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HSBC to close UK Islamic banking operations

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by Jan Harris
HSBC to close UK Islamic banking operations

HSBC Holdings is planning to stop offering Islamic financial services in the UK as part of a global restructuring strategy which will see non-core businesses shut down.

Along with the UK, it is closing its Islamic banking operations in United Arab Emirates, Bahrain, Bangladesh, Singapore and Mauritius.

HSBC will offer Islamic banking only in Malaysia, Saudi Arabia and Indonesia after the streamlining, with only a limited service available in Indonesia.

Islamic banking is based on Shariah principals and bans interest and
pure monetary speculation.

HSBC is exiting an expanding market – Ernst & Young estimates that Islamic banking will have grown by 33 per cent to £680 billion between 2010 and the end of this year.

The bank offers the service through its Amanah division, which was established in 1998.

HSBC Amanah employs 300 professionals and is the largest Islamic financial services team of any international bank.

The staff are expected to be absorbed into HSBC’s main operations, although there are likely to be some job losses.

HSBC Amanah has around 3,000 mortgage customers in the UK, totaling £350 milion in home loans.

In comparison, the bank’s total UK mortgage portfolio is more than £70 billion.

HSBC’s ongoing restructuring, which was announced in 2011, is designed to reduce costs and improve profitability.

The bank said it would reduce its global workforce by 30,000 over two years to 2013 in order to save £2.2 billion.

In a statement it said that the decision to reduce its Islamic operations “represents further progress in HSBC’s execution of the global strategy set out in May 2011 and demonstrates the group’s commitment to driving growth and improving returns by restructuring or exiting businesses that do not meet its investment criteria.”

After the restructure is completed, HSBC will retain 83 per cent of its Islamic business revenues.

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News posted: October 5, 2012

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