Finance

Weekly Investment Banking Scorecard

deals intelligence

CIT Group’s $3.4 billion purchase of California’s OneWest Bank pushed the level of deal making in the financial sector to $206.6 billion for year-to-date 2014, a 54% increase compared to a year ago and the strongest year-to-date period for M&A in the sector since 2011. With strong deal making activity in the healthcare, media and energy sectors, M&A in the financial sector accounts for just 10% of the worldwide total this year, the lowest percentage since year-to-date 1989 when financials accounted for 9% of global M&A

Weekly Highlights: (more…)

Contemporary Zakah issues

Do we own the call to pay Zakah or not? And is it applicable to monthly salaries? 

Zakah is the third pillar of Islam. It is compulsory on all Muslims who have accumulated a minimum amount of wealth, or nisab, to distribute an assigned proportion of that wealth to any one or more of the eight categories of recipients as defined in the Qur’an. Unfortunately, this brings in two controversial issues today – should the state manage the zakah, and should it be collected on a monthly basis?

According to the teaching of Islam, both the collection and the distribution of zakah must be managed by the state or government of a country. This is clearly stated in the Qur’an in Surah al-Taubah (9:103) and leaves no room for ijtihad (independent reasoning) on the matter. Hence zakah distribution cannot be left to individuals, and the right of the eight recipients to benefit from zakah is preserved. While justification for the state’s role in zakah management has been explained in Fiqh books and by many Muslim scholars, there are still many Muslims who question their government’s right to manage zakah collection and distribution, especially if trust in a government is lacking. These Muslims have forgotten the hadith of the Prophet Muhammad (pbuh) which insists that people pay their zakah to the state in order to fulfill their responsibilities and that if any part of zakah management is tampered by the state then the sin will rest squarely on the state.

The second controversial issue concerns the payment of zakah on monthly salaries, a practice in force in Muslim-majority countries such as Sudan and Malaysia.  Many Muslims today question the validity of the payment of zakah on monthly salaries but accept the justifications for paying tax on their monthly salaries (tax payment which is almost always higher than zakah). By doing so they are replacing one of the pillars of Islam with a conventional, non-Islamic practice.

A study conducted by the author revealed large sum of zakah can be collected from salaries in different Muslim countries, which is only type of zakah out of fourteen types, on a yearly basis and is sufficient to eradicate poverty in these affected countries within a very short span of two years. This practice follows a similar one during the time of the ruler Umar ibn Abdel Aziz in the eighth century during the Umayyad dynasty.

It is time we start implementing zakah management to the letter!

Read more about Zakah on Zawya Islamic. (more…)

European carbon market research & forecast

The Research and Forecast service available on Thomson Reuters Eikon now offers critical insights into the European Union emissions trading team. The service is developed by Point Carbon, a market leading analysis provider within the Nordic and European power markets and now part of Thomson Reuters.

Find more information on Eikon here.

Thomson Reuters Eikon for metals professionals: The essentials

The latest version of Thomson Reuters Eikon provides a wide range of tools for commodities analysis, trading and operations specifically tailored to the precious and base metals markets. If you’re new to Eikon and version 4, the intuitive menu driven interface and natural language search tools should be easy to master.

Find more information on Eikon here.

Regulation as a barometer of trust – graphic of the day

Data drawn from our governance, risk & compliance data and Thomson Reuters Accelus™ reveal that the level of regulatory activity worldwide has continued its strong upward trend globally this quarter, and particularly in the Americas. According to risk segment managing director Chris Perry, “it is clear that regulatory activity continues to accelerate and recent enforcements have in many cases seen record-breaking fines and penalties. Most recently the Attorney General of New York joined the financial regulators as fraud and criminal investigations widen. In this environment, the best defense is a strong offense – and banks are stepping up their compliance oversight and risk management.”

The second quarter’s 143 average daily number of regulatory alerts (up from 129 in Q1 and above 100 for the fourth consecutive quarter now totals some 17,800 to date in 2014, well on pace to exceed 2013’s total by year-end. Download the Q2 Trust Index.

