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                                                                                                                                                                                                                                       ALWATAN DAILY

               IN REGION                                                                                                                                                                                                   FRIDAY, FEBRUARY 19, 2010

                                                            ISLAMIC BANKING AND FINANCE SUMMIT IN DUBAI

Reuters Summit: Koch eyes trade finance to right Faisal ship
             CAPITALS: The development of a trade
        finance arm will be an important next step
        in restoring the fortunes of struggling Faisal
        Private Bank, said its new Chief Executive Of-
                                                                                                                                                                      Islamic megabank to launch
        ficer (CEO), but it will take time and probably
        fresh capital too. Mark Koch, who became
        chief executive of the bank at the start of
                                                                                                                                                                      in 6-12 months: Reuters Summit
        2010, told Reuters during the Islamic Bank-                                                                                                                        MANAMA: The creation of a planned Islamic investment megabank is in “fairly ad-
        ing and Finance Summit the company would                                                                                                                      vanced stages” and it will likely be launched in the next six to 12 months, an executive at
        leverage its relationships with its parent, Bah-                                                                                                              a firm advising on the project said on Thursday. A plan to form the world’s largest Sharia-
        rain-based Ithmaar, and other banks in the                                                                                                                    compliant lender - which is being promoted by the chairman of Al-Baraka Banking Group
        group such as Faysal Bank Pakistan.                                                                                                                           Sheikh Saleh Abdulla Kamel - has been in the works for some years. Sheikh Saleh said last
             “You cannot offer these financial servic-                                                                                                                April the global financial crisis had delayed the project, but that they hoped to launch it by
        es in some countries without an authorized                                                                                                                    the fourth quarter of 2009.
        presence, and we can leverage our relation-                                                                                                                        “The key shareholders I would say are on board and we are looking for an imminent
        ships with Ithmaar partners long-established                                                                                                                  launch, within six months to a year”, Sameer Abdi, head of Islamic finance at Ernst &
        in Saudi Arabia, Bahrain, Pakistan and across                                                                                                                 Young, told the Reuters Islamic Banking and Finance Summit in Bahrain. Sheikh Saleh said
        the region,” said Koch, who came out of semi-                                                                                                                 in April the new institution so far had about 10 shareholders, including the Islamic Develop-
        retirement to take the Faisal position.                                                                                                                       ment Bank, Saudi Investment bank and the Kuwait Real Estate Bank. Bigger Islamic banks
             It has been a time of change for Faisal,                                                                                                                 are seen crucial for the industry to realize its growth potential and to compete with Islamic
        whose former CEO resigned for health rea-                                                                                                                     windows or subsidiaries of Western conventional banks that have large market shares in
        sons shortly before Christmas and whose                                                                                                                       wholesale banking services. Abdi said the bank’s “capital aspirations” were between three
        chairman Khaled Janahi also chaired the par-                                                                                                                  and four billion US dollars. -Reuters
        ent Ithmaar before being replaced in the same
             Trade finance is a short-term banking fa-
        cility which allows the buyer and/or seller in
        a transaction to manage cash flows. Under
        Islamic finance profits come from transaction
                                                             Peter Hodgins, Partner at Clyde and Co. Legal Consultants, speaks during the Reuters Is-                 Islamic finance
                                                                                                                                                                      needs retail push: Ernst & Young
