World islamic banking competitiveness report 2012 13 - Ernst & Young

A critical reference source for decision makers in the global Islamic finance industry, providing strategic insights from Ernst & Young

Dear Banking & Finance Leader,

It is with great pleasure that we present to you the 9th annual edition of the World Islamic Banking Competitiveness Report 2012/13, developed in collaboration with leading global professional services and advisory firm Ernst & Young, and exclusively launched onsite at the 19th Annual World Islamic Banking Conference (WIBC 2012) during a specially convened WIBC plenary session held on the 10th of December 2012 in the Kingdom of Bahrain. More than 1,200 industry leaders from over 50 countries attended WIBC 2012 to chart new directions for the global Islamic finance industry, continuing WIBC’s longstanding tradition of shaping the future of Islamic finance.

Despite the challenging global economic environment, leading Islamic financial institutions have been able to sustain their growth ambitions. The industry, with its increasingly international footprint, continues to demonstrate its resilience and competitiveness, while the range of Shari’ah-compliant products and services available globally has significantly widened and deepened. The rapid growth and the intensification of the industry’s internationalisation highlight the dynamic nature of the industry and underscore the increasing efforts of Islamic financial institutions to meet the growing demands of a global economy. However, in order to sustain growth over the long term, there is a need to put in place prudent legal and regulatory policies together with sound and efficient business frameworks that will further boost the resilience and success of the Islamic financial sector.

We would like to express our sincere gratitude to Ernst & Young and their world renowned Islamic Financial Services Team for investing their considerable talent and resources in developing the World Islamic Banking Competitiveness Report 2012/13. The Report, titled “Growing Beyond: DNA of Successful Transformation”, analyzes key strategies that leading Islamic financial institutions must adopt in order to ensure continued stability and success amidst the challenges of slowing growth and declining profitability.

Established as a critical reference resource for key industry players, thought leaders and policy makers in the global Islamic banking and finance industry, we hope that the analysis in this year’s Report will provide practical, constructive and valuable insights which will be useful in your own strategic planning activities and will assist your organization in its quest for success as the Islamic banking and finance industry seeks to ‘adapt to the new dynamics of global finance’. To find out more on how your organization can play a part in this important research initiative in the future, please e-mail [email protected]

Yours sincerely,

David McLeanChief ExecutiveThe World Islamic Banking ConferenceA MEGA Brand

A MEGA Brand: Shaping the Future of the Global Islamic Finance Industry Since 1993P.O. Box 72045, Dubai, UAE | t. +9714 343 1200 | f+971 4 343 6003 MEGA Brands. MEGA Clients. Market Leaders. www.megaevents.net

19th Annual

World Islamic Banking Competitiveness Report 2012-2013 Growing Beyond DNA of Successful Transformation

December 2012

World Islamic Banking Competitiveness Report 2012-2013 Growing Beyond DNA of Successful Transformation

December 2012

Report structure

Country spotlight

Bahrain

Egypt

Kuwait

Malaysia

Pakistan

Qatar

Turkey

United Arab Emirates

Indonesia Saudi Arabia

Global industry insights

Competitive positioning

Performance analysis

CEO agenda

Executive brief Opening

COMPETITIVENESS REPORT 2012-20132

Report structure

Country spotlight

Bahrain

Egypt

Kuwait

Malaysia

Pakistan

Qatar

Turkey






CEO agenda


3COMPETITIVENESS REPORT 2012-2013

Executive brief

Ashar Nazim Partner, Islamic Banking Excellence Center Ernst & Young , MENA

Gordon Bennie Partner, Financial Services Leader Ernst & Young , MENA

Islamic banking assets with commercial banks globally grew to $1.3 trillion in 2011, suggesting an average annual growth of 19% over past four years (2011: 24%). The top four markets account for 84% of industry assets. The Islamic banking growth story continues to be positive, growing 50% faster than the overall banking sector. High potential international markets – each in different stages of development and therefore requiring different penetration strategies - include Saudi Arabia, Malaysia, Qatar, Turkey and Indonesia. This year, we launch the EY Islamic Banking Universe that tracks industry performance across core Islamic finance markets with a combined GDP of $5 trillion in 2011. Islamic banking assets are forecast to grow beyond the milestone of $2 trillion by 2014. It is however a different story when it comes to profitability. The industry’s average ROE was 12% compared to 15% for conventional in 2011. Islamic banks continue to grapple with multiple challenges relating to sub-scale operation, asset quality, negative operating income from core activities and a weak risk culture. The severity of performance challenge has prompted several institutions to initiate wide-ranging transformation programs. We call it the new 3 R’s for the industry:

► Regulatory transformation – involving compliance risk, capital optimization, integrated balance sheet management and liquidity management

► Risk transformation – around Shari’a governance, single data management framework, segment specific risk models and fund transfer pricing capabilities

► Retail banking transformation – strengthening customer centric operating model, channel integration and technology enablement The turnaround could take 2-3 years and shareholders and management need to be making commitments now to capitalize on the positive outlook. Successful transformation around 3 R’s could potentially increase the profit pool of Islamic banks by 25% by 2015. Beyond numbers, Shari’a governance and responsible innovation require urgent attention, and sukuk is developing to be an effective instrument for capital management and growth. The industry is still in transitory stage and a lot more needs to be done to demonstrate the impact of Shari’a compliant system on businesses and economies. The coming up of populous and diverse markets like Indonesia, Egypt and Pakistan would help and regulatory authorities and multilateral institutions will need to play a more central role to facilitate this transition.

Report structure

Country spotlight

Bahrain

Egypt

Kuwait

Malaysia

Pakistan

Qatar

Turkey






CEO agenda



One potential scenario shows global Islamic banking assets with commercial banks to reach $1.8 trillion in 2013 (2011: $1.3 trillion), representing average annual growth of 17%

Islamic banking asset growth (US$b)

Global Islamic Banking Assets

2011

Rest of the World

GCC South East Asia


2013e

1,334

257

131 89

1,811

Source: IMF, The Banker, Central Bank Reports, EY Universe

Islamic banking growth outlook continues to be positive, growing 50% faster than overall banking sector in several core markets. In Saudi Arabia, market share of Islamic banking assets is now over 50%

Source: Central Bank Reports, Ernst & Young Analysis

0%

10%

20%

30%

40%

50%

60%

30% 80% 130% 180% 230%

Bangladesh

Banking asset penetration (% of Nominal GDP, 2011)

Isla

mic

ban

king

sha

re o

f tot

al a

sset

s (2

011)

Banking asset penetration (% of Nominal GDP) and Islamic banking market share of total assets (%) in 2011

Size of circles denote the relative size of Islamic banking assets in 2011

Saudi Arabia

Kuwait

Bahrain

Malaysia UAE

Qatar

Jordan

Egypt

Turkey Pakistan

Indonesia


One potential scenario shows global Islamic banking assets with commercial banks to reach $1.8 trillion in 2013 (2011: $1.3 trillion), representing average annual growth of 17%

Islamic banking asset growth (US$b)


2011

Rest of the World

GCC South East Asia


2013e

1,334

257

131 89

1,811

Source: IMF, The Banker, Central Bank Reports, EY Universe

Islamic banking growth outlook continues to be positive, growing 50% faster than overall banking sector in several core markets. In Saudi Arabia, market share of Islamic banking assets is now over 50%

Source: Central Bank Reports, Ernst & Young Analysis

0%

10%

20%

30%

40%

50%

60%

30% 80% 130% 180% 230%

Bangladesh

Banking asset penetration (% of Nominal GDP, 2011)

Isla

mic

ban

king

sha

re o

f tot

al a

sset

s (2

011)

Banking asset penetration (% of Nominal GDP) and Islamic banking market share of total assets (%) in 2011

Size of circles denote the relative size of Islamic banking assets in 2011

Saudi Arabia

Kuwait

Bahrain

Malaysia UAE

Qatar

Jordan

Egypt

Turkey Pakistan

Indonesia


14.5%

-11.7% 7.7%

2.4% 3.6%

10.5% 13.7%

19.2% 0.7%

3.2% 16.2%

18.3% 16.2%

15.2% 11.5%

10.6% 13.1%

12.1% 8.9%

23.1%

6 7 7 7 8

9 10 10 10 11 11

14 15

16 17

20 22

24 48

60

Top 20 Islamic banks make up 55% of the total Islamic banking assets and are concentrated in 7 countries, including GCC, Malaysia and Turkey

Source: Company Reports, EY Universe (Note: analysis excludes Iran assets & institutions)

Qatar Bahrain Malaysia

Saudi Arabia United Arab Emirates

Kuwait Turkey

Malaysia Saudi Arabia Saudi Arabia

Malaysia Malaysia

Qatar Qatar

Bahrain United Arab Emirates

Malaysia United Arab Emirates

Kuwait Saudi Arabia

Total Assets 2011 (US$b) Average ROE (2008 – 2011)

US$ 17b

US$ 65b

11.6%

15.3%

Leading Islamic Average

Comparable Conventional Average 13.9%

16.2 %

Growth (3Y CAGR)

Bank’s Home Market 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 10,000

UAE

Kuwait

Kuwait

Malaysia

Turkey

Saudi Arabia

Kuwait

UAE

Turkey

Saudi Arabia

Malaysia

Qatar

Bahrain

Qatar

UAE

UAE

Qatar

Saudi Arabia

Kuwait

Saudi Arabia

13 Islamic banks have an equity base of more than $1 billion. Building regional institutions and participating in larger transactions requires the industry to scale up

0 4,000 8,000 12,000

Saudi Arabia Indonesia

Saudi Arabia Malaysia

Turkey Jordan

Indonesia UAE

Malaysia Indonesia

Turkey UAE UAE

Saudi Arabia Saudi Arabia

Kuwait UAE


Qatar

Conventional Banks

Equity US$ m

Equity US$ m

3 4

7

13

Source: Company Reports, Ernst & Young Analysis, EY Universe

Bank

’s H

ome

Mar

ket


14.5%

-11.7% 7.7%

2.4% 3.6%

10.5% 13.7%

19.2% 0.7%

3.2% 16.2%

18.3% 16.2%

15.2% 11.5%

10.6% 13.1%

12.1% 8.9%

23.1%

6 7 7 7 8

9 10 10 10 11 11

14 15

16 17

20 22

24 48

60

Top 20 Islamic banks make up 55% of the total Islamic banking assets and are concentrated in 7 countries, including GCC, Malaysia and Turkey

