Transcript Presentation Title

2006 Half Year Results
September 2006
EIIB – A Brief History
•
Jan 2005
Company established
•
Q2 2005
Private placement raised approximately £108 million (net)
•
Mar 2006
FSA authorisation received
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Apr 2006
Commenced trading
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May 2006
AIM IPO raised approximately £72.8 million (net)
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Sept 2006
Moved to AIM 100 Index
First Islamic investment bank licensed by the FSA
Highlights
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Revenues have increased to £3,019,424 (2005:£1,062,973)
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Operating profits of £184,359 (2005: £547,730)
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Total capital now £184m – better capitalised than most Islamic Banks
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Key business heads and teams in place. Roll-out remains on track versus IPO timetable
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Treasury & Capital Markets; Asset Management; Trade Finance business lines set up and
developing traction – asset acquisition, structuring capability
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Operating Infrastructure and banking platform is in place.
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Developing traction with Shareholders, client, market counterparties
•
Deal pipeline developing
Nearing successful completion of “Start-up” phase
Strategy and Business
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Become a major participant in Islamic financial markets
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Roll-out a broadly-based business model with a wide product range:
– Treasury and Capital Markets (incl Structured Trade Finance)
– Asset Management, including Private Banking
– Corporate Finance and advisory
•
Target investment banking clients across Europe, Middle East and Asia
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Develop and grow liquidity within the Islamic Capital Markets
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Innovate and distribute new structures and asset classes
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Leverage UK presence to develop partnerships with other Islamic and European Institutions
for:
– Transaction origination
– White-labelling Sharia’a products
We believe our model is differentiated from other Islamic banks.
Delivering the Business Plan
Planned Date
Status
Accept Sharia’a compliant wholesale deposits from Islamic
banks, conventional banks, etc
April ‘06

Funding of assets using capital, deposits
April ’06

Deploying excess liquidity via Wakala, Murabaha transactions
April ‘06

Originating, underwriting and distributing Islamic securities and
trading them in secondary market
2006

Originating, underwriting and distributing Islamic securities and
trading them in primary market
2007
On track
Establishing documentary credit facilities, Islamic Money Market
lines
2006

