The CIMB Group has fortified its presence in the Islamic banking industry in the UK, especially in the Islamic money market and foreign exchange segments after it signed separate agreements on the sidelines of the London Sukuk Summit.
In a statement yesterday, CIMB said it had signed an agreement with Bank Negara Malaysia to participate in the Commodity Murabaha Programme (CMP), and a separate CMP and a Foreign Exchange—Forward Agreement with London-based European Islamic Investment Bank (EIIB).
CIMB Islamic Bank chief executive officer and executive director Badlisyah Abdul Ghani said Commodity Murabaha was an established structure and it was inappropriate when the proceeds were used for non-Syariah purposes.
"This is indeed the case and this leakage of Islamic funds is huge. We estimate it to be over US$1.2 trillion (RM4.12 trillion). The basic funds are mostly invested in US treasuries and non-Syariah compliant investment products."
"We need a situation where Commodity Murabaha conducted in the market is done in such a way that the proceeds arising from the transaction are utilised in an Islamic manner, and this is addressed in the agreements we are signing today," he said.
Commenting on its agreement with EIIB, Badlisyah said it was timely for CIMB to leverage its presence, adding that its licence in the UK allowed it operate a wide array of Islamic banking businesses and offer services to customers including those in the Gulf Cooperation Council.
Bank Negara launched the CMP together with the Securities Commission, Bursa Malaysia and industry players in April this year, using crude palm oil as the underlying commodity trade for investment.
Meanwhile in Kuala Lumpur, CIMB-Principal Asset Management Bhd said the 400 million units of its CIMB Islamic Structured Growth Fund had been fully subscribed in just over three weeks, prompting it to increase the fund size by another 200 million units to meet investors' demand
Citi advised petrochemicals firm Saudi Basic Industries Corporation in its $11.6 billion acquisition of US-based GE Plastics last month, the biggest take-over by a Middle East company.
From May 2005 and to May 2006, the aggregate value of transactions in which Citi was involved exceeded $34 billion.
Thomas King, head of Citi's European investment banking, expects the bank to increase is share of deals this year, which he said will be a record year for mergers and acquisitions.
"M&A activity is up 65 per cent this year compared to the same period last year," he said.
The Citi officials said the Dubai office will offer a range of advisory services in areas such as investment banking, Islamic finance and capital markets.
Al Shroogi said the bank is keen to increase its presence in the region and is waiting for a decision on its licence application in Saudi Arabia, where it ended its 49-year presence in 2004.
The group sold its 20 per cent stake in Riyadh-based Samba Financial Group, formerly the Saudi American Bank, to the Public Investment Fund for $760 million.
"We realised it was a mistake now we want to go back to Saudi Arabia. The issue is timing," Al Shroogi said.
He said Citi is willing to enter the market either through a stake in a local bank or on its own.
"We want to be there in some form or the other," he added.
Citi wants to start both investment and commercial banking operations in the country, which Al Shroogi said offers an "outstanding opportunity".
Saudi Arabia's Prince Al Waleed Bin Talal is among Citi's largest individual shareholders.