Tag Archives: Finance

Bahrain’s AUB upbeat on Islamic banking drive

Bahrain’s AUB upbeat on Islamic banking drive

Bahrain’s Ahli United Bank (AUB) AUBB.BH AUBB.KW, the kingdom’s largest lender by market value, on Monday said it expected its new Islamic division to generate revenue equivalent to half its current total in as little as three years.

The bank, whose consolidated net profit was $207.5 million in 2006, also expects to increase to 50 from four its Al Hilal brand Islamic branches in two years. Founded in 2000, the bank has about 100 conventional branches.

“Globally you see the growth of Islamic banking is much faster than conventional … We have got a large customer base across the region and there’s strong demand,” AUB Deputy Group Chief Executive Abdulla Al-Raeesi told reporters.

The bank has operations in Britain, Kuwait, Qatar, Iraq, Oman and Egypt and is targeting Saudi Arabia, the United Arab Emirates, Iran and Switzerland for expansion.

The lender has four Islamic branches — two in Bahrain, one in Britain and another in Qatar — and aims to expand Al Hilal in territories where it is already present.

It is in talks with the Egyptian central bank for an Islamic licence and will open another branch in Bahrain within a month and four more in Qatar this year.

Islamic finance prohibits interest and operates on the principle of sharing risk and reward among all parties in a business venture. Islamic law bans investing in certain sectors, such as alcohol, pornography and gambling.

The industry is set to hit $1 trillion in assets by 2010, management consultants McKinsey & Co said in December, and experts say it is growing at a rate of about 15 percent a year.

International reports indicate Kuwait leading in Islamic finance: Kuwait Minister

International reports indicate Kuwait leading in Islamic finance: Kuwait Minister

According to international reports published recently, Kuwait is leading the world in the number of Islamic financial institutions and the volume of assets these bodies manage, stressed Minister of Commerce and Industry Falah Al-Hajri Sunday.

The minister inaugurated the eighth international forum of Islamic finance institutions and said Kuwait was among the states quick to support the Islamic financing industry through both legislation and creation of friendly operating atmosphere.

Al-Hajri further remarked leading international banks are now seeking to offer Islamic banking products and services, which is testimony to the growth and importance of the field.

In figures, over 300 Islamic finance bodies are operating in 75 states, managing some USD 500 billion amid expectation the figure would go all the way up to over a trillion by 2015.

On issues to be discussed, Al-Hajri mentioned quality control and Shariaah (Islamic Jurisprudence) compliance, which is the main concern, due to the very nature of these bodies as providers of Shariaah-compliant services.

There is also the issue of sovereign rating, as this rating determines these institutions’ competitive edge as they seek international expansion, Al-Hajri noted. Intellectual property rights would also come up in terms of how it applies to financial products and services.

The two-day conference is a most important venue for Kuwait, as the Islamic finance sector is the state’s most developed and fastest growing sector.

Addressing the forum, participant Ahmad Al-Yaseen said the growth seen in the sector is due to the reliability and quality of the services and products and the full and careful implementation of Shariaah guidelines.

He said Islamic financing offers satisfactory solutions and alternatives to interest rate on transactions.

Kuwait Finance House General Manager Mohammed Sulaiman Al-Omar for his part said, on behalf of the sponsors, that the industry is now before a historical opportunity amid the current developments which create favorable conditions for further growth and development in Islamic financing.
He said that as local opportunities are limited, Islamic financing bodies are seeking international and regional expansion to seize opportunities beyond the local market. This is the lone option the way things are, he stressed.

Representing participants, representative for National Bank of Kuwait Abdullah Al-Tuwaijri said Islamic banking and financing in the Arabian Gulf region benefited from the economic boom in the region and the increase in oil prices.

He pointed out products and services saw marked growth, as sukuk, for instance, went up to USD 27 billion by September 2007 and it is expected the figure would reach 50 billion in 2008.

On the industry in Kuwait, he said the sector is more advanced than in most states, and growth saw the number of companies go from 14 companies three years ago to a current 37 companies.

These bodies are managing sums over KD six billion which is over 40 percent of the overall sums managed by investment companies in Kuwait.

