7th APRIL 2015 - Vol.XXXVIII No.018
Business News

Al Baraka eyeing sukuk to fund expansion plan

DUBAI: Bahrain's Al Baraka Bank expects to sell $300 million worth of Islamic bonds by September as it looks to secure long-term financing to fund its expansion plans, its chief executive said yesterday.

Previous plans to issue Islamic bonds, or sukuk, were thwarted by the onset of the financial crisis and, more recently, the regional unrest, said Adnan Ahmed Yousif in an interview.

The Islamic lender had previously announced plans for a $500m sukuk programme but had shelved that, he said.

"It is good with capital and deposits to also have long-term financing that can be used for ongoing expansion and ongoing investments," he said.

Yousif said strength from its current investments and growth in its international operations would lift Al Baraka's profits in 2011.

Al Baraka posted first-quarter net profit of $53.5m, an 11 per cent increase from the same period a year ago.

Yousif expects similar growth in the second quarter.

He added that the company plans to increase branches to 500 by 2015 from 400 and continues to look at new markets to enter.

Yousif said Al Baraka was reviewing proposals to provide assistance in setting up the first standalone Islamic bank in Oman, Bank Nizwa, through providing Islamic products or information technology services but would not consider a minority stake in the bank.

"Omani law does not allow foreigners to own a majority stake which gives flexibility to control their activities," he said.

"If a new law was created to allow for that, then Al Baraka would consider that seriously."

Oman decided earlier this month to permit Islamic banking.

Yousif said Oman's entry into Islamic finance was a positive development for the industry as was the creation of an Islamic megabank to serve as a lender of last resort for the market.

The lack of a lender of last resort is seen as one of the nearly $1 trillion industry's greatest weaknesses, as few central banks issue liquidity instruments compliant with Islamic law, forcing Islamic banks to place their liquidity with large conventional banks.

Yousif said the creation of the megabank was now in the hands of the Islamic Development Bank (IDB).

"IDB is going ahead with it and have awarded the mandate to Nomura Bank to serve as the financial adviser for this," he said, adding the megabank had received written approval from Bahrain to start operations.

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