UPDATE 1-Malaysia's Bank Islam, MEast buyers eye Bank Muamalat
* Bank Islam, Mideast investors eye Muamalat rights issue
* Muamalat to hold commissioners meeting next week - source (Adds quotes, background)
By Janeman Latul
JAKARTA, May 6 (Reuters) - Malaysia's Bank Islam and Middle Eastern investors are keen to buy a stake in PT Bank Muamalat, the Indonesian bank said on Thursday, as they look to tap Indonesia's vast but untested Islamic banking market.
The potential investors want to take a stake in Bank Muamalat, Indonesia's biggest sharia bank, via a planned 1 trillion rupiah ($110 million) rights issue in June, the bank's finance director said.
"Bank Islam is one of the interested investors to acquire stakes in our banks through right issues but we also have several Middle Eastern investors aside from them," Andi Buchari, Muamalat's finance director, told Reuters.
"The total value of the rights issue is around 1 trillion rupiah but the exact value has not (been) decided yet. However, we're surely going to conduct the plan in June."
Bank Islam had no immediate comment.
A source familiar with the plan said Bank Muamalat would hold "a board of commissioners' meeting next week, which will talk about the details on rights issue as well as any possible deals with interested overseas investors, including Bank Islam."
Bank Muamalat had said in February it wanted to raise 1 trillion rupiah from a share sale to double its capital base and allow it to attract new business. [ID:nSGE61A03Q]
Indonesia, which has the world's largest Muslim population, is seen as the next big market for the $1 trillion Islamic finance industry as growth matures in its traditional base of the Middle East and Malaysia.
Gulf investors are also eyeing Asia's Islamic finance market to diversify their sources of earnings as the region tries to recover from the Dubai debt crisis.
Bahraini Islamic lender Al Baraka BARKA.BH expects to buy a stake in Malaysia's Bank Muamalat by year-end [ID:nLDE6430J5].
Bahrain's Unicorn Investment Bank has said it is considering purchasing Dubai Group's stake in Malaysia's Bank Islam [ID:nLDE61E28A].
The Indonesian government has tried to kickstart its Islamic finance industry by holding regular sukuk auctions and recently amended laws to remove double taxation on Islamic financial transactions. [ID:nJAK63460]
Banks such as top sukuk arranger CIMB (CIMB.KL) and insurers like Prudential (PRU.L) and Malaysia's Takaful Ikhlas are among those interested in expanding in Indonesia.
But practitioners warn that a lack of clear industry standards -- especially laws governing corporate sukuk issuance -- are holding investors back.
Bank Islam is Malaysia's No. 2 sharia bank and it is 51 percent owned by financial group BIMB Holdings (BIMB.KL). Dubai Financial Group has a 40 percent share and the Malaysian pilgrim's fund owns 9 percent.
Indonesia's banking sector, comprising mainly small to mid-sized banks, has been increasingly attractive to foreign investors while domestic consolidation has been relatively slow.
Deals in the pipeline include the acquisition of PT Bank Agroniaga (AGRO.JK) by the country's second-largest lender, PT Bank Rakyat Indonesia (BBRI.JK).
(Click on [ID:nISLAMIC] for more Islamic finance stories and ISLAMIC for a speed guide) (Reporting by Janeman Latul, writing by Liau Y-Sing; Editing by Sara Webb)
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