NBAD sees Islamic profit in year one

 Abu Dhabi National Islamic Finance (ADNIF), a unit of the second-largest lender in the United Arab Emirates, will offer a full range of banking services, with its initial focus on corporate and retail finance, General Manager Aref Al Khouri told the Reuters Islamic Finance Summit in Dubai on Tuesday.

"The market demand is huge," said Al Khouri, who helped start the emirate's first sharia-compliant lender, Abu Dhabi Islamic Bank. The unit plans to hire another 30 people before the end of the year, taking the total to 75, Khouri said.

About 14 per cent of the UAE banking market - measured by loans and advances - complies with Islamic law and is growing by as much as 20 per cent a year, compared with growth of between 10 and 12 per cent in the conventional market, said Khouri.

Among other restrictions, Islam bans the receipt of interest, equating it with usury, and instead requires banks to invest with its customers, sharing the risk.

For instance, rather than lend money to a customer to buy a car, the bank buys the car and rents it back to the customer until the cost - and a profit for the bank - is paid.

Khouri had said in September, the month he joined ADNIF, it would take him two years to be profitable.

NBAD, which is controlled by the government of Abu Dhabi, is competing with other conventional lenders in the emirate, such as First Gulf Bank and Union National Bank, which are growing their sharia-compliant businesses.

The government of Abu Dhabi also plans to set up a second dedicated Islamic bank and the UAE's seventh, Al Hilal, in June.

"It's tough out there," Khouri said of the competition, declining to say how much revenue he would contribute to NBAD.

NBAD Chief Executive Officer Michael Tomalin told Reuters in 2006 that the Islamic unit would generate as much as 5 per cent of the bank's revenue within five years.  (Reuters)