FBL to fully transform into an Islamic bank early next year: official

KARACHI: Faysal Bank Limited (FBL) will convert itself into a full-fledged Shariah-compliant lender in January 2023, going to be the largest bank in the world ever to achieve Islamic conversion, an official said on Tuesday.

FBL has 99.8 percent Islamic branches. Its conversion would make its remaining last conventional branch Islamic most probably next month. After the conversion, it would become the second largest full-fledged Islamic bank in Pakistan.

“The process has been almost completed and with the conversion of the remaining single branch, the bank would apply to the State Bank of Pakistan for a license to convert its entire operations to Shariah-compliant banking very soon,” Syed Majid Ali, the chief financial officer at FBL told at the media roundtable.

Since 2016, the Bank has opened 359 new branches and converted 210 branches. One remaining branch will be converted in the last quarter of 2022 and 61 additional branches will be opened in 2022, according to a presentation given by the bank at the occasion.

FBL is creating history as it will be the largest bank in the world ever to achieve Islamic conversion. Previously a few international conversions with limited operations have taken place, FBL said.

The bank has 94 percent Islamic deposits, 93 percent Islamic financings, and 79 percent Islamic investments till July 2022, the presentation showed. FBL commenced business operations in October 1994, taking over six branches of Faysal Islamic Bank of Bahrain. FBL also took over AFIBL (al-Faysal Investment Bank Ltd) in 2002 expanding its network. It was envisioned as an Islamic commercial bank and it was the first bank to offer Islamic products in Pakistan, according to the presentation.

In 1994, Islamic banking was not regulated in Pakistan (SBP guidelines were issued in 2003). With business growth and a non-existent Islamic banking market, the need for investment avenues led to the FBL portfolio’s deviation from its original vision, it said.

The bank initiated the work on its business transformation plan in August 2014 where a comprehensive study of FBL’s products and portfolios was conducted and it was realized that the conversion of this magnitude has a learning curve requiring continuous adjustments. Moreover, the smooth transition needs to be gradual to avoid risks to the stability of the bank.