IslamicFinance.de

The Islamic Corporation for the Development of the Private Sector (ICD), a member of the Islamic Development Bank Group (IDB), and the government of Senegal and have announced the African state’s plan to relaunch a XOF 100 billion ($200 million) sukuk project next year. Amadou Ba, Senegal’s minister of economy and finance, has reaffirmed the interest of his government of Senegal to diversify its financing instruments. This project is the beginning of an ambitious program which could lead to the financing of innovative infrastructure and energy projects through sukuk issuances. This project is the first of its kind in the West African Economic and Monetary Union (WAEMU) and aims to promote Islamic finance as an alternative instrument to finance the economies of the member states of the union.

Al-Rajhi Bank said third-quarter net profit fell 8.1 percent. The bank made SR1.72 billion ($458.6 million) in the three months to September 30, compared with SR1.87 billion in the same period a year earlier. Al-Rajhi attributed the fall in net profit to a decrease in operating income, which dipped 4.6 percent compared to the corresponding period of 2012. It did not elaborate further. Al-Rajhi's loans and advances at the end of the third quarter stood at SR185 billion, gaining 12 percent on the same point of 2012. Its total assets were worth SR273 billion at the end of the third quarter, up 10 percent on the corresponding point in 2012.

HSBC and NCB Capital announced the completion of the largest ever government guaranteed sukuk in Saudi Arabia for the General Authority of Civil Aviation (GACA). Totaling SR15.211 billion ($4.056 billion), the sukuk achieved a profit rate of 3.21 percent p.a. HSBC and NCB Capital acted as joint lead managers and bookrunners of the sukuk. Additionally, HSBC acted as the sukuk coordinator, sole Shariah coordinator, and agent of sukuk holders and payment administration. Standard Chartered Saudi Arabia was co-lead manager for the issuance. The deal was 1.9 times oversubscribed with strong demand from a wide range of investors. Additionally, this issuance is also approved by the Saudi Arabian Monetary Agency (SAMA) to be eligible for repo arrangements and has also been assigned zero percent risk weighting for capital adequacy calculation purpose.

The Islamic Development Bank (IDB) plans to increase its sukuk program to $10 billion from $6.5 billion, to keep pace with demand for investment-grade paper from the international institution. The Jeddah-based lender plans to make the increase official in November subject to clearance from regulators in Britain, where its multi-currency program is listed. An expanded sukuk program would help the IDB increase its profile among global investors and secure similar pricing levels to other development banks such as the World Bank and European Investment Bank, which can borrow at slightly lower rates because they are more frequent issuers. IDB sukuk are highly sought after by Islamic banks.

Malaysia's Shariah-compliant banks should be roped in to manage the country's 1.2 billion ringgit ($375 million) worth of properties held as Islamic endowments. Prime Minister Najib Razak announced this month that the Malaysian Wakaf Foundation will be turned into a corporate entity to derive more value from assets held by the trust. The move to open wakaf (endorsement) management to the private sector may boost business for Malaysia's Islamic banks towards growing their share of the country's total banking assets to 40 percent by 2020 from 24.1 percent presently. The Malaysian Wakaf Foundation will meet the government's Economic Planning Unit this month to finalize its immediate plans

BAJ’s financial strength rating has been affirmed at “BBB” with a stable outlook. The bank’s long-term foreign currency rating has been affirmed at “BBB+” and its short-term foreign currency rating at “A2.” The ratings agency Capital Intelligence noted BAJ’s sound liquidity, strong customer deposit growth and improved profitability and highlighted the benefits of a reviving equity market to BAJ’s business. Nabil Al-Hoshan, CEO and MD of the Bank, was pleased that the banks strong underlying fundamentals had been recognized with this affirmation.

The Islamic Development (IDB) has approved financing of projects worth $747 million in various countries. The projects include $200 million aid for Rades Electric and Gas station project in Tunis for the development of energy sector in Tunisia , projects worth $190 million in six Iranian cities and $110 million irrigation projects in Egypt aimed to increase agricultural production in rural communities. The IDB is also providing $100 million to build an airport in Burkina Faso. The educational aid granted by the bank includes $72.5 million for development of the Lebanese University in Beirut, and $10 million for Arabic and French bilingual education project in Chad. Moreover, the bank approved several other projects in member and non-member countries. IDB's executive directors also reviewed the arrangements for the celebration of the 40th founding anniversary of the bank next year.