Source: Company Reports, EY Universe (Note: analysis excludes Iran assets & institutions)

Qatar Bahrain Malaysia

Saudi Arabia United Arab Emirates

Kuwait Turkey

Malaysia Saudi Arabia Saudi Arabia

Malaysia Malaysia

Qatar Qatar

Bahrain United Arab Emirates

Malaysia United Arab Emirates

Kuwait Saudi Arabia

Total Assets 2011 (US$b) Average ROE (2008 – 2011)

US$ 17b

US$ 65b

11.6%

15.3%

Leading Islamic Average

Comparable Conventional Average 13.9%

16.2 %

Growth (3Y CAGR)

Bank’s Home Market 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 10,000

UAE

Kuwait

Kuwait

Malaysia

Turkey

Saudi Arabia

Kuwait

UAE

Turkey

Saudi Arabia

Malaysia

Qatar

Bahrain

Qatar

UAE

UAE

Qatar

Saudi Arabia

Kuwait

Saudi Arabia

13 Islamic banks have an equity base of more than $1 billion. Building regional institutions and participating in larger transactions requires the industry to scale up

0 4,000 8,000 12,000

Saudi Arabia Indonesia


Turkey Jordan

Indonesia UAE

Malaysia Indonesia

Turkey UAE UAE

Saudi Arabia Saudi Arabia

Kuwait UAE


Qatar

Conventional Banks

Equity US$ m

Equity US$ m

3 4

7

13


Bank

’s H

ome

Mar

ket


0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000

Indonesia

Qatar Turkey

Saudi Arabia

UAE

Malaysia

Pakistan

Egypt

Kuwait Jordan

Bahrain

Bangladesh

Qatar

Malaysia

UAE

Egypt

Jordan

Pakistan

Bahrain

Kuwait

Turkey Saudi Arabia

Indonesia

Conventional Islamic

Aver

age

RO

E (2

008 –

2011

)

Equity US$ m (2011)

Equity vs. ROE


Many Islamic banks still face legacy startup issues with higher fixed operating costs as a proportion of their overall income, lower leverage and are behind the curve in technology enablement

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

0 50,000 100,000 150,000 200,000 250,000 300,000 350,000 400,000

Qatar

Saudi Arabia

Turkey

Brunei

Jordan

Indonesia

Bangladesh

Egypt

Pakistan

Bahrain

Kuwait

Malaysia

Pakistan

Kuwait

Turkey Saudi Arabia

UAE

Bahrain

Egypt

Qatar Indonesia

Malaysia

UAE

Jordan

Assets vs. ROA


Aver

age

RO

A (2

008 –

2011

)

Assets US$ m (2011)


Performance challenge is further exacerbated due to small size, high proportion of non yielding assets and rather basic risk culture at stand-alone Islamic banks


0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000

Indonesia

Qatar Turkey

Saudi Arabia

UAE

Malaysia

Pakistan

Egypt

Kuwait Jordan

Bahrain

Bangladesh

Qatar

Malaysia

UAE

Egypt

Jordan

Pakistan

Bahrain

Kuwait

Turkey Saudi Arabia

Indonesia


Aver

age

RO

E (2

008 –

2011

)

Equity US$ m (2011)

Equity vs. ROE


Many Islamic banks still face legacy startup issues with higher fixed operating costs as a proportion of their overall income, lower leverage and are behind the curve in technology enablement

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

0 50,000 100,000 150,000 200,000 250,000 300,000 350,000 400,000

Qatar

Saudi Arabia

Turkey

Brunei

Jordan

Indonesia

Bangladesh

Egypt

Pakistan

Bahrain

Kuwait

Malaysia

Pakistan

Kuwait

Turkey Saudi Arabia

UAE

Bahrain

Egypt

Qatar Indonesia

Malaysia

UAE

Jordan

Assets vs. ROA


Aver

age

RO

A (2

008 –

2011

)

Assets US$ m (2011)


Performance challenge is further exacerbated due to small size, high proportion of non yielding assets and rather basic risk culture at stand-alone Islamic banks


Financing growth (CAGR, 2008 - 2011)

8.3%

10.0%

30.4%

12.8%

23.5%

4.2%

12.9%

8.5%

10.2%

12.8%

Corporate Government Personal Real Estate Services



Higher growth in personal financing assets is made up from a number of factors: pricing differential has been reduced or eliminated, customers are more accepting of Islamic finance, and distribution capability has improved

Price to book (November 22, 2012)

Pric

e to

ear

ning

s (N

ovem

ber 2

2, 2

012)

Price to book and price to earning Conventional Islamic


0

5

10

15

20

25

30

0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5

Islamic banks, on the whole, no longer trade at higher valuations despite having better prospects. Regaining investor confidence will require fundamental transformation of business practices


0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

0% 10% 20% 30% 40% 50% 60%

Indonesia

Qatar Turkey

Malaysia

Saudi Arabia UAE

Pakistan Bangladesh

Syria Jordan

Kuwait

Bahrain Egypt

Strategic growth matrix Conventional Islamic


Gro

wth

in Is

lam

ic a

sset

s C

AGR

200

8 - 2

011

Low market share High market share Market share 2011

Market Share = Islamic Assets / Total Banking Assets

Significant variation between similar countries imply

different strategies for banks in those markets

Higher growth markets with potential for large retail play

There remains considerable potential for growth with some strategic quick wins possible; retail specialization, regional diversification, transformation of middle-tier conventional banks to Islamic...

Relatively developed infrastructure

Some infrastructure

Weak or no infrastructure

Several core Islamic finance markets lack regulatory clarity. Recent initiatives by Islamic Development Bank could see more jurisdictions introducing Islamic banking legislation and regulatory framework

In a bold step forward, the draft Islamic banking regulations in Oman

disallow commodity murabaha for liquidity management. For a long time

now, the (mis)use of synthetic instruments has disillusioned the

proponents of Islamic banking


0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

0% 10% 20% 30% 40% 50% 60%

Indonesia

Qatar Turkey

Malaysia

Saudi Arabia UAE

Pakistan Bangladesh

Syria Jordan

Kuwait

Bahrain Egypt



Gro

wth

in Is

lam

ic a

sset

s C

AGR

200

8 - 2

011


Market Share = Islamic Assets / Total Banking Assets

Significant variation between similar countries imply

different strategies for banks in those markets

Higher growth markets with potential for large retail play

There remains considerable potential for growth with some strategic quick wins possible; retail specialization, regional diversification, transformation of middle-tier conventional banks to Islamic...

Relatively developed infrastructure

Some infrastructure

Weak or no infrastructure

Several core Islamic finance markets lack regulatory clarity. Recent initiatives by Islamic Development Bank could see more jurisdictions introducing Islamic banking legislation and regulatory framework

In a bold step forward, the draft Islamic banking regulations in Oman

disallow commodity murabaha for liquidity management. For a long time

now, the (mis)use of synthetic instruments has disillusioned the

proponents of Islamic banking


0.0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

40848 40878 40909 40940 40969 41000 41030 41061 41091 41122 41153 41183 41214

IIBR 3 Months LIBOR 3 Months

Key Parties Key Facts

Key Milestone

Road Ahead

• Published for nine price points from overnight to 1 year

• USD reference rate applicable based on underlying Murabaha, Mudaraba and Wakala contracts

• Calculated by taking price of 18 contributors, excluding top and bottom quartiles and calculating mean of remaining data points

• Governed by Islamic Benchmark Committee (which oversees contributions, process and governance) and the Shari’a Committee (which oversees compliance)

• Established by 18 major Islamic banks and windows • IDB and Islamic infrastructure institutions are part of the Islamic

Benchmark Committee, including AAOIFI, CIBAFI, Bahrain Association of Bank and Association of Islamic Banking Institutions

• Central banks of Bahrain, Kuwait, UAE and Qatar are observer members

• Continue enhancing governance • Permit more contributions beyond Malaysia

and GCC (subject to Islamic Benchmark Committee approval)

• Develop benchmarks in more local currencies, SAR, QAR, BAH, EGP

• Develop ‘dealt rate’ benchmarks that are derived from actual trades

LIBOR governance to be transferred from BBA to the FSA with more stringent reporting requirements

IIBR launched on 22 November 2011, after several closed door meetings of the Islamic Benchmark (IB) Committee and Shari’a Committee

IB Committee welcome 3 Malaysian banks

IB Committee first deliberates on changing rate from Bid to Ask and strengthening rules for admitting new contributors

IIBR is moved from Bid to Ask contributor field

New rules for admitting new banks including a minimum level of Shari’a compliant assets and trades. Mandatory Code of Conduct for all contributors proposed

LIBOR scandal breaks: US Department of Justice launches criminal investigation

Major global bank fined more than $420 million by US and UK regulators

Code of Conduct reviewed by IB Committee Chairman

Since its inception last year, the Islamic Interbank Benchmark Rate (IIBR) has been evolving through a process of regular reviews from the Islamic Benchmark Committee and the Shari’a Committee

Source: Thomson Reuters


Qatar 12.8% China 10.3% Kazakhstan 8.5% India 7.4% Vietnam 7.2% Nigeria 6.4% Ghana 5.6% Russian Federation 5.3% Indonesia 5.2% Malaysia 5.0% UAE 4.9% Egypt 4.9% Ukraine 4.7% Korea, Rep. 4.6% Thailand 4.4% Turkey 4.2% Colombia 4.1% Argentina 4.1% Poland 3.9% Chile 3.8% Brazil 3.7% South Africa 3.6% Saudi Arabia 3.4% Mexico 2.3%

10 of the world’s 25 Rapid Growth Markets (RGMs) have large Muslim population and offer strong growth prospects for Islamic banking sector (retail, SME, trade finance, wealth management)

GDP CAGR 2000-2010

Rapid Growth Markets

Kuala Lumpur’s audacious financial sector plan could see Islamic financing assets growing to 40% of the total industry by 2020. A vibrant sukuk market, anticipated consolidation among Islamic banks, Shari’a transformation of developmental institutions, private pension scheme, and tax and regulatory reforms are all steps in the same direction.

