This case study focused on Citi Islamic Investment Bank (CIIB)
A Sharia-compliant Islamic investment bank that is a subsidiary of Citicorp and headquartered in Bahrain. The project's goal was to study and examine financial statements from 2007 to 2014. The study also took an important step in analyzing the managerial aspects of capital management in CIIB to determine whether the sector can maintain the trust of its shareholders. The study used financial sector bank performance metrics and statistics, as well as indicators such as the Du-Pont Analysis, Cost-Income Ratio, ROA, and Net Non-Interest Margin. The financial trends since 2007 have shown a remarkable inclination where the bank showed a positive deviation from the year 2011 after the crisis that hit the CIIB from the start of 2008 to 2010.
Introduction
Citi Islamic Investment Bank(CIIB) has been doing good in rendering services to its customer since it got into Citicorp Banking Corp ownership in July 1996. Since then, the bank management and financial progress were recommendable. However, the bank was also faced with some problems engineered by private forces of the financial crisis. The year 2007-2008 was led the organization to high loses in the value of the bank’s subprime mortgage assets. The crisis was as a result of some factors like; the low-interest rates that were allowed by the state that led to a high devaluation of finances. The high mortgage rates also led to the liquidity crisis as a result of the US federal laws and therefore, banks such as Citi Islamic Investment Bank(CIIB) experienced a downfall that crippled its financial status (Amadeo, 2017).
To counter the banking and finance challenges, Citi Islamic Investment Bank(CIIB) has laid strategies of service. One of them is the Shariah-compliant services, Murabaha, Musharaka and Ijara. Shariah-compliant services include Mudarabah, which is an Islamic contract wherein a party provides funding to another party or agent that provides management advice on undertaking a specific trade. Murabaha, one of the most popular services offered also known as mark up, or cost-plus financing is a contract of sale where a commodity is sold for profit, and the seller discloses their costs and benefits (Hancock, 2011). Musharaka is an Islamic finance service wherein two or more parties provide financing for a project, and all parties share control, profits and losses on a pre-determined ratio.
Furthermore, the Musharaka has two forms; namely, the Permanent Musharaka where an Islamic bank has shares in a project and receives profits on a pro-rata basis until the parties concerned require and the Diminishing Musharaka. It also allows for equity participation and sharing of earnings, but its main feature is that the equity of the Islamic bank keeps reducing over time and consequently transfers ownership back to the participant. Ijara, also known as leasing, is a religiously compliant method of earning whereby assets such as real estate, machinery, aircrafts, etc. are leased by the lessor to a party, the lessee for a specific period and price. Bai Salam is a service similar to a forward contract where the Islamic bank acts as the buyer for a particular commodity in advance for a pre-determined cost and time. ("Citi Islamic Investment Bank: Home Page")
The research was therefore, assessing the possible factors affecting CIIB. The profitability and the efficiency ratio, financial market conditions that affect CIIB band the terms of management of capital in upholding the stakeholder’s confidence. The bank management has been trying to improve the service delivery to the customers notwithstanding the financial and marketing barriers facing the banking sector. The report was given by the bank officials: Navneet Kampani and Mayank Malik and Zuzar Mundarwara, for the long-term projects of the second decade of 21st century, implies a change to better financial and banking services to the Islamic states through mutual funds, investment options, hedge funds, and the insurance plans.
The research questions that guided the study are:
What are the indicators that are currently affecting CIIB?
What are the profitability and efficiency ratios concerning CIIB?
How do financial market conditions affect CIIB?
Does the bank fare well regarding management of capital and does it help to maintain shareholder confidence?
References
"Citi Islamic Investment Bank : Home Page". Citibank.com. n.p., 2017. Web. 3 May 2017.
Amadeo, K. (July 01, 2017)The 2008 Financial Crisis; A Look at the Causes, Costs and Weighing the Chances of It Happening Again. Retrieved from: https://www.thebalance.com/2008-financial-crisis-3305679
Hancock, M. (2011). Islamic banking: The gulf - middle east - the shifting sands of Islamic finance. The Banker, Retrieved from: http://aus.idm.oclc.org/login?url=http://search.proquest.com/docview/882893719?accountid=16946
