Malaysia Bank Islam on domestic, Indonesia M&A prowl

KUALA LUMPUR, Sept 3 (Reuters) - Malaysian sharia lender Bank Islam (BIMB.KL: Quote, Profile, Research, Stock Buzz) in on the hunt for merger and acquisition opportunities at home and in neighbouring Indonesia to boost its market share, its managing director said on Wednesday.

Bank Islam, Malaysia's oldest sharia lender which began business in 1983, is trying to claw back market share after heavy losses and stiff competition eroded its pioneer advantage.

The lender, a subsidiary of financial group BIMB Holdings Bhd (BIMB.KL: Quote, Profile, Research, Stock Buzz), is the second biggest Islamic bank in Malaysia in terms of assets.

"Bank Islam is prepared to merge with anybody if it is the right partner," Managing Director Zukri Samat told reporters.

"We are looking for partners. Anybody who has a proposal, who wants to talk to Bank Islam, we are open to that."

He said the bank had held talks with some institutions but there were no concrete results as yet.

Regionally, Bank Islam's immediate expansion target was neighbouring Indonesia and it would explore growth opportunities in Thailand and Singapore later, Zukri said.

"We have targeted Indonesia as our prime target," he said.

"It's an obvious choice -- it's very near to us, we are very familiar with the country. Also it's a country with a 250 million population and the majority are Muslim."

Zukri said Bank Islam could either take a strategic stake in or buy an Indonesian Islamic lender to tap opportunities in consumer financing in Southeast Asia's largest economy. He did not elaborate.

Indonesia, the world's most populous Muslim country, recently issued its first Islamic bond, in a move it hopes will prod more domestic companies to raise funding from Islamic capital markets and kickstart its sharia banking industry which lags Malaysia's.

Sharia banks have less than 5 percent of Indonesia's domestic banks' total assets. The Indonesian central bank has said the sharia banking industry will have a 10-15 percent share of national banking assets by 2015.

Islamic banking accounts for about 13 percent of total banking assets in Malaysia, and is tipped to be one of the economy's leading growth drivers, thanks to a big government push aimed at making the country a global sharia finance hub.

Zukri said Malaysia's Islamic banking industry was overcrowded with 14 full fledged Islamic banks and some lenders having sharia windows or limited operations, but there were still some growth areas.

"Islamic banking is growing at a much faster rate than conventional banking, now it's growing at a rate of close to 20 percent a year," Zukri said.

"In certain areas there is still a lot of potential that has not been tapped," he added, citing wealth and fund management and venture capital as growth sectors.

(Reporting by Liau Y-Sing; Editing by Kim Coghill)