By Andy Sambidge
Ernst and Young says profit pool across six major Islamic markets broke $10bn mark for the first time last year
Global Islamic banking assets with commercial banks are on course to exceed $3.4 trillion by 2018, fuelled by growing economic activity in core Islamic finance markets, according to specialists at Ernst and Young.
Its Global Islamic Banking Centre said across the six markets of Qatar, Indonesia, Saudi Arabia, Malaysia, UAE and Turkey (QISMUT), the combined profits of Islamic banks broke the $10 billion mark for the first time at the end of 2013.
If the current growth rate continues, the Islamic banking profit pool across QISMUT markets is set to exceed $25 billion by 2018, a statement said.
Ashar Nazim, global Islamic finance leader at EY, said: "While the profit numbers for Islamic banks are impressive, they are still, on average, 15-19 percentage points lower than traditional banks in these markets.
"Regionalisation and operational transformation, which are currently underway in several leading Islamic banks, will help to close this gap."
EY said there is significant growth potential for the industry. There are an estimated 38 million customers who bank with Islamic retail banks globally, but only a small number of these customers have fully transitioned from a traditional to an Islamic banking relationship.
The average number of Islamic banking products per customer is just over two, whereas leading traditional banks have an average of five products per customer, EY added.
"Building consumer confidence through service excellence, especially when it comes to customers opening accounts and cross-selling can increase the market share of Islamic banks by 40% from these customers," said Ashar who added that another major opportunity for Islamic banks is to assist the SME sector with their cross-border business growth.For all the latest banking and finance news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.