HSBC Bank Malaysia Bhd has submitted an application to Bank Negara Malaysia (BNM) to set up a full-fledged Islamic banking subsidiary here, its country head said.
Deputy chairman and chief executive officer Datuk Zarir J Cama said Malaysia is the group's focused location in this region in Islamic banking and finance, and HSBC will use Malaysia as a regional hub to assist growth in Indonesia, Brunei and Bangladesh.
Islamic banking assets now account for about 12-13 per cent of HSBC Malaysia's total assets, and Cama is confident that it will reach the 20 per cent target set by BNM by 2010.
"We hope the central bank will consider our application favourably. If granted the licence, we will be very delighted to partner the country in this very important area," he told a media briefing in Kuala Lumpur yesterday. Also present was HSBC Holdings plc group chairman Stephen K Green, who is in Malaysia on a visit.
Green said the group's overall policy for Islamic banking is to provide syariah- compliant structured services in countries where there is a significant customer base that wanted those products.
Both Malaysia and Indonesia, with large Muslim populations, are obviously the major markets in the region, he said.
"What we see as interesting is that in Malaysia, over 70 per cent of our Islamic products are taken up by the non-Malays, because they find these products as more competitive," Green said.
In Malaysia, Islamic banking has helped the bank rake in record profits last year.
The bank's profit before tax and zakat at RM949 million was 28.8 per cent higher than the previous year.
Net interest income rose by 22.7 per cent to RM990 million, driven by strong loan growth of 13.4 per cent as well as a wider net interest margin.
Income from Islamic banking operations jumped 65.7 per cent to RM179 million, as loans expanded, especially personal instalment loans.
"We do not know if anyone else has put in application for a subsidiary, but our Islamic banking business is by far the largest among the locally-incorporated foreign banks here," Zarir said.
HSBC is also unfazed by the heightening competitive environment for Islamic banking.
"In general, everywhere we go, we run into both the well respected international banks and also strong local competitors. That's a feature of life," Green said.
"And all of them have to build from scratch, in terms of customer base, branches and so on," added Cama.
Meanwhile, apart from the four additional branches that it was allowed to open last year, HSBC has also applied to open eight more in various locations, including city centres.
"We are keen to open more branches and are awaiting the central bank's policy with great anticipations," Cama said.