By Nam Hyun-woo
Financial firms are starting the New Year with a drive for overseas expansion through mergers and acquisitions (M&As).
According to NongHyup Financial Group, Wednesday, it expects to reach an agreement on an acquisition of a microfinance firm in Cambodia by the end of the month.
Like other countries in the region, Cambodia's microfinance market has lower barriers against foreign financial firms. Along with NongHyup, other Korean financial groups are eyeing microfinance markets in Southeast Asia as additional revenue sources.
If the acquisition deal closes successfully, it will be the group's latest move in Cambodia, which is rising as the group's key Southeast Asian market.
Last month, NongHyup Financial Group Chairman Kim Yong-hwan met Cambodia's Posts and Telecommunication Minister Tram Iv Tek in Seoul and agreed the group will help Cambodia Post's entry into the financial service.
An official at the group said it seeks to utilize its expertise in agricultural financing for its businesses in Southeast Asian countries, which have high demand in the domain. NongHyup Financial is a financial holding firm of the National Agricultural Cooperative Federation, or NongHyup.
Industrial Bank of Korea (IBK) is also ratcheting up its M&A efforts. According to sources, IBK is close to acquiring two banks in Indonesia.
The acquisition, if successful, will be the bank's first overseas acquisition deal.
Under Indonesian regulations, foreign financial institutes cannot buy more than a 40 percent stake in one Indonesian bank. They have to approach at least two banks after gaining approval from the government there.
"This comes as a tricky part," an IBK official said. "Because we can apply for a banking license after acquiring two local banks, it is taking time, but our intention to buy two banks is solid."
Shinhan Bank is also reportedly looking for an expansion in Vietnam through acquiring more banks.
In April last year, Shinhan Bank Vietnam acquired ANZ Bank's retail business in Vietnam. After its merger in December, the number of Shinhan Vietnam's business channels increased from 18 to 27, becoming the largest foreign bank in Vietnam.
Despite the financial firms' drive, their overseas business accounts for a small portion of their profit. According to NICE Investors Service researcher Chae Myeong-seok, domestic banks' overseas branches account for less than 5 percent of their assets and less than 10 percent of their net profit.
"Domestic banks are facing structural limits in their growth and profitability and accelerating their overseas drives," Chae said. "Overseas expansion is a positive opportunity in terms of diversifying revenue sources and improving profitability, but at the same time may become a diminishing factor to the stability of their capital adequacy.
Financial firms are starting the New Year with a drive for overseas expansion through mergers and acquisitions (M&As).
According to NongHyup Financial Group, Wednesday, it expects to reach an agreement on an acquisition of a microfinance firm in Cambodia by the end of the month.
Like other countries in the region, Cambodia's microfinance market has lower barriers against foreign financial firms. Along with NongHyup, other Korean financial groups are eyeing microfinance markets in Southeast Asia as additional revenue sources.
If the acquisition deal closes successfully, it will be the group's latest move in Cambodia, which is rising as the group's key Southeast Asian market.
Last month, NongHyup Financial Group Chairman Kim Yong-hwan met Cambodia's Posts and Telecommunication Minister Tram Iv Tek in Seoul and agreed the group will help Cambodia Post's entry into the financial service.
An official at the group said it seeks to utilize its expertise in agricultural financing for its businesses in Southeast Asian countries, which have high demand in the domain. NongHyup Financial is a financial holding firm of the National Agricultural Cooperative Federation, or NongHyup.
Industrial Bank of Korea (IBK) is also ratcheting up its M&A efforts. According to sources, IBK is close to acquiring two banks in Indonesia.
The acquisition, if successful, will be the bank's first overseas acquisition deal.
Under Indonesian regulations, foreign financial institutes cannot buy more than a 40 percent stake in one Indonesian bank. They have to approach at least two banks after gaining approval from the government there.
"This comes as a tricky part," an IBK official said. "Because we can apply for a banking license after acquiring two local banks, it is taking time, but our intention to buy two banks is solid."
Shinhan Bank is also reportedly looking for an expansion in Vietnam through acquiring more banks.
In April last year, Shinhan Bank Vietnam acquired ANZ Bank's retail business in Vietnam. After its merger in December, the number of Shinhan Vietnam's business channels increased from 18 to 27, becoming the largest foreign bank in Vietnam.
Despite the financial firms' drive, their overseas business accounts for a small portion of their profit. According to NICE Investors Service researcher Chae Myeong-seok, domestic banks' overseas branches account for less than 5 percent of their assets and less than 10 percent of their net profit.
"Domestic banks are facing structural limits in their growth and profitability and accelerating their overseas drives," Chae said. "Overseas expansion is a positive opportunity in terms of diversifying revenue sources and improving profitability, but at the same time may become a diminishing factor to the stability of their capital adequacy.
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