Saudi Arabia

Al Baraka Bank issues first subordinated sukuk

The Pakistani unit of Bahrain's Al Baraka Banking Group has raised 2 billion rupees ($19.5 million) via the country's first issuance of subordinated sukuk, or Islamic bonds. The seven-year private placement is the first to be issued by an Islamic bank in Pakistan, according to Abdullah Ghaffar, head of investment banking at Al Baraka Bank Pakistan.

Due to the phasing in of Basel III global banking standards around the globe, several Islamic banks have issued subordinated instruments in order to raise capital, including those in Turkey, Malaysia, Saudi Arabia and the United Arab Emirates.

Saudi Bank to Raise 6 Billion Dollar

The National Commercial Bank in Saudi Arabia, plans to raise 22.5 billion riyals ($6 billion) from the biggest initial public offering this year after Alibaba Group Holding Ltd. It will sell 500 million shares at 45 riyals a piece. The sale is restricted to Saudi investors, with 300 million shares allocated to individuals and the rest to the kingdom’s Public Pension Agency. This makes the sale to the 2nd-biggest globally in 2014.

Saudi's Sedco launches first in-house Islamic fund

Jeddah-based Islamic investment firm Sedco Capital has launched the first fund managed by its own in-house team, looking to bulk up its asset management capabilities. The Gulf equities fund, domiciled in Luxembourg, has an intial $30 million in assets and is Sedco's 14th fund overall. It is part of Sedco's strategy to source two-thirds of its assets under management from outside Saudi Arabia in four to five years. Previously, Sedco relied on external advisors for its funds. Sedco Capital said it had also signed the United Nations' Principles for Responsible Investment (UN PRI), becoming the first Gulf-based Islamic asset manager to do so.

Saudi- Islamic banking: Who is in control

Backed by a good track record and triple A ratings IsDB issued a 1.5 billion sukuk as part of its ambitious program to raise 10 billion. The issuance was met with success despite the general market uncertainty. The value of sukuk offered is still small despite the fact the Islamic finance industry is believed to have grown to 2 trillion. Governments and institutions in the west and Islamic states are driving this lucrative business. However, existing regulations suffer from being incomprehensive and untested in most cases and that again could be traced to the lack of a central body with authority to enforce such regulation. Accordingly it is left to each individual country to come up with whatever it sees fit to adopt and apply.

Islamic Development Bank set to raise $1.5b sukuk

Jeddah-based Islamic Development Bank set the size of its five-year sukuk issue at $1.5 billion while tightening the pricing to the low end of its previous guidance. Final pricing was given at a spread of 10 basis points over mid-swaps; previous guidance was in the range of 10 to 12 bps, and initial price thoughts were 15 bps. The order books were approaching $2 billion. Books closed at 1000 GMT on Thursday. The AAA-rated IDB had mandated CIMB, Deutsche Bank, First Gulf Bank, GIB Capital, HSBC, Maybank, Natixis, National Bank of Abu Dhabi, and Standard Chartered Bank as joint bookrunners to arrange the sukuk sale. The IDB is looking to increase its issuance of sukuk, partly to raise its profile among international investors and to secure similar pricing levels to other development banks.

Saudi Arabia said to weigh opening kingdom's debt markets

Banks with experience arranging Islamic bond sales may stand to benefit from the potential opening of Saudi Arabia’s debt market to foreign investors. There’ll be a lot of potential for non-Saudi banks to get involved on the advising and arranging side. Besides, they’re also some of the biggest sukuk buyers. Saudi Arabia is working on new rules aimed at promoting the local currency bond and sukuk market. The rules are expected to allow foreign investors to buy local currency bonds for the first time and could be published early next year. The new rules for the debt markets are also expected to stipulate that ratings companies will need to have a local presence to rate domestic securities. Saudi Arabia is de facto leader of OPEC and plans to remove some restrictions to lure capital to the $745 billion economy.

Standard & Poor's Reaffirms Highest Rating (AAA) for the Islamic Development Bank

Standard & Poor's (S&P), one of the world's leading rating agencies, has reaffirmed the Islamic Development Bank 's ( IDB ) 'AAA' rating with a stable outlook. The first AAA rating report on IDB was issued in 2002. S&P recognized IDB as having an extremely strong financial profile underpinned by robust capitalization and high liquidity levels; as well as a very strong business profile emanating from the Bank's important policy role in promoting social and economic development across member countries and Muslim communities in non-member countries. The report emphasized the strong relationship, extraordinary support and preferred creditor treatment which IDB enjoys from its member countries.

