Kuwait Finance House considering capital-boosting sukuk

Jan 31 Kuwait Finance House (KFH), the country's biggest Islamic lender, is studying the issuance of Islamic bonds that would boost its capital reserves, its top official told Arabiya TV on Sunday.

The offering still requires necessary approvals, its chief executive Mazen al-Nahedh told the channel.

The firm could issue capital bonds that either enhance its core Tier 1 capital or its supplementary Tier 2 capital.

Besides sukuk plans for the parent company, KFH is also planning to issue Tier 2-enhancing sukuk this year for its Turkish subsidiary.

"We are about to issue Tier 2 sukuk, for the subsidiary bank in Turkey, and we expect the issue will happen this year to support its capital situation so it can grow," he added. 

(Reuters / 31 January 2016)

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Kuwait Finance House moves to Turkey for Islamic finance

Kuwait Finance House (KFH) is exploring the possible sale of assets including its Malaysia unit, as the Islamic lender looks for a leaner structure while seeking greener pastures through its Turkey franchise.

KFH, Kuwait's second largest lender and one of the world's oldest Islamic banks, is restructuring activities ahead of a planned divestment by its largest shareholder, the Kuwait Investment Authority (KIA).

Last week, KFH said it had hired Credit Suisse to advise on its options, including the potential sale of a Malaysia unit launched in 2005 that serves as a hub for southeast Asia. KFH did not give further details; a spokesman declined to comment.

A shift away from Malaysia, where KFH holds a valuable licence but lacks scale, would help it focus on Kuveyt Turk, the largest Islamic bank in Turkey with over 500 branches.

"With looking to leave Malaysia, our view is that KFH is reviewing all its investments outside of Kuwait and not just Malaysia," said Mahin Dissanayake, a director at Fitch Ratings.

"Certainly Turkey has a lot of trading links with the Gulf. There's an Islamic market there that hasn't been tapped that much. The opportunities are there, there's an entry point."

Kuveyt Turk, 62 percent owned by KFH, is in expansion mode: it plans to launch Germany's first full-fledged Islamic bank in July as a gateway to Europe and has applied to issue a 1 billion lira ($376 million) Islamic bond as it secures lower-cost financing.

It also plans to establish a wealth management unit to widen its product range, according to two sources with direct knowledge of the matter. Kuveyt Turk declined to comment, saying it would disclose expansion plans shortly.

KFH Malaysia is in better shape now than in 2009, when it incurred heavy losses in its corporate portfolio, although its impaired loan ratio remains higher than the industry average.

It holds a 1 percent share of total bank deposits, while the Malaysian Islamic banking sector has doubled its assets in the last four years. In April, KFH Malaysia appointed its fourth chief executive since 2005.

A source at KFH said the review of the Malaysia unit was at an early stage, with options ranging from an outright sale to retaining a presence focused on a few business lines.

The reorganisation could give parent KFH, rated A-plus by Fitch, a stronger position as its credit ratings are underpinned by support from the KIA, which said last October it would revive plans to sell its 24.1 percent stake in the lender. The KIA did not set a date for the sale.

An exit by KFH from Malaysia could reignite consolidation in the country's Islamic banking sector, after a proposed merger among three local lenders was abandoned in January.

"The current Islamic finance sector remains competitive with increasing pressures on banks' margins, and therefore any M&A deals would benefit smaller players," said Sharidan Salleh, assistant vice president of ratings at Kuala-Lumpur based rating agency MARC.

(Daily Sabah Finance / 15 May 2015)

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KFH 2014 Sukuk Volume Traded Surpasses $3 Bln

Kuwait Finance House (KFH) volume traded in the secondary Sukuk market surpasses USD 3 billion for the year 2014” said  Abdul-Wahab Essa Al-Roshoud, GM — Treasury at Kuwait Finance House. He indicated that such volume is yet another outstanding achievement to be added to KFH performance as a prime dealer in Kuwait and a global Sukuk market maker.

Al-Roshoud added, in a press release that the bank managed in 2014 to develop the secondary Sukuk market for issuance of short term Sukuk by International Islamic Liquidity Management, IILM on the global level since KFH was nominated “primary Dealer in Kuwait.

He emphasized that these deals have contributed significantly to the increase of liquidity and support of Islamic Financial Markets. Sukuk boost Islamic finance, strengthen its pillars and highlight KFH role as a leadership in this market.

Al-Roshoud stated that Sukuk are the most significant and powerful low risk investment finance tool which contributes effectively to the process of encountering liquidity crises. Sukuk are characterized as instruments of high liquidity, active secondary market, flexibility and good returns. Sukuks play as a significant investment outlet for banks and an effective tool to manage liquidity in accordance with CBK standard liquidity ratios and increase shareholders profit.

Several governments’ worldwide i.e. United Kingdom, Luxemburg, South Africa and Sharjah have issued Sovereignty Sukuk. Other countries such as Jordan and Tunisia have expressed their interest in issuing Sukuk as they contribute significantly in financing income generating and productive projects, thus activating economic growth.

Al-Roshoud reiterated that one of the main significant factors in Sukuk issuance is to provide liquidity to infrastructure projects in GCC countries, Asia and Africa. He highlighted that Sukuk have played a prime role in financing infrastructure projects including public and private sectors. 

(Arab Times / 16 February 2015)

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Al-Monayea Highlights KFH Experiment In Sukuk Issuance

 “KFH succeeded in developing Islamic financial services and capital markets during the last 2 decades through participation in Sukuks issuance and efforts to develop Sukuk markets” said Mr. Emad Al-Monayea, Board Member and CEO – KFH Investment Company. KFH has participated in the issuance of Sukuks of various governments and companies in GCC countries, Turkey, Japan, United States, Britain and South Africa. KFH provides technical support to entities intending to issue Sukuks in order to enable them to issue Sukuks successfully without any hindrance or obstacles.

