The Islamic Bank of Asia, which is backed by Southeast Asia's top bank DBS, will focus on courting Gulf wealth and growing Islamic bonds, private equity and REIT deals to drive its business, its chief executive said.

The lender has struggled to compete against other Islamic banks in the region since its establishment in 2007 due to tough market conditions in the Middle East and a lack of interest in sharia banking in Singapore.

Toby O'Connor, Islamic Bank of Asia's chief executive, said the lender would be a channel for Middle Eastern investors seeking exposure to Asia.

'A lot of the GCC countries where we're primarily focused do not have large populations, with the exception of Saudi,' said O'Connor, who joined the Singapore bank last month after 19 years at JP Morgan.

'They're thinking about diversifying their wealth; they're thinking of diversifying away from hydrocarbons. To the extent that we can leverage our platform here by introducing people, providing the connectivity to that part of the world, we'll be very successful.'    

Last year, the bank transferred 10 of its 65 staff to DBS and redeployed others to new roles. It suffered a loss of $77.1 million in 2009 after making specific allowances on debt owned by customers in the Gulf region, according to latest available figures.   

DBS, Singapore's biggest lender, holds a majority stake of 50 percent plus one share in the bank. Islamic finance has been met with little enthusiasm in Singapore, despite the central bank's drive to create a conducive environment with tax and regulatory measures.   

Another Islamic bank, Kuwait Finance House, shrank its Singapore workforce last year after not managing any funds in the city state since its inception.

Bankers say Singapore's small Muslim population means it does not have a retail market, and it is also relatively late in developing the industry compared with neighbours Malaysia and Indonesia.   

'Our business is going to be very focused on what our core areas of strength are which is direct investments and capital markets activity,' O'Connor said on the sidelines of an Islamic banking conference.

'What we need to do is increase the amount of visible transactions in the market, which will encourage more people to go in.'    

Issuers from Singapore accounted for $74.4 million or 0.5 percent of total global Islamic bond sales of $14 billion last year, Thomson Reuters data showed. - Reuters