LONDON, 28 February 2005 — The announcement yesterday that Bahrain-based investment bank, First Islamic Investment Bank, is to change its name to Arcapita Bank, has raised questions about the reasons behind the move.
The name change, which applies to the parent and its wholly-owned subsidiaries, Crescent Capital Investments Inc. in the US and Crescent Capital Investments (Europe) Limited in the UK, officially takes place on March 15, and according to the bank is a key part of its “strategy to evolve into a leading international financial institution, offering corporate investment, real estate investment and asset-based investment activities”.
First Islamic’s chief executive officer, Atif Abdulmalik, stresses that “although we have a new name, we will continue to adhere to the same values and investment principles which have helped us to succeed. The Arcapita name will allow us to build a differentiated brand and deliver an even better service to our investors.”
Some Islamic bankers however are puzzled. “I would have thought that First Islamic Investment Bank was already a strong brand name. In any case there are many corporates where the names of the subsidiaries are different to those of the parent,” stressed one leading Islamic banker.
First Islamic stresses that hitherto there was some confusion over the relationship between the parent and its US and UK subsidiaries because of the different names. This name change is merely, as Chairman Mohammed Abdulaziz Aljomaih contends, to build a strong unified brand “that will allow us to build on our established relationship with our shareholders, investors and business partners and enhance our ability to deliver innovative investment opportunities that generate superior returns.”
First Islamic recently announced record net profits of $70.5 million for the year ended December 2004 — a 57 percent increase over the $44.8 million achieved in 2003. Since commencing its operations in 1998, the bank’s net income has grown at a compounded annual growth rate of more than 45 percent and its balance sheet has grown twelvefold to more than $1.2 billion as of Dec. 31, 2004. The bank is paying a dividend of $30.8 million to shareholders, representing a return of 20 percent on the bank’s paid-in capital, and a return on average total equity of 27.5 percent for 2004.
During 2004, the bank strengthened its balance sheet by increasing its equity capital base to $325 million through a rights offering and a third party share offering and increased the maturity profile of its liabilities by completing a 75 million-euro Sukuk issuance.
The new name and corporate logo, developed and designed by Future Brands, a leading US-based branding and corporate identity company, according to First Islamic is an amalgam of the words Arc and Capital. Arc signifies the straddling of First Islamic’s business demography from Atlanta in the US to London in the UK and to Bahrain in the Middle East. Capital signifies the building block of finance.
But what about the ethical values which is an intrinsic part of a faith-based financial system? While First Islamic has a clear corporate message in terms of its faith-based financial activities, Arcapita does not have a similar clarity in this respect. Yes, the arc can be construed as Noah’s Ark, with all its connotations.
Shariah advisories such as Sir Dr. Zaki Badawi commend the First Islamic name change and are not keen on the use of words “Islam” and “Islamic” in the titles of banks and financial institutions. At the end of day, they stress, its is the quality of the shareholders, investors, management, operations, compliance, business strategies, performance, and Shariah compliance that will make the bank a success or a failure.
In any case there is no Shariah requirement to include the words “Islam” or “Islamic” in the names of financial institutions. This is purely an arbitrary choice.
Has the name change perhaps been influenced by the post-9/11 fall out and perceivedly anti-Islam and anti-Arab environment in the US and in some European countries? First Islamic, which has over $1.5 billion of exposure to the US markets, primarily in US real estate assets and private equity buyouts, stresses that there is no connection between its name change and the politics of its investment domiciles.
To date, the bank has completed 35 transactions with a total value of over $7.5 billion and has an equity capital base in excess of $300 million.
Abdulmalik, stresses: “The past year has been marked by strong growth across each of our business lines and markets of operation. During the year, we were particularly focused on expanding our asset-based investment line of business and expansion in Europe. We have recruited a number of new executives in our three offices and are well placed to significantly increase our deal flow and execute the next phase of our expansion.”
The bank has recently closed a landmark deal through its US-based subsidiary, Crescent Capital — the acquisition of fast food chain Church’s Chicken from AFC Enterprises, Inc. for $390 million.
To further boost the business, Crescent Capital has appointed Harsha V. Agadi as president and CEO of Church’s Chicken. According to Agadi, Church’s Chicken, one of the largest quick-service food concepts in the world, “will continue to focus on franchise growth in the US and international markets as we maintain our position as the Number One value provider in the chicken segment. Our goal is to be the most admired restaurant company in America.”
