Adding to financial institutions’ efforts to develop secondary market transactions, London-based International Capital Markets Association and the International Islamic Financial Market have joined forces to expand international Islamic financial markets by developing standardised contracts and documentation, as well as market practices for sukuk.
Late in 2006, brokerage firm GFI initiated an interdealer market for sukuk trading in London, and earlier in the year, the London Stock Exchange listed its first sukuk issuance, the $200m offering by National Central Cooling Company (Tabreed) PJSC. Furthermore, the sale in November of the $3.52bn sukuk bond issue by Nakheel Group, the Dubai property developer, spurred trading in London, where volumes reportedly rose to about $2bn at the beginning of 2007.
The global market for Islamic financial products is estimated to be worth more than $300bn and expected to grow at 15% yearly. While sukuk are currently listed in the Middle East, south-east Asia and Europe, they have until recently remained relatively illiquid due to the lack of a diverse investor pool and a tailored regulatory framework.
The development of a sukuk secondary market is a significant step for London in its battle with New York to become the world’s leading financial centre. Islamic banks are not permitted to exist in some US states and some believe that Americans perceive Islamic finance to be linked to terrorist financing. In contrast, UK business leaders and politicians consider Islamic finance as an apolitical bridge to the Muslim world. The UK also aims at facilitating practising Muslims residing in the country to have access to retail shariah-compliant products. According to HM Treasury data, since 2003 the UK Islamic mortgage market has grown to more than £500bn (€750bn), up 50% from the previous year.
In its quest to become a global centre for Islamic finance, the UK capital faces tough competition from Bahrain, Dubai, Riyad, Singapore and Kuala Lumpur.
Berlin to sell landesbank
The city of Berlin has launched the auction to sell its 81% stake in Landesbank Berlin, and both international and German banks, public and private, as well as private equity companies are participating in the bidding process. The city of Berlin must sell its stake by the end of the year to comply with conditions set by the European Commission. A sale to a privately owned bank might sign the end of the German three-pillar banking structure of private, public and co-operative banks.
Paris-based BNP Paribas has acquired, through its subsidiary Nachenius Tjeenk, the private banking operations of Dutch Kas Bank, which has about €750m ($970m) of assets under management. Nachenius will also buy Associatie Cassa, the company within Kas Bank that provides fiduciary services to private banking customers.
Swedbank buys Ukrainian
Sweden’s Swedbank has announced it will acquire Kiev-based TAS-Kommerzbank for up to $985m (€750m) as it aims at becoming the leading Nordic bank in the fast-growing Ukrainian market. Swedbank already has a strong presence in the Baltic area thanks to its acquisition of Tallinn-based Hansabank in 2005.
London-based HSBC has applied for a licence to provide personal banking services in Russia, in a move towards becoming the first UK lender to build a retail presence in the country. HSBC already has a corporate and investment banking business in Russia.
Rating agency Standard and Poor’s has acquired the Goldman Sachs Commodity Index from New York-based Goldman Sachs in an effort to broaden S&P’s index offering. The GSCI dates to 1991 and is a global production-weighted commodity index that is based on 24 exchange-traded futures contracts for energy, industrial metals, precious metals, agricultural and livestock products.
The United Nations has announced it is working with China to set up a carbon trading exchange in Beijing. If successful, the first carbon exchange in the developing world will compete with counterparts in Europe and the US. The UN is trying to help China, the world’s fastest-growing major economy and supplier of a third of global carbon credits, to invest in cleaner industrial technology.
Frankfurt-based Deutsche Bank has agreed to buy up to 20% of Vietnam’s Hanoi Building Commercial Joint Stock Bank. London-based HSBC has also doubled its stake in Vietnam’s Techcombank to 20%.
Zurich-based Clariden Leu, a private banking arm of Credit Suisse, has agreed to buy the Asian private banking business of South Africa’s Standard Bank. The Johannesburg-based bank has about $750m in assets under management in the Asian market and will move a team of eight to Clariden Leu’s Hong Kong office.
Royal Bank of Scotland has announced plans to double its headcount in the Asia-Pacific area over the next three years. The UK-based lender aims at increasing revenue from the area from the current 1% of group income to about 5%.
New York-based retail bank Citibank, part of Citigroup, has offered T$14.2bn ($430m) for 100% of Taiwan’s Bank of Overseas Chinese subject to reaching an agreement with the main vendor, Polaris Group, according to the local Economic Daily News.
Correction The Tier 1 capital figure for Al-Ahli Bank of Kuwait was overstated in the Top 100 Arab Bank listing in the November 2006 issue of The Banker. The Tier 1 capital should have been $683m not $811m. This revised figure would place Al-Ahli Bank in 35th place in the Top 100 and fifth in Kuwait.
