Khazanah pays RM525m for stake in Fajr Capital

Khazanah Nasional Bhd has invested US$150 million (RM525 million) for a 25% stake in a the newly-formed Islamic investment firm, Fajr Capital Ltd, which will also be jointly owned by the sovereign investment bodies of Abu Dhabi and Brunei and a Saudi-based private firm.
Khazanah said Fajr Capital has raised US$588 million after the first round of funding from its shareholders and will focus on providing Shariah-compliant financial services and complementary opportunities in major Muslim regions.
The investment firm, to be based in the Dubai Financial Centre with offices in Kuala Lumpur and London, will be an active and enabling investor in its portfolio of companies with the aim of helping to optimise performance through best-in-class products, service standards, technologies and Shariah expertise.
The move by Khazanah to participate in the Islamic investment firm signals a recent rise in the joint establishment of investment funds by Malaysia and countries in the Middle East.

Last week, the government announced it was setting up a US$2.5 billion fund with Saudi Arabia's PetroSaudi International Ltd while Minister of International Trade and Industry Datuk Mustapa Mohamed yesterday said efforts were underway by Khazanah and the Qatar Investment Authority to set up a US$1 billion joint investment fund.
For Fajr Capital, Khazanah's partners in the investment firm are the Abu Dhabi Investment Council, Brunei Investment Agency and Saudi-based The Mohammad & Abdullah Al Subeaei Investment Co (MASIC). Khazanah's managing director Tan Sri Azman Mokhtar said the venture into Fajr Capital would provide cross linkages between Malaysia and key Muslim markets and lay the foundation for a stronger economic cooperation.
"Islamic financial services is a key priority for Malaysia, and Khazanah's participation in Fajr Capital reflects our commitment to this area.
"This partnership also embodies Malaysia's deepening links with the Middle East and broader Muslim world — regions that are important sources of capital and attractive markets for us to invest in," he said in a statement yesterday.
Azman is a member of Fajr Capital's board of directors, which is chaired by Sheikh Ebrahim Khalifa Al-Khalifa, who is the chairman of the accounting and auditing organisation for Islamic Financial Institutions.
Khazanah said Iqbal Khan, formerly the founding chief executive of HSBC Amanah, has been appointed as CEO of the investment firm.
Other senior members in the company's management team include former BIMB Holdings Bhd CEO Datuk Noor Azman Aziz, while management team members include former executives at HSBC Amanah, Citigroup and ABN Amro.
"The global crisis has highlighted the need for an ethical and community-based approach to investment.
The Islamic financial services indust ry i s st rategical ly positioned to fulfill this need in our target markets.
"We see these markets as our home and wish to work with local partners and indigenous management to grow our portfolio companies and to increase the overall market share for Islamic financial services," Iqbal said in separate statement by Fajr Capital yesterday.

(This story appeared in The Malaysian Reserve on Oct 7, 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)

Four Dubai banks placed on ratings watch

By Habhajan Singh
Four Dubai-based banks have been put under ratings watch due to "growing concerns regarding the impact on the banking sector of the economic downturn in Dubai".
Standard & Poor's Ratings Services have placed on credit watch with negative implications its longterm counterparty credit ratings on Emirates Bank International PJSC (EBI), National Bank of Dubai (NBD), Mashreqbank and Dubai Islamic Bank (DIB).
The rating agency said the "A-1" short-term ratings on EBI, NBD, and Mashreqbank were also put on credit watch with negative implications, while the "A-2" short-term rating on DIB was affirmed.
"This action reflects our growing concerns regarding the impact on the banking sector of the economic downturn in Dubai," it said in a statement. These banks have a hand in Islamic banking.
MashreqBank, the largest private bank in the United Arab Emirates (UAE), is involved in Islamic finance via its subsidiary Badr Al-Islami. DIB badges itself as the world’s first full Islamic bank.
S&P said the outlook for Dubai's economy has worsened relative to last year and the global economic downturn has been hurting some of Dubai's key economic sectors including trade, tourism, and commerce.
"Demand in the all-important real estate sector also continues to show clear signs of stress, with indications that a sharp correction is underway.
"As a result, we expect Dubai's economy to contract between 2% and 4% in real terms in 2009, putting pressure on banks' asset quality and profitability.
"Dubai is a small open economy that can do little to shield its key sectors from the impact of a fall in external demand in the coming months," it said.
S&P said the rating actions on EBI, NBD, and DIB also reflect its concerns that the government may use these banks to support the refinancing that is soon coming due of the debt of other government-related entities (GREs).
"We have already noticed that these banks are important participants to the refinancing of Borse Dubai's debt that matured in February 2009.
"We understand that these banks received deposits to neutralise the impact on their liquidity profile," the ratings firm said. Taking into account the important amount of Dubai GRE debt that is soon coming due, S&P believes that additional directed lending to these entities would increase credit and concentration risk.
On a positive note, it said Dubai's establishment of a US$20 billion (RM72.91 billion) bond programme at the government level and issuance of US$10 billion that was fully subscribed by the UAE central bank somewhat alleviate liquidity pressure.
"We are concerned about Dubaibased banks' exposure to the real estate sector — about 20% of total loans at year-end 2008 — in light of the marked deterioration of this sector," it said.

