BIMB Holdings to start talks on takeover of Dubai Financial Group’s stake in Bank Islam Malaysia (By IFN)

Tuesday 9^th October 2012

MALAYSIA: BIMB Holdings, which owns 51% of Bank Islam Malaysia, has announced that it has received approval-in-principle from the central bank, Bank Negara Malaysia (BNM), for it to begin discussions with Dubai Financial Group (DFG) to take over the UAE firm’s 30.5% interest in Bank Islam. “The negotiations are to be completed on or before the 31st March 2013,” it said, adding that the talks will also involve pilgrims fund Lembaga Tabung Haji, which owns 51.76% of BIMB and 18.5% of Bank Islam. Speculation has been rife that DFG has been looking to sell assets following the indebtedness of its parent, Dubai Group, which owes around US$10 billion in loans. DFG emerged as a major shareholder in BIMB in 2006, when it acquired a 40% stake in the Malaysian firm, which also owns Syarikat Takaful Malaysia. DFG’s interest in BIMB was then reduced to 30.5% in 2010 when it chose not to take up an issuance of new preference shares during a cash call by the Malaysian firm. Meanwhile, in its announcement, BIMB also noted that the consent from BNM does not constitute an approval for its proposal to take over DFG’s interest in Bank Islam, with further approvals needed from the ministry of finance, with the recommendation of the monetary authority, before any deal is struck. Although the Malaysian financial group has been dogged by a legacy of non-performing financing, analysts have increasingly grown to like BIMB as it represents the only pure-play Shariah compliant stock listed on the Malaysian stock exchange. In a report on BIMB’s second quarter financial results, Maybank IB Research noted that it has raised its 2012-2014 forecasts for the financial group, projecting total net income of RM1.67 billion (US$544.95 million), RM1.8 billion (US$587.37 million) and RM1.95 billion (US$636.32 million) for the three years, respectively. If its talks with DFG conclude positively, then BIMB could be in for even larger earnings contributions from Bank Islam going forward.