Feb 27

Merger on hold: Bank Islam, Maybank Islamic told to put house in order first

PETALING JAYA: The proposed merger between Bank Islam and Maybank Islamic Bank is believed to have been put on hold at the Bank Negara level.

StarBiz understands that Bank Negara is in favour of the idea but has requested both parties to spend more time to study their capital base and further put their house in order, before any potential move to merge.

Contrary to market perception, the Bank Islam brand name will likely be retained, should the idea take off.

This is in view of the strength and visibility of its brand as well as its status as the country’s oldest Islamic bank.

It is also learnt that at this juncture, the plan is to retain Bank Islam’s managing director Datuk Zukri Samat to head the merged entity.

Zukri has been credited with doing a good job in continuing the turnaround process in Bank Islam, which was once loss-making.

According to industry sources, a special entity is likely to be created under which the two banks will be merged.

Apparently, shareholders of Bank Islam met in Dubai some time back purportedly to discuss the issue.

Maybank is the largest Islamic banking services provider in the Asia Pacific region.

It converted its Islamic window operations into a stand-alone Islamic bank early last year.

The Dubai Group, the foreign and major shareholder that had injected RM828mil into Bank Islam, will have to sell its stake in Bank Islam to Maybank Islamic for the merger to take place.

One carrot that could be dangled to the Dubai Group, in the event that it does not agree to sell, is to offer an Islamic banking licence for them to start their own Islamic banking operations in the country.

This could also be a way for Maybank to get a more realistic pricing compared with its recent overseas deals which had drawn considerable flak from analysts.

Last week, Zukri said Bank Islam might raise funds to bolster its capital in view of the current global financial crisis, and that he was examining the bank’s balance sheet.

He added that the bank’s non-performing loans level had improved as it had undertaken restructuring measures and upgraded its underwriting standards.

Its risk-weighted capital ratio, a measure of a bank’s health, had improved to 12.9% last financial year from 12% in 2007.

Bank Islam posted a 30.3% higher profit before zakat and tax of RM308.3mil for the financial year ended 30 June, 2008. This was achieved on a 14% increase in income to RM1.15bil.

At Maybank, a rights issue of RM3bil is being considered to shore up its balance sheet following its major acquisitions of three banks in Indonesia, Pakistan and Vietnam last year.

The bank’s total capital requirement is RM12bil while it has thus far raised RM9.1bil.


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