According to Moody's Investors Service, the profitability of Islamic banks' in the Gulf cooperation Council (GCC) region will outpace that of their conventional peers for the second consecutive year in 2017. Islamic banks will maintain stronger margins in 2017, primarily as a result of their low funding costs, which reflect their reliance on stable current and savings account balances. Islamic banks also tend to have higher asset yields, given their focus on retail and the real estate related lending. Moody's expects that Islamic banks will retain a margin advantage of about 40 basis points over conventional banks in 2017. Moody's analyst Nitish Bhojnagarwala says conventional banks will continue to beat Islamic peers in terms of cost efficiency. Islamic banks are investing in branch network expansion, while conventional banks have already established their branch networks.
Metito is the largest privately held water treatment company in the Middle East. Metito’s African operations account for nearly about a third of its revenues and the current backlog is around $300 million. Metito approached Islamic banks in early 2014 to tap on their resources to support the Group’s growth. As of today, a major of the long-term financing that the group has received in GCC region is comprised mostly of Shari'ah-compliant financing tools. The total size of Islamic financing facilities currently in use stand at around $150 million and the share is expected to increase over the next 12 months. The Group has so far availed three types of Islamic finance financing tools, Musharakah, Ijarah and Murabahah. Group CEO Wafic Ghanem said Metito has not yet considered tapping into Sukuk issuance for its African business given the infancy of Sukuk market in the continent.
In this interview HRH Prince Khaled bin Alwaleed bin Talal reveals the full story behind his investment firm’s jump into the Shari’ah space. He founded KBW Investments four years ago and launched in mid-January his newest company, ARADA, in partnership with Basma Group. KBW’s first movement in the Shari’ah-compliant investment space is called Crestmount Capital. Prince Khaled found the fairness of Islamic finance most appealing, the extensive work in preparation of launching Crestmount Capital with Amanie Advisors has been really educational. The projects that Crestmount Fund will invest in will be delivered by PietyTHP Developments, which is a joint venture between Piety and the property arm of Lembaga Tabung Haji of Malaysia. Crestmount Fund I, a Shari’ah-compliant real estate private equity fund, is structured as a Cayman Islands entity. It will fund five identified under-development residential projects in Sydney, Australia, through Shari'ah-compliant commodity Murabahah agreements.
Abu Dhabi Islamic Bank (ADIB) has issued a statement clarifying that the story issued by Reuters about a US dollar Sukuk issuance in the next few months is incorrect. Reuters had recently reported that ADIB is planning to make a US dollar-denominated Sukuk issue in May this year. ADIB said that it has no immediate plans to issue any Sukuk and this has been clarified in an official statement to Reuters.
According to Fitch Ratings, a slowdown in Islamic financing growth in the UAE will reveal a deterioration in banks' asset quality as portfolios season more quickly. This will start to become evident as banks report their 2016 results. Financing growth slowed in 2016 and a continuing slowdown in 2017 is expected. Demand for Islamic financing in the UAE has grown rapidly with increasing customer awareness and wider adoption of Shari'ah products, especially among retail customers. Growth of Islamic bank financing in 2016 was expected to have been significantly lower than in 2015, although still higher than that of conventional bank lending. Newer Islamic banks with smaller franchises are likely to be affected first by the slowdown. Those that have been established for longer are likely to be affected later, and to a lesser degree, given their stronger franchises.
The Assembly General Meeting (AGM) of Qatar Islamic Bank has voted the proposal to increase the limit of the perpetual Sukuk “Additional Tier 1 Capital (AT1) Sukuk“ from QAR 5 Billion to QAR 7.5 Billion. The meeting, held on 21 February, also approved the board of directors’ proposal to distribute 47.5% cash dividends of the nominal value per share, i.e. QAR 4.75 per share.
The Islamic Corporation for the Development of the Private Sector (ICD) and the International Association of Islamic Business (IAIB), signed a Memorandum of Understanding (MoU) to explore collaboration between entrepreneurs from Islamic countries and Russian Federation. The two institutions are determined to collaborate on introducing Islamic banking products in Russia and lobbying for changes in Russian banking legislation. ICD's CEO Khaled Al-Aboodi said he was looking forward to the collaboration, while IAIB President Marat Kabayev said the purpose of the partnership was to develop economic ties among Islamic countries, to promote Islamic Finance in Russia and attract investors from Islamic countries. ICD and IAIB also agreed to organize joint professional programmes, market research, workshops, publications, study tours and assistance in production and certification of Halal goods.
