I’m currently managing director of Content and Business Planning at The Korea Times. Before I took the current position in early 2024, I served as managing editor in charge of both paper and online for over three and a half years. In 2015-2018, I worked as Singapore correspondent covering ASEAN nations.
'Big-three scandal' speeds up Shinhan Bank's transformation
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By Kim Jae-kyoung
'Big three scandal' speeds up Shinhan Bank’s transformation
By Kim Jae-kyoung
The year 2010 was a milestone for Shinhan Financial Group, the nation’s third largest financial holding company by assets, as the group entered a new chapter in its history, with an internal feud reshuffling top management and rebuilding its chairmanship structure.
The so-called “big-three scandal,” the internal strife caused by the power game among the top three executives, exposed hidden problems associated with top management but the fiasco was also seen as an incident that illustrated the strength of the group’s internal control system and its rich pool of executives.
Prior to the mishap, Shinhan was regarded as one of the most competitive and well-established financial services companies here. The only weakness cited by investors was the so-called CEO risks created by twin leadership spearheaded by former Chairman Ra Eung-chan and CEO Shin Sang-hoon.
Many then argued that if Ra and Shin leave the group, it could face challenges in leadership. Against this backdrop, when the top three CEOs — Ra, Shin and Lee Baek-soon, CEO of Shinhan Bank, the flagship of the group, bowed out at the same time, Shinhan was expected to suffer a management vacuum.
However, one year from the internal dispute, it has turned out to have been a blessing in disguise from the long-term perspective.
Shinhan Bank posted a net income of 1.43 trillion won in the first half of this year, nearly doubling the 753.3 billion won profit recorded in the previous half. Its profitability also improved during the same period, with return on assets and return on equity rising to 1.21 percent and 14.78 percent, respectively, from 1.06 percent and 13.58 percent.
Turning point
Shinhan Bank President and CEO Suh Jin-won, who took office in December last year, sees the internal strife as a turning point that has paved the way for the lender and its parent group to make headway in its vision to become a leading Asian bank.
“In human history, one generation lasts for around 30 years. The last year’s scandal was painful but I think it was a turning point that has opened a new chapter for Shinhan,” said Suh during an interview with Business Focus held at his office in Seoul on Sept. 5.
“Shinhan has a history of no retreat. Since its establishment in 1982, the balance sheet has never swung into the red. But even if business goes smoothly, an organization needs a watershed (for further growth). For Shinhan, the incident has accelerated the point,” he added.
Shinhan’s mishap has offered important lessons from two aspects. First, for business sustainability, a strong internal control system is critical.
Despite the fast organizational transition following the incident, Shinhan managed to continue its solid performance on the back of its established internal processes.
Second, the incident highlighted the importance of fostering experienced executives, a broad base of whom is essential to overcoming unexpected challenges. Even after the big three left the group, new Chairman Han Dong-woo and CEO Suh have successfully steered the group in the right direction, dismissing concerns over a management vacuum.
The 60-year-old veteran banker, who joined Shinhan in 1983, attributed the bank’s strong performance to employees’ loyalty and well-established systems. Since being named deputy CEO of the bank in 2004, he has continued to hold executive-level posts, including group vice president.
“I think we have a very well-formed leadership-employee structure. Last year, our corporate image was damaged by the incident. But our system, employees’ passion and new leadership have combined to overcome such challenges and lead to the strong business performance,” Suh said.
Trendsetter
With the lender getting back on track and restoring confidence in the market, the chief executive, who previously served as the CEO of Shinhan Life Insurance, an insurance arm of the group, is now placing top priority on developing new growth engines.
In Suh’s eyes, the domestic market has little room to grow. Therefore, he believes that now is the time to develop a new market segment, as well as make forays into overseas markets.
One of the outstanding changes in strategy after Suh took office is that the lender has started considering foreign residents as a new market segment.
The bank recently launched the new eight-member team in the Foreign Customer Department to better serve international residents and foreign companies.
“We have a clear vision to become the number one bank in terms of foreign customer services. We aim to provide a total financial package ranging from consulting to financial services,” Suh said. “We will open more global desks and branches dedicated to foreign customers.”
Foreigners account for 2 percent of Korea’s population and the number continues to grow, yet banking services available in Korea today do not adequately reflect the needs of this underserved population.
The strategic move is a good case showing Shinhan’s pioneering spirit. The bank has often taken the lead in bringing change to the local financial industry.
For example, it was the first Korean financial firm to recognize the banking service as a consumer product. Immediately after being established in 1982, Shinhan applied the new marketing approach to its business practice.
“Our coin change service at Namdaemun Market was a good example. In the early 1980’s, our employees travelled around the nation’s traditional market with a pull cart on a regular basis to change coins for busy market vendors,” said Suh.
Such an approach was a very unconventional move at the time, as most banks had a bureaucratic mindset. Back then, banks believed banking was a public service, as a result of government policies aimed at directing bank lending to aid the construction of industries and businesses.
Toward becoming Asia’s leader
Suh’s move to strengthen expat banking services is in line with the group’s long-term vision to pull itself up to the local best and Asia’s top 10 by 2015 by increasing the portion of its overseas revenue up to 10 percent from the current 3.9 percent.
“We are seeking to establish an Asian financial belt by focusing on Japan, China, Vietnam and India. In these regions, we are trying to strengthen our foothold by beefing up localization efforts,” he said.
“At the same time, we are looking for an opportunity to pursue merger and acquisition (M&A) in untapped emerging markets, such as Indonesia, Malaysia and Thailand.”
Together with the development of new growth engines abroad, Suh is putting two other things at the top of his agenda — improving the quality of its assets and enhancing its preemptive risk management system.
“Recent crises suggest that what is important is improvement in asset quality, not growth in size. In this regard, we will seek to achieve optimal growth by focusing on asset quality, while strengthening a preemptive risk management system amid lingering economic uncertainties,” he said.