HSBC to shutter Islamic consumer banking business in six countries (By IFN)

Friday 5^th October 2012

GLOBAL: HSBC Holdings issued a shock announcement on the 5th October 2012 that it will downsize its global Islamic banking business as the UK-based bank undergoes a restructuring aimed at cutting costs and increasing profitability. In a statement, HSBC said that save for its Islamic wholesale banking operations, its Islamic banking business in Bahrain, Bangladesh, Mauritius, Singapore, the UK and the UAE will be terminated; in a sign that Shariah compliant consumer banking in those countries has failed to gather sufficient momentum for its business to continue. Stiff competition and a lack of scale at the bank are also seen as reasons for it to shutter its Islamic business in those markets. In a notice on its website, the bank also told customers that there will be no immediate change to any of their existing HSBC Amanah products and services. “We will contact you in due course to discuss a proposed way forward and remain committed to keeping you fully informed of any changes throughout this transition period,” it said. Instead, HSBC said that it will focus on its Islamic business in Indonesia, Malaysia and Saudi Arabia, while continuing to arrange Sukuk through its Malaysian and Saudi presence. Its move to focus on wholesale rather than consumer banking comes at a time when the bank has catapulted to the top of league tables for arranging Sukuk issuances, overtaking traditional leaders Maybank and CIMB; both Malaysian banks. According to data from Dealogic, in the last 12 months up to the 3rd October, HSBC managed 27 Sukuk sales worth close to US$10 billion, taking an 18.9% share of the US$52.66 billion-worth of deals completed during the period. In the same period, HSBC’s Saudi arm, SABB, arranged the largest amount of Islamic financing, totalling US$1.4 billion. HSBC was also the sole arranger of the Saudi Arabian General Authority for Civil Aviation’s landmark US$4 billion Sukuk issued at the beginning of this year; and participated in a number of notable Shariah compliant debt offerings throughout the year, including Saudi Electricity Company’s US$1.75 billion program, the Dubai government’s US$1.25 billion Sukuk and Indonesia’s US$1 billion global Sukuk issued last year.