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MBSB-AFB Merger To See Smaller M'sian Islamic Banks Face Stiffer Deposit Competition: Moody's
Last update: 11/07/2017

SINGAPORE, July 11 (Bernama) -- †If the merger between Malaysia Building Society Bhd (MBSB) and Asian Finance Bhd (AFB) is successful, competition for deposits among smaller Islamic banks in Malaysia will intensify, says Moody's Investors Service.

Moody's said†such a deal would†likely lead to the larger of the two financial institutions, namely MBSB, emerging as the surviving entity.

"MBSB\'s credit profile would be enhanced because the acquisition of AFB†and its Islamic banking license would give it access to cheaper funding†and broaden the†revenue stream," said Vice President and Senior Analyst, Simon Chen, in a statement here.

"The entry of MBSB into the current and savings accounts deposit market†would further intensify competition for low-cost deposits among†institutions that are not part of big integrated banking groups.

"Nevertheless, while competition among Islamic banks is growing, their†profitability remains robust," said Chen.

Moody's analysis is contained in a†just-released report titled, "Islamic†Banking - Malaysia: Potential merger is credit positive for MBSB but will†raise funding pressure on sector," and†authored by Chen.

The†report said that broader sector consolidation is unlikely for†now, because the favourable operating environment will allow standalone†Islamic institutions, to fare well on their own.

It explained†that the†MBSB-AFB proposed merger is driven by unique circumstances that are not shared by the other Islamic banks in Malaysia.

The growth potential for Islamic banks in Malaysia is strong, given†the availability of well-established infrastructure and growing consumer†awareness of Shariah-compliant products.

The stable macroeconomic†environment is also supportive of credit demand for all banks in the country, Moody's said.†

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