April ’06

2007
On track
Accepting Private banking deposits
Creating Sharia’a compliant pension fund products
Treasury and Capital Markets
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Danie Marx appointed head of Treasury and Capital Markets in January 2006
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Team of 6 hired offering treasury, risk management, debt capital market (vanilla and
structured) and structured trade finance solutions
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Capabilities now include - Foreign exchange, profit rate hedging, money markets, term
financing, securities origination, underwriting, structuring, distribution and sales, and asset
securitisation – developing derivatives capabilities
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Since April 2006 committed to 2 primary market Sukuks and 3 secondary market Sukuks
including 1st Islamic Mortgage Securitisation
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1st Islamic Investment bank to quote 2 way prices in selected Sukuks in London
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Structured Trade Finance – 14 transactions evaluated, 3 completed
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Developed strong Sharia'a structuring skill set
Business well positioned to meet goals and grow
Asset Management
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Jeremy Beswick appointed Head of Asset Management May 2006
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Developing 3 EIIB products:
– Real Estate Fund – by end of 2006
– Structured Product Fund – end 2006
– Absolute Return Fund – 1st Quarter 2007
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Evaluating a number of 3rd party wealth management products
– One of late 2006, another 2007
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Evaluated and finalised EIIB Private Banking model for High net worth individuals & Family
offices
– Launch end 2006
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Evaluating two possible Asset Management acquisitions
Key Strengths
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EIIB is the only UK quoted financial institution offering exclusively Sharia’a compliant
investment banking products and services
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Well capitalised to drive the business model
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Based in London, with direct access to extensive deal flow and deep pool of human
resources talent
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Experienced Board and management team
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A diverse and well-respected shareholder base that will be a critical driver of success
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Structuring capability and quality of staff
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Best Practice in all areas of Corporate Governance
Half-Year Results Financial Highlights
Income Statement
Total income
Operating expenses
Profit before tax
Taxation
Profit after tax
EPS
H1 06
£000
FY 05
£000
H1 05
£000
3,019
(2,835)
184
(108)
76
3,841
(2,001)
1,840
(534)
1,306
1,063
(515)
548
(165)
383
-
0.11p
0.06p
•
Interim results prepared under IFRS
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Small profit in 4 month since authorisation to 30 June against an anticipated loss in business plan
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Expenses remain below plan – operating expenses remain well managed and recruitment plan is
staggered to stay in line with business growth.
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Expenses also reflect costs of implementing banking platform that is being tailored to EIIB requirements.
Development expenses of £446k have been capitalised in the 1H06
…have generated a small profit in first three months since authorisation
Half-Year Results Financial Highlights
Balance Sheet
Interbank & Cash
Customer Loans
Investment Securities
Fixed assets
Other assets
Liabilities
Capital
H1 06
£000
FY 05
£000
H1 05
£000
170,867
5,419
7,498
1,038
911
185,733
111,651
109,956
433
327
112,411
6
172
110,134
1,533
1,255
10
184,200
111,156
110,124
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Capital being used as Tier 1 Capital to support operations and to invest in proprietary transactions
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Continued focus on building inter-bank relationship and lines. Bank has taken first customer deposits after
close of 1H06
•
Seeking credit rating in 2H06 and believe that when in place this will further facilitate development of
funding lines
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Balance sheet profile is beginning to see a shift from purely inter-bank to higher yielding assets.
Risk Profile
Internal Risk Rating
IRR7
15%
IRR8
4%
IRR9
1%
IRR10
1% IRR13
3%
Industry/Sector
Manufacturing
IRR14
3%
IRR6
3%
Construction
2%
GCC Banks
28%
Asset Classes
> 12m
4%
6-12m
12%
Saudi 2%
UK 6%
Textile
1%
EU/Other
Banks 67%
IRR3
61%
Geographic Breakdown
Turkey 1%
UAE 9%
<1m 40%
3-6m
14%
Bahrain 21%
2%
Europe 61%
1-3m 30%
Average Risk Rating: A- equivalent
Current Trading and Prospects
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Market environment and opportunity remain highly positive
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Focus is on building sustainable fee income from an Investment Banking and Asset Management business
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Establishing office in Bahrain with a top-tier team to originate and distribute transactions in Gulf is a priority
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Develop product offerings that are innovative and offer our investors the opportunity to build a diversified
portfolio
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Continue to source and recruit quality staff required to grow the business
