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Its return on equity is poor despite the relatively benign economic environment.
Posted 7 March 2026
I have been following the results of the UK's Islamic banks since they were first established over 20 years ago.
In my May 2025 column for the magazine "Islamic Finance News" I updated my figures for Gatehouse Bank. What struck me was how unprofitable it is, without any obvious reason. You can read it below.
Younger evangelists for Islamic finance (and almost everyone is younger than me) forget something quite fundamental about Islamic banks. Islamic banks are businesses. Their purpose is to make money for the shareholders who have invested their capital in the bank. If they cannot make an acceptable return on that capital, they should close down and return the capital to their shareholders.
I was driven to sharing this simple principle by looking at the recent results of one of the UK’s Islamic investment banks, Gatehouse Bank. They are not awful, but nor could one describe them as acceptable.
I originally summarised Gatehouse’s results from the day it started business in the UK to 31 December 2018 in my 4 December 2019 column.
Very briefly, in its first five years to 31 December 2011 Gatehouse made cumulative post-tax losses of £35 million. New businesses often make startup losses, and this period was made worse by the Global Financial Crisis.
From 2012 to 2017 Gatehouse made small profits or small losses, but in 2018 it lost a thumping £15.9 million!
My 7 December 2022 column updated the Gatehouse figures, reporting that in 2019 it had lost a further £3 million, but turned around to make small profits in 2020 and 2021 despite the impact of the pandemic.
I have now looked at the 2022 and 2023 results. (2024 has not been published yet.) The 2022 post-tax profit of £8.1 million looks more encouraging, but in 2023 it fell back to £3.1 million.
Given that shareholders’ equity at 31 December 2023 was £102.2 million, a return of only 3.03% does not justify Gatehouse Bank being in business. The shareholders would be better off liquidating the bank and putting their capital into a Shariah compliant stock market fund.
Furthermore the 2022 results looked good only because they had a £3.9 million tax credit for recognising a deferred tax asset on £23 million of brought forward tax losses. (There were also another £18 million of brought forward tax losses on which no deferred tax asset is recognised. This is a reminder of how much money the bank has lost in the past.)
When a business is performing badly, my first question is always about management continuity, since chopping and changing top management is rarely good news. However, for the seven years 2017-2023, the CEO and CFO have been Charles Haresnape and Danesh Mahadeva respectively. Accordingly, management continuity cannot be faulted.
The low interest environment that followed the Global Financial Crisis (until rates rose in 2022 and 2023) has made the UK a difficult place for banks to make money. However, some other Islamic banks have done better in the UK than Gatehouse, despite its avoidance of major disasters after 2018.
I don’t have the enthusiasm for a detailed analysis of the figures. However, my perception from quickly reading through the front of the accounts is that the bank seems insufficiently focused, and it may be trying to do too many things. In turn, that would lead to the cost structure being too high.
Obviously, the non-executive directors can see what I see and also have access to internal information. So, what are they doing about getting the bank to focus harder on profitability?
Mohammed Amin is an Islamic finance consultant and former tax partner at PwC in the UK.
