Bank Muamalat puts in measures to strengthen operations, says STAR

Bank Muamalat Malaysia Bhd has put in place a new management team and shored up its capital substantially. Its latest risk-weighted capital ratio was 18% compared with 12.12% at end-December last year. RAM Ratings has reaffirmed its current ratings of “negative” outlook despite the challenging environment, reports The Star (Apr 9 2009).
Datuk Mohd Redza Shah Abdul Wahid, the former chief operating officer of DRB-HICOM Bhd, became Bank Muamalat chief executive officer at end-2008 in a management revamp following the purchase of a 70% stake in the bank by DRB-HICOM. A five-year business plan has been drawn up to position Bank Muamalat as a pure Islamic bank.
“The new approach looks more towards syariah principles in decision-making and in being more selective in its target customer base,’’ Redza told StarBiz.
The report continues:
Bank Muamalat is also pursuing similar business areas in the DRB-HICOM group, such as property and motor vehicle. An IT infrastructure that is fully compliant with systems in the Gulf Cooperation Council is being put in place.
“Proactive measures have been put in place to immediately improve the asset quality issues. Stringent credit evaluation process and active recovery measures are being pursued,’’ Redza added.
Net non-performing financing ratio was at 4.1% at end-December 2008.
Last month, Bank Muamalat completed a capital-raising exercise involving the issuance of 500 million shares to its shareholders, DRB-HICOM (70%) and Khazanah Nasional Bhd (30%). This effectively raised the bank’s total capital to RM1bil.
In its report, RAM Ratings pointed to stable funding and liquidity positions at the bank. However, it was concerned about further deterioration in asset quality.
Acknowledging the new measures put in by the new management, RAM Ratings said it needed more time to evaluate them.
Other factors cited were limited franchise (Bank Muamalat is seeking a strategic partner), erratic profitability (pre-tax profit of RM41.3mil in the financial year ended December 2005 (FY05); RM104.8mil in FY06; RM65.5mil in FY07) and impairment losses.