Reuters

Head of Islamic finance body AAOIFI resigns

The head of the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) has resigned. Hamed Hassan Merah presented his resignation after more than three years and the board of trustees accepted it. As a complex organisation with 200 institutional members from across 45 countries, the AAOIFI had been slow to respond to issues relating to conflicts of interest and product standardisation. Under Merah, the AAOIFI tackled such issues head on, launching a review of its accounting, auditing and sharia standards. In November, Merah said AAOIFI would now prioritize wider adoption of its standards by engaging national regulators in key markets, including Turkey and Malaysia. Saudi Arabia’s central bank joined AAOIFI as an institutional member in October 2017.

Afreximbank taps Islamic finance to support Africa trade

The African Export-Import Bank (Afreximbank) has raised around $260 million via three Islamic finance facilities to support small- and medium-sized businesses in the region. The Egypt-based bank obtained a $100 million financing from the Islamic Corporation for the Development of the Private Sector (ICD). It also signed two financing agreements with the International Islamic Trade Finance Corporation (ITFC) worth $100 million and 50 million euros ($59.8 million) to help finance exports among African countries. Both ICD and ITFC are part of the Saudi-based Islamic Development Bank group of companies.

#Turkey issues #detention warrants for 68 Bank Asya shareholders in post-coup probe: police

Turkish authorities have issued detention warrants for 68 shareholders of Bank Asya. The police operation targeted the network of the cleric accused for orchestrating last year’s failed coup attempt. The targeted shareholders all had voting rights to determine the bank’s administrative board. So far 49 of the 68 suspects had been detained. Bank Asya was founded by followers of the U.S.-based cleric Fethullah Gulen and was seized by the state in 2015. According to the Turkish government, Gulen masterminded the 2016 attempted coup, in which more than 240 people were killed by rogue soldiers. Gulen has denied the charges and condemned the coup. Since the abortive putsch, more than 50,000 people, including civil servants and security personnel, have been jailed pending trial and some 150,000 suspended or dismissed from their jobs.

MIDEAST DEBT - #Sukuk documents seek to reassure investors after Dana Gas scare

Sukuk issuers are changing the language in documentation for new issues to reassure investors after Dana Gas refused to redeem $700 million of maturing sukuk. Dana Gas said it would not repay sukuk maturing in October because changes in the interpretation of Islamic finance had made the bonds unlawful in the UAE. Issuers are now amending their documentation to preclude the use of this argument. According to Mohamed Damak, global head of Islamic finance at Standard & Poor's, clauses seeking to reduce sharia compliance risk have become normal in the global industry, but the complexity of sukuk makes it difficult to remove the risk entirely. According to Mohammed Khnifer, senior associate at the Islamic Development Bank, sukuk holders and issuers will now rely more on English law and avoid local laws with dollar-denominated issuance.

#Qatar International Islamic Bank eyes dollar benchmark #sukuk in Feb - sources

Qatar International Islamic Bank (QIIB) plans to issue a U.S. dollar-denominated benchmark sukuk in February. Benchmark deals are generally upwards of $500 million. One of the sources said the transaction could go up to $700 million in size. The sukuk issuance would be QIIB’s first debt sale under a $2 billion sukuk programme the bank established in October. The sukuk programme is arranged by QNB Capital, Citigroup and Standard Chartered.

Dubai's Emirates REIT gives initial price guidance for 5-yr dollar #sukuk - lead

Dubai's Emirates REIT has given initial price guidance in the low-to-mid 5% for its debut U.S. dollar-denominated sukuk. The issuance of the sukuk is expected to be of benchmark size, which conventionally means the higher side of $500 million. The senior unsecured deal, with an expected BB+ rating by Fitch, will price later in the day.

REFILE-Islamic banks lag on corporate #governance -report

A report by the World Bank and the General Council for Islamic Banks and Financial Institutions (CIBAFI) aims to encourage the sector’s governance. The findings are based on a survey of 77 Islamic banks across 22 countries, covering the industry’s core centres in the Gulf region and Southeast Asia and extending to Islamic banks in Africa and Europe. The report found risk governance was a weak spot for Islamic banks, recommending increased use of independent directors and strengthening the role of risk management officers. Sharia governance is another area of relative weakness, the big issues being the lack of diverse experience of the members on the sharia board and the infrequency of sharia board meetings. The report recommends the development of a new or revised standard for corporate governance that is specific to Islamic banks.

