DBS Group is rumored to be considering acquiring Alliance Bank to enter the Malaysian market.

According to foreign reports, two insiders said that DBS Group is considering acquiring a 29.1% stake in Alliance Bank from Temasek Holdings. The stake is currently worth about US$460 million (RM2.02 billion).

Temasek is the largest shareholder of DBS Group, holding 28.9%.

One of the sources said that other options for DBS Group to enter Malaysia include acquiring the Malaysian retail banking assets of Kuwait Finance House. The assets are worth more than US$500 million and have been put up for sale.

However, the source said that the discussions are still in a very early stage. Any formal negotiations for the acquisition of Malaysian bank stakes will require the approval of the Central Bank of Malaysia (BNM).

These two sources declined to be named because the talks on potential acquisitions are confidential.

A spokesperson for DBS Group said, "We do not comment on market rumors and speculations." Temasek also declined to comment.DBS Group is the largest bank in Southeast Asia by asset size, while Alliance Bank is the second smallest listed bank in Malaysia in terms of total assets in the banking sector.

Alliance Bank and the central bank did not respond to requests for comment.

The Kuwaiti Monetary Authority said that the process of selling its Malaysian retail banking business portfolio is in the initial stage and cannot share more information.DBS Group is the only Singaporean bank without retail banking operations in Malaysia. Its competitors, Oversea-Chinese Banking Corporation (OCBC) and United Overseas Bank (UOB), both conduct retail banking operations in Malaysia.

In August last year, DBS Group completed the acquisition of Citigroup's consumer banking business in Taiwan.DBS Group just announced on Thursday that it achieved the highest quarterly net profit in history in the third quarter.

The last time DBS Group tried to acquire Alliance Bank's shares from Temasek was in 2012. According to sources at that time, due to regulatory obstacles, this plan failed to materialize.

According to sources familiar with DBS Group's plan to enter Malaysia, the government led by Malaysian Prime Minister Anwar Ibrahim has a more open attitude towards investment to promote economic growth.DBS Group's intention to enter Malaysia comes at a time when Malaysia's economic prospects are improving. New infrastructure projects and investments are expected to lead to a surge in credit growth.