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Friday March 15, 2013 MYT 12:00:00 AM
Thursday April 18, 2013 MYT 12:55:59 AM
by john loh
PETALING JAYA: Talks between BIMB Holdings Bhd and the Dubai Financial Group (DFG) over the latter's 30.5% stake in Bank Islam Malaysia Bhd have stalled, banking sources said.
This is because a long-awaited plan by BIMB to transfer its listing status to Bank Islam is nearing fruition, a prospect DFG finds more attractive than hiving off its interest to pare down debts, people familiar with the matter told StarBiz.
Bank Negara had given BIMB and DFG until March 31 to conclude negotiations on Bank Islam.
The bigger picture, however, is that pilgrim fund Lembaga Tabung Haji, the parent to both BIMB and Bank Islam, is revisiting the idea of a mega Islamic bank involving a merger between BIMB and Bank Muamalat Malaysia Bhd.
A BIMB-Bank Muamalat fusion would put the combined entity ahead of Maybank Islamic Bank, currently the country's largest Islamic bank by assets and Asia-Pacific's largest syariah lender, market watchers said.
According to sources, Lembaga Tabung Haji's interest in the merger was revived following the breakdown in discussions between Affin Holdings Bhd and Bank Muamalat.
It was reported recently that Affin had not been able to reach an agreement with the shareholders of Bank Muamalat on the acquisition of DRB-Hicom Bhd's 30% stake in the country's second standalone Islamic bank.
In an interview with StarBiz, Bank Islam managing director Datuk Seri Zukri Samat said the lender might carry out an initial public offering (IPO) within a year or two.
“The matter has been discussed at the board and shareholder levels,” he said.
Such a move would position Bank Islam, the country's oldest Islamic lender, as the first and only syariah-compliant bank directly listed on the local bourse.
BIMB, which holds 51% of Bank Islam, had wanted to buy over DFG's stake and increase its share of profit from the company.
It is understood that a listing of Bank Islam would take the form of a share swap between Lembaga Tabung Haji, BIMB, DFG, Bank Islam and BIMB's 61.14%-owned subsidiary Syarikat Takaful Malaysia Bhd.
The IPO would also give debt-laden DFG an avenue to raise cash and ease some of its liabilities, which had ballooned as a result of the 2008 financial crisis.
This is not the first time BIMB has been linked to Bank Muamalat. In 2011, DRB-Hicom had submitted a letter of expression of interest to BIMB to explore a potential merger.
DRB-Hicom, whose interests vary from ports to property development, had acquired a 70% block in Bank Muamalat in 2008 on the condition that it reduces this to 40%.
Khazanah Nasional Bhd owns the remaining 30% of Bank Muamalat but Tan Sri Azman Mokhtar, the state investment fund's chief steward, was quoted as saying in 2011 that the stake was a “non-core holding” the firm was seeking to dispose of.
A market observer noted that it had always been the aspiration of the central bank to create a mega Islamic bank, which would cement Malaysia's status as the world's largest sukuk market and hub for Islamic finance.
Bank Muamalat has had a tough time courting suitors over the past few years, having failed to cut deals with BIMB previously and Bahrain-based Al Baraka prior to that.
But the bank has worked quietly to clean up its books and improve its returns. In the year to March 31, 2012, Bank Muamalat saw its gross impaired loan ratio, a measure of bad loans, decline to 4.8% from a peak of 8.7% in 2008.
Its return on equity for fiscal 2012 stood at 8.9%, while its profit after tax, deposits and financing have gained 12%, 8% and 9% over a compounded five-year period to RM84.98mil, RM18.15bil and RM9.04bil, respectively.
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