Monday, April 26, 2010

Affin eyes Islamic finance foray

Affin Bank Bhd will work with its parent company to convert PT Ina Perdana into a syariah bank once the purchase of the Indonesian lender is concluded, as the group expands into the populous Muslim country, reports Business Times.
"Our holding company is looking at it, it will acquire the bank and then we will work together to convert it into an Islamic bank. It is now a conventional lender," Affin Bank managing director Datuk Zulkiflee Abbas Abdul Hamid told the business section of NST in an interview in Kuala Lumpur.

The legal and financial due diligence have been done recently.
Affin Holdings Bhd, the bank's parent, in January said it was granted the regulatory approval to start negotiating for a controlling stake in PT Bank Ina Perdana, making Indonesia its first overseas venture.
The group's deputy chairman Tan Sri Lodin Wok Kamaruddin told reporters this month that he hopes the purchase will be concluded by the third quarter this year.
PT Bank Ina Perdana is a tiny lender in Indonesia's fragmented market, which has 121 commercial banks. It operates about 20 branches, most of them in Jakarta.
Despite its small size, Zulkiflee said the bank is profitable with relatively low non-performing loans. Most of PT Bank Ina Perdana's business comes from consumer banking, like car loans, while business banking only takes up a small portion of its portfolio.
The purchase will give Affin Holdings a toehold in Indonesia, and it will slowly grow from there, he added.
"We are of the view that, if we want to go (into Indonesia), this is the time for us to go. There are not too many Islamic banks in Indonesia considering its big population. Islamic finance is still in the early stage of development as compared to Malaysia, so there is vast potential for growth," he said.
With a population of 230 million and a fast growing economy, Indonesian banks have been a highly sought after asset. Global banks in the likes of HSBC plc, have all scrambled to get a slice of the market there.
Malayan Banking Bhd, Malaysia's top lender, had paid hefty premiums to buy Bank Internasional Indonesia two years ago, while CIMB Group Holdings Bhd also has a major presence there through CIMB Niaga. RHB Capital Bhd recently bought into PT Bank Mestika Dharma.
Indonesia aside, Zulkiflee said Affin is not eyeing expansion into other countries yet, and it wants to strengthen its operations back home for now.
"True, people say that the Malaysian market is saturated, but we think there are still pockets of opportunity. The big banks probably must go out, otherwise not sexy. But for us, I don't think we should follow them yet."
He said although the net interest margin (NIM) has been narrowing for Malaysian banks over the years, it is still decent at around 2 per cent to 2.5 per cent. Affin Bank's NIM stood at 2.57 per cent last year, improving slightly from 2.46 per cent in 2008.
This year, Affin Bank will hire more sales people to help grow loans by the targeted 13 per cent to 15 per cent. It is eyeing a deposit growth of 10 per cent this year.
Affin Bank will also beef up the branches to let every walk-in customer feel like a premier guest, no matter how much a customer is banking with it. It plans to put more branches within the city and create some flagship outlets in certain locations, overall adding between five and 10 more to the existing 90 branches.
The bank, which has significantly expanded its business banking in the past two to three years, also wants to increase the number of business centres to cover all the major cities.
Last year, the bank's profit after tax fell 4.1 per cent to RM317.8 million, even as operating profit was 17 per cent higher at RM614.1 million.
"Our business has grown. The profit after tax was lower because we had a lot more (loan) recoveries in the previous year," Zulkiflee explained. Loans grew at 12.7 per cent last year, slightly slower than the 15.8 per cent growth in the previous year.
Net NPL has fallen to 2.36 per cent, from 3.22 per cent at the end in 2008. Its return on equity (ROE), which measures how efficient profits are being reinvested, came in at 11.4 per cent.
This year, he said, the bank is targeting a ROE of 12 per cent to 13 per cent.

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