KUALA LUMPUR: OSK Investment Bank Bhd (OSKIB), which received the go-ahead from Bank Negara Malaysia to set up an Islamic window in September, is not ruling out plans for a standalone Islamic banking subsidiary.
“If the business is big enough and we need a subsidiary, we will (apply to set up an Islamic banking subsidiary); it depends on how the Islamic window progresses,” OSKIB director and head of group corporate and legal affairs Woon Chong Boon said in an interview recently.
OSKIB, which applied for the Islamic banking licence in early September, hopes to have its Islamic window up and running by the first quarter of next year.
“It has always been our intention to offer comprehensive products and services to our diverse clientele base,” he said, describing the move to set up an Islamic banking division as “a natural progression of our business”.
When asked why OSKIB was confident in this venture, Woon cited the ever-growing demand for syariah-compliant Islamic financial instruments as pull factors. He said OSKIB had offered Islamic banking products prior to becoming an investment bank.
“We were actively involved in originating and structuring Islamic private debt securities through our debt capital markets division,” he said.
“Since the inception of the division, we have originated, arranged and underwritten over RM1.5 billion of Islamic private debt securities.”
He said the bank also had experience managing Islamic funds through its unit trust management arm.
According to Woon, OSIKB’s group total assets totalled over RM7.5 billion as at June 30, with Islamic banking assets making up 8% or RM600 million of these assets.
On the investor profile OSKIB was looking at, Woon said: “We will be targeting Muslim as well as the non-Muslim segments, comprising both individual investors and enterprises”.
He added that the bank would be exploring opportunities to tap Islamic funds from and offer Islamic instruments to foreign investors and enterprises through its overseas operations and networks.
Talent recruitment will be a part of the bank’s plans for its standalone Islamic banking subsidiary, Woon said.
“Over the years we have built up a pool of talent internally and we intend to complement our experience with new expertise from the industry.” This includes finding a new head for this division, preferably a local candidate.
However, he declined to comment on the projected growth and earnings targets for the new subsidiary. “At this point in time, we have not fixed our targets yet. The key is to set up the division up within the next six months,” he said.
“Over time we hope to build our Islamic banking business to compliment our conventional banking services with a meaningful contribution to the bank’s overall business,” he said.
Woon added that the bank would leverage on its existing branch network and hoped to open more branches in the Klang Valley in the near future.
Commenting on OSK’s foray into Islamic banking, MIMB Investment Bank head of research Pong Teng Siew said as an investment bank, OSKIB was likely looking to tap into the widest range of customers possible. “This is the way to go in future, particularly if they expect to expand to the Middle East.”
“The products for local customers need to be widened; Islamic banking is a strong growing segment and they would want to establish a strong foothold in it,” he said.
While in terms of manpower, OSKIB’s timing is a little short as the Islamic banking industry is facing a dearth of talent, the time is ripe for the investment bank to tap into the petrodollars market.
“OSK has strengths in certain areas, they may not want to pitch themselves against banks such as Maybank; they may want to tap into businesses such as funds linked to Islamic products, they also don’t have Islamic stockbroking facilities, which could appeal to clients overseas who only want to deal with Islamic stockbroking firms,” said Pong.
For the financial year ended Dec 31 2006, OSKIB posted revenues of RM385.1 million against RM215.2 million in 2005. Net profit for the period stood at RM66.7 million against RM22.6 million in the corresponding period.