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Despite initial optimism over investor interest and lucrative prospects in the banking industry, yesterday’s auction for the Al Amanah Islamic Bank failed with only Banco de Oro making a bid.

Although an undisclosed number of bidders were pre-qualified for the auction, only BDO actually made a bid, forcing officials to declare the auction a failure.

Finance officials said they need to regroup and decide what to do with the country’s only Islamic bank—whether to schedule another public bidding or enter into a negotiated sale.

Al Amanah Islamic Bank was put on the block with the floor price set at P900 million for the government’s share representing up to 90 percent.

“I’m disappointed,” Al Amanah president Ali B. Sanki said after the failed auction. “There are a lot of investors who do not understand Islamic banking.”

Finance officials originally expected the auction attract foreign Islamic bankers that have been waiting for the bank to be put on the auction block as well as local business groups.

The bank’s prospects were dramatically improved by the decision to allow it to operate as a regular bank as the Bangko Sentral ng Pilipinas (BSP) approved the proposal to let it perform conventional banking functions for at least five years after it is privatized.

The decision of the BSP’s Monetary Board paved the way for the bank’s privatization, making it more attractive to prospective buyers that have been waiting for the bank to hit the auction block.

Despite the perk, however, only the Sy-owned BDO materialized at the auction, making it twice in a row that the government has failed to privatize two of its big-ticket items for sale this year.

Earlier, the auction for the former Iloilo airport was also declared a failure. Four of five qualified bidders showed up and made their respective bids but none met the floor price of P2 billion.

Traditional Islamic banking laws prohibit Islamic banks from charging interests on loans but the BSP earlier said that if Al Amanah would be able to do regular banking, it would realize some income in the meantime.

After the prescribed period, however, the BSP said Al Amanah would revert to a purely Islamic bank, performing banking operations according to Islamic banking laws.