Shinhan Financial raises capital for M&A

The headquarters of Shinhan Financial Group / Courtesy of Shinhan Financial Group

By Anna J. Park

Shinhan Financial Group is attempting to raise more capital by issuing hybrid bonds worth 400 billion won ($353 million) later this month, following late last year's issuance of new stocks worth 1.15 trillion won. Market watchers see Shinhan's aggressive capital raising lately has to do with the financial giant's plan to add new businesses to the group's portfolio through mergers and acquisitions (M&As).

Shinhan's 4 billion won worth of AT-1 bonds ― Additional Tier-1 ― could be further issued to up to 7 billion won at its maximum. The AT-1 bonds are called hybrid bonds or hybrid securities, as they combine characteristics of both bonds and equities in that they are a type of unsecured, perpetual bond that has no maturity date. Instead they have call options allowing banks to redeem them after a certain period. About 350 billion won of Shinhan's AT-1 bonds to be issued this time will have a five-year call option, while the remaining amount is slated to have a 10-year call option.

Shinhan made it clear that one of the key reasons behind the recent raising of capital is to find opportunities to strengthen the financial group's business portfolio.

“As was the case with the issuance of new stocks last year, the raising of capital with the issuance of AT-1 bonds is aimed to secure enough capital in order to strengthen the group's businesses,” an official from Shinhan Financial Group said in a phone call with The Korea Times.

“While the group does have a specific plan about which companies or which sectors of businesses it hopes to add to its group portfolio, the newly raised capital will likely be used in catching opportunities in the M&A market to acquire companies or global business initiatives that would create synergy within the group.”

The official also said that local media outlets speculate that Shinhan is looking for a non-life insurance company, as the group lacks a general insurance firm in its group portfolio, adding that nothing has been decided as of now. However, the official did not deny that they're closely watching for general insurance-related fintech companies to possibly acquire.

Since Chairman Cho Yong-byoung's leadership began in 2017, Shinhan Financial Group has focused on M&As, including the acquisition of Orange Life for 2.3 trillion won in 2019 and real estate trust firm Asia Trust for 160 billion won in 2018.