LONDON // The Nasdaq Dubai-listed Bank of London and The Middle East (BLME) plans to boost its asset-management business in the emirate, a move that could require it to upgrade its licence to expand its operations in the Dubai International Financial Centre.
The London-based standalone Islamic bank, Britain’s largest, has had an office in the DIFC since May 2013.
BLME’s current asset-management business, which it says is not geared towards retail investors, covers Sharia-compliant asset classes such as property and Islamic bonds.
Humphrey Percy, the chief executive of BLME, said the bank’s key aim this year was to make Dubai its global centre for asset management, as it looks to claim a bigger chunk of the booming global Islamic-finance market.
“There is still a very underdeveloped asset-management market,” he said.
Mr Percy said the bank would not seek a full banking licence in Dubai. That is partly because it does not want to compete with local banks, some of which distribute BLME’s own Sharia-compliant products.
But boosting its asset-management activities could necessitate a revision ofits existing licence, e said. The bank — which provides wealth management and corporate banking services — is currently only entitled to market its products in the UAE.
“We could still continue to promote asset management with our licence as is. But if we are going to have a proper sales office and booking business there, then we would need a different kind of licence. It is something we are contemplating,” he said.
Mr Percy said the bank was looking this year to launch another property fund, which would follow its Light Industrial Building Fund, now closed to investors. It was also studying the launch of its first leasing fund, which would be primarily aimed at Middle East financial institutions.
BLME is mostly Kuwaiti-owned, with Boubyan Bank and its investment arm, Boubyan Capital, holding more than 28 per cent, according to Mr Percy.
The bank in late 2013 became the first company in more than five years to list on the Nasdaq Dubai, in a move that valued BLME at about US$503 million.
Unusually, the bank did not raise new money in the listing, with the move largely designed to raise its profile in the Gulf region. Another reason attributed to the listing was that some of the original Kuwaiti investors wanted to exit, but Mr Percy said that none had done so.
As with most stocks on the Nasdaq Dubai, trading in BLME is thin. Its shares closed at $0.68 on Thursday — down from $1.35 a year ago.
BLME is yet to pay a divided but intends to do so at the beginning of next year. Mr Percy said he hoped this would help to encourage trading in the bank’s shares, adding that the bank remains committed to its Nasdaq Dubai listing.
“One of the things that has been disappointing to us is the lack of liquidity on the Nasdaq,” he said. “But I feel that, as the bank continues to deliver good results, and particularly once we start paying dividends, we’re going to be a much more liquid and active stock.”
Mr Percy said the bank was “on track” to grow its balance sheet to £2 billion by 2018, up from about £1.3bn today.
One blow to the bank was not being involved in structuring the UK government’s £200m sukuk, the first such sovereign bond issued by a country outside the Islamic world. HSBC scooped the deal to act as the main adviser.
“We are disappointed that we weren’t included, because we felt that we had a lot of the criteria for inclusion,” said Mr Percy. “However we were one of the very largest participations at a primary level, and we got a very good allocation.”
More sovereign Islamic bond issuances are likely in the future, said Mr Percy, who also sees opportunities for UK companies to start raising funds through corporate sukuk.
Despite Islamic assets approaching $2 trillion globally, it remains a “niche” market in global financial terms, Mr Percy acknowledged.
One of the biggest opportunities lies in attracting sovereign wealth funds into the Islamic market, he said.
“The single greatest opportunity is the pool of money in investments which should or could be invested in Islamic finance, which are still invested conventionally, simply because they are extremely large,” he said
“As the Islamic finance market develops, some of that money will be drawn into the Islamic finance market, which will in turn spawn a more developed market.”
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