Business

Bank Islam snubs merger bid by Syed Mokhtar’s Muamalat

Bank Islam is the country’s first Islamic bank. — Reuters pic Bank Islam is the country’s first Islamic bank. — Reuters pic KUALA LUMPUR, June 1 — The board of Bank Islam Malaysia Bhd have rejected a merger with tycoon Tan Sri Syed Mokhtar Al-Bukhary’s Bank Muamalat Malaysia Bhd as they do not see any value in an union with Malaysia’s second Islamic bank, sources have said.

The Malaysian Insider understands the directors of the country’s first Islamic bank were initially concerned they would have to accept the merger offer as Syed Mokhtar is seen as a businessman who is favoured by the Najib administration following a string of deals recently.

“They made the decision in a meeting yesterday to reject the merger bid because the view in Putrajaya is there is no compulsion for such a merger between both banks,” the source told The Malaysian Insider.

Bank Islam was founded in 1983 and among its shareholders are Dubai Islamic Investment Group which holds a 40 per cent stake in the bank. Its profits rose 34.3 per cent to RM79.9 million last year.

Syed Mokhtar’s bid for Bank Islam came after his companies won, among others, Khazanah Nasional Berhad’s 32 per cent stake in Pos Malaysia, the Klang Valley Mass Rapid Transit (MRT) project as project delivery partner, and a contract extension as a the sole rice importer in Malaysia.

His DRB-Hicom Bhd said on May 13 that it was exploring a potential merger of its Bank Muamalat with Bank Islam but there were no plans to sell its shareholding in Bank Muamalat.

The bank said it had submitted a letter of expression of interest to BIMB Holdings Bhd (BIMB) to explore a potential merger of the two banks and “has yet to commence any exploratory discussions with BIMB”.

DRB-Hicom is the holding company of Bank Muamalat and it controls a 70 per cent stake while state asset manager Khazanah Nasional Bhd owns the remaining 30 per cent.

“The interest to merge is to add value and enhance the development of Islamic finance in Malaysia which continues to register strong growth over the years,” it said.

DRB-Hicom said the total assets of the overall Islamic banking sector (including development financial institutions) amounted to RM350.8 billion at end-2010, up 15.7 per cent from 2009.

It added the Islamic banking sector (including development financial institutions) now accounted for over 20.8 per cent of the overall banking system in terms of assets, financing and deposits.

“A proposed merger will witness the emergence of a mega Islamic bank and is in line with our government’s call to reinforce Malaysia’s position as a leading international centre for Islamic finance and to create a home-grown bank,” it said.

Bank Muamalat started its operations on October 1, 1999 with combined assets and liabilities brought over from the Islamic banking windows of the then Bank Bumiputra Malaysia Berhad, Bank of Commerce (M) Berhad and BBMB Kewangan.

There are several other Islamic banks in the country including a few from the Middle East in what is seen as a growth sector in the financial services industry. Bank Negara has been encouraging local banks to merge in order to compete with foreign banks but has no policy on mergers in Islamic banking.

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