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Wednesday, 10 October 2012

Sukuk key to funding, say Standard & Poor's

Corporate and infrastructure issuers in the Gulf region may increasingly rely on sukuk as a source of funding in coming quarters, says a report published by Standard & Poor's Ratings Services.
The report - Sukuk Are Surpassing Conventional Bond Issuance in the Gulf Countries as Yields Tighten - said sukuk issuance in the GCC has reached a record high this year, propelled by positive developments in the region's economy and capital markets.
Yields have fallen dramatically on both conventional and sukuk capital market issuance in the past year.
This trend was supported by the GCC financial system's sound liquidity, local investors' strong appetite for debt and accommodative monetary policies around the world.
"As access to capital markets widened, several corporate issuers in the region were able to successfully refinance large amounts of debt falling due, notably by tapping the sukuk market," said Standard & Poor's credit analyst Tommy Trask.
"We also expect the project finance sector, including real estate and transport projects, to increasingly rely on sukuk issuance to fund transactions."
Overall, rising oil prices have led Standard & Poor's Ratings Services' economists to revise their GDP growth forecast for the GCC for 2012 to five per cent from 4pc previously, and created a fertile environment for credit growth, particularly in the Gulf's oil-exporting economies.
However, tough global economic conditions and continued political tension in the region following the Arab Spring should remain key challenges over the coming months.

(Albawaba Business / 09 Oct 2012)

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Global Islamic Finance Matures and Grows

As banking in line with Islamic law matures, partnerships not rivalry feed the industry’s growth.

According to global consultancy Ernst and Young, there are more than 390 Islamic banks and financial institutions based in 75 countries.
The Emirate of Dubai will soon have a new player in the field of banking in line with Islamic law or Shari’ah.
Earlier this month H. H. Sheikh Maktoum bin Hasher Al Maktoum, executive chairman of the United Arab Emirates’ (UAE) oldest investment bank, Shuaa Capital, said that his bank applied for an Islamic banking license. “We plan to launch Islamic banking in Q-1 of Y 2013.”
Shuaa Capital was hit badly by the financial crisis as trading volumes at capital markets fell. In Y 2011, the bank reported a dismal return of equity of – 19.9%.
“We target the market for Shari’ah-compliant financing for small and medium enterprises (SMEs) as in the UAE only 4% of SME financing comes today from banks,” said Sheikh Maktoum, who is a member of Dubai’s ruling family Al-Maktoum.
Because Shari’ah forbids interest, banks become partners of those businesses they finance and share profits, instead of lending money with interest.
It is of no coincidence that Shuaa opts to enter Islamic finance now. The market celebrates a strong comeback. The impressive growth in Islamic bonds, known as sukuk, has moved banking in line with Islamic law or Shari’ah back into the spotlight of global finance.
According to Kuwait’s largest Islamic financial institution Kuwait Finance House, the market for Islamic bonds grew to US$210.8-B, up by 40.1% Y-Y.
Forgotten are the woes when Dubai state-owned developer Nakheel almost defaulted on a US$3.52-B sukuk in November 2009, only a guarantee worth US$10-B issued by Oil-rich Emirate Abu Dhabi saved Nakheel and Dubai from an embarrassing oath of disclosure.
(Live Trading News / 09 Oct 2012)

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GCC and Asia lead in Islamic finance

Gulf States and Asia are leading the growth in Islamic finance, which is being considered most credible alternative to conventional banking in the wake of global financial crisis, a senior banker said.

Standard & Poor’s expects the $1 trillion global Islamic finance industry is set to double in size between 2011 and 2015, recording an annual 20 per cent growth driven by increasing demand for this “credible alternative” to conventional banking in the GCC and Asia.

“Young, fast-growing Muslim populations, robust macroeconomic environments, and large infrastructure projects that require financing are the main drivers of this increasing growth. The UAE is surely a predominant force in the region,” Mohammad J.A. Zaqout, executive vice-president, Personal Banking Group of Al Hilal Bank, told Khaleej Times on the sidelines of World Islamic Retail Banking conference on Tuesday.

He said educational institutions in the UAE have also begun to notice the growing interest in Shariah finance in the country and have started to offer specialised qualifications.

“In terms of regulation and governance there are plans to set up Shariah board for the Islamic finance industry in the region, similar to the one currently in place in other jurisdiction such as Malaysia and Indonesia,” Zaqout said.

To a question about the UAE banking sector outlook in second half, he said the emirates has the highest degree of banking intermediation in terms of assets, loans, and deposits.

“The high level of banking penetration in the UAE reflects its relatively developed banking infrastructure,” he said.

Referring to a recent research report by RNCOS, he said the UAE’s banking sector will post a strong growth in the coming years, with banking assets registering a CAGR of around eight per cent during 2011-2014 despite various restraints.

“There are several promising signs of a reviving UAE economy - which is backed by the stabilisation of real estate prices, higher crude prices, and improved performance by the corporate sector which compliments an overall improving outlook for the emirates banking sector.”

Regarding the bank’s business growth strategy, he said Al Hilal Bank aims to become the leading financial institution in the region by promoting Islamic banking with a new direction, towards new technologies and special services.

“Al Hilal Bank is committed to the UAE’s economic development and our growth strategy is aligned actively in supporting Abu Dhabi’s 2030 plan by financing the strategic projects in the country. It also helps develop Islamic finance as a major contributing sector to the economy,” he said.

“We are fully committed in educating the next generation of Islamic bankers and have undertaken different initiatives internally and externally to ensure this dream turns into a reality,” he added.

About the bank’s Shariah-compliant services, he said Al Hilal offers a very comprehensive wide range of products and in services to clients.

“Our revenue growth in the year 2012 has been quiet strong and we are moving ahead in a positive direction going forward,” he said.

To a question about the bank’s expansion, he said the bank plans to open branches in key locations across all emirates to cater to the increasing number of customers.

“Currently we have 22 branches across the UAE with majority of them across Abu Dhabi and Dubai and other branches at Al Ain, Ras Al Khaimah and Sharjah,” he said.

(Klaeej Times / 10 Oct 2012)

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