Gulf-region Islamic banks arejoining forces to better compete.
A wave of mergers is transforming the banking sector in the Gulf Cooperation Council (GCC) states, reshaping both conventional banks and Islamic financial institutions. The Islamic banking sector faces a difficult environment, with growth forecast in the low single-digit range, according to Standard & Poor’s. A number of Islamic institutions have announced mergers, such as Dubai Islamic Bank’s plans to acquire Noor Bank, creating an institution with some $75 billion in assets. Global Finance’s top-ranked Islamic bank, Kuwait Finance House, has proposed buying Bahrain-based Ahli United Bank, the parent of Ahli United Bank (Kuwait); the combined entity would have approximately $98 billion in assets.
Islamic banks have benefitted from rapid growth of Islamic products—in some cases outgrowing conventional banks. According to the 2018 Islamic Banking Index, 55% of UAE consumers hold at least one Islamic banking product, compared to 47% in 2015. Meanwhile, the conventional bank penetration rate fell to 63% from 69% in 2017. Demand for shariah-compliant Sukuk bonds is growing, with issuance projected to rise 6% to $130 billion in 2019, according to Moody’s.
Growth for these institutions is widely expected to rest on innovation via Islamic fintech and greater standardization. One initiative involves Emirates Islamic Bank, which has launched a chat banking service for customers via WhatsApp, the first of its kind in the Islamic sector. Emirates Islamic has also joined Emirates Development Bank’s Credit Guarantee Scheme, which provides financing to small and midsize enterprises (SMEs) in the UAE.
This year’s ranking of the Safest Islamic Banks includes 12 institutions that conduct only shariah-compliant banking and finance. Following its merger with Abu Dhabi Commercial Bank, Al Hilal Bank is no longer eligible for inclusion. Sharjah Islamic Bank moved up in the ranking following an S&P upgrade that recognized a higher degree of sovereign support for Sharjah from the government.
Institutions in our ranking are among the world’s largest 500 banks that are not wholly owned and have received a minimum of two agency ratings. Recognizing the growth potential of Islamic banking, we include a further 10 banks with only one rating that may be on the cusp of additional agency coverage, possibly making them eligible for inclusion in coming years.
|
Safest Banks in the GCC (GCC Banks with Two Ratings) |
|---|
|
Rank |
Company Name |
Country |
Fitch |
Moody’s |
S&P |
Total Score |
Assets ($ Mil.) |
Statement Date |
|
1 |
Kuwait Finance House |
Kuwait |
A+ |
A1 |
NR |
17 |
58,522 |
31-Dec-2018 |
|
2 |
Abu Dhabi Islamic Bank |
UAE |
A+ |
A1 |
NR |
15.5 |
34,090 |
31-Dec-2018 |
|
3 |
Ahli United Bank (Kuwait) |
Kuwait |
A+ |
A2 |
NR |
15.5 |
12,893 |
31-Dec-2018 |
|
4 |
Qatar Islamic Bank |
Qatar |
A |
A1 |
A— |
15 |
42,082 |
31-Dec-2018 |
|
5 |
Boubyan Bank |
Kuwait |
A+ |
A3 |
A— |
14 |
14,313 |
31-Dec-2018 |
|
6 |
Qatar International Islamic Bank |
Qatar |
A |
A2 |
NR |
14 |
13,808 |
31-Dec-2018 |
|
7 |
Barwa Bank |
Qatar |
A |
A2 |
NR |
14 |
12,187 |
31-Dec-2018 |
|
8 |
Al Rajhi Bank |
Saudi Arabia |
A— |
A1 |
BBB+ |
13 |
97,334 |
31-Dec-2018 |
|
9 |
Dubai Islamic Bank |
UAE |
A |
A3 |
NR |
12.5 |
60,897 |
31-Dec-2018 |
|
10 |
Sharjah Islamic Bank |
UAE |
BBB+ |
A3 |
NR |
11 |
12,184 |
31-Dec-2018 |
|
11 |
Warba Bank |
Kuwait |
A+ |
Baa2 |
NR |
11 |
7,225 |
31-Dec-2018 |
|
12 |
Bank Al-Jazira |
Saudi Arabia |
BBB+ |
Baa1 |
NR |
8 |
19,468 |
31-Dec-2018 |
|
Safest Banks in the GCC (GCC Banks with One Rating) |
|---|
|
Rank |
Company Name |
Country |
Fitch |
Moody’s |
S&P |
Total Score |
Assets ($ Mil.) |
Statement Date |
|
1 |
Masraf Al Rayan |
Qatar |
NR |
A1 |
NR |
N/A |
26,720 |
31-Dec-2018 |
|
2 |
Emirates Islamic Bank |
UAE |
A+ |
NR |
NR |
N/A |
15,896 |
31-Dec-2018 |
|
3 |
Kuwait International Bank |
Kuwait |
BBB+ |
NR |
NR |
N/A |
7,144 |
31-Dec-2018 |
|
4 |
Bank AlBilad |
Saudi Arabia |
NR |
A3 |
NR |
N/A |
18,240 |
31-Dec-2018 |
|
5 |
Noor Bank |
UAE |
A— |
NR |
NR |
N/A |
13,811 |
31-Dec-2018 |
|
6 |
Alinma Bank |
Saudi Arabia |
BBB+ |
NR |
NR |
N/A |
32,356 |
31-Dec-2018 |
|
7 |
Al Baraka Banking Group |
Bahrain |
NR |
NR |
BB |
N/A |
23,831 |
31-Dec-2018 |
|
8 |
Bank Nizwa |
Oman |
NR |
Ba2 |
NR |
N/A |
2,009 |
31-Dec-2018 |
|
9 |
Bahrain Islamic Bank |
Bahrain |
NR |
B3 |
NR |
N/A |
3,395 |
31-Dec-2018 |
|
10 |
Khaleeji Commercial Bank |
Bahrain |
NR |
B3 |
NR |
N/A |
2,258 |
31-Dec-2018 |
Asset figures from Fitch, Moody’s, and company reports. Ratings valid as of Aug. 31, 2019.
