Al Rayan Bank Plc will this year study the feasibility of expanding into France after the lender previously known as the Islamic Bank of Britain posted its first profit, said the chief executive officer.
“We see Europe as a big opportunity,” Sultan Choudhury, who has worked at the bank since 2004 and is its longest-serving employee, said by phone from London on May 14. “There are a number of countries we would be interested in, but France would be one of the obvious first steps. It’s got a big Muslim population, it has a lot of Gulf Cooperation Council investments.”
The potential expansion would be the latest example of Britain’s Shariah-compliant lenders turning abroad to spur growth. London-based Gatehouse Bank Plc in November teamed with a U.S. investment bank to manage a European finance fund, and Bank of London and the Middle East listed in Dubai in 2013. France has about 5 million Muslims, the most in Europe, and the country was the continent’s second-biggest recipient of job-creating investments from the GCC last year.
Birmingham, England-based Al Rayan this month reported its first quarterly profit in 11 years, 15 months after a takeover by Qatar’s second-biggest Islamic bank, Masraf Al Rayan QSC. The U.K. lender, which changed its name in December to align with its parent, started a private banking branch in London’s Knightsbridge last week to target affluent clients from the GCC, seeking to boost their contribution to revenue to a third from 20 percent, according to Choudhury.
Europe Expansion
The feasibility study will be for the whole of Europe, and will start with France, Choudhury said. The country has made legal changes to encourage Islamic banking, including exempting Murabaha real estate transactions from land tax, he said.
The bank needs “to get over there, talk to the market, regulators, and lawmakers to make sure Shariah-compliant finance is feasible,” Choudhury said.
France has not made any legislative changes to accommodate Islamic finance since 2010, according to Standard & Poor’s. The development of Islamic finance in the country will probably be on the wholesale side of banking and gradual, Mohamed Damak, Paris-based global head of Islamic finance at Standard & Poor’s, said by e-mail on Monday.
Knightsbridge
Al Rayan has traditionally been a retail-focused bank. Doha-based Masraf Al Rayan paid about 25 million pounds ($39 million) to takeover the bank in February 2014, and invested an additional 75 million pounds. That made the U.K. lender’s profit possible as it moved into bigger deals, Choudhury said.
“It’s definitely been a transformative acquisition of our bank,” Choudhury said. “With our new branch targeting GCC customers -- these things would not have been possible on our old capital base.”
The Knightsbridge branch, which is the bank’s sixth in U.K. and is located next to Harrods department store, will offer retail and real estate financing services to GCC clients, according to Al Rayan. The bank plans to add investment banking and property-finding services.
“It’s targeting people who have the ability to purchase properties in central London,” Choudhury said. “They may need cash for shopping in the West End.”