KUALA LUMPUR: CIMB Equities Research is positive on Permodalan Nasional Bhd’s plan for Islamic shares in Maybank because if it is implemented, it would unlock value for Maybank Islamic.

In its research note issued on Thursday,  it said there would be an increase in demand for Maybank shares as following the introduction of i-shares. Islamic funds can invest in Maybank’s Islamic banking assets through i-shares.  

“The Islamic banking business accounted for the highest proportion, i.e. an estimated 24.3% of Maybank’s total assets as at end March 2017. 

“The second-placed Affin was not far off with a contribution of an estimated 23.8% from its Islamic banking entity. Apart from these two banks, Islamic banking made up an estimated 13%-18% of other banks’ total assets,” it said.  

CIMB Research said net profit contribution from Islamic banking entity was also the largest at 26.7% for Maybank in 1Q17. 

Again, Affin was at second place with a 20% net profit contribution from Islamic banking business. The net profit contribution for other banks ranged from 8.1% (for Public Bank) to 18.7% (for CIMB).   

The above comparison excludes BIMB which is a pure Islamic banking group.       

Among the local banks, Maybank is the undisputed leader in terms of assets for Islamic banks. As at end-March 2017, Maybank Islamic’s total asset of an estimated RM181.3bil was more than double of (or 108.5% bigger than) CIMB Islamic Bank’s total assets of RM86.9bil. 

Public Islamic Bank and Bank Islam were at third and fourth place with total assets of RM53.8bil and RM53.5bil respectively as at end-March 17. 

“Although the introduction of i-shares for banks would enhance sentiment for banks, we retain our Neutral call on the sector given the potential negative impact from the adoption of MFRS 9 in 2018.

“The potential upside risks would be the faster-than-expected increase in loans and fee income while the potential downside risk would be the deterioration in asset quality,” it said.

StarBiz has reported that come Jan 1, 2018, all banks are required to adopt the new standard. MFRS 9 is based on expected loss model unlike the existing standard - MFRS 139 - which is based on the incurred loss model. 

The new standard requires banks to put up appropriate provisions in anticipation of future potential losses. This, according to industry players could relatively push credit cost higher and in turn impact banks profitability.