IslamicFinance.de

MARC has assigned a final rating of AIS to Bank Muamalat Malaysia's Islamic Senior Notes Programme (Senior Sukuk) of up to RM2.0 billion under the Islamic principle of Wakalah Bi Al-Istithmar with a stable outlook. Upon review of the final documentation of the Senior Sukuk, MARC is satisfied that the terms and conditions of the Senior Sukuk have not changed in any material way from the draft documents on which the earlier preliminary rating of AIS was based. The full details on the assigned rating have been provided in Bank Muamalat's preliminary rating announcement on June 24, 2014 which can be accessed at www.marc.com.my.

In its 'Standpoint Commentary' Malaysian Insurance and Takaful: Stable Fundamentals Amid Evolving Dynamics, RAM Ratings highlights the high growth prospects for Takaful in Malaysia. Under the new Acts, i.e. the Financial Services Act 2013 (FSA) and the Islamic Financial Services Act 2013 (IFSA), composite insurers and Takaful operators (TOs) are required to legally separate their general and life/family businesses by 2018. While RAM Ratings believes this would strengthen regulatory oversight of the sector, the additional capital and resource requirements could be significant for smaller players. RAM Ratings believes that the consensus medium-term forecast of 7-10 per cent growth for general and life insurance and double-digit growth for Takaful is largely achievable.

The creation of a mega Islamic bank will push Malaysian banks to look beyond local shores should the proposed merger of CIMB Group Holdings Bhd, RHB Capital Bhd and Malaysia Building Society Bhd materialise. While the local market for Islamic finance remains lucrative, banks should not be content to remain in the local market as a market downturn could cause a reversal of fortunes. Low risk tolerance is why local banks are not expanding their reach overseas. Some attempts thus far to go abroad have been on a partnership basis contributing knowledge and technical expertise. In addition, local banks’ issuance of Islamic sukuk in the international arena is still low relative to international banks.

The Employees Provident Fund (EPF) stressed it has the right to vote on the proposed merger between RHB Capital Bhd (RHBCap) and CIMB Group Holdings Bhd as it is the major shareholders of both entities. The pension fund’s chief executive officer Datuk Shahril Ridza Ridzuan reminded that it has the interests of 14 million members at stake. Some within the board of RHBCap were against allowing the pension fund to vote in the merger deal. The dissented parties thought that it was “inconceivable” that the EPF had not been engaged in prior discussions relating to the proposed merger between RHBCap and CIMB in which the pension fund holds a 41.34% and 14.46% stake respectively.

Jan - June 2014 issue of the Malaysian ICM bulletin published by the Securities Commission Malaysia (SC) is now available online.

Islamic fund and wealth management is an integral component of Islamic financial system. This is attributed to the significant rise in income and wealth of certain Islamic countries over the last four decades as well as the emergence of Islamic finance as a viable alternative to conventional finance. The benefits of Islamic fund and wealth management cut across racial and religious boundaries as it not only benefit Muslims who wish to see their wealth preserved and enhanced within the Shariah framework, but also to non-Muslims who may view this from an ethical perspective of managing wealth.

Bank Islam Malaysia expects a 20 per cent growth in its financing activities this year, says Managing Director, Datuk Seri Zukri Samat. He said this would be slightly lower compared with the 25 per cent growth registered last year. Zukri added that this was probably impacted by some of Bank Negara Malaysia's measures to slow down the debt growth in the household sector. On its aim to become Malaysia's first mega Islamic bank, he said the bank was open to any merger and acquisition proposal but is not in talks with any party at this point in time. Towards this end, he said the bank was looking for synergies to complement the areas that the Islamic bank is lacking, for instance, corporate banking.

Malaysia is ready and has the potential to become a mega takaful operator in the region given its strong track record, right capitalisation, capable expertise and broad knowledge of the industry, said Ernst & Young. Its global Islamic finance leader, Ashar Nazim, said the local takaful operators had the right ‘ingredients’ to build upon and grow beyond Malaysian borders into Asean region as well as into various parts of the world. Country managing partner and Islamic finance leader of Ernst & Young Malaysia, Datuk Rauf Rashid, said there was huge untapped market in the region that would translate into tremendous demand for takaful businesses.

