London's Gatehouse Bank looks to broaden Islamic revenue streams

Tue Aug 12, 2014 2:12am EDT

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Aug 12 (Reuters) - London-based Gatehouse Bank is developing new business lines and widening its investor base as the Islamic wholesale lender looks to build a more stable revenue stream, its chief executive said.

Gatehouse, one of Britain's six full-fledged Islamic banks, is joining several of its peers in broadening its scope, after the country's Islamic finance sector got a boost from the government's first issue of an Islamic bond in June.

The bank remains focused on real estate in Europe and the United States but wants to expand its investor base beyond Kuwait, its traditional source of funds, while generating more deals outside the British property market.

Among its competitors, Islamic Bank of Britain is building its commercial property business after a capital injection in February from Qatari parent Masraf Al Rayan.

European Islamic Investment Bank is seeking to develop its asset management and advisory services, while exiting higher-risk private equity investments.

Last year, Bank of London and the Middle East listed its shares on the Nasdaq Dubai bourse to help it grow business links in the wider Gulf region.

Gatehouse, a subsidiary of Kuwaiti firm Securities House , has $2.2 billion in assets under management, up from $1.6 billion a year ago, while profits grew 65 percent in 2013.

However, fee and commission income dropped more than two-thirds during last year, partly because of lower deal activity in Britain.

New chief executive Henry Thompson, who joined in April this year, says he wants to reduce the bank's dependence on transaction fees. "The focus for me is to develop and diversify the origination capability and grow the distribution placement capability."

Gatehouse made no investments in the British market in 2013 as no opportunities fit its criteria, while it exited seven deals. Revenue from financing and investment activities compensated for the drop in fee income.

"In terms of predictable, secure and recurring income, this is one of the objectives of the real estate finance line of business, where our appetite is for initially senior first-lien financings on real estate in Europe."

The bank also plans to launch an online retail deposit product in December and is considering structuring private investment funds, Thompson added. The objective of such funds would be "to raise discretionary money that can be deployed at the right time rather than raise money for a specific deal".

Gatehouse will consider joint ventures similar to last year's agreement with property developer Sigma Capital to build rental homes in Britain. Thompson expects the first phase, worth 100 million pounds ($168 million), to close by mid-August.

Last year Gatehouse opened a representative office in Malaysia. "We are looking at the Malaysian strategy and we will decide by the end of the year on the alternatives we have - either to maintain the rep office if that is our requirement, or to apply for a different category of licence." (Editing by Andrew Torchia)

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