Al-Monayea, in a presentation delivered at Euromini Conference at London named “Islamic Finance & Investment” highlighted KFH experiment in Sukuk issuance in general, namely during the year 2014 and the support which it has provided to make all Sukuk issuance deals a success. KFH subscriptions surpassed the required amounts. KFH played a significance role as a guarantor for the success of new Sukuks issuances due to the trust which KFH enjoys globally among investors and global markets. KFH has participated remarkably in the diversification of customers funding, increase number of Sukuk issuers and the size of amounts invested in this field.

Al-Monayea reiterated that KFH shall endeavor to increase the issuance of more Sukuks for governments and companies worldwide in order to reinforce and support the role of this product. This product is  considered as the legislative substitute for bonds and participates in providing finance for several projects in an innovative manner and sound mechanism. KFH seeks to reinforce and support Islamic banking role in major projects and increase development efforts in various societies.

Al-Monayea indicated that sufficient efforts are exerted in the issuance of Sukuks and several countries and marjoram companies have shown great interest in this product. However, the lack of secondary Islamic markets is still mitigating the possibilities of expansion and growth in this vital and axillary activity in the world of Islamic banking. Several countries lack appropriate laws to organize the issuance and dealing process of Sukuks. Sukuks are one of the tools through which banks are able to manage liquidity in case there is a secondary market for issuance of Sukuks.

During the conference, representatives of South Africa emphasized their experience in the first issuance of sovereignty Sukuks last September and how this matter has participated in facilitating Islamic economy affairs. Several entities have adopted this type of finance and investment. They highlighted KFH role as one of the main organizers of these Sukuks. These Sukuks are considered as the first sovereignty Sukuks in Africa. Significant assets were used to issue these Sukuks. Accordingly, Sukuks were given considerable rating by major global rating agencies e.g. Moody’s, Fitch, Standard & Poor’s.

British government was the first European country to issue sovereignty Sukuks in 2014. Britain has shown remarkable interest in Islamic finance. It seeks to occupy a leading position in this sector as it is the case with Malaysia and UAE. Central Bank of Britain endeavors to introduce liquidity tools to serve Islamic banks as well as traditional banks. Appropriate legal environment is considered as one of the basic elements to support and facilitate Islamic economy in Britain. A major part of the contracts used by Islamic organizations are governed by the British law.

(Arab Times / 15 February 2015)

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Islamic financing to overtake conventional banking in Kuwait Finance House (KFH)

An increasing number of Kuwaiti lenders are moving away from traditional banking in a bid to tap into a booming market for Sharia-compliant financial products in the region -- a move that could soon see Islamic financing overtake conventional banking in the Gulf state.

Commercial Bank of Kuwait (CBK) is the latest to unveil plans to turn into a fully-fledged Islamic institution. CBK announced in July that it had received regulatory approval to issue up to KD120m ($425.16m) in bonds in preparation for the transition, which received the approval of 85% of its shareholders in April. The move by CBK, to be completed by the end of 2014, will help Kuwait cement its position as a provider of Sharia-compliant products and services. There are already five other Kuwaiti Islamic banks; Kuwait Finance House ( KFH ), Boubyan Bank, Al Ahli United Bank, Kuwait International Bank, and Warba Bank, which was established in 2010. This compares with four conventional banks.Kuwait's Islamic banking assets grew by 8.7% during the first nine months of 2013, reaching KD22.5bn ($79.7bn), while Islamic financing grew by 11.2% to hit KD13.5bn ($47.8bn) during the same period, reported in The Banker in April. This exceeded the growth rates in the overall banking sector, which saw a 7.1% growth in assets and a 7.5% growth in loans between January and September. 

This move toward Islamic banking follows a broader regional and indeed global trend. Islamic finance industry's assets worldwide are estimated to have grown 18.6% annually to reach $1.8trn at the end of 2013, according to KFH Research, which projects that total Islamic financial assets will reach $2.1trn globally by 2015. The Sharia compliant sector has expanded rapidly within Southeast Asia and the Gulf Cooperation Council (GCC), whose assets accounts for more than a third of the worldwide total according to KFH . Other banks in this region are also looking to make the switch to Islamic banking. Malaysia's Agro Bank plans to convert to Islamic banking by 2015 while the country's SME Bank is planning a full conversion by 2018 according to Reuters. In Pakistan, Faysal Bank and Summit Bank are mulling similar plans. 

LargestIn Kuwait, the sector's history goes back to 1977 with the establishment of KFH Group, Kuwait's largest Islamic bank. For the last three years to end-2013, KFH total assets grew at a compounded annual growth (CAGR) rate of 8.8% to reach KD16.1bn ($57.2bn).CBK, the state's fifth-largest lender by assets, is following in the footsteps of both Boubyan Bank and Ahli United Bank (AUB) Kuwait in converting from a conventional lender, drawn by the sector's rapidly rising popularity and promising outlook for growth, which continues to outpace that of conventional lenders. According to Reuters, CBK's conversion will increase Islamic banks' market share in Kuwait above an estimated 40%. AUB Kuwait, (formerly known as the Bank of Kuwait and the Middle East) posted a record $579.4m in net profit in 2013, a 72.6% increase over 2012's $335.7m, which Deputy CEO Ahmed Zulficar attributed to the switch to Islamic Banking: "Since the bank's conversion to Islamic banking, our performance has improved". 

(Zawya / 24 July 2014)
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