KUALA LUMPUR. With promising growth in recent years, Malaysian lender Malayan Banking Berhad (Maybank) expects the bank’s Indonesian sharia banking units will become some of the top-five biggest sharia lenders in Southeast Asia’s largest economy this year, despite a slowdown in the industry.
Maybank chairman Tan Sri Megat Zaharuddin said the Malaysian lender provided Islamic banking services in Indonesia through sharia units (UUS) of Bank International Indonesia (BII) and Maybank Syariah Indonesia, both of which had given positive results last year.
Zaharuddin said both of Maybank’s sharia banking portfolios in Indonesia had contributed to the group’s Islamic banking business, which recorded a 16.4 percent year-on-year (yoy) increase of total income to RM 3.27 billion (US$904.2 million) last year, stating that “international markets have benefited from higher contributions to the group”.
“By the end of this year, we believe we will enter the list of top five Islamic banks and sharia units in Indonesia,” Zaharuddin said on Thursday.
Currently, PermataBank’s sharia unit, Bank Rakyat Indonesia (BRI) Syariah, Bank Negara Indonesia (BNI) Syariah, Bank Muamalat and Bank Syariah Mandiri (BSM) are ranked in the country’s top five sharia banks, with total assets ranging from above Rp 15 trillion ($1.15 billion) to over Rp 60 trillion last year.
Maybank Syariah Indonesia suffered a slight decrease in its total assets to Rp 2.09 trillion between January and September last year, from Rp 2.1 trillion in the same period of 2013, according to its financial report.
On the other hand, BII’s financial report shows that its sharia unit saw an 80 percent rise to Rp 7.17 trillion in its total assets between January and September last year, from Rp 3.99 trillion in the same period of 2013.
The significant rise in assets was the main contribution to the sharia unit’s financing, which grew 60 percent to Rp 5.67 trillion as of 2014, from Rp 3.44 trillion a year earlier.
Meanwhile, its third-party funding (DPK) stood at Rp 4.15 trillion as of last year, an increase of 37 percent from Rp 3.04 trillion in 2013.
According to BII president director Taswin Zakaria, Maybank’s Islamic banking strategy, coined as “Sharia First” and adopted by BII since 2014, has helped the bank’s sharia unit performance, which showed “a striking difference to the lower growth of Indonesia’s Islamic banking industry due to the decreasing quality of portfolios in bigger players”.
Taswin said the strategy placed sharia products as alternative solutions across all business segments in BII, citing that “the sharia unit has recorded strong growth in Islamic mortgages and is expecting to push automotive as well as corporate financing.”
In addition, Taswin said the strategy had boosted the total share of financing contributed by BII’s sharia unit, which reached 5.3 percent of the bank’s consolidated outstanding loans of Rp 106.3 trillion last year, exceeding its target of 5 percent. (Grace D. Amianti)
“We have set a slightly aggressive target this year as we are trying to enter Indonesia’s top five Islamic banks list. To do that, we expect the sharia unit’s contribution will reach around 7 to 8 percent of BII’s total loans in 2014,” he said.
When asked whether the parent company had a plan to merge BII’s sharia unit and Maybank Syariah Indonesia, Taswin said discussions with the Financial Services Authority (OJK) were ongoing.
“We’re still reviewing the best consolidation model that is efficient in terms of cost and taxation, if our sharia unit meets the due date of sharia banks’ spin-off in 2023. The point is, we expect that both our sharia products can still be sold on BII’s networks in the future,” he said.
In 2010, Maybank Syariah Indonesia — previously Maybank Indocorp — planned to merge with BII’s sharia unit to increase efficiency, as both were controlled by Maybank Group, even though the parent company had yet to decide on the proposal.
The plan remains because all the sharia units of Indonesian banks should transform into stand-alone legal entities (PT) — or “spin-offs” — by 2023.
After the spin-off of BII’s sharia unit, Maybank Group may face Indonesia’s single-presence policy that requires it to either merge the two banks it owns or form a holding company for its subsidiaries.
Last year, Maybank Islamic retained its position as the world’s third largest Islamic bank, with assets of $38.7 billion and a 29.3 percent market share of Islamic assets in Malaysia.
It also ranks third in the 2014 Global Sukuk League Table with a market share of 38.7 percent from 98 issues totaling $4.59 billion.
