‘AFB not affected by Global debt default’

By Habhajan Singh
Asian Finance Bank Bhd (AFB), the Islamic bank backed by shareholders from the Middle East, has not been jeopardised by news that one of its sharehodlers, Global Investment House (Global) from Kuwait, had defaulted on most of its debt.
AFB chief executive officer Datuk Mohamed Azahari Kamil said the bank's position and operations has not been affected in any way. Global, which is one of AFB's pioneer shareholders, has a 10% stake in the bank.
"It is a temporary setback (for Global)," Azahari told The Malaysian Reserve, adding that Global's shareholding in the bank had been shifted to an investment fund since November 2008.
On Jan 8, Reuters reported that the Kuwait's biggest investment bank had defaulted on most of its debt, in the first of several expected casualties for the wealthy oil-producing nation due, to the global credit crunch.
The news dealt a blow to Kuwait's efforts to restore confidence among investors after it recently rescued its fourth-largest lender, Gulf Bank — which was hit by huge derivative losses — and guaranteed deposits at all banks, the newswire added.
Global, with a 10% stake, was the smallest of AFB's three shareholders when the bank was established in 2006, with Qatar Islamic Bank taking a 70% stake and RUSD Investment Bank Inc of Saudi Arabia holding 20%.
Meanwhile, the Securities Commission (SC) announced in mid-November last year that Global, together with India's Reliance Asset Management, was the latest foreign investment players to receive approval to operate in Malaysia.
However, it has yet to set up office here. According to AFB's website, Global's 10% stake is held by Financial Assets Bahrain WLL, a limited liability company incorporated in Bahrain. The shareholders are listed as Financial Assets MENA WLL (99.9% holding) and Global Investment House KSCC (0.1% nominee holding).
"They (Global) are not even shareholders in our books. The shareholder is a fund managed by Global," said Azahari, adding that AFB is in communications with Global.
"If you look at what went wrong, it's just the whole economic environment. With values marked-to-market, the valuations have come down almost 50%.
"As a fund manager, be it equities or structured products, valuations have come down. No one is insulated, all are affected," he said.
"We believe in the able leadership of Maha ( Global's chairperson and managing director Maha K Al-Ghunaim) and Omar (Global's executive vice president for products and business Omar M El-Quqa) to effect the turnaround," Azahari added.
AFB, which began operations on Jan 17, 2007, became the third foreign Islamic bank to be established in Malaysia after Kuwait Finance House and Al Rajhi Bank of Saudi Arabia. Global and other shareholders play a role in helping the Islamic bank to reach out to potential clients in the Middle East to market funds and to tap new sources for funds.
This would benefit AFB, for example, in marketing the worlds first Asean Shariah Corporate Governance Fund. AFB signed an agreement with Corston-Smith Asset Management in December 2008 to be the distribution agent of the RM1 billion fund targeted at GCC countries.
(This story appeared in The Malaysian Reserve on Jan 22, 2009. The Malaysian Reserve is a daily business/finance newspaper published out of Kuala Lumpur, with a sectoral page on Islamic finance on Mondays, edited by Habhajan Singh)