By Kim Jae-kyoung
KB Financial Group Chairman Euh Yoon-dae says that he intends to turn Korea’s leading banking group into Asia’s major player, somewhere between JPMorgan and Banco Santander.
Domestically, he is pursuing a JPMorgan model, a universal banking style that combines investment and commercial activities, with the style of the prospering Spanish lender.
“The reason I showed great interest in Woori is not its asset size but its extensive relationship with large businesses. If we took over Woori, we could become another JPMorgan, which I believe would be good for us,” Euh said during a recent interview with The Korea Times.
His remarks can be interpreted as signs that he seeks to strengthen KB’s corporate banking segment by securing a balance between retail and wholesale banking while enhancing investment banking activities.
Euh said he has no plans to push ahead with large-scale mergers and acquisitions (M&A) with major domestic players such as Woori within the next two years, as the group does not have the capability at the moment.
He now has a different view on expansion — not by M&A — but by networking through stock swaps with other big banks such as the Industrial and Commercial Bank of China, HSBC or DBS.
When it comes to globalization, Euh takes Santander as his role model. He believes that Santander, the largest bank in Spain, is the ideal global player as a benchmark due to the similarities between Korea and Spain, namely a small open economy with a big population.
He likes Santander not just because of its explosive growth that made it 76 times larger over a 20-year period but also the way it has sustained this by utilizing the large market of nations that speak Spanish.
“Asian countries share similar cultures. In Asia, except for China and Japan, there is still a lot of room for Korean players to expand. In addition, Asia is expected to grow at the fastest pace in the coming 50 years,” he said.
The former president of Korea University stressed the need for change in local bankers’ thinking.
“In order to become more competitive, we have to change our mindset. For example, Korean banks now see more deposits than lending. But most deposits are won-denominated,” he said.
“If we can convert those won-denominated deposits into dollar-denominated ones, we can solve a couple of problems at the same time,” he added. “The country will be much less exposed to currency risks even during a crisis and Korean banks can lend dollars to developing countries such as Indonesia.
“The key issue is foreign exchange risk management. If we have a strong currency risk management system, we can encourage local customers to have dollar assets,” he said.
Euh made it clear that he will not leave the bank during his three-year tenure even if he is offered a better position.
Asked how KB will look in three years, the former chairman of the Presidential Council on Nation Branding indicated that KB’s fundamentals will be much improved by the time he leaves the group.
“First of all, KB is likely to have a stronger risk management system by then. Also, the group will become fairer (than now) when it comes to human resources affairs. In short, it is likely that KB will be at least a player that other peers in Asia should be afraid of,” he said.
Regarding the Korean financial groups’ governance system, he said that what is really important is not the system itself but how well it can be run under its intended goal.
“Five years ago, KB’s governance structure was considered the best in the industry. Then, Shinhan was in the spotlight thanks to its good governance system. But the recent internal feud at Shinhan shows that it is about the system, but how to run it,” he said.