Islamic Finance 

Indonesia’s oldest Islamic bank ‘optimistic’ about raising new capital through rights issue, sukuk on Jul 18

| 10 July, 2018
 Yosi Winosa
Indonesia’s oldest Islamic bank ‘optimistic’ about raising new capital through rights issue, sukuk on Jul 18
FILE PHOTO: A woman walks past the front lobby of PT Bank Muamalat in Jakarta February 10, 2010. REUTERS/Crack Palinggi

JAKARTA - Bank Muamalat Indonesia is optimistic it can raise additional capital through a rights issue and sukuk on July 18 as the country’s oldest Islamic lender continues to face challenges expanding its business, Achmad Kusna Permana, its CEO told Salaam Gateway.

Bank Muamalat shareholders agreed at its last annual general meeting on June 28 to conduct a rights issue to raise additional authorized share capital from 8 trillion Indonesian rupiah ($557.8 million) to 11 trillion rupiah. The company will issue new series B shares of as much as 80 billion units.

“Currently we have paid-up capital of 1.1 trillion rupiah and unpaid-up capital of 1.89 trillion rupiah. We have around 18.96 billion series B unit shares that have not been issued yet,” said Permana.

According to him, the Shariah-compliant bank, which was established in 1991 and registered as a reserve bank and non-listed public company in 1994, is in a “healthy” liquidity position yet it has not been able to raise new capital from its shareholders.

“From the liquidity perspective, we are healthy. Our third party funds rose 16.14 percent to 48.68 trillion rupiah at the end of 2017. Lending grew 3.19 percent to 41.28 trillion rupiah and our gross non-performing finance ratio was 4.43 percent, still beyond FSA’s ceiling of 5 percent,” said Permana.

“The problem is, we don't have enough new capital from our shareholders in order to be able to grow. Our capital adequacy ratio currently only reaches 13.62 percent,” he said referring to its assets of 61.7 trillion rupiah at the end of 2017.

The bank’s current CAR puts it beyond the 8 percent minimum requirement but the bank would need a capital injection to grow its business without hurting its CAR.

Bank Mualamat’s assets have dropped 12.3 percent to 54.11 trillion rupiah in May compared to end-2017. This is largely attributed to a 12.16 percent plunge in demand deposits to 26.52 trillion rupiah compared to 30.19 trillion rupiah at the end of 2017, according to Salaam Gateway calculation of data from the bank's financial reports.

Permana, who was appointed new CEO in September last year, has plans to expand Bank Muamalat’s business, including in the haj, umrah and halal food sectors, as well as through schools for children and young people to study the Quran. But these plans will not be executed without a capital injection.

“It's time consuming to get new capital and investors, but we are still working on it,” he said.

In February, securities company Minna Padi Investama abandoned plans to inject around 4.5 trillion rupiah of new capital into Bank Muamalat after it failed to meet regulatory requirements to reveal its funding sources.

In April, rumours surfaced that state-owned lender Bank Rakyat Indonesia was interested in investing in Bank Muamalat.

“BRI had already talked informally with us about the buyout possibility but no due diligence actions have been made,” said Permana.

It remains unclear who the bank’s new investors will be.

The bank’s current main shareholders are the Islamic Development Bank (32.74 percent), Kuwait’s Bank Boubyan (22 percent), Saudi Arabia’s Atwill Holdings Limited (17.91 percent), National Bank of Kuwait (8.45 percent) and IDF Investment Foundation (3.48 percent).

Bank Muamalat is Indonesia’s second largest Shariah-compliant bank by assets after Bank Syariah Mandiri.

($1 = 14,342 Indonesian rupiah)

(Reporting by Yosi Winosa. Editing by Emmy Abdul Alim emmy.alim@thomsonreuters.com)

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