#Malaysia Building Society Bhd (MBSB) has received Bank Negara’s approval for talks on a proposed merger with Asian Finance Bank (AFB). MBSB will soon start negotiations with the existing Middle Eastern shareholders of AFB, namely Qatar Islamic Bank (66.67%), RUSB Investment Bank (16.67%), Tadhamon International Islamic Bank (10%) and Financial Assets Bahrain (6.67%), for the merger. The negotiations are to be completed within the next six months. For the nine months ended Sept 30, 2016, AFB reported a net profit of RM4.54 million, an 18.8% drop compared with RM5.58 million in the same period last year. MBSB has a goal to become an Islamic financial institution by 2020 through merger with an Islamic lender. It centres his business efforts on six areas, namely, business focus, right pricing, asset quality, cost cutting, retail collection and information technology initiatives.
Malayan Banking (Maybank) has established a sukuk programme of up to RM10 billion in nominal value under the syariah principle of Murabahah. According to Maybank's announcement, the sukuk programme will provide the bank the flexibility to raise funds for its Islamic financial instruments and its business activities. The sukuk programme has been assigned a long-term rating of 'AAA' for issuances of senior sukuk Murabahah and 'AA1' for issuances of subordinated sukuk Murabahah by RAM Rating Services. Maybank IB is the principal adviser, lead arranger and manager, and book runner for the programme.
Allianz Malaysia has received the green light to begin stalks to acquire HSBC Amanah Takaful (Malaysia). According to Allianz, Bank Negara Malaysia (BNM) has no objection in principle for Allianz to commence negotiations with HSBC Insurance (Asia Pacific) Holdings, JAB Capital and the Employees Provident Fund Board on the proposed acquisition. This is subject to all parties concluding the negotiations within six months from BNM's written approval. Pursuant to the Islamic Financial Services Act 2013, parties concerned are required to obtain the prior written approval from BNM or the Minister of Finance on the recommendation of BNM, before entering into any agreement to effect the proposed acquisition.
Bank Islam Malaysia Bhd said the proposed move to allow developers to provide loans to house buyers will not have a severe impact on the bank, as it will continue to focus on its target market.
“For us, we don’t see any reduction in (our) approval rate, mainly because our target market remained stable,” its deputy CEO Khairul Kamarudin told reporters after launching the bank’s Visa Infinite Business Credit Card-i (business card-i) here yesterday. “Our target market has always been the middle income (segment) and we will continue focusing on our target market and we are seeing the same approval rate (going forward)”. Khairul said the bank’s approval rate last year was 70%, and slightly better this year at 71%, to date. He also said the bank has not experienced high loan rejections despite the current uncertain economic conditions. “People (borrower) who are eligible last year are also eligible this year. For the ones who have their applications get rejected are maybe for the ‘high ticket’ properties,” he added, noting that the bank is more focused on providing loans for affordable housing.
The Malaysian Rating Corp Bhd (MARC) has affirmed its ‘AAA’ rating on special purpose vehicle Aman Sukuk Bhd’s (Aman) Islamic medium-term notes (IMTN) programme of up to RM10 billion with a stable outlook. MARC said the rating reflects the credit strength of the government as the sole paymaster of the sublease rental payments that are sufficient to meet the principal and profit payments under the IMTN programme.
In the statement the rating agency added the stable outlook reflects its expectations that the sublease rental stream backing the transaction will continue to be supported by timely receipt of payments from the government.
Aman is a wholly owned funding vehicle of Pembinaan BLT Sdn Bhd (PBLT), the developer of 74 projects comprising quarters and facilities for the Polis DiRaja Malaysia. The projects, which are located throughout the country, were developed under a build, lease and transfer (BLT) project model. As at end of August 2016, PBLT has fully completed the construction of the 74 projects with a value of RM7.5 billion, of which 73 projects have been awarded with certificates of completion and compliance (CCC).
The central bank of #Malaysia plans to undertake an in-depth review of important organisations to re-energise the Islamic finance talent development landscape. Bank Negara Malaysia (BNM) Governor Datuk Muhammad Ibrahim said over the years, the central bank had established specialised institutions to enrich the talent ecosystem. These include the International Centre for Education in Islamic Finance, International Shari’ah Research Academy (ISRA), Islamic Banking and Finance Institute Malaysia (IBFIM), the Chartered Institute of Islamic Finance Professionals and the Association of Shariah Advisors in Islamic Finance Malaysia. Ibrahim noted that the new Educator’s Manual on Shariah Standards on Murabahah has several benefits for universities and stakeholders. One benefit is strategising talent deployment, while another area is the reconfiguration of academic programme to nurture talent with enhanced employability.
