Tengku Datuk Seri Zafrul Aziz
Christopher Loh

KUALA LUMPUR: Top Malaysian financial players with a presence in Indonesia lauded the bilateral agreement between Indonesia and Malaysia, saying it will pave the way for greater access to conventional and Islamic banking.

CIMB Group chief executive officer Tengku Datuk Seri Zafrul Aziz said the agreement is positive for the banking industry of both countries.

“It is an additional impetus for CIMB Group to expand its business in Indonesia, particularly in the Islamic and consumer segments, where there are a lot of growth opportunities, given Indonesia’s 260 million population.

“We also view the agreement between Indonesia and Malaysia as an important step towards better Asean economic integration, paving the way for CIMB to continue delivering its universal banking proposition for customers in the region.”

Bank Negara Malaysia and Otoritas Jasa Keuangan of Indonesia have signed the agreement which will provide more access and operational flexibility for Malaysian and Indonesian Qualified Asean Banks operating in the respective jurisdictions.

The agreement permits the formation of three banking groups that meet stipulated criteria to be classified as one of the Qualified Asean Banks, which would be afforded equal treatment as local lenders.

CIMB is eyeing further growth in its banking franchise.

Its subsidiary, CIMB Niaga, is ranked as one of the top five banks in Indonesia by asset size, with a current customer base of 3.6 million. It recently posted strong first-half results.

RHB Banking Group said a commercial banking presence in Indonesia remains a priority in its overseas expansion plan, adding that it will complement its existing business in the country.

“From a merger and acquisition aspect, we will keep an opportunistic mind to ensure the right time, price and strategic fit into our overall group strategy to deliver better value to stakeholders,” said group chief strategy and transformation officer Christopher Loh.

Islamic finance is a significant area of potential growth in the world’s most populous Muslim nation, he pointed out.

“Malaysia, being at the forefront of Islamic finance, could provide expertise to grow this sector, which spells an opportunity for Indonesia as the government aims to deepen the country’s Islamic banking sector. ”

RHB has about 14 branches across Indonesia dealing with securities and asset management business.

Affin Hwang Capital banking analyst Loh Jia Ying said one more banking licence is available for Malaysian banks to expand into Indonesia, adding that it is also possible that the central bank of Indonesia may allow the Malaysian bank to acquire one of the Indonesian banks.

On the impact of the agreement, he said it would be minimal in the near term for Maybank Indonesia, CIMB Niaga and the Indonesian banking sector.

As for state-owned Bank Mandiri’s keen interest to expand in Malaysia, Loh said although the bank may have the advantage of familiarity for Indonesians here, its profitability may be limited if it focuses only on Indonesian workers, unless there is a significant change in their behavioural patterns.

Bank Mandiri, the largest Indonesian bank by assets, currently has five remittance offices in Malaysia, and focuses on the revenue generated from Indonesians working here.

It will also have to undertake significant work to generate more revenue from the Indonesian workers and will be limited by the smaller number of branches.

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