Source：The Asset

Editor：TYC Finance ALI

The Islamic finance industry demonstrated resiliency in the face of challenging market conditions in 2023 with banks in different countries facing lower margins, higher funding costs and liquidity issues, while higher oil prices cast a shadow on sukuk issuance in the core Islamic finance markets. But the supportive operating environment has enabled the industry to maintain its growth momentum and achieve notable milestones with innovative and groundbreaking deal structures as it continues to provide an avenue for issuers and borrowers to meet their funding requirements.

Amid this challenging market backdrop, several issuers stood out last year as The Asset board of editors reviewed the submissions for the Triple A Islamic Finance Awards 2024 and heard presentations from the participating institutions. Accessing the sukuk market for the first time, the Arab Republic of Egypt is voted as the Sovereign Issuer of the Year. The debut offering by the Ministry of Finance (MoF), which raised US$1.5 billion, used a unique structure relying on a purchase of usufruct of real estate assets by the Egyptian Financial Company for Sovereign Taskeek and leased back to the MoF. The deal was 4x oversubscribed with the order book peaking at US$6 billion as it generated a strong demand from regional Shariah-compliant investor base.

Malaysia’s sovereign wealth fund Khazanah Nasional is selected as Quasi-Sovereign Issuer of the Year on the back of its US$750 million sukuk offering, which was part of the total US$1.5 billion fund raising that included another US$750 million in conventional bond. The dual-tranche deal represented Khazanah’s inaugural global capital markets transaction in rated format, setting new benchmarks for the company’s pricing curve. The sukuk tranche garnered a final order book in excess of US$4.9 billion and helped Khazanah to achieve a significant price tightening of 42bp from the initial price guidance.

The award for Corporate Issuer of the Year goes to Sarawak Energy, a vertically integrated electricity group with a monopoly over the generation, transmission and distribution of electricity in the Malaysian state of Sarawak. The company printed in July 2023 a 3.5 billion ringgit (US$786.50 million) sukuk that generated a robust demand from a diverse group of 60 investors. The order book amounted to 10.7 billion ringgit enabling Sarawak Energy to undertake a larger issuance size from the initial objective of 2 billion ringgit and achieved a tighter pricing of up to 10bp from the initial marketing guidance.

Described as Malaysia’s largest renewable energy developer and provider, Sarawak Energy primarily relied on renewable hydropower. It is currently constructing its first floating solar power project due for commissioning in October this year. In early December 2023, the company signed a memorandum of understanding with Masdar, a global leader in renewable energy, for strategic collaboration to advance the development of renewable energy projects across Sarawak and Malaysia.

The Financial Institution Issuer of the Year award is given to Abu Dhabi Islamic Bank (ADIB), which in November 2023 priced what is described as the first-ever US dollar green sukuk by a financial institution globally. The deal also represented the bank’s first senior issuance after an absence of 12 years. It was part of ADIB’s efforts to address climate change and advance sustainable finance solutions that protect the environment and help facilitate a transition into a low-carbon economy. The offering attracted a high-quality and diversified order book comprising some of the largest and most notable emerging market investors as well as regional private bank accounts, real money accounts and green investors who came into the deal early and held on even with the aggressive tightening from the initial price thought to final pricing.

Asset managers

Like the rest in the Islamic finance industry, asset managers faced challenging market conditions, but many still managed to thrive and boost their assets under management (AUM). For the sixth year in a row, Principal Islamic Asset Management wins the accolade as the Asset Manager of the Year for Asia-Pacific. It had AUM of US$3.14 billion under various investment strategies as at December 31 2023, up 15% from US$2.73 billion a year ago. The increment was driven, among others, by new mandates, additional capital injections to existing funds/mandates, as well as by the strong performance of its portfolio/funds especially for both global and regional equities. In 2023, it rolled out UCITS (Undertakings for the Collective Investment in Transferable Securities) funds to Malaysian investors via feeder funds, such as the Principal Islamic Global Responsible Equity Fund and the Principal Islamic Global Multi-Asset Fund.

In the Malaysian market, Franklin Templeton GSC Asset Management (FTGSC) scoops the award for Asset Manager of the Year – Institutional for the 11th consecutive year. The company’s institutional Shariah assets as of end-2023 stood at 9.58 billion ringgit, up 19.6% year-on-year and accounted for about 54% of Franklin Templeton’s total Shariah AUM. FTGSC retained 100% of its Shariah institutional mandates with clients in 2023 with no accounts lost despite the tough investment conditions. In addition, the Franklin Malaysia Sukuk and Franklin Global Sukuk received additional funding from existing institutional clients amounting to 270 million ringgit due to their investment performance and track record.

