MALAYSIA: Despite
posting lower profits every quarter for the past 18 months, Saudi
Arabia’s Al Rajhi Bank remains the world’s largest Islamic bank with
SAR308 billion (US$82.02 billion) in total assets as at the end of the 31st
December 2014. While the Islamic banking giant is feeling the pinch from
slower financing growth and aggressive competition from its peers, it
shows no signs of relinquishing its top position and is moving ahead to
strengthen its presence globally.
The bank recently injected RM500 million (US$138.98 million) into its
Malaysian franchise, a move acting CEO of Al Rajhi Bank Malaysia (ARBM)
Selamat Haji Sirat says is a sign of confidence in the Malaysian economy
(despite headwinds as a result of a sharp decline in oil prices) as well as
the unit’s capabilities and potential. Unlike its parent bank, ARBM is a
minor player in the Malaysian Islamic banking market which is dominated
by local heavyweights such as CIMB Islamic (also one of the world’s
largest Islamic banks) and Maybank Islamic.
With only 24 branches (as compared to Maybank’s 400 and CIMB’s 361), ARBM
lacks the distribution channels and competitive advantages afforded by
being a Malaysian home-grown brand. According to Islamic Banking
Intelligence (IBI), out of the 18 fully-fledged Islamic banks in Malaysia
(as reviewed by IBI using 2013 disclosed total assets figures), ARBM is
in 16th position. However, the bank is hoping to change that
with a new strategy in place this year.
With its profitability largely driven by the retail market, ARBM is now
looking at aggressively growing its corporate business in order to
achieve a more balanced growth overall, revealed Selamat during the
recent launch of its Takaful products. Apart from that, the bank is also
looking at diversifying its streams of income, particularly by expanding
its fee-based income through wealth management products. Just yesterday,
the bank forged its first bancaTakaful partnership with Great Eastern
Takaful, through which the bank rolled out its first ever Shariah compliant
protection plan products – the i-Great Raudhah and i-Great Bakti, with
plans to introduce a greater range in the future. Selamat expects these
products to contribute 20% of the bank’s fee-based income portfolio this
year, or RM15 million (US$4.2 million).
Speaking to IFN, Alan Wee, ARBM’s director of retail banking who came on
board three months ago, explained that while the bank is keen to expand
its branch network, the primary focus would be to strengthen and improve
existing branches first in order to avoid unsustainable physical growth.
This is where the recent RM500 million capital injection comes in as it
will be utilized to enhance the Malaysian unit’s existing network and
execute its business growth strategy.
Not explicitly stating any ambitious market share goals, the bank remains
realistic and rational in its growth strategy taking into consideration
the Malaysian dynamics. Despite its global stature, ARBM is conscious of
the fact that as a foreign bank with a limited domestic customer base in
one of the world’s largest Islamic finance market built upon the success
of its local players, it has glass ceilings to break and obstacles to
overcome; and its strategy to devote its attention towards consolidating
and optimizing existing operations instead of pushing for wildfire-like
growth is indeed a prudent approach.
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