IslamicFinance.de

CIMB Islamic said it will pursue a larger balance sheet to help win more business, regardless of whether a proposed merger with two smaller peers happens. In July, CIMB Group Holdings Bhd, RHB Capital Bhd and Malaysia Building Society Bhd secured regulatory approval to begin merger talks. The enlarged entity aims to compete against conventional banks that dominate larger and more lucrative deals in Islamic finance and could prompt further consolidation in the domestic market. The lenders have until Oct 8 to finalise the pricing, structure and other terms of the merger. Earlier this week, Maybank dismissed rumours that it was considering a merger with Bank Islam, the country’s largest, full-fledged Islamic bank.

Khazanah Nasional Bhd is considering the issue of Sukuk or Islamic bonds in Eastern Europe following the opening of its office in Istanbul, Turkey, last November. Executive director and chief financial officer Mohd Izani Ghani said the office was established to tap investment opportunities around Turkey, North Africa and Eastern Europe. He, however, said Khazanah was not planning on issuing a foreign currency Sukuk. There is a push for Khazanah to do 'kebab' sukuk but the interest rate environment in Turkey is on the high side and volatile, he added. The lender wants to do sukuk in other currencies that can match the stable environment, currency and interest rates in the country, he said.

Bank Muamalat Malaysia Bhd expects to launch Islamic Private Banking within a year to cater to the growing demand for the service. Chief executive officer Datuk Mohd Redza Shah Abdul Wahid said the bank is currently studying the product concept and expected to complete the framework in the next six months. Mohd Redza signed a memorandum of understanding with the Bank of London and the Middle East to penetrate the new segment in a wholesome approach. He also said that the Bank of London and the Middle East had the expertise in dealing with private banking customers, therefore it was a good opportunity for Bank Muamalat to work together with the bank.

The creation of a mega Islamic bank must fulfill the objectives of being able to undertake international business and facilitate cross border financial flows, said Bank Negara governor Tan Sri Dr Zeti Akhtar Aziz. She said that such a mega bank must also be able to support international trade and cross border investment activity. She was responding to a question about the license for the proposed mega Islamic bank as a result of a merger between CIMB Group Holdings Bhd, RHB Capital Bhd and Malaysia Building Society Bhd. Dr Zeti said Bank Negara wanted to see the internationalisation and enhancement of Malaysia’s financial and economic connectivity with other countries.

BIMB Holdings Bhd’s net profit for the second quarter ended June 30 increased 86.4% to RM129.67mil from RM69.58mil a year ago. The banking group's revenue for the period rose 3.8% to RM734.59mil while earnings per share (EPS) for the period stood at 8.68 sen. For the second-half period, the group said as a result of the acquisition of the 49% interest in Bank Islam Malaysia Bhd, the net profit attributable to the shareholders increased by RM109.4mil or 76.1%. Consequently, the EPS for the period under review also increased by 25.8%. To attract deposits, BIMB said greater focus would be placed on individual and retail deposits with new product features.

Malaysia's largest Islamic bank, Bank Islam Malaysia Bhd, is revising its base financing rate (BFR)to 6.85% per annum from 6.6% per annum effective Friday. Bank Islam in a statement on Thursday said the revision is in line with Bank Negara Malaysia's recent move to increase the overnight policy rate (OPR) by 25 basis points to 3.25%. The last revision in Bank Islam's BFR was on May 16, 2011, when the rate was revised from 6.3 % to 6.6%.

Fitch Ratings has warned that a merger plan by Malaysia’s second largest bank CIMB Group with RHB Capital Bhd and Malaysia Building Society Bhd (MBSB) to create the country’s biggest lender is fraught with risks. Fitch said the merger could weaken capital buffers for CIMB if not funded by sufficient new equity, adding that any move to rationalise branches and staff could be “politically unpalatable”. Furthermore, weakening credit growth and asset-quality pressures in the overall banking system will not make the process any easier. On the other hand, a successful merger would provide a stronger domestic platform from which CIMB’s offshore aspirations could continue to expand.

