Al Rajhi Malaysia to raise capital to RM1b

By Habhajan Singh
Al Rajhi Banking & Investment Corporation (Malaysia) Bhd (Al Rajhi Malaysia), the first overseas subsidiary of Saudi Arabia's largest bank, has increased its paid up capital to RM1 billion from RM600 million, in a move to continue with its expansion plans.
Al Rajhi Malaysia CEO Ahmed Rehman said Saudi regulators had last week given the green light to its parent bank to inject an additional RM400 million in capital into its Malaysian operation, which is now 19 branchstrong.
"As we are growing aggresively, we need the capital to support that balance sheet," Ahmed said. He added that RM1 billion in capital for an Islamic bank is "pretty decent" in this region.
With the latest capital injection, Al Rajhi Malaysia will be able to maintain its growth path after launching a flurry of branch expansions and an aggressive advert ising campaign when it began operations here in 2006.
"We have built up a minimum scale of the balance sheet. It has grown fairly aggresively," Ahmed added.
For the financial year ended Dec 31, 2007, Al Rajhi Malaysia's assets totalled RM2.5 billion, up from RM291 million the year before.
As at the end of the first three months of 2008, the bank's total assets stood at RM3.8 billion.
"Our 2008 numbers are not out yet, but you can expect us to double that figure (of total assets). It has gone fairly geomatrically in terms of growth in a short period of time.
"It is important to grow geomatrically as you need a certain amount of scale to be able to conduct your business and have a certain amount of reach. We have arrived at that," Ahmed said.
The bank's total asset size still has much catching up to do when compared to Maybank Islamic Bhd. Maybank Islamic, the nation's largest Islamic bank, was set-up in January last year, but had begun operations via its Islamic window since the 1990s.
For the financial year ended June 30, 2008, the Malayan Banking Bhd subsidiary had RM26.9 billion in total assets.
For the first three quarters ended Sept 30, 2008, Al Rajhi Malaysia reported a net loss of RM52.69 million but had already posted a total net income of RM37.04 million.
(This story appeared in The Malaysian Reserve on Feb 3, 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)