SUKUK PIPELINE - Issue plans around the world

Following are major Islamic bond issues in the global pipeline.

The Thomson Reuters Global Sukuk Index is at 114.57474 points, down from 114.88023 at the end of last month but up from 109.78969 at the end of last year. The Thomson Reuters Investment Grade Sukuk Index is at 112.19700 points, against 112.59309 at end-August and 107.28036 at the end of 2013.

SABANA REIT - Singapore's Sabana Shariah Compliant Industrial REIT announced on Sept. 24 an offer of aSingapore dollar, 4.5-year senior unsecured sukuk, at initial price guidance in the 4.375 percent area; the size, off the issuer's S$500 million ($394 million) multicurrency programme, was yet to be determined. Pricing could come as soon as later in the day.

TURKIYE FINANS - Turkiye Finans Katilim Bankasi plans to issue $50 million worth of ringgit-denominated sukuk in Malaysia by year-end to diversify its funding base, chief executive Derya Gurerk told Reuters in late September.

DIFC INVESTMENTS - DIFC Investments, the investment arm of the company running Dubai's financial free zone, is looking to raise as much as $700 million before the end of October by issuing a sukuk to help repay existing debt and fund real estate development, its top executive said.

MAHCO MALAYSIA - Mahco Malaysia, a vehicle to issue sukuk for Mohammed Othman Al Houkail Trading & Contracting Co, a medium-sized contractor in Saudi Arabia, proposed an Islamic medium-term note programme of up to 300 million ringgit ($93 million), RAM Ratings said in late September.

1MDB - 1Malaysia Development Bhd, a sovereign wealth fund, plans to sell some 8.4 billion ringgit of sukuk by the end of this year, The Edge quoted former prime minister Mahathir Mohamad as saying in late September.

CENDANA SEJATI - Malaysia's Cendana Sejati, a unit of local bank Masraf Al Barakah, proposed a 360 million ringgit senior sukuk murabaha medium-term note programme, RAM Ratings said in late September.

INDONESIA - Indonesia's finance ministry will hold auctions of project-based sukuk as well as six-month sharia T-bills on Oct. 7 and Oct. 21.

LUXEMBOURG - Luxembourg planned to meet fixed income investors starting on Sept. 21 ahead of a debut issue of five-year euro-denominated sukuk, a document from lead arrangers said.

AGAOGLU - Turkish construction-to-energy Agaoglu Group plans to raise around $300 million by issuing sukuk,Niyazi Albay, Agaoglu's chief investment officer, told Reuters in mid-September. No specific time frame was given.

KUVEYT TURK - Lender Kuveyt Turk, 62 percent owned by Kuwait Finance House , plans to issue sukuk inMalaysia, aiming to raise as much as 2 billion ringgit, Turkey's Capital Markets Board said in mid-September. It gave no details.

AKTIF BANK - Aktif Bank, Turkey's largest privately owned investment bank, has received regulatory approval to issue 200 million lira ($91 million) in sukuk, the Capital Markets Board said.

IFFI - The International Finance Facility for Immunisation Co. (IFFI), for which the World Bank acts as treasury manager, has picked four banks for a potential U.S. dollar-denominated sukuk, a document from lead managers showed in mid-September.

ADVANCED PETROCHEMICAL - Shareholders of Saudi Arabia's Advanced Petrochemical Co gave approval on Sept. 15 for the company to issue sukuk in a total amount not exceeding its share capital.

OMAN - The government of Oman is expected to issue 200 million rials ($520 million) of sukuk early next year, its first issue of Islamic bonds, Jamil Al Jaroudi, chief executive of Bank Nizwa, told Reuters.

PAKISTAN - Pakistan's Ministry of Finance selected Citigroup, Deutsche Bank, Dubai Islamic Bank and Standard Chartered as bookrunners for a U.S. dollar sukuk issue, a ministry official said; the tenor of the bond and the format would be decided as soon as the week of Sept. 8.

