Islamic banking rising but impact is minimal

Although Islamic banking business in Malaysia is expected to remain on the uptrend, its contribution will have minimal impact on the total income of local banks, analysts said.

TA Securities noted that while prospects were still good for Islamic banking in the country, it contributed only 10% to 11% on average to the total income of the country’s nine listed banks in the third quarter ended Sept 30, and 9% in the second quarter.

However, for the third quarter of 2008, Islamic banking income for these banks grew 3.7% versus the second quarter despite a 15.7% drop in the banks’ total income.

“We expect the Islamic banking business to contribute an average of 10% to banks’ total income for the current earnings reporting season (the three months ended Dec 31 to be released latest by end February),” said Wong Li Hsia, a banking analyst with TA Securities. “Going forward, we expect the Islamic banking business to slow down a little in line with the rest of the banking industry.”

AMMB Holdings Bhd, which recently announced its third quarter results, recorded a net income of RM143.8mil from Islamic banking or a 16.2% contribution to its total income.