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Tuesday, 20 August 2013

Bank Muamalat Malaysia courts merger, Bank Rakyat and MIDF among possible candidates on its list

PETALING JAYA: Bank Muamalat Malaysia Bhd is said to be revisiting the idea of a merger, but this time possibly with a development financial institution (DFI), sources said.
Among the possible candidates are Bank Rakyat Malaysia Bhd and Malaysian Industrial Development Finance Bhd (MIDF), the sources added.
Bank Muamalat and Bank Islam Malaysia Bhd – ultimately owned by Lembaga Tabung Haji – are the only two standalone Islamic banks in the country licensed by Bank Negara.
DFIs, meanwhile, are specialised financial institutions established by the Government with the specific mandate to develop and promote key sectors that are considered of strategic importance.
DFIs include Bank Simpanan Nasional, Export-Import Bank of Malaysia Bhd, Small Medium Enterprise Development Bank Malaysia Bhd or SME Bank and Bank Pembangunan Malaysia Bhd as well as Bank Rakyat and MIDF.
To recap, the shareholders of Bank Muamalat had been in negotiations with Affin Holdings Bhd, but talks between the parties were called off at end-March.
It was reported that Affin had sought to acquire a portion of DRB-Hicom Bhd’s 70% stake in Bank Muamalat, but the deal fell through due to pricing issues. Talks between the parties had commenced in August last year. At that time, Affin had said that it expected to conclude the talks by the end of 2012.
DRB-Hicom, whose interests vary from ports to property development, had acquired the 70% block in Bank Muamalat in 2008 on the condition that it eventually reduced this to 40%.
It is learnt that Affin was looking to buy 30% of Bank Muamalat from DRB-Hicom.
Khazanah Nasional Bhd owns the remaining 30% of Bank Muamalat.
Affin’s withdrawal from the talks was seen as putting DRB-Hicom in a tight spot, given that it has to pare down its stake in accordance with Bank Negara regulations.
Industry players have said that the idea of a merger between Bank Muamalat and Bank Rakyat is an attractive proposition, given that both are Islamic concerns, with Bank Rakyat being the country’s largest Islamic cooperative bank.
Bank Rakyat, according to sources, is believed to have ambitions to grow its commercial banking segment and a clear path to this would be via a merger with an Islamic bank.
Industry observers have also noted that it has always been the aspiration of the central bank to create a mega Malaysian Islamic bank, which would cement the country’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 strike a merger deal with Bank Islam Malaysia in 2011 and Bahrain-based Islamic lender Al Baraka Banking Group prior to that.
On the positive side, Bank Muamalat has worked to clean up its books and improve its returns over the last few years.
For the financial year (FY) ended March 31, 2013, Bank Muamalat posted a record pre-tax profit of RM236mil, with revenue rising close to 12% to nearly RM1bil. Its asset size stood at RM21.07bil.
The bank began operations in October 1999, with its combined assets and liabilities being brought over from the Islamic banking windows of the-then Bank Bumiputra Malaysia Bhd, Bank of Commerce (M) Bhd and BBMB Kewangan Bhd.
Bank Rakyat, meanwhile, has been enjoying good profitable growth over the years, breaching the RM1bil profitability mark in 2008. For FY2011, it made a profit before tax and zakat of RM2.02bil, with the bulk of its financing income coming from consumer banking.
For the first three months to March 31, 2013, its profit before tax and zakat was RM539.52mil.
(The Star Online / 20 Aug 2013)

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Tunisia's El Wifack plans to become Islamic bank

Aug 19 (Reuters) - Tunisia's El Wifack Leasing has applied to regulators to become the country's third full-fledged Islamic bank, the company said in a statement.
El Wifack, which has its debt rated BB+ by Fitch Ratings, also said it planned to raise its capital by 5 million dinars ($3.1 million) to 25 million dinars, regardless of whether it received approval to operate as an Islamic bank.
Islamic finance was neglected before Tunisia's 2011 revolution but the Islamist-led government is now promoting it.
Currently, sharia-compliant business accounts for just 2.5 percent of the Tunisian financial sector, according to a Thomson Reuters study this year, and there are only two fully operational Islamic banks, Zitouna Bank and the Tunisian arm of Bahrain's Al Baraka Banking Group.

