Introducing Al Rayan plc

Keith Leach Chief Commercial Officer

alrayanbank.co.uk Banking you can believe in Introducing Al Rayan Bank

First wholly Sharia compliant retail bank

alrayanbank.co.uk Banking you can believe in Introducing Al Rayan Bank

UK’s First wholly Sharia compliant retail bank Head office in Knightsbridge

Founded in 2004 Over 60,000 customers Background 140 employees Over 30 products Formerly Islamic Bank of Britain

Member of FSCS Authorised & regulated by FCA & PRA Part of MAR

Oversight via SSC & SCO Asset backed & based Sharia compliant Our values Islamic Different Operates without interest Professional Finance Never invest in prohibited areas Pioneering Aspirational Secure

Based on trade entrepreneurship and risk sharing ‘Banking you can Believe in’

Ethical alternative to conventional Muslim and Non-Muslims

alrayanbank.co.uk Banking you can believe in Introducing Al Rayan Bank

Rapidly growing (3% to 5% in 10 years) 1.53M adult UK Muslims. 76% target UK Muslim market 70% of Muslim non-users would consider 36% of Muslims use Islamic finance

Young, have children, employed, less affluent than average

Retail – banking, savings & home finance Financing up 54% Deposits up 62%

Business – banking and property finance Online sales up 48% Wide product range GCC – property finance Total assets €857m Sustained growth HNW – wealth mgmt & premier banking 8 branches & agencies Outstanding Integrated, multi channel customer Online and telephone banking service Strong customer loyalty UK based, multi-lingual call centre

alrayanbank.co.uk Banking you can believe in Al Rayan Bank’s key milestones

2004 2005 2006 2007 2008

A further four branches IBB is the first standalone Online banking is IBB launches an IBB launches the Home are opened across the Sharia compliant Bank to launched, expanding Internet savings Purchase Plan UK receive an FSA Licence reach beyond the branch account

network

IBB launches additional The first branch is opened IBB launches further IBB launches its Young savings products including in products including a Persons Savings the 60 Day Notice Current Account and Account and Wakala unsecured finance for Treasury Account personal and business

customers

The Bank launches its first IBB launches its first Following the credit Telephone and postal ever commercial property savings account crunch, the Islamic model banking are launched finance product of banking proves more

resilient than the

conventional banking

model

alrayanbank.co.uk Banking you can believe in Al Rayan Bank’s key milestones

2009 2010 2011 2012 2013 2014 2015

The UKs first IBB announces Al Rayan Bank IBB launches its IBB adds Wealth The Buy to Let Masraf Al Rayan Sharia compliant that Masraf Al posts best Premier Banking Management Purchase Plan is (MAR) announces ISA is launched by Rayan has financial Service Services to its launched its intention to IBB become the new performance . HPP is launched proposition Home Purchase purchase parent company Operating income in Scotland Plan Premier majority +168%; customer aimed at GCC shareholding IBB works with financing +86%; IBB launches its clients is added the UK retail deposits Fixed Term to the Premier IBB launches the Government to +59%. After tax Deposit Savings proposition 120 Day Notice provide a HPP profit of £1.2 Accounts Account backed by the million.

Help to Buy IBB’s table Guarantee Al Rayan Bank topping FTD opens proves to be IBB is rebranded Knightsbridge popular. The as Al Rayan Bank branch for majority of new to more closely Private and customers are align it to Masraf Premier non-Muslim Al Rayan . customers

alrayanbank.co.uk Banking you can believe in Products

The Bank has launched and continues to offer an extensive range of products

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

• Current • Young • Internet • Home • HPP in • Wealth • Buy to • 120 Day • Notice • Help to • Fixed Account Persons Savings Purchase Scotland Services Let Notice Cash ISA Buy HPP term ISA Savings Account Plan Purchase Account Plan • Property Develop ment finance • Personal • CPF • 60 Day • Fixed • Home Finance Notice Term Purchase Account Deposit Plan Savings Premier Accounts • Business • Wakala Finance Treasury Account

alrayanbank.co.uk Banking you can believe in Al Rayan Bank - 2015

The Bank after 10 years

► Renamed Al Rayan Bank in Dec 2014

► Capital increased to £100m

► Assets to exceed £1billion before year-end 2015

► 2014 was the first year of full profitability

► Within 4 years assets to exceed £2billion

► Highly experienced strong board

alrayanbank.co.uk Banking you can believe in Al Rayan Bank - 2015

Business model

► Grow existing retail banking business

► Develop for HNW ‘Arab’ clients

► Build UK real estate asset book

► Expansion into Europe, Paris, Germany and Italy?