TRust Index

Weekly Investment Banking Scorecard

deals intelligence

Eight deals over $5 billion were announced this week, setting the all-time record for weekly large-cap deal making and pushing the level of deals over $5 billion to $915.9 billion for year-to-date 2014, more than triple year ago levels. Accounting for 45% of worldwide M&A so far this year, large cap deal making in the healthcare sector (12), energy & power (8) and consumer staples and media (7) make up just over 60% of the number of announced M&A deals greater than $5 billion for year-to-date 2014

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Q2 Thomson Reuters TRust Index advances into positive territory for first time

TRust Index

The Q2 TRust Index, released today, shows improved trust sentiment in the top 50 global financial institutions this quarter as more banks – particularly those in the Americas – received positive scores to push the global TRust Index into positive territory for the first time.

Tracking trust through news sentiment shows: (more…)

Thomson Reuters Newsmaker with Japan Economics Minister

Japan's Economics Minister Amari

Japan’s Minister of State for Economic and Fiscal Policy Akira Amari spoke openly about cuts in corporate income tax, trade sensitivities, prolonged deflation and bold reforms at a Thomson Reuters Newsmaker event held at our Tokyo office last week.

Amari addressed a full house of Thomson Reuters guests and Japanese and international media before being interviewed by Reuters Japan Bureau Chief Kevin Krolicki, and participating in a Q&A session. He warned that it would be premature for the Bank of Japan to consider an exit strategy from its massive stimulus program, voicing hope instead for further monetary easing if achievement of its inflation goal falls behind schedule. Amari also said that while Japan appears to be emerging from years of persistent price declines, it was too early to formally declare a sustained end to deflation with the economic recovery still vulnerable to external shocks.

“The BOJ has expressed strong determination that it won’t hesitate to take further action if (the timing for meeting the inflation target) is not on schedule. If the BOJ judges that it’s not on schedule, I think the central bank will decide on its own (to act),” he said. (Read the full story here.)

Amari also revealed that corporate income tax rates are likely to be cut by around six percentage points over the next few years (video) and said that ‘Abenomics’ is succeeding where conventional policies failed in pulling Japan from its deflationary slump (video).

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Kuwaiti bank’s hurdles to becoming Islamic

The Commercial Bank of Kuwait was granted permission by the Central Bank of Kuwait to issue KD 120 million ($425 million) in Basel III-compliant bonds even as the bank converts itself into an Islamic bank.  Yet the bank has had to write off many loans (KD 58.1 million in 2013 and KD 112.2 million in 2012) that has significantly impacted its profitability and may be the reason the bank needs to issue capital-raising bonds.  That the CBK is issuing conventional bonds while converting into an Islamic bank may indicate its perception about its ability to maintain or grow its market share which has dropped significantly in the past several years as a conventional bank.

The large losses discussed above have had a measurable impact on the bank’s capitalization which fell from 19.95% in 2012 to 18.38% in 2013 with Tier 1 capital falling from 16.74% to 15.51%.  Amidst continuing losses, it may be inevitable that the bank had to issue capital raising bonds but it may complicate the conversion process since Basel requirements place limitations on the call provisions included in bonds issued to raise capital.

These restrictions limit the bank’s ability to call the bonds until the sixth year after they are issued and also limit the use of step-up features that would highly incentivize the bank to redeem on the first call date.  At issue is that the bank will continue to have an interest-bearing liability for five years, which is much longer than the typical period for a conventional bank that has converted to an Islamic bank. (more…)

The Islamic finance industry in Nigeria: From history mystery to future reality

By Dr. Said Adekunle Mikail

Muslims advocacy for Islamic financial system in Nigeria dates back to 1980, however, it met the cold response. The first initiative is taken by the government is to provide profit and loss sharing banking. This is clearly stated in section 23(1) and 61 of the Banks and Other Financial Institutions Act 1991. Thus, the profit and loss sharing enactment in 1991 marks the evolution of modern Islamic banking in Nigeria. Following this enactment, several attempts had been made to get license for Islamic banking operation between 1993 and 1995 but they all end up in vain. The failure of which is attributed to not comply with Central Bank of Nigeria (CBN) requirements by the respective investors. Then, Habib Bank Nigeria Plc, currently known as Keystone Bank successfully opened non-interest banking account, which breaks a record of being the first Islamic banking window in 1996 in Nigeria.  However, no success story or significant growth is recorded owning to the absence of formidable regulatory framework from the Apex Bank.

The demand for full-fledged non-interest banks comes on board from the interested investors in 2004, but the application was given an Approval-In-Principle (AIP) pending the satisfaction of paid-up capital.

The government set up the Financial System Strategy (FSS) in 2005 with the aim to make Nigeria as Africa’s major International Financial Center (IFC). This leads to economic transformation in Nigeria, in which the following are among of their initiatives: (more…)