CIMB Islamic said it will pursue a larger balance sheet to help win more business, regardless of whether a proposed merger with two smaller peers happens. In July, CIMB Group Holdings Bhd, RHB Capital Bhd and Malaysia Building Society Bhd secured regulatory approval to begin merger talks. The enlarged entity aims to compete against conventional banks that dominate larger and more lucrative deals in Islamic finance and could prompt further consolidation in the domestic market. The lenders have until Oct 8 to finalise the pricing, structure and other terms of the merger. Earlier this week, Maybank dismissed rumours that it was considering a merger with Bank Islam, the country’s largest, full-fledged Islamic bank.

Zeti envisages the development of Islamic investment intermediation will come once a new generation of risk-sharing contracts can be applied to investment products and this will enable Islamic finance to help ensure more inclusive and more balanced growth.

Khazanah Nasional Bhd is considering the issue of Sukuk or Islamic bonds in Eastern Europe following the opening of its office in Istanbul, Turkey, last November. Executive director and chief financial officer Mohd Izani Ghani said the office was established to tap investment opportunities around Turkey, North Africa and Eastern Europe. He, however, said Khazanah was not planning on issuing a foreign currency Sukuk. There is a push for Khazanah to do 'kebab' sukuk but the interest rate environment in Turkey is on the high side and volatile, he added. The lender wants to do sukuk in other currencies that can match the stable environment, currency and interest rates in the country, he said.

CIMB Islamic said it will pursue a larger balance sheet to help win more business, regardless of whether a proposed merger with two smaller peers happens. In July, CIMB Group Holdings Bhd, RHB Capital Bhd and Malaysia Building Society Bhd secured regulatory approval to begin merger talks. The lender's chief executive Badlisyah Abdul Ghani said that scale is important in being effective in business, so whether that scale is achievable under the current proposed merger talks or something else, the bank will continue to pursue it. The lenders have until Oct. 8 to finalize the pricing, structure and other terms of the merger. Details have yet to be ironed out, but the new Islamic bank could have assets worth 122 billion ringgit ($38.3 billion).

Allianz SE believes that it is not economically viable to enter into Malaysia's domestic takaful market just yet, board member Manuel Bauer said. He believes that growth in the Islamic insurance sector is beginning to cool down and would therefore be a struggle to justify any major investments to its shareholders. Bound by Bank Negara Malaysia's restrictions that caps foreign ownership at 70% in a local insurers, he said, Allianz's is answerable to its shareholders if it decides to take certain acquisition risk. Bauer also argued that the domestic takaful market has been stagnant and not performing as well as one thought it to be. Bauer said that taking into account Allainz's position in Malaysia as market leaders in both life and general business, the takaful potential figures are not convincing.

Maybank Islamic Bhd has dimissed speculations that it is in talks with Bank Islam Malaysia Bhd over a potential merger and acqusition (M&A). Its chief executive officer Muzaffar Hisham said the proposed merger of three local financial institutions to create a mega Islamic bank has not prompted Maybank Islamic to rush into M&A for expansion. Muzaffar said Maybank Islamic will continue to focus on its key objective, namely humanising financial services, which has been the driver of the bank’s outstanding track record over the last three to four years. Meanwhile, Muzaffar said Maybank Islamic is optimistic of maintaining its growth momentum in the second half of the year after recording an encouraging performance in the first half.

Bank Muamalat Malaysia Bhd expects to launch Islamic Private Banking within a year to cater to the growing demand for the service. Chief executive officer Datuk Mohd Redza Shah Abdul Wahid said the bank is currently studying the product concept and expected to complete the framework in the next six months. Mohd Redza signed a memorandum of understanding with the Bank of London and the Middle East to penetrate the new segment in a wholesome approach. He also said that the Bank of London and the Middle East had the expertise in dealing with private banking customers, therefore it was a good opportunity for Bank Muamalat to work together with the bank.

