Islamic Bank of the Year Awards 2013

Amid the endless stream of news about the financial woes of the global conventional banking industry,the entries submitted forThe Banker’s inaugural Islamic Bank of the Year awards made for a refreshing read.

As they push into untapped markets and product areas, Islamic banks are bucking the conventional industry trend of a divestment of assets, shrinking balance sheets and financial losses. In stark contrast, they are typically acquiring assets, growing their balance sheets substantially and generating very healthy profits.

In setting up these awards,The Bankeris looking to celebrate the significant achievements made by Islamic banks across the globe. The 13 country categories cover a range of markets – from the less-heralded Bangladesh, Iraq and Palestine to the established markets of Malaysia, the United Arab Emirates and Saudi Arabia.

However, regardless of their size and influence, all the entries were united by two common themes: growth and innovation.

According toThe Banker’s Top Islamic Financial Institutions ranking, a survey of global sharia-compliant institutions published every year with our November issue, total Islamic assets grew by 20.7% to reach $1166bn in 2012, from $966bn in 2011. This marked the sixth consecutive year of growth since our survey began, with assets increasing at a compound annual growth rate of 19% from $386bn in 2006.  

With the largest in-house database of Islamic financial institutions’ annual results, The Banker has a unique insight into how different countries and banks are performing.

Of course, the Islamic finance industry has not emerged totally unscathed since the onset of the financial crisis – indeed, there have been some high-profile bankruptcies and restructurings – but by and large it is fair to say that it has considerably outshone the conventional banking industry. Furthermore, there have been some groundbreaking achievements in the industry, such as Abu Dhabi Islamic Bank’s issuance in November 2012 of the world’s first sharia-compliant hybrid perpetual Tier 1 sukuk.

In keeping withThe Banker’s other award programmes, the Islamic bank entrants were judged not only on their ability to deliver shareholder returns, but also on the strategies used to gain proven market advantage, as well as on the launch of competitive products. 

The growth strategies and successful examples of innovation of the winning banks are testament to the crucial role they are playing today in aiding the continued evolution and growing sophistication of the Islamic finance industry.

Global and Asia-Pacific

Winner: CIMB Islamic Group

Already regarded as one of the leading Islamic banks both in Asia and globally,CIMB Islamic Group enjoyed a record year in 2012, despite ongoing financial turmoil across the world and increased competition in its key markets.

In addition to expanding its presence in Indonesia and Singapore, the bank embarked on new lines of business, as well as continuing to preside over milestone sukuk deals.

This led the Malaysia-headquartered financial group to record 19% growth in both sharia-compliant assets and net profits during 2012. Total loans grew by 22% to $11.7bn, while total deposits rose 23% to $12.5bn, of which current and savings account (CASA) deposits increased by 36% to $3.2bn.

“We attribute our strong growth to having developed a sound business model,” says Badlisyah Abdul Ghani, executive director and chief executive officer of CIMB Islamic. “We call it ‘the dual banking leverage model’, which allows us to have effective and real scale, as well as depth, in our ability to service the needs of consumers in the markets that we serve.”

CIMB Islamic Bank Berhad, the group’s core Islamic entity in Malaysia, cemented its position as the second largest Islamic bank in the country, with deposits growing to a record $11.4bn in 2012, up 21% from 2011. In particular, CIMB’s Malaysian entity focused on growing its CASA deposits, which showed impressive growth of 37% to $3.1bn in 2012, while its financing portfolio reached $10.7bn, up 17% from 2011.

CIMB Islamic Group also expanded its regional footprint over the past 12 months. Its Indonesian business, through CIMB Niaga Syariah, grew significantly in 2012, largely due to its strategic foresight in establishing an Islamic auto finance business – CIMB Niaga Auto Finance. This enabled the bank to capitalise on a significantly untapped market given the regulatory limitations imposed on the con-ven-tional auto finance business.

CIMB Niaga Syariah also launched its regional trade finance offerings and added 10 rahn (Islamic pawnbrokers) outlets. During 2012, its total loans and deposits grew by a respective 133% and 69%, the fastest growth exhibited by any Indonesian Islamic financial institution. Today, it ranks as the sixth largest Islamic bank in the country and contributes 5.6% of CIMB Islamic Group’s total CASA deposits.

Meanwhile, CIMB Islamic’s franchise in Singapore also broadened its proposition to include Islamic retail banking and trade finance offerings. “We saw demands for these products from both individual and small and medium-sized enterprise [SME] clients in Singapore,” says Mr Ghani. “At present, we have basic Islamic deposit products for individual retail customers and a fairly comprehensive range of Islamic trade facilities, catering to both import and export activities for our SME clientele.”

CIMB Singapore, meanwhile, was mandated as the sole lead arranger, manager and sharia adviser for a $402.5m Trust Certificate Programme for an Islamic real estate investment trust issuer.

Indonesia and Singapore aside, Mr Ghani believes that Asia as a whole offers growth potential. “We believe Asia is ripe for the development of Islamic finance, with greater awareness across all market stakeholders. And if the domestic markets that we operate in are not ready to facilitate Islamic finance transactions from a regulatory and legal perspective, we can bring our Asian customers from these markets into Malaysia to tap into the world’s biggest Islamic financial market,” he says.

