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Tuesday, 7 May 2013

Malaysia: MBSB earnings up on Islamic banking ops, lower impairment losses

PETALING JAYA: Financial institution Malaysia Building Society Bhd (MBSB)made a net profit of RM166.14mil or 13.08 sen per share in the first quarter ended March 31 compared with RM79.41mil or 6.53 sen per share a year ago, underpinned by its Islamic banking operations and lower impairment losses.
The increase was partially set off by higher operating expenses resulting from improved business volume.
MBSB's pre-tax profit surged 114.6% to RM237.11mil from RM110.47mil while revenue rose 48.4% to RM562.47mil from RM378.88mil.
In a statement, president and chief executive officer Datuk Ahmad Zaini Othman said despite the challenging environment in the retail market, the firm maintained its capability to sustain business growth that had resulted in enhanced revenue and profit levels.
The efforts undertaken to ensure improved asset quality have also borne fruit, with the group's net non-performing loan standing at 3.4% as at March.

(The Star Online / 04 May 2013)

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UAE: Dubai Islamic Bank eyes double-digit profit growth, acquisitions

Dubai: The Dubai Islamic Bank (DIB) has dealt with much of its balance sheet weakness and should see profits for 2013 grow in the high double digits, allowing it to eye acquisitions in new markets in Asia, officials said.
Leaders at the world’s oldest sharia-compliant lender told Reuters it had put aside around Dh5 billion ($1.36 billion) against the sort of soured property loans and transactions which drew into question Dubai’s future as a financial hub in 2009.
In his first media interview since taking over to deal with the fallout of the 2008 global crisis, Chief Executive Abdulla Al Hamli said the bank was now anxious to expand but was being held back in part by the unrest dominating the Middle East.
His deputy Adnan Chilwan said the bank expects to see close to 17 per cent growth in net profit this year after spending the last five years cleaning its books and strengthening its core banking operations.
I can confidently say that Dubai Islamic Bank has nothing to hide. We are very strong, clean and ready for the next growth phase,” Al Hamli told Reuters in the interview on Wednesday.
“2013 has started positively, with first quarter results up by 17 per cent compared to last year,” Chilwan said. “We anticipate similar growth for the remaining part of the year.”
DIB shares are up 43 pct so far this year to 2.88 dirhams, giving it a market capitalisation of about 10.9 bln dirhams. Investment firm Arqaam Capital last month raised its target price for the bank to 3 dirhams from 2.6 dirhams.
The 38-year-old bank, 30 per cent-owned by Investment Corporation of Dubai, needed government support after the global credit crisis burst the emirate’s property bubble, reducing real estate prices by more than 60 per cent over three years after 2008.
Chilwan said the bank had cut real estate investment to 27 per cent of its portfolio from 45 per cent in 2008 and that it would be happy to trim that exposure further.
“The crisis has made us more aware of our key strengths and focus areas,” he said. “The bank’s portfolio has changed and will continue to shift away from being real estate specific towards more consumer and wholesale banking.”
DIB’s non performing loans peaked at 14.5 per cent after the crisis and dropped to 12 per cent by the end of 2012. It hopes to reduce that figure to 10 percent this year.
“Geographically, expansion into Asia makes a lot of sense from where we are placed. One would want to look at Malaysia, Indonesia and maybe India,” Chilwan said. The bank is also interested in the European markets but won’t be active before the dust settles in the euro zone, he said.
DIB expects to finalise its buyout of Tamweel through a share swap by mid May, Chilwan said, with the sharia-compliant mortgage lender due to be delisted right afterwards.

(Gulfmews.Com / 05 May 2013)

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Kuwaiti firm launches Islamic trade finance fund

Kuwait-based Asiya Investments has launched an Islamic trade finance fund with $20 million in seed capital, aiming to cater to small Asian manufacturers.

Asiya, whose largest shareholder is sovereign wealth fund Kuwait Investment Authority, aims to fill a gap left by Western banks that are scaling back their trade finance business, making credit scarce for small and medium-sized firms.

"We engage those companies that are already banked but whose credit lines are limited - we are complementing their financing," said Sulaiman Alireza, executive director of Asiya's investment management arm in Hong Kong.

Despite strong growth in Islamic finance globally over the last few years, the industry has neglected merchandise trade, leaving trade finance for conventional banks to dominate.

But conventional banks are retreating because of the world financial crisis and higher capital requirements under upcoming Basel III regulations, which could open up about 20 percent of the business to non-bank institutions, Alireza said.

Established as the Kuwait China Investment Co in 2005, Asiya estimates that current annual intra-Asia trade of $5 trillion could reach $20 trillion by 2020.

Asiya's Cayman-domiciled fund, soft-launched in December, offers short-term financing through murabaha contracts, where the fund buys and sells merchandise on behalf of the company and shares a portion of the profits.

"We use a murabaha structure with the underlying commodity serving as collateral. This is a standard, tried-and-tested murabaha structure," Alireza said.

Islamic institutions across the Gulf are working to diversify their money market transactions, so Asiya's product could appeal to some of them. It will have a higher yield than commodity murabaha contracts and better liquidity than sukuk, Alireza said.

Asiya's fund aims for a net return to investors of above 5.0 percent and it has $55 million worth of assets in the pipeline, with capacity for approximately $400 million, said Brian Luck, director of Asiya's advisory office in Dubai.

