Bank Islam Malaysia, the country's oldest Islamic bank, announced yesterday that it has become profitable again after two years of losses and plans to set up an investment banking division.

Bank Islam recorded a profit before tax of RM165.8 million (US$47 million) for the first six months ended 31 Dec 2006, compared with a loss of RM43.2 million in the same period a year earlier. Revenue for the period totalled RM467.8 million.

This translated into a 17.6 percent return on shareholders equity, compared to a negative return previously, its managing director Zukri Samat said in a statement.

He said an efficient turnaround plan, which included strategic measures to grow new businesses and an aggressive loan recovery program, helped accelerated the bank's return to profitability after two years of losses.

"We (will) reposition the bank to take advantage of existing and new opportunities arising from the development of Malaysia as an international Islamic financial center," he said.

"We have begun our re-branding exercise to enhance our brand and to improve on our service delivery as part of our overall strategy to stay competitive. Given all these initiatives, we expect our future earnings to be driven by growth of our existing and new businesses."

Recruiting people

Zukri was quoted by Bernama as saying that Bank Islam was working on plans to set up an investment bank.

"We started in November last year and are still recruiting people but we are not going full-fledged," he said. No other details were immediately available and bank officials could not be reached for comments.

Bank Islam, a subsidiary of government-controlled BIMB Holdings Bhd, suffered huge losses for the financial year ended June 2005 due to large provisions for non-performing loans given to companies in Bosnia-Herzegovina and South Africa.

Last year, it sold a 40 percent stake to Dubai Investment Group LLC to raise fresh capital.

Islamic banks operate under Shariah laws, which ban investments that pay interest or that derive profit from alcohol, tobacco, pork, gambling or weapons.