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Nikkei Markets

Competition For Deposits Likely To Intensify Among Malaysia's Smaller Islamic Banks-Moody's

By Kuala Lumpur Newsroom
Nikkei Markets
KUALA LUMPUR (Jul 11) -- The proposed merger between Malaysia Building Society Bhd and Asian Finance Bhd is likely to intensify competition for deposits among smaller Islamic banks, Moody's Investors Service said today.

"MBSB's credit profile would be enhanced because the acquisition of AFB and its Islamic banking license would give MBSB access to cheaper funding and broaden its revenue stream," Simon Chen, a Moody's vice president and senior analyst said. "The entry of MBSB into the current and savings account deposit market would further intensify competition for low-cost deposits among institutions that are not part of big integrated banking groups."

Even though competition among Islamic banks would rise, their profitability remains robust, Moody's said in a report titled "Islamic Banking Malaysia: Potential merger is credit positive for MBSB but will raise funding pressure on sector." The deal would likely lead to the larger of the two financial institutions, MBSB, emerging as the surviving entity, it added.

Broader consolidation in the Islamic banking space is unlikely for now because the favourable operating environment will allow standalone Islamic institutions to fare well on their own, Moody's said.

"The growth potential for Islamic banks in Malaysia is strong, given the availability of well-established infrastructure and growing consumer awareness of Shariah-compliant products," the agency said. Stable macroeconomic environment is supportive of credit demand for all banks in the country, it added.
- By Kuala Lumpur Newsroom; kleditorial@NikkeiNewsRise.com; +60320267363
- Edited by Mrigank Dhaniwala
- Send Feedback to feedback@nikkeinewsrise.com
- Copyright (c) 2017 Nikkei NewsRise Asia Pte Ltd.

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