By Kim Jae-kyoung
Staff reporter
KB Financial Group Chairman Euh Yoon-dae took office Tuesday. Reactions to the rookie financial CEO were mixed. The market welcomed his debut with KB shares rising but he also met with strong protests from the labor union and some shareholders.
This is seen as what is in store for Euh's demanding future. Although he took the helm in the spotlight, he is expected to have to tackle a number of daunting tasks both in and outside the group.
Euh's first message to KB executives and employees was that a radical organizational reform is awaiting the financial group. He stressed that he would place top priority on improving the group's business structure.
Kookmin Bank, the flagship of the financial group, is considered one of the best workplaces in Korea due to fat paychecks and numerous fringe benefits, which many believe are the outcome of the management's populism policy in favor of the lender's labor union.
Due to the bloated management, the bank's productivity has hit rock bottom. Kookmin saw its per capita net profit fall to 20.17 million won in the first quarter, less than half of 45.6 million won of its biggest rival Shinhan Financial Group. With a total of 25,000 employees and 1,195 branches, Kookmin posted 502.2 billion won between January and March.
It seems that Euh realizes the urgency for reform. "KB Financial is like a patient with obesity. It is now suffering from an excess in workforce and overly high salaries. In particular, it is now exposed to risks associated with rising insolvent loans as a result of only focusing on a few businesses," he said.
"The key culprit behind the fall of General Motors last year was the U.S. firm's delay of reform in its chronic high-cost management structure," he added, indicating that he will shake up the group's structure to improve competitiveness.
However, he ruled out the possibility of a massive layoff, saying, "The restructuring is needed but there will be no layoffs. Once the sales grow through the restructuring, we can realign our workforce."
On top of his task to restructure the nation's largest lender, another important job for Euh is to strengthen its non-banking sector to attain balanced growth and maximize synergy among its subsidiaries, as well as to provide comprehensive financial services.
Kookmin currently accounts for more than 90 percent of the group's total revenue. KB Investment & Securities and KB Asset Management contribute 1 percent, while KB Real Estate Trust and KB Data System took up only 0.1 percent of the total sales.
This is in stark contrast to its rival Shinhan, which has achieved a balanced portfolio between the banking and non-banking sector, which account for 60 percent and 40 percent of its revenue, respectively.
Euh stressed that he will seek to secure sustainable growth structure by diversifying its business portfolio. "The current bank-focused business has limitations for the group's sustainable growth. In principle, organic growth would be sought for the development of the group's affiliates, but we will prepare for potential takeover opportunities," he said.
The former president of Korea University, however, said that he will not push for an M&A with another Korean lender, such as Woori or Korea Development Bank, for the next two to three years.
He said the group plans to spin off the credit card business from the banking unit and it will seek takeovers in a bid to further expand its securities operations.
Euh may now be busy coming up with strategies to transform the financial group into a leading Asian player. But before looking ahead, he must first sit back and try to take a lesson from the successes and failures of his predecessors in order to avoid following in their footsteps.
Unfortunately, his two predecessors ― Hwang Young-key, former chairman of KB Financial Group and Kang Chung-won, outgoing CEO of Kookmin Bank ― bowed out before their tenures were up. To become a successful leader of KB, he should pause for a moment to think about why they left the group in disgrace.
Besides, he has to deal with the controversy surrounding his appointment. The labor union and the opposition party have claimed that ranking Cheong Wa Dae officials were involved in his selection. Jeong In-cheol, the presidential secretary for planning and management, allegedly intervened so Euh would be chosen.
Unless he clears himself of such controversy and brushes aside his image as an aide to President Lee Myung-bak, his leadership will be put into question as people will raise suspicions about every move he makes in the future.
The labor union said Tuesday that it will stage a campaign to demand the resignation of the new chairman, saying that Euh is the typical example of a parachute appointment. Euh was formerly the chairman of the Presidential Council on National Branding.