The collective assets of the UAE's three largest Shariah-compliant lenders – Abu Dhabi Islamic Bank, Dubai Islamic Bank and Sharjah Islamic Bank – will grow at a compounded annual rate, or CAGR, of 21 per cent for the four years till 2011, new research revealed yesterday.
Based on this estimate, the net commission income and the bottom-lines of these Islamic banks will grow at CAGRs of 26 and 21 per cent, respectively, Kuwait-based investment bank Global Investment House said in a report titled 'All in good faith'. "With the Dubai Financial Market and the Abu Dhabi Securities Exchange expected to grow further, fee-based income and capital gains will consequentially follow suit and fuel the bottom-line further. Demand for sukuk and issuance of other innovative instruments for Islamic financing will promote generation of advisory/arrangement fee income," the report said.
"With growing awareness of Islamic banking products and aggressive steps for marketing and relationship building carried out by the Islamic banks, we see these banks offering stiff competition to their conventional counterparts in the race for market share," Global's analysts said.
Islamic banks have increased their share of total bank assets from 8.8 per cent at the end of 2002 to 13.4 per cent at the end of the first quarter of this year year. Islamic products like Ijarah and Murabaha have become common in property transactions.
"Going forward, we expect the Islamic banking segment to maintain its growth trajectory with volumes being the fore-drivers," Global said.
DIB to post 34% growth in net
Global expects DIB to post a 34 per cent year-on-year in its net income before extraordinary items this year and maintain a 2007-2011 CAGR of 17 per cent. The bottom-line is forecast to be driven by the net commission income, surging at an uncompromising four-year CAGR of 28 per cent accompanied by 22 per cent CAGR in non-commission income.
"While spreads are expected to taper off slightly and remain at a four-year average of 2.6 per cent, the actual growth is expected to be driven by volumes."
Abu Dhabi Islamic Bank: The lender is expected to register a 50 per cent year-on-year profit growth this year while the same is expected to rise at a 2007-2011 CAGR of 29 per cent. Net commission income and non-commission income will maintain a growth trajectory of 22 and 25 per cent in the same period.