Islamic banking assets in six core markets – Qatar, Indonesia, Saudi Arabia, Malaysia, the UAE and Turkey – are on course to hit $1.8tn by 2019; while the global profit pool of Islamic banks is set to triple by 2019, according to Ernst & Young (EY).
Approximately 95% of international Islamic banking assets of commercial banks are based out of nine core markets, five of which are in the GCC (Gulf Co-operation Council), financial experts said discussing EY’s World Islamic Banking Competitiveness Report 2014-15.
The market share of Islamic banking assets in Saudi Arabia, the UAE, Qatar, Kuwait, Bahrain and Malaysia is now between 20% and 49%, according to the analysts.
“The six rapid-growth markets (RGMs) – Qatar, Indonesia, Saudi Arabia, Malaysia, the UAE and Turkey (QISMUT) – commanded 80% of the international Islamic banking assets at $625bn in 2013. QISMUT Islamic banking assets are expected to continue to grow at a five-year CAGR (compound annual growth rate) of 19% to reach $1.8tn by 2019,” Gordon Bennie, Mena (Middle East and North Africa) Financial Services Leader at EY, said.
Highlighting that the Islamic banking industry has gone mainstream in several core markets, Ashar Nazim (
Although customers have mixed emotions about their experiences of dealing with Islamic banks, he said, “In the future, growth will be most significant for the banks that are able to strengthen customer experience through the use of digital technology.”
Banks that do not keep pace with technological advances are expected to face serious pushback from mainstream customers who will gravitate toward the larger conventional players who can deliver on digital, he said.
“With increasing market size and greater propensity for the adoption of technology-based, customer-centric solutions, the (Islamic banking) industry can be expected to further reduce its profitability gap with respect to conventional benchmarks,” Nazim said.
Having analysed the sentiment of over 2.2mn customers’ social media posts on their banking experiences with Islamic banks in Saudi Arabia, Bahrain, Kuwait, the UAE, Malaysia, Indonesia, Turkey, Qatar and Oman; EY said the results showed that customer satisfaction is mediocre for many Islamic banks.
The ROEs (return on equities) of Islamic banks remain about one-fifth lower than those of traditional banks in the same markets. This performance gap could cost its shareholders, and to some extent the investment account holders, up to $17bn in total forgone profit over the next five years. “Structural transformation and scaling up is therefore becoming extremely critical to improve shareholder returns,” EY said.
Trade finance, mobile payment solutions and managing the cost of regulatory compliance will drive the next phase of profitability, it said, adding most Islamic banks remain underweight when it comes to their role in trade finance business.
‘Qatari investment vehicle leading race for €700mn Pepe buy’
Reuters
London/Dubai
Mayhoola for Investments, a Qatari investment vehicle, is leading the race to buy the Spanish fashion brand Pepe Jeans as buyout funds struggle to match the sellers’ price expectation of at least €700mn, several sources close to the auction process said.
The clothing retailer, which is also selling its menswear brand Hackett, expects binding offers in around three weeks, one of the sources said.
In 2012 Mayhoola purchased the iconic Italian fashion house Valentino from Permira for about €700mn. Pepe’s adviser Morgan Stanley received indicative offers in October from a series of financial investors including Permira, KKR, PAI, and Cinven, a second source said. The highest bid came in at €730mn ($912mn), the source said.
Pepe, known for its denim and casual wear collections, is majority held by private equity firms Torreal, Arta Capital and L Capital. The management team has a 30% stake.
The luxury goods industry has entered a lower growth cycle mainly because of economic weakness in Europe and the slowdown in some international markets including China and most recently Russia, where international sanctions have forced the rouble into freefall.