Wednesday, September 29, 2010

Wan Ariff gets loan for logistics takeover

By Habhajan Singh

Corporate figure Datuk Wan Ariff Wan Hamzah is all set to take control of Integrated Logistics Bhd's (ILB) local operations after securing the necessary financing from a local bank. Wan Ariff's outfit in the RM170 million takeover has secured loans totalling some RM70 million and is now prepared to assume control of the logistic company after earlier forking out some RM30 million cash.

"He has also been able to get Lembaga Tabung Haji (TH) behind him. Their presence in the deal, at the moment, is more of enabling Wan Ariff to take the deal through," one sources familiar with the deal told The Malaysian Reserve.

It is not clear at this moment whether TH, the local pilgrimage fund, is also pumping in money into the venture spearheaded by Wan Ariff, formerly part owner of privatised oil and gas services provider, Bumi Armada Bhd, along with business partner, billionaire T Ananda Krishnan.

Wan Ariff sold his stake in Bumi Armada and acquired Syarikat Borcos Shipping Sdn Bhd, which he has since sold a 40% stake to Sarawak-based Dayang Enterprise Holdings Bhd for about RM132 million last December.

In mid-February, ILB told the exchange it had received an offer for the takeover of its local logistics business for RM170 million.

On March 12, ILB announced that it had agreed to dispose of its Malaysian operations to AWH Equity Holdings Sdn Bhd for RM170 million in cash. The deal will see AWH, controlled by Wan Ariff, taking over ILB's wholly-owned unit, Integrated Logistics Solutions Sdn Bhd (ILSSB), and its wholly-owned unit, Integrated Warehouse Sdn Bhd, and M I Logistics Sdn Bhd.

The RM170 million in consideration includes the transfer of some RM141 million in ILSSB debts to ILB. AWH is jointly owned by Wan Ariff (70%) and Sidqi Ahmad Said Ahmad (30%).

Since Wan Ariff came into the picture, it is understood that ILB's local logistics business had been operating on a business as usual basis.

"It has been some six months. The business has suffered a little, simply because they could not go into an expansion mode due to the deal in the pipeline," said another source familiar with the company.

On March 15, sources had told The Malaysian Reserve that ILB's margin in its Malaysian operations had been slipping over the years, while the margins it was getting for its operations in China had been getting better.

(The Malaysian Reserve, 30 September 2010)

Maybank to boost Islamic finance ops in Indonesia

Top lender Malayan Banking Bhd (Maybank) has obtained Indonesian authorities' approval to convert its unit PT Bank Maybank Indocorp into a full-fledged Islamic bank, its chief said.

The move allows Maybank to step up its Islamic banking activities in the world's most populous Muslim nation. It also fits in with the group's plan of becoming the largest Islamic bank in Asean by 2015, president and chief executive officer Datuk Seri Abdul Wahid Omar said, reports Business Times (30 Sept 2010).


The group's wholly-owned Islamic unit, Maybank Islamic Bhd (MIB), is already the largest Islamic bank in Southeast Asia with total assets of RM44 billion. It is ranked among the top 20 Islamic banks globally.

"Within the context of Asean, our market share in the Indonesian Islamic banking market is still small. We just started ... we just got the approval yesterday," Abdul Wahid told reporters after Maybank's annual general meeting yesterday.

He said Bank Maybank Indocorp, once converted, would be known as Maybank Syariah Indonesia (MSI).

"We are now in the midst of executing the plan for MSI and the next stage will be to consolidate that with the syariah operations under Bank Internasional Indonesia (BII).

"With that, we hope to be able to increase our (Islamic) asset base in Indonesia and to command a big market share. We are starting from a relatively small base with about US$200 million (RM616 million) of assets in MSI," he said.

BII is an Indonesian bank that Maybank acquired in 2008. There are currently 294 BII branches and Maybank aims to raise this to about 450 by 2012.

The group also hopes that more activities will come out of its joint venture investment bank in Saudi Arabia, known as Anfal Capital, in which it owns 18 per cent. "It could serve as a conduit for business and deal flows between the Middle East and Malaysia," Abdul Wahid said.

