Despite the financial turmoil in late 2008 that crippled so many Western conventional financial institutions, Islamic banks have continued to grow in prominence and size with the world's 100 largest full-fledged Islamic banks ranked by assets holding more than $580 billion in 2008, a 66 percent increase from the $350 billion of the previous year, according to a study published at the end of August 2009 by Asian Banker Research.
The top 10 banks remained largely the same as the ones that dominated our previous ranking in 2008, with Bank Melli Iran still topping the list and Saudi Arabia's Al-Rajhi Bank in second place. Iranian banks are still the predominant Islamic banking players, holding seven out of the top 10 ranks, and 12 of the 100. The Iranian banks also take up around 40 percent of the world's 100 largest Islamic banks' assets. The four next-largest markets -- the UAE, Malaysia, Saudi Arabia and Kuwait -- each have similar asset sizes compared with one another, and together carve out nearly another 40 percent of the ranking's assets combined, with smaller banks in 10 other markets rounding out the list," stressed the study.
The rankings, however, should be treated with caution. As with the Islamic bank rankings of The Banker in London, Iranian banks should be excluded until the authorization status of such banks are clarified. Bank Melli for instance is not incorporated as an Islamic bank and privately does not call itself an Islamic bank and is engaged in riba banking. Iranian regulators in the past have similarly conceded that the underlying basis of the Iranian banking system is not Islamic, despite the confusion regarding the so-called Islamic revolution in Iran.
Similarly, Iran continues to raise funding from the international financial markets on a riba basis and has yet to issue a sovereign Sukuk. Despite the size of the Iranian banks, says the study, Saudi Arabian banks are much more profitable as the three Saudi Arabian banks in the top 100 Islamic banks contributed 19 percent of the ranking's total income. Al-Rajhi Bank had the highest net income figure of $1.74 billion, the only bank to break the billion, and almost three times more than the second-most profitable Islamic bank, Kuwait Finance House. The bank also earned over five times the most profitable Iranian bank, Bank Tejarat. Looking ahead, stressed the study, it can already be seen that Bank Melli may not be the largest bank in the listing for much longer, as it had a mere 0 percent growth rate in 2008.
This may be due to the European Union freezing the bank's assets, which has shrunk the bank's lead over Al-Rajhi Bank to just 4 percent from 40 percent the previous year. Considering Al-Rajhi Bank's 32 percent change in total assets in the year, it is likely to overtake Bank Melli in asset size in 2009.
© Arab News 2009
