By Yantoultra Ngui
SINGAPORE (Reuters) – Singapore’s largest lender DBS Group Holdings Ltd (OTC:) is exploring expansion into Malaysia with possible stake acquisitions in banks in its Southeast Asian neighbor, including one of Malaysia’s smallest banks by assets, two sources said.
DBS is exploring a purchase of Singaporean state investor Temasek’s 29.1% stake in Alliance Bank Malaysia Bhd, the two sources with knowledge of the matter said, a portion currently valued at about $460 million.
According to LSEG data, Temasek is DBS’s largest shareholder with a 28.9% stake.
Other options to expand into Malaysia include buying Kuwait Finance House’s Malaysian retail banking assets worth more than US$500 million, which have been put up for sale, one of the sources said.
However, deliberations are at a very early stage, the sources said, and any formal negotiations on an acquisition of a stake in a Malaysian bank would require approval from the Malaysian central bank, or Bank Negara Malaysia.
The two sources declined to be named because discussions about the possible acquisitions were confidential.
“We do not comment on market rumors and speculation,” said a spokesperson for DBS, Southeast Asia’s largest lender by assets. Temasek declined to comment.
Alliance Bank, Malaysia’s second-smallest listed bank by total assets, and Bank Negara Malaysia did not respond to requests for comment after business hours on Friday.
Kuwait Finance House said the process for the sale of its retail banking portfolio in Malaysia was at a preliminary stage and it could not share any additional information.
DBS is the only Singaporean bank with no retail banking operations in Malaysia. Local rivals Oversea-Chinese Banking Corporation and United Overseas Bank (OTC:) both have retail banking operations in Malaysia.
DBS’s plan to enter Malaysia comes amid an improving economic outlook for the Southeast Asian country, with new infrastructure projects and investments expected to result in a surge in credit growth.
In the second quarter, the Malaysian economy grew by 5.9% year-on-year, the fastest growth in 18 months, driven by higher household spending, exports and investment. The currency, the ringgit, is Southeast Asia’s best performing currency this year.
‘BOLT-ON ACQUISITIONS’
Under the 15-year tenure of outgoing CEO Piyush Gupta, DBS emerged as a regional banking power, buoyed by acquisitions that created a significant presence in markets such as China, India, Indonesia and Taiwan.
DBS has completed the acquisition of Citi Group (NYSE:)’s consumer banking operations in Taiwan in August last year. In July, Gupta said DBS was looking to make additional acquisitions that would support further strategic expansion in the region.
Tan Su Shan, head of DBS’s institutional banking group and deputy CEO, will take over from Gupta in March next year, making her the first woman to lead the bank. On Thursday, DBS posted its highest-ever quarterly net profit for July-September, with record fee income.
DBS last tried to buy Temasek’s stake in Alliance Bank in 2012. These plans fell through due to regulatory hurdles, sources said at the time.
The current Malaysian government led by Prime Minister Anwar Ibrahim has been more forthcoming and open to ideas and investments aimed at boosting economic growth, sources with knowledge of the DBS plan for Malaysia said.
