Noor Islamic Bank does not expect the Islamic bond market to turn around for another three years, given the financial and political uncertainty in the region, its chief executive said.

"What you see in the sukuk market right now is not growing but I think it is shrinking a little bit in comparison to years before," Hussain Al Qemzi told Reuters in an interview. "I see three years before we see an upward trend in sukuk. We will see a stronger comeback afterwards."     

Issuance of Islamic bonds, or sukuk, all but dried up as the global financial crisis and then regional political upheaval sapped interest in the market.

Recent sukuk issuances out of the Gulf from companies such as Sharjah Islamic Bank and HSBC Middle East  were oversubscribed and raised some hope that Islamic bonds were poised for a revival.

Al Qemzi said Noor Islamic has no plans to issue any sukuk in the near term but is mandated on a few deals, including one for Turkey's Bank Asya , one of four fully Islamic banks in the country.

"The market remains very cautious, and within the GCC (Gulf Cooperation Council), there is still some reluctance," he said.
"But we are hopeful of concluding one or two sukuk deals this year."     

Noor Islamic is partially owned by Dubai Investment Group, which is the investment arm of Dubai Holding, along with Investment Corporation of Dubai, the Emirates Investment Authority and Noor Investment Group.

Al Qemzi said the bank, which recently swung to a profit in the first half of the year, was still aiming to break even by 2012, but might even achieve it this year, given the strength of its recent earnings report.

"We're not out of the woods yet in terms of the market, and we like to be cautious, but it's a possibility," he said. "Our numbers look very good now."     

The bank, posted a net profit of 85 million dirhams ($23.1 million), up from a loss of 97 million dirhams in the comparable period a year earlier. Revenue came in at 386 million dirhams.

Al Qemzi said its corporate banking division was the main driver of growth, although he expected consumer banking, particularly online banking, would increasingly play a larger role.

He said the Dubai ruler's decision to replace his uncle and close adviser Sheikh Ahmed bin Saeed Al-Maktoum as chairman of Noor Islamic in June was a sign of the Islamic bank's level of financial stability.

Sheikh Ahmed, a respected businessman who helped steer Dubai through its debt crisis, is often seen by the market as a stabilising figure for struggling corporations.

"The change represents confidence in the bank, that we're at a level of stability," Al Qemzi said, adding that the appointment of the new chairman, Sheikh Ahmed bin Mohammed bin Rashid al-Maktoum, would not mark a change in strategy. - Reuters