SocieteGenerale’s forthcoming Sukuk issuance bears testament to Malaysia’s deep Sukuk market - IFN

SocieteGenerale’s forthcoming Sukuk issuance bears testament to Malaysia’s deep Sukuk market

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MALAYSIA: One of the largest banks in the eurozone, SocieteGenerale (SocGen) has revealed plans of launching a RM1 billion (US$302.69 million) Sukuk program in Malaysia. The first tranche of the program is reported to be due by the end of the year. Following the approval from the Malaysian central bank, SocGen will still have to attain regulatory consent from the Securities Commission of Malaysia. Proceeds from the issuance are said to be used to diversify the bank’s funding sources as well as for the purchase of assets in Dubai. Speaking to Islamic Finance news, an industry analyst opined that: “As Malaysia possesses higher liquidity levels and being the largest Sukuk market in the world, SocGen’s decision to issue in Malaysia was moved by liquidity woes arising in Europe.” This is further supported by an industry source who explained that the bank’s advancement into Malaysia is possibly buoyed by the depth and pricing of the country’s Sukuk market: “SocGen is the first French bank to issue in Malaysia. The ‘A’-rated bank’s entry into the Malaysian market is significant as it opens up the distribution base for investors here.” According to data by Malaysia International Islamic Financial Center (MIFC), as of the first half of 2013, Malaysia held US$148.2 billion (60.4%) of the global Sukuk market share. Nik Mohamed Din Nik Musa, the director of the MIFC promotions unit, indicated in a presentation that Malaysia’s deep liquidity in the Sukuk market has created attractive pricing for issuances in Malaysia. Due to higher investor interest, Sukuk has offered more competitive yields compared to conventional bonds at an average disparity of 4bps as of June 2013. Established in 1864, the French bank’s second quarter financials for 2013 doubled in net profits, primarily attributed to its investment banking business and international retail network. Beating analyst forecasts, SocGen’s net profit rose to EUR995 million (US$1.27 billion) in the second quarter, from EUR436 million (US$583.23 million) a year ago. The bank’s net profit for the first half on the other hand, stood at EUR1.32 billion (US$1.76 billion). With an aim to achieve a return of 10% on equity by 2015, SocGen remains to be the third-largest listed bank by assets in France.