RBS sees big growth in Islamic finance

DUBAI (Reuters) - Royal Bank of Scotland (RBS.L)sees big growth opportunities in Islamic investment banking, expecting asset growth rates to remain 15-20 percent annually and profitability levels to increase, a leading executive said.

Navid Goraya, RBS' global head of Islamic banking, said margins have increased as financing costs have fallen, putting the Islamic sector on a solid footing this year.

"Profitability has not been hurt," he told the Reuters Islamic Banking and Finance Summit on Monday. "You could see profitability go up."

In the six countries of the Gulf Cooperation Council -- the world's biggest market for Islamic financial services -- asset growth will remain at 15-20 percent annually, despite the global wealth destruction caused by the financial crisis, he said.

As a result, demand remains strong for wholesale banking services that comply with Sharia code, Goraya said. "There is demand for those who are gearing up," he said.

Demand from the world's 1.3 billion Muslims for investments that comply with their beliefs has soared, and assets that comply with Islamic law are estimated at between $700 billion and $1 trillion.

The Islamic sector will be hit by the same economic downturn that has burdened conventional banking, with many expected to suffer impairments due to a slumping property market, Goraya said, although many Islamic banks have sidestepped massive losses due to their conservative nature.

"The Islamic banking industry or sector will continue growing at its previous pace if not even faster," he said.

RBS will target four areas in its Islamic strategy, he said: debt capital markets, equity capital markets, corporate finance and risk management, and structured products and investment, which includes private equity.

(Reporting by Thomas Atkins; Editing by Sam Cage and Jon Loades-Carter)