Source: Bank Negara Malaysia - Financial Stability and Payment Systems Report 2006 (www.bnm.gov.my)
Operating parallel to conventional banking, Islamic banking has also grown in size, diversity and importance in the Malaysian financial landscape. The number of players in the Islamic banking sector has increased with the commencement of operations of four institutions during the year. Assets of the Islamic banking system expanded by 20.5% in 2006 to constitute 12.2% of banking system assets. This development has been underscored by growth in financing activities (+12.3%) which now accounts for 13.2% of banking system lending. Deposits mobilised by the Islamic banking system had also grown at a robust rate of 18.2% in 2006 to account for 12.2% of banking system deposits.
The Islamic banking sector remained well capitalised, supported by higher pre-tax profit and the injection of capital by new entrants and players. The RWCR recorded a strong level of 16.6% whilst the core capital ratio stood at 12.6%. Preliminary unaudited profit before tax for the Islamic banking system amounted to RM1.7 billion, posting a growth of 9.6%. The higher profit was contributed largely by growth in financing income (13%), income from funds placement (75.1%) and recoveries from nonperforming assets (22.8%). Consequently, return on assets and return on equity for the Islamic banking sector was 1.3% and 16.4% respectively.
The Islamic banking sector continues to support various economic activities that contribute to the nation’s economic growth. Total financing extended by the Islamic banking sector was RM78.5 billion as at end-2006. Similar to the trends observed for conventional banking, of the 12.3% increase in financing, 57.6% was channeled to the household sector. The level of non-performing financing continued to decline steadily as net non-performing assets as at end-2006 declined almost 25% to RM3.4 billion to account for 4.5% of net financing.
Investment deposits (general and specific) rose by 10.3% to account for 49.6% of Islamic banking deposits, the bulk of which was concentrated in the short-term maturity profile of below one year (95.2%). Meanwhile, savings and demand deposits expanded by 16.7% and 38.8% respectively, mainly attributed to the expanding retail customer base in Islamic banking.
The ratio of staff-related expenses and overheads to gross operating income rose to 42.6%. The increase in staff costs was attributed mainly to higher remuneration packages offered to retain and attract expertise amidst competition from the new entrants, as well as additional resources required to support the expansion of the industry. Meanwhile, higher overheads were due mainly to establishment and administrative expenses incurred in the setting up of new branches by Islamic banking institutions, in particular, by the new market entrants.
Operating parallel to conventional banking, Islamic banking has also grown in size, diversity and importance in the Malaysian financial landscape. The number of players in the Islamic banking sector has increased with the commencement of operations of four institutions during the year. Assets of the Islamic banking system expanded by 20.5% in 2006 to constitute 12.2% of banking system assets. This development has been underscored by growth in financing activities (+12.3%) which now accounts for 13.2% of banking system lending. Deposits mobilised by the Islamic banking system had also grown at a robust rate of 18.2% in 2006 to account for 12.2% of banking system deposits.
The Islamic banking sector remained well capitalised, supported by higher pre-tax profit and the injection of capital by new entrants and players. The RWCR recorded a strong level of 16.6% whilst the core capital ratio stood at 12.6%. Preliminary unaudited profit before tax for the Islamic banking system amounted to RM1.7 billion, posting a growth of 9.6%. The higher profit was contributed largely by growth in financing income (13%), income from funds placement (75.1%) and recoveries from nonperforming assets (22.8%). Consequently, return on assets and return on equity for the Islamic banking sector was 1.3% and 16.4% respectively.
The Islamic banking sector continues to support various economic activities that contribute to the nation’s economic growth. Total financing extended by the Islamic banking sector was RM78.5 billion as at end-2006. Similar to the trends observed for conventional banking, of the 12.3% increase in financing, 57.6% was channeled to the household sector. The level of non-performing financing continued to decline steadily as net non-performing assets as at end-2006 declined almost 25% to RM3.4 billion to account for 4.5% of net financing.
Investment deposits (general and specific) rose by 10.3% to account for 49.6% of Islamic banking deposits, the bulk of which was concentrated in the short-term maturity profile of below one year (95.2%). Meanwhile, savings and demand deposits expanded by 16.7% and 38.8% respectively, mainly attributed to the expanding retail customer base in Islamic banking.
The ratio of staff-related expenses and overheads to gross operating income rose to 42.6%. The increase in staff costs was attributed mainly to higher remuneration packages offered to retain and attract expertise amidst competition from the new entrants, as well as additional resources required to support the expansion of the industry. Meanwhile, higher overheads were due mainly to establishment and administrative expenses incurred in the setting up of new branches by Islamic banking institutions, in particular, by the new market entrants.
1 comments:
Islamic banking is coming of age. It has surpassed conventional banking in terms of growth rate posting about 20 % increase in assets. KPMG estimates Islamic assets to rise to one trillion dollar by 2010(*data as of 2008). Though its still in its nascent phase with many innovations and acceptances of Sharia' compliant products going on continuously its certainly going to change the way banking is done.
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