DOGUS GROUP - Turkish conglomerate Dogus Group has received regulatory approval to raise $370 million by issuing the country's first U.S. dollar-denominated corporate sukuk, the Capital Markets Board said in late August. No time frame was given.

CIMB Islamic - CIMB Islamic, the sharia-compliant unit of Malaysia's second largest bank, is preparing an Islamic bond programme to raise up to 5 billion ringgit, ratings agency MARC said in late August.

SUNWAY - Malaysian property developer Sunway will raise up to 2 billion ringgit by issuing sukuk mudaraba, it said in August; short-term commercial paper under the programme will have maturities of between a month and a year, while medium-term notes will have maturities of one to seven years. Sunway will make its first issuance within two years.

MALAYSIA AIRPORTS - Malaysia Airports Holdings hired four banks for a subordinated perpetual sukuk musharaka to raise 1 billion ringgit; investor meetings would be held on Aug. 25.

RAS AL-KHAIMAH - The emirate of Ras al-Khaimah, part of the UAE, invited banks to pitch for arranger roles on a potential dollar-denominated sukuk, sources said in early June. However, bankers said in August that Ras al-Khaimah had sent out requests for proposals for a syndicated loan, casting doubt on whether the planned sukuk issue would now go ahead.

GULF FINANCE HOUSE - Bahrain-based Gulf Finance House said in mid-August it planned a $200 million sukuk issue to repay outstanding debt and for acquisitions. The deal would take place in coming months.

TURKEY - Turkey's Treasury said it plans to issue lira-denominated sukuk worth 1.5 billion lira in October.

ADIRA DINAMIKA - Indonesia's PT Adira Dinamika Multi Finance plans to raise at least 500 billion rupiah ($42 million) with ringgit-denominated sukuk in Malaysia by the end of the year, bankers said.

K-ELECTRIC - Karachi-based utility K-Electric plans to raise as much as 22 billion rupees ($223 million) through sukuk to refinance existing debt, the company said in late June.

LIBYA - Libya's central bank is proposing to issue Islamic bonds to help fund the country's budget and offset a loss of oil revenues that could create a deficit of $25 billion this year, a bank official said in June.

KENYA - Kenya plans to issue another international bond and may consider a debut sukuk issue, the finance minister said in late June, after a successful debut $2 billion eurobond closed.

BANK MUAMALAT - Malaysia's Bank Muamalat, a unit of sovereign fund Khazanah and auto-to-property conglomerate DRB-Hicom Bhd, will raise up to 2 billion ringgit with Islamic bonds, credit agency Malaysian Rating Corp said in late June.

BAHRI - National Shipping Co of Saudi Arabia (Bahri) plans to arrange long-term sharia-compliant financing in the next year to replace a bridge loan backing its $1.3 billion acquisition of Saudi Aramco's marine unit, Bahrisaid in June. Banking sources prebiously told Reuters Bahri was looking at a potential debut sukuk issue to replace the bridge loan.

SOCIETE GENERALE - Societe Generale completed the roadshow for the first issue in its 1 billion ringgit multi-currency sukuk programme in Malaysia, and would decide on the size in days, the bank said on June 18. In early July, banking sources said Societe Generale was still seeking a window to launch.

IFC - The International Finance Corp, the World Bank's lender to the private sector, is considering a return to the Islamic bond market, an IFC official said. A sukuk issue is still in the early stages of discussion but would likely be in the fiscal year starting in July 2014.

JORDAN - Jordan's government is studying a proposal to issue its first Islamic bond as early as next year, possibly raising over $1 billion in multiple currencies, but a preference for concessionary loans from aid donor countries could hinder the plan, government sources said.

MALAYSIAN RESOURCES CORP - Malaysian Resources Corp, a local construction firm, said on June 12 it would issue Islamic bonds to raise up to 680 million ringgit for land acquisitions and working capital.

BOTM - Bank of Tokyo-Mitsubishi UFJ said on June 5 it was seeking to raise as much as $500 million through a multi-currency Islamic bond programme in Malaysia, becoming the first Japanese bank to use sukuk for fund-raising.

