates Islamic Bank, Al Hilal Bank, the National Bank of RAK, Sharjah Islamic Bank, and the Arab Bank for Investment and Foreign Trade. According to Sigma Ratings CEO Stuart Jones, non-credit risk ratings were badly needed on factors like governance, compliance and financial crime risks. Jones added that specifically the GCC countries seem to be over-performing in the region, and there is lot of positive movement with regards to these countries.

Franklin Templeton #funds awarded QFI status in Saudi Arabia

Franklin Templeton is evaluating opportunities to expand its Shariah business, which grew 32 percent in 2017. Franklin Templeton funds have become Qualified Foreign Investors (QFI) in Saudi Arabia, allowing the funds to invest directly in the kingdom’s stock market, it was announced on Monday. Sandeep Singh, Franklin Templeton’s regional head of Central and Eastern Europe, Middle East and Africa and head of Islamic Business said, that they operated in the Middle East and North Africa for almost 20 years and that they will remain dedicated to growing their business alongside the region’s growth.

Dubai Islamic Bank sees huge demand for capital raising plan

Dubai Islamic Bank (DIB) has announced a successful closing to its capital raising programme. The issuance of 1.6 billion additional shares at price of AED3.11 per share was announced in April with the aim to boost the core capital of the bank by over AED5 billion ($1.36 billion). According to DIB's Group CEO Dr Adnan Chilwan, growth remains on the horizon as the bank’s financial position has become stronger than ever before with improved asset quality and balance sheet. He added that the capital boost will help maintain the bank's "competitive edge".

Opinion: Why there's no better time for GCC's #fintech revolution

As financial technologies continue to develop, one region in particular stands to benefit: the Gulf. This isn’t a revolution that is far off, it is happening today. For the countries of the GCC, fintech couldn’t arrive at a better time. The countries of the Gulf are all working to diversify their economies away from a dependence on fossil fuels. Bahrain has already launched its FinTech Bay, which has the mission of accelerating local early-stage fintech companies, as well as foreign companies to establish regional offices in Bahrain. In September this year DIFC’s FinTech Hive will launch the second edition of its accelerator programme for fintech innovators. The 2018 edition has also been expanded to include "insurtech", as well as Islamic finance and regulatory technology ("regtech") solutions.

#Kuwait's Noor Financial to divest stake in #Pakistan's largest Islamic bank

Noor Financial Investment Company will divest a portion of its 49% stake in Pakistan's Meezan Bank. The company is in preliminary discussions with foreign institutional investors for a proposed divestment of 9.59% of the total issued and paid up capital of Meezan. Noor has been mulling a sale since at least 2013. Meezan Bank is Pakistan’s fastest growing bank, it posted a profit in each year of operation and its net profits grew 13.5% in 2017 to $93 million. Noor’s stake in the bank was valued at $375 million in 2017.

One year on: Al Hilal Bank CEO Alex Coelho

In this interview, Al Hilal Bank CEO Alex Coelho gives his regional and global assessment of market threats and opportunities. Coelho still lectures at New York University and those theoretical discussions help feed into the practical decisions he makes in his day job. He’s bullish about recent stock market volatility and doesn’t seem overly concerned at the possibility of the US economy overheating. Now he is more concerned by geopolitical rather than economic upsets. Coelho refuses to predict the future price of oil and sees no correlation between oil prices and their activity as a bank. He says this is due to government focus on diversifying output. He thinks Dubai’s Expo 2020 will have a positive effect on the UAE economy, as such events have high impact in economies that are in growth mode, such as the UAE and GCC.

Shariah compliant finance is now nearly half of GCC banking market: Moody's

According to Moody’s, Islamic banking has grown in a decade from less than a third of the GCC banking market to account for 45% of the sector. Moody's senior analyst Nitish Bhojnagarwala said that growth in the Islamic finance sector would continue to outstrip that of conventional assets in coming years. In his view, growth will be supported by governments looking for diversification, as well as by continued demand for Islamic products from individuals. Another growth factor will be Islamic insurers' penetration into Southeast Asia and North Africa. Annual sukuk issuances have more than doubled to $100 billion from $42 billion from 2008 until September 2017. Moody's expects a similar level of activity in 2018.

Dubai launches #incubator to boost ethical Islamic start-up firms

Dubai Airport Freezone Authority (DAFZA) has announced the launch of Goodforce Labs, a startup incubator focused on supporting ethical startups in the fields of Islamic economy and Halal industries. Goodforce Labs will select a group of startups and small and medium enterprises and support them towards a $50 million in annual revenues and measurable social impact. Most Islamic economy startups face many problems and struggle to grow and survive. A number of startups have joined the incubator like Growmada, an e-platform for selling handicrafts from developing countries, Waqf 2.0, a cloud-based platform for managing Awqaf, Zileej, a company specializing in disciplined entertainment products and Rabia Z, which designs modest women’s clothing.

Opinion: Global #sukuk market unlikely to repeat 2017 performance

In 2017 the exceptional performance of sukuk was driven by good liquidity conditions, alongside certain countries’ desire to develop their Islamic finance industries. However, the outlook for sukuk in 2018 is more uncertain. According to Mohamed Damak, S&P Global Ratings’ Head of Islamic Finance, tighter global liquidity conditions, mounting geopolitical risks and slow progress on the standardisation of Islamic finance products will continue to hold the market back from its full potential. While sukuk issuance may decrease in 2018, there are a couple of interesting trends. These include the more stringent application of the profit-and-loss-sharing principle supported by several Sharia scholars. The sukuk investor base is broadening, but there is a lack of a specific regulatory framework to protect retail investors.
Dubai Islamic Bank (DIB) has successfully issued a $1bn sukuk with a five-year tenor. It is the first US dollar benchmark sukuk transaction from the GCC in 2018. The issuance emanates from DIB’s $5bn sukuk programme and carries a profit rate of 3.625%. The instrument will carry a dual listing on the Irish Stock Exchange and Nasdaq Dubai.

#Bahraini bank plans aggressive #expansion in #Pakistan

Bahrain-based Ithmaar Bank plans to add more than 100 branches in Pakistan this year through its subsidiary Faysal Bank. Ithmaar's deputy CEO Abdul Hakeem al-Mutawa says banking penetration is less than 20% in Pakistan, so there are good opportunities to grow. Ithmaar Bank's parent company, Ithmaar Holding, listed recently on the Dubai Financial Market. Al-Mutawa believes the company is well established now to approach the capital markets and the bank has no imminent plans to raise funds through a bond or loan. Ithmaar Holding is also exploring the sale of its 25.4% stake in Bahrain's BBK, which has operations in Bahrain, Kuwait, India and Dubai. Al-Mutawa declined to comment on the timeframe for the disposal of the BBK stake.

#UAE-based real estate investment trust completes $210m deals

UAE-based Residential REIT has completed new property transactions worth AED772 million ($210.1 million). The deals were closed with Abu Dhabi Islamic Bank, Arcapita and an unnamed large Saudi institution. Abu Dhabi Islamic Bank has contributed 165 residential units located in three buildings in Marina Square on Al Reem Island in Abu Dhabi. Arcapita and the Saudi institution have contributed three buildings with a total of 285 residential units located in Saadiyat Beach Residences on Saadiyat Island in Abu Dhabi. Following the new acquisitions, the Residential REIT's portfolio includes a total of 1,069 units across Abu Dhabi, Ras Al Khaimah and Dubai.

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