Kuwait Finance House pivots to Turkey as it mulls Malaysia exit

Kuwait Finance House (KFH) is exploring the possible sale of its Malaysia unit, as the Islamic lender looks for a leaner structure while seeking greener pastures through its Turkish franchise.

KFH, Kuwait's second largest lender and one of the world's oldest Islamic banks, is restructuring activities ahead of a planned divestment by its largest shareholder, the Kuwait Investment Authority (KIA).

Last week, KFH said it had hired Credit Suisse to give advice on its options, including the potential sale of a
Malaysia unit launched in 2005 that serves as a hub for Southeast Asia. KFH did not give further details; a spokesman declined to comment.

A shift away from Malaysia, where KFH holds a valuable license but lacks scale, would help it focus on Kuveyt Turk, the largest Islamic bank in Turkey with over 500 branches.

"With looking to leave Malaysia, our view is that KFH is reviewing all its investments outside of Kuwait and not just Malaysia," said Mahin Dissanayake, a director at Fitch Ratings.

"Certainly Turkey has a lot of trading links with the Gulf. There's an Islamic market there that hasn't been tapped that much. The opportunities are there, there's an entry point."

Kuveyt Türk, 62 percent owned by KFH, is in expansion mode. It plans to launch Germany's first full-fledged Islamic bank in July as a gateway to Europe and has applied to issue a 1 billion Turkish Lira ($376 million) Islamic bond as it secures lower-cost financing.

It also plans to establish a wealth management unit to widen its product range, according to two sources with direct knowledge of the matter. Kuveyt Turk declined to comment, saying it would disclose expansion plans shortly.