Qatar Islamic Bank (QIB), Qatar's biggest Islamic bank, has confirmed that it is in exclusive talks to acquire a strategic stake in Bank Aysa, Turkey's biggest Islamic Bank.
QIB (UK) reaps benefits of new strategy
ABA Corporate Member, QIB (UK) reported record profits last year as it reaped the benefits of a change in strategy and its senior management team.
ABA Editor, Andrew Cunningham, spoke to Fuad Shakshir, who leads the bank’s Structured Real Estate business, to find out how the bank has been changing, and to get his insights on the UK property market.
Arab Banker: Who is QIB (UK)?
Fuad Shakshir: QIB (UK) is a London bank, regulated by the PRA and FCA, that is wholly-owned by Qatar Islamic Bank. Like our parent, we are a wholly Shari’ah-compliant bank. We had assets of £622 million at the end of 2018, of which nearly 80% was in financing arrangements. About 80% of non-equity funding is in the form of deposits. We had a total capital ratio at the end of 2018 of 22%.
Three years ago, we re-focussed our strategy on two business lines: Structured Real Estate (SRE) and Private Banking. Our CEO, Duncan Steele-Bodger joined us in September 2016, Nadeem Yaghnam, Head of Private Banking, joined around the same time and I joined shortly afterwards.
Private Banking develops strong relationships with Qatari and other High Net Worth Individuals providing them with bespoke banking services that include current and savings accounts, and longer-term Wakala deposits and residential real estate financing (which includes buy-to-let and buy-to-live regulated mortgages) covering the Greater London area.
What kind of real estate financing does your SRE department do?
I think of that question more in terms of, “What do our customers want?” We have customers who are focussed on wealth preservation: they are often interested in prime assets, which they will hold for a long time – they are often thinking in terms of inter-generational wealth transfer. Then there are customers who are focussed on yield: they are often looking for commercial properties with long leases and tenants who have strong covenants and they are also open to opportunities outside London. Then there are clients who are very financially sophisticated and are focussed on short term capital growth (IRR - internal rate of return - driven) and development finance is often the best fit for these clients.
Do you only do business with Qatari clients?
No, we are open for business with all nationalities and in practice we deal with clients from all over the Gulf and the Middle East. We also work with local investors, including UK companies and high net worth individuals.
It is worth pointing out that both Nadeem and I are Arabic speakers. We are originally Jordanian and spent about 30 years each working in UK property and banking before joining QIB (UK), so we know the market very well. As a result, both Nadeem and I are very comfortable interacting with clients from the Middle East – we can hold the meetings in Arabic, and we have usually visited our clients’ countries many times during the course of our careers.
Is the political uncertainty in the UK making the UK property market less attractive for foreign investors?
We’re not seeing that. If we talk about Brexit, it is important to make a distinction between commercial banks who are doing cross border business in Europe, and a firm like QIB (UK) that is managing investments and private banking in the UK. Commercial banks that have been providing services for clients in the EU are having to make new arrangements to provide those services after the UK leaves the EU because the ‘passporting’ arrangements whereby firms regulated in the UK were able to provide those services in other EU countries are expected to fall away. But that is not what we do – ‘passporting’ is irrelevant to us. Our ability to provide services in the UK to investors from the Middle East, or even investors based in Europe, will continue unchanged after Brexit.
In recent years, the British government and British regulators have been increasing disclosure requirements around property investment in the UK and reducing some of the tax advantages. How is that affecting demand for UK property?
The new disclosure requirements are not a problem for serious investors. From our side, we help our clients by clearly setting out and explaining all the requirements. From their side, they often have accountants and lawyers who know them well, have worked with them for years, and can quickly put together the required information. As for taxation, that has had most impact around the £2 million price point and our transactions tend to be much larger than that. Many of our deals are in the £5 – 15 million range and, even around the £2 million point, the costs of buying, holding and selling properties in London are lower than in many other centres, including Paris and Berlin (according to research by Savills).
Furthermore, from a Middle Eastern perspective, London retains many advantages which other cities do not have. It is an English-speaking environment which Gulf Arabs and others have been visiting in large numbers since the 1970s. It is a city that they know their way around. The rule of law, and legal precedents, are established throughout the UK, and travel connections are easy to anywhere in the world.