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Thursday, 16 April 2015

Malaysia: MBSB priority to become full-fledged Islamic bank in 5 years

KUALA LUMPUR: The priority for Malaysia Building Society Bhd (MBSB) in the near term is to continue to close its gap in becoming a full-fledged Islamic bank – something it aspires to achieve in the next five years.
The move from being a non-conventional bank to an Islamic bank is to prepare itself for any potential corporate exercise.
“Any form of corporate exercise of a financial institution will require Bank Negara’s blessing but this is something in the future,” MBSB chief executive officer Datuk Ahmad Zaini Othman told reporters after its AGM yesterday.
He said that any possible merger would require the Employees Provident Fund’s (EPF) approval and laborious study by the board.
Asked if the company was in talks with any other banks to achieve the goal, he said: “Not at this stage.”
But this was up to the major shareholders to push to the regulators should there be something that they thought was worthwhile, he said.
Asked whether MBSB would be merging with an Islamic bank, he said: “It would be, logically.”
It has been previously speculated that Bank Islam Malaysia Bhd was an ideal merger candidate for MBSB that was supposed to be turned into a mega-Islamic bank under a merger exercise that also involved CIMB Group and RHB Capital Bhd.
Currently, about 80% of MBSB’s assets are Islamic assets.
In terms of timeline, Zaini hinted that it could happen this year or next but pointed out that the critical part was to close its gap to being a full-fledged bank that met the regulators’ requirements.
MBSB would align its operations, processes and systems in line with the regulatory framework of the central bank, he said.
“Then, the timeline will just fall in place,” he said.
Zaini also said that becoming an Islamic Bank was part of its business plan.
For the past two years, measures and processes had been put in place so that it ran like a bank, he said.
“It’s a must. If you look at the business environment, we need to transform to move to that new environment,” he said.
Zaini said MBSB had wanted to start the five-year plan earlier but the mega bank merger which involved CIMB Group and RHB Capital proposed in June last year made the management put the the plan on hold. The mega merger was called off in January this year.
He also said the capital requirement for it to move towards that vision had been there.
On whether it would apply for a new banking licence, he said yes, but noted that it would be a longer journey and that there would be more pressure on its major shareholder to get the required capital.
Looking ahead, it aims to grow its loans from 3% last year to between 7% and 8% this year.
Its focus would be on quality loan growth rather from a pure number perspective.
“Last year was a unique year… we were distracted by eight months of hibernation,” he said, referring to the mega deal.
Now, it will “re-activate” its original business plan.
Among the improvements it’s looking at include its continual effort to reduce its non-performing loans to below 3%. It also targets to grow its corporate segment from 12% to 20%.
The shift to emphasise on business financing is to mitigate the decline of its personal financing segment, which has been its bread and butter.
Going forward, it would streamline its resources and could embark on a rightsizing programme involving about 10% of its 1,500-strong workforce.
(The Star Online / 16 April 2015)
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QIIB and QNB Capital in deal to promote Islamic finance in China

QIIB and QNB Capital have joined hands with Southwest Securities (SWSC) to promote Islamic financing and investments in China.

Chinese brokerage Southwest Securities is based in Chongqing, one of the five “listed central cities” in China. Southwest Securities is also Chongqing’s first listed financial institution.
The agreement was signed yesterday in Doha on the sidelines of an event held to formally open the Middle East’s first centre for clearing transactions in the Chinese yuan. QIIB chief executive officer Abdulbasit A al-Shaibei told Gulf Times yesterday the “partnership would help create a framework for Islamic financing” in China. 

Besides helping Southwest Securities to access investor markets in Qatar and the Middle East, the agreement also aims to open the Chinese market for both QIIB and QNB Capital. 
“We are looking to access the Chinese market for financing and investments, either directly or indirectly,” al-Shaibei said. 

He said the agreement was the first one of its kind in both China and Qatar.

Al-Shaibei said there was a “clear appetite” for Islamic financial instruments in China. “Chongqing is among the five top Chinese cities and they are looking to promote Islamic banking not just in the other provinces in China, but beyond their borders to surrounding Asian countries,” he said.

Al-Shaibei said an agreement between the two countries called for Qatari banks’ presence in China.

“As HE the QCB Governor Sheikh Abdulla bin Saud al-Thani mentioned today (Tuesday), the agreement encouraged Qatari banks to have a presence in China.”

He said it was part of “QIIB’s vision to invest in China”.

“We have clearly seen from the Chinese side an interest for Islamic instruments. China is a huge economy and their neighbouring countries in Asia have a huge population of Muslims. Clearly, there are prospects for developing Islamic financing in China and the surrounding countries,” he said. 

“Through this agreement, QIIB and QNB Capital will work together with SWSC to reach the targeted goals and support Chongqing in the development of its economic blueprint to develop Islamic financial instruments,” al-Shaibei said. 

The agreement, the QIIB chief executive officer said, was “open and not time-bound.”
A Reuters dispatch said currently there was very little Islamic finance activity in China, but the country’s population of Muslims was estimated at more than 20mn. The agency said some bankers saw room for the Islamic finance industry to develop in China.

China’s AVIC Capital Co said in late December that its unit AVIC Securities had signed an agreement to advise the government of the country’s Ningxia Hui Autonomous Region, which has a large population of Muslims, on the global issue of up to $1.5bn worth of instruments such as Islamic bonds and US dollar bonds, with maturities of up to five years. Since then, no concrete progress towards an issue has been announced. 

(Gulf Times / 14 April 2015)
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