Malaysia's Bank Islam eyes larger domestic share

KUALA LUMPUR - Bank Islam Malaysia Bhd (BIMB.KL) will focus on boosting its domestic customer base in the next two years, while keeping an eye on possible mergers and acquisitions, a senior executive said on Wednesday.

Bank Islam, Malaysia's oldest Islamic lender, was also eyeing business opportunities in China, Indonesia, Thailand and Vietnam, Managing Director Zukri Samat told reporters after a signing ceremony with a third-party for will writing services.

'In the next one to two years, we are looking to grow domestically, either through organic growth or if there is opportunity for merger, we will certainly look at it,' he said.

Bank Islam wants to increase its fee-based income to at least 10 percent of its bottomline in the financial year starting July, with help from its wealth management arm which will be launched by September this year, Zukri said.

'One of the strategies of the bank is to increase fee-based income, and wealth management is one of the areas that we will be pushing forward,' Zukri said.

Fee-based income, which includes investment banking, currently comprises less than 5-6 percent of Bank Islam's profits.

The lender currently has a fifth of Malaysia's Islamic banking market in terms of deposits and planned to grow its market share by 20 percent annually, Zukri said.

'There's a lot more that can be done in this market.'

Bank Islam, which has 1.5 million retail customers in Malaysia, would add 25 branches to its existing 90 branches in Malaysia over the next three years, he said.

Mostly-Muslim Malaysia, which has a population of about 26 million, has the world's largest Islamic bond market with a 60 percent share of the pie -- worth some $100 billion in outstanding debt.

While the bank was keen on overseas expansion, Zukri said the stringent rules for Islamic banking would be a hurdle.

'First and foremost, you must have a legal system. For example, you must have an Islamic banking act in China, and even if you have the act, you must have a player there,' he said.

Islamic finance bans interest and generally avoid investments in alcohol, gambling and other activities barred for Muslims. Islamic bonds, or sukuk, are typically based on physical assets that pay a rent or dividend to bondholders.

'I must have an outlet to put money in sharia-compliant products,' Zukri said. ($1=3.221 Malaysian Ringgit.