KUALA LUMPUR: Kuwait Finance House (Malaysia) Bhd's (KFH Malaysia) exit from the country indicates the highly competitive environment in the local banking sector, industry observers said.
The foreign Islamic lender, which has been operating in Malaysia for 19 years, decided to wind down its business here, citing expansion plans in the Gulf Cooperation Council (GCC) and Middle East as the main reasons for the exit.
Bank Muamalat Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said although the move was a commercial decision made by the bank, it still indicated the sector's competitive and highly regulated environment.
"Perhaps, the market forces have shown us to stay resilient. Banks have to be constantly on the lookout to be competitive and agile especially when competition from the digital banks are expected to exert further pressure on the traditional banks," he told Business Times.
Universiti Kuala Lumpur Business School economic analyst Associate Professor Aimi Zulhazmi Abdul Rashid said KFH Malaysia's exit is a common business strategy given that lenders tend to acquire assets, merge or close down.
He added that the bank's departure does not signal that Malaysia's banking industry is not profitable.
"Malaysian banks have thrived and a few are ranked the biggest in the Asean region namely Malayan Banking Bhd, CIMB Bank and Public Bank Bhd which are regarded as big regional banks.
"Nonetheless the banking industry is intensely competitive with many players joining and leaving. Bank Negara Malaysia already announced five digital banking licences last year which further underlined tougher competition ahead in the industry, either conventional or Islamic banks," he said.
KFH Malaysia is Malaysia's first foreign Islamic bank and is one of two standalone foreign Islamic banks in the country. It has eight branches here.
In a statement yesterday, the bank said its exit aligned with its international business strategic review to focus and expand its regional market in the GCC and Middle East.
As part of ensuring a smooth transition, the group said KFH Malaysia is exploring the potential sale of certain portfolio segments to prospective buyers, all subject to regulatory approvals.
It said the entire process will adhere strictly to Malaysia's regulatory frameworks, ensuring compliance with Shariah principles.
Acting chief executive officer (CEO) Ida Aizun Husin said KFH Malaysia is profitable and remains solvent as the transition is approached with a strong financial foundation.
Ida was appointed as the acting CEO after Mohd Hazran Abd Hadi stepped down in June.
Mohd Hazran left the bank after five years at the helm and was said to depart to pursue personal endeavours.
For the financial year ended Dec 31, 2023, it recorded a pre-tax profit of RM88.1 million, up 22.7 per cent from the previous year. This was achieved on the back of a revenue of RM371.6 million.
Its total assets grew to RM7.6 billion from RM7.1 billion in 2022 and net assets per share rose 5.08 per cent to RM1.24 billion in 2023 from RM1.18 billion the previous year.