Qatar Islamic Bank's QInvest is exiting the St. Edmund’s Terrace LP Fund. The Shari'ah compliant fund was jointly owned by QInvest and a range of GCC institutional and retail investors. It invested GBP 50 million into developing a new, prime residential project through a real estate development company. The Fund was created to provide investors with the opportunity to invest in London’s prime residential market. At completion, the Fund generated 22% net returns to investors. Craig Cowie, Head of Real Estate at QInvest said the returns exceeded expectations and added a notable asset to the luxury real estate market in London. The project, 50 St. Edmund’s Terrace, completed in June 2015 and comprises of three residential blocks and 37 units. It delivered an average selling price in excess of GBP 2,600 per square foot.
Applications for Islamic car loans in the UAE grew by 64.79% from 2015 to 2016. Despite growth in Islamic car loans, car loans based on traditional finance were more popular among UAE residents in 2016. Emirates NBD’s Feature-Packed Auto Loan was the most applied-for car loan in 2016. The second most applied-for auto loan of 2016 was that of HSBC, the third, fourth and fifth most applied-for car loans of 2016 were from Islamic banks. Emirates Islamic’s Auto Finance product came in third place, while Noor Bank’s Auto Finance and Ajman Bank’s Car Finance came in fourth and fifth respectively.
The Dubai Islamic Economy Development Centre (DIEDC) announced the launch of its refreshed strategy for 2017-2021. Making the announcement, Sheikh Hamdan said the first part of the strategy includes identifying new key performance indicators (KPIs) for monitoring the growth of important sectors. The second component is enhancing Dubai’s status as a reference for Islamic finance, Halal sector and Islamic lifestyle that includes culture, art, fashion and family tourism. Sultan bin Saeed Al Mansouri said the DIEDC’s latest goal is to demonstrate the positive impact of Islamic economy. It is necessary to establish the structural framework of the ecosystem. Finance, production and consumption must feature in it as integrated systems aligned with the UN Sustainable Development Goals. Al Mansouri pointed out the need for universally accepted standards across Islamic economy sectors and stressed that the UAE will focus on refining these standards.
The Islamic Research and Training Institute (IRTI) and the Islamic Development Bank (IDB) have organised a regional consultation workshop on the Sukuk Model Law Project. Partner of the workshop was the Central Bank of West African States (BCEAO). The workshop was held at the BCEAO headquarters in Dakar, Senegal from 23-24 January 2017. The objective of the Project is to create a model Sukuk law and guidelines that leverage global best practises for creating a legal framework for Sukuk issuance and regulation. Subsequent regional consultations are planned for South East Asia, Central Asia and the MENA regions. IRTI Director General, Prof. Mohamed Azmi Omar, said the workshop reaffirmed the importance of Sukuk as an emerging instrument of resource mobilisation.
Awqaf and Minors Affairs Foundation (AMAF) has signed a Memorandum of Understanding (MoU) with the Islamic Development Bank (IDB) to collaborate in areas related to endowment services enhancing the prosperity of Muslim societies. Tayeb Al-Rais, Secretary General of AMAF, and Dr Bandar Al Hajjar, Chairman and President of IDB, signed the MoU in Jeddah, Saudi Arabia. The two parties will work towards maximising the availability of Islamic banking services to the endowment sector. AMAF and IDB will also explore the possibilities of forging endowment partnerships and engaging third parties. Other areas of cooperation include building successful marketing strategies and providing advanced endowment tools for banking, finance, and investment.
The #UAE-based Emirates Real Estate Fund (EREF) has procured a AED700 million ($190.6 million) Shari’ah compliant finance facility with Emirates NBD. CEO of Emirates NBD Asset Management Tariq Bin Hendi said the facility would enable the bank to complete strategic acquisitions to boost the value of the fund. Over the last 24 months the fund has invested over $163 million in real estate acquisitions including Binghatti Terraces in Dubai Silicon Oasis, Arabian Oryx House in Al Barsha Heights, part of Burj Daman Office Tower in the DIFC and a residential building in Remraam, Dubailand. The partially undrawn facility is a five-year, profit-only Mudharabah facility with a 10% repayment of principal in its fourth year.
