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Wed 24 Apr 2013 02:40 PM

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Bahraini Islamic lender plans African expansion

Al Baraka Bank eyes investments in Libya, Morocco as part of five-year plan

Bahraini Islamic lender plans African expansion

Bahrain-based Islamic lender Al Baraka Bank plans to expand its global footprint with a focus on Africa under a five-year plan that includes investments in Libya and Morocco, its chief executive told Reuters.

The lender, which has operations in the Middle East, Asia and Africa, aims to nearly double group assets and income by 2017 and is considering the introduction of an Africa-specific brand to support this effort.

"The group is seriously thinking about having an Al Baraka Bank Africa brand presence," chief executive Adnan Ahmed Yousif said in an interview in Dubai.

The bank may spend as much as $100m this year in Libya, where it opened a representative office in 2011, to buy and convert a conventional bank to Islamic finance, and could ultimately build a network of 30 branches, Yousif said.

In Morocco it will open a standalone operation with a $100m capital investment within the year, broadening the group's presence to 16 countries, he added.

"A committee was set up last year to study markets to penetrate. We have eight African markets under study."

The international strategy has allowed the bank to weather tough market conditions in its home base of Bahrain. Its assets there declined 16 percent in 2012, partly because of civil unrest and one-off transactions.

But group assets grew 11 percent to $19.1bn, and the bank plans to expand this to $36bn by 2017, Yousif said. Total operating income is envisaged reaching $1.5bn by 2017 from $880m in 2012.

Al Baraka has contrasted with most Islamic banks in building the bulk of its business outside the Gulf and southeast Asia. It derives less than 3 percent of operating income from Bahrain and with the exception of Iraq and its Jeddah-based asset management firm Itqan Capital, it has no further presence in the Gulf.

The group hopes to expand its global branch network from 425 in December 2012 to 810 by 2017, which would be accompanied by a large hiring drive. The bank has added over 2,600 employees in the last four years and sees the size of its staff rising to 15,000-16,000 by 2017 from 9,400, Yousif said.

In the last few years the group has exited several markets including India, Bangladesh and Yemen, while focusing on places where it sees stronger growth prospects. Units in Turkey, Algeria, Egypt, Jordan, Pakistan and South Africa added 26 branches in 2012.

In the medium term, the bank will consider expansion in Indonesia and China, but this may only materialise in three to five years, Yousif said.

"Indonesia is a very strong market for us. Our representative office is reviewing the market for acquisitions."

In 2011, Al Baraka's Jakarta office identified Bank Kesawan as an acquisition target and went as far as signing a memorandum of understanding with the lender, but the unit was eventually purchased by Qatar National Bank.

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