Bank Islam’s growth strategy

KUALA LUMPUR: Bank Islam Malaysia Bhd plans to increase its asset size to RM100bil by 2025 from RM75bil presently, with a five-year business plan themed LEAP25, according to Bank Islam and BIMB Holdings Bhd CEO Mohd Muazzam Mohamed.

Muazzam said LEAP25 is aimed at Bank Islam becoming the champion in syariah-compliant environmental, social and governance (ESG) total financial solutions, with leadership in digital banking and social finance.

“With LEAP25, we also aim to improve our cost-to-income ratio to below 50%, from 52% presently. And beyond that, the target has always been to be at about 45%, ” he told a media briefing.

The LEAP25 business plan also aims to double the financial group’s ESG-rated financing assets, which stand at 2.3% presently (highest in the industry), and sustain its industry-leading return on equity at above 15%.

The plan also aims to increase its fee-based income or non-fund-based income contribution, create positive social impact through social finance initiatives, as well as nurture a high-performing pool of talents with employer engagement score at par with Malaysia Best Employer norms.

Muazzam said the group will focus on five pillars – wholesale banking, enterprises, digital bank, wealth management and social finance.

Under the wholesale banking pillar, it aims to grow its corporate banking portfolio, double non-fund-based income, be ranked among the top three in the Islamic league table and surpass RM10bil in assets under management for BIMB Investment.

Under the enterprises pillar, the group aims to expand its small and medium enterprises portfolio, empower the halal economy and provide a platform for structured and trade financing.

As for digital banking, Muazzam said the group would not be applying for digital banking licence as it could leverage on its existing Islamic banking licence.

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“Bank Islam has established a dedicated division to design and build our digital-only proposition.

“A Centre of Digital Experience (CDX) was established a year ago and we plan to launch the digital-only proposition this year, ” he said.

The CDX division focuses on next-generation technologies and delivering financial solutions to the unserved and underserved segments in Malaysia.

On wealth management, the group aims to expand its high net-worth and affluent client base and drive sustainable ESG investments.

Meanwhile, the group does not expect significant modification loss in 2021, assuming that no automatic moratorium is introduced this year.

Regarding the restructuring exercise that would see Bank Islam taking over BIMB’s listing status, Muazzam said it is on track for completion by August 2021.

He also explained that BIMB staff will be reskilled and absorbed into Bank Islam. “There will not be any retrenchment exercise, ” he said.

Last December, BIMB said the transfer of its listing status is part of a restructuring that would unlock “significant value” for its shareholders.

“Upon completion of the proposed exercise, BIMB’s listing status will be transferred to Bank Islam, which will emerge as the one and only full-fledged Islamic financial institution to be listed in the region, and enhance its corporate stature.

“This listing will allow Bank Islam to better position itself in the Islamic finance and capital markets and capitalise on the growth of both markets in its efforts to expand its customer base, ” it said.

The principal adviser for the exercise is Maybank IB.

But prior to the transfer, BIMB has to undertake a private placement of new shares to raise RM800mil to fully settle the outstanding sukuk held by Lembaga Tabung Haji (LTH). It will be an early redemption of the sukuk, which only matures in December 2023.

On Tuesday, the group disclosed that it would issue 222.22 million new shares, representing 12% of its issued capital, under a private placement exercise that would raise RM795.6mil.

LTH is the controlling shareholder of BIMB with a 53.14% stake, followed by the Employees Provident Fund (12.24%), Permodalan Nasional Bhd (10.93%), Yayasan Pelaburan Bumiputra (5.07%) and Retirement Fund (Inc) (2.65%).

Post-restructuring, Bank Islam and Syarikat Takaful Malaysia Keluarga Bhd, of which BIMB owns 59.5%, will be two separate listed entities.