Mega mergers to be the highlight in Malaysian Islamic banking in 2015

KUALA LUMPUR: Malaysia's Islamic banking sector is set to attract global limelight next year with the formation of the world's first mega Islamic bank amid challenging times next year.

The proposed three-way merger between CIMB Group Holdings Bhd, RHB Capital Bhd and Malaysia Building Society Bhd (MBSB) will help internationalise the Malaysian model of Islamic finance thus positioning the country as the leader in Islamic banking.

"This is a positive industry development because it is market driven mergers and acquisitions (M and A)," Maybank Islamic Bank Chief Executive Officer Muzaffar Hisham told Bernama.

On July 10, Bank Negara gave the greenlight to commence discussions with the aim of merging the businesses of both RHB and CIMB, as well as, create an enlarged Islamic Banking franchise with MBSB. 
The mega merger is expected to take off in the first quarter of next year.

Association of Islamic Banking Institutions Malaysia (AIBIM) President Datuk Mohd Redza Shah Abdul Wahid was reported to have said that the creation of a mega Islamic bank in the country may spark further industry consolidation.

He also said some companies, however, may want to find their own market place and concentrate on their particular niche areas of business instead of embarking on M and As.

Meanwhile, banking stocks depreciated recently after investors shifted their selling position from oil and gas sectors, due to falls in global crude oil prices and pressured by the weaker ringgit. 

Affin Hwang Investment Bank Vice-President/Head of Retail Research Datuk Dr Nazri Khan Adam Khan opined that consolidation in the banking sector, which showcased synergistic benefits from the mega merger, would provide upside bias to the banking and finance stocks on Bursa Malaysia, going forward. - Bernama