Business and finances headlines

Australias nsw revives islamic finance push


May 13 The government of the Australian state of New South Wales, home to the country's financial capital Sydney, will send a group to Dubai this week to discuss ways to develop the Islamic finance industry, officials said. The delegation, led by New South Wales premier Barry O'Farrell and including financial services professionals, will explore regulatory and legal issues at a roundtable discussion with the Dubai Export Development Corp on Tuesday."The event will discuss business opportunities in New South Wales, with particular attention given to Islamic finance," an Australian government official, who declined to be named under briefing rules, told Reuters. The delegation will also visit Abu Dhabi and Lebanon. With proximity to southeast Asia, where Islamic finance is growing rapidly, Australia could play a role in the industry, officials believe. But efforts to pass the necessary legislation at a federal level have been slow, so the state government wants to get involved."The state government is very interested and trying to be proactive in getting Middle East and local players together to work out a deal," said Salim Farrar, senior lecturer at the University of Sydney Law School. Passing legislation governing Islamic finance will require a series of politically charged debates, Farrar said.

But support is building in the business community, said Talal Yassine, managing director at Sydney-based Crescent Wealth. "Clearly there is going to be a push to get Islamic finance up in Australia."TAX

Australia faces a challenge shared by other jurisdictions new to Islamic finance: taxation. Certain Islamic finance structures, particularly sukuk or Islamic bonds, can attract double or even triple tax duties because they require multiple transfers of title of the underlying asset. Obtaining tax amendments to alleviate this appears difficult to push through the minority government of Australian Prime Minister Julia Gillard."At the federal level developments are going nowhere fast," said Matthew Stutsel, national head of taxation for consultants KPMG in Sydney.

The Australian Board of Taxation released a discussion paper in October 2010 which prompted consultation meetings and submissions. The final review was delivered to the government's assistant treasurer last June. But no further action has been taken, and the public release of the report "is a matter for the Government to decide", a Board of Taxation statement said. The government's attention has been focused on mining and carbon tax initiatives, and an attempt to deliver a budget surplus; extending tax breaks in other areas might not sit well with voters. Elections are due in 2013. But while federal-level discussions have been difficult, New South Wales is interested in Islamic finance partly because of the need to fund state projects such as upgrading railway networks and refinancing public utilities. Islamic investors operate large pools of investment funds in southeast Asia and the Gulf. Attracting investment into infrastructure and other sectors is an important part of the state government's efforts to position Sydney as a leading international financial centre, the Australian official said. Stutsel said work was being done within the state government on infrastructure proposals. "The issue is largely going to be withholding tax on sukuk, where we would be looking to leverage a tax law change," he said. Tax incentives might, for example, be offered for Islamic investors in public-private partnerships. Typically, 10 to 15 percent of New South Wales infrastructure has been delivered using , according to a government report. Granting special tax treatment for such projects cold avoid the need for a full tax amendment.

Bahrains ibdar bank eyes larger deals after three way merger


Dec 2 Bahrain's Ibdar Bank hopes to leverage the combined expertise of its predecessor banks and a larger balance sheet to win business which its three legacy banks struggled to individually, its chief investment officer told Reuters in an interview. Ibdar was launched as a brand on Monday following the merger of Capivest, Elaf Bank and Capital Management House, after more than a year of negotiations between the Bahraini lenders and authorities. Bahrain's banking industry is streamlining, aided by a central bank policy encouraging mergers and acquisitions, after it struggled in the aftermath of the global financial crisis and political unrest which deterred some foreign investment."2013 was a year we focused on integration, where we laid the foundations, 2014 is hopefully a fresh start for us," said chief investment officer Mohamed Aljasim. The Islamic lender now has $300 million of paid up capital, $329 million in equity and assets of $360 million, which it hopes can help it win deals in its focus areas of capital markets, private equity and real estate."There were a lot of opportunities that each of the legacy banks could not do individually, as it was too big or they couldn't close the transactions. We now have a bigger balance sheet, it opens the door to greater opportunities for us."

Ibdar is not leveraged and will retain Elaf Bank's licence in Malaysia to support a geographical scope that includes the Middle East, North Africa and Turkey, Aljasim said. In the past, the three lenders were involved in financing, advisory work and portfolio management in the aviation, shipping, infrastructure and real estate sectors, which Ibdar aims to maintain while disposing of non-core assets. Ibdar would launch new products along these same business lines, said Aljasim, without elaborating on the timing or size of future transactions.

"The business lines will continue, not one will out-shine the other."The merger is a rare example of a successful consolidation of Gulf Arab banks, helping the tiny kingdom's standing as a regional banking sector against growing competition from the likes of Dubai, Abu Dhabi and Doha. Although the commercial rationale for consolidation is largely accepted, Gulf bank mergers are uncommon because main shareholders, often powerful local families, are reluctant to cede control and can demand exaggerated valuations.

"In terms of the process, which started in June 2011, it was shareholder-driven which made it easier to execute. The framework avoided a lot of the issues of valuation and other issues that can come in-between," Aljasim said. The merger comes at a time when several other Bahraini banks are considering mergers of their own. Islamic lender Al Salam Bank said in September it had agreed to merge with fellow Bahraini lender BMI Bank, an affiliate of Oman's Bank Muscat, through a share swap. Khaleeji Commercial Bank, 47 percent owned by Gulf Finance House, said in June it was evaluating a potential merger with local lender Bank Al Khair. In March, National Bank of Bahrain and a local pension fund bought a 51.6-percent stake in Bahrain Islamic Bank from Kuwait's Investment Dar in a deal worth around $92.6 million.

