Having topped international league tables for arranging Sukuk due to its domination of the Malaysian Islamic debt market, CIMB Islamic is now looking to expand its activities across the ASEAN region.
“Indonesia and Singapore are our main focus for this year. ASEAN is huge; so if we don’t get it right for Indonesia and say, Singapore, there’s no point going to other markets,” said Badlisyah Abdul Ghani, the executive director and CEO of CIMB Islamic, in an interview with Islamic Finance news.
The bank, which is already on its way to locking in its best year yet for Sukuk deals thanks to its role in arranging the landmark RM30.6 billion (US$10.12 billion) Islamic bonds for Malaysia’s Project Lebuhraya Usahasama (PLUS), is also pursuing opportunities in Thailand as part of its Asean proposition.
Returning to Indonesia
According to Badlisyah Singapore, Thailand and Indonesia make up CIMB Islamic’s main markets outside its home market of Malaysia. It is already playing a role in state-owned Islamic Bank of Thailand’s planned THB5 billion (US$162.55 million) debut Sukuk, and continues to look for more Sukuk deals in Singapore after having arranged all but one of the Islamic debt deals in the island republic so far.
“Indonesia is something we are re-looking [at] this year. We have kept ourselves out of the Sukuk market purposely in the past, because we wanted to be more comfortable with the market; and we are now comfortable enough to look into it,” said Badlisyah, who added that the bank has familiarized itself with the Sukuk documentation process and tax issues in Indonesia.
Badlisyah added that the bank is eyeing Sukuk transactions to begin with; given the country’s established Islamic bond market. “It’s just a matter of going in and participating in it where the opportunity arises. As we build that up, other value propositions can be added; in terms of Islamic IPOs or warrants, subject to various approvals for those products,” he explained.
On Indonesia’s regulatory framework Badlisyah, who declined to comment on the authorities’ recent decision not to limit foreign ownership of local banks, said that the existing rules for Islamic finance in the country have hitherto sufficed to provide CIMB Islamic with “a little bit of comfort” to run its business; adding that the bank continues to be keen to work with regulators to improve regulations to facilitate transactions.
Exploring Singapore prospects
Singapore comprises another market CIMB Islamic is hoping to further tap this year; having already established itself in the wholesale Shariah compliant banking business there. “We have put in place the core banking system that would be able to facilitate both conventional and Islamic (banking) under CIMB Bank Singapore; and with that system we now have the right platform for the business,” said Badlisyah.
He further noted that the bank has focused on small and medium-sized enterprise (SME) banking; and has completed several financings for the market. “That was our first foray into consumer banking in Singapore; and [we] hope to follow suit with some retail products,” he said.
The bank will also explore prospects for larger corporate deals in Singapore, although Badlisyah noted that this represents a tougher market segment “because they are spoilt for choice”. However, he added that the bank continues to chase interesting opportunities in the city state, although it has not yet secured any specific mandates.
Nonetheless, he remains positive on the outlook for Islamic finance in Singapore, where the industry has been slow to pick up steam, noting that Islamic banking presents just another value proposition amid the high demand for banking services.
Bread and butter
Despite its ASEAN ambitions, Badlisyah acknowledges that Malaysia is the bread and butter for CIMB Islamic, and will remain so for quite some time. As such, this year will be very much business as usual for the bank, even after taking into account its landmark deals. According to data from Dealogic, the CIMB Group has managed the largest amount of Sukuk in the past 12 months, at US$6.95 billion.
Although he could not disclose CIMB Islamic’s Islamic debt capital market deal pipeline for this year, Badlisyah acknowledged that it is “reasonably sized.” Apart from the PLUS Sukuk, the bank is seen as a frontrunner to arrange the Malaysian government’s Sukuk to fund its mass rapid transit project; while CIMB Investment Bank has also been appointed sole principal advisor and sole lead arranger for communications firm Maxis’ planned RM2.45 billion (US$809.66 million) Sukuk.
Of its local capital market deals, the bank is also focusing on Islamic IPO activities this year, in the belief that proper development of the Islamic IPO market will help the sales command better premiums than conventional share sales.
“It should be our best year yet in terms of number and quantum of deals, but then again it is very difficult to say exactly how much (the pipeline will amount to) because the exact issuance size of quite a number of deals we are working on is still being determined, as they involve infrastructure development. So the quantum cannot be determined until the project cost is identified,” he explained. — EB