KUALA LUMPUR (Oct 8): A corporate development is brewing at Public Bank Bhd (KL:PBBANK), sources say, with the country’s third-largest banking group by assets believed to be undertaking a potential acquisition of a related company.

Industry sources say the development is in relation to LPI Capital Bhd (KL:LPI).

In late night stock exchange filings, Public Bank and LPI Capital each announced that the trading of their shares on the stock market would be suspended from Wednesday (Oct 9), “pending an announcement”.

Public Bank is expected to hold a press conference on Friday (Oct 11) morning, according to an invitation sent to the media on Tuesday. Public Bank managing director and CEO Tan Sri Tay Ah Lek and “a few key stakeholders” will be sharing important updates and information related to a “major announcement”, the invitation said.

Main Market-listed LPI Capital wholly owns Lonpac Insurance Bhd, a leading general insurance provider in Malaysia.

LPI Capital’s latest annual report shows that, as at Jan 24, Consolidated Teh Holdings Sdn Bhd held a 42.74% stake (or 170.27 million shares) in the insurer. Consolidated Teh Holdings is the private investment vehicle of the late Tan Sri Teh Hong Piow, the founder of Public Bank Bhd. Teh passed away in December 2022.

Based on LPI’s closing price of RM13 on Tuesday, Consolidated Teh Holdings' stake in the insurer was worth RM2.21 billion. Teh had also held a direct 1.31% stake in LPI Capital.

LPI Capital’s other major shareholder is Sompo Japan Insurance Inc, with a 7.76% stake.

The late Teh held all the shares in Consolidated Teh Holdings with the exception of one share, held by a Tay Mui Leng, according to CTOS data. Tay and Diona Teh Li Shian (Teh’s youngest daughter), along with Chua Siew Chuan and Cheng Chia Ping, were listed as directors/officers of Consolidated Teh Holdings.

Consolidated Teh Holdings is also the biggest shareholder of Public Bank, with a direct holding of 21.64%. Based on the bank’s latest annual report that cited shareholding data as at Feb 29, the estate of the late Teh held a direct 0.64% stake in the bank but a total interest of 23.41%. LPI Capital held a direct 1.1% stake in the lender.

Lonpac is LPI Capital’s operational arm for the group’s insurance activities in Malaysia and Singapore. In Cambodia, LPI Capital has a 45% stake in Campu Lonpac Insurance plc.

LPI Capital made a higher net profit of RM313.73 million for the year ended Dec 31, 2023 (FY2023) compared with RM252.22 million the year before. This was on the back of a 16.5% increase in operating revenue to RM1.9 billion. That year, its net return on equity improved to 13.7% from 11.4% the year before. The group rewarded shareholders with a total dividend of 66 sen a share, amounting to RM262.9 million or a payout ratio of 83.8%.

For the first half ended June 30, 2024, LPI Capital’s net profit came in 30.7% higher year-on-year to RM179.29 million. It declared a first interim dividend of 30 sen a share. In the notes accompanying its financial statements, LPI said demand for insurance is expected to increase in the coming quarters with the government boosting spending in the semiconductor industry, building manufacturing capabilities and expanding public infrastructure.

Meanwhile, Public Bank also holds a 30% stake in AIA Public Takaful Bhd.

LPI’s share price of RM13 at the Oct 8 market close gives the company a market capitalisation of RM5.18 billion. The shares were up by 22 sen or 1.72% from their Oct 7 closing of RM12.78.

Public Bank shares were up by a sen or 0.22% to RM4.57 at the market close, giving the company a market cap of about RM88.71 billion.