Saudi Arabian dairy producer Almarai Co. has chosen four banks to arrange the sale of a hybrid sukuk. The firm has mandated the investment banking arm of Banque Saudi Fransi, BNP Paribas, HSBC's Saudi Arabian unit and Standard Chartered to arrange the transaction. The offering, which is not imminent, is likely to be denominated in Saudi riyals, although the company could opt to issue in dollars instead. Almarai's Chief Financial Officer, Paul Louis Gay, told reporters in May it could opt to issue a hybrid Islamic bond in the next 12 months to help fund its ambitious growth plans, with a target amount of around $500 million. However, Gay said in May it was looking to raise the cash from international investors, rather than the local debt market. Earlier this month, Almarai posted a 4.9 percent year-on-year rise in second-quarter net profit on the back of growth in its core business.

The Malaysia-based International Islamic Liquidity Management Corp. (IILM) has reshuffled its Shariah board, losing four of its original six members. The IILM has been troubled by internal management upheaval, like the change of its chief executive late last year and the surprise pullout of Saudi Arabia's central bank in April this year. The changes to the Shariah board, which monitors the IILM's activities and instruments to ensure that they follow Islamic principles, could indicate further delays to the body's plan to begin issuing sukuk. The IILM announced in April that it aimed to make an initial issue worth up to $500 million in the second quarter of this year but has not yet proceeded with the plan, and it has not given a new time frame for it. The body did not issue a statement on the changes to its Shariah board.

Mohammed Obaidullah of the Islamic Development Bank highlighted the role of customers in strengthening Islamic banks and financial institutions by asking right questions and monitoring the bank’s activities and dealings. The customer is the driving force who can make Islamic banking move, he said while giving a lecture on the relevance of Islamic banking and finance in the modern world at the Islamic Education Foundation. Obaidullah called for the establishment of independent Shariah bodies to monitor and approve the activities of Islamic Banks. Moreover, Islamic banking and finance have become a strong industry that will not be shaken by defaulting of some institutions or individuals, he added emphasizing the importance of taking protective regulatory measures. Obaidullah hoped that India would soon get on the bandwagon of Islamic banking since the country could get the much-needed funds available in GCC countries for its infrastructure projects.

Depressed initial public offering (IPO) activity in the Gulf Cooperation Council (GCC) continued into the second quarter (Q2) of 2013 with three new listings raising a total of only $ 48 million. This compared to two IPOs in Q1, 2013 raising an aggregate of $ 337 million, representing an 86 percent decrease in total value raised. The average offering value dropped 94 percent this quarter compared to the same quarter last year where four IPOs were witnessed raising a total of $ 1.1 billion. While the value of offerings significantly dropped this quarter, the number of offerings remained relatively stable at 3 IPOs. In contrast, Europe’s IPO markets have continued to gain momentum in Q2, building on the successful start to the year, with $ 6.8 billion being raised, a 58 percent increase on the $ 4.3 billion raised in the first quarter of 2013.

Islamic International Rating Agency (IIRA) has assigned a national scale rating of A+/A-1 (SR) to Bank AlJazira. On the international scale, IIRA has assigned a foreign currency and local currency rating of A-/A-2. Outlook on the rating is ‘stable’. The fiduciary score has been assessed in the range of ‘71-75’, reflecting adequate fiduciary standards. The assigned credit ratings incorporate the bank’s improving asset quality and standalone profitability as well as an adequate liquidity profile and capitalization levels. However, BAJ, like other banks in Saudi Arabia, remains sensitive to concentration related risks. While large single exposures are likely to persist in the portfolio, segment-wise broadening will overtime reduce its possible impact, in case of impairment in large financings.

The National Commercial Bank (NCB) recently signed an agreement with King Khalid Foundation to give financial donations to the best charity foundations that were able present a plan of a charity project. The aim of this initiative is to support training programs and build the capabilities of charity foundations’ staff to promote efficiency, effectiveness and performance, which will be positively reflected on the society. The list of wining projects included Qualifying the Adolescents project presented by Charity Society for Marriage & Family Care in Baha, Rehabilitation of Visually Impaired project presented by Ebsar Foundation, My Skill is Enough project presented by Albir Society Jeddah, and Qualifying the Job Seekers from Ensan Committee project presented by Charity Committee for Orphans Care (Ensan), Riyadh. Each foundation received a financial donation at the value of SR 200,000.

