Finding untapped markets

Shinhan looking for M&A opportunities in Indonesia, Malaysia

By Kim Jae-won

When it comes to globalization, the Korean banking industry lags far behind other industries. Many local lenders have put “going global” at the top of their agenda but they are still lacking scale beyond Korea in many aspects.

With the domestic market coming closer to saturation, they are now speeding up their moves to make forays into the emerging markets as part of efforts to find new growth engines.

Suh Jin-won, president and CEO of Shinhan Bank, the nation’s third largest lender by assets, is one of the few Korean bank executives who see the urgency for globalization and have a clear vision on how to make it happen. The lender is now setting eyes on untapped Asian markets, particularly looking for M&A opportunities in three Southeast nations.

“We are considering M&As in Indonesia, Malaysia and Thailand. We are now examining markets and looking for possible candidates in these countries to meet our takeover price range,” said Suh in an interview with Business Focus held at his office in Seoul on Sept. 5.

The 60-year-old veteran banker said that the bank is moving with caution so as not to pick a rotten apple.

“We are checking out the M&A plan very thoroughly because it may become a big burden if we take over a bank with hidden risks.”

Suh declined to elaborate on the plan further worrying that he would negatively affect the prices of the M&A deals and the regulatory approval from the financial authorities in the countries.

The lifetime banker, who has worked at Shinhan for the past 28 years, said that the lender targets Asian markets because it is not easy to compete with U.S. and European banks for now.

He said that the lender already is running business successfully in Japan, China and Vietnam, and it is time to spread to other emerging markets.

Shinhan is expanding its business in the three Asian nations. The bank launched a credit card business in Vietnam in May — the first time for a Korean financial company — in partnership with its affiliate Shinhan Card. Credit card business is one of key sectors of the retail banking business, which brings broader customer base as well as sustainable profits from handling fees.

Suh said that the lender aims to have 10 percent of its revenues from its 54 overseas networks in 14 countries in the mid- and long-term though he has not set specific time line.

During the first six months of this year, the lender posted 3.9 percent of total revenues, or 424 billion won, from offshore entities.

DNA of success

Shinhan is the third-largest bank by assets in Korea, but one of the most profitable banks here. It marked 1.4 trillion won of net profits in the first half of the year, nearly double the previous six months’ 753.3 billion won. Its bigger rivals Kookmin Bank and Woori Bank posted 1.6 trillion won and 1.2 trillion won in net profits, respectively, during the same period.

Asked how the lender could produce such surprising performances though its holding company amid the fierce internal feud last year, Suh pointed out employees’ passion to keep the lender in top place is the key factor behind the strong performance.

“It is because of our employees’ passion. Their pride was hurt (by the feud) last year, and customers’ trust also dwindled, but the passion of our employees did not fade out.”

Suh said that “DNA of Success” is flowing in the heart of its employees, and every single worker has historic calling to make the lender keep growing.

Suh, who studied history from Korea University, used words of “history” and “historic” about 10 times during the 30 minutes’ interview. He even said that “we are Shinhan, we are history of Shinhan Bank, and we should make and lead it with our own hands.”

For the chief executive, Shinhan seems to be not just a name of a bank, but a nation, which he should be patriotic to. He explained that such a mentality came from its history, which began its business in a humble manner.

“We introduced customer first principle in the Korean banking industry. We broke a banking culture, which lacked sprit of customer respect. We made our own behavior patterns, which became our system later.”

Suh said that it is summarized as the Shinhan Way, which emphasizes customers, mutual respect and the pioneer spirit.

Many economists have studied Shinhan’s exceptional success story and its unique office culture. Harvard University picked the lender for a case study to learn from Shinhan’s experience, according to the bank.

Suh showed what Shinhan Way means by answering humbly the tough questions regarding the internal feud last year, but showing confidence when he mentioned the lender’s spirit and performance.