Khaleej Islamic Investment Bank, the new Islamic banking subsidiary of Bank of Bahrain & Kuwait (BBK), is due to launch operations in late July or early August, BBK chief executive officer Murad Ali Murad says. Murad says he expects the registration process with the Commerce Ministry to be completed by the middle of June.

BBK's move follows the recent establishment of a number of Islamic banks in Bahrain, some as wholly-owned subsidiaries such as ABC Islamic Bank, and others as joint ventures, such as First Islamic Investment Bank.

BBK has already been issued with a licence for the establishment of the new Islamic bank, which is a joint venture 65 per cent owned by BBK and 35 per cent owned by Kuwait's The International Investor (TII). A service agreement has been signed with TII which will manage the bank and take responsibility for appointing its first chief executive officer. Khaleej Islamic has paid-in capital of $12.5 million and will operate from the Sheraton Tower in Manama.

Murad says that Khaleej Islamic will initially focus on investment banking, to make best use of TII's experience in this area, and will use BBK's strong network as a distribution channel. 'However, as time passes, Khaleej Islamic will seek to diversify into other areas of Islamic banking,' says Murad. 'In the same way, the bank will initially focus on its Bahraini market but it will later aim to establish operations within other Arab and Islamic markets.'

The bid to open an Islamic bank is an attempt by BBK to establish a presence in one of the fastest growing regional banking markets, says one Bahrain- based analyst. 'BBK has watched a number of Islamic banking subsidiaries established by its competitors and has felt the need to get into the market,' he says.