“We remain very focused on Asia, predominantly the Asean [Association of South-east Asian Nations] region, and will continue to be in the near term. But we also have a long-term view of the Gulf and we will continue to look for opportunities there, particularly in areas where we can bridge Gulf investors with Asean investment opportunities.”

The CIMB Islamic Group also maintained its leading reputation in the sukuk market, topping both the Malaysian league tables and securing second position globally.

During 2012, Malaysian-based CIMB Investment Bank was involved in several record-breaking deals, including the $9.8bn sukuk musharaka for the Projek Lebuhraya Utara-Selatan Berhad, a corporate sukuk deal that ranked as the world’s largest issuance to date.

It also arranged the $1.5bn multi-currency sukuk for Axiata Group Berhad, the world’s largest renminbi sukuk issuance, and the $1.6bn sukuk murabaha for Celcom Axiata, which ranked as the largest issuance based on commodity murabaha in Malaysia.

Furthermore, it acted as a joint global coordinator for the successful closure of Malaysia’s Felda Global Ventures $3.2bn initial public offering (IPO) – one of the world’s largest IPOs in 2012.

“We were especially proud of our involvement in the promulgation of Islamic IPO transactions in 2012 and we hope to see more Islamic IPOs coming to market in the near future,” says Mr Ghani. “Going forward, we also plan to win a larger market share of CASA deposits from retail customers in Malaysia, Singapore and Indonesia, as we look towards growing our balance sheet prudently. At the moment, our CASA deposits are very corporate-centric – we want to focus on more ‘sticky’ CASAs.”

Commenting on the global Islamic finance industry’s performance as a whole, Mr Ghani says: “The industry has never performed better, with an increased number of regulators being more receptive to the need to facilitate Islamic finance. 

“However, this must be translated into actual regulation to ensure real facilitation. As such, the biggest challenge for the industry today is the lack of a comprehensive, effective regulatory framework in the many countries where Islamic finance is practised. Without such facilitation, opportunities to scale up cross-border initiatives will be limited.”

Middle East

Winner: Abu Dhabi Islamic Bank 

During 2012, Abu Dhabi Islamic Bankmade great strides in its performance and continued to play an increasingly significant role in cultivating and advancing Islamic banking in the Middle East.

The clearest example of this was in ADIB’s issuance in November 2012 of the world’s first sharia-compliant hybrid perpetual Tier 1 sukuk. As a perpetual sukuk, it has no maturity date: rather ADIB can choose to repay the bond at selected dates from 2018 if it wishes. It is the first such instrument to be publicly issued by a bank to meet the new Tier 1 capital requirements of Basel III. The structure raised ADIB’s Tier 1 capital ratio to 19% from its previous 13.7%. The Tier 1 structure was perfectly attuned with sharia principles, given that the flexibility to cancel coupons and the perpetual maturity provided equity-like features to the instrument.

The response to ADIB’s roadshow for the sukuk underpins the groundbreaking nature of the deal. The final orderbook exceeded $15bn, making it 30 times oversubscribed from the initial benchmark size of $500m.

During 2012, ADIB also renewed its focus on increasing its range of retail products and its number of distribution channels. This translated into an 11.2% growth in customer deposits to Dh61.3bn ($16.69bn) and an 11.9% increase in the bank’s retail customer base to 506,689 customers, crossing the half-million mark for the first time. Customer loans also grew, by 4.8% to Dh51.2bn.

The bank partnered with the United Arab Emirates’ largest telecom provider, Etisalat, to launch the country’s first Islamic telecom reward payment card. The new product enables customers to earn free talk time for every dirham spent on their card, in addition to the best-in-market sign-up points. Upon signing up for the card, ADIB Etisalat cardholders will receive up to 70,000 more reward points – the equivalent to 2000 minutes of free talk-time within the UAE.

ADIB also opened six new branches as well as 89 new ATMs during 2012, taking its total to 75 branches and 549 ATMs – giving the bank the third largest retail network in the UAE. ADIB also extended its regional and international footprint by establishing a presence in Qatar, Saudi Arabia, Iraq, Sudan and the UK.   

All of this translated into an overall improvement in the bank’s financial figures. Total assets grew by 15% to Dh85.7bn, net profit rose by 4% to Dh1.2bn, and total revenues by 4.1% to AED3.6bn.

“In addition to growing our assets, attracting new customers and expanding our geographical presence, the bank’s issuance of a $1bn Tier 1 perpetual sukuk was truly innovative. The first such transaction in the region for an Islamic bank, it was extremely well received by global investors, paving the way for other Gulf Co-operation Council banks, both Islamic and conventional, to follow,” says Tirad Al-Mahmoud, chief executive of Abu Dhabi Islamic Bank.

“This funding provides a very solid foundation for the bank to continue its strong growth trajectory in the coming years. We are already active in the area of corporate financing, and we now want to extend our services to what we call ‘emerging corporates’ – medium-sized firms looking to move upwards. We also believe that our focus on straightforward, ethical banking has wide appeal among individual customers, so we expect to expand our retail offering beyond our traditional clients and beyond our local market.”