BANGLADESH - The central bank is seeking to amend rules on its existing sukuk programme to broaden its use and allow for sovereign issuance by the government, a central bank spokesman said in June.

BANK ISLAM - Malaysia's Bank Islam plans to raise 1 billion ringgit by selling Islamic bonds to fund organic growth as well as a potential acquisition in Indonesia, two people involved told Reuters in early June. A 300 million ringgit Basel-III compliant Tier 2 sukuk is awaiting approval from the central bank and the Securities Commission for issue in July.

AL OTHAIM - Saudi Arabia's Al Othaim Real Estate and Investment Co, owner of five shopping malls in the kingdom, plans to issue its debut local currency sukuk as early as in June, sources aware of the matter said at the start of the month. The transaction is likely to be worth between 500 million and 1 billion riyals ($133-267 million), one of the sources added.

AL BARAKA - Bahrain-based Al Baraka Banking Group said in mid-May that it was considering issuing subordinated Islamic bonds through its South African and Pakistani units to boost their regulatory capital.

TUNISIA - Tunisia will sell its first sovereign Islamic bond in September after months of delays, raising $140 million, its finance minister said in mid-May. The ministry had previously planned a $500 million sukuk and gave no reason for the reduction in size.

JEDDAH ECONOMIC CO - Saudi Arabia's Jeddah Economic Co said in mid-May it was in talks with local banks to raise funds for the 14 billion riyal first phase of its Kingdom City project. For part of the money, "we are looking at the bonds and sukuk market but this will need a structure in place, which we are working on," chief executiveMounib Hammoud said.

IOI PROPERTIES - Kuala Lumpur-listed IOI Properties is considering an offer of Islamic bonds; it is looking to raise up to 750 million ringgit off a 1.5 billion ringgit sukuk programme, the company said in early May.

BANK MUSCAT - Bank Muscat plans a dual-currency U.S. dollar and rial sukuk issue worth around $300 million that would be the first sukuk sale by an Omani bank. The issue, which could carry tenors of three to five years, would be part of a 500 million rial ($1.3 billion) sukuk programme which shareholders approved in March, Sulaiman Al Harthy, group general manager of Meethaq, Bank Muscat's Islamic operation, told Reuters in early May.

PELABURAN MARA - Malaysia's Pelaburan MARA, the investment arm of Majlis Amanah Rakyat, plans to issue sukuk worth up to 1 billion ringgit this year or next to finance its investments in the oil and gas and technology sectors, group chief executive Nazim Rahman was quoted as saying in April by The Edge Financial Daily.

HUA YANG - Malaysian property development firm Hua Yang Bhd said on April 29 it had won approval from thesecurities commission to raise up to 250 million ringgit with an Islamic bond programme.

FIRST GULF BANK - Abu Dhabi's First Gulf Bank, the third-largest bank by assets in the United Arab Emirates, plans to raise up to 3.5 billion ringgit with Islamic bonds in Malaysia, RAM Ratings said in March.

KILER REIT - Turkish real estate investment trust Kiler GYO plans to issue a five-year sukuk worth at least $100 million in the second half of this year, parent company Kiler Holding's chief financial Officer Kaan Aytogu said in February.

ACWA - Last December, Saudi Arabia-based water and power project developer ACWA Power said it had raised a 1.77 billion riyal Islamic loan from four local banks to help finance investments including acquisitions and act as a bridge to a sukuk issue in 2014.

ADB - The Asian Development Bank said in December that it was considering an Islamic bond issue as early as in 2014.

© Reuters 2014

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IFSB - INCEIF Executive Forums for Islamic Finance to Discuss the Global Regulatory Reforms and Sound Governance Practices for Islamic Finance

The Islamic Financial Services Board (IFSB) and the INCEIF - The Global University of Islamic Finance are organising the fifth and sixth Executive Forum (EF) on Islamic Finance series in November and December 2014. The IFSB-INCEIF Executive Forums aim to provide a platform for global leaders in Islamic finance to discuss selected emerging issues facing the global Islamic financial services industry, emphasising on issues related to supervision and prudential regulation, both at national and international levels, harnessing from the experiences of a distinguished pool of global experts, academics and practitioners.

