Industry analysts in favor of Bank Muamalat Malaysia’s potential merger plans - IFN

Industry analysts in favor of Bank Muamalat Malaysia’s potential merger plans

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MALAYSIA: Local media reports have revealed that Bank Muamalat Malaysia is presently mulling over a potential merger with several local financial institutions. The bank is said to be looking for prospective partners from development financial institutions, and has shortlisted a few candidates including Bank Rakyat Malaysia and Malaysian Industrial Development Finance (MIDF). Bank Muamalat is currently owned by automotive and property construction conglomerate, DRB-Hicom (DRB) who holds a 70% stake, while the remaining shares are held by Malaysia’s sovereign wealth fund, Khazanah Nasional. Speaking to Islamic Finance news, industry analysts have opined that the merger would be “a good idea” for the Shariah compliant institution as it would strengthen the bank’s overall financials. Although it has numerous branches across the country, in terms of operations, Bank Muamalat’s financials are reportedly not as strong compared to other banks. There have been two major mergers in the industry namely, RHB Capital and OSK Investment Bank as well as the recent acquisition of Bank Islam Malaysia by BIMB Holdings. This is said to signify the rising liquidity concerns in Malaysia’s Islamic banking industry. “By merging, they are able to leverage on liquidity with an extensive reach through more branches and deposits, further creating an increased synergy in the market,” an analyst said. Moreover, seeing that banks are constantly wrestling to provide lower rates to consumers, mergers and acquisitions will facilitate in reducing competitiveness in the industry. At time of press, Bank Muamalat was unavailable for comment on the matter. In September last year, DRB held negotiations with Affin Holdings (Affin) to dispose part of its stake in Bank Muamalat in pursuit of the central bank’s aspiration of establishing an Islamic megabank. This however came to a halt following Affin’s abrupt withdrawal from the proposal.