JEDDAH – The Islamic banking assets at commercial banks in the GCC is likely to surge to more than $515 billion by the end of 2013 from $452 billion last year led by Saudi Arabia, Ernst & Young's Global Islamic Banking Center said in its report. The global Islamic banking assets banks reached $1.54 trillion in 2012, it said. 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, it added. In the GCC, Saudi Arabia was the dominant player with an estimated $245 billion in assets in 2012, followed by the UAE whose Islamic banking assets, including windows were estimated at more than $80 billion and Qatar at $53 billion, said the report. 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, the report said. 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, it added. Ashar Nazim, the partner at Global Islamic Banking Center of Excellence, EY, said: “There are six markets that are systemically important to the future internationalization of the Islamic banking industry. They are Saudi Arabia, Malaysia, the UAE, Qatar, Indonesia and Turkey.” “Of the top 15 Islamic banks with a capitalization of $1 billion or more, 13 of them are located in these rapid growth markets. With trade patterns shifting decisively in favor of these rapid growth markets, this is a huge opportunity for Islamic banks,” he said. However, the industry however has recently experienced a slowdown caused by two major developments. The continuing economic and political setbacks in some of the Islamic finance markets have adversely impacted overall business sentiments, including the financial services sector, said the E&Y report. In addition, the large-scale operational transformation that many of the leading Islamic banks initiated approximately 18 months ago, continue to consume time and investment, it added. Nazim pointed out that the progress of the industry was not without challenges. “Large-scale and technology-enabled transformation around customer centricity remains a critical consideration for Islamic banks which intend to become mainstream in their respective markets.” – SG/Agencies
