Dubai’s firm buys stake in Brunei bank

Bank Islam Brunei Darussalam (BIBD) has sold an undisclosed minority stake to Dubai-based Islamic investment firm Fajr Capital as the Asian bank bids to extend its international reach.

Javed Ahmad, managing director at BIBD, said the investment makes Fajr Capital the third-largest investor in the bank.

Brunei's government has a 45 per cent stake in the bank, while the Sultan of Brunei's charitable foundation owns a 25 per cent stake.

Ahmad declined to comment on the exact size of the deal or its value, but when talk surfaced last June that a stake sale might be in the offing, The Malaysian Reserve newspaper said the deal was estimated to be worth about $200 million.

It is the first stake purchase by Fajr Capital, which was launched in 2009, and has previous ties with BIBD.

"The key strategic objective is to bring in international best practices to make the institution far more dynamic, domestically and internationally," Ahmad said in an interview.

Brunei is increasingly becoming a market of interest for Islamic finance providers, with Islamic financial services making up 40 per cent of the Brunei market.

Ahmad said he expected Brunei's Islamic market share to reach around 50 per cent within the next five years.

BIBD, which is the largest financial institution in the country, is hoping to capitalise on that expected growth by becoming more competitive among the regional and international players already operating within the country.

"Brunei is a competitive market with nine financial institutions in a small economy" he said. "The majority are international powerhouses and regional players. We want to make sure that we can compete effectively."

According to a joint statement, Fajr Capital will be a minority investor with "management responsibilities" at the bank to bolster its current Islamic service offerings.

Ahmad said BIBD was eyeing international expansion opportunities either through partnership or acquisitions as part of its growth strategy.

"International is an area where we have aspirations," he said. "We have a very high capital base, and our adequacy ratio is nearly 30 per cent. We have the capacity to see transactions and do them."

BIBD has a capital base of $650 million and a 25 per cent market share in the country's financial sector.

Through its deal with Fajr, Ahmad said the bank was looking to capitalise on opportunities for investment from the Middle East.

"We do want to play a role in making sure that the Middle East investor has accessibility to high-growth areas in the Far East," he said, adding that Brunei was strategically located near major eastern markets such as Hong Kong and Bangkok.

Fajr Capital was launched with an initial funding of $600 million from shareholders including Malaysian sovereign wealth fund Khazanah Nasional, the Brunei Investment Agency and the UAE’s Abu Dhabi Investment Council.

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