Bank Islam Gives Up on Muamalat

Tuesday, April 12, 2011, 08.25

By Adeline Paul RajPublished: 2011/04/12S



Kuala Lumpur: Bank Islam Malaysia Bhd (5258) has, after two years, given up its pursuit of Indonesia's oldest Islamic lender PT Bank Muamalat Indonesia.

Sources said Bank Islam was recently invited to bid for a controlling stake in the Indonesian lender, but decided not to because it was looking too pricey.

"The pricing expectations were too high," one of them told Business Times.

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It is understood that the three major shareholders of Bank Muamalat, who are from the Middle East and collectively hold just over 70 per cent, hired investment bank Morgan Stanley to advise on the sale and handle bids.
The deadline for bids to come in was last Thursday. It is believed that several private equity firms put in bids.

Sources said that apart from pricing issues, Bank Islam also became less keen on Bank Muamalat after a closer study revealed that the latter's business is predominantly in small-to-medium-enterprise banking rather than retail banking.

Bank Islam, which is controlled by BIMB Holdings Bhd, had wanted a bank that was strong in retail banking to tap the vast potential in the world's most populous Muslim nation.

Managing director Datuk Seri Zukri Samat, when contacted, said the bank "is not participating in Bank Muamalat but is still keen on Indonesia". He declined further comment.

Bank Islam, which is Malaysia's oldest Islamic bank, was reported to have been eyeing Bank Muamalat as far back as August 2009, but exploratory talks with some of the bank's shareholders since then have not led to anything more concrete, sources said.

Jakarta-based Bank Muamalat has 350 offices in Indonesia and a branch in Malaysia. It had some 20.4 trillion rupiah (RM7.2 billion) in assets as at end-2010, a 32 per cent increase from a year ago.

Its major shareholders are Islamic Development Bank (28 per cent), Boubyan Bank Kuwait (about 21.3 per cent) and an investment holding company from Jeddah, Sedco Group (about 21.3 per cent).

Bank Islam, which is 30.5 per cent-owned by Dubai Group LLC, operates primarily in Malaysia, where competition is set to become more intense as more foreign banks are allowed in under further liberalisation of the financial sector.

For it to grow, it needs to explore mergers and acquisitions. But banks from all over, including Malaysia and the Middle East, have been pursuing lenders in Indonesia, driving up prices.

"Indonesia, with its population of over 200 million and low banking penetration, offers banks opportunities for faster growth," banking analyst David Chong of RHB Research said.

Malaysian banks that were early movers there include CIMB Group, which bought Bank Niaga in 2002, and Malayan Banking Bhd, which bought Bank Internasional Indonesia in 2008.


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