Malaysia's Bank Islam plans 1 bln ringgit sukuk for growth, acquisition

KUALA LUMPUR, June 2 Mon Jun 2, 2014 6:43am EDT

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KUALA LUMPUR, June 2 (Reuters) - Malaysia's Bank Islam plans to raise 1 billion ringgit ($311.24 million) by selling Islamic bonds to fund organic growth as well as a potential acquisition in Indonesia, two people involved in the sale told Reuters on Monday.

The country's oldest and largest Islamic-only bank is wholly owned by BIMB Holdings Bhd, which last month said competition in the Islamic banking sector has narrowed profit margins and brought about the need to raise funds for growth.

Bank Islam aims to maintain the annual growth rate in the amount of money it lends at 20 to 25 percent by selling in July 300 million ringgit worth of Murabahain under a 30-year sukuk programme, one of the people said.

The sale of the Basel-III compliant Tier 2 sukuk is awaiting approval from the central bank by next week ahead of the final green light from the Securities Commission, said the person who declined to be identified as the matter was not yet public.

Bank Islam then plans to raise another 300 million ringgit in 2016 for organic growth, that person said.

In addition, the bank aims to raise 400 million ringgit in 2015 to buy a business in neighbouring Indonesia, said the second person without identifying the target.

The bank is waiting for the outcome of Indonesia's July presidential election before finalising acquisition plans, the person said.

Rivals Malayan Banking Bhd (Maybank) and CIMB Group Holdings Bhd earn up to a third of their income in Indonesia thanks to rapid corporate loan growth there as well as increased custom from a burgeoning middle class.

Bank Islam earns all of its income at home, offering over 70 percent of loans to retail consumers. The bank lent out a record 683 million ringgit last year, 21.7 percent more than the year prior, boosting net income by 5 percent to 1.5 billion ringgit.

In Islamic deposits, the bank put its local market share at 16 percent in 2013, behind Maybank and ahead of CIMB, Public Bank Bhd and AmIslamic Bank Bhd.

Last month, parent BIMB reported a 67 percent rise in January-March net profit of 123.5 million ringgit, largely thanks to Bank Islam's earnings.

BIMB completed the purchase this year of the 49 percent of Bank Islam it did not already own from pilgrimage fund Tabung Haji and the Dubai Group for $884 million.

($1 = 3.2130 Malaysian Ringgit) (Reporting by Al-Zaquan Amer Hamzah; Editing by Christopher Cushing)

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