KUALA LUMPUR, (Reuters) – Dubai Financial Group has refused an offer to buy preference shares in Malaysia’s Bank Islam, in which it holds a 40 percent stake, the Malaysian lender said on Thursday.

Bank Islam, which is Malaysia’s No 2 sharia bank, had offered preference shares to its shareholders in April to raise up to 540 million ringgit ($156 million).

Islamic banking group BIMB Holdings Bhd owns 51 percent of Bank Islam and Lembaga Tabung Haji, or the Malaysian pilgrims fund, holds the remaining 9 percent.

Both Malaysian shareholders took up the share offer, allowing Bank Islam to raise its Tier 1 capital by 324 million ringgit, Bank Islam said in a statement.

“Dubai Financial has not taken up the offer to subscribe to its portion of the (share offer) by 30 September 2009 amounting to 216.0 million ringgit,” Bank Islam said.

“Pursuant to the terms of the (share offer), Bank Islam will now offer the said portion to BIMB Holdings and Lembaga Tabung Haji on a pro-rata basis.”

Both shareholders have to decide whether to take up the offer within seven days, it said.

There has been talk of a change in Bank Islam’s shareholding in the past year, with speculation that Dubai Financial, which is part of Dubai Group, would sell its stake to Maybank Islamic.

The Dubai investor had dismissed such talk in February, saying it was “a long-term strategic investor” in Bank Islam.

A Malaysian newspaper report on Thursday had cited unnamed sources as saying the Dubai firm would eventually sell its stake in Bank Islam. The Dubai company could not be reached for comment, the paper said.