                                                             lamic Finance Summit in Dubai Feb. 18, 2010. (Reuters)
        charges rather than interest on the facility. Al-
        though this type of transaction is widely used       said more international firms will move to the     general, and has also attracted business from
        in Islamic banking, it has never been an im-         region and form joint ventures to tap a largely    conventional peers. But issues like the ab-
        portant part of the offering at Faisal, but Koch     underserved Islamic insurance, or Takaful sec-     sence of long-term Sukuk, or Islamic bonds,                MANAMA: The Islamic finance industry has so far neglected retail banking that could
        said the parent company board has agreed             tor, which is set double in the next five years.   to compliment some of the products are ham-           provide it with a funding base more stable than its main wholesale and investment business,
        to give him the resources to build an experi-        The Takaful sector, estimated to be worth $7.4     pering the process of asset deployment.               the head of Islamic finance at Ernst & Young said.
        enced team.                                          billion in 2009, is expected grow to as much           “As an insurer, if I want to offer annuity             “I think almost everybody forgets that retail customers are what make Islamic finance
                                                             as $15 billion by 2015, industry experts say.      products I need to have long-term assets to           ... so you have to go down to the individual,” Sameer Abdi told the Reuters Islamic Banking
                     Insurance sector                             “There are 179 insurance companies, in-       match my liabilities which are still not avail-       and Finance Summit in Bahrain. Most Islamic institutions in the Gulf Arab region are invest-
                  to consolidate in 2010                     cluding Takaful, in the GCC (Gulf Coopera-         able,” Abdulrahman Tolefat, chief executive of        ment houses that have channeled the wealth accumulated during the six year oil boom that
            The Gulf Arab region insurance industry,         tion Council) issuing $10.4 billion of insur-      Allianz Takaful, told the summit in Bahrain.          ended in mid-2008 into regional real estate. “What you make in one transaction may take
        both conventional and Islamic, will see “sig-        ance premiums. That’s around a quarter of              Tolefat said the firm was in talks with a         you three years in a retail book, but .... retail is sustainable,” Abdi said. Bahrain’s Ithmaar
        nificant” deals between firms during the next        the insurance premiums of Belgium,” he said.       regional financial institution, urging them to        Bank is converting itself into a retail bank by integrating its fully-owned unit Shamil Bank
        18 months as they consolidate to tap huge            “Saudi Arabia has 29 insurance companies           issue a bond earmarked for the industry. Is-          to improve its liquidity situation. Analysts say few retail customers would switch from con-
        growth potential, lawyers said on Thursday.          and a population of 28 million. That’s a huge      lamic insurance works like mutual insurance,          ventional banks to Islamic banks for purely religious reasons but customers would move
            “They will be significant in terms of juris-     market with an insurance penetration of 0.6        but there is a clear segregation of the assets        if it was better for their wallet. “Unfortunately most Islamic retail banks do not appeal to
        diction and in terms of names,” Peter Hodgins,       percent,” he added.                                owned by members and those owned by the               this big segment in the market place,” he said. “The look, feel and service culture has to
        partner at international law firm Clyde & Co,             The Islamic insurance industry, or Takaful,   insurer.                                              be consistent for the retail customer. That’s how you build scale and scale is just absolutely
        told the Reuters Islamic Banking and Finance         is struggling to find suitable long-term invest-       Unlike conventional insurance, invest-            essential,” he said. Abdi also said that Islamic retail banks are at the very beginning of build-
        Summit in Dubai, adding two or three deals in        ment opportunities, executives at the Reuters      ments made using the pool of funds have to            ing up the international scale and footprint needed to compete with global conventional
        2010 would be significant.                           Islamic Banking and Finance Summit said.           adhere to Sharia law and shun sectors such            retail banks. “They have very low cost of funding and can easily compete on price. You see
            Clyde, which earlier in February advised         The Takaful - or Sharia-compliant - insurance      as alcohol and gambling. Islamic insurers also        all of them are opening Islamic windows and that’s ... very difficult competition to beat,” he
        on RSA Insurance Group’s acquisition of Al-          industry has grown at double- or three-digit       keep away from investments in risky assets            said. Kuwait Finance House (KFH) and Bahrain’s Al-Baraka Banking Group are two of the
        Ahlia, Oman’s third largest insurer for 19 mil-      growth rates so far as the Gulf Arab region is     and prefer fixed income products for parking          few Islamic retail banks that have a presence in more than one country. -Reuters
        lion Omani riyals (49.35 million US dollars),        underpenetrated with insurance products in         their funds. -Reuters

