Shinhan to strengthen foothold in ASEAN
By Kim Jae-kyoung
Cho Yong-byoung Shinhan Bank CEO
Shinhan Bank CEO Cho Yong-byoung said that the bank will step up efforts to strengthen its foothold in Southeast Asia to capitalize on opportunities created by the launch of the ASEAN Economic Community (AEC).
“The establishment of the AEC means the birth of a powerful economic bloc with the world’s seventh largest GDP and over 600 million people,” Cho said in a recent interview.
“This will bring great opportunities for Korean financial firms looking for new growth engines.” The AEC is an agreement among the 10 ASEAN member nations to create a single market with the free flow of goods, capital and skilled labor by 2025.
He added that the ASEAN market is particularly attractive because net interest margins (NIMs) are still very high in the region.
“In Korea, NIMs have been stuck at below 2 percent, while those in many of ASEAN member states stand at over 4 to 5 percent,” he said. “Also, the penetration rate of financial services still remains very low in many parts of the region.”
Currently, Shinhan has operations in five ASEAN nations _ Singapore, Vietnam, Indonesia, Cambodia and the Philippines. It plans to open an office in Myanmar this year. Its revenue from the region accounted for 42 percent of the lender’s global revenue in 2015.
The chief executive said that ASEAN is a market that fits the bank’s globalization strategy.
“We are looking to expand our presence in markets where Korean firms have operations and that we well understand,” he said.
“Also, there should be cultural similarities and we should be able to secure competitive advantages there in the future,” he added. “In this regard, ASEAN is the region where we should put our strategic focus.”
Cho stressed that in order to ensure sustainable growth in ASEAN, the lender will employ a localization strategy.
“We plan to expand our customer base by providing the best financial services tailored to local markets and customers,” he said.
“To that end, we will establish an organization able to maximize that goal and continue to introduce market-tailored products and services,” he added. “At the head office in Seoul, we will create a global matrix structure to support it and set up a customized business model.’
In particular, he said that the bank will pursue a two-pronged strategy in globalization.
“For expansion in ASEAN, we will push for additional merger and acquisitions (M&A) while opening new branches and subsidiaries in promising markets,” he said. “We are looking at multiple targets for M&As in strategic markets in the region.”
When asked which market he is most attracted to, the CEO did not single out one market.
“It is difficult to pick just one market among ASEAN nations because every market is important. We will try our best to achieve success, as we have had in Vietnam, in other markets,” he said.
On the back of robust growth in the ASEAN region, Cho aims to turn Shinhan into Asia’s leading global bank by increasing its portion of overseas revenue to 20 percent by 2020 from the current 10.5 percent. It was 5.37 percent in 2011 and 8.7 percent in 2014.
Shinhan has 142 branches in 19 nations across the globe. Among them, it has 120 outlets in 14 countries in Asia.
This year, Shinhan plans to merge Bank Metro Express (BME) with Centratama National Bank (CNB) to gain a stronger foothold in Indonesia, which it believes will help Shinhan establish Asia’s financial belt linking strategic markets _ Japan, China, Vietnam, Indonesia and India. It acquired BME in 2014 and CNB in 2015.
In Vietnam, the bank plans to get approval this year to open four more branches, which will increase its outlets there to 18, the most extensive network among foreign banks operating in Vietnam.