The 5th edition of the Executive Forum, themed, Global Regulatory Reforms: What They Mean For Islamic Finance will be held on 10 - 11 November 2014 in Sasana Kijang, Kuala Lumpur, Malaysia. This EF emphasises on the recent global regulatory reforms and how they impact the stability, development and growth of the Islamic financial services industry. It will also include deliberations on macroprudential reforms highlighting the importance of macroprudential issues in financial stability and the efficiency of macroprudential policy in achieving greater stability for the industry.

This EF will provide in-depth knowledge on the fundamental subjects related to the existing Basel Framework, and the main aspects of the Basel III Requirements. It will also discuss reforms made to the banking sector capital framework, moving from bail-out to bail-in, and enhanced focus on Internal Capital Adequacy Assessment Process (ICAAP). Speakers will also follow global developments in liquidity management and their impact on asset liability management in order to develop a comprehensive and effective liquidity infrastructure for the banking sector. Furthermore, the EF will feature a panel discussion on the strategies and practices in implementing the reform agenda, in which participants will be exposed to real issues and challenges in implementing global regulatory reform from the perspective of both market players and supervisors.

The final EF for this year on Sound Governance Practices: Promoting Stability in Islamic Financewhich will be held on 9 - 10 December 2014 aims to provide a platform for high level deliberations and exchanges of views among speakers and participants - global leaders from among practitioners, regulators and academics.

The 6th edition of EF also aims to deliberate on the key trends and dynamics of corporate governance initiatives in the global and Islamic finance industry. Among others, the two-day Executive Forum will discuss the evolving roles of the Board of Directors, Board and management committees and their capacity to meet challenges related to risk governance and internal control. It also seeks to provide insights on how institutions offering Islamic financial services (IIFS) should align their corporate and Shari`ah governance practices to promote and achieve industry stability. Participants will benefit from the differing views of counterparts and peers of various backgrounds and geographical locations.

The Executive Forum is targeted for mid to senior-level management who seek to sharpen their skills and deepen their knowledge of the industry's driving factors, as well as broaden their cross-border perspective. It is ideal for Chief Executive Officers and Board Members of investment companies, credit rating agencies, special purpose entities, credit enhancement companies, as well as originators/issuers, and senior financial advisors. The Forum will also benefit senior managers in risk management, governance and compliance functions, as well as regulators and supervisors of the Islamic banking sector, auditors, lawyers and academics. Experienced practitioners, banking supervisors, and thought leaders are brought together in this Executive Forum, which encourages knowledge sharing and active discussions.

For further information and to register, do visit www.ifsb.org. Please contact Mr. Hamizi Hamzah athamizi@ifsb.org / ifsb_sec@ifsb.org for queries on the Executive Forum series.

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About the Islamic Financial Services Board (IFSB)The IFSB is an international standard-setting organisation that promotes and enhances the soundness and stability of the Islamic financial services industry by issuing global prudential standards and guiding principles for the industry, broadly defined to include banking, capital markets and insurance sectors. The IFSB also conducts research and coordinates initiatives on industry-related issues, as well as organises roundtables, seminars and conferences for regulators and industry stakeholders. Towards this end, the IFSB works closely with relevant international, regional and national organisations, research/educational institutions and market players.

The members of the IFSB comprise regulatory and supervisory authorities, international inter-governmental organisations and market players, professional firms and industry associations.

For more information about the IFSB, please visit www.ifsb.org.

About INCEIFINCEIF - The Global University of Islamic Finance, is set up by Bank Negara Malaysia to develop human capital for the global Islamic finance industry. Apart from its academic programmes, which are Chartered Islamic Finance Professional, Master in Islamic Finance Practice, MSc in Islamic Finance and PhD in Islamic Finance, INCEIF also offers customised executive training programmes and industry-focused applied research in line with its vision to be the knowledge and thought leader in Islamic finance.