Saudi's Itqan Capital to boost Islamic finance business

Saudi Islamic investment firm Itqan Capital plans to expand its investment and advisory activities in the kingdom after it received regulatory approval to boost its capital. The firm will increase its capital by 100 million riyals ($26.6 million) to 173.4 million riyals by the end of October, said Adil Dahlawi, managing director and chief executive of Itqan Capital. Itqan currently manages four sharia-compliant funds: a money market fund and three real estate funds. New product launches are scheduled this year with two funds in the pipeline, the first of which is a private equity fund investing in the Saudi education market, Dahlawi said. About half of all assets under management in Saudi Arabia follow Islamic investment principles.

Saudi Arabia helps to develop new screening method for sukuk

A new screening method for sukuk, developed in cooperation with Saudi Arabian financial institutions, aims to reduce the cumbersome approval process that these instruments often require. San Francisco-based IdealRatings said its product addressed compliance hurdles faced by sukuk investors contending with multiple structures and disparate opinions. The product reviews and categorises sukuk to allow Islamic banks to adhere to their own guidelines more efficiently, reducing the time and costs of due diligence in each deal. The service was developed over the past two years in consultation with Islamic financial institutions, in particular Saudi firms.

SAMA unveils new rules for consumer lending

Saudi Arabia’s central bank has published new consumer lending regulations which give it the power to cap retail lending at individual banks and limit the fees that banks can charge. The rules could dent profit growth at banks, especially those that rely heavily on retail activity. The regulations, published on the Saudi Arabian Monetary Agency’s (SAMA) website, state that SAMA may, at its discretion, impose a restriction on a creditor under which its consumer financing portfolio may not exceed a specified percentage of its total financing portfolio. They also state that all fees, costs and administrative services charges collected by banks must not exceed either 1 percent of the financing amount or SR5,000 whichever is lower.

Al Rajhi Capital Launches First Sukuk Fund

Rajhi Capital has started the offering period for the Al Rajhi Sukuk Fund. The Sukuk fund is an open ended fund designed to capture the opportunities available within the Shariah-compliant universe of sovereign, quasi-sovereign and corporate Sukuk, issued locally, regionally, as well as globally. The Fund will also invest in other income generating assets, within its mandate comprising of Commodity Murabaha Placements, Islamic Placements, Structured Islamic Products and Commodity Mudaraba Funds. The benchmark of the Fund is 3 month USD LIBOR 75 bps. Al Rajhi Capital is offering a special incentive whereby the subscription fees are waived for all new subscriptions until September 11 2014.

SEDCO Capital outsources external Shari’a Audit of its $160 million real estate funds to Shariyah Review Bureau

SEDCO Capital announced assigning the External Shari’a Audit of its $160 million real estate funds to Shariyah Review Bureau (SRB). The two funds which SRB will be periodically auditing the implementation of the Shari’a h guidelines are SEDCO Capital Partners Group Opportunities Fund and SEDCO Capital Real Estate Income Fund I. SRB will independently ensure that the investments, Zakah verification, implementation of the modalities and reporting functions are conducted in accordance with the Shari’a guidelines set out by SEDCO Capital Shari’a Supervisory Board.

Saudi Chambers Council launches awards for female entrepreneurs

The Council of Saudi Chambers has launched a series of awards for businesswomen with the main objectives to support and encourage Saudi businesswomen to take a more prominent role in the Kingdom’s economy. The awards will highlight achievements in three categories: ‘Leading Young Businesswoman,’ ‘Leading Businesswoman,’ and ‘Productive Families.’ The nominations will be submitted electronically and that no preference will be given to particular geographic regions within the Kingdom. The jury will not include members of the Council, however, in order to ensure the awards are unbiased. Nominations for the awards will closed on September 10. Results will be announced in 2015 to coincide with the Second National Forum.