Brazil banks eye latin america for more bond deals


* Itau, Pactual win bond mandates outside Brazil* Strategy seen paying off as expansion gains steam* Underscores strength of local shops regionallyBy Guillermo Parra-Bernal and Aluisio AlvesSAO PAULO, Feb 15 Brazilian investment banks, which in recent years gained muscle by snatching away lucrative deals from their foreign rivals, are now showing their might by clinching more mandates to handle corporate bond sales across Latin America. Itaú BBA, BTG Pactual and Bradesco BBI, all based in São Paulo, are taking advantage of the busiest start of the year for corporate bond offerings since 2007 to manage deals for Argentine and Chilean issuers. As activity picks up, they expect to land more mandates from Colombia and Peru. Private and publicly controlled companies in Latin America sold $24.2 billion in foreign currency-denominated bonds in the year through Feb. 10, up from $14.28 billion in the same period a year earlier, according to Thomson Reuters data. More deals await Brazilian shops, which are besting their foreign competitors in forging strong ties with customers, funding deals and setting distribution networks rivaled only by global banks. The retreat of traditional lenders in the United States and Europe in the aftermath of the financial crisis of 2008 is also helping."Brazilian banks are now being taken much more seriously by rivals," said Renato Ejnisman, head of debt capital markets for Bradesco BBI, the securities unit of Banco Bradesco, Brazil's second-biggest private sector lender.

Currently, Itaú BBA, the investment banking unit of Itaú Unibanco Holding, is a joint bookrunner in a sale of six-year debt for Argentina's Empresa Distribuidora de Electricidad de Salta. Pricing for the deal is expected as early as this week."We have two mandates for Chile," Nadine Cavosoglu, a senior debt capital markets banker for Itaú BBA, said in a phone interview from New York. "We will see more activity from March on, once markets digest the recent supply."Cavosoglu, a former UBS AG banker who joined the Brazilian bank's New York desk in 2009, declined to elaborate on the upcoming mandates. BTG Pactual, the three-year-old banking powerhouse created by banking wunderkind André Esteves, is helping the City of Buenos Aires sell debt in its return to bond markets after a two-year hiatus. Citigroup and Barclays Capital are also involved in the transaction.

"Our strategy is to keep attracting business from companies outside Brazil," said Alexander "Sandy" Severino, a veteran banker who is responsible for foreign bond sales advisory at BTG Pactual in New York. Bradesco BBI last month was named a co-manager for a sale of five-year bonds by the financing arm of Ford Motor Co -- a move probably aimed at luring Latin American investors to the securities. COLOMBIA, CHILE

The increase in advisory roles outside Brazil coincides with efforts by Brazilian banks to set up units in other Latin American countries. Last week, BTG Pactual agreed to buy Chilean rival Celfin Capital for about $600 million, a step in its plans to win more capital market advisory business in Chile, Colombia and Peru. BTG Pactual and Esteves himself have become a symbol of Brazil's growing economic might, competing neck-and-neck with big global investment banks in a region with bustling capital markets and booming demand for wealth management services. Itaú BBA is scheduled to start investment-banking operations in Colombia by mid-year as Brazil's most profitable bank taps a growing market for deal advisory in Latin America's third-largest economy. Itaú BBA already has offices in Argentina, Peru and Chile. Rivals such as state-controlled Banco do Brasil are also on the lookout for banking assets in Colombia. Bradesco BBI plans to open a unit in the once violence-torn Andean nation, Sergio Clemente, senior vice president in charge of investment banking and wholesale banking, told Reuters in December. Colombia is South America's second-most populous nation and, like Brazil, has a diversified economy dependent on oil, coal, agriculture and manufacturing.

British govt investment scheme used for islamic solar project


A British government investment scheme could become a platform for Islamic financial investments in the country, says a company which is using the scheme to establish a small solar power plant. The government's Enterprise Investment Scheme (EIS) helps small trading companies raise finance by offering tax relief to investors. British-based Islamic financial advisory firm Simply Sharia plans to raise 3 million pounds ($5 million) by the end of June to build the solar plant, using the tax relief to create a wakala funding structure, said chief executive Faizal Karbani.

The project has been vetted by Bahrain-based Islamic advisory firm Shariyah Review Bureau and will be managed by London-based Gardner Asset Management LLP, which is now seeking a suitable site for the solar farm in Britain.

Islamic finance has grown rapidly in its core markets in the Middle East and southeast Asia, but expansion elsewhere has been slow partly because asset transfers expose sharia-compliant structures to high taxation. EIS could address this issue as it provides investors with income tax relief at 30 percent, capital gains tax exemption, loss relief and 100 percent inheritance tax relief.

Under the wakala structure used by the solar project, one party acts as agent (wakil) for another, charging an agency fee and a performance fee which roughly correspond to interest payments under conventional finance. Revenues will be generated from government-backed renewables obligation certificates, which are tradable green certificates issued by the government to producers of renewable electricity, and from selling power generated by the solar farm, said Karbani.