Gulf Finance House (GFH), the Bahrain-based Islamic investment bank, plans to tie up with Australia's Macquarie Group to broaden its range of investment banking products. The two banks have signed an initial agreement that will allow Australia's biggest investment bank to tap into GFH's expertise in Sharia-compliant products and expand its regional network. At the same time, GFH is seeking to diversify its income stream by offering more financial products.
"Partnering with a well-known investment bank allows us to step into the standard investment banking products and leverage on what Macquarie already has to offer, said John Wright, the GFH chief operating officer. "To reinvent the wheel would take too long." GFH currently focuses on infrastructure financing in the Middle East, which contributes more than two thirds of its revenues. Its balance sheet has come under strain during the financial crisis and the bank has reported losses in the latest three quarters.
Earlier this month, it announced a US$300 million (Dh1.10 billion) rights issue to help it weather the downturn and allow it to expand. "Any long-term financial services company must be broad and well diversified, and have a mix of revenues," said Mr Wright. Macquarie plans to invest as much as $100m in the venture in the form of a murabaja, a Shariah compliant investment typically used in asset financing and property transactions.
GFH's exposure to infrastructure financing has made it vulnerable to the slowdown in spending on major projects across the region, while a lower oil price this year has crimped government investment in new roads, bridges and airports. Tightening credit availability and waning confidence within the region's property industry has also delayed many infrastructure projects and dampened demand. The bank has generated much of its revenues from governments seeking to develop special zones such as telecommunications or energy-based business parks. After zoning and parcelling the land, GFH then raises funds to develop the infrastructure, which it subsequently sells on to developers.
In October, GFH partnered with Dubai Investment House and Ithmaar Bank to invest in tourism, agriculture and infrastructure projects in the Middle East, North Africa and South East Asia. As part of their "Vision3 Alliance", the three groups plan to invest $1.8bn in building a resort in the coastal city of Essaouira, in Morocco. "That is well on track," Mr Wright said. The group has also tied up with Attijariwafa, Morocco's largest bank, to finance agricultural initiatives in the MENA region, and signed a deal with the Turkish government to identify innovative agricultural investment opportunities in the country.
uharnischfeger@thenational.ae
