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Mon 19 Nov 2007 11:46 AM

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Bahrain Islamic eyes $1bn acquisition in 2008

Bahraini bank will finance most of next year's bid through selling Islamic bonds.

Bahrain Islamic eyes $1bn acquisition in 2008

Bahrain Islamic Bank is planning a $1 billion acquisition next year and will finance most of the purchase by selling Islamic bonds, the bank's acting Chief Executive said on Sunday. The bank, which only has branches in Bahrain, is among Islamic lenders planning to expand abroad to meet growing demand among the world's 1.3 billion Muslims for financial services that comply with their beliefs.

"I'm looking for a $1 billion acquisition, and it will be financed mainly through Islamic bonds," acting Chief Executive Mohammed Ebrahim Mohammed told Reuters on the sidelines of an Islamic banking conference in Bahrain.

The plan would be presented to the bank's board next month and expansion would most likely start in the United Arab Emirates and Saudi Arabia, Mohammed said. The bank has applied for licences to operate in the five other Gulf Arab oil producers, he said.

The Islamic bond would be worth at least $500 million and the bank is working on raising funds for the rest of the acquisition cost, Mohammed said, declining to name a target.

Like other lenders that comply with sharia law, Bahrain Islamic wants to expand to strengthen its balance sheet to meet surging demand for lending in a region with more than $1 trillion infrastructure projects.

Banks such as Dubai's Noor Islamic and Emirates Islamic Bank, a unit of Emirates NBD, have said they are looking for acquisitions.

"A very big reason we're trying to grow is to not be acquired ourselves," Mohammed said. "We haven't had approaches to our knowledge, but small banks are always a target."

Bahrain Islamic made a third-quarter net profit of 6.9 million dinars ($18.3 million), a more than four-fold increase from the year-earlier period.

Bahraini rival Ithmaar Bank said this month it would acquire the 40 percent it did not own of subsidiary Shamil Bank.

Earlier this year, Albaraka Islamic Bank, a unit of Albaraka Banking Group, merged with Al Amin Bank, another Albaraka unit, to consolidate in the face of growing competition and create a unified brand as it expands globally.

Albaraka says its network of about 230 branches in 10 countries gives it the widest international reach of any Islamic bank. (Reuters)