Islamic Financial Institutions Awards 2010
Neville, Laurence, Global Finance
Islamic financial institutions were not immune to the turmoil of the past two years, but their strict ethical code helped them prosper in many areas where others foundered.
The world of Islamic finance has not been immune from the travails of the international financial system. One of the biggest headlines of the past year was the near collapse of real estate firm Dubai World and its rescue by neighboring emirate Abu Dhabi. The event vividly demonstrated that Islamic finance was just as susceptible to excessive leverage, speculative real estate development and lack of financial transparency as conventional financial markets.
Nevertheless, by general consensus Islamic finance had a good financial crisis. The global market for Islamic financial services in 2009, as measured by shariahcornpliant assets, is estimated to have been broadly flat on 2008's level of $951 billion, according to not-for-profit industry group International Financial Services London (IFSL). However, that compares to a conventional financial system that saw assets fall sharply.
Moreover, the global Islamic bond or sukuk market bounced back strongly in 2009. Issuance hit S20 billion last year - still some way off the $34 billion raised in 2007 but 30% higher than the $15 billion raised in 2008, according to IFSL figures. Duncan McKenzie, IFSLs director of economics, notes that the financing problems at Dubai World have created uncertainty and "brought concerns about settlement of sukuk defaults into focus."
However, McKenzie adds, "Quality issuers of sukuk are continuing to attract demand from both Islamic and non-traditional investors." The scores ot Islamic and non-Islamic investors that flocked to Indonesia's pioneering $650 million sukuk ijarah (lease finance deal) in April 2(XW are a testament to the perceived long-term viability of the market. Other aspects of Islamic investment banking have also enjoyed a boost recently. The launch on March 1. 20 K), of the ISDA/IIFM (International Swaps and Derivatives Association/International Islamic Financial Market) tahawwut (hedging) master agreement is expected to significantly accelerate the growth and development of the Islamic derivatives market.
In the broader banking world, Islamic banking continues to expand its reach. Germany's first Islamic Bank, a unit of Kuwait Finance House's Turkish operation, is set to open shortly in Mannheim. Given the 4 million Muslims that live in Germany, there is clearly significant potential for the market. Similarly, France, which also has 4 million Muslims, will get its first shariahcompliant bank when a joint venture between France's Banque Populaire and Caisse d'Epargne Group and Qatar Islamic Bank begins operations before the end of the year.
The third annual Global Finance Best Islamic Financial Institutions Awards honor the leading institutions in the regions, countries and product areas in which Islamic banking has an established or growing presence. The awards are based on extensive consultations with bankers, analysts and industry experts but ultimately are the decision of Global Finance's editors. The criteria incorporate a range of factors, including growth in assets, profitability, geographic reach, strategic relationships, new business development, innovation in products and the banks' financial stability.
Best Sukuk Bank
CIMB Islamic is the undisputed leader in Islamic bonds, with a global market share of almost one-fifth, resulting from 32 bond issues it managed, double the total of second-place HSBC, according to information provider Dealogic. It is CIMB Islamic s deal count that holds the key to its success: Its depth of experience in sukuk is equaled by its breadth. While most banks in the business continue to focus primarily on their home markets, CIMB Islamic was a manager on issues such as Saudi Arabia's Islamic Development Bank as well as major transactions from Malaysian issuers such as Petronas and Cagamas. …