The Asian subsidiary of Kuwait's top Islamic bank is considering regional acquisitions and business alliances to boost its size as it eyes huge untapped markets such as China and Japan.
Kuwait Finance House (Malaysia) may buy into regional Islamic lenders in its quest to fill a gap in the industry for large banks, Managing Director K Salman Younis said, adding that the bank had not yet identified any specific targets.
"The Islamic finance industry is fragmented; there are too many small players in the market," Younis said in an interview. "What is missing in the banking environment in Malaysia is the presence of a mega Islamic bank. If you have the size, you will be able to do all kinds of transactions."
The bank, a wholly-owned arm of Kuwait Finance House, started operations in Malaysia in 2005.
It recently received a $300 million (Dh1.1 billion) capital boost from its parent, bringing its paid-up capital to $500m.
Islamic banking has become increasingly mainstream, funding Japanese car factories and helping plug shortfalls in government finances worldwide, but the industry lacks large, well capitalised banks, especially outside the Middle East.
Last month, the General Council of Islamic Banks and Financial Institutions said the world's largest Shariah lender, with paid-up capital of $11bn, would be launched by June.
In 2007, Kuwait Finance House Malaysia bid for RHB, Malaysia's No4 lender, but lost out to the state pension fund.
"We would want enough equity in a bank which gives us management control," Younis said. "Outside of Malaysia, if we were to go and acquire, we would want a bank with at least a 70-100 branch network."
In Asia, Kuwait Finance Malaysia sees Islamic banking opportunities in Hong Kong, Thailand, India and Indonesia. It is also still interested in China, despite regulatory changes which had scuttled its earlier bid to launch an Islamic bond there.
Kuwait Finance House had earlier invested $275m in a real estate project in China.
Younis said the company was also in talks with institutions in Japan "on having some strategic alliance to do some deals together inside and outside of Japan."
In Australia, the bank is working with several lenders to develop an Islamic interbank market in the country.
"That is the objective: to activate the Islamic banking market even before we open a full bank there," Younis said.
The global economic downturn has hit Kuwait Finance Malaysia's business, although certain industries such as food, healthcare and oil and gas remain resilient, he said, adding that there were no plans to cut jobs in Malaysia.
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