Bangladesh

Winner: Export Import Bank of Bangladesh

Export Import Bank of Bangladesh (Exim Bank)recorded impressive growth in 2012. Its total Islamic assets grew by 29% from $1.6bn in 2011 to $2.09bn in 2012, while its Tier 1 capital rose by 14% from $181m to $207m. Its profitability also climbed by 3% from $25.3m to $26m over the same period. The bank also achieved a reduction in its cost-to-income ratio from 38.24% to 34.8% during 2012.

Exim Bank has launched a number of new initiatives since the start of 2012, predominantly a wide range of deposit, investment and services products. A notable example is the Mudaraba Cash Waqf Deposit account, through which savings made from earnings by the more affluent segment of society can be mobilised and transferred to underprivileged members of society. Through this product, the bank hopes to popularise the role of ‘waqf’ in the country. (Waqf is a voluntary donation of a portion of one’s wealth for Muslim religious or charitable projects that must be sharia-compliant in nature; for example, for the construction of mosques.)

Other new products included the Islamic marriage savings scheme account (mudaraba denmohor), a green banking account and further advancements in micro-financing.

In 2011, Exim Bank recorded $3bn in export and import business – the largest volume in the bank’s history. The bank is targeting an increase to $4bn in 2013. Today, its deposits stand at $1.6bn and its loans at $1.4bn. Exim Bank also joined the national clearing and payment system and is today fully connected to the entire ATM network of Bangladesh. It is looking to add more ATMs and in order to ensure the smoothest roll-out of technology, it has signed up to the world-renowned Swiss IT software Temenos T24.

The bank has a network of 72 branches as well as an investment banking subsidiary in Bangladesh, Exim Islami Investment, and it operates four fully owned foreign subsidiaries in the UK, Canada, the US and Australia.

Such growth and expansion has earned Exim Bank a solid reputation and helped position it as one of the best-performing private sector commercial banks in Bangladesh. In addition to driving profits and enhancing shareholder wealth, the bank also places huge importance on social initiatives. It established the Exim Bank Foundation in 2006 to carry out activities that are solely dedicated to executing its corporate social responsibility strategy. 

In light of the fact that Bangladesh is forecast to have a population of 190 million by 2025, with fewer than half of those under the age of 30, Exim Bank has implemented a number of social projects. Examples of these include scholarships and loans to poor students, donations to educational institutions and the building of the Exim Bank Agricultural University, which gives priority to poor students that it deems deserving of additional sponsoring.

Brunei

Winner: Bank Islamic Brunei Darussalam

Bank Islamic Brunei Darussalam (BIBD) had a notably successful year in 2012 as reflected in its 36.6% growth in net profits to $95.6m.

In order to bolster an aggressive expansion plan, it boosted its sales team from six people in 2011 to 60 in 2012. The benefits are evident – BIBD doubled its market share for housing finance and almost trebled its market share for credit cards.

It launched Rumah Plus, a new sharia-compliant product in the home financing space whereby there is entitlement of up to 97% of a property’s value for up to Br$1m ($795.9m), flexible monthly instalments for up to 30 years and an ability to enjoy a 0% profit rate for the first six months of repayment. 

BIBD maximised the benefit of new technology platforms in 2012 to offer new products and services to its customers. One such service is its trade finance department through which it issues letters of credit, trust receipts, collection bills, shipping guarantees and foreign exchange hedging.

It also revamped its contact centre with new infrastructure and capabilities – including training each agent to handle a heightened call increase from 23 to 80 calls per day, coupled with the introduction of Interactive Voice Response capability. 

BIBD also made improvements in its bank-client communications for its consumer division through the implementation and constant upgrade of BIBD Mobile (the only mobile banking application in Brunei) and BIBD Online (a web-based banking application).

During 2012, BIBD rolled out a new rewards programme called Hadiah Plus, which allocates all transactions on BIBD debit and credit cards towards point redemption prizes. The bank also completed the third round of its flagship Blessing Rewards promotion, whereby customers who sign up for any one of BIBD’s products or services are automatically enrolled into to a lucky draw, with the grand prize of a luxury car.

As the largest standalone Islamic bank in Brunei, BIBD leads the market in terms of assets, financings and deposits.

Aside from its 14 branches at strategic locations in Brunei’s four districts, it also operates the largest ATM network in the country, with 55 machines, and the option of holding accounts in different currencies.

Iran

Winner: Bank Pasargad

Established in 2005,Bank Pasargad has grown quickly and played a key role in raising the bar for Islamic banking in Iran. It achieved impressive growth across the board in 2012, most notably in its pre-tax profits, which grew by 28% to $810m, and its return on assets, which grew by 21% to 4.24%.

Furthermore, its Tier 1 capital rose by 10% to $3.36bn and its assets increased by 5.8% to $19.1bn.

With a capital adequacy ratio (CAR) of 24.71%, Bank Pasargad has the highest CAR among all Iranian banks. Equally impressive is the fact that despite this rapid growth, it has maintained a tight grip on costs, reducing its cost-to-income ratio from 15.15% in 2011 to 14.48% in 2012.

