Business

Monday April 20, 2009

Al Rajhi Bank to extend reach via Malaysian branch

By ELAINE ANG


It wants to grow investment banking business in Asia

AL Rajhi Bank KSA aims to grow its investment banking business in the Asian region by leveraging on its newly-opened branch in Malaysia.

The branch, which commenced operations on Thursday, will serve as the group’s regional Islamic investment banking base to support the growing demand in the region for such services.

Al Rajhi Bank, Saudi Arabia’s largest Islamic bank, obtained its International Islamic Banking licence to operate a branch office in the country on March 26. The licence was issued under the Malaysia International Islamic Financial Centre.

Al Rajhi Bank’s International Islamic bank in Malaysia principal officer Leong See Meng said the bank’s objective was to cover the East Asian market.

Leong See Meng and Ahmed Rehman ... Malaysia will be a natural focus

“Malaysia will be a natural focus as we have good companies and opportunities here. We are also looking at the Singapore and Indonesia markets in the near term as they are closer to home logistically.

“However, we will not be taking big steps for now as we are getting ourselves embedded into people’s mindsets in this part of the world,” he told StarBiz.

Al Rajhi Bank Malaysia chief executive officer Ahmed Rehman said the branch would be able to leverage on its parent’s balance sheet and capital to do bigger ticket Islamic investment banking transactions.

“The team will also have access to intellectual capital and all the resources available in Saudi Arabia. Malaysia is the only international operations outside Saudi Arabia for Al Rajhi Bank and will be used as a launching pad to cover the region,” he said.

Al Rajhi Bank has total assets of over US$44bil, shareholders’ equity of US$7.2bil and net profit of US$1.7bil in 2008.

The bank successfully participated as Initial Mandated Lead Arrangers in two landmark project finance transactions in Saudi Arabia exceeding US$8bil last year.

According to Leong, target clients for the Islamic investment banking business would be the government sector, top-tier corporates and those who require more sophisticated products and services.

“Traditionally, many Islamic banks offer simple vanilla type products which are sukuk-related without much diversity. Recognising the increasing demand from customers in the region we have spun off a more sophisticated platform,” he said.

The international Islamic bank will have capabilities ranging from leverage finance to traditional investment banking type set-ups in the Islamic perspective covering the equity capital markets, merger and acquisition (M&A) advisory practice and special situations that require customised solutions as well as private equity.

“What will take place in the next six months is very serious gearing up to acquire expertise, especially in Saudi Arabia, to deliver on the different categories. In the next six months we will cover a large spectrum of offerings,” Leong said.

He sees many Islamic investment banking opportunities available in Malaysia and the region, especially with the amount of government stimulus injected into regional economies and top-tier companies gearing up to prepare themselves for the pick-up in the economy.

“I am sure there are opportunities such as project financing, M&A advisory and equity distribution available.

“We are particularly keen on advisory opportunities now because in the past we have been very balance sheet-focused and, with our new capabilities, we can offer a very broad perspective to our clients,” he said.

Ahmed said Al Rajhi Bank Malaysia was planning to set up an international currency business unit to enable it to tap the deals undertaken by its counterpart and earn additional income.

“We are in the process of making the application to the central bank,” he said.

Ahmed said the bank, which currently has 19 branches, might open a couple more branches in the last quarter of the year, possibly in Kota Kinabalu, Kuala Terengganu, Alor Star or Ipoh.

“Next year, we want to open a few more but we do not need expansion at such a furious pace as before since we already have customer reach. Opening branches is also expensive,” he added.

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