PNB eyes approval for Islamic shares initiative

PETALING JAYA: Permodalan Nasional Bhd (PNB) chairman Tan Sri Abdul Wahid Omar is hoping that the regulators will approve the Islamic-shares initiative within the year following its proposal to convert 20% of Malayan Banking Bhd (Maybank) shares into Islamic shares or I-shares.
“We were hoping for the ‘I’ shares initiative to be approved in 2017 but unfortunately this has yet to materialise. We will continue to engage with relevant stakeholders to hopefully make this a reality in 2018,” he said in his new year message released today.
Abdul Wahid reiterated that syariah compliant stocks or equity instruments in financial services are still wanted in the domestic market, despite Malaysia being a global leader in Islamic finance.
There are only three syariah-compliant public listed financial services companies in the country, namely BIMB Holdings, Syarikat Takaful Malaysia and MBSB with a combined market capitalisation of RM15 billion.
“This is hardly 5% of the total market capitalisation of listed banks and financial services companies. At the same time, there are many syariah-compliant funds that need to invest in syariah-compliant financial services stocks,” Abdul Wahid noted.
He said one effective way to meet this need is to designate a portion of shares in Malaysian banks (such as Maybank, CIMB and RHB) that have sizeable Islamic Finance business as Islamic or I-shares.
Nonetheless, Abdul Wahid said the separate listing of Maybank Islamic is not possible as the Maybank group adopts an “Islamic First” strategy where the Islamic finance operations are an integral part of Maybank, with common infrastructure and distribution channel.
“What is possible is to designate say 20% of Maybank shares as ‘I’ shares where the dividend income can be traced or ‘ring-fenced’ from Maybank Islamic and Maybank’s other syariah-compliant activities,” he explained.
Maybank Islamic is the largest Islamic bank in Malaysia with total assets of RM185 billion, three times larger than Bank Islam. Maybank’s Islamic financing makes up 56% of Maybank’s total loans & financing in Malaysia. In terms of profit contribution, Maybank’s Islamic finance activities contribute some 25% to Maybank group’s total profit.
Based on Maybank’s market capitalisation of RM100 billion, Abdul Wahid said Maybank “I” shares will potentially have a market capitalisation of RM20 billion.
“This is three times larger than the market capitalisation of BIMB Holdings of RM7 billion. The same concept can be replicated for CIMB, RHB and even Bursa Malaysia itself, where 60% of the counters listed (based on market capitalisation) are syariah-compliant.”
Besides continuing with the execution of the PNB Strategic Plan, Abdul Wahid said it will ensure strategic companies focus on improving their business fundamentals, earnings and dividend payout, which will lead to improved total shareholder returns (TSR).
“This will include increasing our exposure to private investments both domestically and internationally subject to the right opportunity,” he said.
In addition, PNB will engage with its core companies, in which it has at least 10% shareholding or RM1 billion in value to drive better performance.