INCEIF syllabus is structured with inputs from industry players to bridge the gap between academic knowledge and industry experience. INCEIF faculty members, who are globally respected among the Islamic finance academia and industry, have a combined wealth of experience and diversity. The faculty, coupled with continuous support from the industry, provides INCEIF students with strong mentoring relationships and opportunities for professional development. For more information, please visit www.inceif.org.

© Press Release 2014

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Meethaq, Zubair SEC collaborate on supporting entrepreneurs with Islamic finance

Meethaq, the pioneer of Islamic banking in Oman from Bank Muscat, and Zubair Small Enterprises Centre (Zubair SEC), signed a Memorandum of Understanding (MoU), to extend support to entrepreneurs and owners of small businesses and maximise successful entrepreneurial channels in the Sultanate.

The MoU was signed at the Zubair Corporation headquarters in Athaiba by Sulaiman Al Harthy, Group General Manager - Islamic Banking, and Mohammed Al Hasani, Chief of Communications Officer of Zubair Corporation , in the presence of top management executives from both sides.

Sulaiman Al Harthy said: "Meethaq is proud to join hands with Zubair SEC to provide Islamic finance for SMEs in Oman. The main objective of the bank's SME strategy is to complement the government efforts in empowering entrepreneurs to chart successful business ventures by providing necessary training, guidelines, tools etc. The partnership with Zubair SEC marks a clear progression of the well defined strategy pursued by the bank in line with the directives of His Majesty Sultan Qaboos bin Said to support the SME sector and strengthen its role in the economic development of Oman."

Al Harthy added: "Meethaq strives to fulfill the needs of customers with innovative Shari'a based products and is well positioned to provide Islamic financial expertise to diverse segments and thereby promote the good of society as a whole. Meethaq has adopted the best practices in Islamic banking and finance worldwide to combine a robust model which protects customers and complements the Islamic banking industry."

Commenting on the MoU, Mohammed Al Hasani said: "Today we are adding significant value to the system that we have been building for entrepreneurs and owners of small businesses in the Sultanate. This facility has been evolving and developing based on the close attentiveness to the needs of Zubair SEC's members and the market demand. What we always aim for is to cater to entrepreneurs' needs with all our capacity and reach. Hence, the partnership with Meethaq Islamic Bank has been very well received by our members and brings a new perspective to the "access-to finance" that we try to facilitate for them through our network of strategic partners."

On fulfilling the funding criteria based on Meethaq credit policy, financial assistance will be extended to micro and small enterprises in the Sultanate, including members of Zubair SEC's Direct Support Programme who get selected every year by Zubair SEC as the most engaged and committed members.

Zubair SEC will direct its members possessing feasible business proposals to Meethaq for Islamic financing for SME ventures. Mutual efforts by both parties will also be in place towards raising awareness on Islamic financing, entrepreneurship, and business administration.

Zubair SEC is one of the initiatives which emanated from Zubair Corporation 's strategic social responsibility vision towards Omani society. The vision reflects the corporation's belief in the importance of small enterprises (SEs) in enhancing the national economy and contributing to sustainable socio-economic development. The centre comprises a team of socially engaged and business savvy advisors who put all efforts to contribute to leveraging the Omani community through equipping and enabling entrepreneurs and start-ups to grow with their businesses in a sustainable and responsible manner. Since its launch in 2013, Zubair SEC has added to its membership 200 small businesses and around 220 entrepreneurs from all sectors of the economy to benefit from its services and support.

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About Zubair Small Enterprises Centre (Zubair SEC)Established in June 2013, the Zubair Small Enterprises Centre (Zubair SEC) is one of the initiatives which emanated from Zubair Corporation 's strategic social responsibility vision towards Omani society. The vision reflects the corporation's belief in the importance of small enterprises (SEs) in enhancing the national economy and contributing to sustainable socio-economic development. The centre extends business mentorship and guidance to Oman's promising entrepreneurs as well as financial support to selected entrepreneurs every year, to help them succeed and grow in a sustainable manner.

