Ithmaar Bank is pushing ahead, with full force, towards completing, in the shortest time possible, plans for a comprehensive reorganisation with its wholly-owned subsidiary, Shamil Bank, after a majority of shareholders yesterday (ed note 04/1109) voted in favour of the proposal.
The plans, which will turn Ithmaar Bank into a premier Islamic retail bank, involve both banks pooling their resources together to create a single, more efficient and significantly stronger retail-focused bank with an Islamic license, under the Ithmaar brand.

The plans, which already have the Central Bank of Bahrain’s No Objection, were presented by the Ithmaar Board of Directors to the Bank’s shareholders at an Extra-ordinary General Meeting (EGM) that was held at the Regency Intercontinental Hotel, Bahrain. The Shamil Bank EGM held on 3 November 2009 has already approved the reorganisation.

At the EGM, Ithmaar Bank shareholders approved to increase the authorised capital to US$2 billion and also approved three capital raising initiatives that will, together, add up to US$500 million to the Bank’s capital, thereby increasing shareholder equity to about US$1.4 billion.

“The shareholder’s overwhelming support for the Board’s proposals has ushered in a new era for the Bank,” said Ithmaar Bank Chairman Khalid Abdulla-Janahi. “Our focus is now on ensuring that the reorganisation and capital raising plans are completed in the shortest time possible,” he said.

“When the reorganisation and capital raising initiatives are completed, Ithmaar Bank will have been transformed into one of the region’s largest, most efficient retail-focused Islamic banks – and, with the additional capital, we will in a better than ever position to capitalise on the unique opportunities that are being created by the challenging financial climate,” he said.

“At the onset of the financial crisis, we had stressed that our strategy, moving forward, would focus on protecting our capital base and on insulating our shareholders from the global financial crisis,” said Ithmaar Bank Chief Executive Officer and Member of the Board, Mohamed Hussain. “This was our clear message to shareholders at the last General Meeting in March and, although we’ve managed to successfully deliver on our promises, we are continuing to further reinforce our position to protect against the challenging financial climate,” he said. 

“To further bolster our position, we also announced three capital raising initiatives which include a five-year Mandatory Convertible Sukuk that will be the first of its kind issued by a financial institution in the region,” said Hussain. “These plans will substantially increase our regulatory capital and, in doing so, will give us the opportunity to capitalise on the many, very promising opportunities that are now being created,” he said.

On 17 October, Ithmaar Bank had announced that it intends, as part of its capital-raising exercise, to offer a rights issue and that J.P. Morgan is assisting the Bank for the Mandatory Convertible Sukuk. He had also announced that an agreement in principle had been reached with Global Emerging Markets of London (GEM), whereby GEM would commit to provide an equity line of credit amounting up to US$125 million which the Bank will have the option to draw down, resulting in issuance of new ordinary shares. The benchmark size of the capital raising plans is between USD400 million and USD500 million.

Earlier, on 14 October, Ithmaar Bank had announced plans for a comprehensive reorganisation with its wholly-owned subsidiary, Shamil Bank.  The plans will further improve liquidity, lower the Bank’s risk profile and enhance shareholder value by amplifying existing synergies and eliminating duplicated resources. The unification of the boards of directors will further strengthen the Bank’s overall corporate governance and ensure compliance with best practices.