Saturday April 28, 2012

Maybank Islamic eyes region


THE buzz of activity at Maybank Islamic Bhd is a sign that's most welcome to its CEO Muzaffar Hisham. It is the largest Islamic bank in the country which had seen assets grow to US$23bil (RM70.32bil) at the end of last year and the hectic movement within the corridors of the bank is an indication of the momentum it has built.

Having built its position through the Islamic window at parent Malayan Banking Bhd's branches, Maybank Islamic is now looking to branch out its success formula into the region.

Looking at a wider regional perspective, Muzaffar says there are still pockets of opportunities for the bank to expand and grow its presence.

“The key markets that we like to focus on are Singapore and Indonesia, and we saw that when we were able to grow our cross-border financing to Indonesia to US$500mil to US$600mil from basically nil after changes in the tax structure,” he says.

While regulators of banks in different countries are taking steps to promote Islamic business, it is up to players like Maybank Islamic to compliment that, he adds.

To Muzaffar, value proposition is always the key to unlock value for Maybank and its customers, with the bank even having an operation in Hong Kong to serve its fund-based clients who are looking at doing some transactions there.

“While Islamic finance is still new to the conventional finance industry, I believe innovation can add value to Islamic finance, and I think the key part of growth in the region will be in Indonesia and Malaysia,” he says.

Muzaffar says the group also embraces competition where the liberalisation of the Islamic finance industry will bring the best of players together.

“In a sense, it will make us work a lot harder to create the best efficiency for clients and customers and the bank,” he says.

Though regulation and the right framework is already in place in the country, Muzaffar says there are still many areas that need to be introduced to improve efficiency, such as strengthening syariah governance.

“We require clarity on regulations, Shariah Governance Framework and other issues such as taxes, which act as incentives to encourage growth of Islamic finance and create a level playing field between Islamic finance and conventional banking,” he says.

The bank also intends to work more closely with regulators and relevant authorities in developing the Islamic finance industry, and is looking to collaborate with key industrial players to tap into Islamic finance opportunities.

“Our partnership with Bank Shariah Mandiri paves the way for enhanced cross-border liquidity flows, capital market deals and sukuk issuances. We are always on the lookout for opportunities in Brunei, China, the Philippines and the Middle East where the potential is there to take Islamic banking to the next level,” he says.

Recently, the Maybank group moved to raise its stake in Saudi Arabia-based Anfaal Capital to 35.17% by acquiring another 17.7% equity in the financial institution.

Its intention is to increase its presence in Saudi Arabia, which provides a good opportunity for the bank in the area of syndication, sukuk structuring and project financing in the country.

Meanwhile, being part of the bigger group, Maybank Islamic targets to achieve one-third Islamic financing contribution to the group's total domestic loans and advances by 2015.

“Our domestic business is important and we want to ensure that effective execution is in place whenever a customer be it a corporate or individual or a product proposition comes up we will be there to provide support,” he says. Last year, the bank recorded a profit before tax of RM567.1mil, an increase of 31.9% compared with the previous year, with fund-based revenue surging by 38.7% to RM865.5mil, while fee-based income rose 32.9% to RM142.5mil.

“Although we are growing pretty well, and is on track to reach our big milestone of achieving profit before tax of RM1bil this year, we are still cautious about growth. Generally, worries are on external shocks and we need to monitor quite closely some of these external shocks and how they are going to affect the domestic business,” he says.

Muzaffar says over 60% of Maybank Islamic's financing growth comes from its Community Financial Services division, especially from mortgage and term financing, while the rest is contributed by its global wholesale banking division.

“Our growth can be attributed to the authorities' continuous commitment to further develop the Islamic banking industry, amongst others, in strengthening the Shariah Governance Framework, providing tax neutrality to level the playing field with the conventional players and encouraging cross-border opportunity,” Muzaffar says.

“The overall global market was sluggish but Islamic finance is resilient as evidently seen by the year-on-year growth in the products and services on offer. In Malaysia, we are excited over the growth in 2011 in a number of projects under the Economic Transformation Programme. Islamic banking assets grew 21.4% compared with overall banking assets growth of 6.4% in the same period.”

Muzaffar expects to see more sukuk issuances in the near future. The appetite for sukuk was seen through the increase of 72% in sukuk issuance to US$84.4bil in 2011, while sovereign deals accounted for 78% of sukuk issuances.

According to Muzaffar, several notable issuances of sukuk last year included Indonesia's sovereign sukuk sale in 2011 which was a huge success with 6.5 times oversubscribed. Demand for non-traditional markets like the Khazanah renminbi sukuk was encouraging, drawing demand of 3.6 times book size, which prompted Khazanah to upsize the sukuk to 500 million renminbi from 300 million renminbi previously.

“We anticipate growth in the sukuk market globally, not only for the ringgit but potentially the US dollar sukuk market, particularly in the space of sovereign sukuk and key big corporate issues,” he says.

Muzaffar says the establishment of the International Currency Business Unit and the incentives set forth by Bank Negara had also resulted in cross-border Islamic transactions seeing much more action.

“Another factor that assisted our progress was the central bank's strong emphasis on the internationalisation of Islamic finance as demonstrated in the Financial Sector Blueprint 2011-2020 and its full support for the offering of our services and products,” he says.

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