Over the last two years, M&As in the Malaysian insurance sector have mainly involved conventional insurers, and analysts foresee some consolidation taking shape in the takaful sector in view of the Financial Services Act (FSA) and the Islamic Financial Services Act (IFSA). Among the candidates for potential M&As are Takaful Ikhlas Sdn Bhd, a unit of MNRB Holdings Bhd, and Syarikat Takaful Malaysia Bhd (STMB). The IFSA may prompt MNRB to sell its stake in Takaful Ikhlas to a strategic partner, as further internal capital injections could be complicated. In the next few years, the main thrust for M&As is expected to be on the general insurance and general takaful industry. The life insurance sector sees to have consolidated somewhat for the time being.

ndonesian airline Garuda Indonesia Tbk has secured US$100 million in financing from a unit of Malaysia's Maybank to fund its operations and expansion. The Musyarakah-based loan has a tenure of three years and will be issued through Maybank's Indonesian unit, PT Bank Internasional Indonesia Tbk. Garuda Indonesia posted a net loss of $163.9 million in its first quarter ended March, compared with a loss of $33.75 million in the same period a year earlier, as the airline continued to struggle with rising competition.

Last month, Ikim organised a seminar on “Promoting Waqf as a Mainstream Tool in the National Economic Policy”. Several issues were discussed on the potential of waqf in supporting the social and economic development of the nation. One such issue perceived to impede its ability to unleash its fullest potential is the prevalent scepticism about the capability and professionalism of waqf management in managing its assets. Undoubtedly, waqf institutions – especially those under the purview of state religious councils – that are as professionally managed as well-governed corporations can significantly contribute towards improving the welfare standards and quality of life of many in a particular location or state.

Syarikat Takaful Malaysia has announced a final single-tiered dividend of 40%, which its shareholders approved at its AGM on Tuesday. Takaful Malaysia posted record-breaking results for 2013 as profit after tax and zakat grew by 34% to RM134.4mil from RM100.1mil in the previous financial year, with return on equity at 25.9%. With the proposed final dividends, the total single tier dividends for 2013, including the two interims dividends paid during the year, will be 82%, and this translates into a dividend yield of 6.6% based on the company’s share closing price of RM12.40 as at April 21, 2014. Group managing director, Datuk Mohamed Hassan Kamil said the company’s ultimate goal was to outpace the market and to strengthen its image through various advertising channels and marketing activities.

Bank Islam Malaysia Bhd has reiterated its interest in the Indonesian Islamic banking market despite previous attempts at penetrating the world’s largest Muslim country seeing a dead-end. Managing director Datuk Seri Zukri Samat said Indonesia possessed tremendous prospects as the country, with a population of 240 million, is still underserved in the Islamic banking sector. Islamic banking penetration in Indonesia is about 3% to4%, whereby Malaysia is between 23% and 24%. There is a huge Muslim population in Indonesia but Islamic banking penetration is very low, certainly there is a lot of business opportunity there, he said.

RAM Ratings said the Malaysian Islamic banking industry’s assets have almost doubled in the last five years, expanding to RM423bil as at end-February 2014 and accounting for 21% of the banking system’s assets. Gross financing continued to outpace deposits last year. In terms of asset quality, RAM said the the Islamic banking system’s gross impaired-financing (GIF) ratio stood low at 1.4% as at end-February 2014. RAM noted Islamic banks in Malaysia are well capitalised, with common-equity tier-1, tier-1 and total capital ratios of 12.5%, 12.5% and 14.7%, respectively, as at end-February 2014. The gradual derecognition of Basel II securities as qualifying capital, besides being an alternative source of long-term funding, will support the issuance of Basel III-compliant capital instruments for Islamic banks in Malaysia.

There are several sukuk issuances in the pipeline, among others the following: The Malaysian government will raise 2.6 billion ringgit ($797 million) via Islamic bonds on April 7 to finance new and existing housing loans held by government servants. The Tunisian government plans to issue sukuk worth "a few hundred million dollars" this year. Maybank Islamic will set up a 10 billion ringgit subordinated sukuk programme. Bahrain-based Gulf Finance House plans to issue convertible sukuk worth up to $500 million to restructure liabilities, develop projects and fund possible acquisitions, subject to shareholder and regulatory approval. A proposed bill in Luxembourg would allow securitisation of three properties for a sovereign sukuk issue worth 200 million euros ($275 million).

