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Sunday, 9 September 2007

Islamic Bank of Asia to hike capital to $500m

The Islamic Bank of Asia expects to boost its capital to $500 million from the current $418 million by the end of September, Vince Cook, the Singapore-based bank's chief executive officer, said yesterday.When the bank was launched four months ago, shareholders had said a second capital raising would be completed within weeks, but that was delayed largely because of summer holidays in the Gulf region, he said. The delay hasn't affected the bank's activities, Cook told Dow Jones Newswires in an interview.The bank is currently 60% owned by Singapore's DBS Bank and 40% owned by another 22 Gulf-based families and companies. The upcoming capital raising will cut DBS' stake to 50% plus one share.Cook declined to specify who the new shareholders putting in the capital would be, but said they were all based in the Gulf.The bank conducts its business according to Shariah, or Islamic law, and is seeking to establish itself as a bank that can bridge the needs of Asia- and Gulf-based investors and borrowers.Financing and investing according to Koranic law bars, for example, payment or receipt of interest which is deemed usury. Investments in highly indebted companies or firms engaged in forbidden activities such as gambling or alcohol production are also taboo."The bank, certainly on the operating level, has been profitable from a very early stage," he said. "The area that has delivered the revenue is the corporate business." The Islamic Bank of Asia is looking to focus on corporate and investment banking and wealth management.According to the latest Merrill Lynch-Cap Gemini World Wealth Report, total wealth held by high net worth individuals in the Middle East grew by 11.7% last year and was up 10.5% in the Asia Pacific. Singapore witnessed the world's fastest growth in its population of high net worth individuals, followed by India and Indonesia.The Islamic Bank of Asia has already provided financing to a number of companies in both the Gulf and Asia, including a property company, a property developer and a foodstuffs trader.The bank is also in talks with "a couple" of potential issuers of sukuk - or Islamic bonds - in Asia and the Gulf and with others on mergers and acquisitions. "We are also exploring Shariah-compliant REIT (real estate investment trust) issuance and some Treasury products," Cook said.He stressed that such initiatives were all at "a relatively early stage" but hoped to get one of the deals completed by the end of the year or in the first quarter of 2008.On wealth management, the bank aims to work jointly with DBS particularly on back-office operations because the Singapore bank has established systems in place which are common to both Shariah and conventional products.On the front office side, the two would work together to develop and distribute products which could be sold to both Muslims and non Muslims."We are quite keen to give all of our products as broad a distribution as possible," he said.Potential wealth products could include equity funds, real-estate funds and cash management funds," he said.The bank - which now has just over 40 core staff members and anticipates 50-60 by year end - is still looking to establish a representative office in the Middle East sometime around the end of the year. It has been considering Bahrain, Qatar and Dubai as potential locations. DBS already has an office in Dubai which offers conventional financing services. - (MFN, 9 Sep 07)
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Alfalah Consulting - KL: www.alfalahconsulting.com 
Islamic finance consultant: www.ahmad-sanusi-husain.com 
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

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