(This story appeared in The Malaysian Reserve on Mar 23, 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)

MIDF Investment to tap local talent

By Habhajan Singh
MIDF Amanah Investment Bank Bhd (MIDF Investment) is pinching back a local talent in Islamic finance from the Middle East as its new deputy chief executive officer, sources says.
Mohamad Safri Shahul Hamid, currently with Deutsche Bank Dubai and previously at CIMB Islamic Bank Bhd, is understood to have accepted MIDF Investment's offer and is in the final stages of getting Bank Negara Malaysia's (BNM) clearance.
It is understood that the appointment signals MIDF Investment's move to tap the growing Shariah-approved financing, including cutting sukuk deals.
For 2008, Malaysia remained the world's largest sukuk market, accounting for more than 37% of global sukuk issuances in that year.
Safri, 37, is currently the director of global markets and head of Islamic structuring at Deutsche Bank Dubai.
He left CIMB Islamic almost a year ago as the director and head of debt capital market.
He was involved in groundbreaking and complex sukuk transactions, both onshore and offshore, including Khazanah Nasional Bhd's exchangeable sukuk.
"Some time ago, the talk was that he may be coming back to spearhead Deutsche Bank's Islamic operations in Malaysia," said an industry executive.
This was most likely in reference to newsreports in February 2008 that HSBC Malaysia and Deutsche Bank had received the go ahead by regulators to set up dedicated Islamic banking subsidiaries.
It had been reported then that Deutsche Bank had appointed Safri to lead its Malaysian operations. The idea was for him to be stationed in Dubai first before moving back to Kuala Lumpur.
Since then, HSBC has unveiled its Islamic subsidiary, HSBC Amanah Malaysia Bhd. Other foreign banks that have followed suit are Standard Chartered Saadiq Bhd and OCBC Al-Amin Bank Bhd.
Deutsche Bank has yet to do so.
Malaysia is the first South-East Asian country in which Deutsche Bank has opened an office.
In 2006, it was the lead arranger of foreign currency bonds for local corporations following Penerbangan Malaysia Bhd's US$1 billion (RM3.69 billion) transaction.
At MIDF Investment, Safri will report to its chief executive officer Datuk Megat Hisham Megat Mahmud.
MIDF Investment is the rebadged investment bank setup in 2007 following an internal restructuring at Malaysian Industrial Development Finance Bhd (MIDF), a subsidiary of Permodalan Nasional Bhd (PNB).
It is an integration of four companies within MIDF’s investment banking division — Amanah Short Deposits Bhd, Malaysia Discounts Bhd, MIDF Sisma Securities Sdn Bhd and the former Utama Merchant Bank Bhd.
On the Islamic front, MIDF Investment was the principal adviser and lead arranger in a RM350 million debt capital market transaction for Tanjung Langsat Port Sdn Bhd.
It involved a RM250 million sukuk musyarakah and up to RM135 million musyarakah commercial papers/musyarakah medium term notes programme.
It also acted as the joint lead arranger and underwriter for Sabah Ports Sdn Bhd's RM150 million Islamic securities comprising RM80 million bai bithaman ajil Islamic debt securities and RM70 million murabahah underwritten notes issuance facility.

