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Tuesday, 20 May 2014

Bahraini bank Al Baraka plans sukuk in South Africa, Pakistan

DUBAI (Reuters) - Bahrain-based Al Baraka Banking Group said it is considering issuing subordinated Islamic bonds through its South African and Pakistani units to boost their regulatory capital.
The Islamic bank's plans come at a time when sovereign sukuk are expected from both countries later this year. [ID:nL5N0JA34X] [ID:nL6N0NK1WR]
The lender has operations in 15 countries across the Middle East, Asia and Africa.
Al Baraka is working with the authorities in South Africa and Pakistan over launching Islamic bonds there, said Chief Executive Adnan Ahmed Yousif.
While details have not been finalised, the prospective deals could mirror the $200 million capital-boosting sukuk issued by Al Baraka's Turkish unit last year, Yousif said. That deal enhanced the bank's Tier 2, or supplementary, capital.
"We will try to do it as a subordinated, to raise capital adequacy ratios," he said.
Islamic banks typically obtain their funding from retail deposits and short-term syndicated Islamic loans, but subordinated deals are increasingly being used as Basel III global banking standards are phased-in across the globe.
In Pakistan, for instance, Islamic banks must maintain a minimum paid-up capital of 6 billion rupees ($60.9 million), a requirement that will be raised to 10 billion rupees by the end of 2016.
Unlike most other Islamic banks, Al Baraka has built the bulk of its business outside the Gulf and southeast Asia. In South Africa, it operates the only full-fledged Islamic bank in the country, with seven retail branches.

Its franchise in Tunisia switched this year from an offshore bank license to a full commercial banking permit, with plans to open 25 branches there in the next three years.($1 = 98.4650 Pakistani rupees)
(Reuters Africa / 19 May 2014)
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Global Islamic banking assets to exceed $3.4trn by 2018, says EY

Global Islamic banking assets with commercial banks are on course to exceed $3.4 trillion by 2018, fuelled by growing economic activity in core Islamic finance markets, according to specialists at Ernst and Young.
Its Global Islamic Banking Centre said across the six markets of Qatar, Indonesia, Saudi Arabia, Malaysia, UAE and Turkey (QISMUT), the combined profits of Islamic banks broke the $10 billion mark for the first time at the end of 2013.
If the current growth rate continues, the Islamic banking profit pool across QISMUT markets is set to exceed $25 billion by 2018, a statement said.
Ashar Nazim, global Islamic finance leader at EY, said: "While the profit numbers for Islamic banks are impressive, they are still, on average, 15-19 percentage points lower than traditional banks in these markets.
"Regionalisation and operational transformation, which are currently underway in several leading Islamic banks, will help to close this gap."
EY said there is significant growth potential for the industry. There are an estimated 38 million customers who bank with Islamic retail banks globally, but only a small number of these customers have fully transitioned from a traditional to an Islamic banking relationship.
The average number of Islamic banking products per customer is just over two, whereas leading traditional banks have an average of five products per customer, EY added.
"Building consumer confidence through service excellence, especially when it comes to customers opening accounts and cross-selling can increase the market share of Islamic banks by 40% from these customers," said Ashar who added that another major opportunity for Islamic banks is to assist the SME sector with their cross-border business growth.
(Arabian Business.Com / 19 May 2014)
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