Sharia banks in Indonesia may offer bigger returns

Bank Mega Syariah Indonesia said demand for Islamic products could boost Islamic lender's ROE by 40%.

Beny Witjaksono, president director of Bank Mega Syariah Indonesia, the country's fourth-largest Islamic lender, told the Reuters Islamic Banking and Finance Summit he expected his bank to post a return on equity (ROE) of around 40 percent this year.

That would be in line with the trend in the sharia banking industry in Indonesia, and about twice the ROE for conventional banks.

Indonesian banks, both conventional and Islamic-compliant, have attracted strong foreign interest in recent years, with about half of the country's total banking assets in the hands of foreign-controlled lenders.

Islamic banking assets in Indonesia have seen annual growth of about 40 percent in recent years, but still account for just 2.5 percent of Indonesia's total banking assets of $270 billion, providing strong potential for growth.

"Our return on equity was above 40 percent in the past four years, except in 2008 when it was 11 percent because of large expansion," Witjaksono told the summit.
He forecast ROE growth would be sustainable at a similar rate in coming years.

View the full story in Reuters.