Singapore's DBS Group Expands into Malaysia

By Yantoultra Ngui

SINGAPORE (Reuters) – Singapore's largest lender, DBS Group Holdings Ltd (OTC: DBSDY), is considering expanding into Malaysia through potential acquisitions in local banks, including a smaller bank by assets.

Potential Acquisitions

DBS is looking to purchase Singapore's state investor Temasek's 29.1% stake in Alliance Bank Malaysia Bhd, currently valued at around $460 million. Temasek is the largest shareholder in DBS, holding a 28.9% stake, according to LSEG data.

Additionally, DBS is exploring options to buy Kuwait Finance House's retail banking assets in Malaysia, valued at over $500 million and currently up for sale.

Early Stages

Discussions are in their infancy, and any formal negotiations would require approval from Bank Negara Malaysia, the Malaysian central bank. Sources remained anonymous due to the confidential nature of the talks.

DBS representatives stated, "We do not comment on market rumours and speculation," while Temasek declined to comment. Both Alliance Bank and Bank Negara Malaysia did not respond after business hours.

Kuwait Finance House noted that the sale process for its Malaysian retail banking portfolio is still in preliminary stages.

Market Presence

DBS is the only major Singaporean bank without retail operations in Malaysia, unlike Local rivals Oversea-Chinese Banking Corporation and United Overseas Bank (OTC: UOVEY).

DBS's expansion plan coincides with positive economic forecasts for Malaysia, where new infrastructure projects and investments are expected to increase credit growth. Malaysia's economy expanded by 5.9% annually in the second quarter, the fastest growth in 18 months.

Strategic Growth

Under outgoing CEO Piyush Gupta’s 15-year leadership, DBS has become a regional banking powerhouse through acquisitions in markets like China, India, Indonesia, and Taiwan. Just last August, DBS completed the acquisition of Citigroup's consumer banking operations in Taiwan. Gupta has mentioned seeking 'bolt-on acquisitions' to further regional growth.

In March next year, Deputy CEO Tan Su Shan will assume leadership, marking the first woman to head the bank. Recently, DBS reported its highest-ever quarterly net profit attributed to record fee income.

DBS previously attempted to acquire Temasek's stake in Alliance Bank in 2012 but faced regulatory hurdles. The current Malaysian government under Prime Minister Anwar Ibrahim is keen to attract investment to stimulate economic growth, according to sources aware of DBS’s plans.