Bahrain's Ithmaar Bank converted into a Sharia-compliant retail lender earlier this year but the facelift has yet to impress many investors. The lender's shares have lost 11 per cent of their value in the first two sessions this week, dropping 4 per cent yesterday to close at 12 US cents. The stock has hit multiple 52-week lows this month and retreated more than 50 per cent from its peak in late June last year.
Ithmaar said in October it would turn itself into a premium retail Islamic banking entity after it integrated its fully owned subsidiary, Shamil Bank, into its operations. The restructuring plan was aimed at pooling resources to create a single, more liquid banking entity with a lower risk profile. The bank raised US$200 million in March through a rights issue to finance its expansion and obtained a licence from the regulators in April. It is now operating as an Islamic bank.
"Ithmaar as a banking story is not really rewarding. Investors are not comfortable with the stock at the moment due to ongoing restructuring and integration of the banks," said Fadi al Said, a senior fund manager at ING Investment Management in Dubai. Ithmaar was once regarded as the one of the leading investment banks in Bahrain and its shares were among the most traded on the country's stock exchange. But the current lack of appetite for the stock is attributed to the bank's shift from wholesale investment banking to retail operations.
"There has to be more clarity on the business model it is following," said Mr al Said. The stress on the bank's pre-conversion balance sheet is another point of concern for investors. Ithmaar reported a net loss of $235m last year compared with a net profit of $22.1m a year earlier due to provisions. After the larger-than-expected losses, analysts at Taib, a brokerage based in Bahrain, revised its forecast for this year to a net loss of $32.90m, against an earlier net profit estimate of $6.78m.
skhan@thenational.ae