Dana Gas says #UAE court allows it to appeal British #sukuk ruling

Dana Gas announced it will appeal against a British court’s ruling on its $700 million sukuk, after a UAE court lifted an injunction preventing it from participating in the British proceedings. Dana previously said the sukuk was invalid under UAE law and refused to repay holders of the sukuk which matured at the end of October. The energy producer sought a declaration on the sukuk’s lawfulness at courts in the UAE and Britain. Last month, a British court ruled in favour of Dana creditors, deciding the purchase undertaking was valid and enforceable. Dana has said it aimed to appeal against the ruling because it could not take part in proceedings. A hearing in Sharjah on the validity of the sukuk under UAE law is scheduled for Dec. 25.

UPDATE 1-#Maybank posts 4th straight quarterly #profit gain on #Islamic #banking growth

Malayan Banking Bhd is Malaysia’s biggest lender by assets. It made higher profits for a 4th quarter in a row, which was driven by rising net interest income and growth at its Islamic banking operations.
Southeast Asia’s third-largest economy has recovered in 2017 after a challenging 2016, when growth slumped to its slowest pace since the global financial crisis in 2009. The turnaround has buoyed business for banks. Maybank posted a net profit of $496.70 million for the 3rd quarter ended September, up 13% a year ago. Its net interest income rose 8.6% while Islamic banking income increased by 24.3%. Revenue climbed 2.7%.
Earlier, CIMB Group Holdings, the number two lender of the country, reported a surprise rise in quarterly profit, helped by an improving domestic economy.
Malaysia‘s central bank has said the economy was on track to register growth of 5.2% to 5.7% this year, and may even exceed that estimate.

#Pakistan raises $2.5 bln from #sukuk, #Eurobond sales, sees solid demand

Pakistan gained $2.5 billion from selling two U.S. dollar-denominated sukuk and Eurobond issues in New York, according to senior official. These issues had attracted total offers of $8 billion in the process.
Pakistani authorities however decided to only sell $2.5 billion at, according to officials „affordable rates“. In an interview an delegate said: "We have raised $1 billion through five-year sukuk at rate of 5.625% and $1.5 billion from a 10-year Eurobond maturity at a rate of 6.875%," Federal Secretary Finance Shahid Mehmood said.
These two deals have been the largest in the country's history so far. The 10-year bond was the cheapest bond ever launched by Pakistan. Last year the country borrowed $1 billion in the global sukuk market at 5.5%. It also floated a 10-year, $500 million Eurobond at 8.25% in 2015.
The government appointed a consortium of Standard Chartered Bank, Industrial and Commercial Bank of China, Citibank, Deutsche Bank, Dubai Islamic Bank and Noor Bank as the lead managers for conducting sukuk transactions. Noor Bank thereby will manage the Middle East sukuk bond.

Dubai's Emirates REIT to meet investors ahead of debut dollar #sukuk - lead

Emirates REIT will hold fixed income investor meetings until Dec. 1 ahead of a debut dollar-denominated five-year sukuk sale. The issuance is expected to range between $350 million and $425 million. The company has mandated Standard Chartered as sole global coordinator, and Dubai Islamic Bank, Emirates NBD Capital, Standard Chartered and Warba Bank as joint lead managers and bookrunners to arrange the meetings ahead of the planned issuance.

Noor Bank to move away from unsecured small business lending- CEO

UAE's Noor Bank is to move away from unsecured lending to small and medium-sized enterprises. CEO John Iossifidis said the bank was not turning its back on that sector, but it’s certainly not going to be the unfettered lending that was happening two years ago in the banking sector. Other local banks have already taken steps to cut their exposure to the SME sector. Noor Bank also intends to diversify its corporate loan book. In its retail business, the bank aims to shift its focus more towards affluent consumer clients by raising the minimum salary threshold for customers. Iossifidis said the bank had a 7% market share in the UAE mortgage market, giving it an advantage in capturing greater market share in the affluent market.

British judge to issue ruling on $700 million Dana Gas #sukuk case soon

British High Court judge George Leggatt said that he would not further adjourn a trial in the Dana Gas case and would issue a judgement soon. Dana is claiming it does not need to redeem its $700 million sukuk, which matured at the end of last month, because the instruments became invalid under UAE law. Dana had asked for further postponement of the trial pending developments in a UAE court, where motions in the case have also been filed.

#UAE's Dana Gas profit boosted by financial settlement with KRG

Dana Gas reported a steep rise in third-quarter profit, benefiting from a $1 billion payment as part of a settlement agreement with the Kurdistan Regional Government (KRG). The agreement boosted Dana’s third-quarter earnings and net profit for the nine-month period ending on September 30, which amounted to $125 million against $26 million during the same period one year earlier. The settlement led to a reversal of the provision for payments to the KRG, with the balance of unpaid receivables booked to new petroleum costs. The company is at the centre of a legal dispute after having refused to redeem $700 million in outstanding Islamic bonds claiming they are no longer sharia compliant. It has started legal actions in UK and UAE courts to avoid redeeming the sukuk. Dana claimed being confident pursuant to independent legal advice of prevailing in its interpretation of the outcome.

