The report notes that 2008 financial year assets have increased 66% since the previous year's survey, bucking the trend of slow growth in other markets- Asia's 300 largest banks, for example, only grew assets 13.4% in the same period.
"Islamic finance has seen an incredible surge in popularity, based on stronger regulatory regimes and a better inter-national understanding of its dynamics," says Emmanuel Daniel, President and CEO of The Asian Banker.
The report notes that Islamic finance assets are largely concentrated in Iran, Kuwait, Malaysia, Saudi Arabia and the United Arab Emirates, but growth drivers have come from all over the region, in particular Al-Rajhi Bank, which saw assets increase 32.1%. Banks in Bahrain, Malaysia, Kuwait, Qatar, Syria, and the UK also saw significant double- or triple-digit asset growth.
World's largest Islamic banks by assets are concentrated in only five markets
Despite the financial turmoil in late 2008 that crippled so many large Western institutions, Islamic banks have continued to grow in prominence and size. According to Asian Banker Research, the world's 100 largest wholly Islamic banks, ranked by assets, held more than $580bn in assets in 2008, a 66% increase from the $350bn they held in the previous year.
The top ten banks remained largely the same as the ones that dominated our previous ranking in 2008, with Bank Melli Iran (BMI) still topping the list and Saudi Arabia's Al Rajhi Bank in second place, albeit catching up rapidly with a 32% surge in assets compared with BMI's negligible growth.
Iranian banks are still the biggest Islamic banking players, holding seven out of the top 10 ranks, and 12 of the 100. The Iranian banks also take up around 40% of listing's assets. The four next-largest markets--the UAE, Malaysia, Saudi Arabia and Kuwait--each has similar asset sizes to one another, and together carve out nearly another 40% of the ranking's assets combined, with smaller banks in 10 other markets rounding out the list.
Although two Islamic banks in the UK are large enough to be in the top 100, Islamic banks headquartered outside the Middle East, Asia and North Africa are still very small next to longer-established players in the Middle East. East of Iran, as only Malaysian and Bangladeshi Islamic banks have a significant amount of assets. Indonesia, the world's most populous Muslim nation, only has two banks on the list, while Pakistan has three, and Brunei and Singapore one each. Saudi Arabia's representation is proportionately the largest, as the three banks it has in the list are all in the top 35. Sudanese banks appeared to be among the weakest, with only seven appearing in this year's ranking, down from 19 in the previous ranking.
Saudi Arabian banks are the most profitable in the sector
Despite the size of the Iranian banks, Saudi Arabian banks are much more profitable: the three Saudi Arabian banks in the top 100 Islamic banks contributed 19% of the ranking's total income. Al Rajhi Bank had the highest net income figure of $1.74bn, the only bank to break a billion, which was almost three times more than the second-most profitable Islamic bank, Kuwait Finance House. The bank also earned over five times the most profitable Iranian bank, Bank Tejarat.
The bank that jumped the greatest in the asset ranking is Dubai's start-up lender Noor Islamic Bank, which climbed up the ranks to 20th this year. CIMB Islamic Bank also shot up 19 positions to stand in the 22nd position with asset growth of 107.5%.
This is largely due to the growth of consumer banking, where financial assets grew by 130.2% and deposits by 82.3%. The bank expects this segment to continue contributing positively to the bank's bottom line.
On the other hand, Bank Islam Brunei Darussalam--the sole Bruneian bank in the listing--slipped the most from 34th to 49th. Investment Dar from Kuwait, despite a 20.9% growth in assets, dropped from 19th to 30th position since its growth fell short of the overall growth of the banks in the ranking.
Expecting major changes in the top 10 banks within the next six months
Looking ahead, it can already be seen that BMI may not be the largest bank in the listing for much longer, as it had a negligible growth rate in the ranking. This may be due to the European Union freezing the bank's assets, which has shrunk the bank's lead over Al Rajhi Bank to just 4% from 40% the previous year.
Considering Al Rajhi Bank's 32% change in total assets in the year, it is likely to overtake BMI in asset size in 2009. Furthermore, with a lack of growth in assets of Dubai Islamic Bank and Bank Maskan, we expect to see a broad shake-up in the rest of the top ten Islamic banks in 2009 as well.
About The Asian Banker
The Asian Banker is the foremost provider of strategic business intelligence in the financial services industry in the Asia Pacific and Middle East regions. The organization has offices in Singapore, Kuala Lumpur, Beijing and Dubai as well as representatives in Shanghai, London and New York. With a business that revolves around publications, research services, training and forums, the organization is highly regarded in the financial services community for its incisive and independent commentaries on developments in the industry.
Source: Middle East Company News Wire