The Edge Markets

Islamic Finance: Efforts to boost Islamic banking sector paying off (Part 1)

The enforcement of the Islamic Financial Services Act by Bank Negara Malaysia in June to distinguish between deposit and investment accounts offered by Islamic banks will pave the way for the introduction of new retail products. The development of the Islamic finance sector in Malaysia has enjoyed the support of the government, which has announced the RM150 million Investment Account Platform under Budget 2015. The platform, which is slated to start on Sept 1, is a shariah-compliant investment product designed to attract institutions and individuals to invest in the country's Islamic financial markets.

QNB said to bid for Kuwait Finance House’s Malaysia business

Qatar National Bank is among suitors that submitted final bids for Kuwait Finance House’s Malaysian operations. KFH is evaluating offers from Qatar National Bank and at least one other party. It may not proceed with the sale unless it can agree on a high enough price. State-controlled Qatar National Bank has been expanding overseas to reduce its reliance on its home market. It has spent US$3 billion on acquisitions since 2012. Kuwait Finance House’s Malaysian unit had a book value of 1.7 billion ringgit (US$395 million) and total assets of 10.5 billion ringgit at the end of December. Offers for the business were affected by the difficult economic environment in the country.

Johor Corp to list RM252.36m Islamic REIT on Sept 22

Johor state investment arm Johor Corp will list its Islamic real estate investment trust (REIT) known as Al-Salam on the Main Market of Bursa Malaysia on Sept 22. Al-Salam REIT is seeking to raise gross proceeds of RM252.36 million arising from the issuance of 252.36 million offer units, based on an offer price of RM1 per unit, which will account for 43.5% of the trust. The bulk or RM242.86 million of the proceeds raised from the initial public offering (IPO) will be used to pay for the purchase of five properties that will make up the initial portfolio.The Islamic REIT will primarily comprise commercial retail, office and industrial purposes as well as real estate-related assets.

Bank Islam eyes 30% commercial portfolio by end-2015

Bank Islam Malaysia Bhd, which has a 26% corporate and commercial banking portfolio, is looking to raise the figure to 30% by end-2015 to reduce its dependency on consumer banking from 74% to 70%. It is looking to further tap the green technology sector, particularly hydropower projects, as well as the infrastructure sector, to up the commercial banking contribution. Managing director Datuk Seri Zukri Samat noted that the bank intends to focus on organic growth for the time being, even as it looks into the possibility of a merger and acquisition (M&A) beyond 2017. He also said Bank Islam’s overall financing growth is expected to be lower for its financial year 2015.

Malaysia sukuk sale lures weakest demand in 2015 on 1MDB concern

Malaysia attracted the weakest demand at a sovereign sukuk auction in almost eight months amid concern it will need to bail out state-owned investment company 1Malaysia Development. The Treasury sold 3.5 billion ringgit ($916 million) of Shariah-compliant bonds due October 2025 to yield 4.105 percent on Thursday. The bid-to-cover ratio of 1.85 was the lowest since Dec. 5. Prime Minister Najib Razak removed his deputy Tuesday as he seeks to head off a public rift within his cabinet over his handling of financial probes into debt-ridden 1Malaysia Development Bhd. The entity’s borrowings totaled 41.9 billion ringgit ($11 billion) at the end of March 2014.

Bank Islam eyes 15% growth in assets for 2015

BIMB Holdings Bhd is expecting a 15% growth in assets for its banking arm Bank Islam Malaysia Bhd for 2015, despite saying that it will be a very challenging year for the banking industry. Hizamuddin Jamalluddin, chief strategy officer of the managing director's office, said the expected asset growth is based on the group's current balance sheet. He added that in terms of loan growth, the group is expecting this year's growth to be similar to that of last year's. Hizamuddin was speaking to reporters during BIMB's launch of three new term investment accounts under the Islamic Financial Services Act 2013 (IFSA). The three products launched are the Special Investment Account Mudarabah, Waheed Investment Account Wakalah, and the Al-Awfar Account.

Malaysia sovereign fund plans $279 mln "social impact" sukuk

Malaysia's $40 billion sovereign wealth fund Khazanah Nasional plans to issue a sukuk worth up to one billion ringgit ($279.17 million) to help fund schools, its managing director Azman Mokhtar said. The planned "social impact sukuk" is awaiting regulatory approval from Malaysian financial regulators. The move is aimed at opening funding for education to a broad pool of investors rather than financing it out of its own reserves, he added. Mokhtar said a lot of charitable organisations, family offices and trusts wanted to participate in the fundraising and this had helped prompt Khazanah into setting up the sukuk rather than using its own money.

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