Bank Islam Makes Moves In Indonesia

Bank Islam Malaysia is seeking a controlling equity stake in Indonesia's PT Bank Muamalat, sources say

Bank Islam Malaysia Bhd is pursuing a stake in Indonesia's PT Bank Muamalat to expand into the world's most populous Muslim nation, sources said.

The oldest Islamic bank in Malaysia is ultimately seeking a controlling equity stake and the sources said it was already engaged in talks with several shareholders of the Indonesian Islamic bank.

It is believed to be close to cementing a deal with at least one of the shareholders.

PT Bank Muamalat is Indonesia's largest bank by branch network. It has some 230 branches nationwide and is represented by another 3,800-odd outlets through its collaboration with Indonesian post offices. The bank, which began operations in 1992, is Indonesia's first Islamic bank.

Its biggest shareholders as at end-2008, according to its website, are the Jeddah-based Islamic Development Bank with a 28 per cent stake; Boubyan Bank Kuwait (21.28 per cent); Atwill Holdings Ltd (15.32 per cent); and individuals Abdul Rohim (6.7 per cent) and Rizal Ismael (5.49 per cent).

Analysts contacted by Business Times were positive about a potential marriage between the oldest Islamic banks in both countries.

PT Bank Muamalat, besides being well run, has a strong capital base with a capital adequacy ratio of 10.83 per cent as at end-2008. It made a net profit of about 207 billion rupiah (RM73 million) last year and had a high return on equity of about 33 per cent.

It is one of the leaders in the Islamic banking industry, with total assets of about 13 trillion rupiah (RM4.6 billion) as at the end of last year.

“It’s a good platform for Bank Islam to tap the biggest Muslim population in the world,” said Vincent Khoo, head of research at UOB-KayHian in Kuala Lumpur.

For Bank Islam to grow, it needs to explore mergers and acquisitions, its managing director Datuk Zukri Samat said last week.

The bank operates primarily in Malaysia, where competition is set to become more intense as more foreign banks are allowed in under Malaysia’s financial sector liberalisation.

He said the bank was “actively” looking for a potential merger partner to expand in the region, but declined to say in which markets it was looking.

"If we think we can do it locally, we’d like to … but our focus and priority is always South-East Asia,” he had said. Bank Islam is 51 per cent owned by BIMB Holdings Bhd and 40 per cent owned by Dubai Investment Group.

It recently moved to raise RM540 million from the sale of preference shares to strengthen its capital. Earlier this year, Bank Islam was reported to have been studying a merger with Maybank Islamic Bank but the plan was said to have been put on hold as the two needed to focus on strengthening their respective capital base.

From Busines Times