Bloomberg

Alinma Bank's CEO on Growth Strategy, #Sukuk Issuance

In this interview Abdulmohsen Al-Fares, CEO of Alinma Bank, discusses the growth in the company's balance sheet, credit growth, their Sukuk issuance and competition from other banks. Alinma Bank has maintained its growth pace and Al-Fares is optimistic about the upcoming Saudi Arabian government sukuk. It is an opportunity not only for companies and banks, but also for the secondary markets. Timing and size of the sukuk has not been decided yet. In his opinion, competition from other banks will not affect Alinma Bank, as they will compete only in very small segments, not in retail. He added that the stand-off with Qatar would not have a negative impact on the Saudi economy, as the kingdom's economy is strong and the economic relationship with Qatar is small in size.

KFH Said in Talks for #Bahrain Ahli United Bank, Kuwait Unit

Kuwait Finance House is in talks to buy Bahrain’s Ahli United Bank in a deal that would create one of the Middle East’s largest Islamic lenders with $85 billion of assets. However, there is no guarantee that a deal will take place and final agreements haven’t been reached yet. Lower oil prices are forcing Gulf lenders to consolidate for scale. Abu Dhabi lenders National Bank of Abu Dhabi and First Gulf Bank recently merged to create a regional powerhouse with $175 billion of assets. Qatar’s Masraf Al Rayan is planning to combine with unlisted Barwa Bank and International Bank of Qatar to create the country’s largest Islamic lender. Ahli United in Bahrain declined to comment. KFH shares have lost 0.6% so far this year, giving the lender a market value of $9.3 billion. Ahli United shares have jumped 16% so far this year, giving it a $5.57 billion market capitalization.

#Kuwait's Noor to Weigh Stake Sale of #Pakistan's Meezan Bank

#Kuwait’s Noor Financial Investment is considering the sale of its 49% stake in Pakistan’s largest Islamic lender Meezan Bank. The stake has a market value of about $396 million at the current market price, according to data compiled by Bloomberg. Noor Financial hired advisers to assess opportunities, but it has not tasked the consultants with either increasing or decreasing its stake in Meezan Bank. Shares in Noor Financial gained 5.9% by 12:30 p.m. in Safat, Kuwait, the highest since April 16. Meezan advanced 3.6% in Karachi trading to a record high.

#Aramco Plans to Raise #$3 #Billion in #Sukuk Sale

Saudi Aramco has plans that would raise 11.25 billion riyals (3 billion US-Dollar) from its debut Islamic bond. That would boost the size of the sale because of investor demand. King & Spalding Partner Rizwan Kanji weighs in on "Bloomberg Markets: Middle East."

Saudi Aramco to Price Islamic #Bond in $10 Billion Debt Push

Saudi Arabian Oil Co (Aramco) set final pricing for its debut Islamic bond as the company presses ahead with plans to raise $10 billion in debt. Aramco is selling debt with a seven year tenure in a private placement at 25 basis points over the country’s interbank offered rate. The oil giant is selling debt ahead of an initial public offering in 2018 as the country’s finance ministry plans to cut taxation on the company. The cut will boost Aramco’s net income by 300%, putting per-barrel income in a range similar to that of international oil companies. Aramco’s sukuk follows Saudi Arabia’s $17.5 billion bond issue in October, which was the state’s debut international debt sale. Saudi Arabia is also said to be planning a sale of riyal-denominated Islamic bonds to local institutions to help boost the country’s Islamic bond market.

JPMorgan, HSBC, Citigroup Said to Be Hired on #Saudi Dollar #Sukuk

Saudi Arabia hired Citigroup, JPMorgan Chase and HSBC as global coordinators on its international Islamic bond sale. The kingdom also picked Deutsche Bank and BNP Paribas among others as lead managers for the sale. The sukuk could come as soon as this month. Saudi secretary-general of the Finance Committee, Mohammad Al Tuwaijri, announced in December the kingdom's plans to raise between $10 billion and $15 billion from international bond markets in 2017 and sell about 70 billion riyals locally. The world’s biggest oil exporter is considering international and domestic debt issues to help finance its budget deficit.

Alinma Bank CEO: Infrastructure, Low Oil Driving Lending

#Saudi-based Alinma Bank’s chief executive officer, Abdul Mohsen Al Fares discusses the bank's earnings and lending growth. Alinma Bank achieved a new record in the last quarter. Growth drivers include the infrastructure projects that started two years ago and will take other three of five years to complete. In terms of net interest margins, Al Fares believes that the recovery will come gradually. As interest rate is rising, the margin will also go up. Alinma Bank has expansion plans for 2017, it currently has 164 branches across the kingdom and it plans to open 12 new branches this year.