Australian Islamic investment company Crescent Wealth and KAF Investment Funds have jointly launched the KAF Australian Islamic Property Fund (KAIPF). Crescent Wealth corporate strategy director Omar Khan said the fund would achieve 9-10% annual return to investors, a target driven by the appetite of Malaysian investors for Australian property. The KAIPF is Malaysia’s first fund that provides non-institutional investors direct access to Australian commercial property. The launch of KAIPF brings the total number of funds under KAF to 18, with close to RM2.3 billion worth of assets under management.
1Malaysia Development (1MDB) has paid the RM1.579 million interest coupon on the RM2.4 billion Bandar Malaysia sukuk due in 2024. This is the second interest payment made by 1MDB since its dispute with the Abu Dhabi’s state-owned investor, International Petroleum Investment (IPIC). The first payment was in May, when 1MDB made a scheduled coupon payment amounting to RM143.75 million on its RM5 billion 5.75% Islamic medium-term notes due 2039. The two payments strongly indicated that the company had ample liquidity to make interest payments. According to 1MDB president Arul Kanda Kandasamy 1MDB was focused on resolving the dispute with IPIC and would continue to honour current debt obligations.
In #Malaysia Danajamin Nasional is guaranteeing a 17-year sukuk murabahah programme amounting to RM300 million for Chellam Plantations. The first tranche of the programme amounting to RM150 million with a tenure of up to 17 years, was issued and subscribed last Friday. Funds from the sukuk issuance will support Chellam Plantations’ new planting in Kalimantan and expansion in Indonesia. Proceeds from the sukuk will also be used to refinance its outstanding borrowings and finance its capital expenditures. Joint lead arrangers of the transaction are RHB Investment Bank and OCBC Al-Amin Bank.
In #Malaysia the Employees Provident Fund (EPF) expects 1.5 mn to 2 mn members to convert their contributions to the syariah-compliant fund in the first year of implementation. CEO Datuk Shahril Ridza Ridzuan said 71% of the members agreed on the need for the Islamic pension scheme called Simpanan Shariah. Simpanan Shariah’s initial fund size will be RM120 bn. EPF is in the process of classifying its assets as syariah-compliant and conventional, with about 40% of its assets now fully syariah-compliant.
Bank Muamalat Malaysia Bhd sees a listing of the bank as an alternative for its shareholders, but is of the view that the market is not conducive for such an exercise currently. Bank Muamalat is 70% owned by DRB-Hicom Bhd and the rest is held by Khazanah Nasional Bhd. A potential listing of Bank Muamalat could be an option if DRB-Hicom fails to find a suitable suitor to acquire a stake in the bank. DRB-Hicom is required to pare down its stake in Bank Mualamat to 40% but this has been delayed for a few years because it was unable to agree on the terms with potential buyers.
While 1Malaysia Development Bhd (1MDB) is seeing a positive balance sheet with total assets exceeding total debts by RM3 billion, it cannot be denied that revaluation of its land assets, which were acquired relatively cheaply, is what saved it from slipping into a deficit. As at last January, 1MDB had RM53 billion in assets compared with RM50 billion in debts. While details of 1MDB's latest assets and debts are not available, past records do show that its cheap buys in the land division with the federal government especially have worked to help bolster its balance sheet by at least RM6.36 billion.
The world's first Global Halal Data Pool offers massive trade opportunities for halal products and services providers, especially when it connects to the global data syncronisation network in August. Serunai Commerce Sdn Bhd Chief Executive Officer Amnah Shaari said in developing the platform it collaborated with the GS1 Council in Brussels, producer of 95% of global barcodes, which also runs the global data syncronisation network. Serunai Commerce, currently working with over 200 halal certification bodies, would act as the live verification centre for halal products and services using the Global Trade Item Number, as specified by the GS1 attributes.
RAM Ratings expects investment accounts (IAs) to become an important source of new funding for Islamic banks this year as they emerge as potential game-changers in the way Islamic banks source their funds from the public. It noted that unrestricted IAs (UIAs), which are marketed to customers, are estimated to have increased more than RM14 billion in Q4’ 2015, surpassing the RM8.3 billion growth in the overall banking system’s deposits. The recent rapid growth of UIAs follows the requirement of the Islamic Financial Services Act 2013 that Islamic banks distinguish IAs from principal guaranteed deposits by end-June 2015. RAM’s assessment revealed that UIAs accounted for two-fifths of the RM47 billion of IAs in the Malaysian Islamic banking system as at end-2015.
