CIMB Islamic eyes moderate growth, focus on core markets: CEO

By Bernardo Vizcaino KUALA LUMPUR (Reuters) - Malaysia's CIMB Islamic Bank Bhd , part of Southeast Asia's fifth-largest lender by assets, expects moderate levels of domestic growth as it plans to focus on core markets to maintain profitability, its chief executive told Reuters. The modest growth expectations at CIMB Islamic, part of CIMB Group Holdings Bhd and one of the most established names in Islamic finance, highlights the broader trend in an industry that is grappling with global economic conditions that are dampening growth prospects and profitability. The Islamic lender saw gross financing assets increase by 13.2 percent year-on-year compared to 23.8 percent for the same period last year, according to June financials. "This year we see our growth moderating even further, not just because we have a bigger base but it's a different market altogether," chief executive Badlisyah Abdul Ghani said in an interview at the bank's Kuala Lumpur headquarters. "Our focus is to deepen our penetration in the existing market, making sure that we focus on customer segmentation. We want to focus on our current business activities through organic growth." CIMB Islamic held 50.9 billion ringgit ($15.3 billion) in assets and has an overseas presence that includes Bahrain, Brunei, Indonesia and Singapore. Its consumer banking business is focused on Malaysia and Indonesia, with Indonesia in particular expected to help buoy the bank's growth if its economy expands in line with forecasts. "In Malaysia you will not see a high growth rate like the 20 percent, but overall we will still be over 20 percent," he said. CIMB Islamic now represents 15 percent of the group's balance sheet and 30 percent of domestic operations. It now offers a wide range of banking services, having started as a unit focused on investment banking. "Islamic business across the group is still predominantly Malaysia-centric. Our overseas contribution for Islamic business is less than 10 percent and has been that for the last 11 years, and we do not foresee that increasing substantially." The bank is also preparing to transition some mudaraba-based deposit accounts into investment accounts to align itself with the new Islamic Financial Services Act (IFSA) that came into effect in June. Mudaraba is a form of investment partnership that is common in Islamic finance, which follows religious principles such as a ban on interest and gambling. "Currently we have a lot of mudaraba-based products that are deemed or operated as a deposit. Under IFSA they will be considered as an investment account, so that remains a deposit until five years down the road." The bank is taking steps to make the transition but there would be no immediate impact as IFSA gives a five-year moratorium to fall in line with the rules, Abdul Ghani said. The bank's mudaraba-based savings, demand and term deposits amounted to 5.3 billion ringgit or 15 percent of all customer deposits, according to June financials. (Editing by Stephen Coates)