The signing of the agreement between Singapore and Malaysia’s prime ministers on the Johor-Singapore special economic zone (JS-SEZ) may have been a catalyst behind DBS’s reported decision to purchase Vertical Theme’s 29.1% stake in Alliance Bank Malaysia, say CreditSights analysts Karen Wu and Pramod Shenoi. Singapore’s and Malaysia’s leaders signed the JS-SEZ agreement on Jan 7.
Vertical Theme is 49% owned by Temasek Holdings via Duxton Investment & Development Pte. The remaining stake is held by RRJ Capital founder Richard Ong, hotelier Ong Beng Seng and corporate adviser Seow Lun Hoo through Langkah Bahagia Sdn.
On Jan 16, Bloomberg reported that Vertical Theme was considering selling its 29% stake in Alliance, which is one of Malaysia’s smallest-listed banks.
“A deal for Alliance would give DBS a foothold in Malaysia, where Singaporean rivals Oversea-Chinese Banking Corp. (OCBC) and United Overseas Bank Ltd. (UOB) already have an established presence,” Bloomberg noted.
In their Jan 20 report, Wu and Shenoi also point out that of the three Singapore banks, DBS has the smallest presence, with just one branch in Malaysia serving corporate clients. However, they note that DBS CEO Piyush Gupta said, during the bank’s 3QFY2024 results call, that Malaysia has always been a core market for DBS but it faced constraints due to regulatory or governmental issues.
All three banks have adopted different strategies for overseas expansions.
See also: UOB Kay Hian: A hidden gem poised to benefit from JS-SEZ
UOB has a bigger focus on Asean markets, especially in Malaysia, Thailand and Indonesia, which account for 20% of the bank’s loan book collectively. The bank also announced, on Jan 14, 2022, that it would acquire Citi’s retail and wealth businesses in Indonesia, Malaysia, Thailand and Vietnam. The acquisition of all four markets were completed in 2023.
Meanwhile, DBS has a bigger presence in Greater China, which accounts for 30% of the banks’ loans, as well as a presence in India with over 500 branches from its acquisition of Lakshmi Vilas Bank in 2020.
DBS also completed the acquisition of Societe Generale’s private banking business in Asia in September 2016 and completed the acquisition of ANZ’s wealth management and retail banking business in five markets, Singapore, Hong Kong, China, Taiwan and Indonesia in February 2018.
See also: Alliance Bank’s top shareholder Vertical Theme is said to consider sale to DBS
At the same time, OCBC has presence in Asean but only with Malaysia and Indonesia as core markets. Both countries contribute some 15% to the bank’s total loan book. OCBC also has a wholly-owned subsidiary in China as well as a 20% stake in the Bank of Ningbo. In addition, the bank acquired Wing Hang Bank in Hong Kong in 2014 and acquired Commonwealth Bank of Australia’s (CBA) Indonesian unit in 2024. OCBC, via its insurance subsidiary, Great Eastern Holdings , also acquired a Malaysian insurance business jointly owned by AMMB and MetLife in 2024. The bank, through Bank of Singapore, acquired Barclays’ wealth and investment business in Singapore and Hong Kong in November 2016.
As at 11.45am, shares in DBS, OCBC and UOB are trading at $43.40, $17.04 and $36.79 respectively.