During 2012, the bank successfully innovated new products – namely a long-term deposit account with a periodic profit that can be invested in the same account for up to five years, with an estimated 171% average return on profit.

In order to capitalise on the rapid growth in electronic banking in Iran, Pasargad has established an information and communications technology division that is dedicated to introducing new banking technologies and preparing the bank’s technology roadmap.

In April 2012, it launched a virtual card for its customers in order to maximise the protection and safety of their debit and credit card identity. It is the first virtual card service to be provided in Iran and was launched in response to the sharp rise in online phishing attacks.

In recent years, the bank has also strengthened its capital base. Its 147.75% annual growth in Tier 1 capital to $3.06bn at March 2011 saw it occupy the number one spot as the fastest moving Middle Eastern bank in The Banker’s annual Top 1000 World Banks ranking published in July 2012, as it climbed from 471st position in the 2011 ranking to 266th. By this same financial indicator, it was the ninth fastest-moving bank worldwide.

Today, the bank operates 192 branches in Tehran, 102 branches in other provinces and cities in Iran, as well as two branches in the country’s designated free zones.

Looking ahead, Pasargad believes that investment banking – only authorised in Iran since 2006 – has strong potential. The bank is currently looking to expand its products and services in this field, namely through the issuance of profit participation certificates and sukuk, as well as by growing its merger and acquisition capabilities.  

During 2013, Pasargad aims to increase its capital and grow its market share in the Iranian banking sector. It is also keen to expand its retail, corporate and private banking services, as well as grant more facilities to large projects due to its increased capital size.

“We are looking to diversify our revenue structure and provide innovative services and products, with a particular emphasis on investment, retail, corporate and private banking,” says Majid Ghassemi, chief executive of Bank Pasargad.

Kuwait

Winner: Ahli United Bank Kuwait

Ahli United Bank Kuwait (AUBK) had a particularly successful yearin 2012 as demonstrated by the fact it recorded the highest return on average equity (ROAE) and return on assets among all Kuwaiti Islamic banks. Its ROAE also ranked as the highest among conventional banks, growing from 12.7% in 2011 to 14.5% in 2012, while net profits rose by an impressive 22.2%.

The bank’s adoption of new technology during 2012 helped to bring down its cost-to-income ratio from 39.7% in 2011 to 34.2%, the lowest among Kuwait’s Islamic banks.

The new technology supported the rollout of new SMS and e-banking services which helped slash operating fees and enhance sales. The bank grew its point-of-sale terminals by 18%, its SMS services by 30% and the value of overall transactions by 23%.  

Meanwhile, AUBK’s launch of new savings and deposit products helped it to grow its deposit base by 7% to reach $6.4bn at the end of 2012. These included the Al-Hassad Islamic Saving Investment scheme, as well as a new corporate deposit card that has enabled its corporate customers to perform cash and cheque deposit functions for the first time. 

The bank’s new products and services included a business-to-business integration platform that provides various Islamic services for corporate clients, including online banking and a merchant-to-merchant network, as well as 3-D secure services for credit cards and securities e-trading for new segments and markets.

During 2012, AUBK also launched several new financing products, such as an auto-purchase financing service that is centred around several flexible repayment options. The launch of such financing products helped the bank grow its loan book by 8% to reach $6.2bn in 2012.

AUBK converted from being a conventional bank to an Islamic bank in April 2010, and since then has consistently launched a number of innovative Islamic products on both the asset and liability sides that have helped consolidate its market position.  

It was the first bank in Kuwait to offer private banking and wealth management products in the form of Islamic bonds or sukuk, and has partnered with global real estate firm Jones Lang LaSalle to provide investment opportunities in residential areas in London. 

The bank remains focused on expansion in the coming years, with plans to add 10 more branches to its current network of 30 by 2016.

Headquartered in Bahrain, its parent bank, the AUB Group, has a footprint in seven countries through its 120 branches.

“The bank will be enhancing its advanced electronic and internet banking products, focusing on the corporate and retail segments to provide a superior customer service,” says AUBK’s chairman and managing director, Hamad Al-Marzouq, of the bank’s growth strategy over the next 12 months.

Jordan

Winner: Jordan Islamic Bank

Jordan Islamic Bank (JIB) had a very successful year in 2012,which is reflected in its 28.76% surge in net profit from $39.92m in 2011 to $51.4m. The bank achieved growth across all key departments and ranked first in the country by return on equity (16.74%), up from 14.15% in 2011.

Its Tier 1 capital increased by 9.43% to $291.2m, while its total sharia-compliant assets rose by 4.22% to $4.3bn. It also effectively reduced its cost-to-income ratio from 40.10% to 37.95%, and its non-performing loan ratio from 6.45% to 4.09%.   

During 2012, JIB established a new department in order to speed up the provision of services for retail and corporate banking. This department is also capable of issuing letters of credit to correspondent banks around the world on the same day as receiving their application.

The bank also increased its focus on providing financial assistance towards projects aimed at improving social services. It is highly active in granting interest-free loans to assist in core areas of social development such as education ($2m provided in 2011; $2.2m in 2012) and medical treatment ($800,000 provided in 2011; $967,073 in 2012). JIB remains the only Jordanian bank offering such loans for social purposes, benefiting 22,000 people in 2012.

