Lee Hyo-jin covers the Bank of Korea, the banking industry and broader financial news. Her previous beats include foreign affairs, North Korea and general reporting on Korean society.
Align Partners' BNK-JB merger proposal draws fierce regional opposition
JB Financial Group's headquarters in Jeonju, North Jeolla Province, left, and BNK Financial Group headquarters in Busan / Korea Times file
By Lee Hyo-jin
Activist fund Align Partners Capital Management's proposal to merge BNK Financial Group and JB Financial Group has sparked fierce opposition from regional business groups and labor unions, which argue the deal would prioritize short-term shareholder returns at the expense of the public role and regional identity of local lenders, industry officials said Friday.
Align holds a 14.83 percent stake in JB Financial, making it the group's second-largest shareholder, and owns more than a 1 percent stake in BNK Financial.
JB Financial is the holding company of Jeonbuk Bank and Kwangju Bank, while BNK Financial controls Busan Bank and Kyongnam Bank.
The activist fund has urged the two regional financial groups to review the strategic merits of a merger, arguing that consolidation would strengthen their long-term competitiveness. At a July 14 press conference, Align CEO Lee Chang-hwan asked the companies to announce by Aug. 7 whether they would begin a formal review and disclose any implementation plan when they report third-quarter earnings.
The proposal has since faced mounting opposition from regional business groups and labor unions, which have urged Align to withdraw the proposal.
"Undermining a financial group that has grown with deep roots in the region in pursuit of short-term investment gains would jeopardize the province's bid to become the country's third-largest financial hub," the North Jeolla-based Jeonbuk Chamber of Commerce and Industry said in a statement.
In a separate statement, the Gwangju Chamber of Commerce and Industry warned that merging two banking groups serving different regional economies would weaken support for local businesses.
Labor unions at the two financial groups' banking subsidiaries have also protested against the proposal.
Busan Bank's labor union argued that the proposed share exchange ratio would unfairly disadvantage BNK shareholders in a potential merger, given BNK's larger contribution to the combined group.
The labor union at Jeonbuk Bank, for its part, said a potential merger would ultimately weaken the group's operations.
"Although the proposal is being presented as a strategy to achieve economies of scale and support AI (artificial intelligence) investment, at its core, it is aimed at driving up the share price and allowing short-term investors to cash out," the union said. "This will ultimately result in organizational downsizing, widespread job losses and branch closures."
The union urged JB Financial's board to reject the proposal.
Kwangju Bank's labor union echoed those concerns, warning that a rushed review of the merger would weaken the public role of regional finance and ultimately reduce support for local companies and small businesses.
Industry insiders have also cast doubt on the feasibility of the merger. They said the proposal runs counter to the original purpose of regional banks, which were established to support local economies, as BNK Financial and JB Financial operate in separate markets with limited regional overlap.
“It would be difficult to secure approval from shareholders of both financial groups. Even if they reached an agreement, the chances of obtaining regulatory approval would be slim,” a banking industry official said.