KB Kookmin Bank accelerates expansion in Southeast Asia

KB Kookmin Bank CEO Hur Yin / Courtesy of KB Kookmin Bank

By Kim Bo-eun

KB Kookmin Bank has begun its drive to expand in Southeast Asia, the top priority of CEO Hur Yin who started his second term in November.

As the first of such efforts, the lender approved a plan Thursday to acquire Cambodia's No. 1 microfinance deposit-taking institution Prasac Microfinance. The bank will take 70 percent of the institution's shares for 702 billion won ($603 million).

Kookmin has been considered a latecomer in terms of global expansion, with the fewest overseas outlets among the four major banks. It has subsidiaries in China, Cambodia and Myanmar.

However, Hur has placed overseas expansion at the center of the bank's strategy for his second year. The plan for the acquisition was unveiled after the CEO visited Cambodia, China and Hong Kong earlier this month ― his first overseas trip marking his second term.

Expansion into fast-growing Southeast Asian markets is becoming crucial as banks face declining profits amid low interest rates here.

Prasac's scale of loans is third-largest among financial firms in Cambodia, including banks. It posted a net profit of 90.7 billion won last year. Its return on equity was 29.4 percent and its net interest margin 8.3 percent.

KB Kookmin Bank has six branches in Cambodia. The Cambodian subsidiary posted a net profit of 2 billion won in the first half of 2019, which is double that of the first half of 2017.

It is seeking to create synergy through its acquisition of Prasac, by sharing its retail banking and digital capabilities.

"The bank's acquisition of Prasac will serve as a watershed for KB Kookmin's expansion of its retail banking network in Asia, which is part of our global strategy," a bank official said.

The deal is set to be closed in two to three months, after Kookmin obtains approval from financial authorities in Cambodia and Korea.

KB said it will take over the remaining 30 percent of Prasac after two years, with long-term plans to turn Prasac into a commercial bank. KB plans to make it a base to conduct business in Southeast Asia and further expand in the region.