Lee Min-hyung joined The Korea Times in 2014 and has worked as a journalist mainly in Korea’s finance, tech and automotive industry. He specializes in content creation, breaking news and in-depth analysis currently on transportation and mobility. You can reach him via mhlee@koreatimes.co.kr.
Sanctions to put brakes on Shinhan's portfolio expansion
Shinhan Financial Group Chairman Cho Yong-byoung speaks during an event celebrating a partnership between the car industry and financial sector in Seoul on Feb. 4. Yonhap
By Lee Min-hyung
By Lee Min-hyung
Shinhan Financial Group could be forced to suspend its plans to expand its portfolio into the non-life insurance sector in the face of possible heavy sanctions from the Financial Supervisory Service (FSS).
The regulator delivered a prior notification recently informing the financial holding firm that it will receive an institutional warning for its involvement in the mis-selling of Lime Asset Management funds last year. The final decision is scheduled to be made on Feb. 25 during the authority's sanctions committee meeting.
The sanction is considered a “heavy” penalty out of the five-tier sanction system. Any financial firms slapped with the sanction are barred for a year from tapping into new businesses or engaging in any M&A activities.
This will put the brakes on Shinhan's years-long efforts to expand into the non-life insurance sector. Even if Shinhan is one of the top-tier financial holding firms along with KB Financial Group, it has yet to establish its group-wide business portfolio for the insurance area, unlike KB which acquired formerly LIG Insurance and finished building its own life and non-life insurance portfolio.
For the past few years, Shinhan has left open the possibility of purchasing one of the mid-tier non-life insurers here or launching its own digital insurer to complete its financial portfolio. The expansion into the non-banking sector is crucial at a time when most financial firms here seek new revenue areas by reducing their reliance on traditional loan-deposit margins from their cash cow banking businesses.
In his New Year speech, Shinhan Financial Group Chairman Cho Yong-byoung also reiterated his willingness to keep searching for companies in the areas of financial and even non-financial sectors here and abroad for possible takeover.
“We will seek strategic M&As at home and abroad that encompass the financial and non-financial areas this year,” Cho said in the speech in early January.
Last year, Shinhan considered acquiring AXA General Insurance, even if the former decided not to join a preliminary bidding to take over the Korean unit of the French insurance group at the last minute.
But Shinhan will not be able to take part in such a bidding this year if the regulator confirms the sanction amid ever-toughening competition against its arch-rival KB.
For two years since 2018, Shinhan had topped the list among the nation's financial groups in terms of an annual net profit. But it yielded its lead in 2020 when KB reported a record annual net profit of 3.45 trillion won. Shinhan narrowly came in second with a 2020 net profit of 3.41 trillion won.
“Chances are a number of midsize to small insurers will be put up for sale this year amid their weakening profitability stemming from toughening competition and prolonged low interest rates here and abroad,” an industry source said.