Malaysia's RHB Islamic says screening change may boost business

KUALA LUMPUR, March 24 Mon Mar 24, 2014 6:42am EDT

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KUALA LUMPUR, March 24 (Reuters) - RHB Islamic, the sharia arm of RHB Capital, Malaysia's fourth biggest lender, says its corporate business may benefit as firms look to maintain sharia-compliance for their shares on the local bourse.

Last November the Securities Commission revised the list of sharia-compliant securities approved by its Shariah Advisory Council, using a new screening method which includes financial ratios.

The revised list features 653 sharia-compliant securities, or 71 percent of those on Bursa Malaysia; the regulator added 16 new ones and removed 158 that were on the previous list issued in May 2013. The list is issued twice-yearly.

Firms looking to convert a portion of their conventional debt to sharia-compliant debt, in order to meet the new standards and restore or maintain their sharia status, have sought help from Islamic banks.

"As usual, the market always reacts to guidelines or instructions," Nora Tahir, head of Islamic finance at RHB Islamic, told Reuters.

"As they try to switch, banks will try to take each other's customers. We must be able to retain these people on our books."

Government-linked firms, such as property builder Malaysian Resources Corp, may be among those acting to preserve their sharia status, to ensure institutional investors such as the Employees Provident Fund and Lembaga Tabung Haji keep access to their shares.

The most recent list of sharia-compliant stocks saw the exclusion of firms including AirAsia, Bumi Armada and SP Setia.

GROWTH

The RHB group hopes to double its sharia financing assets to 30 percent of the total in 2017 from 15 percent today. During the next few years it plans to adjust the organisation of its Islamic operations, which are still run across separate commercial and investment divisions.

"We want to enlarge the kind of offering we do for the retail customer - if it's fragmented like this we cannot offer a lot of products. As a banking group we have the resources. We need to get together to coordinate our efforts," said Nora.

RHB Islamic plans soon to issue a 1 billion ringgit ($303 million) Basel III-compliant sukuk, becoming only the second sharia bank in the region to do so. (Reporting by Al-Zaquan Amer Hamzah; Editing by Andrew Torchia)

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