Bahrain’s unique Islamic banking proposition is guided by four strategic priorities: 1) Regulatory clarity across

major existing and emerging Islamic finance areas

2) Empowering institutions through skills development

3) Consolidation amongst market players

4) Standard setting initiatives facilitated through industry infrastructure institutions

Leading Islamic finance centers


Several Arab Spring markets are expected to launch Islamic banking initiatives although progress to-date has been slow

Egyp

t ► Regulatory framework for Islamic banks being considered

► Sovereign sukuk planned ► Launch of Shari’a compliant products

by several banks

Saudi Arabia Oman

UAE Qatar Bahrain

Algeria Libya Egypt

Turkey

Tunisia

Morocco Lebanon Jordan

Iraq

Yemen

Syria

Kuwait

Hydrocarbon reserves center

Population center

Tuni

sia

► Regulatory framework for Islamic banks being considered

► Sovereign sukuk planned for 2013

Liby

a ► Approval of Islamic banking legislation ► Regulatory framework for Islamic

banks being considered

Iraq

► Islamic banking legislation being considered

► Several existing and new banks considering Islamic banking operations


Demand for sukuk instruments will continue to grow, outpacing global supply and providing opportunities for banks to establish and grow their Islamic fixed income advisory platforms

Source: IFIS, Standard & Poors , Bloomberg, ThomsonReuters, EY Analysis

Based on current growth forecast, Islamic financial institutions will require at least US$ 400b of short term, credible, liquid securities for liquidity and capital management purposes, by 2015

Including other investor classes, global sukuk demand could be in excess of US$ 600b by 2015

2012 would see in excess of US$ 110b in new issuance – a record year but still short of industry demand

Market opportunity will drive more Islamic banks to set up international platforms to offer Islamic fixed income advisory services

55 15

35

15 20

39 179

400

0

50

100

150

200

250

300

350

400

2012 2013 2014 2015 2016 2017+ TOTAL O/S '11

Est Dem. '15

GAP

Outstanding Sukuk maturity profile and estimated demand by Islamic banks

US$ b


Report structure

Country spotlight

Bahrain

Egypt

Kuwait

Malaysia

Pakistan

Qatar

Turkey






CEO agenda


ROE decomposition assists in understanding the key performance indicators of banks

ROE

Leverage

Return on assets

Deposits

Cost of funding

Operating expenses

Provisions

X



Islamic banks Conventional banks

Treasury & investment

Corporate

Retail

36% 36% 30%

21%

23% 32% 43% 61%

41% 32% 28%

18%

Malaysia Saudi Arabia UAE Turkey

45%

17% 22% 22%

18%

39%

57%

37%

38% 44%

20%

40%

Malaysia Saudi Arabia UAE Turkey

Includes selected banks from each country based on the availability of data

Segment assets


Islamic banks continue to develop their non-retail banking assets. With the sukuk market development continuing, we expect to see a rapid increase in both Corporate and Treasury & Investments assets


10%

14% 13%

5%

10%

15%

20%

2008 2009 2010 2011



Return on equity

GCC

South East Asia

Rest of the world

17%

12%

18%

15%

5%

7%

9%

11%

13%

15%

17%

19%

2008 2009 2010 2011 13%

12%

16% 14%

5%

10%

15%

20%

2008 2009 2010 2011

15% 14%

18% 19%

5%

10%

15%

20%

2008 2009 2010 2011

After a difficult few years, banking profitability looks to be stabilizing in major Islamic banking markets. However, Islamic banks have experienced a mixed recovery across markets

Based on weighted average


2.4%

1.5% 1.6% 1.8%

1.0%

1.5%

2.0%

2.5%

2008 2009 2010 2011


Return on assets (ROA)

GCC

Rest of the world

1.7%

1.3%

1.5%

1.7%

1.0%

1.2%

1.4%

1.6%

1.8%

2.0%

2.2%

2.4%

2.6%

2008 2009 2010 2011

1.2% 1.1%

1.4% 1.8%

1.0%

1.5%

2.0%

2.5%

2008 2009 2010 2011

1.2%

1.6% 1.6%

1.0%

1.5%

2.0%

2.5%

2008 2009 2010 2011

South East Asia

With underperforming assets being disposed and capital replenished, banks have seen ROA stabilize or improve. However, Islamic banks must address others factors too…

Source: Company Reports, Ernst & Young Analysis, EY Universe Based on weighted average


2.1% 2.4% 2.6%

1.4% 1.2% 1.1%

-0.8% -1.0% -1.2% -0.2%

-0.7% -0.6%

-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

6%

2007 2010 2011

2.7% 2.7% 2.9%

2.6%

1.4% 1.0%

-2.1% -1.8% -1.8%

-0.3% -0.9% -0.8%

-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

6%

2007 2010 2011

ROA 2.9% 1.4% 1.3% 2.2% 1.8% 1.7%

Operating expenses

Net financing income

Provisions

Other income

Return on assets

… a more detailed analysis shows operating expenses as a proportion of assets are 50% higher for Islamic banks. For mid to smaller sized banks, this proportion would be higher still

Source: Company Reports, Ernst & Young Analysis, EY Universe Numbers may not add up due to rounding


2.4%

1.5% 1.6% 1.8%

1.0%

1.5%

2.0%

2.5%

2008 2009 2010 2011


Return on assets (ROA)

GCC

Rest of the world

1.7%

1.3%

1.5%

1.7%

1.0%

1.2%

1.4%

1.6%

1.8%

2.0%

2.2%

2.4%

2.6%

2008 2009 2010 2011

1.2% 1.1%

1.4% 1.8%

1.0%

1.5%

2.0%

2.5%

2008 2009 2010 2011

1.2%

1.6% 1.6%

1.0%

1.5%

2.0%

2.5%

2008 2009 2010 2011

South East Asia

With underperforming assets being disposed and capital replenished, banks have seen ROA stabilize or improve. However, Islamic banks must address others factors too…



2.1% 2.4% 2.6%

1.4% 1.2% 1.1%

-0.8% -1.0% -1.2% -0.2%

-0.7% -0.6%

-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

6%

2007 2010 2011

2.7% 2.7% 2.9%

2.6%

1.4% 1.0%

-2.1% -1.8% -1.8%

-0.3% -0.9% -0.8%

-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

6%

2007 2010 2011

ROA 2.9% 1.4% 1.3% 2.2% 1.8% 1.7%

Operating expenses

Net financing income

Provisions

Other income

Return on assets

… a more detailed analysis shows operating expenses as a proportion of assets are 50% higher for Islamic banks. For mid to smaller sized banks, this proportion would be higher still

Source: Company Reports, Ernst & Young Analysis, EY Universe Numbers may not add up due to rounding


2.8% 1.6%

3.5%

1.2% 1.0%

3.0%

5.0%

7.0%

9.0%

2008 2009 2010 2011


Cost of funds

GCC

Rest of the world

2.1%

3.2%

2.3% 1.0%

3.0%

5.0%

7.0%

9.0%

2008 2009 2010 2011

5.5% 4.5%

8.8%

5.6%

1.0%

3.0%

5.0%

7.0%

9.0%

2008 2009 2010 2011

3.5%

2.8%

5.1%

3.1%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

2008 2009 2010 2011

South East Asia

Cost of funds remains lower for Islamic banks overall, although smaller banks and those in distressed markets have seen this advantage erode sharply post financial crises



33%

42% 39%

32%

10% 20% 30% 40% 50% 60%

2008 2009 2010 2011


Operating cost / operating income

GCC

Rest of the world

45% 47%

43% 40%

10%

20%

30%

40%

50%

60%

2008 2009 2010 2011

46% 48%

45% 45%

10% 20% 30% 40% 50% 60%

2008 2009 2010 2011

57% 50%

45% 43%

10% 20% 30% 40% 50% 60%

2008 2009 2010 2011

South East Asia

The largest operational cost tends to be for human capital. Inefficient operating models need urgent reform to increase technology enablement



17% 19%

14% 12%

5%

10%

15%

20%

25%

30%

2008 2009 2010 2011

15% 22%

13%

19%

5% 10% 15% 20% 25% 30%

2008 2009 2010 2011


Provisions / operating income

Rest of the world

18% 18%

13% 8%

5% 10% 15% 20% 25% 30%

2008 2009 2010 2011

17% 16%

15% 10%

5% 10% 15% 20% 25% 30%

2008 2009 2010 2011

South East Asia

GCC

Asset quality still needs better management with risk and governance often a complex and sensitive factor in deciding revaluations or disposals



17% 19%

14% 12%

5%

10%

15%

20%

25%

30%

2008 2009 2010 2011

15% 22%

13%

19%

5% 10% 15% 20% 25% 30%

2008 2009 2010 2011


Provisions / operating income

Rest of the world

18% 18%

13% 8%

5% 10% 15% 20% 25% 30%

2008 2009 2010 2011

17% 16%

15% 10%

5% 10% 15% 20% 25% 30%

2008 2009 2010 2011

South East Asia

GCC

Asset quality still needs better management with risk and governance often a complex and sensitive factor in deciding revaluations or disposals


Report structure

Country spotlight

Bahrain

Egypt

Kuwait

Malaysia

Pakistan

Qatar

Turkey






CEO agenda



The severity of performance challenge demands wide-ranging transformation of business practices around the 3 R’s

Faced with mounting pressure to improve sub-par ROE, many institutions are tempted to cut or delay the much needed change agenda.The danger is that banks will miss the limited window they have to implement their future blueprint

Retail Transformation

Regulatory Transformation

Risk Transformation

Regulatory transformation – will deepen the divide between weaker and stronger banks. The impact of reforms will force the industry to adapt to radically different ROE expectations

