Bank Islam's gateway to Europe (September 18, 2007)

Tie-up paves way for Bank Islam to offer Islamic services in Europe
KUALA LUMPUR: Bank Islam Malaysia Bhd will gain entry into Europe's fast-growing Islamic financial services industry through its newly formed partnership with Britain-based European Islamic Investment Bank Plc (EIIB).
The tie-up would give Bank Islam an immediate presence in Britain and Europe without the need to set up physical infrastructure while providing EIIB with a platform to expand its business to Asia, managing director Datuk Zukri Samat said.
Bank Islam, he said, would be able to boost its fee-based income by drawing on EIIB's expertise and capabilities in corporate finance and advisory services.
“Bank Islam and EIIB will jointly originate, structure and distribute a range of innovative Islamic financial products, particularly in fee income generating areas such as capital market, treasury and wealth/asset management,” he said after the signing of a strategic collaboration accord with EIIB yesterday.
Zukri said as a start, Bank Islam and EIIB would jointly bid to be lead arranger for a US$300mil sukuk to be issued by a Malaysian company.

The outcome of the bid would be known in a month and if successful, both parties would market the sukuk primarily to European foreign investors, he said.
Meanwhile, Bank Islam's medium-term plans would be to develop its human capital by tapping into EIIB's skills in investment banking.
“We will initiate a staff exchange and secondment programme to leverage on each other's expertise,” Zukri said, adding that the initiatives would enable Bank Islam to take advantage of Government incentives to accelerate the development of Malaysia as an international Islamic financial hub.
On the bank's progress in addressing legacy non-performing finances (NPFs), or non-performing loans (NPLs), he said Bank Islam had identified an interested party and was looking to sell more than RM2bil of gross NPFs to it.
“This is our gross NPL, which we have identified to carve out. Our aim is to bring our NPF level below the industry average. Hopefully, it will be finalised by the year-end,” he said, adding that the party was currently carrying out due diligence.
As at June 30, Bank Islam's gross and net NPFs was RM2.15bil and RM943mil respectively. The “carve-out plan” is part of the bank's recapitalisation and restructuring scheme to strengthen its balance sheet.
EIIB managing director John Weguelin said that Malaysia was an attractive gateway to Asia due to its financial, legal, regulatory and syariah infrastructure.
“EIIB gains a footprint in Malaysia with access to the infrastructure to originate and distribute in this market,” he said.
Weguelin said both parties would work together on a non-exclusive basis to increase international awareness of Islamic finance. “This will include the development and distribution of Islamic financial products and the sharing of technical expertise and knowledge through joint ventures.”
Headquartered in London with a representative office in Bahrain, EIIB is the first independent syariah-compliant Islamic investment bank to be authorised and regulated by Britain's Financial Services Authority.
The firm started trading in April last year and reported a pre-tax profit of £1.9mil on revenue of £7.8mil for the year ended Dec 31, 2006.
EIIB is listed on the Alternative Investment Market of the London Stock Exchange.

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