This article first appeared in The Edge Malaysia Weekly on December 9, 2024 - December 15, 2024

ISLAMIC lender Kuwait Finance House (M) Bhd (KFH Malaysia), which is selling its retail portfolio as part of its exit plan from the country, is said to prefer a buyer that is willing to include its branches and employees as part of the acquisition.

“That’s the preference. They’re looking to have a clean exit,” a source tells The Edge.

This may, however, limit its pool of potential buyers.

The Edge understands that at least two banks — Affin Bank Bhd (KL:AFFIN) and Bank Islam Malaysia Bhd (KL:BIMB) — that had been eyeing KFH Malaysia’s retail portfolio are now out of the picture.

Sources say Affin Bank, the country’s second-smallest banking group by assets, had submitted a non-binding bid for the retail portfolio, but did not qualify for the final round.

As for Bank Islam, a source says the country’s largest standalone Islamic bank did not submit a bid as it had only been keen on the retail assets and deposits. “If it were to go in, it would only have been for the retail portfolio and not the staff and branches,” the source adds.

A spokesperson from KFH Malaysia, in an email response to queries from The Edge, says: “As the sale process for KFH Malaysia’s retail portfolio remains ongoing, we are not in a position to share any additional information at this juncture.”

It is unclear how many branches KFH Malaysia currently has, but a source put it at “around seven”. Its main branch is at the company’s headquarters in Menara Prestige in Jalan Pinang, Kuala Lumpur. The HQ takes up five floors.

With banks making a strong digital push, they increasingly have less need for physical branches. “It’s very unlikely that any incumbent bank in Malaysia will want to take on additional branches or staff. Most are looking to consolidate their own branches,” an analyst points out.

“I’d imagine that it would be a bank with a relatively small footprint in Malaysia that would be keen on taking on KFH Malaysia’s branches and people, on top of its assets,” an industry source says.

It remains to be seen, however, how many suitors remain in the running.

“In a worst-case scenario, I would not be surprised if they (KFH Malaysia) circle back to those who were only interested in its assets and deposits,” another source says.

The source says that KFH Malaysia, in running the bid process, was open to suitors making a bid for some or all of what it was putting up for sale, but ideally wanted one buyer for everything.

The Edge, had in September, reported that five banks were said to be exploring a potential acquisition of the Islamic lender’s retail banking portfolio.

In that report, Al Rajhi Banking & Investment Corp (M) Bhd quashed speculation that it may be one of the suitors. “Al Rajhi Bank Malaysia is not involved in any discussions or negotiations regarding the acquisition of KFH Malaysia’s retail business. We are committed to projects that will expand our current business through strategic Islamic finance innovation,” it told The Edge.

According to sources at the time, neither MBSB Bank Bhd (KL:MBSB) nor Bank Muamalat Malaysia Bhd was pursuing KFH Malaysia’s assets.

On July 31, KFH Malaysia’s sole shareholder — Kuwait Finance House KSCP — announced that it had decided to voluntarily withdraw from the Malaysian market after 19 years of operation here. Its decision to exit followed an international business strategic review to focus on and expand in the Middle East.

KFH Malaysia is a predominantly retail banking-focused group, but it also has two other businesses, namely corporate banking and treasury. The retail banking portfolio is considered the “gem” within the group and will be sold to the highest bidder, its acting CEO Ida Aizun Husin told The Edge in an interview in August.

As at the end of last year, KFH Malaysia’s retail financing assets stood at about RM2.7 billion, comprising both performing and non-performing assets. Retail current account and savings account deposits stood at over RM400 million.

The gross non-performing financing ratio of its retail business stood at 1.8% as at end-2023 compared with 1.74% the year before. 

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