In Malaysia, Maybank is implementing a new strategy this financial year that will see it offering customers Islamic banking products over conventional ones as the first choice.

It aims to expand its Islamic financing base so that it accounts for a third of the group's total domestic financing portfolio by 2015 from 24 per cent currently, according to its annual report.

On Basel III global banking rules, Abdul Wahid said the Maybank group should have no problems complying.

30 vie for BNM Islamic finance award

Thirty nominees from around the world are being considered for The Royal Award for Islamic Finance.

The Securities Commission (SC) and Bank Negara said in a joint statement that the nominations were being deliberated by an independent international jury chaired by Tun Musa Hitam, chairman of the World Islamic Economic Forum Foundation.

“Unlike commercial awards which are deal-based, this award focuses on an individual’s record of achievement and outstanding contribution towards the advancement of Islamic finance globally,” they said.

“These 30 nominees represent the diversity and global acceptance of Islamic finance – from across all regions of the world including the Middle East, Europe, South-East Asia, Africa and Australia.

“This pool of influential drivers of global Islamic finance also includes non-Muslims and both genders.”

The Royal Award is spearheaded by the Malaysia International Islamic Financial Centre and supported by Bank Negara and the SC.

(The Star, 21 Septemebr 2010)

Al Baraka to spend RM618m on Indonesian, M’sian assets

By Anuja Ravendran
Bahrain-based Islamic lender, Al Baraka Banking Group, plans to spend US$200 million (RM618 million) on acquisitions and is looking at buying assets in Indonesia and Malaysia, Bloomberg reported yesterday, citing its chief executive officer, Adnan Ahmad Yousef.

Al Baraka also plans to sell US$200 million of sukuk by year-end and has appointed Standard Chartered plc as its manager for the sale, according to Bloomberg.

Al Baraka had even earlier on set its sights on Malaysia. In January, a Middle East news portal quoted Adnan as saying that the bank was talking to a Malaysian party to acquire a stake in Bank Muamalat Malaysia Bhd, which is 70% owned by DRB Hicom Bhd and 30% owned by government investment arm, Khazanah Nasional Bhd.
Al Baraka was said to be interested in buying a 40%-49% stake in the Malaysian lender as it sought new growth areas to diversify earnings amidst a maturing domestic market. Adnan had hoped to conclude the acquisition by end-2010.

However, a local newspaper had in mid-September reported that the talks had broken down as the parties could not agree on the terms.
DRB-Hicom had indicated that it was looking for a potential foreign strategic partner that will be able to bring its market to the Malaysian bank.
The Al Baraka Banking Group is is a Bahrain Joint Stock Company listed on Bahrain and NASDAQ Dubai stock exchanges, with Standard and Poors' longterm and short-term credit ratings of BBB- and A3 respectively.
The group, this year, acquired Pakistan's Emirates Global Islamic Bank Ltd, which boosted its network in the country to about 90 branches. It also began operations in Syria this year. The authorised capital for the bank is US$1.5 billion (RM4.64 billion), while total equity amounts to about US$1.7 billion.

(This story appeared in The Malaysian Reserve on 23 September 2010. 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)

Islamic finance seems overwhelmed by scholar reforms

Islamic finance is toughening supervision of its powerful religious advisers as shareholders worldwide demand increasing accountability from directors, but key reforms may do little to boost independence and transparency. Islamic banking is overhauling rules that govern the conduct of its influential sharia advisers, with competition for investor dollars and a growing market putting pressure on the once-arcane industry to adopt clearer, more uniform guidelines, according to Reuters (Sep 28 2010).

Key to these challenges is the small number of scholars advising a growing number of banks on increasingly complex financing structures, raising issues such as transparency of rulings, independence of advisers and how to groom new scholars. But varying sharia standards, different regulatory approaches and vast disparities in development across markets stand in the way of reforms to streamline and boost supervision, which are critical to growth, the article said.

It quoted John Sandwick, a Geneva-based Islamic asset and wealth manager, as saying: "Investors want to see the same degree of responsibility and professionalism going into sharia compliance as they expect from Moody's for credit ratings and S&P for market information."