Impact on Business Model

Risk weighted assets & revenue levers

Capital and funding pressure

Cost of funds and operational cost

Basel III & IFSB - Capital

Basel III & IFSB - Liquidity

Unique Islamic banking framework

Shari’a rulings Sukuk as growth and capital instrument

Transformation Agenda

Capital optimization 1

Dynamic liquidity forecasting 2

Integrated balance sheet management 3

Data management 4

Regulatory reporting 5

Compliance risk management 6


The severity of performance challenge demands wide-ranging transformation of business practices around the 3 R’s

Faced with mounting pressure to improve sub-par ROE, many institutions are tempted to cut or delay the much needed change agenda.The danger is that banks will miss the limited window they have to implement their future blueprint

Retail Transformation

Regulatory Transformation

Risk Transformation

Regulatory transformation – will deepen the divide between weaker and stronger banks. The impact of reforms will force the industry to adapt to radically different ROE expectations

Impact on Business Model

Risk weighted assets & revenue levers

Capital and funding pressure

Cost of funds and operational cost

Basel III & IFSB - Capital

Basel III & IFSB - Liquidity

Unique Islamic banking framework

Shari’a rulings Sukuk as growth and capital instrument


Capital optimization 1

Dynamic liquidity forecasting 2

Integrated balance sheet management 3

Data management 4

Regulatory reporting 5

Compliance risk management 6


The risk agenda has been elevated significantly as regulators require banks to implement comprehensive reforms. Islamic banks require more attention

Areas of greatest progress*

83% Increased board oversight of risk

89% Strengthen CRO mandate

65% Capital reallocation

92% Liquidity risk management

93% Enhanced stress testing

Areas requiring more progress*

78% Compensation schemes

92% Attention on risk culture

96% Clearly defined risk appetite

59% Enhanced risk transparency

► Boards playing a more active role in setting organizational risk policies and parameters and spending more time on risk

► The influence of the Chief Risk Officers has been elevated, and CROs are now actively participating in strategy planning and product development

► Clearly defining organizational risk appetite and risk strategy for the businesses to follow

► Embedding the risk culture throughout the organization

* Source: Selected responses from Ernst & Young’s survey on risk management practices

Risk transformation – balancing models and judgment

Risk governance

Data & IT infrastructure

Fund transfer pricing

Integrated data and reporting

Strengthening risk governance to integrate risk appetite, stress testing, strategic planning, capital and liquidity management

Longer term strategy to eliminate redundancies across data initiatives, and development of a single data management framework to meet business, Shari’a and regulatory demands

Using granular data and enhanced funds transfer pricing to segment and price products effectively

Building capacity for granular risk, finance and treasury data analysis to improve development and pricing of products

1

2

3

4

Tran

sfor

mat

ion

Agen

da


Retail – developing a ‘whole-customer’ view of requirements and profitability will be an essential capability for Islamic banks to improve performance

41%

36%

31%

22%

22%

22%

Service Quality

Price

Product offering

Specific service offering

Trust

Branch proximity

Banking activities customers most want their bank to improve*

Customer centric operating model

Customer acquisition model (integrated onboarding strategy & process definition)

Product portfolio management (up sell and cross sell at customer level)

Sales force effectiveness

Integrated channel strategy (channel proposition, segment alignment, migration)

Customer data design and advanced pricing management

1

2

3

4

5

6

* Source: Selected responses from Ernst & Young’s global consumer banking survey



Retail – developing a ‘whole-customer’ view of requirements and profitability will be an essential capability for Islamic banks to improve performance

41%

36%

31%

22%

22%

22%

Service Quality

Price

Product offering

Specific service offering

Trust

Branch proximity

Banking activities customers most want their bank to improve*

Customer centric operating model

Customer acquisition model (integrated onboarding strategy & process definition)

Product portfolio management (up sell and cross sell at customer level)

Sales force effectiveness

Integrated channel strategy (channel proposition, segment alignment, migration)

Customer data design and advanced pricing management

1

2

3

4

5

6

* Source: Selected responses from Ernst & Young’s global consumer banking survey


Retail – technology will emerge as both an enabler and a differentiator despite all forms of capital expenditure being under heavy scrutiny

Technology to comply

As new regulatory requirements take effect, Islamic banks will need to become more data intensive. The quality and extent of data expected, the connectivity between functions, the level of risk assessment and the speed of delivery will prompt organization-wide change programs

Technology to understand

Islamic banks need to implement new systems for effective collection, management and mining of customer data

Technology to deliver

Although some security concerns remain, technology will play an increasing role in the interaction between bank and customer via multiple channels. Increasing importance of smartphones in Islamic banking markets can no longer be ignored


Customer & Product

Management

Retail – the digital channel must now be at the heart of an integrated multi-channel offering to improve accessibility, cross sales and servicing

Key Segments Mass market HNW SME

Marketing Retail Marketing

Sales & Distribution

Management

Branches

Internet

Contact centers

Direct sales force

RMs

ATM / self

Intermediaries

Joint ventures

Customer product design & propositions

Consumer products and propositions

HNW Products & Propositions

SME Products & Propositions

Divisional Supports

Strategy & Planning Change Operational

Efficiency Credit Policy

& Risk Shari’a support

Group Manufacturing

Prod Service Fulfillment

Customer Servicing Technology Credit

operations Payments

Group Supports HR Legal Risk & Compliance Credit Finance &

Tax

Develop joint sales & marketing strategy optimizing sales capture

Reassure customers with robust but simple security measures

Develop integrated channel development plan with cost –benefit by channel

Instigate fast track approval & change processes to exploit online channel flexibility

Design end to end experience and operating model for online services, to understand full costs and operating implications

Understand the real needs of your target customers and keep the online offering & experience as simple as possible

Partner with innovative companies to fuel creative channel design

Use champion challenger testing to improve channel performance

Build online capabilities once, for use by all products and brands

Optimizing the value of digital channels

A well executed transformation program would take 2-3 years to be implemented and embedded, and could improve Islamic banks’ profitability by approximately 25%

Global Islamic banking – estimated combined profit pool, 2015 (US$ b)

Current performance (2011)

Growth momentum (2012 – 2015)

Potential combined Islamic banking profit pool (2015)

3 R’s driven improvements

17 - 18

15 - 17

~ 9

41 - 44

► Regulatory transformation

► Risk transformation

► Retail transformation


Report structure

Country spotlight

Bahrain

Egypt

Kuwait

Malaysia

Pakistan

Qatar

Turkey






CEO agenda



Banking sector overview – Bahrain

Banking sector 2011 Macroeconomic 2011

Real GDP growth 1.9%

Nominal GDP (US$b) 29

Nominal GDP per capita (US$) 24,939

Total population (m) 1.2

Total Muslim population (m) 1.1

Population (0-14) 20.2%


Population (65 & over) 2.6%

Population growth -1.9%

Inflation -0.4%

Unemployment rate 3.7%

Policy interest rate 1.0%

Total domestic assets (US$b) 47

Total loans (US$b) 17

Total deposits (US$b) 32

Total equity (US$b) 27

Assets CAGR (2007-2011) 6.0%

Loans CAGR (2007-2011) 11.4%

Deposits CAGR (2007-2011) 12.8%

Total Islamic assets (US$b) 13

Islamic asset market share 26.9%

Islamic assets CAGR (2007-2011) 7.4%

Total number of commercial banks 23

Total number of Islamic retail banks 6

Source: Central Bank Report, Industry Sources, Ernst & Young Analysis Limitation: Impact of consolidation, off-shore business and window operation


Banking sector snapshot – Bahrain

21 23

25 27 27

-

5

10

15

20

25

30

2007 2008 2009 2010 2011

11

16 16 15 17

- 2 4 6 8

10 12 14 16 18

2007 2008 2009 2010 2011

20

25 25 29

32

-

5

10

15

20

25

30

35

2007 2008 2009 2010 2011

Total domestic banking assets (US$b) Total equity (US$b)

Total banking deposits (US$b) Total advances (US$b)

38

49 42

46 47

-

10

20

30

40

50

60

2007 2008 2009 2010 2011


Top five banks – Bahrain

0

5

10

15

20

25

30

Bank A Bank B Bank C Bank D Bank E 0.0

0.5

1.0

1.5

2.0

2.5

3.0

Bank A Bank B Bank C Bank D Bank E

14%

9%

4% 3% 3%

0%

2%

4%

6%

8%

10%

12%

14%

16%


11.5% 11.8% 13.4%

-10.7%

16.8%

-15%

-10%

-5%

0%

5%

10%

15%

20%


Return on equity

Total equity (US$b) Total assets (US$b)

Market share (Assets)

2011 Figures Source: Central Bank Report, Industry Sources, Ernst & Young Analysis Limitation: Impact of consolidation, off-shore business and window operation


Banking sector snapshot – Bahrain

21 23

25 27 27

-

5

10

15

20

25

30

2007 2008 2009 2010 2011

11

16 16 15 17

- 2 4 6 8

10 12 14 16 18

2007 2008 2009 2010 2011

20

25 25 29

32

-

5

10

15

20

25

30

35

2007 2008 2009 2010 2011



38

49 42

46 47

-

10

20

30

40

50

60

2007 2008 2009 2010 2011


Top five banks – Bahrain

0

5

10

15

20

25

30


0.5

1.0

1.5

2.0

2.5

3.0


14%

9%

4% 3% 3%

0%

2%

4%

6%

8%

10%

12%

14%

16%


11.5% 11.8% 13.4%

-10.7%

16.8%

-15%

-10%

-5%

0%

5%

10%

15%

20%


Return on equity





Islamic banking sector snapshot – Bahrain

0

3

6

9

12

15

18

21

Bank A Bank B Bank C 0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 1.6 1.8 2.0

Bank A Bank B Bank C

12%

-11%

3%

-15%

-10%

-5%

0%

5%

10%

15%


8.7%

3.5%

2.1%

0% 1% 2% 3% 4% 5% 6% 7% 8% 9%

10%


Total equity of top 3 Islamic banks (US$b) Total assets of top 3 Islamic banks (US$b)

Market share of top 3 Islamic banks ROE of top 3 Islamic banks


-10%

-5%

0%

5%

10%

15%

20%

0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20%

Bank B

Bank A Bank C

Bank D

Bank E Bank A

Bank B

Bank C

Bank G Bank F


Gro

wth

in a

sset

s C

AG

R 2

008

- 201

1


Undifferentiated business models will need to be reconfigured to be specialized (retail, SME) and diversified (regional, trade finance, wealth management, etc.)

