Maybank to convert Indonesian unit into syariah bank

BMI keen to exploit growing potential of Islamic banking following its $93.44mln capital reduction.

Malaysia's largest lender Malayan Banking Bhd (Maybank) will turn its Indonesian unit into an Islamic bank and undertake a capital reduction in the firm.

Maybank said in a stock exchange filing on Wednesday that the shareholders of PT Bank Maybank Indocorp (BMI) wanted to move away from conventional banking to tap the growing potential of Islamic banking in the world's most populous Muslim nation.

Maybank did not give a timeline for the conversion but Indonesia's Central Bank Deputy Governor Muliaman Hadad told Reuters on Monday that the Malaysian bank will set up an Indonesian syariah bank by August.

The capital reduction exercise will see BMI's authorised share capital fall to 300.7 million ringgit ($93.44 million) from 346.8 million ringgit as well as eliminate retained losses that totaled 50.1 million ringgit last year, Maybank said.

"This exercise is undertaken to enable BMI to make a fresh start under its new business activity of syariah banking, with a balance sheet that reflects fair value, without being burdened by the accumulated losses," Maybank said in a statement.

The exercise is part of Indonesian Central Bank's regulations involving a change in business activities.

View the full story in Reuters.