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Monday, 24 March 2008

Bank Islam clinches first corporate advisory deal

(Daily Edge, 24 March 08)


KUALA LUMPUR: Bank Islam Malaysia Bhd has clinched its first corporate advisory deal, Akarmas Sdn Bhd’s RM36.96 million mandatory takeover offer for PK Resources Bhd, a milestone which is in line with its strategy of boosting its corporate banking division’s investment banking services.


BIMB is looking to grow its business and corporate banking unit in an effort to increase non-fund based income.


Its managing director Datuk Zukri Samat said: “Currently, business and corporate banking constitute about 30% of the bank’s financing mix. Our goal is to increase this to 40% of our total financing assets.”


Consumer banking business contributes the remainder of the bank’s RM8.73 billion total financing assets.


Zukri told The Edge a focus of its corporate banking unit was to increase its investment banking services, which began operations in November 2006.


“This includes arranging financing for clients, such as sukuks, from the Islamic capital market. We have already completed a RM2 billion sukuk mandate with another issuer, and are currently working on two more,” he said, declining to elaborate further.


Bank Islam recently reported a 17.45% rise in net profit to RM175 million in the first half ended Dec 31, 2007. It had posted a record net profit of RM251.3 million in the year ended June 30, 2007, after incurring two years of losses.


In 2006, the bank had unveiled a five-pronged turnaround plan, including capital restructuring, revamping its information technology infrastructure, a transformation programme including re-branding, a cost rationalisation exercise and human capital development.


The bank had also revealed it would not proceed with plans to sell its non-performing financings (NPF), which in FY2005 stood at more than RM2 billion.


While the bank had reportedly carried out due diligence with a prospective buyer of its NPFs last year, Zukri had told reporters at a media briefing last week the bank decided the carving out of its NPFs was no longer necessary as it had been brought down to a “manageable level”.


For the half-year ended Dec 31, 2007, Bank Islam’s NPF fell to RM785 million from RM1.05 billion a year earlier. Its net NPF ratio improved to 8.8% from 10.8%.


Going forward, the bank is expected to step up domestic operations while also exploring the possibility of expanding regionally, namely to China, Thailand or Indonesia.


Meanwhile, on the outlook for the Islamic banking sector, Zukri said opportunities still abound despite growing competition.


“Certainly the competition is getting keener each day. However, with the Islamic financial services industry expanding rapidly locally and globally, the cake will expand, and there will be enough for everyone, especially in areas where the potential is not fully tapped. These include private banking and wealth management,” he said.

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Alfalah Consulting - KL: www.alfalahconsulting.com 
Islamic finance consultant: www.ahmad-sanusi-husain.com 
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

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