In a significant strategic shift, Singapore's largest bank has dramatically scaled back its ambitions to enter the Malaysian banking market. DBS Group Holdings Ltd. has withdrawn its initial application to acquire up to 49% of Alliance Bank Malaysia Bhd., replacing it with a more modest proposal for a 30% stake instead.
Regulatory Roadblock Forces Strategic Revision
According to sources familiar with the matter, DBS made this crucial decision after failing to secure approval from Bank Negara Malaysia, the country's central bank, for its original request. The initial 49% stake would have required a special waiver because Malaysian regulations typically limit foreign ownership in financial institutions to a maximum of 30%.
The people involved, who asked not to be identified due to the confidential nature of the discussions, indicated that the revised 30% request stands a much better chance of receiving regulatory approval. This adjustment would clear the path for DBS to begin formal negotiations with Alliance Bank's largest shareholder, Vertical Theme Sdn., a Malaysian holding company that enjoys backing from Singapore's state-owned investment giant Temasek Holdings Pte.
Complex Ownership Web and Strategic Implications
The ownership structure reveals intricate connections between the involved parties. Temasek holds a 49% stake in Vertical Theme through its subsidiary Duxton Investment & Development Pte. Interestingly, Temasek also maintains approximately 28.3% ownership in DBS itself, creating a complex web of financial relationships.
When approached for comments, representatives for both DBS and Vertical Theme declined to provide any statements. A spokesperson for Alliance Bank indicated the company was unaware of the matter, while Bank Negara Malaysia did not immediately respond to requests for comment.
Malaysian Market Access Crucial for DBS Expansion
This potential acquisition represents a strategic move for DBS to establish a meaningful presence in Malaysia, where its Singaporean competitors Oversea-Chinese Banking Corp. and United Overseas Bank Ltd. already operate successfully. As Southeast Asia's largest bank by total assets, DBS has been seeking to expand its regional footprint, making the Malaysian market an important strategic priority.
The market has shown some skepticism about Alliance Bank's prospects, with the bank's shares declining by 6% in Kuala Lumpur trading this year, underperforming the city's main benchmark index, which has fallen less than 2% during the same period. Alliance Bank currently maintains a market capitalization of approximately 7.7 billion ringgit ($1.9 billion).
This development highlights the challenges international banks face when navigating different regulatory environments across Southeast Asian markets, even when dealing with closely connected economies like Singapore and Malaysia.
