Islamic Bank loses £6.5m

Shariah-compliant Islamic Bank of Britain lost £6.5 million last year and plans to win more clients with new services.

AIM-quoted Islamic Bank, where the ruling family of Qatar holds a controlling stake, more than trebled customer numbers in 2005 to 19,985, still only a very small proportion of Britain's muslims. But customer deposits grew only 40 per cent to £47.7 million, following the withdrawal of half a single £14 million deposit by a founding shareholder.

The Birmingham-based bank, which pays no interest but gives depositors an equivalent amount in the form of profit on hedged metal trading, has set itself some specific targets, says chief executive officer Michael Hanlon, an experienced British banker. These include internet banking as from next month, increasing branch numbers from seven to 12, moving into home loans with a third-party supplier, establishing 'relationship banking' for rich people and small businesses, and launching an 'Islamic credit card'.

Hanlon and finance director Ashraf Piranie also want to take the bank into continental Europe and move into Islamic insurance. This is based on the mutual principle and can be 'very profitable', says Hanlon.

He will not commit himself to any target date for achieving profitability. But he argues these new services, some of them set to benefit from Budget tax changes, should significantly increase Islamic Bank's market penetration. He says he expects the expansion drive will involve coming back to the market for money next year.

Islamic Bank floated on AIM in 2004 with an £8.45 million placing at 25p, handled by broker Keith Bayley Rogers. The shares, which spiked up to 81.5p a year ago, now languish at 28p and look speculative.

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