► Significant growth in the balance sheet over the next 5 year

alrayanbank.co.uk Banking you can believe in Al Rayan Bank - 2015

Business model - Funding

► Attract retail deposits to fund asset growth

► Attract new deposits through Private Banking

► Seek a credit rating to attract institutional deposits

► Issue a real estate backed Sukuk?

► Continued support from our parent bank

alrayanbank.co.uk Banking you can believe in Al Rayan Bank - 2015

Business model – Asset growth

► Home finance products

► Owner occupier; Investment property; Buy to Let

► Help to Buy Scheme (backed by the UK Government)

► Residential finance to non-UK buyers in the UK

► Commercial property finance for UK and non UK investors

► Commercial Investment property

► Residential investment property

► Residential development property

alrayanbank.co.uk Banking you can believe in Al Rayan Bank - 2015

A modern fast growing bank

► Modern systems with on-line banking

► Soon to be launched mobile banking platform

► Cloud based sales and marketing platform

► Contact less payment cards

► New ‘flagship’ Knightsbridge Branch

alrayanbank.co.uk Banking you can believe in Al Rayan Bank - 2015

Modern relevant products

► Selection of table topping savings products frequently offer the highest returns in the UK

► ISA savings accounts for tax efficient saving

► Help to Buy scheme supported by the government

► Children’s savings accounts

► Discretionary Portfolio Service

► Provides access to Islamic will writing service

alrayanbank.co.uk Banking you can believe in Distribution channels

Branch/Agency Distribution channels Online banking

Intermediary Contact Centre SelfSelf Service Service

alrayanbank.co.uk Banking you can believe in Distribution channels

Online • Partnership with aggregators In 2013, Al Rayan Bank began a programme to drive • MoneySupermarket.com online sales: • Moneyfacts.com • A brand new, fully mobile responsive, website • Money.co.uk • Significant conversion enhancements to online • LoveMoney.com customer acquisition process • Advanced web call tracking • Targeted pay per click advertising: • Google Adwords and Display Network • Bing Ads • Facebook and Twitter advertising • Social engagement with prospects • Facebook • Twitter • Linked IN • Google Plus • Video and animation on website and through YouTube

alrayanbank.co.uk Banking you can believe in Distribution channels

On-line marketing

► Drives clients to the website or call centre

► Highly successful in attracting depositors through use of the ‘best buy’ tables

► 80% of our long term savers are non-Muslim and accounts in the source of nearly 60% of our long- term savers

alrayanbank.co.uk Banking you can believe in Al Rayan Bank - 2015

alrayanbank.co.uk Banking you can believe in Strategy has generated a twenty-fold increase in direct sales in four years

alrayanbank.co.uk Banking you can believe in alrayanbank.co.uk Banking you can believe in alrayanbank.co.uk Banking you can believe in Evolution of Islamic finance in the UK

alrayanbank.co.uk Banking you can believe in Evolution of Islamic finance in the UK

Financial Exclusion

► 2 – 3 million Muslims living in the UK

► Many living in deprived areas with high unemployment and a disaffected youth

► Led by the new Labour Government in 1997

► Supported by Sir Eddie George governor of the Bank of England

► Government headed working party formed to examine barriers to entry

alrayanbank.co.uk Banking you can believe in

Evolution of Islamic finance in the UK

Economic reasons

► Strong liquidity in the oil producing states resulted in the rapid growth of Islamic finance in the region

► UK plc saw the potential for large capital inflows as a global financial centre

► The law and tax changes seen as a result of the developments in the domestic market supported the City’s case that the UK is open to Islamic finance

alrayanbank.co.uk Banking you can believe in Evolution of Islamic finance in the UK

Tax and regulation

► The biggest obstacle in Western economic systems is the taxation environment

► In Islamic finance the buying and selling of ‘real’ assets creates a taxation impact

► There is a requirement to create “level playing field” so that the Islamic finance transaction is treated as a finance transaction

