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Standard Chartered, which became the first international firm to offer Islamic banking products in Malaysia in 1992, is considering selling its Malaysian unit or winding it down.
Sunday 10, February 2019
(Bloomberg) --Standard Chartered is considering options for its Islamic banking unit in Malaysia, including a potential sale, people with knowledge of the matter said.
The London-based lender has been gauging interest from potential buyers for the business, known as Standard Chartered Saadiq, according to the people. It is weighing an exit from Malaysia’s Islamic banking market as fierce competition from local rivals has limited its growth prospects, the people said, asking not to be identified because the information is private.
“This story is categorically untrue,” Standard Chartered said in an emailed statement.
It isn’t running a formal process, and the bank hasn’t appointed advisers, the person said. Standard Chartered Saadiq had MYR 670 million ($165 million) of net assets at the end of September, according to its latest financial statements.
Deliberations are at an early stage, and there is no certainty they will result in a transaction, the people said.
Standard Chartered follows other foreign lenders, like Saudi Arabia’s Al Rajhi Bank and Kuwait Finance House, that have been considering exiting their Islamic banking operations in Malaysia. Last year, a consortium including Qatar Islamic Bank completed the sale of its holdings in a local Shari'ah-compliant lender, Asian Finance Bank, to Malaysia Building Society.
Malaysia, which pioneered Islamic finance in the 1980s, aims to have 40 per cent of its banking assets complying with the religion’s ban on interest by 2020. that is up from an estimated 30 per cent at the end of last year.
In May, Standard Chartered identified Malaysia as one of the large “turnaround” markets where it wants to improve returns from its retail banking operations. The firm told investors it will shift its approach, accelerating a pivot toward wealth management offerings and Priority Banking services for affluent customers, as well as focusing on clients’ international needs.
Standard Chartered Saadiq’s net income fell 27 per cent in 2017 to MYR 23.5 million, roughly a third of its profit five years earlier. Profit after tax for the first nine months of last year more than doubled to MYR 45.9 million.