Mashreqbank is following a growing trend among banks in the UAE to establish Islamic banking operations. 'Gulf banks are profitable, with fat margins on yields and low costs of funds,' says Standard & Poor's (S&P) analyst Anouar Hassoune. 'Islamic banks have an advantage on both sides. Customers will pay for the Islamic nature of services. Islamic banking is a success when retail lending is booming and in the UAE this is particularly the case.' S&P estimates that the assets of Islamic banks in the GCC have been increasing by 10 per cent a year.

National Bank of Dubai has announced plans to establish an Islamic finance subsidiary and already distributes sharia-compliant products through its private banking division. Dubai Bank has embarked on a process to convert entirely to a sharia-compliant institution (MEED 12:5:06).