GLOBAL: With the market
well into the second quarter, financial results for the first quarter of
2015 are rolling in; and based on the statements reviewed by IFN thus far,
it seems that the Islamic banking industry is maintaining its strong growth
momentum this year.
Apart from Islamic banking giant Al Rajhi Bank which saw net profit for the
first three months closing in 10.9% lower than the corresponding period
last year (a consistent declining pattern for almost two years), other
Saudi banks are on an upward trajectory. Banque Saudi Fransi in the same
period managed to push its net earnings up by 22.66% to SAR1.05 billion
(US$279.79 million), while Riyad Bank realized an 8.62% growth in net
profit to SAR1.17 billion (US$311.88 million). Saudi British Bank and Samba
Financial Group confirmed that their net profits were up 3.21% and 3.06% to
SAR190.16 billion (US$50.68 billion) and SAR1.28 billion (US$341.12
million) respectively. Other first quarter gainers include Barwa Bank
(41.5%), Boubyan Bank (30%), Kuwait Finance House (14.6%), Dubai Islamic
Bank (34%) and Warba Bank (148%) among others. And despite the only two
fully-fledged Islamic banks in Oman (Alizz Islamic Bank and Bank Nizwa)
registering losses for the first q uarter (a given considering their relative
youth), the banks are nonetheless seeing impressive growth in revenues,
total assets and branch expansion which are likely to boost financial
performance this year.
The positive trend for the past quarter builds the case for another stellar
year in the Islamic banking space. Breaking the US$10 billion benchmark in
combined profits in 2013, the Shariah banking profit pool is anticipated to
hit US$37 billion by 2019 – a threefold expansion. While conventional
banking remains a dominant component of most banking markets, the healthy
double-digit growth of the Shariah banking segment will see Islamic banking
forming a bigger minority, if not majority, in several countries over the
next few years.
Saudi Arabia, where 48.9% of its banking system is considered Shariah
compliant, will likely have Islamic banking command the majority share in
five years at 70%, according to EY; while some quarters have projected for
Brunei to develop its Shariah banking segment to at least hold a 50% market
share by 2020. Whereas Malaysia, where Islamic banking is expanding about
twice as fast as its conventional peer, seems steadfast in achieving its
2020 goal of having 40% of its banking assets Shariah compliant, almost
double from its current 20.7% figure; and Kuwait, which according to EY is
seeing Islamic banks (44.6% market share) growing more than three times
above its conventional counterparts, could also see Islamic players holding
a bigger share.
While we are only about a third through the second quarter, it seems that
we are off to a good start to what is looking like another year of
promising growth for the Islamic banking industry.
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Another good year for Islamic banking in Pakistan
Islamic finance has witnessed tremendous growth in the last four decades
and currently has expanded across the globe having an asset base of around
US$2 trillion. The industry has also got access to the new markets
including various new destinations such as the European region, Korea,
Australia, Brazil, Malta, Argentina, China and many more. Having
established itself as a viable alternative during the last financial
crisis, standard-setting bodies are increasingly looking to promote Islamic
finance globally.
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