This article first appeared in The Edge Malaysia Weekly on July 7, 2025 - July 13, 2025

MBSB Bank Bhd (KL:MBSB) plans to divest its asset management business to the Salaam group, Australia’s largest shariah-compliant wealth services provider, in a move that would mark the latter’s entry into Malaysia, industry sources say.

Its divestment of MIDF Amanah Asset Management Bhd to Salaam is subject to regulatory approvals and it will likely take “a few months” for a deal to be completed.

MBSB, the country’s second-largest standalone Islamic bank after Bank Islam Malaysia Bhd (KL:BIMB), had late last year issued a request for proposal to potential suitors, The Edge reported in January this year.

At that point, MBSB had been exploring all possible options for MIDF Amanah Asset Management, including getting a strategic equity partner to come in and beef up the business, or undertaking an outright sale.

“MBSB recently made the decision to sell the business to Salaam,” a source tells The Edge.

The Salaam group provides shariah-compliant wealth creation and personal finance solutions to Australia’s one million-strong Muslim community, its website shows.

MIDF Amanah Asset Management is a relatively small player, with assets under management (AUM) of under RM1 billion. MBSB had inherited the business following its RM1.01 billion acquisition of Malaysian Industrial Development Finance Bhd from Permodalan Nasional Bhd in October 2023.

A CTOS search shows that MIDF Amanah Asset Management slipped into the red in the financial year ended Dec 31, 2024 (FY2024), having registered a net loss of RM9.32 million compared with a net profit of RM1.12 million in FY2023. Revenue fell by a sharp 82.8% to RM1.78 million from RM10.34 million in FY2023.

In FY2022, it posted a net loss of RM4.92 million on the back of RM2.87 million in revenue. 

MBSB’s decision to sell MIDF Amanah Asset Management does not come as a surprise to analysts, given that it is a non-core and sub-scale business for the group.

Increasingly, local banking groups are choosing to either partially or wholly divest their stakes in their asset management business to focus on their core strengths, preferring instead to work with strategic partners. “They want to focus on the distribution [of the products], not the production. That’s not their core strength,” says an industry source.

One of the more significant divestments in recent years was in July 2022 when Affin Bank Bhd (KL:AFFIN) sold its entire 63% stake in Affin Hwang Asset Management Bhd (AHAM) — then the country’s third-largest asset management firm — to private equity group CVC Capital Partners for a handsome RM1.42 billion.

Although AHAM was a strong contributor to Affin Bank’s earnings at the time, the offer from CVC was considered too good to pass up, bank officials said then. The offer came at a time when Affin Bank was in urgent need of capital to fund its Islamic banking business.

The AHAM transaction in 2022 valued the firm in its entirety at RM2.25 billion, which translated into a price-to-AUM of 3.08%, above the average of 2.64% for past merger-and-acquisition deals involving asset management companies since 2014. On a price-to-earnings ratio basis, the deal was valued at a multiple of 19.7 times compared with the past average of 15.2 times.

At the time, AHAM had AUM of about RM80 billion.

It is widely known in the industry that Affin Bank is on the search for another asset management business to acquire. Most banking groups today either fully or partly own an asset management business in order to be able to provide their clients with a full suite of offerings.

It is not clear how much Salaam will be forking out for MIDF Amanah Asset Management, but given the latter’s relatively small size, the sum is likely to be “insignificant” in relation to MBSB’s earnings, an industry source says.

MBSB reported an 8.1% year-on-year rise in net profit to RM84.68 million for the first quarter of its financial year ending Dec 31, 2025, thanks to higher net interest income and lower provisions. Provisions that quarter fell 37% to RM28.13 million.

In August last year, Australia’s Melbourne Capital Group, a private wealth management company, acquired a Malaysian firm (formerly known as Blueprint Planning) and its capital markets service licence, enabling the group to broaden its wealth management offerings to Malaysia. It did not disclose the acquisition price.

Malaysia’s fund management industry has been growing, with AUM reaching a new high of RM1.1 trillion last year — surpassing the RM1 trillion mark for the first time — compared with RM975.5 billion in 2023, on the back of strong global equity market performance, according to data from the Securities Commission Malaysia. 

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