‘AL RAJHI-MIDF MERGER MAKES SENSE’

Move will make do­mes­tic Is­lamic fi­nance sec­tor more ro­bust, says Ke­nanga

New Straits Times - - BUSINESS - LIDIANA ROSLI [email protected]­di­aprima.com.my

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.

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