► In UK nearly every Finance Act since 2003 has had taxation legislation to adjust for sharia compliant products

alrayanbank.co.uk Banking you can believe in

Taxation regime

2003 2005 2006 Finance Act 2003: Relief Finance Act 2005: Alternative • VAT treatment of Islamic from double Stamp Finance Financial Products Duty Land Tax “SDLT” Arrangements: (Murabaha, Mudaraba, on Home Finance • Profit Share Return Musharakah, Wakala and Murabaha and Ijara “Mudaraba” Ijara) • Alternative Finance Return Products • Finance Act 2006: Extend “Murabaha” “SDLT” relief on property

finance to all entities, • Extending “SDLT” including companies, exemption to include clubs and LLPs. Musharakah home finance products • Taxation of Wakala based deposits

alrayanbank.co.uk Banking you can believe in

Taxation regime

2007 2008 2009 Finance Act 2007 • The Finance Act 2008, • The Finance Act 2009 introduced legislation added amendments for introduced provisions to which provided for Sukuk Stamp duty and stamp duty exempt land which is used to be taxed similar to reserve tax for Sukuk for Sukuk purposes from conventional bonds. “SDLT”. • Gave power to Treasury to Introduced further raise funds using Sukuk • The Statutory Instrument amendments to the SDLT No 2568 2009, extending • Introduced anti-avoidance relief the definition of financial measures on alternative institution under the property finance alternative finance transaction arrangement to include Insurance Company

alrayanbank.co.uk Banking you can believe in

Taxation regime

2010

• The Statutory Instrument No 814 2010 amended the rules on anti avoidance to ensure that the SDLT relief available for Sukuk “alternative finance investment bonds” (AFIBs) operates as intended.

alrayanbank.co.uk Banking you can believe in

Political commitment

“Our commitment to help London lead the way in Islamic finance across the world” David Cameron speech WIEF 2013

► Every government department is meant to consider Islamic Finance impact

► Student Finance that is Sharia compliant

► Help to Buy scheme for home finance

► Sovereign Sukuk oversubscribed

alrayanbank.co.uk Banking you can believe in UK Student loan scheme

alrayanbank.co.uk Banking you can believe in in the UK offering Shariah products

► Al Rayan Bank ► ABC

► Gatehouse ► AUB

► BLME ► QNB

► Abu Dhabi Islamic ► HSBC Bank, ► UBL

► European Islamic ► Investment Bank, ► Numerous international ► Qatar Islamic Bank banks UK Islamic Banks Windows in conventional banks

alrayanbank.co.uk Banking you can believe in Evolution of Islamic finance in the UK

Summary

► In the UK it started with local demand and pressure

► The wider international economic benefits to the UK were a consequence

► The clear vocal and ongoing support of Government is vital to provide the confidence for investment

► European cross board laws need to recognise Shariah compliant finance

alrayanbank.co.uk Banking you can believe in

UK institution “passporting to EU”

alrayanbank.co.uk Banking you can believe in Challenges

• Consumer Education and Awareness • Difficult with Muslim consumers2010 but 7 times harder to reach Non-Muslims • Islamic Banking ‘in practice’ needs to evolve further to the ‘ideals’ • Proportion of debt based financing (murabaha) compared with equity style financing (murabaha) • The financial system has inbuilt bias towards debt • Tax, accounting, regulatory systems making equity financing disadvantageous • Liquidity management • Shortage of liquidity instruments reduces returns for Islamic Banks • Development of frameworks and standardisation • Standardisation of interbank documentation, frameworks such for benchmarks

Islamic Banking is ‘Values’ based.

Product innovation must focus on building on these distinctive values

alrayanbank.co.uk Banking you can believe in

Challenges

• The understanding of Sharia principles among the regulators, the professionals and the consumers 2010 • Arbitration of Sharia (lack of standardisation) • Human resources (no expertise readily available) • The assurance of Sharia-compliance throughout the product lifecycle • The innovation and development of competitive products • Governance frameworks (the implications of Basel III) • The taxation issues related to the nature of the products

• Re-takaful issues for Takaful providers • The complexity of marketing Islamic financial products • The reluctance from the consumers (lack of understanding of the products)

alrayanbank.co.uk Banking you can believe in

Success factors

Treating Islamic Finance as an opportunity, not a threat

Creating awareness across the board2010

Capacity building particularly developing the human capital

Developing innovative products that are regulatory and Sharia compliant, market competitive and commercially viable

Marketing the products with a clear differentiation

Targeting the wider market instead of limiting to Muslims

Positioning the products as an ethical alternative with clear definition of ethical

Investing in Research, Development, Training and ongoing assurance

alrayanbank.co.uk Banking you can believe in

Banking you can believe in