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Launch 3 products and complete 2 deals by year end
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Obtain rating and complete listings
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EIIB continues to have 1st Mover advantage allowing it to develop brand presence and leverage its
competitive niche
On track to meet market expectations
Appendices
Appendix 1 : Organisational Structure
Board of
Directors
Sharia’a Supervisory
Board
Nomination Committee
Remuneration
Committee
Audit Committee
Board Executive
Committee
Managing
Director
Finance Director
and
COO
Head of Risk
Head of Bahrain
Office
Head of Asset
Management
Head of Sharia'a
Compliance &
Legal
Head of Treasury
And Capital Mkts
Head of HR
Head of IT
Head of Administration
Financial Controller
Head of Operations
Teams are in place, charters of committees ensure oversight and independence
Head of Internal
Audit
Appendix 2: Board of Directors
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Adnan Ahmed Yousif, Non-Executive Director and Chairman, is also CEO and Board Member of AlBaraka Banking
Group.
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Khalid Abdulla Al-Bassam, Non-Executive Director, Deputy Chairman and Chairman of the Nomination Committee,
is Chairman of Al Bassam Investment Co., and Chairman, Bahrain Islamic Bank and prior to this, Deputy Governor of
Bahrain Monetary Agency.
•
John Weguelin, Executive Director and Managing Director, has over 30 years banking experience, was Managing
Director of Bank of America Securities Limited in London and COO and Chief Administration Officer of Bank of America NA
for Europe, Middle East and Africa
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Atif Raza, Executive Director and Chief Operating Officer and Finance Director, was previously with Unicorn
Investment Bank in Bahrain, where he was the Chief Financial Officer. Prior to that he was CFO for Citicards UK, a
Citigroup entity and SAMBA.
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George Morton, Senior Non-Executive Director, was previously Senior Vice President and Head of International Division
at Arab Banking Corporation (BSC), Bahrain
Appendix 2: Board of Director cont/…
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Shabir Ahmed Randeree, Non-Executive Director and Chairman of the Remuneration Committee, is also Managing
Director of DCD London & Mutual PLC and a Non-Executive Director of Islamic Bank of Britain Plc.
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Hatem Abou Said, Non-Executive Director, is also a member of the Board of Directors of the Italo-Arab Chamber of
Commerce. His international, investment and commercial banking experience spans more than 40 years and was awarded
the honorary title of Cavaliere al Merito della Repubblica Italiana (Knight of the Order of Merit of the Italian Republic) by the
President of Italy, in recognition of his service to the national economy.
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Yusef Abu Khadra, Non-Executive Directors, was previously a member of the Management Committee of Investcorp
Bank E.C. in Bahrain and latterly an Executive Director of Investcorp Securities in London
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John Clouting, Non- Executive Director and Chairman of the Board Executive Committee, and is also a non-executive
Director of Turkish Bank (UK) Limited. He was General Manager of Jordan International Bank Plc and General Manager of
Turkish Bank (UK)
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Salman A Abbasi, Non-Executive Director, was General Manager of Investcorp Bahrain until 2004. Prior to that, he was
Vice President & CEO responsible for all Chase Manhattan Bank NA’s business in Africa and the Middle East
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Aabed Alzeera, Non-Executive Director, is a prominent Bahraini banker and Chief Executive Officer of International
Investment Bank (IIB). Previously Aabed held senior positions with American Express Banking Corporation and Arab
Banking Corporation (ABC)
Appendix 3: Sharia’a Supervisory
Board
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Justice (rtd.) Muhammad Taqi Usmani, Chairman was a member of the Sharia’a Cassation Board at the Supreme Court
of Pakistan from 1982-2002. He has also been Chairman of the Sharia’a Board of Accounting and Auditing Organisation for
Islamic Financial Institutions (AAOIFI) and a former Chairman of the Sharia’a Board of Islamic Bank of Britain Plc and sits on
a number of Sharia’a boards of other institutions.
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Dr Abdul Sattar Abu Ghuddah has taught at various institutes, including the Imam Al Da’awa Institute in Riyadh and the
Sharia’a College and Law faculty in Kuwait University. He is Secretary General of the Unified Sharia’a Supervisory Board of
Dallah Albaraka Group in Jeddah and a member of the Sharia’a board of AAOIFI.
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Dr Abdul Latif Mahmood Al Mahmood has been Head of Arabic Language and Islamic Studies Department at the
University of Bahrain from September 2001 to September 2005 and Assistant Professor for Islamic Studies since 1985. He
is a member of the Board of Trustees of the International Union for Muslim Scholars. He is head of a number of Sharia’a
boards including the Bahrain Islamic Bank (BSC) and Lebanon Islamic Bank.
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Sheikh Nizam Muhammad Seleh Yacouby is a member of a number of Sharia’a Supervisory Boards, including the Dow
Jones Islamic Index, Bahrain Islamic Bank and Citi Islamic Investment Bank. He is also a member of the Sharia’a board of
AAOIFI, a member of the Sharia’a Board of Islamic Bank of Britain Plc and has been a visiting lecturer at Harvard
Appendix 4: Management Team
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John Weguelin, Managing Director. John has over 30 years’ banking experience. Until 2003, he was