HSBC Said to Advise #Saudi Pension Fund on Financial Hub Sale

The local unit of HSBC Holdings is advising Saudi Arabia’s Public Pension Agency on the sale of its struggling financial hub to the country’s sovereign wealth fund. The Public Investment Fund is offering to acquire the Riyadh district for less than the pension fund’s 30 billion riyals ($8 billion) investment. The wealth fund is being advised by JPMorgan Chase, but a deal hasn’t been reached yet. The King Abdullah Financial District (KAFD) is about 70% complete and is failing to attract its target clientele, banks, auditors and lawyers. The sale is meant to rehabilitate the 1.6 million square-meter district which includes over 70 buildings. The district will become a special economic zone with looser visa rules and direct links to Riyadh airport as part of plans to restructure the development.

#China Islamic Bond Push Renews as Global-Focused #Funds Quadruple

China plans its first dollar sukuk issuance to tap a four-fold increase in Chinese funds that can invest in bonds overseas. Sichuan Development Financial Leasing plans to sell $300 million of Islamic bonds via Singapore-based special purpose vehicle, Silk Routes Capital. According to investment manager Hasif Murad, the predominant interest for this issuance will remain from yield-hungry domestic Chinese investors. Silk Routes Capital hired Standard Chartered, CIMB Group Holdings, Bank of China and Bank of China International to help to arrange investor meetings. In a sign that the traditional Silk Road is coming back to life, Chinese companies are building roads, railways and ports along the route to the Middle East, Africa and Europe.

S&P's Not Yet Ready to Upgrade #Indonesia's #Rating from Junk

S&P Global Ratings may not be ready to upgrade Indonesia’s credit rating from junk, concerned by rising bad debts and risks to the growth outlook. Indonesia failed in June to win an upgrade from S&P, which rates the nation’s debt at BB+ with a positive outlook. S&P said at the time that while the country’s fiscal framework had improved, it still faced challenges on its budget performance. Josua Pardede, an economist at PT Bank Permata in Jakarta, said Indonesia still faces fiscal risks. He estimated the tax shortfall for this year will be more than 200 trillion rupiah ($15 billion), causing the budget deficit to widen to around 2.7% of gross domestic product. The government has a deficit cap of 3% of GDP. The ratings company will meet with Indonesian Finance Minister Sri Mulyani Indrawati within the next few weeks before it makes its next assessment due in December. S&P is the last of the three main credit-rating companies to keep Indonesia on junk status.

Oil’s Tepid Rally Just Right for Islamic Debt Market Rebound

Oil’s rally from a 12-year low has gone far enough to revive demand for Islamic bonds, but not so far that frequent issuers aren’t still in need of funds. Stimulus efforts in oil-producing nations helped drive sales of Islamic bonds up 34% to $37.5 billion in 2016, after dropping to a five-year low in 2015. A two-year slump in energy markets has compelled governments in Malaysia and the Middle East to boost debt sales to finance projects built in partnership with private companies. S&P Global Ratings estimates that weak energy prices will leave Gulf Cooperation Council countries with $560 billion of funding needs from 2015 through 2019. According to Apostolos Bantis, head of credit research at Commerzbank AG in Dubai, GCC sukuk activity will rise next year and there will be some first-time issuers.

Abu Dhabi Islamic Bank Said to Cut More Than 200 Jobs in #U.A.E.

Abu Dhabi Islamic Bank has cut more than 200 jobs over the past three months. The cuts were made mostly in the retail business and about 100 people were dismissed last month. Abu Dhabi Islamic Bank joins other lenders in the U.A.E. that have cut jobs to adjust to slower economic growth after oil prices halved over the past two years. Union National Bank dismissed about 50 people in August, while Emirates NBD, the nation’s biggest bank, reduced its workforce by more than 250 people at its small and medium enterprise and Islamic lending businesses in April.

Malaysia Plans Indonesia Shariah Stock Trading Link by 2017

Malaysia’s stock exchange operator is discussing a tie-up with Indonesia’s bourse and plans further alliances to mobilize funds targeting the world’s almost $12 trillion in Shariah-compliant equities.

Bursa Malaysia Bhd. is in talks with the Indonesia Stock Exchange to explore various forms of cooperation such as allowing cross listings and hopes to start collaborating by mid-2017, Jamaluddin Nor Mohamad, Bursa’s Islamic capital market director said in an interview in Kuala Lumpur. Bursa plans to forge partnerships with exchanges in Asia and the Middle East to develop the Islamic capital market, he said.
Malaysia already tightened compliance rules for Shariah stocks in 2013 as it sought to draw overseas funds who have a stricter view on permitted investments. Shariah law forbids investments in shares of companies involved in activities considered unethical such as gambling, prostitution, alcohol and pork-related businesses.
Some 669 stocks, or 74 % of the total shares listed on Bursa Malaysia, comply with Shariah principles, according to the Securities Commission. The market regulator reviews the list twice a year based on the companies’ audited financial statements.