(This article appeared in The Malaysian Reserve, page 1, Mar 13, 2009. the business/financial daily has a dedicated sector page on Islamic finance on Mondays, edited by Habhajan Singh)

BIMB denies Bank Islam-Maybank Islamic merger talks

By Alfean Hardy
BIMB Holdings Bhd has categorically denied that it is in talks with Malayan Banking Bhd (Maybank) over a potential merger between its 51%-owned subsidiary, Bank Islam Malaysia Bhd (Bank Islam) and Maybank's Islamic banking unit, Maybank Islamic Bank Bhd.
Reports in the local media over the past couple of days have hinted that a possible merger, which would have created the largest Shariah bank in the region, was in the offing.
In a brief statement issued yesterday, BIMB said that it was not in discussion with Maybank over a potential merger between the two Islamic banks, which are the market leaders in the local Islamic banking sector.
"Although BIMB is open to considering potential strategic partnerships for Bank Islam to strengthen its Islamic banking business and market share, any steps to be taken would firstly require the relevant regulatory approvals," it added.
The bank has made no secret that it was looking for strategic partnerships or mergers.
On Tuesday, a newswire reported that several local Islamic bankers had said that Maybank's Islamic subsidiary wanted to take up stakes in Malaysia's second largest Islamic bank and that Dubai Group's Dubai Islamic Investment Group, which holds a 40% stake in Bank Islam, was keen to sell its stake to Maybank Islamic.
A Maybank spokesman was reported to have said the group was not currently in talks with the Dubai Group as had been speculated. Dubai Group, when approached, said it was a longterm strategic investor in Bank Islam.
"We are proud to be associated with the bank's impressive turnaround over the past two years and are confident of its potential to grow further. "We believe that Bank Islam is well positioned to capitalise on the opportunities presented by the rapid growth of Islamic finance," it added.
Another report in a local daily, citing sources, said the proposed merger had been put on hold at central bank level. It said Bank Negara Malaysia was keen on the idea but had requested both parties to take more time to study their capital base as well as to put their respective houses in order before considering any merger.
The report said, if the merger gets the green light, a special entity would be created to house the two parties, the Bank Islam brand name would likely be retained and that Bank Islam managing director Datuk Zukri Samat, who has been seen as instrumental in Bank Islam's turnaround, would be named the managing director of the new entity.
The report also said the Dubai Group would be asked to sell its stake in Bank Islam to Maybank Islamic and, in return, would be offered an Islamic banking licence, which would allow it to start its own local Shariah-compliant banking operations.

(This story appeared in The Malaysian Reserve on Feb 20, 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)

Dubai Islamic Bank teams up with Hawkamah

By Habhajan Singh
Dubai Islamic Bank (DIB), the world's first Islamic bank, recently signed a "founding member's" agreement with a regional corporate governance outfit to show its commitment towards strengthening its corporate governance standards.
Hawkamah Institute, an autonomous association of corporate governance practitioners, regulators and institutions, is an international association with a primary mandate to develop corporate governance best practices in the Middle East region.
Launched in February 2006, Hawkamah is working to create a system of governance that promotes institution building, corporate sector reform, good governance, market development and increased investment and growth across the region.
DIB's corporate governance standards are clear, consistent and fully in line with international best practice, said a statement released by the Dubai-based bank which also operates in Pakistan and Sudan.
"Corporate governance plays a critical role in the development of modern businesses as it enhances investor confidence and helps in developing the capital markets of the region," said Hawkamah executive director Dr Nasser Saidi (left, in picture) in the statement.
He said that Islamic finance has experienced unprecedented growth so far, but the enactment and implementation of well defined corporate governance structures is essential if trust and confidence is to be maintained.
DIB chairman Mohammed Ibrahim Al Shaibani said Islamic financial institutions (IFIs), by their very nature, have a responsibility to enact precautionary and prudential measures that are specific to their unique structure.
In the statement, DIB chief executive officer Abdulla Hamli said the recent growth within the Islamic banking sector has been unprecedented, and the players are now seeking new and innovative ways to implement the necessary checks and balances to maintain customer, stakeholder and shareholder confidence.
"The Shariah Supervisory Board has become an indispensable aspect of our corporate governance and will be well paired with the objectives of Hawkamah, which aims to ensure these standards are being met to better protect all those associated with the bank," he said.
Conventional governance standards seek to address the separation of ownership and management by ensuring that actions of the management are kept inline with the interests of shareholders and stakeholders, the bank said.
(This story appeared in The Malaysian Reserve on Feb 4, 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)

