Bank Islam pursues local, overseas M&A deals

by Ashwin Raman
Bank Islam (M) Bhd is actively pursuing merger and acquisition (M&A) opportunities locally and abroad in a move to expand its business. Its managing director Datuk Zukri Samat said Bank Islam was looking at inorganic growth opportunities for expansion purposes as competition in the Islamic banking sector has been intensifying.
"We are looking at M&A opportunities both locally and overseas. If we can find something locally we'll do it but as far as regional opportunities are concerned, our focus and priority is in South-East Asia.
"We are always looking at opportunities but at this juncture there is nothing concrete I can mention except that expansion and inorganic growth are always on our agenda," he told reporters at the sidelines of a conference in Kuala Lumpur yesterday.
Earlier this year, speculation was rife of a merger between Malayan Banking Bhd's Islamic arm and Bank Islam. However, Bank Islam's controlling shareholder, BIMB Holdings Bhd, denied it was in talks with Maybank Islamic. When asked to name specific candidates, Zukri declined to comment, adding that Bank Islam would only go ahead with an M&A as long as the partnership would be a good fit.
Asked if Bank Muamalat Malaysia Bhd would be considered a good fit for Bank Islam, he said: "If I comment on one bank, then everyone will think we are talking to them."
As for expansion in South-East Asia, Zukri said Bank Islam is keen on expanding into Indonesia. In February this year, Bank Islam entered into a strategic collaboration with the Bank Muamalat Indonesia Group to promote Islamic trust products in Indonesia. On Bank Islam's exercise to raise RM540 million from the sale of preference shares, he said the bank's 40% foreign shareholder, Dubai Investment Group (DIG), has indicated it will subscribe to its portion.
So far, Bank Islam's other major shareholders, BIMB and Tabung Haji, have subscribed to the sale. BIMB and Tabung Haji own 51% and 9% respectively.
"This matter was brought up, discussed and deliberated at the board level and DIG has three members on the board who have agreed to this scheme. I presume DIG is agreeable.
"But to be fair, all parties are given until Sept 30 to put in their portion. It is just that Tabung Haji and BIMB have put in the funds already," Zukri said.
He said the bulk of the RM540 million from the exercise would be used for internal expansion while a portion of the cash raised could be used for M&A purposes. The cash raised from the exercise is expected to increase Bank Islam's riskweighted capital ratio to 17.26% from 13.08% as at end December 2008. (The Malaysian Reserve, Aug 4, 2009, p6)