Islamic banking group Kuwait Finance House (KFH) plans to spend up to RM4.4 billion (US$1.3 billion) to gain control of Malaysia's fourth-largest lender RHB Capital, a report said today.

The New Straits Times said that KFH, the largest Islamic bank in Kuwait, is working with a group of Middle Eastern investors who plan to turn RHB into a giant Islamic financial service entity.

It said that under the deal, KFH will spend up to US$2.2 billion for Utama Banking Group's stake in debt-ridden Rashid Hussain Bhd (RHB), the parent of RHB Capital, while an additional RM2.2 billion would be used to recapitalise the group.

Expansion

The deal would see the revitalised RHB Capital shed its non-converted Islamic assets, with proceeds to be used to expand the group's Islamic business. Its branch network would be expanded to Singapore, Thailand and Indonesia.

According to the report, the Malaysian government had been told that as much as RM12 billion could flow into Malaysia as foreign direct investment.

Hong Kong's Primus Pacific Partners Ltd is a rival bidder for Utama Banking Group's stake in RHB, with a plan to wipe 50 percent off its debts and the balance to be redeemed over three years.