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Malaysian Islamic banking to heat up as smaller lenders merge

Tie-up between non-bank MBSB and AFB would create the country's No. 2 Islamic bank

A Malaysia Building Society branch in Kuala Lumpur

KUALA LUMPUR -- Malaysia Building Society (MBSB) is a step closer to becoming a full-fledged Islamic bank after the proposed acquisition of Asian Finance Bank.

The move would allow MBSB a cheaper funding source and offer more fee-based products by inheriting AFB's banking license. The entry of MBSB as the second-largest stand-alone Islamic bank by assets could spur competition for low-cost deposits in an already matured market but would probably not spark broader sector consolidation unless bigger banking groups in the country make their moves, according to analysts.

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