Amanie launches Islamic finance learning centre in Dubai

Amanie, an Islamic finance consulting company led a Malaysian Shariah expert, has launched its Islamic finance learning centre in Dubai on Oct 16.
Operating under the brand name of Amanie Islamic Finance Learning Centre (AIFLC), the Dubai International Financial Centre (DIFC) registered entity will offer a range of Islamic finance, banking and takaful training programmes and services, it said in a statement.
AIFLC will meet the significant demand for training and human development from the Islamic finance industry in the Gulf region, it added. Apart from the focus of practitioners in the Gulf region, Amanie said the centre aims to attract practitioners from countries with large Muslim populations, including the United States, United Kingdom, Germany, France and Holland.
Amongst the core strengths of AIFLC is its deep pool of very experienced trainers and facilitators, which include many of the renowned Shariah scholars and practitioners from the Gulf and also from other parts of the world.
"Our objective of setting up the AIFLC is to provide focused industry related training programmes that will further spur the growth of the Islamic finance industry," said AIFCL managing director Dr Mohd Daud Bakar, a Shariah scholar who heads the Shariah Advisory Council of Bank Negara Malaysia (BNM).
He felt that by making industry related knowledge available to more practitioners, it will help to encourage a healthy growth of the industry and set the platform for more innovations in Islamic finance products and services. AIFLC said it has already lined up its training programmes for the next calendar year.
These programmes will be a mix of introductory, intermediate and advanced level to cater to the needs of the industry. On top of the training programmes, AIFLC will also offer a tailor made in-house training programs to serve the specific need of any organisation and organise various conferences on special topics and issues that are related to the Islamic finance industry.
(The Malaysian Reserve, Oct 20, 2008, Page 32)

Bank Islam eyes Indonesia for regional expansion

By Alfean Hardy
Bank Islam Malaysia Bhd, which is eyeing both organic growth and mergers and acquisitions (M&As) to grow its business, is looking at penetrating the Indonesian market for all the opportunities it offers despite the recent problems encountered by Malayan Banking Bhd (Maybank), its managing director Datuk Zukri Samat said.
Speaking at a media briefing in Kuala Lumpur on Bank Islam's financial performance for its financial year ended June 30, 2008, Zukri said the bank would take the lessons learnt from the Maybank affair before it ventured into the Indonesian market.
"It's the obvious choice. It's very near us... also, it's a country of 250 million with the major it y Muslims. There's a lot of potential in Indonesia, especially in consumer banking and we're a retail bank and we want to export our expertise there," he added.
Asked on what Bank Islam's strategy would be, Zukri said it could either acquire a strategic stake in an Indonesian bank or acquire completely one of the country's smaller banks. "There's nothing black and white but we're expanding a lot of energy and time looking for (the right partners)," he added.
"We want, if there's a suitable partner, to merge Bank Islam with a suitable partner in order to make a bigger Islamic bank. In terms of regional expansion, the focus for now will be Indonesia. Other markets like Thailand and Singapore will come later. For now we need to prioritise," he added.
On how Bank Islam could finance any future M&As, Zukri said the bank did not have have any financial constraints.
"As of now, there's no budget yet but, as and when, we've identified and finalised our target, then we will work out our numbers," he said.
"In terms of support from our shareholders, I don't think we've got any problems. We've got big shareholders like Dubai Investment Group (DIG) and Lembaga Tabung Haji (LTH), so we don't foresee getting more capital as an issue.
"The challenge is to find the right party and partner to marry," he added. DIG and LTH hold a 40% and 9% respectively in the bank. The 51% majority stake is held by BIMB Holdings Bhd.
(The Malaysian Reserve, p5, Sept 04, 2008)