#Saudi's Jabal Omar picks two banks for #sukuk sale early next year -sources

Saudi Arabia’s Jabal Omar Development Company has hired two banks to manage a sukuk sale which could exceed 4 billion riyals ($1.07 billion). Bank Albilad and GIB Capital were hired to arrange the issuance, which is planned for the first quarter of 2018. The property developer's sukuk would be among just a few corporate debt sales expected over the next few months, as the Saudi market is still largely dominated by government bonds. The government has issued a total of 47 billion riyals through monthly sukuk sales since July, and is likely to continue. Jabal Omar’s flagship Mecca development project includes residential units, hotels and commercial malls. The company has raised a number of large bank loans over the past few years, and the sukuk proceeds would be used to refinance its existing bank debt.

Unified industry practices key to Islamic finance growth: AAOIFI

The Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) will prioritize wider adoption of its standards by engaging national regulators in key markets. Islamic finance has grown fast in part due to self-regulation, but the approach is now viewed as a barrier to growth. AAOIFI secretary-general Hamed Hassan Merah said wider adoption had a direct link to the qualitative growth of the industry. AAOIFI has recently signed Borsa Istanbul and the Saudi Arabian Monetary Agency as institutional members. Special attention will be given to Malaysia and the convergence of AAOIFI standards with the local rules. An AAOIFI survey of 213 scholars found 78% of respondents favour making AAOIFI sharia standards mandatory. On the other hand, 82% of respondents said Islamic finance institutions should adopt them on a voluntary basis.

MIDEAST #DEBT-#Qataris hold non-deal bond roadshows as rift drags on -sources

Qatari banks have met investors in Europe and Asia to gauge their interest in potential U.S. dollar bond issues. Access to international debt markets has become problematic since the diplomatic crisis has erupted. Saudi Arabia, the United Arab Emirates, Bahrain and Egypt cut diplomatic and transport ties with Qatar, accusing it of supporting terrorism. Cross-border deposits accounted for about a quarter of Qatar's total deposits, so banks started to look for alternative funding. Al Khalij Commercial Bank, Doha Bank, Qatar International Islamic Bank and QNB have all met investors in recent weeks. Feedback was positive, but investors also made clear that issuers would have to pay premiums in order to attract sufficient demand. According to an international portfolio manager, the premium that Qatari banks would have to pay is about 30-40 basis points. A second fund manager said Qatari banks would have to pay up not only because of the increased political risk, but also because of general market conditions in the region.

Exclusive - #Saudi Arabia preparing tougher rules for insurers - sources

Saudi Arabia’s central bank is preparing tougher rules for insurance companies. A new supervisory framework will be introduced in the coming months that will force insurers to boost capital significantly and improve internal risk controls. The moves are aimed at triggering consolidation in the insurance industry and forcing weaker companies to merge with stronger ones. The proposed changes were discussed during a meeting between officials of the Saudi Arabia Monetary Authority (SAMA) and senior insurance executives. Saudi Arabia’s insurance market is fragmented, with only a few companies dominating the sector and an abundance of smaller firms unable to make inroads. The central bank does not want the smaller companies to fail, as more than half of the shares are owned by politically sensitive retail investors in a market unaccustomed to liquidations.

#Russia's Sberbank considers Islamic finance entity, to propose regulatory change

Sberbank is considering setting up an Islamic finance entity and will propose regulatory changes to facilitate sharia-compliant business. Vnesheconombank and Tatfondbank are also developing Islamic finance products. Legislation will need to be passed in Russia to make Islamic finance cost-effective. Taxation is often an obstacle, as transactions have double or triple tax duties since they require multiple transfers of underlying assets. Sberbank is currently testing pilot transactions in leasing, financing food production and trading. Oleg Ganeev, deputy chairman at Sberbank, said the decision on whether to set up a separate entity could come by next year. He added that local businesses could also consider issuing sukuk, as they have a variety of tangible assets that can support such deals.

Qatar International Islamic Bank readies $2 bln #sukuk programme

Qatar International Islamic Bank has finished creating a $2 billion sukuk issuance programme and is preparing to issue it when market conditions improve. Qatar's access to international bond markets has become problematic since Saudi Arabia, the United Arab Emirates, Bahrain and Egypt cut diplomatic and transport ties with the country. Instead of debt markets banks have turned to privately placed bond and sukuk deals, as well as bilateral loans. Qatari banks are facing greater urgency to secure funding because banks from the four Arab countries have been withdrawing deposits from Qatar. Last month the largest Qatari lender, Qatar National Bank, raised $630 million in Taiwan’s Formosa bond market. Commercial Bank of Qatar is also considering whether to borrow money on the Taiwanese bond market.

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