* To invest initial capital of 45 mln euros in German unit
* In talks with companies to obtain mandate for sukuk issuance
* Plans to set up its own pension unit (Adds details, background)
By Seda Sezer and Ebru Tuncay
ISTANBUL, Nov 28 Kuwait Finance House's Turkish operation, Kuveyt Turk, has applied for a German banking licence and aims to become the first Islamic bank in Europe's largest economy, Chief Executive Ufuk Uyan told Reuters.
Kuveyt Turk - which issued a $350 million sukuk, or Islamic bond, last year - is waiting for a response from German financial watchdog BaFin, Uyan said. It hopes the application process will be completed next year.
"We are trying to obtain a full banking license," he told Reuters in his office in Istanbul. "We plan to open branches in Germany, and if this model becomes successful, we could consider going to other European countries."
Uyan said Kuveyt Turk planned to invest initial capital of 45 million euros ($58 million) in its planned German unit.
Islamic finance follows religious principles, such as a ban on interest and speculation. Kuveyt Turk aims to tap demand from the roughly 4 million people in Europe's second-largest Muslim community, many of them of Turkish origin. But it also sees potential demand among non-Muslims who distrust conventional banking after the global financial crisis.
"There is significant small-medium enterprise potential there," Uyan said. "They demand interest-free funds. We want to play a role in growing this segment."
Kuveyt Turk expects around 30 percent deposit and 15 percent loan growth this year, Uyan said. For 2013, loan growth is expected to exceed 15 percent, with deposit growth broadly on par with this year.
It plans to increase its current capital of around 950 million lira ($530 million) next year and is looking into setting up its own pension unit, Uyan said.
Kuveyt Turk is in talks with at least two major Turkish companies about arranging possible sukuk issues, he said. ($1 = 0.7733 euros) ($1 = 1.7923 Turkish liras) (Writing by Seda Sezer; Editing by Nick Tattersall, Larry King)