If Dubai Group eventually sells its stake in Bank Islam, it could spark a round of consolidation among Malaysia’s Islamic banks. Several Islamic bankers in Malaysia have said Maybank’s Islamic subsidiary wants to acquire a stake in Bank Islam.
“Dubai Group confirms that it is in the process of reviewing its strategic options relating to its (Bank Islam) stake,” it said in a statement on its website. “Following the reassessment of its investment strategy, Dubai Group has redirected its competitive advantage closer to home.”
Bank Islam, Malaysia’s No. 2 sharia bank, had offered preference shares to its shareholders in April to raise up to MR540m ($ 156m). But Dubai Financial Group, a unit of Dubai Group which holds a 40 percent stake in the Malaysian lender, refused the offer, Bank Islam said yesterday.
Maybank Islamic is the biggest Islamic bank in Malaysia, which has one of the world’s most developed Islamic financial industries, thanks to a vast sharia bond market and a well-established regulatory framework.
Talk of a Maybank Islamic-Bank Islam merger comes as several other banks in the rapidly growing sector seek acquisition opportunities, though a weak global economy could put a brake on expansion plans.
Kuwait Finance House Malaysia, a subsidiary of Kuwait’s top Islamic bank, and Islamic Bank of Asia, which is backed by Singapore’s DBS have said they are on the lookout for acquisition opportunities in the region.
Dubai Holding, Dubai Group’s parent, is undergoing a transformation to help it weather the global crisis.
“They are looking into assets that can be liquidated to generate cash and to support the restructuring process,” said Samer al-Jaouni, general manager of Middle East Financial Brokerage Co.
“The focus will be more on local markets, they will become more picky in overseas investments … I think this will become the strategy going forward,” he said.
Dubai Group said, however, that Malaysia remained a key market for future investments.
Islamic banking group BIMB Holdings Bhd owns 51 percent of Bank Islam, with Lembaga Tabung Haji, or the Malaysian pilgrims fund, holding the remaining 9 percent.