(MENAFN- The Peninsula) Bank of Tokyo-Mitsubishi UFJ (BTMU), Japan's largest lender, hopes to secure a licence for its Malaysian unit to expand operations by providing Islamic loans in the local currency.
This would allow BTMU Malaysia, a wholly owned unit, to meet the needs of existing clients for Islamic loans in ringgit, the unit's Chief Executive Naoki Nishida said.
He said the bank might obtain the licence next year and hoped to start such lending in the near future, though other issues such as accounting systems also needed to be resolved.
Nishida was speaking after BTMU earlier in the day became the first Japanese commercial bank to issue Islamic bonds, selling $25m of sukuk in a US dollar tranche and 2.5bn yen ($22.9m) in a yen tranche.
Its issue underlined growing interest in Islamic finance among big, international conventional banks. Goldman Sachs raised $500m with its debut sale of sukuk earlier this month, while France's Societe Generale set up a sukuk programme in Malaysia this year.
Currently, BTMU's Islamic operations are only allowed to provide loans in currencies other than ringgit and they conduct nearly all transactions in US dollars. That is the reason why BTMU's first sukuk issue, part of a $500m multi-currency sukuk programme established in Malaysia in June, was not denominated in ringgit.
"We did not choose ringgit because of the lack of ringgit assets on our books," said Nishida, noting that issuing ringgit sukuk at this stage would have entailed negative carry on the cost of funding.
BTMU Malaysia serves large Malaysian firms and government-linked companies, particularly those with operations abroad in the oil and gas, palm oil and real estate sectors.
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