Islamic banks in Bahrain need to take a fresh look at their business model

Strategic growth matrix

Banks are ranked based on asset size 2011 Source: Central Bank Report, Industry Sources, Ernst & Young Analysis


Islamic banking sector snapshot – Bahrain

0

3

6

9

12

15

18

21

Bank A Bank B Bank C 0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 1.6 1.8 2.0


12%

-11%

3%

-15%

-10%

-5%

0%

5%

10%

15%


8.7%

3.5%

2.1%

0% 1% 2% 3% 4% 5% 6% 7% 8% 9%

10%





-10%

-5%

0%

5%

10%

15%

20%

0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20%

Bank B

Bank A Bank C

Bank D

Bank E Bank A

Bank B

Bank C

Bank G Bank F


Gro

wth

in a

sset

s C

AG

R 2

008

- 201

1


Undifferentiated business models will need to be reconfigured to be specialized (retail, SME) and diversified (regional, trade finance, wealth management, etc.)

Islamic banks in Bahrain need to take a fresh look at their business model




Report structure

Country spotlight

Bahrain

Egypt

Kuwait

Malaysia

Pakistan

Qatar

Turkey






CEO agenda


Banking sector overview – Egypt





Total population (m) 82

Total Muslim population (m) 78




Population growth 1.7%

Inflation 10.1%



Total assets (US$b) 215




Assets CAGR (2007-2011) 8.7%

Loans CAGR (2007-2011) 8.5%

Deposits CAGR (2007-2011) 10.7%




Total number of banks 39


Note: Only commercial banks Source: Central Bank Report, Industry Sources, Ernst & Young Analysis Limitation: Impact of consolidation, off-shore business and window operation


Report structure

Country spotlight

Bahrain

Egypt

Kuwait

Malaysia

Pakistan

Qatar

Turkey






CEO agenda


Banking sector overview – Egypt











Inflation 10.1%







Assets CAGR (2007-2011) 8.7%

Loans CAGR (2007-2011) 8.5%

Deposits CAGR (2007-2011) 10.7%








Banking sector snapshot – Egypt

154 172

189 211 215

-

50

100

150

200

250

2007 2008 2009 2010 2011

58

70 71 75 80

-

20

40

60

80

100

2007 2008 2009 2010 2011

108 124

135 148

162

-

30

60

90

120

150

180

2007 2008 2009 2010 2011

10 11 12

14 14

-

2

4

6

8

10

12

14

16

2007 2008 2009 2010 2011




Top five banks – Egypt

0

5

10

15

20

25

30


0.3

0.6

0.9

1.2

1.5


12.7%

6.1% 4.8%

3.5% 2.9%

0%

3%

6%

9%

12%

15%


7.2%

22.7% 20.2%

15.7%

9.0%

0%

5%

10%

15%

20%

25%


Return on equity





3%

5%

7%

9%

11%

13%

15%

0% 2% 4% 6% 8% 10% 12% 14%

Bank B

Bank A

Bank B

Bank A

Post Arab spring, Egypt is expected to be a key market for Islamic banking although pace may be slow initially


Gro

wth

in a

sset

s C

AG

R 2

008

- 201

1


Great potential for Islamic banking but key challenges related to fiscal stability remain

Regulatory clarity will be key to development of Islamic banking in Egypt


Report structure

Country spotlight

Bahrain

Egypt

Kuwait

Malaysia

Pakistan

Qatar

Turkey






CEO agenda



Banking sector overview – Indonesia







Population (0-14) 27%



Population growth 1%

Inflation 5.4%







Assets CAGR (2007-2011) 16.5%

Loans CAGR (2007-2011) 14.1%

Deposits CAGR (2007-2011) 11.8%







Banking sector snapshot – Indonesia

222 258

283 336

408

- 50

100 150 200 250 300 350 400 450

2007 2008 2009 2010 2011

32 35 43

54

68

-

10

20

30

40

50

60

70

80

2007 2008 2009 2010 2011

225 225 255

309

381

- 50

100 150 200 250 300 350 400 450

2007 2008 2009 2010 2011

221 222 243

286

345

-

50

100

150

200

250

300

350

400

2007 2008 2009 2010 2011





Banking sector overview – Indonesia










Population growth 1%

Inflation 5.4%







Assets CAGR (2007-2011) 16.5%

Loans CAGR (2007-2011) 14.1%

Deposits CAGR (2007-2011) 11.8%







Banking sector snapshot – Indonesia

222 258

283 336

408

- 50

100 150 200 250 300 350 400 450

2007 2008 2009 2010 2011

32 35 43

54

68

-

10

20

30

40

50

60

70

80

2007 2008 2009 2010 2011

225 225 255

309

381

- 50

100 150 200 250 300 350 400 450

2007 2008 2009 2010 2011

221 222 243

286

345

-

50

100

150

200

250

300

350

400

2007 2008 2009 2010 2011





Top five banks – Indonesia

0

10

20

30

40

50

60

70

Bank A Bank B Bank C Bank D Bank E 0

2

4

6

8


19.5%

30.3%

25.8%

15.4% 13.3%

0%

10%

20%

30%

40%


16% 13%

11% 9%

6%

0% 2% 4% 6% 8%

10% 12% 14% 16% 18%


Return on equity




Islamic banking sector snapshot – Indonesia

0

2

4

6

Bank A Bank B Bank C 0.0

0.1

0.2

0.3

0.4


17.9%

13.2%

1.7%

0%

5%

10%

15%

20%


1.3%

0.9%

0.3%

0.0%

0.5%

1.0%

1.5%






Top five banks – Indonesia

0

10

20

30

40

50

60

70


2

4

6

8


19.5%

30.3%

25.8%

15.4% 13.3%

0%

10%

20%

30%

40%


16% 13%

11% 9%

6%

0% 2% 4% 6% 8%

10% 12% 14% 16% 18%


Return on equity




Islamic banking sector snapshot – Indonesia

0

2

4

6


0.1

0.2

0.3

0.4


17.9%

13.2%

1.7%

0%

5%

10%

15%

20%


1.3%

0.9%

0.3%

0.0%

0.5%

1.0%

1.5%






0%

10%

20%

30%

40%

50%

60%

70%

80%

0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20%

Bank D

With population approaching 250 million, and a positive stable economic outlook, Indonesia is likely to be the next major growth market for Islamic banking


Bank A

Bank B

Bank C

Bank D

Bank A

Bank B

Bank C


Gro

wth

in a

sset

s C

AG

R 2

008

- 201

1


While political and economic risks remain, Indonesia’s nascent Islamic banking industry is forecast to grow five folds to $83 billion by 2015

With local banks focused on retail customers, foreign institutions are developing significant presence in wholesale and corporate banking

A regulatory proposal seeks to limit foreign ownership to less than 50%


Report structure

Country spotlight

Bahrain

Egypt

Kuwait

Malaysia

Pakistan

Qatar

Turkey






CEO agenda



Banking sector overview – Kuwait











Inflation 4.7%






Total equity (US$ b) 22

Assets CAGR (2007-2011) 5.5%

Loans CAGR (2007-2011) 6.1%

Deposits CAGR (2007-2011) 8.7%


Islamic asset market share 33%





Banking sector snapshot – Kuwait

17 17 18

21 22

-

5

10

15

20

25

2007 2008 2009 2010 2011

128 141 145 149

159

- 20 40 60 80

100 120 140 160 180

2007 2008 2009 2010 2011

85 99

104 106 108

-

20

40

60

80

100

120

2007 2008 2009 2010 2011

83 99 104 109

116

-

20

40

60

80

100

120

140

2007 2008 2009 2010 2011




Banking sector overview – Kuwait











Inflation 4.7%






Total equity (US$ b) 22

Assets CAGR (2007-2011) 5.5%

Loans CAGR (2007-2011) 6.1%

Deposits CAGR (2007-2011) 8.7%







Banking sector snapshot – Kuwait

17 17 18

21 22

-

5

10

15

20

25

2007 2008 2009 2010 2011

128 141 145 149

159

- 20 40 60 80

100 120 140 160 180

2007 2008 2009 2010 2011

85 99

104 106 108

-

20

40

60

80

100

120

2007 2008 2009 2010 2011

83 99 104 109

116

-

20

40

60

80

100

120

140

2007 2008 2009 2010 2011




Top five banks – Kuwait

0

10

20

30

40

50


2

4

6

8

10


31% 31%

10% 8%

6%

0%

5%

10%

15%

20%

25%

30%

35%


13.0%

2.4%

10.2%

0.2%

9.1%

0%

2%

4%

6%

8%

10%

12%

14%


Return on equity




Islamic banking sector snapshot – Kuwait

0

10

20

30

40

50

60


1.0

2.0

3.0

4.0

5.0

6.0


2%

9%

3%

0%

2%

4%

6%

8%

10%


30.9%

6.0% 3.6%

0%

5%

10%

15%

20%

25%

30%

35%






-8%

-3%

2%

7%

12%

17%

22%

27%

0% 5% 10% 15% 20% 25% 30% 35%

Search for a differentiated business model to reignite growth


Bank C

Bank A Bank B

Bank D

Bank A

Bank B

Bank C


Gro

wth

in a

sset

s C

AG

R 2

008

- 201

1


Retail banking transformation, wealth management solutions and regional expansion will drive the next phase of growth for Islamic banks in Kuwait