Traditional finance and banking operators are starting to offer Islamic products and services, such as the National Bank of Kuwait, which currently runs more than one Islamic fund.

Hong Kong’s Islamic New Year

Hong Kong’s Islamic New Year

When Jawaher Al Sudairy began talking about the sands of Saudi Arabia, her audience listened attentively. At a recent luncheon meeting at the Hong Kong Chamber of Commerce, the China director of the Saudi Arabian General Investment Authority captivated Hong Kong business executives about the fortunes lying underneath the sands of the Kingdom. And she wasn’t talking about oil. Al Sudairy was pitching mining opportunities in Saudi Arabia.

There’s a hunger in Hong Kong to know more about the Middle East these days, fueled in part by the recent buzz created by the city’s leader, Donald Tsang, that Hong Kong will open its doors to Islamic banking and finance, promising to create an Islamic bond market and to bring in more of the Middle East’s petrodollars into the city.

The interest goes both ways. Middle Eastern financial institutions and companies have been investing in Hong Kong’s rising stock market and property sector. HSBC’s local unit, Hang Seng Bank, for instance, decided to introduce Hong Kong’s first Islamic fund after being approached by a Middle East financial institution in 2006 to help manage its investments in Hong Kong and China. Last year, Dubai Investment Group, part of the government’s Dubai Holdings, bought a roughly 10% stake in Sun Hung Kai Financial, one of the city’s largest non-bank financial institutions and a unit of one of Hong Kong’s biggest property developers.

Still, Al Sudairy says, the Greater China region remains unfamiliar territory to some back home.

“The interest is there, but the knowledge or the understanding is still building because Hong Kong and China are very new [markets],” she says. “A lot of them will come but they are still not clear how to penetrate the market, I think”.

Unlike its neighbors to the south – Malaysia, Indonesia and Singapore – Hong Kong is a latecomer in the highly lucrative and competitive Islamic banking and finance industry. Predominantly Muslim Malaysia has already gained a reputation as an Islamic financial center in Asia and as one of the world’s biggest sukuk markets.

Can Hong Kong compete?

Early this year, Tsang and Hong Kong’s financial secretary John Tsang (no relation), will be visiting the Middle East to sell Hong Kong. But some say it takes more than a high profile road show to attract a flood of Islamic funds, even if Hong Kong and mainland China’s prospects are bright.

The main drawback, at the moment, appears to be infrastructure. Although it possesses a sophisticated financial system, Hong Kong still has to build a support system for Islamic banking and finance alongside its Western financial infrastructure. That system, some say, is critical in creating a climate where Islamic investors can feel confident that their investments strictly follow Islamic principles. This includes shariah compliance certification, Islamic financial reporting standards, and a legal platform to settle disputes relating to Islamic investments or financial instruments.

Lord Edwin Hitti, a Lebanese businessman, has been at the forefront of setting up the building blocks of Islamic banking and finance in Hong Kong. As chairman of the Arab Chamber of Commerce and Industry, Lord Hitti last year helped form Hong Kong’s sole shariah compliance certification body, and the Hong Kong Islamic Stock Index.

“Hong Kong is ready from a psychological point of view. But from a practical point of view, Hong Kong still has to make certain accommodations,” he says. “Hong Kong still has to review and restructure its infrastructure to be able to accommodate Islamic finance, Islamic banking and shariah law within its current conventional settings.

He cites that two of the city’s largest banks – HSBC and Standard Chartered – are well-known players in Islamic banking and finance in the Gulf and in Malaysia but have yet to offer the same services in Hong Kong.

“Why the hesitation to say we offer these services in Hong Kong? It will not take major changes for them… The reason, I say, is because the Hong Kong legal system is not at this point able to deal with any area of conflict pertaining to shariah, and because the accountancy system and the tax system do not have any provisions at the moment to deal with Islamic practices,” says Lord Hitti.

Setting up the proper infrastructure may prove a tall order. After all, Malaysia started the development of Islamic banking and finance in the 1980s, first with the issuance of an Islamic Banking Act as a legal basis for the creation of Islamic banks.

