Monday, October 12, 2009

Dubai Financial snubs Bank Islam’s share offer

By Alfean Hardy
BANK Islam Malaysia Bhd's plan to raise RM540 million from the sale of Islamic convertible redeemable non-cumulative preference shares (Islamic CRNCPS) to its shareholders hit a snag following the decision by Dubai Financial Group LLC not to take up the offer. Dubai Financial holds a 40% stake in the country's oldest Islamic bank.
BIMB Holdings Bhd holds a 51% majority stake while Lembaga Tabung Haji (Tabung Haji) holds the remaining 9%. Announced in April 2009, the exercise, which qualified as Tier-1 capital, would have allowed Bank Islam to strengthen its capital base and fund the expansion of its business.
Both BIMB and Tabung Haji have accepted the offer for their entitlements amounting to RM275.4 million and RM48.6 milllion respectively, raising the bank's total Tier-1 capital by an additional RM324 million.

In a statement yesterday, Bank Islam said Dubai Financial, which is part of the Dubai Group, had not taken up the offer to subscribe to its port ion of the Islamic CRNCPS amount ing to RM216 million.
It said it would now offer the firm's portion to BIMB and Tabung Haji on a pro-rated basis.
In a press statement late yesterday evening, Bank Islam said its major shareholder has made a commitment to subscribe to the 216 million CRNCPS rejected by Dubai Financial.

Meanwhile, in a seperate statement of its own, Dubai Group said that it was in the process of reviewing its strategic options relating to its stake in Bank Islam. "Bank Islam boasts strong attributes across the Asian banking sector, and the capital raise offer came in reflection of the successful transformation plan implemented by Bank Islam since 2006.
"However, following the reassessment of its investment strategy, Dubai Group has redirected its competitive advantage closer to home, namely the GCC and the greater Middle East region. Malaysia does remain a key market for future investments," it added.
According to Dow Jones and other reports, market speculation has been rife over the past year that Dubai Financial would sell its stake to Malayan Banking Bhd's Islamic banking subsidiary Maybank Islamic Bhd. Commenting on such speculation, Bank Islam, in its media release, said it would welcome any strategic partner who can add value to the bank's business and growth plans if and when Dubai Financial sells its stake.
However, Dubai Group has routinely dismissed such talk, stating that it remained a strategic long-term investor in Bank Islam. According to media reports in the Middle East, Dubai Group itself has been hard hit by the global financial crisis and has already cut 70% of its staff since last November.
The firm, which is owned by the ruler of Dubai, Sheikh Mohammed Rashid, via Dubai Holdings, has also indicated plans to reduce its holdings that included investments in firms like Egypt's Commercial International Bank and propery developer Mazaya Saudi.
There are also plans in the pipeline, according to the reports, of consolidating the back offices of Dubai Group and Dubai Investment Capital to reduce costs. The firm has already completed the merger of its property and business park assets into two new units.

(This story appeared in The Malaysian Reserve on Oct 2, 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)


Anonymous said...

Dubai Group has hardly any money to pay its own bills; it’s about time to stop reproducing the official announcements of certain Dubai Inc censored representatives publish and face the reality… Most quasi-Dubai Gov companies operate with loans given by the Feds in Abu Dhabi. What the business world needs to realize is that Dubai government continues to operate with a large debt – and taking more every year as most charts show. Why would Abu Dhabi continue to loan money to Dubai when the debt is so high? It’s exactly what happens in the US! It doesn't cost the US Fed anything to print the money that it loans, so they don't mind loaning all that the US needs to borrow. The cash has nothing to back its value, such as gold or silver. Likewise, the more the UAE Council and the Central Bank remains faithful to the Dollar peg, the more Dubai will accumulate debt and will not be able to honour the various offers for its entitlements (see Bank Islam Malaysia Bhd's convertible shares plan…). Another scenario (or a conspiracy again … ? ) is that Abu Dhabi will give cash to Dubai – that has unofficially defaulted on its loans, especially against Dubai-controlled banks – so they can pay its loan balance off to the central bank in exchange for key projects, land and profitable assets based in Dubai or even other offshore investments that Dubai Inc holds.

mohd_azfar said...

12th January, 2010.

Syariah Products issued by Islamic Banks in Malaysia are endorsed or pre-approved by Bank Negara the issuer of Islamic Banking Licenses.
Some of the High Courts have found that the products are not Syariah compliant.The Central Bank Act 2009has now made the Central Bank(Bank Negara) through its Syariah Supervisory Committee the sole arbiter of whether the products are Syariah compliant or not. Can we logically expect the Syariah Supervisory Committee to state that the product it endorsed is not Syariah compliant?

Of greater concern is the ursurpation of the High Court's powers by way of this legislation.

It is a common fact that many of our so-called "Syariah compliant" products are not recognised as such in other jurisdictions.

Islamic finance is one of the fastest growing markets but our action is ensuring that no one can question these so called Syariah compliant" products in a legitimate Court of Law will drive away investors, who through choice, want to ensure that their investments are Syariah compliant in accordance to Islam and not in accordance to the Syariah Supervisory Committee.
Mohd. Azfar Abdullah