PNB mulls turning 20% of Maybank shares into Islamic equity

Maybank will not list its Islamic bank due to operational challenges


Permodalan Nasional Bhd (PNB) plans to carve out 20% of the shares in Malayan Banking Bhd (Maybank) and convert them into Islamic shares, creating Shariah-compliant assets worth over RM20 billion.

PNB which owns a 48% stake in the country’s largest bank based on assets, intends to distribute the profit from Maybank’s Shariah-compliant businesses for the proposed i-Maybank shares.

The move to separate about 2.1 billion from the bank’s 10.5 billion total outstanding shares, if successful, would end any possible listing of the bank’s Islamic banking business.

PNB chairman Tan Sri Abdul Wahid Omar said PNB is currently working on the proposal to convert the shares into i-Maybank.

“PNB has come up with an idea to come up with a ring fencing mechanism, whereby the profits coming from Maybank’s Shariah-compliant business activities are used to pay the dividends of the Islamic shares,” he told a media luncheon yesterday.

Abdul Wahid had previously said there was a need to list more Islamic financial institutions on the local bourse, leading to speculation that Maybank may list its Islamic banking and takaful business.

From the present 676 Shariah-compliant securities listed on Bursa

Malaysia, only BIMB Holdings Bhd and Syarikat Takaful Malaysia Bhd are from the financial sector.

Maybank recorded a net profit of RM6.74 billion last year with a revenue of RM44.65 billion. Maybank Islamic Bank (IB) Bhd is Malaysia’s largest Shariah-compliant lender with assets worth around RM182.6 billion as at end of last year.

Maybank’s Islamic banking operation contributes RM1.28 billion to the group’s profit, according to the bank’s 2016 financial statement.

Maybank’s share price closed unchanged at RM9.69 yesterday, valuing the lender at RM102.3 billion in market capitalisation.

Abdul Wahid said PNB is working on the new mechanism for the i-Maybank shares, but has not set any timeline.

“It is still work in progress. Please give us some time, because when it comes to development of new Shariah- compliant instruments it will have to go through a vigorous process, thus it will take sometime,” he said.

Abdul Wahid said about 25% of Maybank’s current profit is derived from Shariah-compliant activities and the proposal to create i-Maybank shares should not be difficult.

“We think there is logic and basis to it. If it is successful, the others like CIMB Group Holdings Bhd, RHB Bank Bhd and Bursa Malaysia may replicate the model,” he said.

He also dismissed the possibility of listing Maybank’s Islamic banking division due to operational challenges.

“Maybank had adopted an Islamic first strategy where Maybank IB is embedded and part of the total group. Thus, it is not an option for Maybank IB to be carved out and listed because operational wise, they are all embedded together in a group,” he said.

Abdul Wahid said the i-Maybank shares proposal has been discussed with various Shariah council members.

“They were generally supportive but expressed a few issues that we have to deal with and rectify before taking it to the next level,” he said.

i-Maybank shares with a market value of RM20 billion will be the biggest for Islamic lender, surpassing BIMB’s RM7.2 billion market capitalisation.