The International Sharia Research Academy for Islamic Finance, which is backed by Malaysia's central bank, is planning a global regulatory body for sharia advisers. "This is a step too soon," said Ayman H. A. Khaleq, a partner and Islamic banking lawyer at Vinson & Elkins in Dubai, referring to the proposed global authority.

"I don't know how you're going to convince all governments that this is the best approach. Without convincing governments, how are you going to give teeth to that association?

Reflecting the industry's diversity, Middle Eastern countries like the United Arab Emirates leave regulation to the industry whereas Malaysian authorities assume centralized control through national sharia advisers and dedicated Islamic banking laws. Practitioners agree on the need for more supervision but differ on the scope of oversight needed, the article noted.

MAA Takaful inks collaborative agreement with LIMRA, CERT

By John Gilbert
MAA Takaful Bhd inked a collaborat ive agreement with Life Insurance and Market Research Association International (LIMRA) and Centre for Research and Training (CERT) yesterday as part of its strategies to further enhance its agency force and to reach a broader takaful market segment.
This is the first time LIMRA is undertaking a broadbased professional distribution development project with a takaful operator. Under the collaborative agreement, LIMRA and CERT will develop and implement a comprehensive Shariah-compliant leadership development programme encompas sing agency leadership training, certification and international recognition in addition to strengthening MAA Takaful's distribution network.
"We have about 6,000 active agents and we hope that within the next five years, half of the current active agents can be accredited as LIMRA Certified Managers of Financial Advisors," MAA Takaful chief executive officer, Salim Majid Zain, told reporters yesterday after the signing ceremony in Kuala Lumpur.

He said the programme will contribute towards value proposition and will further develop the takaful industry in the country.
"Our priority is to ensure that our takaful participants in every corner of the country receive professional advice through a well-suited system that focuses on their needs.
"We are confident this programme will deliver high and professional standard for takaful practitioners in the country," he said.

On MAA Takaful's revenue, Salim said the company is expecting RM1 billion in total revenue in five years through the strong presence of its distribution channels.
He said the contributions will come from life and general insurance segments, which stand at 60% and 40% respectively.
"We expect to receive RM750 million from life insurance in five years time and with the strengthening of our agency force, this will also contribute to our future growth," he said.
Up to June this year, MAA Takaful had already earned RM160 million in revenue and is expected to earn RM250 million by year-end.

(This story appeared in The Malaysian Reserve on 21 September 2010. 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)

Shariah scholars & Malaysia's SC

The amended Capital Markets and Services Act 2007 (Act) institutionalises in law the pivotal role of the Shariah Advisory Council (SAC) of the Securities Commission Malaysia (SC) as the authority for all Shariah matters relating to the Islamic capital market (ICM).

The amendments to the Act, which came into effect on 1 April 2010, give the SAC statutory recognition and mandate, empowering it in its role to ensure Shariah compliance on matters pertaining to ICM business or transactions, according to an article in Bank Negara Malaysia's electronic newsletter.

The article, entitled 'Amendments to Capital Markets and Services Act 2007 Institutionalises Role of Shariah Advisory Council in Malaysian Islamic Capital Market', reads:

The Act, as amended by the Capital Markets and Services (Amendment) Act 2010, contains comprehensive provisions relating to the role of the SAC and the Shariah governance process for the ICM. The amendments further give the SAC the mechanism to ensure legal certainty and comfort regarding Shariah rulings in the Malaysian ICM.

The SC's Chairman, Zarinah Anwar, is confident that the amendments will strengthen the SC's SAC as the law recognises it as the authority for the ascertainment of Shariah principles for ICM business or transactions. The SAC since its establishment has not only been an enabler but also a catalyst for innovation in the ICM on both the domestic and international front

The Act, amongst others, details out the functions of the SAC including " ascertain the application of Shariah principles on any matter pertaining to ICM business or transaction and to issue a ruling upon reference made to it; to advise the Commission on any Shariah issue relating to ICM business or transaction; to provide advice to any person on any Shariah issue relating to ICM business or transaction...".

