Merger talks between MIDF and Al Rajhi still ongoing

By SHAHEERA AZNAM SHAH / Pic By ISMAIL CHE RUS

Merger talks between Al Rajhi Banking and Investment Corp (M) Bhd and Malaysian Industrial Development Finance Bhd (MIDF) are on-going, said MIDF group MD Datuk Charon Wardini Mokhzani (picture).

“It is coming along…the central bank has given us the approval to negotiate and we are doing that.

“We are looking for due diligence and it takes time. We have to study both of our accounts,” he said at the MIDF Green Conference 2019 in Kuala Lumpur yesterday.

Bank Negara Malaysia in January approved the parties to negotiate a possible merger, which has to be concluded within three months.

If a merger is agreed, the merged financial institution would have a combined net asset of up to RM2.5 billion — thus making Al Rajhi the second foreign-backed Islamic bank to merge its regional operation with a Malaysian financial institution.

The proposed merger could also provide a wider scope of growth for business and shareholders.

Analysts said the proposed merger suggests that Middle Eastern-owned banks in the country are struggling with asset quality and growth opportunities due to intense competition from larger local rivals and central bank regulations.

The Malaysian Reserve reported an analyst as saying that — as of September 2018 — MIDF’s shareholders’ fund stood at RM1.7 billion.

Its shareholder Permodalan Nasional Bhd could make a gain of about RM1 billion from the sale of its stake in MIDF in the proposed merger, depending on the structure of the merger.

Al Rajhi had RM7.78 billion in assets and made a net profit of RM5.8 million for its third quarter ended September 2018.

Malaysia — which started its journey in Islamic finance in the 1980s — aims to make 40% of its banking assets Shariah- compliant by 2020.

Shariah-compliant banking assets stood at around 30% of the total industry as at end-2017.