By Oh Young-jin
Wednesday’s resignation of Hana Financial President Kim Jong-yeol came at a time when the fourth largest financial group can’t afford any new distractions in its protracted bid to take over the Korea Exchange Bank (KEB).
It is hard to tell what caused Kim’s sudden resignation but he as the No. 2 man in the group he had been heavily involved in Hana’s negotiations to buy a controlling stake of KEB from the Texas-based Lone Star fund.
Although Hana Chairman Kim Seung-yu is leading the bid, Kim Jong-yeol’s departure may disrupt the takeover effort at a time when the deal is at a make-or-break stage.
Regulators appear to be dragging their feet in giving their final approval. Some worry that election-year politics may derail the Hana-Lone Star deal.
Hana needs to contain the fallout from Kim’s resignation to a minimum.
If there are any follow-up developments such as bombshell statements that fuel speculation that Hana is embroiled in an internal power struggle, it would be as good as helping naysayers among regulators. They could argue that Hana doesn’t deserve to purchase KEB, if it can’t keep its own house in order.
Still fresh in the public’s memory is the power struggle in Shinhan Financial Group where President Shin Sang-hoon was forced to leave after conspiracy by Chairman Ra Ung-chan and Bank CEO Lee Baek-soon. Like Shin, Kim was a lifetime colleague of Chairman Kim.
Some reports also say that Chairman Kim may not seek another term as Hana’s head but this is not confirmed.
If Kim resigned following “advice” from the government, it would put the issue in a different light.
Already, some have said that those in power flew into a rage after it was reported that Hana used social networks to attack the KEB union. Hana’s PR team tried to negotiate the article out of the paper in question and Chairman Kim was not aware of it. Hana’s PR team was not available for comment.
By Kim Jae-won
Rumors are raging as to why Hana Financial Group President Kim Jong-yeol has suddenly stepped down.
One scenario is that Hana made him the fall guy for reports that it had hired part-time workers to upload postings critical of the Korea Exchange Bank’s (KEB) union. The union is leading a drive to thwart Hana’s bid to take over KEB from Texas-based Lone Star funds.
This report drew the attention of authorities, who sought to have Hana rectify its misdeeds at a time when the ruling party is losing ground ahead of April’s National Assembly and December’s presidential elections.
Kim was the No. 2 in the fourth largest financial group and seems to have been made the scapegoat. He cleared his schedule for Wednesday and met his boss, Chairman Kim Seung-yu. During a telephone interview Wednesday night, Kim Jong-yeol told The Korea Times, “I notified Chairman Kim of my decision when I dropped by his office at 2:30 p.m.”
The word “notified” is rarely used to describe a junior employee’s action toward a senior colleague, perhaps signifying he was displeased.
Some sources say that immediately after the meeting with the chairman, Kim called in a wire service reporter and had a one-one talk. He was described to be in an excited state. He didn’t take questions, only saying what he had prepared for the next 30 minutes.
The second scenario is that he lost the race to succeed Chairman Kim and was kicked out. If this is true, it could mean another power struggle, echoing the debacle at Shinhan Financial in 2010 and 2011.
“President Kim and Hana Bank CEO Kim Jung-tae have been on icy terms for a long time,” a source said.
The source added that it is very unusual for Kim to step down without any premonition and assumed that there should be a good reason behind the decision.
“Kim is the most reasonable man I’ve ever met. He is very accurate and does business by rule and principle. This is unexpected behavior.”
Kim said Wednesday that he offered to resign to make Hana’s deal with KEB successful as he was targeted by the KEB trade union as the commander of an invader.
“A man should retire in a clean and tidy manner. I worry that Hana will follow a similar path as Shinhan,” the source went on to say.
Shinhan Chairman Ra Eung-chan and Bank CEO Lee Baek-soon tried to oust President Shin Sang-hoon in September 2010, but failed to do so and faced a strong counterattack revealing their wrongdoings. All three stepped down as the financial regulator and the prosecutors launched investigations over their embezzlement and breach of trust.
Some suspect the Hana chairman’s trust in Kim has weakened as the KEB deal drags on. They say the chairman wanted to show his will to seal the deal completed by pressuring the regulator who has delayed proceedings, to approve it, with Kim’s resignation.
Industry watchers wonder how this will unfold and affect the KEB sale, the biggest acquisition deal in Korea’s finance history, for which the company has mobilized all its assets. The financial authorities are examining Hana’s application for the 3.9 trillion won ($3.4 billion) contract with Lone Star Funds to buy KEB’s 51 percent stake, which expires at the end of February if the government does not approve it before then.
Hana is expected to appoint Kim's successor via a board meeting in February and confirm it at a shareholders meeting in March. Hana Bank Executive Vice Presidents Kim Byeong-ho and Lee Hyeon-ju, who have both contributed to striking the KEB deal, are strong candidates, inside sources say.
Oh Young-jin is The Korea Times' publisher and president. He began to work at The Korea Times in 1988 as a sports writer. Then, he worked as a reporter and later as editor at the City Desk, Business Desk and Politics Desk. He worked as chief editorial writer before taking the current position. He has a keen interest in politics as well as defense affairs.