Malaysia Building Society Bhd (MBSB) is understood to be eyeing Kuwait Finance House (M) Bhd (KFH Malaysia) as an option for a merger exercise, according to sources who have been cited in local media.
MBSB, which 80% of its assets are Islamic, is planning a transition into a full-fledged Islamic bank.
“MBSB is looking at KFH Malaysia as one option as the deal came to it for consideration. There are no formal talks between the two financial institutions yet,” the source said.
KFH Malaysia is wholly-owned by Kuwait-based Kuwait Finance House (KFH) and is the country’s first and largest foreign Islamic lenders here. Its parent group is the Gulf nations’ biggest Islamic lender.
Yesterday, Reuters reported that KFH may sell some of its investments including KFH Malaysia and has picked Credit Suisse to advise it on the matter. KFH, however, did not provide any details such as a timeline or a potential sale price of the unit.
In an understated announcement last week, KFH Malaysia posted a press release on its website noting the appointment of its new CEO and MD Ahmed S. Al Kharji effective 20 April 2015. The appointment, StarBiz reported last week, could be a precursor to a corporate exercise such as a merger and acquisition (M&A).
“However, other quarters reckon the bank is here to stay and it is unlikely that the Kuwaitis will sell cheap, that is if it does at all. This is because Asia still presents huge potential for Islamic finance and Malaysia is often seen as a springboard for expansion into neighbouring countries,” the local daily reported.
Al Kharji, a Kuwaiti, is KFH Malaysia’s fourth CEO since it began operations 10 years ago, and the second foreign chief to be appointed.
The bank was established in Malaysia in 2005 under the liberalisation of the Islamic banking industry, but has seen the going tough due to fierce competition with local banks.
KFH Malaysia has total assets of MYR10.47 billion as at financial year ended Dec 31, 2014. According to its 2014 annual report, corporate and commercial financing are the major contributors to the bank’s assets portfolio at 69%, while consumer is next at 31% as at the end of last year.
“Industry players said a merger with an Islamic bank was logically in line with MBSB’s aspiration to become a full-fledged Islamic bank. The non-bank lender also aims to double its corporate loan book, from 15% now, by 2020. The retail sector, derived largely from personal financing, forms the bulk of its loan portfolio at 85% currently,” StarBiz reported.
There was an earlier speculation that Bank Islam Malaysia Bhd, the country’s first standalone Islamic bank, was also on MBSB’s radar.