By Daliah Merzaban
MANAMA (Reuters) - Bahrain's Arab Banking Corp ABCB.BH said on Monday it could arrange as much as $5 billion worth of Islamic bonds and loans in 2008 if the market recovers from a global credit crisis.
Several Gulf Arab borrowers scrapped sales of Islamic bonds, or sukuk, last year because of the credit crunch triggered by U.S. mortgage defaults, which made borrowing more expensive and banks more reluctant to lend.
Arab Banking's Islamic finance unit had to shelve between eight and 10 financing deals as a result of credit market turmoil, said Duncan Smith, Arab Banking's global head of Islamic financial services.
Most of those could return to the market beginning in the third quarter as issuers in the Gulf Arab region and North Africa raise money to finance infrastructure projects, Smith told the Reuters Islamic Finance Summit.
"We've hit a little bit of a hiccup because of the credit crunch and the liquidity squeeze," he said.
"By the third quarter, things will turn around. The underlying trend in the region is still there. That market will come back particularly in the Gulf and in North Africa."
Investors in the world's biggest oil-exporting region have spurred demand for Islamic bonds, helped by a near five-fold increase in oil prices since 2002.
But Gulf Arab issuers had put borrowing plans on hold as spreads on Islamic bonds widened at the end of last year, more than doubling between July and October, according to HSBC data. Continued...
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