Last month, parliament approved a law that will allow the state to issue Islamic bonds, or sukuk. The Jeddah-based Islamic Development Bank (IDB) has offered Tunisia a financial guarantee to issue a sukuk worth $600 million, though the issue could be delayed to 2014 because of political instability and approaching elections. 

(Reuters / 19 Aug 2013)

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New rules and products lay groundwork for Nigerian Islamic finance

Lagos/Sydney: Nigeria is gradually opening up to Islamic finance, a move that could bring non-interest banking to over 80 million Muslims and develop one of Africa’s fastest-growing consumer and corporate banking sectors.
Home to the largest Muslim population in sub-Saharan Africa, Nigeria is trying to establish itself as the African hub for Islamic finance, which follows religious principles such as bans on interest and gambling.
In recent months, a string of regulatory initiatives have set the groundwork for products such as Islamic bonds (sukuk), insurance (takaful) and interbank lending products, although there is still only a small number of local market participants.
“The potential is there but the market is negligible in Nigeria because we have only one Islamic bank and one window — but it has potential to grow,” said Bashir Aliyu Umar, special adviser on non-interest banking to the central bank governor.
Islamic banking is currently offered by the Islamic window of Stanbic IBTC, a unit of South Africa’s Standard Bank, and Jaiz Bank, a full-fledged Islamic lender which has operated since 2012.
Abuja-based Jaiz now plans to obtain a national licence to expand operations beyond Nigeria’s north, which has been hit by an Islamist insurgency.
“That was where the security challenges started last year, that really affected the roll-out of the products,” Umar said.
Despite the challenges, Jaiz has grown its branch network to 10 from an initial three, with ambitious expansion plans calling for 100 branches by 2017.
It completed a capital raising in August, attracting investors such as the Jeddah-based Islamic Development Bank. As of June, it had total assets of 20.6 billion naira ($129 million) and capital of 10 billion naira.
Sterling Bank has been granted approval in principle for an Islamic window, while two more lenders have expressed interest in obtaining licences to operate Islamic windows, according to a central bank official.
The market needs the competition. A November report by Efina, a Lagos-based development organisation, estimated that 34.8 per cent of Nigerian adults who did not use non-interest banking products were likely to take them up if they were available.
But Nigeria’s banking sector remains underdeveloped. The same report found that over 61.6 per cent of adults borrowed from family and friends, while only 5.6 per cent used deposit-taking banks and 9.9 per cent used co-operatives.
To service the demand, Sterling Bank plans to roll out several products including a profit-sharing account and other investment products, Basheer Oshodi, group head of non-interest banking at Sterling, told Reuters.
“We are ready to go live immediately when we get the final licence. We will pilot with 10 branches and will end up using all 165 branches across the country thereafter.
“In reality, we will be having almost all basic Islamic banking products. We have also started to structure a couple of sukuk,” he added.

Rules for sukuk
Sukuk could come to the market soon, after rules for their issuance were approved in March by the Securities Commission; cocoa-producing Osun State plans the country’s first such issuance.
Nigeria’s regulators have taken steps to retain the final say on what Islamic products come to market, a centralised approach which mirrors regulation of the industry in countries such as Malaysia and Oman.
The central bank has set up an advisory committee to regulate sharia compliance, while the insurance regulator issued guidelines for takaful operators in April.
There are currently three takaful windows operating in Nigeria and up to five firms may be considering entry into the market, said Auwalu Ado, internal sharia auditor at Jaiz Bank.
“With a meagre 100 million naira as the minimum capital requirement for either family or general takaful, it is expected that many players will join the train as full-fledged takaful companies,” said Ado.
Takaful would not just give Islamic lenders an opportunity to protect their assets, but also offer an avenue for Islamic banks to invest their funds actively, he added.
Nigeria’s central bank has begun developing lending products to help Islamic banks manage their short-term funding needs; a lack of such products has slowed industry growth in other countries.
“The financial market department is developing instruments that will be used between the central bank and the Islamic banks as well as on an interbank platform,” said Umar.
The central bank is a shareholder in the Malaysia-based International Islamic Liquidity Management Corp (IILM), which aims to provide cross-border options for short-term funding through a planned sukuk programme.
In December, the Nigerian central bank issued guidelines for asset-backed securities that would use IILM certificates as collateral — potentially putting Nigeria ahead of many other Islamic finance centres in developing such complex products.

(Gulfnews.Com / 18 Aug 2013)

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