"Trade finance is not well known as an asset class...but the reality is there are not enough Islamic fixed income products available," Luck said. Plans include offering the trade finance product on a managed account basis, he added.

The firm identifies clients such as denim and latex manufacturers through its Singapore-based joint venture partner, EuroFin Asia.

(Al-Arabiya / 06 May 2013)

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Malaysia: Post-election hope for future of Islamic finance in the nation

Today, as Malaysians welcome their newly elected and returned Members of Parliament as well as state assemblymen, I would like to share with you about my hope for the future of Islamic finance in Malaysia.
Islamic finance, as I have often said time and time again, has come a long way in Malaysia.
It dominates the primary and secondary debt capital market with 70%-80% market share. It also dominates the equity capital market with close to 90% of the listed stock on Bursa Malaysia being Syariah-compliant stocks.
It is increasingly becoming a force in the banking sector with a 30% market share. Many other components of the Islamic financial market such as takaful, asset management, wealth management, private equity, etc, are also growing by leaps and bounds with increasing market share.
The following are my hopes for the future of the market in Malaysia:
1. I would like to see better recognition and acceptance on the part of everyone involved in the market on the difference between Islamic banking activities, Islamic debt capital activities, Islamic equity capital activities, Islamic asset management activities, Islamic private equity activities and Islamic operating lease activities.
Of course, this is not an exhaustive list of the activities done in the market and people need to learn all of them to have better appreciation of them.
2. I would like to see people having a greater understanding of the difference between a licensed bank, a licensed investment bank, a non-bank financial institution, a licensed fund management company, a private equity firm, a licensed investment company, non-profit organisation undertaking, etc, that are undertaking the myriad existing Islamic financial activities in the market.
Financial solutions
3. I would like for people to stop accusing Islamic financial institutions in general of merely emulating and replicating the products and services of conventional financial institutions.
They need to learn that an Islamic bank’s offerings are not dependent on what a conventional bank offers.
In my experience, when it comes to developing and innovating products for the Islamic financial market, I, just like many other bankers in Islamic financial institutions, am only interested in providing financial solutions that are desired and needed by consumers in a manner that is consistent (thaty is, not in contradiction) with Syariah.
If a product turns out to have the same feature or deliver the same economic effect as a conventional financial product, then it is a mere coincidence, considering that both Islamic and conventional banks try to meet the same consumer demands.
4. I would like for people to stop trying to find a distinction between an Islamic bank and a conventional bank undertaking banking activities.
A bank, irrespective of whether it is an Islamic or a conventional bank, exists to intermediate between the haves and have-nots by meeting the differing financial needs of the various customer segments (for example, mass market, mass affluent, HNWIs, corporate, institutional investors, etc).
The only difference or distinction between an Islamic and a conventional bank or any type of operating entity doing other Islamic or conventional activities would be the fact that an Islamic bank or institution undertakes its activities purely in a manner consistent with Syariah, while the conventional institutions are not Syariah-compliant.
5. I would like to see the proliferation and inclusion of wakaf in the Islamic financial market. Wakaf is the missing component in the market now.
Economic dealings
6. I would like to see the education on the prohibition of riba or usury to be done starting from pre-school up to pre-university in the country’s education syllabus.
Most of us are taught about what is halal and haram in terms of food consumption from the time we were born (just to exaggerate), so it should not be difficult for the same to be done for our financial and economic dealings.
7. I would like to see our Islamic financial institutions become more international in its operation – more Islamic banks to obtain international rating; more of them having the capacity to do cross border financial activities to facilitate intra-trade in a Syariah-compliant manner.
8. I would like to see more Malaysian bankers based in Malaysia, either still serving or retired, being recognised by Malaysians as the global market leaders that they are or were.
Too long have we awarded and recognised foreigners over Malaysians when in fact the architects of the Islamic banking industry, the debt capital market or sukuk market (both local and global), the takaful industry, the Islamic equity capital market, the Islamic asset management and many more are all Malaysians! We should stop being shy of our talent and capacity.
9. I would like to see less confusion on how Islamic finance is governed under Syariah. We should fully embrace the basic principle of Syariah that everything is allowed unless clearly and expressly stipulated as disallowed in the Quran and legitimate Hadith.
The onus is to prove that something is disallowed instead of trying to prove that something is allowed. We need to put our energy in the right place so that the dynamism, robustness and integrity of our market is not lost.
10. I would like to see more Malaysian bankers having Syariah degrees. More Syariah degree holders should aspire to become bankers instead of just religious teachers.
If banks can hire English, agriculture, engineering, law or accountancy graduates, we can definitely hire Syariah graduates as bankers but they must be willing to slug it out just like everybody else.
There are many more things that I hope to see happening in the Malaysian Islamic financial market, but suffice for me to stop at a list of 10. I hope the new parliamentarians and state assemblymen will share some of the hopes that I have listed here.
Legislators play a significant role in creating the right platform for a more inclusive Islamic financial market and we have not communicated enough on their roles in making Islamic finance in Malaysia the best in the world all these years.
I wish all of them the best in their new five-year term and look forward to their continuing support of Islamic finance.
(F.M.T News / 06 May 2013)

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