The creation of a mega Islamic bank must fulfill the objectives of being able to undertake international business and facilitate cross border financial flows, said Bank Negara governor Tan Sri Dr Zeti Akhtar Aziz. She said that such a mega bank must also be able to support international trade and cross border investment activity. She was responding to a question about the license for the proposed mega Islamic bank as a result of a merger between CIMB Group Holdings Bhd, RHB Capital Bhd and Malaysia Building Society Bhd. Dr Zeti said Bank Negara wanted to see the internationalisation and enhancement of Malaysia’s financial and economic connectivity with other countries.

BIMB Holdings Bhd’s net profit for the second quarter ended June 30 increased 86.4% to RM129.67mil from RM69.58mil a year ago. The banking group's revenue for the period rose 3.8% to RM734.59mil while earnings per share (EPS) for the period stood at 8.68 sen. For the second-half period, the group said as a result of the acquisition of the 49% interest in Bank Islam Malaysia Bhd, the net profit attributable to the shareholders increased by RM109.4mil or 76.1%. Consequently, the EPS for the period under review also increased by 25.8%. To attract deposits, BIMB said greater focus would be placed on individual and retail deposits with new product features.

The Securities Commission Malaysia (SC) today launched the Sustainable and Responsible Investment (SRI) Sukuk framework to facilitate the financing of sustainable and responsible investment initiatives. The proposal on the SRI sukuk framework was first announced in the 2014 budget speech.

The launch of the SRI sukuk framework is in line with the initiative set out under the SC’s Capital Market Masterplan 2 to promote socially responsible financing and investment. With the shifts in investor demographics, there are growing concerns over environmental and social impact of business and greater demand for stronger governance and ethics from businesses. The Malaysian capital market is well-positioned to capitalise on these changing trends and facilitate sustainable and responsible investing. ommission Malaysia (SC) today launched the Sustainable and Responsible Investment (SRI) Sukuk framework to facilitate the financing of sustainable and responsible investment initiatives. The proposal on the SRI sukuk framework was first announced in the 2014 budget speech.

CIMB Islamic, the shariah-compliant unit of Malaysia's second largest bank, is preparing an Islamic bond programme to raise up to RM5 billion ($1.58 billion). The Basel III compliant sukuk programme, assigned a preliminary rating of AA+ by ratings agency MARC, will go towards replacing an existing RM2 billion Tier-2 sukuk and to fund working capital. The securities commission is still finalising approval and CIMB is not expected to issue sukuk from the programme any time soon. The company did not specify the range of maturities or sizes for sukuk under the programme. CIMB is currently in talks with two smaller banks to create a mega-Islamic bank.

AIA Public Takaful Bhd has declared a total surplus of RM8.5 million for the financial year ended Nov 30, 2013. In a statement, the insurance company said the surplus distribution will involve more than 36,000 certificates under AIA Public, marking the first surplus distribution since the company’s inception three years ago. The distribution will benefit eligible customers who had participated in Takaful products offered by AIA AFG Takaful Bhd and ING Public Takaful Ehsan Bhd, the two companies which had integrated their businesses in March 2014 to form AIA Public. AIA Public said the surplus will be distributed to those who are registered as a customer of AIA Public as at Nov 30, 2013, do not have any outstanding contribution payments and have not made any claims.

Selangor Menteri Besar Tan Sri Abdul Khalid Ibrahim today said there was nothing dubious about the out-of-court settlement with regard to the loan of more than RM60 million he took from Bank Islam. He said he had taken court action against the irresponsible people who had slandered him. Khalid made the statement when speaking at the monthly gathering of Selangor government departments. The Port Klang state representative reminded those who were not satisfied with him to lodge reports with Bank Negara for an audit to be carried out and not to act as they pleased. He said he had decided to remain silent as he had to protect the bank’s secrecy practice.