By Kim Jae-kyoung
Staff reporter
Euh Yoon-dae, the nominee for chairman of KB Financial Group, is facing a strong backlash from labor unions over the proposal to merge Kookmin Bank, the flagship of the group and the largest in Korea by assets, with Woori Bank, the nation's second largest lender.
The unions of Kookmin and Woori joined forces Monday to oppose Euh's envisioned plan to create a so-called mega bank, which they believe is in line with Cheong Wa Dae's vision to enlarge the size of local banks.
At the meeting, the two agreed to launch a joint taskforce to thwart Euh's bid to push for the merger.
"A bank merger should be done in a way to maximize synergy. However, a merger between the two banks will have a negative effect both on the banks and the industry," said a senior union official at Kookmin, asking not to be named.
"We believe that Euh, together with the government, is pushing ahead with the merger for the sake of Cheong Wa Dae's scheme," he added.
Choi Chang-keun, the vice chief of Woori's union, said, "If Kookmin merges with Woori, it will dominate the banking industry, hampering its development. It is not desirable to pursue an M&A only to create a mega bank, which is against the global trend."
According to the Korea Financial Industry Union, if the two merge, the new combined bank will control around 32 percent of the lending and 35 percent of the deposit markets in the local industry.
Following his nomination a week ago, Euh, a close aide to President Lee Myung-bak and the chairman of the Presidential Council on National Branding, said that he would consider taking over Woori to create a mega bank that could compete internationally.
The former president of Korea University is expected to take office next month after getting the final nod from shareholders.
The unions' protest arises from growing concerns over a possible reduction of their payrolls if the merger goes ahead.
According to a report by the Korea Financial Industry Union, if the two lenders merge, their combined assets are estimated to reach 499 trillion won, with a total of 2,140 branches and an employee payroll numbering 46,089.
If Euh restructures the merged entity by closing overlapping branches and cutting staff by 20 percent, as many as 9,218 employees could be laid off, according to the report.
In a phone interview with The Korea Times Sunday, Euh said that he would restructure the KB organization in order to maximize its profitability but ruled out the possibility of reducing the payroll.