Bank Islam Malaysia Bhd is eyeing opportunities for expansion in Indonesia and Bangladesh, which have sizeable Muslim populations and adequate Islamic banking regulatory policy and supporting infrastructure in place to facilitate Shariah-based financing and banking operations. Managing director Datuk Seri Zukri Samat said as mergers and acquisitions are on Bank Islam's agenda for inorganic growth and corporate expansion, the bank is on the lookout for suitable candidates but has not initiated any discussions on mergers or acquisitions.

While the two countries have been identified as "very interesting countries" that fit into the bank's expansion plan, Zukri, however, said such plans would have to take into consideration the current global economic situation and its effect in this region.

"Some economists believe that there could be a double dip with Europe going into recession and growth in the Asian region decelerating.” Zukri added.

"We are monitoring this situation and because of that, we are adopting a cautious approach towards our agenda, so we are very cautious and we don't want to be overly aggressive. Nonetheless, there is always an opportunity in a crisis -- acquisition may occur when a shareholder wants to exit -- and as long as there are synergies and the pricing is right, the opportunity arises," he said.

Zukri said both countries have sound economies which offer opportunities for Islamic banking and the presence of many Indonesian and Bangladesh migrant workers here also allows the bank to tap the lucrative remittance business. Asked to comment on the Indonesian market, Zukri said the Central Bank of Indonesia has yet to make an announcement on foreign ownership in the country's financial institutions. Currently, the regulation allows foreigners to own more than 90 per cent, however this may change.

"Indonesia has a population of more than 240 million, the majority of whom are Muslims. However, the penetration of Islamic banking assets is only three per cent of the total banking asset. We see an opportunity here," he told Bernama in an interview.

Bangladesh, apart from its Muslim population of 140 million, has also put in place an Islamic banking infrastructure for Bank Islam to start its operations should there be a merger or acquisition. It is a market that is similar to Indonesia, he said.

He said Bank Islam's overseas expansion model would involve acquiring Islamic banks rather than conventional banks. This is to avoid operational issues involving non-Shariah income from the businesses of the conventional banks during the transition period.

Zukri said Bank Islam prefers to work with a local party, who would be familiar with the local market and the regulatory environment, adding a controlling stake is not a requirement but preferred, provided it is not costly to the bank.

On the bank's acquisition of a 20 per cent stake in Sri Lanka-based Amana Bank Ltd, he said: "It's a good decision to go to Sri Lanka. We are upbeat about the potential and we expect this investment to break even after two years."

Source: The Independent/ Bangladesh/ 8th Dec 2011