Race to be leading bank heats up
Han Dong-woo, Shinhan chairman
By Kim Jae-won
Shinhan Financial and KB Financial groups are expected to engage in an increasingly fierce battle to become the nation’s leading bank.
Long-time winner Shinhan seeks to consolidate its status as the nation’s largest and most profitable financial holding firm, while KB and Hana Financial are eager to surpass the bank through mergers and acquisitions (M&As).
Shinhan was the most profitable last year, posting 2.1 trillion won ($1.9 billion) in net profit in 2014, up 9.6 percent from the previous year.
Shinhan’s performance is much stronger than its rivals.
KB saw its net income reach 1.4 trillion won in 2014, compared with 1.1 trillion won the previous year, while Hana’s net profit came in at 937.7 billion won last year, up 0.4 percent from 2013’s 933.9 billion won.
Analysts said Shinhan’s excellence in risk management and good performances from non-banking affiliates helped the group stand as No. 1.
However, industry sources said Shinhan may face cutthroat competition this year as its competitors seek to dethrone it. Among them, KB draws most attention as its new Chairman Yoon Jong-kyoo eyes M&As to diversify its banking-centered portfolio.
“The gap in net income between Shinhan and KB is likely to narrow this year as Shinhan may suffer from low interest margins while KB will get tax refunds by winning a lawsuit against the tax authorities,” said Daishin Securities senior analyst Choi Jeong-wook.
KB is interested in buying state-owned KDB Daewoo Securities this year, after its successful takeover of LIG Insurance last year. As Shinhan is also known to be interested in the brokerage company, the competition over the sale will heat up. The state-run Korea Development Bank owns a controlling stake in the company, and plans to sell it this year.
Hana also did not hide its ambition to become the top player by merging its two banking units ― Hana Bank and Korea Exchange Bank (KEB); but this hit a bump Wednesday after a Seoul district court ordered the company to stop the merger process. The Seoul Central District Court said Hana should respect its agreement with KEB union to guarantee the lender’s independence until February 2017.
Analysts said the union may test Hana’s negotiation skills and ability to leap forward as a leading financial company. Unionists of KEB remain an obstacle ahead of Hana’s drive as they have opposed the early merger plan, asking the group to keep a promise of five-year merger suspension when it bought the lender three years ago.
Woori Bank also seeks to compete with its rivals by increasing its assets before privatization. The government seeks to unload its 30 percent stake in the lender by the end of this year.
Woori’s new CEO Lee Kwang-goo vowed to become a strong player by raising its assets by 15 trillion won per year, thus generating at least 1 trillion won of net income from next year.