Report structure

Country spotlight

Bahrain

Egypt

Kuwait

Malaysia

Pakistan

Qatar

Turkey






CEO agenda



Banking sector overview – Malaysia











Inflation 3.2%


Policy interest rate 3%





Assets CAGR (2007-2011) 9.9%

Loans CAGR (2007-2011) 11.8%

Deposits CAGR (2007-2011) 11.4%







397 435 464

504 579

-

100

200

300

400

500

600

700

2007 2008 2009 2010 2011

Banking sector snapshot – Malaysia

28 34

40 44

48

-

10

20

30

40

50

60

2007 2008 2009 2010 2011

267 304

334 359

411

-

100

200

300

400

500

2007 2008 2009 2010 2011

208 235

254 286

325

-

50

100

150

200

250

300

350

2007 2008 2009 2010 2011





Banking sector overview – Malaysia











Inflation 3.2%







Assets CAGR (2007-2011) 9.9%

Loans CAGR (2007-2011) 11.8%

Deposits CAGR (2007-2011) 11.4%







397 435 464

504 579

-

100

200

300

400

500

600

700

2007 2008 2009 2010 2011

Banking sector snapshot – Malaysia

28 34

40 44

48

-

10

20

30

40

50

60

2007 2008 2009 2010 2011

267 304

334 359

411

-

100

200

300

400

500

2007 2008 2009 2010 2011

208 235

254 286

325

-

50

100

150

200

250

300

350

2007 2008 2009 2010 2011





Top five banks – Malaysia

0

30

60

90

120

150


2

4

6

8

10

12


25%

14% 13%

8%

4%

0%

5%

10%

15%

20%

25%

30%


14.1%

22.4%

14.2% 14.8% 15.8%

0%

5%

10%

15%

20%

25%


Return on equity




Islamic banking sector snapshot – Malaysia

0

5

10

15

20

25


0.2

0.4

0.6

0.8

1.0

1.2

1.4


3.7%

2.3% 1.8%

0.0%

1.0%

2.0%

3.0%

4.0%


16% 18%

13%

0%

5%

10%

15%

20%

25%






0%

5%

10%

15%

20%

25%

30%

35%

40%

0% 5% 10% 15% 20% 25% 30%

Malaysia is seeking to double the share of Islamic banking assets by 2020. The game changer would be conversion of conventional banks


Bank A

Bank C

Bank B

Bank D

Bank A

Bank B

Bank C Bank D


Bank E

Bank F

Bank D

Bank G

Gro

wth

in A

sset

s C

AG

R 2

008

- 201

1

Low market share High market share

Market share 2011

Consolidation will help create larger Islamic banks with capacity to grow regionally

Operational transformation of Islamic banks and windows is a pre requisite for meaningful growth


Report structure

Country spotlight

Bahrain

Egypt

Kuwait

Malaysia

Pakistan

Qatar

Turkey






CEO agenda



Banking sector overview – Pakistan











Inflation 12%







Assets CAGR (2007-2011) 7.7%

Loans CAGR (2007-2011) 8.1%

Deposits CAGR (2007-2011) 12.9%







Banking sector snapshot – Pakistan

92 93 99

112 124

0

20

40

60

80

100

120

140

2007 2008 2009 2010 2011

4 4

6 7

7

0

2

4

6

8

2007 2008 2009 2010 2011

26 30

33 34 35

0

10

20

30

40

2007 2008 2009 2010 2011

36 41

44 50

58

0

10

20

30

40

50

60

70

2007 2008 2009 2010 2011





Top five banks – Pakistan

0

2

4

6

8

10

12

14

Bank A Bank B Bank C Bank D Bank E 0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 1.6


10% 10%

7% 6%

4%

0%

2%

4%

6%

8%

10%

12%


13.1%

22.2%

17.3%

21.0% 23.3%

0%

5%

10%

15%

20%

25%


Return on equity




Islamic banking sector snapshot – Pakistan

0.0

0.5

1.0

1.5

2.0

2.5


20.4%

6.3%

-1.2%

-5%

0%

5%

10%

15%

20%

25%


1.8%

0.6% 0.5%

0.0%

0.5%

1.0%

1.5%

2.0%


0.00

0.06

0.12

0.18






0%

10%

20%

30%

40%

50%

60%

70%

0% 2% 4% 6% 8% 10% 12%

Islamic banks will continue to experience high growth as they build their distribution capacity


Bank A

Bank B

Bank C

Bank A Bank B

Bank C


Gro

wth

in a

sset

s C

AG

R 2

008

- 201

1


Industry leader Islamic bank has thrived on differentiating itself from conventional peers

Strong potential for organic growth but Islamic banks need to build distribution capacity and scale


Report structure

Country spotlight

Bahrain

Egypt

Kuwait

Malaysia

Pakistan

Qatar

Turkey






CEO agenda



Banking sector overview – Qatar











Inflation 1.9%







Assets CAGR (2007-2011) 23.9%

Loans CAGR (2007-2011) 25.9%

Deposits CAGR (2007-2011) 21.4%



Islamic assets CAGR (2007-2011) 30%




Banking sector snapshot – Qatar

79

109 126

153

187

-

50

100

150

200

2007 2008 2009 2010 2011

9

13 15

17

26

-

5

10

15

20

25

30

2007 2008 2009 2010 2011

45 57

67

83

98

-

20

40

60

80

100

120

2007 2008 2009 2010 2011

43

66 73

85

109

-

20

40

60

80

100

120

2007 2008 2009 2010 2011





Banking sector overview – Qatar











Inflation 1.9%







Assets CAGR (2007-2011) 23.9%

Loans CAGR (2007-2011) 25.9%

Deposits CAGR (2007-2011) 21.4%







Banking sector snapshot – Qatar

79

109 126

153

187

-

50

100

150

200

2007 2008 2009 2010 2011

9

13 15

17

26

-

5

10

15

20

25

30

2007 2008 2009 2010 2011

45 57

67

83

98

-

20

40

60

80

100

120

2007 2008 2009 2010 2011

43

66 73

85

109

-

20

40

60

80

100

120

2007 2008 2009 2010 2011





Top five banks – Qatar

0

30

60

90


43.5%

10.3% 8.4% 8.0% 7.5%

0%

10%

20%

30%

40%

50%


0

2

4

6

8

10

12

14


17.7%

13.2% 12.2%

16.5% 17.5%

0%

4%

8%

12%

16%

20%


Return on equity




Islamic banking sector snapshot – Qatar

0

3

6

9

12

15

18


8.4% 8.0%

3.4%

0%

3%

6%

9%


12.2%

16.5%

13.3%

0%

3%

6%

9%

12%

15%

18%


0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5






0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%

Regulatory clarity has helped Islamic banks in Qatar to achieve scale in the high growth market. There is also potential for a strong Islamic capital market play in future


Bank B

Bank C

Bank A

Bank C

Bank B

Bank A


Gro

wth

in A

sset

s C

AG

R 2

008

- 201

1

Low Market Share High Market Share Market Share 2011

Barring the conventional industry leader, Islamic banks are comparable in size to conventional peers

Large infrastructure spend will fuel continued profitable growth for the banking industry


Report structure

Country spotlight

Bahrain

Egypt

Kuwait

Malaysia

Pakistan

Qatar

Turkey






CEO agenda



Banking sector overview – Saudi Arabia









Population (65 & over) 3%

Population growth 2.2 %

Inflation 5.0%







Assets CAGR (2007-2011) 9.5%

Loans CAGR (2007-2011) 9.5%

Deposits CAGR (2007-2011) 11.4%







Banking sector snapshot – Saudi Arabia

291

352 370 383 417

-

50

100

150

200

250

300

350

400

450

2007 2008 2009 2010 2011

29

36

44 48

51

-

10

20

30

40

50

60

2007 2008 2009 2010 2011

161

201 199 210 232

-

50

100

150

200

250

2007 2008 2009 2010 2011

194

229 254 266

298

-

50

100

150

200

250

300

2007 2008 2009 2010 2011





Top five banks – Saudi Arabia

0

30

60

90


3

6

9

12


19.5%

14.3% 12.5% 11.7%

9.0%

0%

5%

10%

15%

20%

25%


17.2%

22.5%

15.2%

10.4%

14.8%

0%

5%

10%

15%

20%

25%


Return on equity




Islamic banking sector snapshot – Saudi Arabia

0

10

20

30

40

50

60

Bank A Bank B Bank C 0

2

4

6

8

10


14.3%

2.5% 2.4%

0%

3%

6%

9%

12%

15%


22.5%

6.4%

2.7%

0%

5%

10%

15%

20%

25%






-5%

0%

5%

10%

15%

20%

25%

30%

35%

0% 5% 10% 15% 20%


Bank C

Bank D

Bank B Bank A Bank A

Bank B

Bank C

Bank D

Bank E



Gro

wth

in a

sset

s C

AG

R 2

008

- 201

1

With more than 50% share of the banking system assets in 2012, Islamic banking is in fact mainstream banking in Saudi Arabia

Conventional banks have large Islamic banking book which is more than just a ‘window’ operation

Housing finance will be reconfigured based on new mortgage law and (draft) regulations and offers significant growth opportunity

A key systemic challenge is to safeguard and strengthen Shari’a governance framework


Report structure

Country spotlight

Bahrain

Egypt

Kuwait

Malaysia

Pakistan

Qatar

Turkey






CEO agenda



Banking sector overview – Turkey











Inflation 6.5%







Assets CAGR (2007-2011) 20%

Loans CAGR (2007-2011) 27.2%

Deposits CAGR (2007-2011) 18.9%







Banking sector snapshot – Turkey

299

374 427

520

631

-

100

200

300

400

500

600

700

2007 2008 2009 2010 2011

136 168

189

268

354

-

50

100

150

200

250

300

350

400

2007 2008 2009 2010 2011

189

239 270

325 378

-

50

100

150

200

250

300

350

400

2007 2008 2009 2010 2011

50 54

71

86 88

- 10 20 30 40 50 60 70 80 90

100

2007 2008 2009 2010 2011





Top five banks – Turkey

0

20

40

60

80

100

120


2

4

6

8

10

12

14


17% 15% 15%

13% 11%

0%

5%

10%

15%

20%


11.8%

16.5%

24.8%

13.9%

18.3%

0%

5%

10%

15%

20%

25%

30%


Return on equity




Islamic banking sector snapshot – Turkey

0

2

4

6

8

10


0.2

0.4

0.6

0.8

1.0

1.2

1.4


9.9%

13.6% 14.6%

0%

4%

8%

12%

16%


1.5% 1.3%

1.2%

0.0%

0.4%

0.8%

1.2%

1.6%






0%

5%

10%

15%

20%

25%

30%

35%

40%

0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20%

Bank A

Bank B

Bank C

Bank D

Bank A

Bank B

Bank E

Bank C Bank D


Gro

wth

in a

sset

s C

AG

R 2

008

- 201

1


Turkey’s 2023 financial services vision could see Islamic banking industry tripling in size to more than $100 billion (approximately where Malaysia is today)


