AUB builds far and wide
Ahli United Bank, a pan-Middle Eastern lender with branches and divisions from Cairo to London, is slowly, steadily, making its name in the global real estate market. It’s still far behind such institutions as Australia’s Macquarie, or investment banks such as Morgan Stanley and Merrill Lynch, but the Bahrain-based bank is gaining a reputation for being a solid, long-term investor and partner in the global property industry. The bank ranked first for investment and commercial banking for the Middle East North Africa region in this year’s Liquid Real Estate poll. Few Gulf-region lenders can touch AUB for size or scale. In July 2008, it posted a 40.5% rise in first-half group earnings, to $211.7 million. The bank noted that the growth in core earnings resulted from higher net interest margins thanks to a “prudently managed asset profile” supplemented by accretive fees and commission income, with a large chunk of that asset profile increasingly coming from its investments in the real estate sector in the Middle East and Europe, including the UK.
The bank’s overseas subsidiaries are also doing well. Egypt’s Ahli United Bank, previously called Delta International Bank, posted earnings of $11.9 million in the first three months of 2008, double the level recorded the year previously.
Quality real estate – so scarce in the Gulf region until recently – has taken on special meaning for Middle Eastern corporations and high-net-worth investors seeking steady, long-term yield- or revenue-generating returns. Much of what has been built in the Gulf region in recent months and years is quality real estate, although too much is sub-standard, particularly in rapidly expanding cities such as Dubai. To that end, Ahli United Bank – alongside its regional peers – has been pushing hard into the property sector in the developed world where yields are likely to be lower but where buildings tend to last much longer.
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AUB’s headquarters in Manama |
In 2006, AUB joined forces with independent asset management firm Henderson Global Investors to launch the Opportunity Fund III, a German property fund. The fund, with about €350 million in assets, owns some 20 properties across Germany, each with a maximum value of €70 million, with Ahli United Bank and its partner choosing to focus on retail warehouses, offices and industrial properties. But where AUB really distances itself from rivals – and fulfils its willingness to branch out into new markets for its customers, is in such areas as Islamic mortgages. These products, on offer to UK-based citizens, come in all shapes and sizes. Its Manzil Ijara Home Purchase Plan, fixed until April 1, 2009, with a minimum deposit of 17% of the entire loan, offers clients no early payment penalty if the mortgage is paid in full. It also offers a buy-to-let version of the same plan, with a minimum deposit of 25% of the whole mortgage.
Two further strains of its offerings provide overseas customers with services that enable them to buy UK property from abroad, again with a minimum deposit of 25%. Under the ijara plan, the bank buys and owns a customer’s chosen property, which is then sold to the customer at the same price, with payments spread over a period of 25 years. The minimum property value AUB will finance for is £100,000 ($187,500).
This may seem simple stuff to a run-of-the-mill global real estate owner but AUB has been carving its initials in the vast and fast-growing Islamic mortgage business for years, and is considered a trailblazer in the sector. Indeed, it is the longest-standing Islamic home finance business operating in the UK, with roots there extending back to 1966. For years, it was also the only provider of Islamic-financed mortgages that complied strictly with the complex tenets of Islamic law. It boasts the largest Islamic mortgage portfolio in the UK.
AUB is also pushing hard into the land-related infrastructure sector in the Gulf. Its $150 million loan agreement with Bahrain Bay Development – a two-and-a-half year murabaha facility – will enable the latter to fund a key infrastructure development – including roads, power plants, communications, water, cooling and waste management – in AUB’s homeland of Bahrain.
The bank continues to rack up the awards – this year it won Euromoney’s Award for Excellence for best bank in Bahrain, following hard on the heels of its best overall Middle Eastern bank award for 2007 – as fast as it snaps up rivals, particularly lenders focused on the property sector. In December, AUB bought a 35% strategic stake in Oman’s Alliance Housing Bank, for $131.2 million. And with oil prices likely to remain high for decades to come, and executives determined to continue to parlay profits into the real estate sector, Ahli United Bank looks set to become a global player in the property sector.