In accordance with provisions of the Act, members of the SAC are duly appointed by His Majesty the Yang di-Pertuan Agong of Malaysia, and are qualified in the field of Fiqh al-Muamalat (Islamic law relating to financial transactions); Islamic jurisprudence; Islamic finance and other relevant disciplines.

The new provisions also enable any licenced person, stock exchange, future exchange, clearing house, central depository, listed corporation or any other persons to refer matters to the SAC for its advice and ruling which shall be binding on the person or entity concerned.

Another important provision of the Act relates to any proceedings before any court or arbitrator concerning a Shariah matter in relation to ICM business or transaction. In such a case, the court or the arbitrator is obliged to take into consideration any ruling of the SAC or refer such matter to the SAC for its ruling.

Where a ruling given by a SC-registered Shariah adviser to a person engaging in any ICM business or transaction is different from the ruling given by the SAC, the ruling of the SAC shall prevail.

Tuesday, September 7, 2010

HSBC Amanah picks Rafe as chief, awaits BNM nod

By Habhajan Singh

HSBC Amanah Malaysia Bhd is said to have chosen a local Islamic banker to helm its operations while Maybank Islamic Bhd is casting its net wider, including the Middle East, in search for a potential new head for its operations.

Rafe Haneef, a promising local banker in the Islamic finance circle, has been tipped to take charge of the Islamic banking subsidiary of HSBC global banking group.

It is understood HSBC Amanah Malaysia is now awaiting for the green light from Bank Negara Malaysia (BNM), one of the steps any person must go through before they can be appointed as a chief executive at local banks and insurance companies, both sectors which come under the purview of the central bank.

"His move to Dubai is on hold for now with this new assignment," said one source.

Rafe, who was managing director of Dubai-based Islamic investment company Fajr Capital, had just taken up the position of managing director at HSBC Amanah, responsible for its global markets in Asia-Pacific, which would have required him to move to Dubai.

At Maybank Islamic, sources told The Malaysian Reserve that the largest Islamic banking player in Asia-Pacific asset size is "still on active pursuit" in its search for a potential new chief executive. "Wahid himself has met some candidates," one source said.

Maybank Islamic is the subsidiary of Malayan Banking Bhd headed by Datuk Seri Abdul Wahid Omar.

On Aug 23, this newspaper, quoting sources, reported Maybank Islamic was in the market to head-hunt for a new CEO to replace Ibrahim Hassan who will retire soon.

In the same report, HSBC Amanah Malaysia was also reported to be on the lookout for a new head as its executive director and CEO Musa Abdul Malek had opted for retirement.

A check on Rafe's profile found references of him having played a "leadership role" in developing sukuk and Islamic-structured and project finance since 1999 at HSBC, ABN AMRO and Citigroup. He was previously the head of Islamic banking for Citigroup Asia based in Kuala Lumpur. Then, he was also responsible for developing Malaysia as a regional Islamic finance hub for Citigroup and spread its Islamic business footprint across the region.

Prior to joining Citigroup, he established the Global Islamic Finance Department at ABN AMRO based in Dubai and was in charge of the Islamic wholesale and retail businesses for the group. Before that, he was with HSBC Amanah in London and Dubai focusing on Islamically-structured crossborder transactions and the sukuk market.

(This story appeared in The Malaysian Reserve on 8 September 2010. 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)

Bank Muamalat, Saadiq handle Bernas RM750m sukuk

KUALA LUMPUR, Sept 7 (Bernama) -- Bank Muamalat Malaysia Bhd and Standard Chartered Saadiq Bhd (Saadiq) have acted as joint principal advisers, lead arrangers and lead managers for Padiberas Nasional Bhd's (Bernas) sukuk.

In a joint statement here today, they said the sukuk involved the issuance of RM750 million Islamic Islamic commercial papers/medium-term notes (ICP/MTN) programme. "The sukuk issuance marks a significant milestone for both Islamic banks as it is the first time Bernas is tapping the sukuk market for its funding," it said.

The ICP/MTN programme has been asigned respective long- and short-term ratings of 'AA3' and 'P1' with stable outlook by RAM Ratings Services Bhd. Bernas managing director, Bakry Hamzah, said the sukuk was an important source of financing for large-scale investment projects and played a key role in facilitating the economic development process of Bernas.