Managing Director of Bank of America Securities Limited in London, and Chief Operating Officer and Chief
Administration Officer of Bank of America NA for Europe, Middle East and Africa
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Atif Raza, Finance Director and Chief Operating Officer. Atif is a UK qualified chartered accountant
with over 20 years experience in public accounting and senior leadership positions in chief financial officer
roles in international financial institutions in the UK and Middle East. Atif was previously with Unicorn
Investment bank in Bahrain, where he was the Chief Financial Officer. Prior to that he was CFO for
Citicards UK, a Citigroup entity and CFO for Saudi American Bank (SAMBA) in Saudi Arabia. He was a
director of UIB Capital Sdn. Bhd., Malaysia until November 2005.
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Mohaimin Chowdhury, Head of Legal, Sharia’a and Compliance and Company Secretary.
Mohaimin is a solicitor qualified in England and Wales and joined EIIB in June 2005 from Dubai Islamic
Bank where he was Legal Advisor. Prior to that, he was Legal Advisor in the Legal and Sharia’a
Compliance Department of Abu Dhabi Islamic Bank from October 2000 to July 2004. Mohaimin started his
legal career in private practice in London where he worked for 4 years after qualification.
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Danie Marx, Head of Treasury and Capital Markets. Prior to joining EIIB he was Treasurer and Head of
Capital Markets at Absa Bank Limited’s London branch. Until 2000 he was tasked with structured
solutioning at Absa’s Head Office in Johannesburg, South Africa. Before that, Danie was at Standard Bank
of South Africa
Appendix 4: Management Team
Cont/…
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Jeremy Beswick, Head of Asset Management. Jeremy joined EIIB from RMB MultiManagers, which is
the London-based international investment management arm of FirstRand Group. Before this, Jeremy
spent seven years with US mutual fund company MFS. He established and launched its operations in
Europe, and was Managing Director (Europe). From 1999 to 2002, he was seconded to MFS’s owner Sun
Life of Canada, to become CEO of India’s second-largest mutual fund company, Birla Sun Life AMC.
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Grant Lowe, Head of Risk Management. Prior to joining EIIB Grant consulted at the Bank Supervision
Department of the South African Reserve Bank, specialising in counterparty and position risk management.
Before joining the Central Bank, Grant was the Head of Risk at Citibank Johannesburg Branch, and prior to
that he was a Senior Credit Officer with Bank of America London Branch and Standard Bank London Plc.
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Tara McCabe, Head of HR. Tara has approximately 10 years experience in Human Resources, and joins
EIIB from the General Council of the Bar, England & Wales where she was the Human Resources
Manager. Prior to this Tara worked as an HR contractor for 5 years in various start-up and restructure
projects in telecommunications, PPI’s, Investment Banking and Asset Management.
Appendix 5: Market Opportunity
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Significant growth in Islamic banking
– 1.4bn Muslims – 24% of world population
– 88.5% Muslims (incl Turkey) – 20% EU population
– Global assets estimated at approximately $700bn
– Deposits of approx $200bn
– Global Sukuk market + $41bn
– $82bn outstanding in Commodity Murabaha
– $3bn pd: traded in London
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Total of HNW wealth in ME - £1.3 trillion, 70% GCC
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Increased demand for Sharia’a compliant investment products
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Significant opportunity to bring higher-yielding Islamically structured assets to the EU market place
Islamic Finance market continues to record robust growth.
Appendix 6: Market Environment
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Macro-economic environment in ME remains very positive with oil prices at record levels generating
surplus liquidity in region: 74% growth in the last 3 years
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Strong investor appetite for European and OECD assets supports EIIB’s positioning to intermediate EU
Capital markets and ME liquidity
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Six GCC countries estimated to generate over $220bn surplus in ’06 and ’07
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GCC economies will remain in surplus based on current spending plans, even if oil prices fall to $40
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Non energy sector is growing faster – 8% in 2006 - than the Oil & Gas sector
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GCC countries are expected to accumulate foreign assets almost as rapidly as China will add to its FX
reserves
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Bulk of capital flows are expected to be used to finance portfolio investment.
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Estimated in excess of $1,000bn of infrastructure investment over next 5-10 years
Appendix 7: Islamic Finance
developments
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Islamic banking heading for 20% of total banking assets – growing at 10-15% pa
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GCC banks continue to report solid performance
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Most major Islamic banks investing resources directed at becoming regional players. Smaller banks
looking to expand footprint and size through overseas expansion
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Malaysian Islamic banking deposits reached £10.7bn while Islamic banking is now 12% of total system.
44% of bonds being issued are Islamically structured