Friday, September 24, 2010

Friday Bullets

  • The future of Islamic finance--outside of retail banking--is moving more towards asset management with institutions realizing that the recurring revenue from this business is important to offset the highly cyclical nature of investment banking. No institution perhaps stands as a better example of overreliance on private equity/investment banking in Islamic finance than Gulf Finance House, which is planning to build its recurring revenue business now that it has extended the maturity of several loans.
  • Pakistan's central bank is urging Gulf-based Islamic banks to open branches in the rural areas of Pakistan as a way to increase the country's share of Islamic banking assets, which the bank wants to double in the next 3 years.
  • A few more articles came out on the Deloitte report on Islamic finance. One article from Gulf News includes two charts from the report that point to the need for regulation, particularly in accounting standards, risk management, corporate governance and Shari'ah standards & compliance.
  • Adnan Ahmad Yousef, CEO of Al Baraka Banking Group, says that sufficient financing is available for Islamic financial institutions and the banking group is planning a $200 million sukuk to finance the bank's expansion into France next year. Qatar Islamic Bank is also planning a sukuk issue of up to $750 million when market conditions are right, according to a statement from the bank.
  • An article describes the enforcement of an ijara-based financing in Dubai that went through the UAE court system.
  • The Islamic Bank of Britain released results for the first half of 2010.
  • The Nakheel 5-year sukuk to pay trade creditors may be issued by year-end and is estimated to be up to $3.2 billion. It will pay a 10% coupon semi-annually, will be tradable and will be listed on NASDAQ Dubai.
  • An article in Arabian Business highlights the degree to which credit conditions in sukuk markets have recovered this quarter (and also the amount they still have to go before conditions normalize): "The spread between the average yield for Islamic bonds in the UAE and the London interbank offered rate shrank 104 basis points to 507 basis points so far this quarter, according to the HSBC/NASDAQ Dubai UAE US Dollar Sukuk Index." Issuance is expected to be as much as $5 billion in the fourth quarter, the highest since Q3 ofo 2007, before the AAOIFI ruling and the impact of the financial crisis caused a sharp decline in the volume of sukuk issued.

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