The award for Asset Manager of the Year – Retail goes once again to Public Mutual for the 14th year in a row, with its aggregate net asset value (NAV) of Islamic retail funds amounting to US$9.25 billion as at end-December 2023, representing a 39.94% share of the domestic market. Its aggregate NAV of Islamic private retirement scheme funds amounted to US$275.08 million during the same period, or a domestic market share of 57.49%. Public Mutual launched one Shariah-compliant equity fund in 2023, the Public Islamic Regional ESG Fund, which invests in Shariah-compliant stocks of companies primarily in the Asia-Pacific region that incorporate ESG considerations in their business practices.

Also a repeat winner in Malaysia is AIIMAN Asset Management as the Asset Management of the Year – Multi-Asset. The company staged a recovery in 2023 that saw its assets under administration (AUA) posting an increase of 14.4% to 28.66 billion ringgit, compared to a decline of 5.5% in 2022. The company worked diligently in assuring clients of the robustness of its investment philosophy, which is anchored on delivering absolute performance with a clear focus on fundamentals, guided by valuation and technical factors. In line with the growing demand for sustainable investment particularly from institutional clients, AIIMAN made changes to several funds’ investment strategy through the issuance of replacement prospectus, allowing the funds to qualify as sustainable and responsible investment (SRI) funds in accordance with the guidelines set by the Securities Commission Malaysia.

BIBD Asset Management likewise retains the accolade as the Asset Manager of the Year – Brunei. The company offers capabilities in sukuk through its in-house management team, equities through strategic alliances with global investment managers, and multi-assets, which are tailored portfolio management solutions that optimize both sukuk and equity allocations to achieve specific risk-return objectives. The company’s flagship product offering, Global Sukuk Strategy, has seen its AUM reach 550 million Brunei dollars (US$413.50 million) since its inception in 2019. Leveraging its regional hubs in Dubai and Singapore, BIBD is actively expanding its reach and client engagement in international market as part of its business growth strategy. It is also actively expanding its institutional and retail offerings, targeting to launch a number of offerings in 2024, including a Shariah-compliant global real estate investment trust.

In Pakistan, Al Meezan Investment Management secures the honour as the Asset Manager of the Year – Pakistan for the 14th consecutive year. It has AUM of over 431 billion Pakistani rupees (US$1.53 billion), inclusive of discretionary portfolio, as of December 2023. This represented an increase of 53% in rupee terms from a year ago and a market share of 40% in the Islamic mutual fund category and 19% in the overall industry. One of the key milestones the company achieved in 2023 was its successful agreement with a Pakistani provincial government to launch an exclusive voluntary pension scheme fund for its employees. Al Meezan is also actively working on expanding its asset base in the ESG universe, exploring several aspects of ESG funds such as the underlying categories of the funds and the screening criteria.

For the 10th year in a row, Sidra Capital wins as the Asset Manager of the Year – Saudi Arabia. Its AUM rose to 15 billion Saudi riyals (US$4 billion) in 2023 from 14.3 billion Saudi riyals in the previous year. By asset class, 66% of its AUM are in real estate as of the first quarter of 2024, while the rest was in private finance (15%), private equity (10%) and liquid investments (9%). By geography, 43% of its real estate investment is in the United States, 40% in the United Kingdom, 13% in Saudi Arabia and 4% in other markets. The US investment mainly targets industrial, student housing and offices, while the UK investment focuses on originating, structuring and managing UK and European real estate assets.

Islamic banks

The challenging market environment in 2023 weighed on the Islamic banks’ profitability as they endured margin compression. But they continue to maintain strong capital position well above the regulatory requirements. Maybank Islamic is a multiple winner as it is voted as the Bank of the Year in Asia-Pacific, Malaysia and Singapore. Total income climbed 22.7% to over 13.89 billion ringgit in 2023, while total gross financing and advances rose 6.7% to 231.9 billion ringgit. Standard Chartered Saadiq wins the distinction in the Middle East and Bangladesh. Other winners include National Australia Bank in Australia, Qatar Islamic Bank (QIB) in Qatar and ADIB in the United Arab Emirates (UAE).

In terms of product segments, there is a big focus on retail and SME businesses, with banks competing vigorously to secure market share through products and services offerings. While not the biggest retail bank in its home market, Affin Islamic Bank is chosen as the Retail Bank of the Year in Malaysia. Retail banking spearheads Affin Islamic Bank’s asset growth and growing customer base for deposits. Sustainability is at the centre of its product offerings such as solar financing-i, Tawarruq education financing-i, mortgage green building index financing-i, personal financing-i, and hybrid and electric vehicle financing. Elsewhere, Standard Chartered Saadiq is the winner of the award in Bangladesh, QIB in Qatar and ADIB in UAE.

