Public Bank to set up syariah unit in Nov

Public Bank to set up syariah unit in Nov
Published: 2008/09/18

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PUBLIC Bank, Malaysia's third largest lender by assets, will set up a syariah subsidiary in November as strong demand is expected to boost its Islamic loan growth to double the conventional industry level next year, its managing director said yesterday.

Like other Malaysian lenders, Public Bank is seeking alternative sources of income by going overseas and tapping the rapidly growing Islamic industry as the domestic market of 27 million people becomes increasingly saturated.

The bank, which is Malaysia's second largest lender in terms of syariah loans and deposits, sees its Islamic loans rising 15 per cent in 2009, versus the seven to eight per cent growth expected for the conventional banking industry.

The bank's Islamic business would focus on the retail market, managing director Tan Sri Tay Ah Lek said.



"We will still focus on the retail financing part and the deposit-taking business and wealth management products," Tay said in an interview.

Public Bank's upbeat outlook comes amid a global credit crisis which has pushed Lehman Brothers to seek bankruptcy protection, Merrill Lynch into the arms of Bank of America and insurer American International Group Inc to the brink of collapse.

But Public Bank said Malaysian lenders are likely to remain healthy in the absence of a sharp decline in economic growth.

Malaysia's economy is officially forecast to expand 5.4 per cent in 2009, among the fastest-growing in Southeast Asia.

"We expect 2009 to be challenging but we expect it to remain strong," said Public Bank's group economist Nasaruddin Arshad, referring to the domestic banking sector.

Islamic banking - which shuns usury-based investments and gains from sectors such as alcohol, gaming, weapons and pornography - is perceived to be a relatively safe sector as transactions have to involve specific assets. - Reuters