Khazanah Said to Weigh $500 Million Exchangeable #Sukuk Sale

Khazanah Nasional, the Malaysian sovereign fund, is considering selling as much as $500 million of exchangeable sukuk. The state-owned firm is currently choosing banks for the potential offering. Khazanah has been reducing stakes in listed Malaysian companies through Islamic debt offerings that can be converted into shares. The fund last sold $500 million sukuk that can be exchanged into shares of Tenaga Nasional, the country’s biggest power producer, in 2014. It is also the largest shareholder of IHH Healthcare, Asia’s biggest hospital operator. Sales of Islamic bonds in Malaysia surged 60% this year to 45.8 billion ringgit ($11.4 billion), while offerings of global sukuk climbed 19% to $28.1 billion.

Khazanah Said to Weigh Insurance Deal With Billionaire Quek

Khazanah Nasional, the $27 billion Malaysian sovereign fund, is weighing a bid for control of the insurance operations of billionaire Quek Leng Chan’s Hong Leong Financial Group. Khazanah is considering an offer for Hong Leong Financial’s 70% stake in Hong Leong Assurance and its 65% holding in Hong Leong MSIG Takaful. The bid could be valued at about 3.2 billion ringgit ($799 million). Hong Leong Financial said last month that Malaysia’s central bank had no objection to the sale of its stakes in the two insurance units.

#Malaysia’s Sarawak Hidro Said to Plan $1.3 Billion #Sukuk Sale

Sarawak Hidro, the state-owned developer of Malaysia’s biggest hydropower project, plans to offer 5.5 billion ringgit ($1.3 billion) of sukuk without a government guarantee. The electricity generator is weaning off government guarantees to ease the nation’s fiscal burden. Sarawak Hidro’s plant on Borneo island is part of Prime Minister Najib Razak’s $444 billion development plan to become a developed economy by 2020. Malaysia aims to cut its ratio of debt to gross domestic product to 45% by 2020, from 54.5% at the end of last year.

Aberdeen Says Time Ripe for New Hong Kong Islamic Bond Offering

The worst time for global markets may be the best time for Hong Kong’s government to carry out its planned third Islamic bond sale. Aberdeen Islamic Asset Management says the time is ripe for a sukuk. The yield on the city’s five-year Shariah-compliant bonds sold in September 2014 has fallen 32 basis points to 1.56% since February. Sales of dollar sukuk are at an all-time high for this time of year, suggesting there’s appetite for an issue by Hong Kong, rated AAA by S&P Global Ratings.

#Turkey Raising $1 Billion in First Dollar #Sukuk Since 2014

Turkey is issuing $1 billion dollar-denominated sukuk after a 18-month absence from the Islamic finance market. The government is offering five-year notes at 290 basis points above the midswap rate, aiming to sell debt before the Federal Reserve acts on its stated intention to increase interest rates. Turkey has already raised $3 billion in capital markets this year, completing two-thirds of its planned borrowing program for 2016. Turkish government debt is rated Baa3 at Moody’s Investors Service, the lowest investment grade.

1MDB Pays Coupon on Debt After Missing Two Interest Payments

#Malaysia’s state investment company 1MDB paid the coupon on its Islamic debt after missing two payments on other securities earlier. The company undertook the scheduled payment of 143.8 million ringgit ($34.9 million) on its 5 billion ringgit 5.75% notes due 2039. President Arul Kanda said 1MDB has ample liquidity to make interest payments and service its current debt obligations. 1MDB’s separate $1.75 billion of 5.99% notes due 2022, which are guaranteed by IPIC, rose 0.1 cent to 103.7.

Zero Tax on #Indonesia’s Bonds Seen Reviving Dying #Sukuk Market

The Indonesian government is considering cutting the levy to zero for all local-currency sovereign bonds from 15% for domestic investors and 20% for international ones. According to Abas A. Jalil, CEO of Amanah Capital Group, the zero tax will definitely encourage more participation by government funds in the Indonesian sukuk market. The proposal aims to revive Islamic banking after the industry shrank to 3.5% of total financial assets in March, from 5% a year earlier. Only one Indonesian company has issued rupiah sukuk in 2016 for the equivalent of $7.3 mn compared with $5.9 bn worth of ringgit sales in Malaysia, the biggest Shariah-compliant debt market.

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