Islamic banks will continue to post strong growth helped by regulatory clarity and new liquidity management solutions

Possible entry of more foreign Islamic banks through acquisition & conversion


Report structure

Country spotlight

Bahrain

Egypt

Kuwait

Malaysia

Pakistan

Qatar

Turkey






CEO agenda



Banking sector overview – UAE











Inflation 0.9%







Assets CAGR (2007-2011) 8.5%

Loans CAGR (2007-2011) 12.2%

Deposits CAGR (2007-2011) 10.6%







Banking sector snapshot – UAE

325

391 411 434 450

-

100

200

300

400

500

2007 2008 2009 2010 2011

35

45

66 74 76

-

20

40

60

80

2007 2008 2009 2010 2011

193

246 265

283 289

-

50

100

150

200

250

300

350

2007 2008 2009 2010 2011

169

250 259 262 268

-

100

200

300

2007 2008 2009 2010 2011





Top five banks – UAE

0

20

40

60

80


2

4

6

8

10


17.1% 15.4%

11.0% 9.5%

5.4%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%


7.1%

14.0% 13.8% 13.9%

10.4%

0%

4%

8%

12%

16%


Return on equity




Islamic banking sector snapshot – UAE

0

5

10

15

20

25

30


0.5

1.0

1.5

2.0

2.5

3.0


10.4%

13.5%

6.7%

0%

4%

8%

12%

16%


5.4%

4.5%

1.7%

0%

1%

2%

3%

4%

5%

6%






-10%

-5%

0%

5%

10%

15%

20%

0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20%

Strategic Growth Matrix

Bank B

Bank A

Bank D

Bank A

Bank C

Bank C

Bank B

Bank D


Gro

wth

in a

sset

s C

AG

R 2

008

- 201

1


Regaining momentum through retail banking transformation is essential for Islamic banks in UAE

Undifferentiated business models will need to be reconfigured to be specialized (retail & SME) and diversified (regional, infrastructure, wealth management, etc.)


Report structure

Country spotlight

Bahrain

Egypt

Kuwait

Malaysia

Pakistan

Qatar

Turkey






CEO agenda



Ernst & Young Leadership – Islamic Banking Center of Excellence (and what they have to say)

Ashar Nazim [email protected]

Game changer for us would be bold, fresh thinking that drives responsible innovation

Abid Shakeel [email protected]

Successful strategy execution is dependant on a bank's operating model being realigned to deliver on the new strategy

Nida Raza [email protected]

Islamic banking is no rocket science but structuring real Islamic products requires sophisticated thinking

Sohaib Umar [email protected]

Industry may potentially face an existential threat if it cannot manage its most important risk, i.e. Shari'a non-compliance

Shoaib Qureshi [email protected]

Real progress will only come from greater integration with the real economy

Shahid Mughal [email protected]

If the change does not happen at the right time, there will be nothing left to change

Mustafa Adil [email protected]

Market leadership will belong to those who can meet both commercial and Shari'a needs of their customers

Noman Mubashir [email protected]

I wish my Islamic bank could deliver the same service levels that my previous conventional bank had to offer!

Report methodology and tools

► The break down of banks selected country wise in the EY Universe is:

► Bahrain – 7 Islamic and 4 conventional banks ► Saudi Arabia – 4 Islamic and 5 conventional banks ► Kuwait – 4 Islamic and 3 conventional banks ► Qatar – 3 Islamic and 3 conventional banks ► UAE – 8 Islamic and 4 conventional banks ► Indonesia – 5 Islamic and 4 conventional banks ► Malaysia – 13 Islamic and 4 conventional banks ► Pakistan – 5 Islamic and 3 conventional banks ► Bangladesh – 5 Islamic and 2 conventional banks ► Jordan – 2 Islamic and 1 conventional banks ► Egypt – 2 Islamic and 4 conventional banks ► Turkey – 4 Islamic and 5 conventional banks

Anonymity and Quotes

► All interviewees were assured of anonymity and minutes documented during our discussions

► Quotations have been used to support arguments made in the report.

► Global Islamic banking assets are estimated based on publicly available data from 22 Islamic banking markets

► The research and insights are primarily based on EY Islamic Banking Universe (EY Universe), which is proprietary, based on sample, and is not meant to be fully exhaustive

► The EY Universe analysis covers 62 Islamic banks and 42 conventional banks across 12 Islamic banking markets, with a total asset base of $2.6 trillion (2011)

► For the purpose of this report, the analysis excludes Iran market due to its unique characteristics (except when reporting estimated global industry assets)

► EY Universe covers approximately 80% of the estimated global Islamic banking assets (excluding Iran market)

► Insights are also based on industry survey, including interviews with executives and industry observers, to identify key trends, risks and priorities

► Limited disclosures on Islamic windows, subsidiary operation and offshore businesses was a limiting factor

► The EY Universe is categorized as follows: ► GCC – Bahrain, Kuwait, Qatar, Saudi Arabia, UAE ► South East Asia – Indonesia, Malaysia ► Rest of the World – Bangladesh, Egypt, Jordan, Pakistan,

Turkey


Report methodology and tools

► The break down of banks selected country wise in the EY Universe is:

► Bahrain – 7 Islamic and 4 conventional banks ► Saudi Arabia – 4 Islamic and 5 conventional banks ► Kuwait – 4 Islamic and 3 conventional banks ► Qatar – 3 Islamic and 3 conventional banks ► UAE – 8 Islamic and 4 conventional banks ► Indonesia – 5 Islamic and 4 conventional banks ► Malaysia – 13 Islamic and 4 conventional banks ► Pakistan – 5 Islamic and 3 conventional banks ► Bangladesh – 5 Islamic and 2 conventional banks ► Jordan – 2 Islamic and 1 conventional banks ► Egypt – 2 Islamic and 4 conventional banks ► Turkey – 4 Islamic and 5 conventional banks

Anonymity and Quotes

► All interviewees were assured of anonymity and minutes documented during our discussions

► Quotations have been used to support arguments made in the report.

► Global Islamic banking assets are estimated based on publicly available data from 22 Islamic banking markets

► The research and insights are primarily based on EY Islamic Banking Universe (EY Universe), which is proprietary, based on sample, and is not meant to be fully exhaustive

► The EY Universe analysis covers 62 Islamic banks and 42 conventional banks across 12 Islamic banking markets, with a total asset base of $2.6 trillion (2011)

► For the purpose of this report, the analysis excludes Iran market due to its unique characteristics (except when reporting estimated global industry assets)

► EY Universe covers approximately 80% of the estimated global Islamic banking assets (excluding Iran market)

► Insights are also based on industry survey, including interviews with executives and industry observers, to identify key trends, risks and priorities

► Limited disclosures on Islamic windows, subsidiary operation and offshore businesses was a limiting factor

► The EY Universe is categorized as follows: ► GCC – Bahrain, Kuwait, Qatar, Saudi Arabia, UAE ► South East Asia – Indonesia, Malaysia ► Rest of the World – Bangladesh, Egypt, Jordan, Pakistan,

Turkey


Ernst & Young universe of Islamic and conventional banks

Islamic banks that contributed data to Universe: Bahrain ► Al Baraka Banking Group (ex subsidiaries) ► Al Baraka Bank Bahrain ► Ithmaar Bank ► Al Salam Bank ► Bahrain Islamic Bank ► Khaleeji Commercial Bank ► Kuwait Finance House Bahrain

Saudi Arabia ► Al Rajhi Bank ► Bank Al Jazira ► Alinma Bank ► Bank AlBilad

Kuwait ► Kuwait Finance House ► Ahli United Bank ► Boubyan Bank ► Kuwait International Bank

Qatar ► Qatar Islamic Bank ► Masraf Al Rayan ► Qatar International Islamic Bank

Conventional banks that contributed data to our Universe : Bahrain ► Arab Banking Corporation ► Ahli United Bank ► Bank of Bahrain and Kuwait ► National Bank of Bahrain

Saudi Arabia ► National Commercial Bank ► Samba Financial Group ► Riyad Bank ► The Saudi British Bank ► Arab National Bank

Kuwait ► National Bank of Kuwait ► Burgan Bank ► Commercial Bank Kuwait

Qatar ► Doha Bank ► Qatar National Bank ► Commercial Bank of Qatar


UAE ► Abu Dhabi Islamic Bank ► Ajman Islamic Bank ► Al Hilal Bank ► Dubai Islamic Bank ► Emirates Islamic Bank ► Noor Islamic Bank ► Sharjah Islamic Bank

Indonesia ► Bank Bri Syariah ► Bank Muamalat ► Bank Syariah Mandiri ► Bank Syariah Mega ► Bank Syariah Bukopin

Malaysia ► Affin Bank ► Al Rajhi Bank ► Alliance Bank ► Asian Finance ► Bank Islam ► Bank Muamalat ► CIMB Islamic Bank ► Hong Leong Islamic Bank ► Kuwait Finance House Malaysia ► Maybank Islamic Bank ► Public Islamic bank ► RHB Islamic Bank

UAE ► Abu Dhabi Commercial Bank ► Emirates NBD ► First Gulf Bank ► Mashreq Bank ► National Bank of Abu Dhabi