It is currently working to extend its financial assistance programme to fund professional craftsmanship and small businesses – it currently provides loans of up to $70,000 towards the latter. The bank also remained focused on applying the latest technological developments. It continued to automate the provision of salaries for public and private sector workers and is also introducing a new debit card similar to the Visa electron card. JIB also successfully grew its number of active accounts by 7.1% from 8.3 million to 8.9 million and installed 17 new ATMs, bringing its total number to 123 (11% of Jordan’s ATMs).

JIB is both the oldest and largest of Jordan’s four Islamic banks, accounting for 11.8% of total financing and 11.47% of total deposits across the entire Jordanian banking sector. Despite strong competition, following the entry of a number of Gulf Islamic institutions over the past few years, it remains the market leader in Islamic banking in Jordan.

The bank’s liquidity profile remains very strong, with funding sourced principally from customer deposits. Meanwhile, its gross income expansion is being driven by higher financing volumes.

“Jordan Islamic Bank continues to diversify its banking services, including the expansion of financing by means of ijara muntahia bittamleek – financial leasing with ownership,” says Musa Shihadeh, vice-chairman, chief executive and general manager of JIB.

“We are also looking to issue tradable Islamic bonds. The continued expansion of our financing programmes for small and medium-sized enterprises, which will help create job opportunities, is also of pivotal importance.”

Lebanon

Winner: Blom Development Bank

In spite of the turmoiltaking place throughout Lebanon and the Middle East and north Africa in general, Blom Development Bank (BDB), the Islamic subsidiary of Blom Bank, grew its sharia-compliant assets by an impressive 23.6% to $1.6bn in 2012, its deposits by 59% and number of new accounts by 36%.

Well known within Lebanon as being an innovator, BDB continued to solidify this reputation in 2012 – most notably through the launch of a variable rate revolving Islamic house financing facility (murabaha).  

Launched in mid-2012, the instrument allows BDB’s clients to finance their home purchases for a maximum tenor of 25 years, with a variable rate murabaha instrument currently only available in the conventional banking sector. All other Islamic banks in Lebanon offer a fixed rate seven-year murabaha structure for house financing.

Starting from June 2013, BDB will tap the government’s house financing subsidy, currently only used by conventional banks, and peg it to its variable rate revolving instrument, providing it with a significant advantage over other Lebanese Islamic banks.

Other examples of BDB’s innovation include its design of the first Islamic fund in the country, the first Islamic constant proportion portfolio insurance product – Qitaf – and the first Islamic cross-border corporate financing deal. 

BDB also led the initiative with Lebanon’s central bank to create Islamic certificates of deposit by creating a detailed commodity murabaha four-legged structure that enables the Islamic banks to deposit their excess liquidity with the central bank.

“The structure was legally demanding and took more than a year to achieve, after passing legal, regulatory and sharia-compliance screening. Today, all Islamic banks in the country use this structure to deposit their excess liquidity and obligatory reserves,” says Moataz Natafji, general manager of BDB.

“BDB is currently in the process of finalising an Islamic global equity fund that will be launched in the Lebanese market before the end of the year. We are going to continue our endeavour to increase our market share in a market where Islamic banking is still nascent. During the past 12 months, we grew our total balance sheet by 42%, despite the slowdown witnessed in the country.” 

Launching operations in 2008, BDB currently operates three branches and is planning to open two more in the near future. At a regional and international level, BDB is present in Saudi Arabia and Qatar, where it is launching an Islamic equity fund in June through BlomInvest, the investment arm of the Blom Bank Group.

Its expansion plan for 2013 envisages expansion in Egypt via its sister company, Blom Bank Egypt, a commercial bank that operates 27 branches and which comprises 6.7% of the banking group’s total assets. The Egyptian subsidiary recorded net profits of $10.93m, a 3.26% rise on 2011 figures.

Malaysia

Winner: Bank Islam Malaysia Berhad

Bank Islam Malaysia Berhad’s (BIMB) three-year sustainable growth plandrew to a close at the end of 2012. The plan had targeted organic growth in retail banking and culminated in the bank achieving its set targets and recording significant growth.

BIMB posted a 20.4% increase in total Islamic assets from $10.2bn in 2011 to $12.2bn in 2012, and achieved an 18.6% growth in net profits to $140m in 2012. 

In its pursuit of greater innovation, BIMB introduced Transact at Palm (TAP) – a mobile banking service that does not require an internet connection. The service has been rolled out not only in Malaysia, but across the entire south-east Asian region. Its ability to function without internet access and compatibility with all types of mobile phones makes it stand out from its competitors. TAP mobile banking offers bill payment services, interbank Giro fund transfers, balance inquiry and airtime re-loads.

The launch of the service has helped the bank to penetrate the young demographic of the population, and to date the service has attracted 300,000 subscribers.

Another pioneering milestone was achieved in January 2012 when BIMB launched floating rates for its personal financing products – becoming the first bank in Malaysia to offer such a service. The service has proven very popular – as of the end of 2012, BIMB had disbursed RM3bn ($1bn) in personal financing with the floating rate.

