Kookmin Bank lags rivals in global expansion
By Nam Hyun-woo
KB Financial Group Chairman Yoon Jong-kyoo
Investors initially cheered Kookmin Bank’s ambitious plan to expand its non-Korean businesses aggressively, but the mega bank is still struggling to gain a foothold abroad.
Despite several attempts to diversify revenue by cutting its heavy reliance on the local market, the bank is far from its goal of being a “serious challenger,” even in Asia.
Kookmin, the nation’s No. 2 bank by assets, is led by KB Financial Group Chairman Yoon Jong-kyoo. Yoon previously set globalization as one of the bank’s goals for diversification.
However, market analysts and experts say Kookmin’s efforts have been hampered, mostly by a lack of international recognition and sales network and government regulation.
Slowest among rivals
According to data from the Financial Supervisory Service (FSS), KB Kookmin Bank had 12 subsidiaries, branches and offices outside the country at the end of 2015.
This was the lowest among its five rivals. KEB Hana Bank had the most with 37, followed by Eximbank Korea (25), Korea Development Bank (23), Woori and Shinhan banks (both 24) and Industrial Bank of Korea (13).
KB Kookmin Bank posted a 29.3 billion won net profit in its overseas business last year, down 6.7 billion won from a year earlier. The share of net profit from its overseas business declined to 2.65 percent in 2015 from 3.5 percent in 2014.
In comparison, KEB Hana Bank netted 207.9 billion won through overseas business last year, up 22.7 billion won from 185.2 billion won in 2014. The share also increased to 21.4 percent from 14.9 percent.
Adding to its slow numbers, KB Kookmin Bank’s overseas business will face another obstacle next month when its branch in Osaka, Japan, closes.
The Osaka branch opened in August 2012 as the second KB Kookmin branch in Japan, following the Tokyo branch established in 1992, and grew as one of the bank’s key overseas businesses.
But in 2014, Japan’s Financial Services Agency slapped the two branches with a suspension from new transactions between Sept. 4, 2014, and Jan. 3, 2015, saying “fundamental problems regarding the operation of management of the Japan branches’ businesses were identified.”
The Japanese financial regulator said in its report that some former branch managers and employees of the Tokyo branch had received cash payments “potentially deemed as rebates from corporations.”
After the suspension, KB Kookmin’s loan portfolios in Japan declined to $165 million as of June last year, from $381 million the previous year. The bank said last month it would close the Osaka branch because of “aggravating business conditions in Japan.”
Once bitten, twice shy?
Market watchers say KB Kookmin Bank’s weak overseas drive derives from its 2008 failure, when it suffered a 1 trillion won loss after purchasing a 41.9 percent stake in a Kazakhstani bank, Bank CenterCredit.
Then, Kookmin spent some 939.2 billion won as part of its globalization strategy, but the value has fallen since the global financial crisis hit the country, causing continuous losses for the Korean lender. In the wake of the losses, Kookmin Bank CEO Kang Chung-won resigned in 2010 after facing punishment from the FSS.
“After the failure, observation became palpable that KB Kookmin was intimidated by the failure and seeking a passive strategy in globalization,” said an industry insider, on condition of anonymity.
Another insider said KB Kookmin has chosen “wrong timing” in its overseas moves.
An official at KB Kookmin Bank said, however, it was part of the bank’s strategy to be more prudent in expanding its business.
“When it comes to overseas business, the bank has to conduct studies about the local situation as much as possible,” the official said. “It is hard to say the BCC case had no impact at all on the bank’s globalization strategy. But the past year has been a period for us to study the situation of the overseas market.”
After taking the group’s helm in late 2014, Yoon stressed the importance of globalization, but also said the bank has to be “prudent” about entering foreign markets.
In December, the bank opened its fifth Chinese branch, in Shanghai, marking its first overseas entrance in two years. Market watchers say the branch’s performance will likely be a gauge of the bank’s overseas business direction.