Globalization Shinhan to Open Subsidiaries in Tokyo, Ho Chi Minh
By Kim Jae-kyoung
Staff Reporter
``Selection and Concentration''
These are two watchwords in Shinhan Bank's globalization strategy to ride out the ongoing financial and economic storms. Instead of pursing quantitative expansion, the lender seeks to narrow down its target markets and focus on them.
Under the principle of ``selection and concentration,'' it plans to set up a subsidiary in Toronto, Canada, in March this year, followed by establishing a subsidiary in Tokyo, Japan in the first half to reflect its strategic importance. It also plans to set up its second corporate body in Vietnam to capitalize on the rapidly growing market there.
Since the lender, the flagship of Shinhan Financial Group, already has branches in Japan and Vietnam, the subsidiaries are expected to generate stable profits and capture economies of scale by gaining more ground in the countries.
``We expect to minimize the first mover disadvantages in these areas and secure good return on investments within a short space of time by leveraging existing branches there,'' Cho Yong-byoung, head of Treasury & Global Business Group, said.
The lender said that although it must make some minor changes, the ongoing turmoil will not change its long-term globalization strategy, noting that it still recognizes that its long-term growth potential lies overseas.
Shinhan is considered well positioned for globalization. Shinhan Financial Group has successfully expanded its business line-up by taking over Goodmorning Securities in April 2002, Chohung Bank in June 2004 and LG Card in March 2007.
Over the past few years, the group focused on becoming the country's top financial services provider by aligning itself with Shinhan Bank, Shinhan Card and other subsidiaries. It has a very balanced structure between banking and non-banking sectors and yielded 53.7 percent of its total net profits from its non-banking sector in 2007.
Meanwhile, it has tried to strengthen internal capabilities by enhancing customer relations, reducing costs and nurturing human resources. The bank is now placing top priority on capital management by forming a balanced portfolio of the bank's assets.
When it comes to globalization, it is believed that Shinhan is ahead of its rivals, such as Kookmin and Woori, as its CEO, Shin Sang-hoon, has a very clear and firm belief about globalization that is different from his peers'.
While heads of other major lenders are looking to become the biggest lender here before going abroad in earnest, Shin believes it's meaningless to become No. 1 in the local market by outpacing only a few domestic competitors.
``I don't think it is a good idea to enlarge size only to become the biggest lender here. The most important factors in M&As is profitability and synergy,'' Shin said in an earlier interview with The Korea Times.
``Although there's been a minor delay, we have no plan to either drop or change any of our long-term globalization plans. Once the global market gets back on track, we will push ahead with our original plan,'' he added.
As of the end of January, Shinhan Bank has 42 overseas units in 12 countries, including 10 overseas branches, seven corporate entities and one representative office, and corporate bodies in Kazakhstan, the U.S., China, Hong Kong, Cambodia, Vietnam and Germany.
Currently, Shinhan yields only some 4 percent of its income from abroad. The bank has set a goal to increase overseas revenue to 10 percent and increasing the number of overseas units to more than 100 by 2012.
For successful globalization, Shinhan is also pursuing a localization strategy to gain medium- and long-term competitiveness in other countries, rather than just open more overseas branches to support Korean firms there.
``We have pressed ahead with our overseas expansion since 2007, with a business model tailored for successful localization in a specific market,'' Cho said.
``The reason Shinhan has performed better than other Korean banks in overseas markets is that it has employed a business strategy targeting localization by advancing early into rapidly-growing markets, such as Vietnam, India and China,'' he added.
Shinhan Bank has recently upgraded its Global Business Department to a Global Business Group to bolster its support and control of overseas networks in a bid to transfer the lender's core capabilities in marketing, customer relations and risk management.