MBSB to become full-fledged Islamic bank, via merger with Bank Muamalat

MBSB chairman Abdul Halim Ali and CEO Ahmad Zaini Othman, image taken from website.

Malaysia Building Society Bhd (MBSB) is on track to obtaining a full-fledged Islamic banking licence, that will come together through a merger with Bank Muamalat Malaysia Bhd.

Local media StarBiz reported, citing sources, said that plans were being laid out to realise MBSB’s goal to get a full-fledged Islamic banking licence.

This comes seven months after news-grabbing three-way merger between MBSB, CIMB Group Holdings Bhd and RHB Capital Bhd fell through in January.

In May this year, MBSB was reportedly eyeing Kuwait Finance House (M) Bhd as an option for a merger exercise, according to sources cited in local media.

MBSB, which is 65 per cent-controlled by the Employees Provident Fund (EPF), it has been seeking a migration to becoming a full-fledged conventional bank.

The largest shareholder in Bank Muamalat is currently DRB-Hicom Bhd, which controls 70 per cent of the group, followed by the state investment arm Khazanah Nasional Bhd which holds a 30 per cent stake.

When DRB-Hicom took over Bank Muamalat in 2008, Bank Negara had imposed a condition that its stake had to be pared down to 40 per cent. DRB-Hicom had acquired the stake from Bukhary Capital, StarBiz reported.

Khazanah’s managing director Azman Mokhtar had said in 2011 that its stake in Bank Muamalat was a “non-core holding”, which it was seeking to dispose.

Sources said if the plan for the merger takes off, EPF’s stake in the merged entity would be down to 40 per cent, while Khazanah and DRB-Hicom’s interest was likely to be trimmed to 20 per cent, each.

The rest of the shareholding will be held by the public, a source told the newspaper. A source noted that MBSB’s interest in Bank Muamalat was for the Islamic banking licence.

In April, MBSB chief executive officer Ahmad Zaini Othman told local media that the financial institution’s departure from being a non-conventional bank to an Islamic bank is to prepare itself for any potential corporate exercise.

Ahmad Zaini had also said that a corporate exercise was inevitable for the financial institution in an increasingly competitive landscape.

He had also said that becoming an Islamic Bank was part of MBSB’s business plan, having establishing measures and processes to run like one, since the past two years. About 80 per cent of MBSB’s assets are Islamic.

“It’s a must. If you look at the business environment, we need to transform to move to that new environment,” he said then.

One of MBSB’s setbacks as a non-conventional bank is its inability to tap low-cost funds from the money market that are accessible to conventional banks.

Without being able to tap into low-cost deposits, the company finds it difficult to grow its loan base. To get out of this “no man’s land” and be on a firmer growth towards a financial institution platform, MBSB needed to seriously look into a corporate exercise in the “very near” future, StarBiz reported.

Also read:

Employees Provident Fund-owned MBSB targets KFH Malaysia for merger

Malaysia’s MBSB looks at possible merger during next two years

CIMB-RHB-MBSB: mega merger aborted?

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Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.