Clifford Chance named best law firm in Islamic finance

Clifford Chance named best law firm in Islamic finance

Clifford Chance has been named Best Islamic Law Firm in the 2007 Islamic Finance News Awards. The firm also won a number of awards across a range of practice areas.

In the sector awards, the firm was awarded for its work on the $850m Khazanah sukuk, which received ‘Deal of the Year’ awards in the Equity and Cross-border categories. The $2.53bn sukuk-al-mudaraba for Aldar received ‘Deal of the Year’ awards in the Mudaraba and Real Estate categories.

In addition, the $5bn DP World IPO was named ‘IPO Deal of the Year’, the MTC Telecommunications acquisition of the 3rd Saudi mobile operators license won ‘Tawarruq Deal of the Year’ and the Dhs7.5bn sukuk-al-musharaka for Jebel Ali Free Zone won ‘Sukuk Deal of the Year’ and ‘UAE Deal of the Year’.

In the country awards, the firm was awarded ‘UK Deal of the Year’ for its work on the $925m Aston Martin acquisition, ‘Djibouti Deal of the Year’ for the $263m Doraleh Container Ports financing and ‘Egypt Deal of the Year’ for the $1.41m financing of the Egyptian Fertilisers Company acquisition.

Qudeer Latif, Head of Islamic Finance for the Middle East, said,

‘These awards demonstrate the global strength of Clifford Chance’s Islamic Finance practice across all our practice areas. We concluded more than $25bn worth of Islamic finance deals in 2007 across the asset classes. It’s a tremendous achievement and an honour for us to be recognised by our clients and peers for our leading practice.’

The awards will be received at a ceremony in Dubai in February.

To 500 Islamic Financial Institutions

To 500 Islamic Financial Institutions

The Banker, the flagship global finance magazine of the Financial Times and Group HSBC Amanah, the leading global provider of Islamic Finance have joined forces to launch the world’s first comprehensive ‘Top 500 Islamic Financial Institutions‘ listing.

The global listing in The Banker’s November 2007 issue shows that the global total of sharia-compliant assets, based on the latest official figures of the Top 500 Islamic financial institutions, grew by 29.7% in 2006 to reach $500.5bn at year end 2006.

This first comprehensive listing which covers institutions in 47 countries and incorporates all institutions that offer sharia-compliant products shows that Islamic finance is growing at almost twice the rate of western (interest-related) financial services and analysis suggests that the level of Islamic finance is still largely under-reported on a global basis.

This groundbreaking research in Islamic finance includes both Islamic financial institutions and conventional banks offering Sharia-compliant financial services.

This unique listing provides the core benchmark for Islamic finance across the globe and the first time detailed figures have been provided by institutions on the size of the market in Islamic financial services.

Mohammed Hassan Ismaeel, Global Head of Marketing, HSBC Amanah said: ‘Since its launch one decade ago, HSBC Amanah has been setting the pace for the Islamic finance industry globally through innovation and best practices. HSBC Amanah offers Islamic banking solutions which combine our financial expertise with our enduring values. Our current joint initiative with The Banker is indicative of our commitment to take the industry to new heights.’

‘At HSBC Amanah, customers can experience the global coverage and convenience of banking with HSBC without compromising the principles of the Sharia. HSBC Amanah brand speaks of the commitment of HSBC to the Muslim societies in which it operates,’ he added.

Stephen Timewell, Editor-in-Chief of The Banker, said: ‘The Top 500 Islamic financial institutions listing is a pioneering move that creates the first credible benchmark for the rapidly expanding Islamic finance industry. Just as our Top 1000 World Banks listing in July has become an essential piece of prime data for the banking industry, we are confident that this new listing, to be published every November, will become the key benchmark for Islamic finance.’

The Top 500 Islamic institutions listing provides not only an individual institutional breakdown based on sharia-compliant assets, it also includes country and regional breakdowns of the key players in the industry as well as growth, profitability and underwriter league tables. In addition to 292 banks, both fully Islamic and those offering Islamic windows or selling Islamic products, there are 115 Islamic investment banks and finance companies, and 118 insurance companies , adding up to a global total of 525 institutions from which the Top 500 was drawn.