‘AL RAJHI-MIDF MERGER MAKES SENSE’
Move will make domestic Islamic finance sector more robust, says Kenanga
AL Rajhi Banking & Investment Corp’s merger talks with Malaysian Industrial Development Finance Bhd (MIDF) is a sensible move, said an analyst.
The potential merger of Al Rajhi’s unit Al Rajhi Banking & Investment Corp (Malaysia) Bhd and MIDF might make the domestic Islamic finance sector more robust, said Kenanga Investment Bank Bhd analyst Ahmad Ramzani Ramli.
The merger would make sense as Al Rajhi was looking to strengthen its position in Malaysia, he added.
“As of now, there are only two Middle Eastern banks operating in Malaysia, namely Al Rajhi and Kuwait Finance House Malaysia Bhd.
“Both are not that big despite Al Rajhi’s parent company being the world’s largest Islamic lender,” he told NST Business.
“Al Rajhi is a small player in Malaysia but a merger with MIDF can change all that.
“It is, of course, too soon to predict what will come out of their merger negotiations but if it does happen, it will definitely make the Malaysian Islamic finance industry more robust,” said Ahmad Ramzani .
Bank Negara Malaysia gave its approval to MIDF and Al Rajhi last Thursday to begin the merger negotiations.
If successful, the merged entity’s net asset combinations could be worth up to RM2.5 billion, depending on the structure.
Bloomberg had earlier reported that a potential merger would expand the scope of MIDF’s business and give it the right to take deposits.
Al Rajhi Malaysia reported a net income of RM48.7 million on RM106 million revenue for the third quarter ended September 30 last year while MIDF reported a loss of RM24 million on the back of RM97.3 million revenue in the same quarter.
Permodalan Nasional Bhd is MIDF’s parent company. Both entities declined to comment when contacted.
This will not be the first time that a Middle Eastern bank is merging with a local player.
Last year, Malaysia Building Society Bhd realised its goal of becoming a full-fledged Islamic lender after taking over Asian Finance Bank Bhd, which was controlled by Qatar Islamic Bank.