Malaysia’s Islamic banking assets are on track to make up 40% of the country’s total banking sector assets by 2020 from about 25% now, according to Wasim Saifi, Standard Chartered Saadiq Bhd chief executive officer and global head of Standard Chartered’s Islamic consumer banking. Islamic banking has grown twice as fast in Malaysia as its conventional counterpart at a compounded annual growth rate of 22%. Syariah-compliant solutions are currently offered at 10 Standard Chartered Saadiq branches, but will now also be available via the Islamic banking counters at Standard Chartered Bank Malaysia’s conventional branches. Standard Chartered Saadiq is also targeting to penetrate further into the SME market.

Assets held by the takaful sector in Brunei recently have grown significantly while those of conventional types of insurance have been declining, the monthly report from Brunei's monetary authority AMBD showed. In the year ended Sept. 30, takaful assets rose 21 percent to 425 million Brunei dollars ($336 million). Conventional insurers saw a drop of 1.3 percent in assets during the same 12-month period. At end-September, Brunei's takaful market accounted for 33 percent of total insurance assets. Although insurance assets have seen rapid growth in Brunei in the past decade, industry players say there is still poor awareness about insurance among its population. Brunei has four takaful operators.

The infrastructure projects to be launched in Asean and the Middle East and North Africa (Mena) regions will continue to put Malaysia as the champion in the sukuk market next year, according to CIMB Islamic Bank. Its Executive Director and Chief Executive Officer Badlisyah Abdul Ghani said the sukuk market will perform positively in 2014, with a projection of between US$42bil (US$1=RM3.25) and US$48bil of new issuances led by Malaysia and Saudi Arabia. CIMB Islamic has so far topped the lead manager league table after arranging RM9.70bil worth of sukuk issuance, garnering a 25.9% market share. Out of 20 countries worldwide, Malaysia was ranked third in terms of total Shariah-compliant assets at US$196.820mil, with 41 institutions offering Shariah services, representing 63.7% of the total population.

Indonesia's central bank estimates growth of Islamic banking assets will slow next year due to rising pressure from trade deficits and a depreciation in the rupiah. The country's authorities now plan to introduce an array of policies to develop the sector, ranging from regulating foreign exchange markets, introducing Islamic repurchase agreements as well as education and promotion initiatives. The central bank said a tighter policy in finance-to-deposit ratio, similar to the loan-to-deposit (LDR) ratio used for conventional banks, and developing a sharia-compliant lender of last resort (LOLR) would be needed to support the stability of the financial system.

More measures to encourgae the development of the Hong Kong’s Islamic financial market, particularly the sukuk and the Islamic fund management industry were discussed during the first meeting of the Joint Finance Forum which was held in the special administrative region. The forum participants agreed to identify potential sukuk issuers and encourage cross-border sukuk issuances between Hong Kong and Malaysia. Moreover, they also agreed to consider launching Islamic funds and make use of the established mutual recognition framework for Islamic funds between Hong Kong and Malaysia to facilitate cross-border Islamic financial activities.

Standard Chartered Saadiq (Saadiq) and Credit Guarantee Corp Malaysia (CGC) have collaborated to launch Malaysia’s first Islamic portfolio guarantee (PG) scheme to provide financing to small and medium enterprises (SMEs) in the country. The term-financing facility, which offers financing from RM100,000 to RM800,000 over a flexible financing tenure of between 12 and 84 months, is expected to benefit about 400 SMEs within the next one year. Up to RM200mil will be offered under the Islamic PG agreement between Saadiq and CGC. Under the agreement, CGC would guarantee 70% of the approved total principal amount undertaken by SMEs and assist to verify the credibility of applicants in consultation with Saadiq. The scheme is expected to have a shorter turnaround time in terms of approval and disbursement to enable SMEs to gain quicker access to financing.