June 24 (Reuters) - Islamic Bank of Britain (IBB), the country’s only sharia-compliant retail lender, plans to broaden its product range to win business both locally and across Europe, aided by the backing of its new Qatari shareholder.
IBB is developing its commercial property business to widen fee-based income as it aims to post a profit for the first time, newly-appointed chief executive Sultan Choudhury told Reuters.
“The acquisition was a watershed moment for us, what it means is that we will be adjusting the direction of IBB. We will shift to a much stronger focus on commercial banking,” said Choudhury, who previously served as interim managing director.
The lender was acquired in January by Masraf Al Rayan , Qatar’s largest Islamic bank by market value, which in February injected 75.8 million pounds ($129 million) into IBB to support its expansion plans.
Birmingham-based IBB has around 50,000 customers and 380 million pounds worth of retail deposits, but it has struggled to turn a profit since its inception in 2004.
That could soon change as its property finance business has doubled in size in the last year, which could allow IBB to expand later into Europe, said Choudhury, adding its retail operations would remain focused in the UK.
“Clearly that is the objective (to break even) no only in the medium term but also in the short term, and we are on course to do that.”
IBB also aims to buy some of the 200 million pounds of sukuk that the British government will issue this week, a much needed sterling-denominated liquidity tool for the bank.
Choudhury said he hoped demand would be such that the government would consider a future issuance, which could be facilitated through the use of a different sukuk structure.
Britain’s maiden sukuk will use an ijara structure, a sharia-compliant sale and lease-back contract, allowing the rental income of three central government offices to underpin the transaction.
But a structure known as wakala, or agency agreement, could side-step the need to find unencumbered government assets, instead securitising cash flows from roads or bridges, he said. ($1 = 0.5880 british pounds) (Editing by Kim Coghill)