Indonesia's Bank Muamalat to increase equity with rights issue

JAKARTA–Indonesian Islamic bank Muamalat will increase equity through a pre-emptive rights issue of 39.81 billion new c-series shares next month, with an indicative price 30 rupiah per share, in the hopes of raising 1.19 trillion rupiah ($83.9 million) from investors. In addition to this, the lender will also issue 2 trillion rupiah ($140.5 million) sub debt (sukuk), Hayun Aji, its corporate secretary, told Salaam Gateway.

The fund will be allocated to strengthen its capital structure. Bank Muamalat is weighed down with bad assets as non performing financing soared to an unhealthy level of around 5 percent in the last three years. Its NPF soared to 4.64% in the third quarter of 2019 from 2.5% in the third quarter of 2018, and it soared to 5.69% in the third quarter of 2020 and 4.94% in the third quarter of 2021. 

“After this right issue, our focus is on changing the business model from the majority corporate segment into the retail segment. In the past, our financing went mostly (65%) to corporates and it turned out that it led to surging NPF. We should focus on Indonesian Muslims, which comprise a huge market,” Aji said.