Islamic banks in GCC likely to outperform conventional counterparts: Report

Analysts at Moody’s said that Islamic banks perform better primarily as a result of their low funding costs, which reflect their reliance on largely stable current and savings account balances. (Reuters)
Updated 19 March 2017
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Islamic banks in GCC likely to outperform conventional counterparts: Report

JEDDAH: The profitability of Islamic banks in the Gulf Cooperation Council (GCC) is likely to outpace that of their conventional peers for the second consecutive year in 2017 on the back of stronger margins and the resilient cost of risk, said a report issued by Moody’s Investors Service.

According to the report, Islamic banks have become more profitable than their conventional counterparts in 2016 after trailing for five years.
“Islamic banks will be able to maintain their profitability in 2017, as lower funding costs will support their margins against a backdrop of rising interest rates, while improvements in their risk management and asset quality will further ease the pressure on their cost of risk,” said Nitish Bhojnagarwala, assistant vice president — analyst at Moody’s.
Analysts at Moody’s said that Islamic banks perform better primarily as a result of their low funding costs, which reflect their reliance on largely stable current and savings account balances. “Islamic banks also tend to have higher asset yields, given their focus on retail and the real estate-related lending,” the report said.
Moody’s expects that Islamic banks will retain a margin advantage of about 40 basis points over conventional banks in 2017. Islamic banks’ net profit margins are analogous to conventional banks’ net interest margins.
“The cost of risk for Islamic banks has converged with the conventional peers as they diversify away from real estate lending toward other sectors and tighten their risk management practices. In the past, higher impairment charges on loans and investments have dampened Islamic banks’ profitability,” said Bhojnagarwala.
“Conventional banks will continue to beat Islamic peers in terms of cost efficiency,” he added.
Islamic banks have a higher cost base because they are younger and more focused on retail customer segments. This means higher levels of investment in branch network expansion and technology. Conventional banks in the GCC, in contrast, have already established their branch networks.


‘There is no free lunch’, Macron tells tech giant CEOs

Updated 24 May 2018
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‘There is no free lunch’, Macron tells tech giant CEOs

PARIS: President Emmanuel Macron told executives from the world’s biggest technology firms on Wednesday that he wanted innovation to be a driving force for the French economy, but also that they needed to contribute more to society.
The French leader paints himself as a champion of France’s plugged-in youth and wants to transform France into a “startup nation” that draws higher investments into technology and artificial intelligence. He is also spearheading efforts in Europe to have digital companies pay more tax at source.
Macron’s guest-list included Facebook Inc. Chief Executive Mark Zuckerberg, IBM’s Virginia Rometty, Intel Corp’s Brian Krzanich, Microsoft Corp’s Satya Nadella and a raft of other big hitters in the corporate world.
“There is no free lunch,” he quipped in English to the executives lined up on the steps of the Elysee Palace for a photo call at a lunch meeting. “So I want from you some commitments.”
As Macron spoke, IBM announced it would hire about 1,400 people in France over the next two years in the fields of blockchain and cloud computing.
Ride-hailing app Uber also said it planned to offer all its European drivers an upgraded version of the health insurance it already provides in France in a drive to attract independent workers and fend off criticism over their treatment.
Macron will hold one-on-one talks with Mark Zuckerberg on tax and data privacy on the sidelines of the Tech For Good summit — a day after the Facebook chief executive faced questions from European Union lawmakers.
Those talks will be frank, an Elysee official said ahead of the meeting. While Macron will be pitching France Inc, he will also push his case for a European Union tax on digital turnover and a tougher fight against both data piracy and fake news.
Zuckerberg on Tuesday sailed through a grilling from EU lawmakers about the social network’s data policies, apologizing to leaders of the European Parliament for a massive data leak but dodging numerous questions.
Macron told the executives that business needed to do more in tackling issues such as inequality and climate change.
“It is not possible just to have free riding on one side, when you make a good business,” the French president said.