ADCB reveals plans to set up Islamic unit

The project is about a year behind schedule. ADCB Chief Executive Officer Eirvin Knox said in July he hoped to get the unit operational by the end of 2007.

Operations will now start in the fourth quarter, Ala Eraiqat, ADCB’s deputy CEO told Reuters.

ADCB said in March it had won Malaysian approval to buy 25 per cent of RHB Capital, Malaysia’s fourth-largest lender, and could conclude the deal in April. RHB Capital is an Islamic bank.

“ADCB will launch its Islamic banking services unit based on a double-fold strategy; through the provision of sukuk, in addition to the establishment of small and medium enterprises,” the bank said in a statement.

Sukuk are Islamic bonds that comply with a religious ban on the receipt of interest, and instead pay a rent or profit-based on underlying assets such as property.

GCC countries would see the launch of more US dollar-priced sukuks after the central bankers reiterated their commitment to pegging their currencies to greenback, said Moinuddin Malim, head of corporate and investment banking at Dubai’s Badr Al Islami.

“We will start to see more dollar sukuks in the third quarter because the depegging issue will no longer be an issue after central bank governors maintained they will not revalue or depeg,” Malim said.

Banks introduced local currency sukuks late last year as they believed GCC currencies would appreciate and bankers started taking positions on the upside.

Jebel Ali Freezone sukuk, which was originally priced at 130 basis points over Libor in 2007 fetched as much as 300 basis points above libor as speculation mounted on a revaluation or depeg. “A lot of sukuks that were dollarised were postponed because of the uncertainty of GCC countries depegging,” Malim said.

But more multi-currency bonds will also be introduced to cater for those investors still expecting a change in forex policy.

To capitalise on the growing Islamic finance market in the Middle East, Malaysia’s Amanah Raya plans to invest up to $1bn (Dh3.67bn) in Shariah-compliant hedge funds in the region, a company official said on Tuesday.

Amanah Raya is looking to invest $300m in Shariah-compliant hedge funds, Mohamed Azahari Kamil, Amanah’s Managing Director, said. “The investment may go up to $1bn if successful. We are speaking to Faisal Islamic Bank in Switzerland and ABN Amro and Royal Bank of Scotland,” he said.

Amanah will launch a $300m offshore “marine fund” by the end of this month with the Asian Finance Bank, Kamil said.

“We have also been mandated by Qatar’s Barwa Real Estate Company to look into establishing a $400m real estate investment trust,” Kamil said. Amanah will also launch an “Islamic green fund” to invest in carbon credit projects under the Kyoto Protocol, Kamil said.

“We are launching the fund with Bahrain’s Al Salam Bank and it will be worth $300m,” Kami added.

A fund for distressed assets is likely to be launched this year and will be worth $200m initially, said Kamil’s office.