National Bank of Kuwait (NBK) finally found middle ground and struck a deal with Commercial Bank of Kuwait (CBK) to buy 19.1% of Boubyan Bank (Islamic). The total consideration is around KD 120M; valuing Boubyan Bank shares at 550 fils/share . CBK made KD 27M in the deal. NBK has an authorization until June 21 from the Central Bank to buy up to 40% of Boubyan Bank’s shares.
Investment Dar used to own the Boubyan Bank stake which it used as collateral for loans from CBK. The financial tsunami (god how much I hate this word!) caused highly leveraged Investment Dar to default on various loans. Consequently, they lost their buyback option on the Boubyan Bank stake and the title transferred to CBK.
According to Bloomberg.com, Investment Dar said in a statement today that it has filed three lawsuits with the Kuwaiti judiciary against Commercial Bank of Kuwait. The first accuses CBK of “fraud and dishonesty,” the second is to prevent CBK dealing with the shares and the third lawsuit demands the return of the shares to Investment Dar.“Investment Dar warns the National Bank of Kuwait, or any other party, against getting involved in this dispute so as not to subject its reputation and the interests of its clients and shareholders to risk,” Investment Dar said in the statement.
Enough with Investment Dar’s whining! With the conclusion of this deal, NBK officially grew a little but potentially prolific beard. I believe that NBK will not only add to their never-ending stream of winning products, but also transform the Kuwaiti Islamic market into a more competitive field. It is no hidden secret that Kuwait Financial House (KFH) has dominated the Islamic area for a very long time and I am glad they now have substantial competition because this will definitely enhance product quality/prices.
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Nice title.
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Howdy folks, after a long absence !
As an ex-NBK employee (resigned in 1993), I think NBK will fail in making signifigant competition/mark in Islamic services. I feel it will fail as it did in trying to establish a proper asset management arm.
Could someone tell me which conventional financial institution/Bank in the Middle East managed to combine a successful Islamic and conventional banking services?
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Welcome back from vacation! I hope u had a good time in Kuwait. It was a very very long absence! We were about to shut down because of your absence
On the contrary, I think NBK will succeed in this venture. I don’t know of any successful hybrid banks, but I know of this: On June 4th, NBK announced that their Islamic KD Ijara Fund offering was fully subscribed in the first two days of its offering period with a fund size of KD40 million.
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Kuwait was dusty and dandy !.. Spent time with the family and some friends. The swim in the sea (Jelea’a, Thubaiya) last Friday was awesome!
Back to the discussion, having a successful Islamic Fund is fine. Am not surprised for the over-subscription as the return for a leasing fund is higher than the KD interest rates, and people are chasing higher yields. But running an Islamic Bank is another case all together. There are no examples out there except for HSBC (Amanah), Standard Chartered, Citi Islamic bank..etc. These guys, Islamic services is just a small window of their total operations. Their core business remains conventional.
Am not convinced and only time will tell.
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I hate dusty and humid. Friends and family always visit so no big deal, but I surely miss swimming in a sea (vs. an ocean).
I guess only time will tell if THEY succeed, but at least there is a prominent competitor to KFH and this can only help US consumers. I think u have a good point.
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Welcome back Ra’ad,
Qatari QNB has an islamic banking unit which is growing substantially to become the biggest islamic bank in Qatar. I’m sure if they can make it our NBK will defiantly have a good chance of success.
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Thank you Oikonomia. Next time am in Kuwait I’ll check you out.
The Qatari example is good and that is probably because the other old fashioned Islamic players have been sleeping (lacking innovative financial services) and thinking locally than regionally. KFH is a mammoth and undeniably has a head-start. at the end of the day, the issue is management and culture. Will NBK force its culture (cost cutting, staff promotions, increased salaries pay to lure KFH staff..etc)on Boubyan? How different and innovative they are going to run Boubyan vis a vis KFH?
In my view an arm’s length management is the best approach. The few (if any) successful conventional operators with an islamic operations opted this approach. You need to provide the Islamic operator its own identity and culture. Is the camel flexible, or will the KFH heat wear him down?
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