Officials after the opening of Al Rayan private banking branch in London’s Knightsbridge last week, to target GCC clients.
Bloomberg/Dubai
The oldest Shariah-compliant bank in the UK is planning its next step as it aims to expand into continental Europe.
After registering its first profit in 11 years, Al Rayan Bank Plc, previously known as the Islamic Bank of Britain, will this year study extending its operations to France, according to chief executive officer Sultan Choudhury.
Birmingham, England-based Al Rayan also started a private banking branch in London’s Knightsbridge last week to target affluent clients from the Gulf Cooperation Council, seeking to boost their contribution to revenue to a third from 20%, he said.
“France would be one of the obvious first steps,” Choudhury, who has worked at the bank since 2004 and is its longest-serving employee, said by phone from London on May 14. “It’s got a big Muslim population, it has a lot of GCC investments. We see Europe as a big opportunity.”
Britain’s Islamic lenders are seeking to tap demand for Shariah-compliant financial services from Europe’s growing Muslim population and to serve Middle Eastern clients investing in the continent. France has about 5mn Muslims, the most in Europe, and was the region’s second-biggest recipient of job-creating investments from the GCC last year.
The feasibility study will be for the whole of Europe, with France being the first country assessed, Choudhury said. The nation has made legal changes to encourage Islamic banking, including exempting Murabaha real estate transactions from land tax, he said. The bank needs “to get over there, talk to the market, regulators, and lawmakers to make sure Shariah-compliant finance is feasible,” Choudhury said.
France has not made any legislative changes to accommodate Islamic finance since 2010, according to Standard & Poor’s. The development of Islamic finance in the country will probably be on the wholesale side of banking and gradual, Mohamed Damak, Paris-based global head of Islamic finance at Standard & Poor’s, said by e-mail on Monday.
“The main unknown is whether or not there is a demand for such products in France and whether they will be competitive versus conventional products,” Damak said. “For the banks looking to expand in France, the cost of entry is likely to be high, and the branding issue may also emerge given the secular nature of the French society.”
Al Rayan, which has traditionally been a retail-focused bank, posted its first profit 15 months after a takeover by Qatar’s second-biggest Islamic bank, Masraf Al Rayan. The Doha-based lender paid about £25mn ($39mn) for the bank in February 2014, and invested an additional £75mn.
“It’s definitely been a transformative acquisition of our bank,” Choudhury said. “With our new branch targeting GCC customers — these things would not have been possible on our old capital base.”
The Knightsbridge branch, which is the bank’s sixth in UK and is located next to Harrods department store, will offer retail and real estate financing services to GCC clients, according to Al Rayan. The bank plans to add investment banking and property-finding services.
“It caters for GCC clients better than any of our branches,” Choudhury said. “It’s targeting people who have the ability to purchase properties in central London. They may need cash for shopping in the West End.”