In October 2012, the bank also launched the University Debit Card-i, a multi-purpose, all-in-one card designed for the students and staff of Universiti Malaysia Kelantan. The card, the first of its kind developed for a public university in Malaysia, is essentially a BIMB visa debit card which comes with an additional chip that enables it to serve as an access card, library card and university ID card. By the end of 2012, BIMB had issued 1 million of these cards.

The bank has also grown its physical presence over the past 12 months by opening five new branches, bringing its total number to 127. It also installed 66 new ATMs to bring the total to 1172, helping to cater to more than 5 million customers.

Internationally, the bank also completed a share subscription that gives it a strategic 20% stake in Sri Lanka’s first Islamic commercial bank, Amana Bank.

“Completing our three-year sustainable growth plan, which led to a record-breaking profit of $140m in 2012, has been a source of immense pride to us,” says Dato’ Sri Zukri Samat, managing director of BIMB.

“We are now embarking on a new corporate plan, Hijrah to Excellence [In Pursuit of Excellence], to further strengthen our growth momentum, with a particular focus on retail business. We are also looking to place a greater emphasis on sharia-led innovations.”

Pakistan

Winner: Standard Chartered Saadiq Pakistan

Since receiving its Islamic banking licencein 2004,Standard Chartered Saadiq Pakistan has worked hard to push the envelope on innovation.

Most recently, in 2012, it acted as the sole arranger for a $60m receivables-backed Islamic facility for Pakistan International Airlines Corporation (PIA) – the first of its kind for any global corporate customer in Pakistan. With a tenor of 12 months, the facility assisted PIA in reducing its financing costs by replacing more expensive Pakistani rupee funding with a cheaper US dollar-denominated facility – helping to eliminate both currency and political risk.

The Islamic structure is based on a sale of ticket vouchers representing seat space on designated routes. The financiers to the facility will purchase ticket vouchers from PIA as the seller, and subsequently appoint PIA as distributor to sell these tickets. This way the bank will neither carry inventory or debt on its balance sheet.       

This deal earned Pakistan the accolade of being the first country in the Middle East, north Africa, Afghanistan and Pakistan region to execute an Islamic structured warehouse financing with a multinational company.

The success of the transaction was the result of seamless execution and coordination between the capital markets, structured trade finance, coverage and Islamic origination teams within the bank.

During 2012, Standard Chartered Saadiq Pakistan also launched the Islamic version of its award-winning Straight2Bank platform – the bank’s global and comprehensive e-channel on transaction banking services for corporate clients.

Such initiatives have led the bank to continue to record strong financials. Its total sharia-compliant assets rose by 53% from $219.6m in 2011 to $336.2m in 2012, while its profits increased by 5% from $12.4m in 2011 to $13m. The bank also recorded revenues of $30.8m in 2012, up from $13.1m in 2010.

Today, the bank’s nationwide footprint encompasses 10 dedicated branches and 45 windows that effectively combine its deep local knowledge with its global expertise. As the Islamic window of the UK’s Standard Chartered, it can draw on its parent bank’s long presence in the country – it is the oldest international bank in Pakistan, having established a presence in 1863, marking its 150th anniversary this year.

“Banks play an essential role in society, and as both the largest and oldest international bank in Pakistan, we understand specific clients’ needs,” says Mohsin Nathani, chief executive of Standard Chartered Saadiq Pakistan.

“Standard Chartered Saadiq has retained a leadership position since 2004, as the only foreign bank in Pakistan that offers innovatively structured sharia-compliant Islamic banking products and services.”

Palestine

Winner: Palestine Islamic Bank

Palestine Islamic Bank grew its net profits in 2012 by a hugely impressive 44.4% to $5.8m, up from $4m in 2011. It also increased its total assets by 7.8% from $392.7m in 2011 to $423.1m in 2012. Total loans reached $365.2m in 2012, compared with $340.6m in 2011, a net increase of 7.2%. Meanwhile, shareholder equity increased by 11.2%, to $57.9m in 2012 from $52m in 2011.

During 2012, Palestine Islamic Bank opened three new branches in Gaza, Ramallah and Tulkarem, raising the total number to 17 branches, and it also opened a second office. This geographical expansion was accompanied by an expansion in new products and services. Palestine Islamic Bank launched a new savings campaign as well as Islamic products such as musawama and manfa’a.  

Musawama is a sale in which the seller is not obligated to disclose the price paid to create or obtain the good or service. This defers from murabaha, where a buyer knows the cost of the underlying asset. Manfa’a, meanwhile, is the yield that a utilisable property produces. For example, in an automobile lease, the term manfa’a is the benefit which the lessee derives from the use of the car for the duration of the lease (as opposed to the actual ownership of the vehicle).

Palestine Islamic Bank also signed two important agreements in 2012. The first of these was with Bank of Palestine, which acts as the Visa agent in Palestine, to serve as the provider for Palestine Islamic Bank’s Visa credit and debit cards.

The second agreement was a subcontract with Reach, Palestine’s largest customer care solutions provider, to serve the bank’s customers through a toll-free number which the provider will manage. Palestine Islamic Bank also signed a number of agreements with regional and international banks to serve as correspondent banks for its customers.

