Asia’s biggest Islamic lender Maybank to boost GCC lending and focus on the wealthy

Exclusive: Malaysia-based bank expects its financing book and assets under management in the region to account for 5% of its balance sheet by 2030, chief executive says

Maybank Islamic plans to start offering Sharia-compliant services to affluent clients in the GCC. Chris Whiteoak / The National

Maybank Islamic, one of the top five Islamic banks globally, aims to grow the size of its GCC lending book by more than three times in the next two years and launch Sharia-compliant wealth management solutions for affluent clients in the region, its chief executive has said.

The lender, the Islamic banking arm of Malaysia’s largest lender Maybank, is also counting on significant growth in its sustainable financing portfolio in the GCC as governments in the six-member bloc focus on reducing their carbon footprint and launch climate-focused projects, Mohamed Merican told The National in an interview.

The bank, which launched operations at the Dubai International Financial Centre in 2020, expects its GCC operations to contribute substantially to its balance sheet growth in the long term.

“We expect our lending book and our assets under management in the GCC to account for about 5 per cent of our total balance sheet by 2030, which stood at $72.65 billion at the end of last year,” he said.

Maybank Islamic has grown its financing assets from zero to about $200 million in the region, which mostly includes syndicated deals the bank has participated in.

“I think it's relatively small … but it's double-digit growth, so we're quite pleased with that fact,” Mr Merican said.

The lender initially set a target of $500 million in financing book size when it launched operations in Dubai, but that has since been revised to $700 million by 2025.

“It's dynamic; we will see if the deals actually make sense for both sides, the borrower, as well as for us, then we have an opportunity to change this target size [again],” Mr Merican said.

The global Islamic finance industry is expected to grow by about 10 per cent in 2023 to 2024 despite the economic slowdown, after posting a similar expansion in 2022 mainly led by the GCC countries, according to S&P Global Ratings.

The sector continued to expand in 2022, with assets up 9.4 per cent from 12.2 per cent in 2021, supported by growth in banking assets and the sukuk industry, S&P said in a report last month.

GCC countries, mainly Saudi Arabia and Kuwait, spurred 92 per cent of the growth in Islamic banking assets last year.

Moody’s Investors Service expects demand for Sharia-compliant financing to outpace conventional funding in 2023, driven by strong economic growth and development agendas in key markets, including Saudi Arabia, amid higher oil prices.

In the UAE, the Arab world’s second-largest economy, growth in Islamic banking outpaced that of conventional lenders last year, Fitch Ratings said in a report last month.

Islamic lenders grew by 8 per cent in 2022, more than conventional banks, which grew by 3 per cent, the rating agency said at the time.

“There's a lot of participation from this part of the world in international issues and there's a lot of interest from markets in Asia into issues here as well,” Mr Merican said.

The bank, which has mobilised 34 billion Malaysian ringgits ($7.75 billion) in sustainable finance by the end of last year, also expects significant growth potential for its green funding portfolio as government, financial institutions and corporates continue to issue green loans and bonds to fund renewable energy and climate-related projects.

The UAE alone is spending Dh600 billion ($163 billion) to finance projects that will help it reach its net zero target by 2050.

Although Maybank Islamic has recorded substantial growth in the syndicated and trade finance business over the past years, the sukuk market has been “quite challenging” amid a consistent rise in interest rates, Mr Merican said.

US interest rates need to stabilise as currently issuers have adopted a wait-and-see approach.

However, once pricing is attractive again, demand for sukuk transitions will rise, he added.

Maybank Islamic, the biggest Islamic lender in the Association of South-east Asian Nations (Asean) region, intends to expand its presence in Dubai and use the DIFC as a centre for its regional operations.

“Our objective was to establish credentials here, build relationships, get to know the market better. I think after three years … we understand the market better,” Mr Merican said.

“There are pockets opportunities, which we can actually build on.”

Sharia-compliant wealth management solutions for affluent clients in the region is one such opportunity, with potential of growth in Saudi Arabia and the UAE, he added.

The bank estimates a potential flow of about $10 billion from affluent GCC clients into Islamic investable assets in the Asean region that offer attractive returns.

However, there are “several building blocks”, including developing a product suite before it can start offering services to rich clients in the GCC.

Maybank has also yet to make a decision on whether it will start offering services directly to clients or team up with established wealth managers to offer its Sharia-compliant solution to their clients.

The bank has already held discussions with potential partners and aims to launch wealth management services within the next 12 months, Mr Merican said.