Indonesia ► Bank Central Asia ► Bank Mandiri ► Bank Negara Indonesia ► Bank Rakyat Indonesia

Malaysia ► CIMB Bank ► Maybank Bank ► RHB Bank ► Public Bank



Islamic banks that contributed data to Universe: Bahrain ► Al Baraka Banking Group (ex subsidiaries) ► Al Baraka Bank Bahrain ► Ithmaar Bank ► Al Salam Bank ► Bahrain Islamic Bank ► Khaleeji Commercial Bank ► Kuwait Finance House Bahrain

Saudi Arabia ► Al Rajhi Bank ► Bank Al Jazira ► Alinma Bank ► Bank AlBilad

Kuwait ► Kuwait Finance House ► Ahli United Bank ► Boubyan Bank ► Kuwait International Bank

Qatar ► Qatar Islamic Bank ► Masraf Al Rayan ► Qatar International Islamic Bank

Conventional banks that contributed data to our Universe : Bahrain ► Arab Banking Corporation ► Ahli United Bank ► Bank of Bahrain and Kuwait ► National Bank of Bahrain

Saudi Arabia ► National Commercial Bank ► Samba Financial Group ► Riyad Bank ► The Saudi British Bank ► Arab National Bank

Kuwait ► National Bank of Kuwait ► Burgan Bank ► Commercial Bank Kuwait

Qatar ► Doha Bank ► Qatar National Bank ► Commercial Bank of Qatar


UAE ► Abu Dhabi Islamic Bank ► Ajman Islamic Bank ► Al Hilal Bank ► Dubai Islamic Bank ► Emirates Islamic Bank ► Noor Islamic Bank ► Sharjah Islamic Bank

Indonesia ► Bank Bri Syariah ► Bank Muamalat ► Bank Syariah Mandiri ► Bank Syariah Mega ► Bank Syariah Bukopin

Malaysia ► Affin Bank ► Al Rajhi Bank ► Alliance Bank ► Asian Finance ► Bank Islam ► Bank Muamalat ► CIMB Islamic Bank ► Hong Leong Islamic Bank ► Kuwait Finance House Malaysia ► Maybank Islamic Bank ► Public Islamic bank ► RHB Islamic Bank

UAE ► Abu Dhabi Commercial Bank ► Emirates NBD ► First Gulf Bank ► Mashreq Bank ► National Bank of Abu Dhabi

Indonesia ► Bank Central Asia ► Bank Mandiri ► Bank Negara Indonesia ► Bank Rakyat Indonesia

Malaysia ► CIMB Bank ► Maybank Bank ► RHB Bank ► Public Bank



Pakistan ► Al Baraka Pakistan ► Bank Islami ► Burj Bank ► Dubai Islamic Bank Pakistan ► Meezan Bank

Bangladesh ► Al Arafah Bank ► First Security Bank ► ICB Islamic Bank ► Islami Bank Bangladesh ► Shahjalal Islamic Bank

Jordan ► Jordan Dubai Bank ► Jordan Islamic Bank

Egypt ► Al Baraka Egypt ► Faisal Islamic Bank of Egypt

Turkey ► Al Baraka Turk ► Bank Asya ► Kuveyt Turk ► Turkiye Finanse

Pakistan ► MCB Bank ► National Bank ► United Bank

Bangladesh ► Agrani bank ► Rupali Bank

Jordan ► Arab Bank

Egypt ► Arab Cairo Bank ► Banque Misr ► Commercial International Bank ► Union National Bank Egypt

Turkey ► Turkiye Vakiflar Bankasi ► Yapi ve Kredi Bankasi ► Turk Economi Bankasi ► Turkiye Garanti Bankasi ► AK Bank



Pakistan ► Al Baraka Pakistan ► Bank Islami ► Burj Bank ► Dubai Islamic Bank Pakistan ► Meezan Bank

Bangladesh ► Al Arafah Bank ► First Security Bank ► ICB Islamic Bank ► Islami Bank Bangladesh ► Shahjalal Islamic Bank

Jordan ► Jordan Dubai Bank ► Jordan Islamic Bank

Egypt ► Al Baraka Egypt ► Faisal Islamic Bank of Egypt

Turkey ► Al Baraka Turk ► Bank Asya ► Kuveyt Turk ► Turkiye Finanse

Pakistan ► MCB Bank ► National Bank ► United Bank

Bangladesh ► Agrani bank ► Rupali Bank

Jordan ► Arab Bank

Egypt ► Arab Cairo Bank ► Banque Misr ► Commercial International Bank ► Union National Bank Egypt

Turkey ► Turkiye Vakiflar Bankasi ► Yapi ve Kredi Bankasi ► Turk Economi Bankasi ► Turkiye Garanti Bankasi ► AK Bank

References and acknowledgments

Sources ► Making the right moves – Global banking outlook 2012-13 ► Financial regulatory reform – What it means for bank business models ► Rapid Growth Markets (RGMs) forecast ► DNA of the CIO ► Trading places - the emergence of new patterns of international trade ► Central bank reports ► Global Insight - comparative world overview tables ► Zawya ► Economist intelligence unit ► The Banker ► Islamic Finance News ► Bloomberg ► Bank annual reports Ernst & Young’s Project Team ► Shoaib Qureshi ► Noman Mubashir ► Saad Qureshi ► Zahid Awan ► Ali Al Musawi

For questions or comments, please contact : Shoaib Qureshi: [email protected]

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Ernst & Young is a global leader in assurance, tax, transaction and advisory services. Worldwide, our 167,000 people are united by our shared values and an unwavering commitment to quality. We make a difference by helping our people, our clients and our wider communities achieve their potential.

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© 2012 EYGM Limited. All Rights Reserved.

EYG no. AU1369

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A MEGA Brand: Shaping the Future of the Global Islamic Finance Industry Since 1993P.O. Box 72045, Dubai, UAE | t. +9714 343 1200 | f+971 4 343 6003 MEGA Brands. MEGA Clients. Market Leaders. www.megaevents.net

Celebrating 20 Years of Leadership and Innovation in the Islamic Finance WorldMEGA: Shaping the Future of the Global Islamic Finance Industry Since 1993

2 Decades of Supporting the Market Leaders

MEGA is the leading international information firm focused on achieving business results for the Islamic banking & finance industry since 1993. Our exclusive focus on Islamic finance has enabled us to create significant value for the leading players in the Islamic banking, finance and investment markets. The portfolio of MEGA brands represents the landmark industry conferences and our clients are the leading players in the international financial markets.

Partnering with Governments and the Industry Thought Leaders

Our Strategic Partners are world leaders in their respective fields and include key government finance and regulatory agencies such as the Central Bank of Bahrain, Dubai International Financial Centre, UK Trade & Investment, the Monetary Authority of Singapore, the Economic Development Board of Bahrain, the Qatar Financial Centre Authority, Luxembourg for Finance, Business Bermuda, the U.S. Chamber of Commerce and Invest in Mauritius. These and our other strategic alliances with international thought leaders including Ernst & Young further strengthen MEGA’s brand leadership position by providing original new research insights on the Islamic finance industry worldwide.

Investing in Our Brands: Number 1 in Each of Our Markets

MEGA continues to grow its portfolio of Islamic finance brands to further extend our leadership position across the Banking, Takaful, Funds, Capital Markets, and Project Finance segments. Each brand is successfully developed over many years in order to further cement its number 1 position in its respective market.

In 1994 we founded the World Islamic Banking Conference (WIBC), which at the time was one of the first conferences in the world to focus on this nascent industry. That first year we had 120 pioneering delegates and one sponsor. Today, fast approaching 2 decades later and with more than 1,200 delegates from over 50 countries attending the conference each year, WIBC is an iconic brand internationally recognised as the world’s largest gathering of Islamic finance leaders.

A World Stage: Genuinely Global Dialogues

MEGA brands have a genuinely global reach across the Islamic finance industry. An initiative to further broaden this international representation ‘The World Comes to WIBC’ was launched at WIBC 2007 and has grown to now feature a British Pavilion led by UKTI and comprising leading British-based banks. Over the years, the World Comes to Initiative has expanded and now features a series of Country Pavilions, Country Interfaces and Country Focus Roundtable Debates showcasing exciting new high-growth markets for Islamic finance. A number of leading international Islamic banking groups also now convene their annual board meetings along the sidelines of WIBC.

Understanding Client Needs & Delivering Long-Term Value

MEGA’s leadership position has come as a result of our relentless focus on the constantly changing needs of our clients as the Islamic finance industry has grown and matured. Whether it be the challenges of launching a new bank, a new investment fund, an innovative new retail financial product or raising corporate profile in a key target market, we ensure that our offerings are closely aligned to the immediate business priorities of our clients. Then we make sure that we deliver on our promises and that is why the market leaders come back and work with us year after year. Our genuine value creation is highlighted by our long-term relationship with Ernst & Young who have worked with us continuously since the inception of the World Islamic Banking Conference 19 years ago - and who are also now our partners across the portfolio of MEGA brands.

20 Years of shaping the future of the global Islamic finance industry

20 Years of gathering industry thought leaders in dynamic debate

20 Years of bringing together more than 1,200 international industry leaders

20 Years of successfully working with the market leaders

20 Years of delivering a one-of-a-kind spectacle to the Islamic finance industry

1,200 Industry leaders. 50+ Countries. 1 Gathering: WIBC 2013The World’s Largest Annual Gathering of International Islamic Finance Leaders

WIBC: Celebrating 2 Decades of Supporting Growth, Excellence & Innovation in the Global Islamic Finance Industry

To be a part of the 2 decades of WIBC celebrations please contact: [email protected] | t:+971 4 343 1200 | f:+971 4 343 6003 | P.O. Box 72045, Dubai | www.megaevents.net/Islamic_banking

In collaboration with

WIBC is a MEGA Brand

20th Annual

8, 9 & 10 December 2013, The Gulf Hotel, Kingdom of Bahrain

Supported by

World islamic banking competitiveness report 2012 13 - Ernst & Young

Economy & Finance

Transcript of World islamic banking competitiveness report 2012 13 - Ernst & Young