Malaysian lender sets up Islamic arm, plans global expansion

Malaysian lender sets up Islamic arm, plans global expansion

Agence France-Presse
Kuala Lumpur

Malaysia's fourth largest lender Bumiputra-Commerce Bank (BCB) on
Friday launched its Islamic banking arm and unveiled plans for a
foreign alliance to expand to the lucrative Middle East market by
next year.

Commerce Tijari Bank kicked off with a branch in the capital
Kuala Lumpur and will roll out services nationwide later this
year to BCB's existing four million customers, said Tijari chief
executive Nor Azzam Abdul Jalil.

Tijari would seek to expand globally from next year with a
branch in the Labuan offshore financial center off Borneo island,
through regional tie-ups with BCB's affiliates such as
Indonesia's PT Bank Niaga, and leverage on BCB's overseas
branches in London, Singapore, Hong Kong and Japan.

Tijari is currently in negotiations with several global
players in Islamic financial services for a possible alliance and
hopes to conclude talks by the end of this year, he said.

"We have talked to a few (foreign institutions) from the
Middle East, Europe and the United States. There is a lot of
overseas interest after the central bank allowed Islamic banks to
sell 49 percent of their shareholdings," he told reporters.

"We hope to open up our own branch in the Middle East. We are
looking at Dubai or Bahrain."

The central bank last month eased restrictions on foreign
ownership in local Islamic banks, raising the ceiling to 49
percent from 30 percent so as to boost Malaysia's aim to become a
key Islamic financial hub in the region.

It has awarded licenses to three Middle East players and plans
to allow all local groups to set up Islamic banking arms to
bolster the sector and encourage offshore expansion of such
services.

Despite growing competition, Nor Azzam said there was still
room for growth as assets in the Islamic banking sector currently
represented only around 10 percent of those in the entire banking
system. The government aims to double this by 2010.

"The entrance of foreign banks, I think, will add value rather
than become an obstacle to Islamic banking. Competition is good
because it will keep us on our toes. The industry will see more
innovative products," he said.

BCB is the commercial banking arm of Commerce Asset-Holding,
one of the country's 10 banking groups.

Nor Azzam said Tijari was expected to contribute about 10
percent of the group's net income within the next three years and
up to 20 percent in five years. Its asset base is likely to grow
to four billion ringgit (US$1.1 billion) by then, he said.

He said Tijari's Islamic loans growth was targeted at between
10 and 15 percent a year amid growing demand due to interest rate
volatility in the global market.

"There is a huge demand right now because of the interest rate
scenario. Islamic banking gives certainty to future financial
planning for customers," he added.

Islamic banking, first introduced in Malaysia in 1983,
combines Islamic laws which forbid interest payments, with modern
banking principles.