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Bank Muamalat seeks new investor to help business
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CD A motorcyclist passes a Bank Muamalat office in Jakarta. (Kontan/Cheppy A. Muchlis)
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ecause of tight capital the first sharia lender in Indonesia, Bank Muamalat, is seeking a new investor to assist with its lending expansion.
A number of potential suitors have lined up domestically and from abroad, including state-owned lender Bank Rakyat Indonesia (BRI), according to The Jakarta Post’s sources who wished to remain anonymous because of the sensitivity of the issue.
One source, who works at the State-Owned Enterprises (SOE) Ministry, which oversees state firms such as BRI, said the largest micro loan provider was attracted to Muamalat after it delved into the latest reviews of the sharia lender prepared by a global consultancy firm.
“I have not read the report in detail, but the OJK [the Financial Services Authority, which oversees the banking industry] has contacted me,” he said recently.
Kontan reported that BRI finance director Haru Koesmahargyo declined to comment on the matter and he did not answer phone calls or reply to text messages sent by The Jakarta Post.
Contacted separately, Muamalat retail banking director Purnomo B. Soetadi confirmed that several local and overseas investors had conveyed their interest in becoming shareholders, but he declined to confirm whether BRI was one of them.
He said it was natural for Muamalat, being a non-listed public company, to have investors attracted to join as shareholders and their interest shows that it has positive business prospects.
“However, the matter is in the domain of our board of commissioners and controlling shareholders, while the board of directors is tasked with managing the bank, so that it will provide optimum results for all stakeholders,” he said.
According to Muamalat’s June financial report, the Saudi Arabia-based Islamic Development Bank (IDB) controlled the largest number of shares with 32.74 percent, followed by the Kuwaiti Islamic lender Boubyan Bank with 22 percent.
Meanwhile, Saudi investment company Atwill Holdings Ltd. had 17.91 percent and the National Bank of Kuwait owned 8.45 percent. The remaining 18.9 percent of shares were owned by several other institutions and individuals.
Purnomo argued that all banks, including Muamalat, would need more capital to support their growing operations, as required by the banking regulator, insisting that the Islamic lender was not having difficulties in its financial performance.
However, data from the bank clearly show that Muamalat has been suffering from growing non-performing financing (NPF) that has been chipping into its profitability and capital.
Muamalat’s gross NPF stood at 7.2 percent in the first half, rising from 4.93 percent a year ago. Its net NPF grew as well to 4.6 percent from 3.8 percent in the period of January to June 2015. The OJK sets the net NPF limit at 5 percent.
As result, the lender’s profitability dropped more than 70 percent year-on-year (yoy) to Rp 32.92 billion (US$2.51 million) and its capital adequacy ratio (CAR) declined to 12.78 percent in the first half from 13.6 percent in the same period last year.
Despite its deteriorating financing quality, OJK commissioner for banking supervision Nelson Tampubolon said Muamalat remained a healthy bank, but he also acknowledged the need to strengthen capital to support lending growth.
“Muamalat’s CAR still hovers above the regulatory minimum CAR based on risk profile, but it doesn’t have wiggle room. The bank is currently asking its shareholders to provide a capital injection,” he said.
Nelson declined to confirm whether Muamalat’s discussions with BRI were part of the bank’s efforts to seek fresh funds to strengthen its capital.
