Islamic Bank of Britain to open flagship outlet in heart of Knightsbridge

Denise Marray/Gulf Times Correspondent/London

Just ten weeks into his appointment as the chief commercial officer for the Islamic Bank of Britain (IBB), (to be renamed as Al Rayan Bank after its acquisition earlier this year by Masraf Al Rayan), Keith Leach has a sharp focus on his brief of growing the corporate and real estate business with an emphasis on higher value transactions.

Speaking to Gulf Times, he said that it is indicative of the importance placed on developing this sector that the bank has advanced plans to open a flagship branch in Knightsbridge next spring. Knightsbridge is, of course, home to one of London’s most famous landmarks — the Qatar Holding owned Harrods.

Leach has extensive experience of working for Arab banks in London including the United Bank of Kuwait, Ahli United Bank and the Arab Banking Corporation. “My specialism was London real estate finance, particularly for  investors from the Gulf region, and that evolved into Islamic finance — so I have been involved in Islamic finance since the mid ’90s,” he explained.

Talking of the parent company, Masraf Al Rayan, he said: “Clearly, they want to bolster our ability to provide real estate finance to our client base and to the wider GCC contacts they have. So apart from our established retail business, with the new parent that is the part of the business we want to grow over the first year or so.”

Speaking of the commercial and residential markets in the UK, he commented: “In the commercial property world London is quite in demand; prices are quite high, so many of the GCC investors I am dealing with have started to look further afield.”

Within the UK, for example, he said: “We have been looking at financing opportunities in business parks near Reading, a prime office in Leeds, a distribution centre in the Midlands, and a corporate office specialist facility in Lincoln.”

He explained that Gulf-based investors fall broadly into two main categories:

“First, there are the financial institutions/quasi bank type entities from the GCC that are looking for almost a bond-like return from their investments. They want good quality property with a secure tenant on a long lease and a regular income stream.

 What that gives them, with a bit of bank finance involved as well, is the ability to distribute income to their own bank or investor clients locally. Because prime central London yields are so low —3% for retail in the West End or 4% to 5% for office space in the West End and the City —  they struggle to get the returns that they need to pass on to their clients. So many are now looking outside of London for higher yields with similar security and quality property and tenants where the yields are slightly higher out of London.

“Second are the high net worth private investors or family offices who sometimes also look for assets where they can place their money — within a stable political environment like the UK. For them, it is more about wealth preservation in the long term. In addition a lot of the construction in the residential sector in London is underpinned by investment from the Arab world and increasingly we are seeing investment outside of London as well,” he said.

Leach is currently building a team within the bank equipped to service both of these categories.

The main competition in the area of prime type commercial property comes from some of the German banks and the London Islamic banks such as QIB-UK, Gatehouse and BLME. “Each of these are carving their own niche — but I think where we benefit is that we have got an established retail business which underpins everything that we plan to do going forward. We have tens of thousands of account holders, we are the biggest provider of Islamic mortgages in the UK and, of course, with Masraf Al Rayan as our parent, we are able to do bigger and better things,” he observed.

He noted that while the UK government had initially been motivated to support the development of Islamic finance in the UK in order to ensure social inclusion among some of the marginalised Muslim communities, today it sees the wider benefits to the country of becoming a major centre for Islamic finance.

However, within that adjustment of perspective, the social elements first identified by the Labour party in the 1990s have not been lost sight of as seen for example in IBB’s Sharia-compliant mortgages and help to buy schemes for first time buyers.  

Asked about the potential for Islamic banking in the UK, Leach said: “We are still in the early stages of that journey. But looking at the ethical banking side, products in development, and available products, which are proving attractive to both Muslim and non-Muslim customers, there is a lot of room for growth, albeit as a relatively small part of an industry dominated by the long established traditional banks.”