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What the UK Islamic banks' 2014 accounts tell us


16 July 2015

Last week the magazine Islamic Finance News asked me to write a 700 word article about the UK Islamic banking scene.

I decided to show how much information one can gain simply from reading their accounts. The article was published in the 15 July 2015 issue and my submitted text is reproduced below.

The UK’s Islamic banks – divergent strategies, divergent fortunes

Just as conventional banks have many different strategies, so do Islamic banks. 10 years after the first UK Islamic bank commenced operations, their accounts reveal their different strategies and different fortunes.

All of the banks have issued accounts for the year ended 31 December 2014:




Shareholders’ equity £’m



Total assets £’m



Profit (loss) before tax £’m



Pre-tax return on equity %






Bank of London and the Middle East (BLME)





European Islamic Investment Bank (EIIB)





Gatehouse Bank





Al Rayan Bank plc, formerly known as Islamic Bank of Britain plc












ADIB (UK) Ltd is a wholly owned subsidiary of Abu Dhabi Islamic Bank PJSC. It has a clearly stated strategy: “provides banking services in London to High Net Worth Individual (HNWI) customers of ADIB Group (ADIB and all of its subsidiaries.” A review of the accounts suggests that the loss is due to ramping up operating costs while income is limited due to low fee income and assets that primarily earn a return equivalent to today’s low market interest rates.

The 2013 and 2014 accounts show a very high level of turnover of senior staff, which always indicates an organisation having problems.


BLME states that it has two focuses, Corporate Banking and Wealth Management which includes Asset Management, Islamic Capital Markets and Private Client Services. Unlike ADIB mentioned above, BLME has been a model of management continuity, with the same CEO and same CFO since it opened for business in 2007.

Corporate Banking is a risky business, illustrated by the £7.1 million additional impairment provision which led to the 2014 accounts being revised. However even if that additional impairment provision had not been required, the pre-tax return on equity would have been only 3.3% showing how hard it is to make a reasonable return on banking in today’s low interest rate environment.


EIIB describes itself as an asset management group. That is consistent with its balance sheet, which shows few liabilities, none of which looks like deposit taking.

Accordingly, although EIIB has a banking license and calls itself a bank, at present it is not engaged in banking as generally understood, but rather in investing its own equity.

Gatehouse Bank

Gatehouse Bank does not state its strategy explicitly. However its main focus appears to be the financing of commercial real estate transactions.

That activity appeals to Islamic banks even more strongly than it appeals to conventional banks, but carries the risk of excessive concentration on one sector, especially when there is a major fall in real estate prices. Banking history is littered with crises arising from a fall in real estate prices.

Al Rayan Bank

Islamic Bank of Britain (IBB) was established in 2004 as the first Shariah compliant bank in the UK or indeed Europe. Its strategy was to be a retail bank but it lost significant amounts of money in every year of its operations. It was initially taken over in 2010 by Qatar International Islamic Bank QSC.

However that bank was not able to provide the level of support needed, and in 2014 IBB was acquired by a different Qatari institution, Masraf Al Rayan QSC which added share capital of £75.8 million taking total equity up to £103.1 million. The extra assets the increased equity base allowed the bank to take on led to it reporting its first ever profit in 2014.

QIB (UK) plc

QIB is the UK subsidiary of Qatar Islamic Bank. Its accounts report a change of strategy away from investment banking to instead providing “niche private banking services.”

However apart from serving Middle East High Net Worth Individuals (which is obviously core to the strategy) its business lines also include providing senior and mezzanine finance for commercial and development property, and trade finance. Accordingly the strategy is not as focused as its strategic statement first suggests.


None of the UK Islamic banks is yet earning adequate rewards for its shareholders, although heavy losses seen before appear to have ended; unless of course there is another economic downturn.

Mohammed Amin MA FCA AMCT CTA (Fellow) is an Islamic finance consultant and was previously UK Head of Islamic Finance at PricewaterhouseCoopers LLP.


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