Affin Bank looks East

WHILE the focus has been on firming up its foundation on local shores through a bank-wide transformation the last seven years, Affin Bank has not let slip expansion opportunities across the seas too.
One such is through its partnership with Hong Kong-based Bank of East Asia Ltd (BEA) which Affin is banking on as the route into China’s unexplored Islamic banking landscape.
However,
talks about venturing into China is still in its preliminary stage and
Affin believes that it should go through the process of engaging the
Chinese authorities before further commenting on the matter.
That
said, the potential for spreading its wings abroad is there. With a
connection with BEA, Affin can join forces to leverage on its global
reach and experience.
BEA first surfaced as a substantial
shareholder in Affin in June 2007. The bank started actively picking up
shares in Affin in the middle of 2009 and is now the second largest
stakeholder with a 23.52% block.

[You must be registered and logged in to see this image.] Affin Bank plans to market Islamic banking products in north-western China where BEA has a branch in Urumqi. In
August 2010, Affin Bank’s parent company Affin Holdings Bhd (AHB)
signed a memorandum of understanding with BEA establishing a strategic
partnership to jointly develop their business potential in mainland
China, Hong Kong, Malaysia and other key markets where they both
operate.
Affin’s interest in introducing Islamic banking to the
China market has been on the table since and BEA has been playing a
role in expediting talks with the China Banking Regulatory Commission.
Earlier
this week, Affin told the media after its AGM that it was optimistic to
be the first local bank to secure a presence in mainland China in the
medium term.
Affin has a mind to market Islamic banking products
in the Muslim-majority population areas in north-western China where
BEA has a branch in Urumqi.
AHB chairman Tan Sri Mohd Zahidi Zainuddin
said then that the strategic partnership would enhance AHB’s ability to
support its customers who want to have a business presence in China and
Hong Kong by leveraging on BEA’s strong presence and extensive branch
network there.
“We are confident that this strategic alliance
will place both Affin and BEA in a better position in many important
Asian markets.”
Mohd Zahidi had said that the areas where both
banking group could explore include treasury, Islamic banking,
investment banking and asset management.
Alliance Research banking analyst Cheah King Yoong says the partnership will be beneficial to both parties.
“Although
we acknowledge that this venture is unlikely to be earnings accretive
in the near term, we foresee a deepened strategic alliance between AHB
and BEA going forward,” he says, adding that one way the strategic
partnership could be fruitful for both sides is Affin leveraging on
BEA’s extensive network and expertise in the region to launch its
Islamic products.
While he says there is not much information
available at the moment, Cheah understands that BEA has been interested
to increase its stake in Affin.
“Therefore, we believe that the
potential for BEA to increase its stake in AHB is imminent, in view of
further liberalisation in the domestic banking sector by Bank Negara in December last year with the unveiling of the Financial Sector Blue Print,” he says.
Around South-East Asia, Affin has also expressed keen interest in Indonesian bank PT Bank Ina Perdana, which if acquired, Affin intends as a full-fledged Islamic bank.
The
group is now waiting for the Indonesian central bank, Bank Sentral
Republik Indonesia’s formal agreement to allow Affin to hold at least a
51% stake in the small bank.
Deputy chairman Tan Sri Lodin Wok Kamaruddin says that “the informal indications so far seems to be quite positive.”
He adds that Affin would not be interested in acquiring should it end up holding less than 50% stake.
Other
than Indonesia, Affin also hopes to establish banking operations in
recently democratised Myanmar but such ambitions depend on the
Government’s relations with Myanmar.
BEA, incorporated in Hong
Kong in 1918, provides comprehensive commercial and retail banking
services. It is listed on the Hong Kong Stock Exchange and is one of
the constituent stocks of the Hang Seng Index.
As the largest
independent local bank in Hong Kong, it has total consolidated assets
amounting to HK$611.4bil (RM241.44bil) as at Dec 31, 2011.
The
bank also operates one of the largest banking networks in Hong Kong,
with more than 150 branches and financial centres throughout the city.
BEA
entered the mainland China market in 1920 when it first opened a branch
in Shanghai. It is the largest foreign bank in China with more than 100
outlets in major urban centres the country over.
In other parts
of the world, BEA has presence in North America, the UK, Singapore and
Malaysia. It has branches in Los Angeles and New York as well as a New
York-based subsidiary, Bank of East Asia (US) and North America.
As a gauge of the banking group’s size, BEA operates more than 220 outlets and employs over 12,000 people worldwide.
In
2007, it was one of the first foreign banks to receive approval from
the China Banking Regulatory Commission to establish a
locally-incorporated bank in mainland China, the Bank of East Asia (China) Ltd, which offers a full range of banking and financial services.
BEA is 15.09%-owned by Tan Sri Quek Leng Chan through Guoco Group Ltd.