"The RM750 million will be used for working capital purposes as well as to finance Bernas' current and future investments while enabling Bernas to focus more on business and market expansion," he said.

Bank Muamalat chief executive officer (CEO), Datuk Mohd Redza Shah, said with the improving economy and corporate performance, the bank would continue to participate in more corporate issues. "Bank Muamalat is committed towards making Malaysia the hub of Islamic finance, supporting the government and corporate issuers," he said.

Saadiq CEO, Azrulnizam Abdul Aziz, said the bank was delighted to put together the sukuk for Bernas which would meet its key financing requirements in this challenging environment. -- BERNAMA

Plans for certified syariah experts in Islamic finance

Leading Islamic finance scholars are preparing the first global certification for syariah experts, seeking to bolster the industry's reputation and make it easier for banks to find qualified advisers, reports Bloomberg (8 Sept 2010).

The International Syariah Research Academy for Islamic Finance in Kuala Lumpur will pick a board of regulators by year-end to issue permits for scholars qualified to sit on syariah boards, said Aznan Hasan, president of the oversight committee. The scholars decide whether financial products meet the religion's precepts, including a ban on interest payments.

"We are worried that people who aren't qualified to be syariah scholars may enter and become members of the advisory boards as the market flourishes. Banks try to search for competent advisers. Sometimes they get the right person, sometimes they get the wrong person," ," Aznan told the news agency an interview in Kuala Lumpur.

The report goes on:

Attempts to set up an organisation with a code of ethics to certify Islamic scholars have been frustrated by differing interpretations of syariah law across the Muslim world, Madzlan Mohamad Hussain, a partner at Zaid Ibrahim & Co, Malaysia's largest law firm, said in an interview.

Scholars are now required to have recognised university degrees before they can act as advisers to banks and companies. The council of scholars at the academy includes Sheikh Nizam Yaquby of Bahrain, Mohammad Daud Bakar of Malaysia and Abdul Sattar Abu Ghuddah of Syria, who were all ranked among the top 10 experts in a 2008 report by the Chicago-based Failaka Advisors LLC, an advisory company that monitors and publishes data on Islamic funds. Yaquby serves on the Islamic boards of 52 institutions, including the New York-based Citigroup Inc and London-based HSBC Holdings plc. Daud advises firms such as the Paris-based BNP Paribas SA, according to the data.

"The whole idea is to further strengthen confidence by making syariah scholars truly professional," Madzlan said, adding that the majority of experts also have full-time careers. "The plan will materialise because there's a need for it."

A shortage of scholars versed in syariah law means they tend to sit on a number of advisory boards simultaneously, which increases the risk of conflicts of interest, according to the Bahrain-based Accounting & Auditing Organisation for Islamic Financial Institutions, or AAOIFI.

"We desperately need an institution that could certify and standardise different Islamic products in the market," Kaleem Iqbal, a senior executive vice-president at Al Baraka Islamic, a unit of the Bahrain-based Albaraka Banking Group, said in an interview yesterday from Islamabad, Pakistan. "The banking community will certainly welcome a common platform with a global mandate."

BT: 4 family takaful licences given out

Bank Negara Malaysia has given out four family takaful licences, instead of two as had been announced earlier. The central bank said the decision to grant the additional licences was driven by the favourable economic conditions since the initial announcement made on April 27 last year and the growth potential of the industry in the country as well as region, reports Business Times (2 Sept 2010).

"There are tremendous growth opportunities for the insurance and takaful industry in supporting the requirements of the economy," Bank Negara said in a statement yesterday.

In a report by Jeeva Arulampalam, the newspaper noted that the new licences see several banking groups collaborating with foreign insurance partners.

AMMB Holdings Bhd teamed up with the UK's Friends Provident Group plc. Public Bank Bhd and its Public Islamic Bank Bhd formed a tripartite pact with ING Management Holdings (Malaysia) Sdn Bhd, while The Great Eastern Life Assurance Co Ltd tied up with Koperasi Angkatan Tentera Malaysia Bhd.