Eiger Trading releases 24/7 automated retail and wholesale Murabaha platform

Eiger Trading launched the first ever fully-automated, Shariah-compliant 24/7 Commodity Murabaha platform, in conjunction with Gulf International Bank’s (GIB) KSA retail arm, under the ‘Meem’ brand name. This fully-automated Islamic e-banking solution offers 24/7 online personal finance and deposits to retail clients in the Kingdom of Saudi Arabia. Eiger and GIB’s combined technology provides online customers with a 24/7 real-time mechanism for executing Shariah-compliant transactions, using commodities all of which are located and deliverable within the Kingdom.

Our killer banks

After a decision by the Saudi Arabian Monetary Agency (SAMA) prohibiting banks from compounding interest, Saudi commercial banks were expected to improve their services. However, the services remained substandard. In their terms and conditions for extending loans, the banks determine the profit rates depending on the size of the loan and the financial position of the customer. You will often see customers waiting in long queues to be served because the banks do not appoint sufficient number of employees to serve customers. The complaints against Saudi commercial banks have become a normal phenomenon. The banks would have improved their services if they had heeded SAMA's instructions.

Saudi market surprise sparks speculation of Sukuk access

Saudi Arabia’s plan to open its $531 billion stock market to foreigners is prompting analysts’ speculation that Islamic bonds will be next. Saudi Arabia capital market authority said last week that the stock-market change would take place in the first half (H1) of next year. The move may lead to the country’s inclusion in MSCI indexes, which are used to measure performance by money managers with an estimated $9 trillion of assets. Opening the local-currency sukuk market would give foreign investors access to companies that sold 42 billion riyals ($11.2bn) through a dozen sales in the past year. However, access to the kingdom’s debt market may appeal more to investors wanting to broaden their exposure than to those seeking yield.

Saudi’s Al Rajhi Bank posts fourth straight quarterly profit drop

Al Rajhi Bank posted a fourth successive quarterly profit decline as its second-quarter earnings fell 8.2 per cent year-on-year, with Saudi Arabia’s largest listed lender hit again by higher provisioning. The bank said it made 1.95 billion Saudi riyals in the three months ending June 30, compared with 2.12bn riyals in the same period a year earlier, citing an increase in total operating expenses for the drop without elaborating. Despite the decline, Al Rajhi’s net profit figure was in line with analyst forecasts, with a poll conducted by Reuters expecting an average profit of 1.97bn riyals for the quarter. Al Rajhi’s quarterly profit decline stands against the positive earnings performance reported by most other Saudi lenders.

Saudi Market Surprise Sparks Speculation of Sukuk Access

Saudi Arabia’s plan to open its $531 billion stock market to foreigners is prompting speculation that Islamic bonds will be next. The government’s approval of overseas financial institutions to trade equities may herald a similar relaxation of rules in the local-currency primary debt market. Opening the local-currency sukuk market would give foreign investors access to companies that sold 42 billion riyals ($11.2 billion) through a dozen sales in the past year. That’s more than three times the amount of dollar Islamic bond sales, which are open to overseas buyers. However, access to the kingdom’s debt market may appeal more to investors wanting to broaden their exposure than to those seeking yield since lots of Saudi debt prices very tightly.

Saudi Arabia tightens control on zakat

The Saudi Ministry of Social Affairs is warning Saudis seeking to fulfil their zakat duty during the holy month of Ramadan against donating funds to those who solicit money via social networking tools. Those who wish to donate money are encouraged to give to the more than 700 licensed charitable organisations in the kingdom, to social security offices or to organisations involved in the Al-Khair al-Shamel (Global Goodness) project, the ministry said. These groups document donations in a transparent fashion under the state's auspices, it added. In Saudi Arabia, cash donation boxes are not allowed in mosques, markets and malls, as cash donations are accepted only at banks.

Latham & Watkins advises Mobily on $200m murabaha facility

Latham & Watkins advised Etihad Etisalat Company (Mobily), a telecommunications operator in the Kingdom of Saudi Arabia, in connection with a $200m murabaha facility made available by Export Development Canada. The facility will be used by Mobily to purchase eligible goods and services supplied to it by affiliates and subsidiaries of Alcatel Lucent S.A., including Alcatel Lucent, Canada Inc. This transaction represents Mobily’s third ECA-backed Islamic financing following on from its $646m murabaha facility with the support of Exportkreditnämnden and Finnvera plc in August 2013. In 2014 Latham & Watkins advised Mobily in connection with its $561m murabaha facilities made available by Exportkreditnämnden and Finnvera plc.

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