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Sun 27 Feb 2011 10:50 AM

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Abu Dhabi's NBAD plans Islamic banking unit in Malaysia

Lender also plans to expand operations in the Middle East, awaits banking licences in Lebanon and Syria

Abu Dhabi's NBAD plans Islamic banking unit in Malaysia
ISLAMIC BANKING: National Bank of Abu Dhabi (NBAD) plans to set up an Islamic banking unit in Malaysia
Abu Dhabi's NBAD plans Islamic banking unit in Malaysia
(ITP Images)

National Bank of Abu Dhabi

(NBAD) will launch a sharia-compliant repo product in

March to encourage secondary market trading and is in talks with

two unnamed counterparties for the same, an official said on

Sunday.

The Abu Dhabi lender expects the Islamic repo market in the

Middle East and North Africa (MENA) region to be worth about $2bn, said Sameh Al Qubaisi, general manager for NBAD's

institutional and corporate coverage group.

"We have finished the documentation for the repo. The legal

side is also done. It will be the first Islamic repo," Qubaisi

told reporters on the sidelines of a conference.

The shortage of sharia-compliant liquidity instruments is

regarded as a major handicap of Islamic banks, as the religion's

ban on interest rules out most interbank money market tools.

Repurchase agreements, also termed repos, allow banks to grant

extra funds to lend or buy assets, thereby boosting liquidity.

Activity in the Islamic bonds market has been muted after

several high-profile defaults in the last two years.

Dubai's state-owned property firm Nakheel repaid a $4.1bn sukuk in 2009 after a $10bn bailout from oil-rich

neighbour Abu Dhabi.

"After the Nakheel issue, the doubts in the sukuk market

have been the talk of the town," Qubaisi said.

Separately, the bank is also in talks to create an Islamic

Real Estate Investment Trust (REIT), he said without providing

more details.

The top UAE lender wants to set up an Islamic banking

business in Malaysia after its conventional bank unit starts

operations there in the third-quarter, its chief executive said

earlier in the day.

"We have a conventional licence. If the authorities allow

us, we would like to have ... an Islamic licence," Michael

Tomalin told reporters. He did not give more details.

The lender, largest by market value in the UAE, also plans to expand operations in the Middle East and

is awaiting banking licences in Lebanon and Syria.

NBAD plans to have 50 branches in Egypt by 2014 from 30

branches currently, he said. Its shares rose 1.8 percent on the

Abu Dhabi bourse as at 0700 GMT.

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