A joint venture between American International Assurance Bhd (70 per cent) and Alliance Bank Malaysia Bhd (30 per cent) was also granted a licence. AMMB and Friends Provident will set up a new company, tentatively known as AmTakaful Bhd. AMMB will have a 70 per cent stake, while its British partner will own the remaining 30 per cent. Both parties previously collaborated in forming AmLife Insurance Bhd, a life insurance company. With an initial capital of RM100 million, the new company is expected to begin operations in the second quarter of next year, AMMB told Bursa Malaysia yesterday.

"The approval for the family takaful licence will greatly enhance AMMB's existing Islamic finance activities and widen its insurance services to provide financial solutions across all levels of Malaysian society," it said.

ING Management will hold a 60 per cent stake in a partnership with Public Bank (20 per cent) and Public Islamic (20 per cent). The joint-venture company will have a built-up agency force of 15,000 in the long term, the companies said. Its takaful products will be promoted through tied agency, banctakaful and employee benefits, which currently exist in ING and the Public Bank group. "The family takaful company will focus on increasing takaful penetration domestically and develop Malaysia as an international Islamic financial hub," ING and Public Bank said in a joint statement. The new company is targeted to be fully operational by the first half of next year. ING and Public Bank officially began their 10-year strategic bancassurance alliance in 2008.

The collaboration between Great Eastern and Koperasi Tentera will see the former holding a 70 per cent stake. To be known as Great Eastern Takaful Sdn Bhd, the new insurer will be operational early next year. "Malaysia will function as the group's Islamic finance headquarters as we expand our takaful business beyond Malaysia's shores into the region," Great Eastern chairman Fang Ai Lian said in a statement yesterday.

BT: Cagamas set to issue another landmark sukuk

By Hamisah Hamid
The ringgit-denominated sukuk is now ready and will probably be launched this month after it receives approval from the authorities, sources say. National mortgage company Cagamas Bhd is expected to issue another landmark sukuk, after the launch of the benchmark Sukuk Al-Amanah Li Al-Istithmar (Sukuk ALIm) in mid-July.

Like Sukuk ALIm, Cagamas' latest sukuk is also an innovative issuance that does not incorporate "doubtful" principles. Sources said the new sukuk will be ringgit-denominated. However, they declined to reveal the amount.

"The sukuk is now ready and will probably be launched this month after it receives approval from the authorities," the source told Business Times in Kuala Lumpur. While Sukuk ALIm was designed to meet the requirements of broader investors, especially from the Middle East, the new sukuk is anticipated to attract local institutional investors.

Sukuk ALIm, which was developed in collaboration with Al Rajhi Bank Malaysia, marks the first of its kind in the country's Islamic bond market and sets a benchmark for future sukuk issuance in the global Islamic debt capital market. Cagamas' mixed asset Sukuk ALIm, which includes a RM5 billion Islamic commercial paper and Islamic medium term note programme, completely precludes the elements of sale and buyback (Inah), trading of debt (Bai' Dayn) and undertaking (Wa'ad) - concepts which are not be acceptable to some Syariah scholars, particularly from the Middle East.

Cagamas' new sukuk is also expected to be well-received by local investors.

Analysts see huge appetite for sukuk among institutional investors in Malaysia's Islamic debt capital market. "Although the yield of sukuk originated from Malaysia is not that high, of between 3 and 4 per cent, they are always oversubscribed. This is because there is more demand than supply in the market," an analyst based in Kuala Lumpur told Business Times. Sukuk issued in the international market usually fetch double-digit returns.

In an interview with Business Times earlier this year, Cagamas president and chief executive officer Steven Choy said the corporation plans to sell more sukuk this year, in line with the recovering economy.

Last year, the country's biggest buyer of home loans sold RM11.3 billion worth of bonds, down by more than half from the record RM25 billion in 1999. About 40 per cent, or RM4.3 billion, were sukuk. Cagamas issues bonds or debt securities to finance the purchase of housing loans from banks, freeing up lenders to give out more loans. It is the second biggest issuer of debt papers after the government and carries the highest credit rating of "AAA" from local rating agencies. This means that its paper is highly sought after by investors because the probability of a default is very low.

(Business Times, 6 Sept 2010)