           France, UK must show Sharia market mettle: Reuters Summit
               LONDON: Paris and London, the financial centers vying for the lead on             gling over debt in Dubai and neither France nor the UK have issued a Sukuk.       stands even if this year’s elections are won by the opposition Conservative
           Islamic finance business in Europe, need to issue Sukuk bonds soon to show            Last April, France seemed to have all but won the Sukuk race, after Gilles        party, he said. Similarly, Saint Marc believes that issuing a Sukuk this year -
           commitment and keep competition at bay, experts told Reuters. The market              Saint Marc, a member of the Islamic Finance committee at Paris Europlace -        whether the planned one billion euro bond or any other - will be crucial for
           for Islamic bonds in Europe failed to push out deals after the collapse of Leh-       which promotes the French capital’s financial district - said a corporate was     France.
           man Brothers, when credit was hard to come by and companies were yearn-               close to issuing a one billion euro Sukuk. Well into 2010, however, Paris is
           ing for alternatives to traditional financing methods.                                still addressing fundamental issues such as tax and legal changes to avoid                                          Young Turks
               “Twelve months ago all sorts of UK and European corporates were talk-             double taxation of Islamic products, Saint Marc said at the Reuters summit            There is also fresh competition in the frame. Turkey, whose secular set-up
           ing to us about tapping the Islamic markets because either their conventional         on Wednesday.                                                                     has so far been an obstacle to Islamic finance development, is giving signs
           sources had dried up,” Farmida Bi, partner at law firm Norton Rose, told the                                           Tory Sukuk                                       of relenting and potentially opening the doors to a market with 80 million
           Reuters Islamic Banking and Finance Summit this week. A series of factors,                Britain remains the most sophisticated Islamic market in Europe, despite      Muslims, said Imam Qazi, head of Islamic finance at law firm Burges Salmon.
           including legal and political complexities, helped to derail potential deals,         holding off from a sovereign issuance, which had been expected to be in the       A Turkish Sukuk may not immediately threaten London’s position, but ramp
           leaving both cities struggling for credibility, and giving new market entrants        region of two billion British pounds through short term notes. And Hum-           up the competition, he said.
           such as Turkey a chance to step in. “Some of those concerns were now allevi-          phrey Percy, the CEO of the Bank of London and the Middle East - one of the           “They will eventually (issue a Sukuk). My feeling is that the pure Islamic
           ated and these corporates are not so much in the markets now,” she said.              country’s five stand-alone Sharia banks - reckons the UK and will eventually      ideas are gaining in momentum. There will gradually be more and more Is-
               Appetite on the continent has also been dampened in the wake of wran-             consider Sukuk again as it looks at way to re-pay its ballooned debt. That        lamic banks,” he told the Reuters summit this week. -Reuters

