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05 June 2023

Noor eyes British bank venture

By Frank Kane

The ambitions of Noor Islamic Bank are becoming clearer, and grander, by the day. Last week we learned that the bank was to team up with Emirates Post in a strategy to offer banking services to the low-income, cash-based sector of the UAE economy. Now comes news of an expansionist programme designed to make Noor the world’s biggest Islamic bank in the next five years.


At a banking conference earlier this week, Noor’s chief executive Hussain Al Qemzi told reporters that he had earmarked $2 billion (Dh7.34bn) for acquisitions overseas, and was focusing on Britain in his search for suitable targets. We also await imminent details of the investment banking business Al Qemzi has promised, presumably as the vehicle to deliver this strategy.


Noor, it should be remembered, is backed by Dubai Holding and by His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai, personally, and in Dubai all business is conducted at only one speed – very fast. So when a bank with this pedigree says it will achieve global market leadership, we must assume it means it. Britain is a very good place to start.


The explosive growth in Islamic finance has been one of the defining trends of global business so far this century. The market for Shariah-compliant financial and investment services among the world’s 1.3 billion Muslims is estimated at $400bn – and rising fast.


Britain already has three Islamic banks, and the traditional High Street banks are increasingly offering Shariah services in a bid to catch the business of the UK’s 1.8 million Muslims. Sukuk bonds are listed in the City of London, and the British government has made a conscious policy decision to attract new Shariah business.


But the question for Al Qemzi – and for Sheikh Ahmed bin Saeed Al Maktoum, the Emirates airlines’ boss who is Noor’s chairman – is how to spend the $2bn he has stashed away in the box marked “UK investment”. This amount of money will not buy much in the financial sector, even one that has seen values falling as sharply as in recent days.


At the top end of the ambition, two of the big British banks, Barclays and Lloyds TSB, are regarded – in degrees varying with the financial cycle – as potential takeover targets.

But an outright purchase would seem to be beyond Noor’s capabilities. Barclays has a market value of around $63bn, with Lloyds TSB not far behind at $51bn. Too much for Noor, even if the British financial authorities would allow it. To invest $2bn by taking an equity stake in one of them is an alternative, with the expectation that Dubai’s presence on the share register would ignite the banks’ enthusiasm for Shariah expansion.


Of course, there is one financial situation the British authorities are desperate to resolve – the debacle of Northern Rock. Gordon Brown would almost certainly welcome Dubai equity participation in the rescue he is currently attempting, and $2bn would command a substantial seat at the table. Rock’s customer base is probably just about right for some Shariah marketing.


Noor would have to assess whether it wants to get involved in one of Britain’s messier financial scandals, but the upside would be considerable if it could be presented as helping resolve an increasingly intractable mess. It is the sort of judgment call the new Noor investment bank will have to make.