#Saudi Arabia’s Bank AlJazira has reported a drop in profits of 32.25% to SAR 872 million for 2016. Profits for Q4 2016 were down 4.4% on a year ago to SAR 152 million. Earnings per share were down from SAR 3.22 to SAR 2.18. However, the loans and advances portfolio contracted by 0.18% to SAR 42 billion. The bank attributed the fall in net income to a decrease in operating income by 14%. There is also a decrease in net special commission income, net trading income and other operating income against an increase in net exchange income and net banking fees. Total equity as of end-2016 was SAR 8,104 million, comparing with amount of SAR 7,413 million the previous year, an increase of 9%.
Abu Dhabi Islamic Bank (ADIB) has launched its First Shari'ah compliant equity investment structured note of the year 2017. The note is linked to a basket of undervalued blue chip companies from diversified sectors including healthcare, technology & telecommunications. The investment note has a maturity of one year and minimises investment risk by providing 100% capital protection to the capital invested. The note is currently open for subscription until 22 January, 2017 with a minimum investment requirement of $30,000. ADIB’s last three matured equity investment notes have yielded returns of 4.2%, 4.8% and 6.2%, respectively.
The Securities Commission Malaysia (SC) has launched a five-year Islamic Fund and Wealth Management Blueprint designed to drive further development and growth of Malaysia's Islamic capital market. The Blueprint aims to establish the country as a leading international centre for Islamic fund and wealth management. It was launched by Datuk Johari Abdul Ghani, Second Finance Minister of Malaysia, on behalf of Prime Minister Dato’ Sri Mohd Najib Tun Razak, at the International Fund Forum 2017. To be implemented on a phased approach, initial work programmes will include the formulation of a framework for SRI funds, the setting up of a global centre for Islamic capital market and the introduction of a digital investment services framework.
The Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) has approved the draft of the governance standard on central Shari’ah boards. The proposed standard covers several key aspects such as the appointment, composition and dismissal of the board members; tenure of the board; functions of a central Shari'ah board; responsibilities of the appointing authority; fit and proper criteria and independence. The draft is expected to be issued by beginning of 2017 and will be posted on the AAOIFI website. The AAOIFI board also discussed progress on projects being carried forward into 2017, including the Internal Shari’ah Audit, Shari’ah Compliance and Fiduciary Rating, and Comprehensive Ethics projects. The next meeting is proposed to be held by March 2017, in Oman.
Abu Dhabi Islamic Bank (ADIB) has acted as the sole bookrunner on a AED 1 billion Islamic financing facility for the Meydan business group. Dubai Islamic Bank and Al Hilal Bank were both mandated lead arrangers for the financing, which matures in December 2018. The deal was structured to meet Meydan’s financing objectives, on the back of its ongoing District One Project, a master-planned luxury residential neighbourhood in Mohammed Bin Rashid City in Dubai. Commenting on the transaction, ADIB's CEO Tirad Al Mahmoud said this deal demonstrates ADIB's ability to bring together diverse elements with a particular focus on high-growth companies and the real estate sector. Earlier this year, Meydan raised AED 1 billion Islamic financing through a dual tranche offering, comprising a AED 700 million Sukuk issue and a AED 300 million term facility, both maturing in 2024. ADIB acted as the sole coordinator of the transaction.
The Bahrain-based Al Baraka Banking Group (ABG) has obtained the approval of the Bank Al Maghrib (the central bank of Morocco) to establish a new bank in Morocco. The Group is now represented in all countries in the Maghreb. The Group now owns banking subsidiaries in Algeria, Tunisia, Libya and Morocco, as well as the African continent in Egypt, Sudan and South Africa. The Group has already obtained the approval of the Central Bank of Bahrain to establish the Morocco bank and will carry the name of Al Baraka Bank Morocco. The new bank will be under the management of Al Baraka Banking Group and will operate within its network of subsidiary banking units, which are currently located in 15 countries and in turn own more than 700 branches.
Five Islamic banks are set to open in Morocco after Bank Al-Maghrib, the country’s Central Bank, approved five applications. A further three banks have been given permission to sell Islamic products. A Shari’ah committee which will govern all Islamic finance activities will also be established. The five banks are: CIH Bank in partnership with Qatar International Islamic Bank; BMCE Bank of Africa jointly with the Saudi/Bahraini group Dalla Al Baraka; Banque Centrale Populaire with the Saudi group Guidance; and Crédit Agricole du Maroc in partnership with the Islamic Corporation for the Development of the Private Sector (ICD). Attijariwafa Bank is currently in talks about a future partnership. Banque Marocaine du Commerce et de l’Industrie, Crédit du Maroc and Société Générale have all been given the green light to sell Islamic products.