Another way in which Palestine Islamic Bank impressed The Banker’s judges was the way in which it consolidated its reputation as one of the leading banks in the country in corporate social responsibility. It was the first bank, not only in Palestine but throughout the Arab world, to provide staff trained in communicating with deaf customers. During 2012, it appointed two employees trained in these skills to each of the bank’s branches.

Today, Palestine Islamic Bank operates the largest Islamic bank network in Palestine. It ranks first among the Islamic banks in terms of market share as measured by total assets (54.09%), total deposits (54.81%) and total financing (57.69%). It also accounted for the second largest share of profits among the seven banks constituting the Palestinian banking industry – with a 12.23% share of the market.

Qatar

Winner: Qatar Islamic Bank

Qatar Islamic Bank (QIB) is the largest Islamic bank in Qatarand one of the largest in the world, but perhaps more importantly, it is also one of the most innovative. Developing new products and services has been one of the main strategies of the bank and 2012 was no exception, with QIB launching three new products.

QIB became the first Islamic bank in Qatar to introduce a mobile banking application for smartphones for its customers. The app allows customers to access their accounts on their mobile phone, enabling them to check their balance, view mini-statements, make transfers and payments and locate their nearest branch or ATM.  

It also launched Aamlay, a programme to serve small and medium-sized enterprises (SMEs). Aamaly supports businesses through a one-stop-shop banking package that offers debit and credit cards, current and savings accounts, trade services, financing and cash-flow management.

In addition, Aamaly has introduced product bundles for the trade, construction and services sectors. Market evaluation of the service found that it had helped to aid SME customers in the smooth running of their finances.

QIB also launched Tamayuz, a new service aimed at improving services for retail customers. The service offers accounts for all purposes and provides credit and debit cards that provide preferential financing schemes. Tamayuz quickly became a popular product in the marketplace.

In October 2012, QIB launched a five-year $750m sukuk, priced at a profit rate of 2.5%, and a spread of 175 basis points over midswaps, tighter than the earlier guidance after strong investor demand. Orderbooks for the issue were reportedly more than $6bn ahead of launch, according to lead arrangers.

QIB grew its assets by 25.3% from $16.01bn to $20.11bn in 2012 and its Tier 1 capital by 21.54% from $2.1bn to $2.5bn in 2012.

“Our assets grew by 25.3% during 2012 as we successfully launched new products and services for private banking clients, affluent clients and SMEs. Another major achievement was the successful issuance of our $750m sukuk. All of this, along with our strong capital and liquidity base, led to the bank being awarded an A rating by S&P and Fitch,” says Bassel Gamal, group chief executive officer of QIB.

During 2012, QIB also obtained a licence to open a commercial bank in Sudan, which is due to start operations in mid-2013. 

“QIB has launched various strategic initiatives to develop a strong business model able to withstand competitive pressures, in order to grow business both locally and internationally. The bank will continue to introduce innovative sharia-compliant products for both the wholesale and retail markets,” says Mr Gamal.

Saudi Arabia

Winner: National Commercial Bank

With net profits increasing by 7.3% to SR6.5bn ($1.73bn), 2012 ranked as the most profitable year in National Commercial Bank’s (NCB’s) history, eclipsing its performance from before the global economic crisis.

Fee income from banking services increased by an impressive 21% during the year, the result of across-the-board growth in all business segments. Customer deposits increased by 14% to SR274bn, and total assets were up 15% to SR345bn. This increase was reflected in expanded lending activities, with the bank’s loan portfolio growing by 21% to SR164bn.

NCB’s financial performance and achievements in 2012 reflect the effectiveness of the bank’s strategy to optimally deploy its assets and diversify revenue sources.

NCB played a key role in the landmark $1.3bn Prince Mohammad Bin Abdulaziz Airport project in Medina – the world’s first large project finance transaction to be entirely structured as a sharia-compliant public-private partnership. It is also Saudi Arabia’s first full airport privatisation. As the Islamic structuring bank, NCB led the project finance for senior debt and an equity bridge loan. The new terminal will have annual capacity to handle 8 million passengers when operational in 2015.

Meanwhile, NCB Capital, the bank’s wealth management business, established global strategic alliances with the Trust Company of the West and Amundi in 2012. These alliances will create one of the largest and most diversified Islamic fund platforms in the world. NCB Capital also became the first Saudi asset manager to launch sharia-compliant funds on a new Undertakings for Collective Investment in Transferable Securities platform, registered in Ireland, a significant innovation that will boost international investor access to Saudi Arabia.

At the smaller end of the corporate scale, NCB has been leading the way in providing financial assistance to small and medium-sized enterprises. The bank has been the largest lender through the government’s Kafala loan guarantee programme, providing some 30% of the total Kafala funds to more than 4000 companies.

On the innovation front, in 2012 the bank launched AlAhliMobile, a new smartphone and tablet app. Compatible with most Apple, Android and Blackberry devices, the app allows customers to check their balances and account statements, as well as access a wide range of other services. Another unique service is cardless ATM cash withdrawals, providing emergency support when customers urgently need cash but do not have their ATM or debit card to hand.