The award for SME Bank of the Year in Malaysia goes to AmBank Islamic, which achieved a profit after tax of 173.2 million ringgit in 2023. Total financing asset amounted to 6.81 billion ringgit, while total deposits stood at 12.12 billion ringgit. Return on assets was 2.38% per annum in 2023, while net funding margin was 1.74% per annum. The other winners of the award are Standard Chartered Saadiq in Bangladesh and QIB in Qatar.

HSBC Amanah Malaysia is the choice for ESG Bank of the Year for the fifth consecutive year on the back of its commitment to sustainable finance and its track record of supporting clients in net-zero transition and climate solutions. It contributes to market development, pioneering new structures and leading product innovations with social and sustainability-linked loans, green sukuk and green trade facilities. Internally, it embeds sustainability, net-zero transition and ESG across its business, products and services for commercial execution, and integrates them into risk considerations and bank operations.

Sukuk advisers

Another highly competitive award category is the sukuk adviser of the year. Standard Chartered remained a force to reckon as it led, structured and executed sukuk deals across the Asean region and the Middle East on the way to winning the Sukuk Adviser of the Year – Global, Sukuk Adviser of the Year – Middle East, and Sukuk Adviser of the Year in Bahrain, Saudi Arabia and the UAE. The bank was involved in several pioneering sukuk deals and in ESG-centric types of offerings.

Among the deals that defined Standard Chartered’s credentials in 2023 included the Republic of the Philippines’ (RoP) debut US$1 billion sukuk, the Republic of Indonesia’s US$1 billion green trust certificates, the Kingdom of Bahrain’s US$1 billion sukuk, Energy Development Oman’s US$1 billion debut sukuk, Al Rajhi Banking and Investment Corporation’s US$1 billion sustainability sukuk, Kingdom of Saudi Arabia’s US$6 billion trust certificates, Public Investment Fund’s US$3.5 billion sukuk, and ADIB’s US$500 million debut green sukuk.

In Malaysia, it was another highly competitive match-up between Maybank Investment Bank and CIMB when it comes to executing sukuk transactions as they brought several significant deals into the market, with Maybank Investment Bank retaining the award for Sukuk Adviser of the Year – Malaysia. Backed by its sustainability structuring team, Maybank Investment Bank is playing a big part in Maybank Group’s commitment to mobilize 50 billion ringgit in sustainable finance by 2025.

CIMB, though, is not just Malaysia-centric when it comes to arranging sukuk deals as it is also active in executing sukuk offerings out of Indonesia and repeats as the Sukuk Adviser of the Year – Asia-Pacific. The other winner in the sukuk advisory category was PT IndoPremier Sekuritas in Indonesia.

Fitch Ratings once again exhibited the strength of its rating franchise in winning the Rating Agency of the Year award for the eighth year in a row. Its outstanding Fitch-rated sukuk volumes surged 26.2% in 2023 from a large base – the fastest growth rate in five years. It also rates more than 70% of the outstanding US dollar sukuk market in 2023 and over 80% of the US dollar-denominated ESG sukuk market. Fitch rated multiple first-time sukuk deals in 2023, including those of RoP, Air Lease Corporation of the US and PIF of Saudi Arabia. It also rated its first Islamic insurance company in the UAE, the Abu Dhabi National Takaful Company.

Meanwhile, Raja Amir Shah Raja Azwa, CEO of HSBC Amanah Malaysia, is named the Banker of the Year, having established his credentials in advocating Islamic finance and in sustainable type of financing. Since he took over the bank leadership in 2021, HSBC Amanah has led a number of pioneering transactions with strong ESG focus. He led a transformation programme called Project Cocoon to embed sustainability in HSBC Amanah’s business and operations in line with the global standards and value-based intermediation (VBI).

The Industry Leadership Award award is given to Bashar Al Natoor, managing director and global head of Islamic finance group at Fitch Ratings. Al Natoor is at the forefront of analyzing market trends in Islamic banking and finance across different regions, dissecting any new regulatory changes that impact the industry. He is responsible for coordinating all Islamic finance activities across Fitch’s group globally. He has overseen the rating agency’s sukuk criteria and Islamic finance practices, undertaken research and written numerous published articles on Islamic finance.

Note: The Asset Triple A Islamic Finance Awards by The Asset magazine is one of the most prestigious awards in the industry, which has become one of the fastest growing and most promising segments in global finance. The awards recognize the best Islamic banks and institutions, as well as transactions that define the industry during the review period. The Asset takes a rigorous approach in selecting the best Islamic institutions and transactions in each country. Scoring points for quantitative and qualitative factors are combined to determine the winners.