Bank Negara Malaysia governor Tan Sri Dr Zeti Akhtar Aziz is likely to leave when her term expires in April. Zeti said she had not received any request to stay on amid the current market volatility, a scenario which had fuelled speculation that her contract may be extended. She stressed that it was "very unlikely" for her term to be extended again, as the succession process is already underway. Zeti, who has served as governor for 16 years, was however tight-lipped on who her successor would be, saying she is not at liberty to discuss the matter. She, however, said the central bank will remain independent even with the appointment of a new governor. Zeti stressed that a politician should not be appointed as governor of the central bank.
Malaysia retained its leading position as a sukuk hub in 2015, accounting for 53% of global issuance at the end of the year, RAM Ratings head of Islamic finance Ruslena Ramli said. Although the performance pales in comparison to the country's 69% of share of global sukuk as at end-2014, the ringgit remained the currency of choice accounting for 39% of sukuk issuance followed by the US dollar (32%) and the Indonesian rupiah (9%). However, RAM Ratings noted that Malaysia's share of outstanding global sukuk had declined to 52% in 2015 from 55% in 2014 due to the weaker ringgit. On the overall global sukuk market, RAM Ratings noticed an increase in sukuk issuance from new markets, as Oman and the Ivory Coast have joined the growing list of sovereign sukuk issuers.
Standard & Poor's Rating Services (S&P) expects sukuk issuance to remain at below-peak levels in 2016 mainly because Bank Negara Malaysia (BNM), the largest issuers of sukuk worldwide, has stopped issuing Islamic notes. In absence of its biggest issuer, the rating agency expects sukuk issuance to reach US$50 billion-US$55 billion (RM219.5 billion-RM241.45 billion) in 2016, compared with US$63.5 billion in 2015 and US$116.4 billion in 2014.
Excluding the BNM effect, S&P said sukuk issuance dropped by around 5% in 2015 from 2014. Three main factors are expected to shape the performance of the sukuk market in 2016: monetary policy developments in the US and Europe, the drop in oil prices, and the possible lifting of sanctions on Iran.
BIMB Holdings Bhd’s wholly-owned subsidiary Bank Islam Malaysia Bhd has issued the second tranche of the Subordinated Sukuk Murabahah amounting to RM400 million under the Subordinated Sukuk Murabahah Programme. BIMB said the second tranche has a tenure of 10 years non-callable five years, with its maturity date being Dec 15, 2025. The sukuk has been rated A1/stable by RAM Rating Services Bhd. The proceeds will be utilised to finance Bank Islam’s Islamic banking activities, working capital requirements and other corporate purposes and/or, if required, to redeem any outstanding Subordinated Sukuk Murabahah issued under the Subordinated Sukuk Murabahah Programme.
Malaysia’s Islamic finance industry will continue to grow strongly despite the withdrawal of some Islamic finance-related incentives in Budget 2016.
Chartered Institute of Islamic Finance Professionals (CIIF) president Badlisyah Abdul Ghani said the country’s Islamic financing market has grown positively over the years, attributed to the tax incentives provided for Islamic financing in previous budgets.
“(But now) the Islamic finance no longer requires that assistance to penetrate the market. (Previously) the incentives were there to create the momentum to build nderstanding and acceptance of Islamic finance,” he told a press conference after the launch of CIIF last Friday.
Badlisyah said the CIIF, a professional body for qualified practitioners in the Islamic finance industry, was established following the increasing need for a global reference point for professional talent in the industry, as it expands internationally.
R&A Telecommunication Group Bhd's major subsidiary, R&A Telecommunication Sdn Bhd (RASB), has been served a writ and a statement of claim by Maybank Islamic Bhd for defaulting a loan payment of RM30.54 million. R&A said it plans to address the issue via a regularisation plan. The filing of the writ and statement of claim is a result of the outstanding amount for various Islamic financing facilities granted by the plaintiff including murabahah cashlines and Islamic tradeliness facilities, R&A said. The financial of operational impact of the writ and statement of claim on the group will be severe, it said, adding that it will severely impact the group's cash position.