Few Saudis are insuring their homes despite the recent floods and the relatively low-cost SR 5,000 annual premium per house on average. Sheikh Khaldoun Barakat, chairman of the board of directors of Arab Reinsurance Company, said current prices are “reasonable” and based on a house’s location, preparations to avoid risk and other factors.
He added companies and shops need to have insurance because there is a high risk of heavy losses if an accident or disaster occurs. Homeowners and businesspeople in Saudi Arabia are unaware of the importance of insurance against disasters. according to Barakat. Insurance experts said that government and the private sector should raise awareness of the importance of housing insurance.

Dubai Islamic Bank (DIB) is anxious to expand but is being held back in part by the unrest dominating the Middle East, according to its CEO Abdulla Al-Hamli. The bank expects to see close to 17 percent growth in net profit this year. DIB shares are up 43 percent so far this year to 2.88 dirhams, giving it a market capitalization of about AED 10.9 billion. After the global credit crisis the bank cut real estate investment to 27 percent of its portfolio from 45 percent in 2008. DIB’s non performing loans peaked at 14.5 percent after the crisis and dropped to 12 percent by the end of 2012. DIB is considering its expansion into Asian markets like Malaysia, Indonesia and India.

The Saudi Capital Market Authority (CMA) board has approved Aljazira Takaful Ta’awuni Company’s (ATT) initial public offering (IPO) of 10,500,000 shares, representing 30 percent of its share capital, amounting to SR 350 million. The offer price will be SR 10 per share and the subscription period will be from May 13 to 19. ATT's chairman Abdulmajeed Al-Sultan said the step will improve the company’s financial position and enable it to realize its strategic objectives to become the local and regional leader of Shariah-compliant cooperative insurance. Despite being still under establishment, Aljazira Takaful Ta’awuni is considered to be one of promising companies in the cooperative insurance sector in Saudi Arabia.

In the past, European arrangers and investors dominated issuance of international bonds from Turkey. But in recent months the Gulf has started to play a major role, for commercial and possibly even political reasons. One reason for the shift is Turkey’s move into Islamic finance. The fact that three of Turkey’s four Islamic banks are affiliates of Gulf banks has also helped steer sukuk issuance to the region. Another factor behind the trend is Turkey’s increasing emphasis on developing political and economic ties with the Gulf. Pricing is also a factor. A compression of yields in the Gulf over the past 18 months has reduced the returns from bonds issued within the region.

Morocco expects to sign a $ 2.4 billion loan deal next month with the Islamic Development Bank (IDB). The North African country has agreed a package with the IDB under which it will receive $600 million each year from 2013 to 2016. A small part of that sum will be a donation rather than a loan. A formal signing will be held in May. Moreover, Morocco is expected to raise around $ 1.5 billion this year by selling its first sukuk, with a final decision on borrowing to be taken by July. Morocco’s government has said it will limit its public debt to 60 percent of GDP despite the rising budget deficit.

Sixty percent of Saudis save less than 10 percent of their monthly salary, according to a survey conducted by souqalmal.com. A recent report issued by Jadwa Investment confirmed that the Saudi consumer price index (CPI) inflation maintained the 3.9 percent year-on-year increase for the third consecutive month in March. According to the report, the main contributors to inflation are food and housing rent components. Financial experts have said Saudi families lack awareness on consumer consumption and financial management. Many reports confirm that Saudis are one of the highest spenders in the MENA region.

Announcing its interim consolidated financial results ended March 31, 2013, Al-Rajhi Bank stated that its net profit during the first quarter is SR 2.05 billion, representing an increase of 2 percent compared with the corresponding quarter of previous year. Total operating income for Q1 is SR 3.53 billion compared to SR 3.43 billion for the corresponding quarter of previous year, representing an increase of 3 percent. Net profit from financing and investments increased by 3.5 percent. Earning per share for the three months is SR 1.37 compared to SR 1.34 for the same period of previous year. The reason for the rise in profits in the current quarter compared with the same period of previous year is due to higher income from operation income.