Chinese, Japanese capital buying into Korean firms

By Yoon Ja-young

Foreign capital, especially from China and Japan, is increasing in the Korean financial industry, leading to the purchase of diverse financial companies.

This contrasts with Korean investors which are shunning the financial industry due to tough regulations.

The most notable of these is the acquisition by Japanese investors of Korean savings banks. SBI Holdings, for instance, bought Hyundai Swiss Savings Bank back in 2013, to set up SBI Savings Bank. It is the biggest player in the industry with assets of 3.8 trillion won, accounting for 10 percent of the market.

J Trust, a Japanese consumer lender, also acquired Mirae Savings Bank in 2012 to launch Chinae Savings Bank. It ranked fifth in the industry with assets of 1.1 trillion won. It considered taking over SC Savings Bank, in which case the Japanese lender could rise to become the second highest in industry rankings, with the assets of the two savings banks surpassing 2.3 trillion won.

Orix, a Japanese financial service company, also acquired a couple of savings banks to launch OSB Savings Bank with assets of 1.1 trillion won.

Japanese funds have already taken over half of the private money lending industry here. Apro Financial is top in industry with loans of over 2 trillion won in balance, followed by Sanwa Financial which has provided loans of over 1 trillion won.

Japanese moneylenders have been entering Korea because they can enjoy substantial interest-rate spreads.

The foreign funds are expanding their presence on the main stage of the financial industry, buying securities companies and considering acquiring commercial banks.

For instance, Tong Yang Investment and Securities was acquired by Yuanta Securities of Taiwan. Japan’s Orix also recently made headlines by being chosen as the preferred bidder for Hyundai Securities.

China’s Anbang Insurance was the only bidder that applied to acquire Woori Bank in November, though the deal failed because it requires at least two bidders to be valid. If Woori Bank is acquired by foreign capital, it will be a major event in the industry.

However, the acquisition of Korean financial companies is causing concern that it may end up in outflow of the national wealth.

Lone Star’s acquisition of Korea Exchange Bank (KEB) has left Koreans with a negative impression of foreign capital buying Korean financial companies because the U.S. buyout fund deserted Korea after making over 4 trillion won by selling KEB.

Other foreign banks are also stirring controversy over the outflow of national wealth by sending huge dividends to the headquarters.