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Wednesday May 9, 2012

Bank Islam remains interested in buying a stake in an Islamic bank in Indonesia

PETALING JAYA: Bank Islam Malaysia Bhd is still keen on buying a stake in a Islamic financial institution in Indonesia, but is awaiting further clarification on the country's shareholding regulations for commercial banks.

BIMB Holdings Bhd group managing director and chief executive officer Johan Abdullah said no decision has been made on potential Indonesian acquisitions for now.

“At this juncture, we are still exploring and collecting data,” he told reporters after the group's 15th AGM.

Samsudin expects a global slowdown to have an adverse impact on Bank Islam, especially in the area of trade finance.

BIMB Holdings has a 51% stake in Bank Islam Malaysia, with another 30.5% owned by the Dubai Financial Group LLC and 18.5% by Lembaga Tabung Haji (Pilgrim Fund Board).

Bank Islam Malaysia is the major earnings contributor to BIMB Holdings.

Last year, Bank Islam Malaysia contributed RM469.6mil or 82.7% of BIMB Holdings' profit before zakat and tax (PBZT) of RM567.6mil.

Syarikat Takaful Malaysia Bhd, which is 65.22% owned by BIMB Holdings, contributed RM101.4mil or 17% of the group's PBZT.

A local business daily had reported in February that Bank Islam Malaysia was looking to buy a stake in Indonesia's PT Bank Muamalat, which is known as the country's second largest Islamic lender.

However, recent media reports said Bank of Indonesia (BoI) might impose new caps on single-shareholder stakes in the country's commercial banks as early as this month.

Under the present regulatory framework, an investor, including a foreign party, can own up to 99% of an Indonesian commercial bank.

“I think we need to constantly engage with them (Indonesian authorities) because we don't want to be caught in a situation where we put in money, and later on, we don't know what is the downside,” said Johan.

Johan pointed out that the group liked the Indonesian financial market as it was quite robust. He also said no decision had been made on a potential public listing of Bank Islam Malaysia.

“It is not in the pipeline. We are still exploring. We want to know if the present structure is right? How to create value?”

On whether Bank Islam Malaysia could potentially take over the listing status of BIMB Holdings, Johan said: “One of the options .... maybe. We are continuously looking for opportunities.”

Regarding the group's continued focus on consumer lending, Johan said “it is good”.

“You need to look at the profiles of our customers. The main bulk are civil servants. For example, our housing loans are more on owner occupied properties, so the risk is not that great. We also deduct the loan (repayments) at source, meaning from the monthly salary.”

The Minority Shareholder Watchdog Group had noted that for the financial year ended Dec 31, 2011, BIMB Holdings continued to be focused on consumer lending, which accounted for 76% of its total financing portfolio.

The household sector was the largest segment with RM11bil out of RM14.56bil under the group's total financing and advances last year.

Johan pointed out that last year, the group had a gross non-performing financing (NPF) ratio of 2.61.

“This is very good, as it is an improvement of 42% from the NPF ratio of 4.50 recorded in 2010. we are also better when compared with the NPF ratio of 2.7 for the industry.”

He also said this year would be more challenging as the external macroeconomic landscape was not as robust as last year.

“For our loan growth, we target 13% to 15% this year.”

In the group's annual report 2011, BIMB Holdings chairman Tan Sri Samsudin Osman had stated that the targets for this year included a return on equity of 16% and return on assets of 1.5%.

Samsudin had noted in his statement that a global slowdown would continue to have an adverse impact on Bank Islam Malaysia, especially through the trade finance business.

Bank Islam Malaysia is aiming to open three new branches, namely in Bukit Jelutong (Shah Alam), Cyberjaya and Ipoh by June, which will enlarge its network to 125 branches nationwide.

Another nine new branches are also in the pipeline.

Samsudin also stated that on the consumer banking front, personal and house financing will continue to be the key drivers for 2012, with a strategic thrust in selected household segments.

In commercial banking, Bank Islam Malaysia will target priority sectors that are seen as being resilient to the global environment and which have high growth potential.

These include the 12 National Key Economic Areas identified under the Economic Transformation Programme (ETP), such as oil, gas and energy, palm oil and rubber, healthcare and education.

Corporate banking will continue to pursue syndicated financing opportunities to drive asset growth while the investment banking division will seek to be involved in more sukuk and corporate finance advisory mandates to enhance non-fund based income distribution.

Meanwhile, Samsudin said the implementation of the Risk Based Capital Framework may see a round of consolidation between smaller Takaful players.

“If this takes place in 2012, there will be bigger but fewer players to contend with, which augurs well for Takaful Malaysia moving forward.”

Maybank Investment Bank (IB) Research said in a recent report that BIMB Holdings' growth over the next few years will be driven by domestic activities.

“Indonesia really is the icing on the cake over the longer term.”

Maybank IB Research also noted that it was unclear at this stage as to whether Indonesia's upcoming revised shareholding regulations for commercial banks would be extended to insurance companies also.

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