TOTAL assets of the Islamic banking sector grew by 15% last year to RM94.6bil, spurred by higher growth in total financing.
As at the end of last year, total financing stood at RM57.9bil or 61.2% of the total Islamic banking assets.
Bank Negara said investment in securities was cut by 15.6% or RM3.5bil to RM19bil, representing 20% of total assets.
Of the RM94.6bil assets, IBS (Islamic Banking Scheme) commercial banks had a 57% share, followed by Islamic banks (26.3%) and IBS finance companies (8.2%).
But it was the IBS merchant banks that recorded the highest growth rate in terms of assets last year rising 47% compared with 46% for IBS commercial banks and 18.4% for Islamic banks.
The central bank said that the Islamic banking sector continued to grow in tandem with the economy.
The industry was able to sustain its performance and its strong capitalisation levels were attributed to increases in capital and profits as well as higher financing activities, it said.
Asset quality also recorded further improvement with a declining trend seen in net non-performing financing (NPF) ratio and high financing loss provisions, it added.
Its risk-weighted capital ratio and core capital ratio were sustained above 12% and 10% respectively throughout 2004.
The total capital base of the Islamic banking institutions increased to RM7.8bil last year from RM6.8bil in 2003 was due to new capital injections and audited profits.
The gross and net NPF ratios stood at 8.1% (2003: 8.5%) and 5.3% (2003: 5.5%) respectively based on a six-month classification.
The net NPF ratio of the Islamic banking institutions was sustained between 4.8% and 5.7% throughout the year.The report said the general provision of total net financing for the Islamic banking industry increased to 2.1% from 1.8% as at end-2003, reflecting the prudent stance of a number of Islamic banking institutions in setting aside higher provision for financing.
The property sector held the largest share, 67%, of the total NPF (2003: 62%).
During the year, the rates of return to general investment depositors showed a declining trend across the different tenures, the report said.
It said the one-month and three-month rates ranged from 2.63% to 2.87% and from 2.73% to 2.93% respectively, partly due to the proportionately larger increase in the general investment deposit base than the increase in the net distribution income.
Bank Negara said the Islamic banking sector recorded an increase of 14.1% in net income (from financing activities and securities) of RM306.6mil at operating level. The sector's other income rose by RM87.5mil or 11.8%.
It posted a higher profit before provision of RM2.6bil (2003: RM2.3bil) and after allocating financing loss provisions, recorded a pre-tax profit of RM986.3mil last year compared with RM960.4mil in 2003.
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