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Turkish Islamic banks plan to sell bonds

DUBAI / ISTANBUL - Bloomberg | 4/13/2011 12:00:00 AM | DANA EL BALTAJI / SELÇUK GÖKOLUK

Turkey’s Islamic banks are planning sukuk sales to take advantage of both the lowest borrowing costs in more than five years and the rising demand for securities.

Turkey’s Islamic banks are planning sukuk sales to take advantage of both the lowest borrowing costs in more than five years and the rising demand for the country’s securities.

Türkiye Finans, Kuveyt Türk and Albaraka Türk, all at least part-owned by Persian Gulf lenders, said they plan to offer Islamic bonds this year.

Sukuks are bonds that comply with Islam’s ban on interest.

Foreign investment in Turkish government securities climbed to $39.7 billion for the week ending April 1, the most in at least six years, data released April 7 showed.

Borrowers are seeking to benefit from growing investment in Islamic finance, an industry whose assets are forecast to rise to $1.6 trillion by 2012, according to the Kuala Lumpur-based Islamic Financial Services Board.

“We would definitely look into investment opportunities in Turkey, that also includes Islamic debt issuance and syndications,” Ramiz Moukarim, head of debt capital markets at Qatar Islamic Bank, told Bloomberg. “Turkey’s economic growth and strength within the region allows it to benefit from the capital base and growth of the Islamic markets.”

The Turkish government allowed companies last April to issue debt in accordance with Islamic finance rules. It is also considering changing tax laws to encourage sukuk sales, Osman Akyüz, secretary general of the Association of Participation Banks, said in August. The Istanbul Stock Exchange started an Islamic index of 30 shares on Jan. 6.

The Turkish economy expanded more-than-forecast at 9.2 percent in the fourth quarter after 5.2 percent growth in the previous three months.

[HH] Plans of three banks

Türkiye Finans, the lender part-owned by the National Commercial Bank of Saudi Arabia, plans to sell at least $300 million of sukuk this year, chief executive Yunus Nacar said March 17. Kuveyt Türk, the Turkish unit of Kuwait Finance House, will sell five-year Islamic bonds this year after the June 12 general elections, chief executive Ufuk Uyan said March 28. Albaraka Türk, a part of the Manama-based Albaraka Banking Group, plans to offer as much as $200 million of sukuk this year, chief executive Fahrettin Yahşi said the same day.

Global sales of sukuk more than doubled to $4.5 billion this year.

“Turkey is an interesting proposal because ... it’s not that far away from the Gulf Cooperation Council, it has a large population and there are opportunities for Gulf investors,” said Geert Bossuyt, the Dubai-based managing director and CEO of Dar Al Istithmar, an Islamic finance advisory company established in the United Kingdom “Turkey is taking initiatives to attract investments, which are obviously paying off.”

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