NCB’s customer base now numbers more than 3.3 million people, responsible for about 300 million transactions annually – 86% of which are conducted electronically, reflecting the 20% growth in online users during the year.

Turkey

Winner: Albaraka Turk Participation Bank

Albaraka Turk Participation Bank oversaw one of the largestand most impressive Turkish Islamic finance deals of 2012. In September 2012, the bank’s $350m murabaha syndication, originally undertaken in 2011, was renewed at $450m, thus retaining the deal’s standing as Turkey’s biggest credit syndication. A total of 32 banks from 16 countries participated in the one-year trade finance facility signed by Albaraka Turk.

Today, Albaraka is Turkey’s leading Islamic participation bank in terms of musharaka project finance. At the end of 2012, the bank had 10 musharaka projects focused on the construction sector, generating revenues of $9.8m in 2012, a significant increase from $3.8m in 2011 and $2.7m in 2010.

During 2012, the bank’s net profits grew by 27% to reach $107.8m, its sharia-compliant assets by 24% to $6.9bn and its Tier 1 capital by 28% to $684.4m.

Albaraka also grew its domestic operations by opening four corporate banking branches in 2012, as well as establishing a commercial marketing department charged with expanding the bank’s customer base in the small and medium-sized enterprise (SME) segment. Five regional departments were created to support this new structure. 

The bank also continued to grow its branch network – opening 14 branches in 2012, bringing the total to 137. It is planning to open between 15 and 20 new branches every year over the next three years, with the aim of reaching 200 branches in 2015.   

Another important undertaking for Albaraka during 2012 was the launch of an internal cultural transformation project known as Simurg. Established in April 2012, Simurg is to be carried out in a series of 25 programmed phases. To date, 110 project workshops have been conducted in co-operation with some of the world’s leading business consultancies. Scheduled for completion in 2015, Simurg is aimed at taking Albaraka’s core skills and competencies to higher levels in order to give the bank a strong and modern structure that it needs to compete in the international arena. 

“We are also planning to continue our sustainable and profitable growth in 2013. Total asset and funded credits growth are forecast at 20% and total collected funds at 15% in 2013. We are also looking to achieve a 17% return on average equity and one of our main priorities is to keep our non-performing loan ratio below 2.5%,” says Fahrettin Yahsi, general manager of Albaraka.

“We are going to increase our focus on SMEs, the retail segment and international banking operations and continue to support the real economy.”

Since 2010, the bank has tapped international markets for more than $1bn-worth of credit that it has put to work for the benefit of the Turkish economy. Albaraka’s long-term vision is to be the world’s best participation bank.

United Arab Emirates

Winner: Attijari Al Islami

Attijari Al Islami’s excellent performance and retail offering in 2012,as well as its improved commercial offering, earned the bank the award as the best Islamic bank in the United Arab Emirates. In 2012, Attijari’s assets grew by 18% from $849m in 2011 to just over $1bn, its Tier 1 capital rose by 18.9% to $154.4m and its net profits by 3.37% to $19.8m.   

In 2012 alone, Attijari customer deposits grew by 13.5%, of which mudaraba savings (investment management) increased by 54% and investment and wakala (investment agency) deposits increased by 8%. Loans rose by 181% over 2011’s figure, of which murabaha (cost plus financing) increased by 22% and ijarah (a form of leasing) by 67%.

Attijari also strengthened its Islamic product suite with new products spanning personal finance, banking for women and trade services, to bring its total offering to 33 products. It introduced products called ‘Absher Personal Finance Tawarruq through Equity Shares’ and ‘Mudaraba Tasdeer Finance’. In addition, its ‘Shahrazad Al Islami’ membership programme was introduced exclusively for women to offer Islamic products to an often neglected segment of the population.

Products and services offered by the bank’s Islamic trade services unit, such as Islamic letters of credit, murabaha finances and others, also proved successful, giving Attijari a clear market advantage over all other Islamic windows.

Another Attijari strategy has been to focus on government entities and be their preferred partner to provide various payment and collection services. For example, in 2012 special arrangements were made with government departments to enhance the bank’s portfolio. Product offerings that ensued include immigration services, special Olympics-themed credit cards, real estate finance for the Mohammed Bin Rashid Society and collection services for the civil defence department.  The bank also launched a customer feedback programme called ‘Voice of the Customer’ in 2012, which is a rare initiative among UAE banks.

Established in 2008 as the Islamic banking window of Commercial Bank of Dubai (CBD), today Attijari accounts for 6% of CBD’s total assets, while its deposits account for 12% of CBD’s deposit base. Besides the five dedicated Attijari branches, sharia-compliant products and services are also available from 20 Islamic banking centres within CBD’s conventional branches in the UAE.

“We are proud to be known for the value-added services that we offer our Islamic banking customers. During the past 12 to 15 months, our relationship managers have worked with our clients to provide customised financing solutions. Knowledge of the nuances of Islamic banking is a key differentiating factor in the industry. Our certified relationship managers have in-depth knowledge of sharia principles, thus instilling confidence in clients,” says CBD’s chief executive, Peter Baltussen.