At just a little over four years old, Abu Dhabi-based Al Hilal Bank has spent the past year strengthening its investment banking proposition as it seeks to capitalize on the increasing number of Sukuk transactions in the Middle East.
In an exclusive interview with Islamic Finance
news, Lim Say Cheong, the executive vice-president of the bank’s investment banking group, said that in addition to its concerted effort to win Sukuk mandates for this year and next, the bank also has plans to grow its fund offerings, while keeping a keen eye on business opportunities outside of the UAE.
“Sukuk has been in the limelight this last year, with most of the funding completed in the Middle East done through Sukuk; and with low pricing, issuers have had a good time issuing Sukuk. Al Hilal has spent a lot of effort in the last eight to nine months pitching for Sukuk mandates,” said Lim, adding that the bank is “always talking” to potential issuers.
He also noted that Sukuk has emerged as a crucial alternative for governments and corporates to move away from direct financing, with expectations that the Islamic bond market will gain further momentum next year, especially as issuers look to raise fresh capital to replace older borrowings.
On his expectations for the Sukuk market next year and Al Hilal’s role in arranging Islamic bond issuances, Lim noted that: “Sukuk is expected to continue growing in 2013, with more from the GCC, such as from Qatar, Saudi Arabia and the UAE, to fund infrastructure.”
The bank will look at Sukuk origination “in earnest” next year and more aggressively pitch for business as it builds on the momentum it has developed this year.
Additionally, Islamic financing has become increasingly important in the Middle East, as European banks lower their credit exposure as the ongoing crisis in Europe causes them to draw back from the market. Lim however warned that the Eurozone crisis still poses the “biggest danger” for the credit markets next year, with even expectations of Sukuk issuances for 2013 to hinge on developments in Europe.
According to Dealogic data, Al Hilal managed six Islamic financing transactions worth US$224 million in the 12 months to the 6th November 2012.
The growth in the Middle East Sukuk market has also increasingly attracted Al Hilal’s eye for the expansion of its business activities. Lim cautioned however that the bank will first focus on its business in the MENA region before expanding its presence outside the region, although it will consider other opportunities which may arise; including setting up a presence in Asia. Currently, the bank is also present in Kazakhstan, after launching its business there in 2010.
Meanwhile, apart from its financing business, the bank also launched its Global Sukuk Fund in March this year. As at the end of September, the fund has more than doubled in size to US$40 million from US$16 million at its inception.
According to Lim, the bank is now in the midst of “putting something together” in terms of a new fund offering, which may be a real estate fund or a balanced fund. — EB