Bahrain lender launches US$580m Islamic offering

PUBLISHED : Monday, 29 May, 2006, 12:00am
UPDATED : Monday, 29 May, 2006, 12:00am

Despite the doom and gloom scenario for stock markets in the Middle East, Bahrain-based Albaraka Banking Group (ABG) has launched a US$580 million initial public offering in what it bills as the region's biggest Islamic bank listing.

ABG, with an authorised capital of US$1.5 billion, is offering 188.9 million shares at a subscription price of US$3.08 each with a face value of US$1.

Gulf International Bank is the financial adviser for the public offering which is open for subscription up to June 15.

The shares are expected to be listed on both the Bahrain Stock Exchange and the Dubai International Financial Exchange.

The bank has enlisted some strategic investors, including Dubai-based Emirates Bank Group, the parent company of Emirates Islamic Bank. About US$425 million worth of shares have been subscribed to via private placements.

ABG chairman Sheikh Saleh Kamel has predicted a 'twofold oversubscription' for the issue.

The bank's listing adds to a growing list of new players in Islamic banking whose combined market capitalisation has been estimated at US$13 billion with assets of US$265 billion and investments of more than US$400 billion. Their deposits are estimated at more than US$202 billion.

Usman Ahmed, deputy chief executive of Citi Islamic Investment Bank, a subsidiary of Citibank, expects Islamic financing to continue growing at 10 per cent to 15 per cent a year.

However, according to Eckart Woertz, programme manager for economics of the Dubai-based Gulf Research Centre: 'At some point in the future, growth rates [for Islamic finance] will be slower because the industry is maturing.

'Much of the industry's future growth depends on how it will be able to copy conventional banking products, including project financing, options, short selling.'

Already, some pioneering Islamic financial institutions have launched innovative products that adhere to Islamic practices.

The Dubai Islamic Bank, one of the region's oldest players, has arranged the world's largest sukuk, a form of Islamic financing, worth US$3.5 billion for Dubai Ports, Customs and Free Zone Corp and a US$1 billion Islamic bond issue for Dubai's Department of Civil Aviation to raise funding for the second phase of the Dubai International Airport expansion. In 2004 the bank arranged a US$1 billion sukuk for the civil aviation department.

ABG chief executive Adnan Ahmed Yousif hopes proceeds from the share sale will enable the bank to expand operations into new markets such as Saudi Arabia.

'The IPO will also enable us to enhance the capital of our banks in Turkey, Egypt, Algeria and Jordan which have achieved good results for the group,' he said.