“There are some very high-level discussions [going on]. It has become a negotiation point as the Malaysian government is seeking more concessions from the Singapore government in relation to the [Johor-Singapore] Special Economic Zone,” another source tells The Edge Malaysia.
DBS is said to be keen to advance the matter before Malaysia holds its next general election, given the current warm relations between both governments. (Parliament will automatically dissolve in mid-December 2027 if it serves its full five-year term.)
“They (DBS) figure they have a roughly two-year window, if not shorter. If they don’t work within this window, things won’t move, so they have to try hard now. DBS really wants to get this acquisition through,” the source says.
A DBS spokesman declined to comment.
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Earlier this year, DBS was widely reported to be interested in acquiring Vertical Theme’s 29.06% stake in Alliance Bank. Vertical Theme is the Malaysian bank’s largest shareholder.
On Sept 2, Bloomberg reported that the plan had stalled as Bank Negara Malaysia had yet to give its consent for the two parties to begin talks on a potential acquisition. DBS and Vertical Theme had submitted separate applications to Bank Negara “about eight months ago”, but had not heard back from the regulator, it reported, citing people familiar with the matter.
“There was no approval or rejection from Bank Negara; it just went silent. I guess that’s why they (DBS) need to negotiate at the government level,” another source tells The Edge Malaysia.
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Both DBS — Southeast Asia’s largest bank by assets — and Alliance Bank, the smallest banking group in Malaysia by the same measure, are backed by Singapore state investor Temasek Holdings.
Temasek holds a 28.3% stake in DBS. As for Alliance Bank, its largest shareholder, Vertical Theme, is 49%-owned by Duxton Investments, which is ultimately held by Temasek.
The remaining 51% stake in Vertical Theme is held by Langkah Bahagia, a private company controlled by Singapore-based hotel and property tycoon Ong Beng Seng, private equity RRJ Capital founder Richard Ong Tiong Sing and corporate adviser Seow Lun Hoo. All three are Malaysians.
Whether DBS will succeed in acquiring Vertical Theme’s stake in Alliance Bank remains to be seen. According to sources, some of the local banks are lobbying the government against DBS’s potential entry into Malaysia, given the already intensely competitive environment.
One source remarks, “There’s been pushback, especially from the big banks. And some of the smaller ones are asking, ‘Why not sell to us, instead of a Singapore bank?’”
Despite being the region’s largest bank, DBS does not have a commercial banking presence in Malaysia. Gaining a foothold here would plug a significant gap. Its relatively smaller Singapore rivals OCBC and UOB have long had operations in Malaysia and are thriving.
“If DBS comes in, with its strong balance sheet, connections and digital heft, local banks will definitely feel the heat,” comments a senior banker.
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DBS had an asset size of $841.9 billion as at end-June, while Alliance Bank’s was at RM84.58 billion ($26.59 billion). In comparison, the assets of Malayan Banking, the largest local lender, stood at RM1.07 trillion.
Industry observers say DBS is unlikely to be satisfied with only an associate stake (29.06%) in Alliance Bank. Strategically, it would make sense for it to eventually seek a controlling stake to consolidate the Malaysian bank’s earnings. Whether Bank Negara will allow this, however, remains to be seen. At present, there is a 30% cap on foreign ownership for Malaysian commercial banks.
In a recent interview with The Edge Malaysia, Bank Negara governor Abdul Rasheed Ghaffour was asked about further liberalisation on foreign ownership of banks. “If a shareholder — local or foreign — wants to increase their stake, we expect a stronger value proposition. We ask: what new products or services are you bringing to the market that is not available here How will this benefit Malaysia and Malaysians? These are the key questions we ask. What matters most is whether the proposal aligns with the Best Interest of Malaysia criteria set out in the law,” he said.
Meanwhile, Beng Seng’s interest in Alliance Bank — held through Vertical Theme — came under scrutiny in recent months following a corruption probe in Singapore, which raised questions about his suitability as a bank shareholder. It is understood that this may have prompted considerations for Vertical Theme to divest its stake.
The 79-year-old was fined $30,000 in August after pleading guilty to a charge of abetting the obstruction of justice in a corruption case linked to former transport minister S Iswaran. He avoided jail as the Singapore court exercised leniency due to his poor health.
As at Nov 14, Alliance Bank’s shares have shed 4.4% year to date to close at RM4.41, giving the bank a market value of RM7.63 billion.