For more information on Zubair SEC, please contact the Communications Office at info@zubairsec.org

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Banking sector looking up with positive prospects

Oman's macro-economy continues to remain strong with a positive outlook owing to its stable fundamentals and expansive policies to support growth of both oil and non-oil sectors.

According to the Central Bank of Oman (CBO), the Sultanate's economic growth prospects are encouraging for the coming years and the World Bank has projected Oman's real GDP growth at 4.9 per cent in 2014 and 5 per cent in 2015.

Supported by the steady economic advancement, Oman's banking sector too is witnessing healthy growth in lending, deposits and earnings.

Although there is presence of foreign banks in Oman, the six listed conventional banks form the significant chunk of the country's banking sector with a credit base of RO 15.2 billion against deposits of RO 15.8 billion contributing nearly 88 per cent and 96 per cent of the total commercial banks' credit and deposit respectively in the Sultanate as on June 30, 2014.

The widening gap between credits and deposits narrowed compared to the previous quarter as deposit growth slowed and loan growth remained healthy for the banks over the last one year.

Total loans of the banks registered an increase of 12.8 per cent in the twelve months until June 2014 which was in line with the increase in deposit base during the same period.

In terms of market share, Bank Muscat continues to be the market leader accounting for around 44.2 per cent of the total gross loans and advances and 41.2 per cent of the total deposits by the six banks as on 30 June 2014.

Amongst the listed conventional banks offering Islamic products too, Bank Muscat remains the market leader with 56.6 per cent of the Islamic finance market share and 64.1 per cent of the Islamic deposits market share.

Over the last one year Islamic banking activity is picking up pace as the banks expand their network of Islamic windows and introduce various Sharia compliant products.

The second quarter of this year witnessed a substantial increase in both credit and deposits to reach combined Islamic receivables of RO 634 million and Islamic deposits of RO 279 million by the five listed conventional banks (excluding HSBC Bank Oman). As banks' lending and Islamic banking activity grew, the combined income and profits of the six listed conventional banks too witnessed steady growth.

Hence although faced with stiff competition that marginally impacted the average interest spread and net interest margin, the six banks registered an increase of 6.7 per cent year-on-year in their operating income and 7 per cent year-on-year in their net profit to reach a total net profit of RO 155.4 million for the first half of the year.

The banks also managed to control their overall costs, supporting their bottom line growth and return to equity holders.

Combined return on average equity of banking thus remained steady above 12 per cent.

Based on the improving performance of banks and supported by positive market outlook, the average gain of the six banking stocks has been more than 20 per cent this year so far significantly outperforming the broad market index gain of 9.4 per cent. However, despite the recent run-up, banking stocks trade at average PE (TTM) of 12.2x and PBV of 1.4x which is at a discount to the GCC banks' valuations.

Compared to their GCC peers, Omani banks also have a better asset quality and higher capital adequacy mainly attributable to prudent market regulations.

Going forward, although the cap on personal loans portfolio and interest rate would temporarily impact the retail lending of banks and their interest margins, the corporate and Islamic business as well as buoyant market scenario would mitigate its impact and maintain the resilience of the sector.

Also as the sustainable economic development continues, Oman's banking sector would continue to benefit from the same and expand further also supported by the favourable demographics.

Hence the outlook continues to be encouraging for the banking stocks that are currently trading at attractive valuations compared to their GCC peers and the broader market.

As the six banks together constitute almost 40 per cent weight of the MSM 30 Index, a re-rating in banking valuations would also have a positive impact on the market, further boosting investor confidence and overall activity going forward.

Disclaimer: The views and opinions expressed in this article are solely those of the authors and do not reflect the opinion of the Observer.

© Oman Daily Observer 2014

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