No chance of an Islamic megabank says CPI Financial poll

By: Mike Gallagher Available at: http://www.cpifinancial.net/v2/fa.aspx?v=0&aid=458&sec=Islamic%20Finance

Will an Islamic megabank emerge in 2010? The debate continues to rage with proponents and opponents passionately arguing their case in a CPI Financial poll. Megabank, Islamic megabank, cimb, maybank, hsbc, standard chartered, dib, dubai Islamic bank, saadiq, poll. Is the idea of an Islamic megabank grounded in reality? The concept usually pops up into the headlines around the first quarter of the financial year as analysts speculate about which bank might claim the grand mantle.

However, a poll on the CPI Financial website generated a flood of voting when it posed the question: Will an Islamic megabank emerge in 2010? A slim majority of 55 per cent said ‘no,’ when the votes were tallied. Some people have dismissed the whole idea of an Islamic megabank as utterly ridiculous for a wide number of reasons. Plenty of questions are being asked about how it will take shape and the biggest question is where the skilled staff will come from.

Another is how it will be created. The investors and the good intentions may be there, but does the capacity exist? Building a global presence as an Islamic megabank is fraught with regulatory hurdles. Will conventional banks be converted? What if they can’t get a licence in a given country? Where will the bank come from? Will it be Asia, the Middle East or Europe? Will a number of Islamic banks with a global presence in different countries agree to merge to become a single, giant entity? Again, more scepticism.

Megabank sceptics like to point out that ambitious, egotistical chief executives are unlikely to want to hand over power and take a lower position. Some Middle Eastern Islamic banks are owned by prominent families who may be unwilling to see their creation disappear into the arms of a more powerful neighbour. Regional and local rivalries are common. Arcane laws which impose limits on foreign ownership in Asia may trip up the unwary.

This year all the speculation (not for the first time) is on Al Baraka Banking Group (ANG), which is led by Sheikh Saleh Abdulla Kamel. ABG (by Islamic banking standards) has a fairly wide geographical reach. It has a presence in a number of countries in the north and south of Africa (Tunisia, Egypt, Algeria, Sudan and South Africa) and is also on site in Pakistan and Indonesia, not to mention a number of Near Eastern (Turkey and Lebanon) and Middle Eastern (e.g Bahrain, Syria and Jordan).

Sameer Abdi, Head of Islamic finance at Ernst & Young seems to think it is likely to be a possibility this year. “The key shareholders I would say are on board and we are looking for an imminent launch, within six months to a year,” he told the Reuters Islamic Banking and Finance Summit in Bahrain. There has been speculation that Saudi Arabia-based Al Rajhi Bank could claim the title. It has 19 branches in Malaysia. Or maybe it could be Dubai Islamic Bank with its teams already in place in Ireland, Pakistan, Iran, Turkey, the Bahamas, Jordan, Sudan, Bahrain, Bosnia and Yemen.

Malaysia’s Maybank is on the ground in Bahrain, Brunei, Cambodia, China, Hong Kong, Indonesia, the Philippines, Singapore, the US, the UK, Uzbekistan and Vietnam. CIMB from Malaysia is another contender. It has a presence in Bahrain, Brunei, Hong Kong and China, Indonesia, Myanmar (Burma), Singapore, Thailand, the UK and the US and HSBC Amanah with its immense global presence also cannot be discounted. Another significant presence in emerging markets with lots of Islamic potential is Standard Chartered Saadiq. Takaful companies may be asking the same questions. When will a megaTakaful company come along?

“A bank is a place where they lend you an umbrella in fair weather and ask for it back when it begins to rain.” Robert Frost

Regards
ZULKIFLI HASAN
DURHAM, UK

Oxford University