DOHA/DUBAI: Islamic banking assets are expected to exceed $515bn by 2013 end in the GCC from $452bn in 2012, according to EY’s Global Islamic Banking Centre. Saudi Arabia, the UAE and Qatar lead the GCC in assets in 2012 with Saudi Arabia on top with $245bn in assets in 2012. UAE Islamic banking assets, including windows, were more than $80bn and Qatar’s Islamic banking assets reached $53bn in 2012.
Global Islamic banking assets with commercial banks reached $1.54 trillion in 2012. This includes both Islamic banks and Islamic windows of conventional banks. The annual growth of the industry remains at 16 percent (5-year CAGR), which is faster than the growth of conventional banking system assets in each of the core Islamic finance markets.
Ashar Nazim, Partner, Global Islamic Banking Centre of Excellence, EY, said: “There are six markets that are systemically important to the future internationalisation of the Islamic banking industry. They are Saudi Arabia, Malaysia, the UAE, Qatar, Indonesia and Turkey. Of the top 15 Islamic banks with a capitalisation of $1bn or more, 13 of them are located in these rapid growth markets. With trade patterns shifting decisively in favour of these rapid growth markets, this is a huge opportunity for Islamic banks.”
However, the continuing economic and political setbacks in some of the Islamic finance markets have adversely impacted overall business sentiments, including the financial services sector. In addition, the large scale operational transformation that many of the leading Islamic banks initiated around 18 months ago, continue to consume time and investment.
A common theme across leading GCC Islamic banks is the fundamental repositioning of their balance sheets and their business following the global financial crisis in 2008. Going forward, many Islamic banks are looking to expand regionally, where a sizeable amount of their revenues are expected to be generated from outside their local market.
“The progress of the industry is not without challenges. The rapid growth of Islamic banks over the years has also been costly due to increased operational complexity as the banks transform from operating in a single market to becoming multi-jurisdiction businesses. These factors have had an impact on profitability, which although is improving, still remains approximately 18 percent lower than their conventional banking peers.”
The Peninsula
