HSBC Holdings Plc, the largest bank in Europe, plans to offer Shariah-compliant services in India and China to tap economic growth after the countries issue regulations to develop their Islamic financial markets.
HSBC Amanah also plans to expand in Egypt and Oman, said Razi Fakih, the deputy chief executive officer of the bank’s Islamic unit. The lender, which has operations in 10 nations including Malaysia and Saudi Arabia, is seeking to increase bank branches globally to about 125 over the next two years from 100 at the end of 2010, he said.
“Our ability to expand in these markets depends on how the regulatory environment changes in those countries,” Fakih said in a telephone interview from London today. “Licensing to foreign banks is restrictive in certain markets. We would certainly like to see ourselves in the entire Middle East.”
HSBC is trying to strengthen its brand in a market that has attracted competitors such as Barclays Plc, Citigroup Inc. and Standard Chartered Plc to tap wealth from the world’s 1.6 billion Muslims. Global assets held by Shariah-compliant financial institutions may climb to $1.6 trillion in 2012 from about $1 trillion, the Kuala Lumpur-based Islamic Financial Services Board said in April.
HSBC ranked second among 31 Islamic bond underwriters this year, arranging $2.3 billion of the notes, or 17 percent of the total $13.5 billion, according to data compiled by Bloomberg. The bank had a market share of 13 percent last year.
India has no Islamic finance policies, and that is restricting sales of Shariah-compliant bonds in a nation with 157 million Muslims, according to Paris-based BNP Paribas SA and Standard Chartered. Prime Minister Manmohan Singh said last week during an official visit to Kuala Lumpur that he would ask the central bank to learn more about Islamic finance from Malaysia, the world’s biggest market for sukuk.
Countries with smaller Muslim populations are taking steps to develop Islamic finance. Australia plans to amend laws to ensure products are taxed fairly, the national taxation board said on Oct. 13. South Africa, whose 737,000 Muslims account for 1.5 percent of its population, will forgo charging tax on three Islamic structures to allow home loans that meet Shariah principles, the country’s Treasury department said in August.
HSBC Amanah bank has a “strong pipeline” of Islamic bonds over the next six to eight weeks, Fakih said. The bank is in discussions with new issuers in Asia and Europe seeking to sell sukuk next year, he said.
“We continue to work with many issuers, both sovereigns and financial institutions, and we have a healthy pipeline in place globally,” he said, declining to provide details.
Sales of sukuk fell 29 percent to $13.5 billion so far this year, from $19.1 billion in the same period of 2009, according to data compiled by Bloomberg. Islamic law, or Shariah, bars investment in industries such as gambling and alcohol, while sukuk are typically backed by assets such as real estate.