Al-Wasem Fund for local stocks
realizes 5% return in January
                                                                   Saudi hikes March gasoline imports
                                                                   Oil rises above                                                                                                                      2008. The plant can pump up to 60,000 bpd of high-octane

                                                                   $78 on greenback slip
                                                                                                                                                                                                             Meanwhile, oil worldwide turned positive on Thursday,
                                                                                                                                                                                                        rising towards 78 US dollars a barrel as the dollar weakened
                                                                                                                                                                                                        after an unexpected increase in US jobless claims, and on

                                                                   and French strikes                                                                                                                   strikes in French refineries. US crude oil futures rose 77 US
                                                                                                                                                                                                        cents, or about 0.8 percent, to $78.10 a barrel by 1505 GMT,
                                                                                                                                                                                                        after falling to as low as $76.32 earlier. Brent crude gained 67
                                                                                                                                                                                                        cents to $76.93 a barrel.
        Yaseen Al-Tabta-                                                CAPITALS: Top oil exporter Saudi Arabia would nearly                                                                                 The dollar dipped against the yen and the euro as the
        baei, Senior Vice                                          triple gasoline imports in March from February due to main-                                                                          number of US workers filing new applications for unemploy-
        President of the                                           tenance at a refinery on the Red Sea, oil traders said on Thurs-                                                                     ment insurance unexpectedly surged last week, a government
        Asset Manage-                                              day. State oil firm, Saudi Aramco, and Exxon Mobil plan to                                                                           report showed on Thursday, dealing a setback to hopes the
        ment Department                                            shut their joint-venture 400,000 barrels per day (bpd) Samref                                                                        economy was on the verge of job growth. The weak job market
        at KFIC.                                                   refinery at Yanbu for about 45 days from mid-March. The plant                                                                        will continue to weigh on oil demand in the United States, the
                                                                   is the kingdom’s third-largest refinery.                                                                                             world’s largest oil consumer.
            KUWAIT: Kuwait Finance and Investment Com-                  “They have to cover their production shortage from Yan-                                                                              “The employment outlook is not showing a notable im-
        pany (KFIC) announced that Al-Wasem Fund for lo-           bu,” said one oil trader. “They also have some pent up demand                                                                        provement, and so you are losing a lot of gasoline demand that
        cal stocks has realized exceptional revenues during        to cover after refinery maintenance elsewhere, and strong de-                                                                        would simply be associated with commuting to work,” Harry
        January 2010. The fund was successful in achieving         mand on the Red Sea coast.”                                                                                                          Tchilinguirian, BNP Paribas’ oil analyst, said.
        5 percent returns during January although Kuwait                Imports for the next few months would likely come in                                                                                 “A high level of unemployment also weighs on consumer
        Stock Exchange Market’s recorded performance was           at similar levels, traders said. Aramco would import 82,400                                                                          sentiment, so US motorists will continue to limit discretionary
        at 0.29 percent. This was stated in a press release this   barrels per day of gasoline in March, they said, nearly triple                                                                       leisure travel.”
        week. Senior Vice President of the Asset Manage-           February imports of 28,333 bpd. “They have concluded deals                                                                                The oil price fall was limited as the dollar dipped against
        ment Department Yaseen Al-Tabtabaei attributed this        to buy 10 cargoes of gasoline for March, those are already                                                                           the yen after the jobless claims data. Earlier on Thursday, a
        outstanding performance to high-level competence           done,” one trader said. Each cargo carries around 30,000 tons,                                                                       stronger dollar pushed oil lower by about one dollar. A stron-
        and good organization that is rather characteristic        or over 250,000 barrels.                                                                                                             ger US dollar typically pressures oil prices as it reduces the
        of the administration team in the company’s Asset               Traders declined to estimate the price of the cargoes, but                                                                      purchasing power of other currencies, discouraging non-US
        Management Department in general and Portfolios            said the purchasing had bolstered regional prices in the physi-                                                                      investor interest in dollar-denominated commodities.
        and Funds Department, in particular. A professional        cal market. Maintenance at the kingdom’s largest plant, the                                                                               Some traders cited the extension of French refineries
        team of fund and portfolio managers supported by a         550,000 bpd Ras Tanura refinery, concluded in January. But                                                                           strikes, which may halt output from some plants, pulled up
        specialist team of researchers and corporate analysis      the kingdom was still rebuilding supplies after the work there,                                                                      ICE gas oil futures, leading other oil contracts higher. ICE gas
        experts are in charge of this department’s daily man-      traders said.                                                                                                                        oil was trading 1.43 percent higher, compared with 0.4 per-
        agement activities. He added that third party client            Strong demand on the Red Sea coast, home to the com-                                                                            cent gain in New York heating oil and a 1.15 percent rise in
        portfolios managed by KFIC, have achieved 10 per-          mercial hub of Jeddah and Islam’s holy cities of Mecca and                                                                           RBOB gasoline futures. The market focus will shift to official
        cent returns during the same month.                        Medina, contributed to the need for more imports, traders          FILE- A worker waits for the signal to change a drilling pipe     oil figures.
            The Al-Wasem Fund was launched in 2005 to              said.                                                              on the rotary table of a natural gas drilling rig near Tow-            Analysts in a Reuters poll expected the figures from the
        invest in local companies’ stocks enlisted on the               Car use is expanding as the economy and the population        anda, Pennsylvania, Feb. 3, 2010. (Reuters)                       Energy Information Administration (EIA) to show an increase
        Kuwait Stock Exchange and new companies offer-             grows. Cheap subsidized fuel has also encouraged consump-                                                                            of 2.2 million barrels in US crude oil inventories in the week
        ing their shares for subscription to be traded it in       tion.                                                                  Work to upgrade existing refineries has already boosted       to Feb. 12.
        the market. The fund adopts a clear and transparent             The kingdom aims for self sufficiency in fuel supply but      the kingdom’s gasoline supply potential. Domestic output in            They forecast an increase in gasoline inventories and a
        strategy based mainly on risk mitigation and creating      has struggled to meet rapidly rising domestic demand. It plans     the kingdom expanded last year through the start up of the        drop in middle distillates stocks, including heating oil. The fig-
        investment opportunities of promising potential by         to build up to 1.6 million bpd of additional refining capacity     Rabigh Refining and Petrochemical complex.                        ures will be released at 1600 GMT on Thursday, a one-day
        selecting companies stocks that have clear business        at four plants in the kingdom to help meet domestic demand             The joint venture between Saudi Aramco and Japan’s            delay from the normal Wednesday release due to a US public
        plans and operating profits.                               and boost exports.                                                 Sumitomo Chemical started partial operations at the end of        holiday. -Agencies

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