Hana to wrap up KEB stake purchase this week

Korea's No. 4 banking group Hana Financial Group Inc. is set to complete its purchase of Korea Exchange Bank (KEB) shares as early as this week as it moves to integrate the two lenders after receiving a long-awaited regulatory nod, market watchers said Monday.

On Friday, the Financial Services Commission approved Hana Financial's acquisition of the country's fifth-largest bank, a move which cleared a pending 3.9 trillion won (US$3.5 billion) deal to buy a 51.02 percent stake in KEB. Under the deal with KEB's major shareholder Lone Star Funds, Hana Financial is obliged to meet its payment by Friday, or within five operating days following the approval by the financial regulator.

Hana Financial is also set to purchase an additional 6.25 percent stake, worth 479.4 billion won, from policy lender Korea Export-Import Bank, which would bring the bank's stake in KEB to 57.27 percent.

While legal procedures for Hana Financial and KEB's overseas units will take more time, industry watchers largely forecast the stake acquisition to be finished by the end of the week. Such a move would enable Hana to better compete with banking giants Woori Finance Holdings Co. and KB Financial Group Inc.

Upon completion of the deal, Hana Financial will be able to take control over the biggest overseas network run by a domestic lender, and the second-largest local operational network with assets totaling 331 trillion won.

Analysts painted a rosy picture of the financial group, raising their share price targets on hopes the acquisition would lead to a profitable mix of retail and corporate banking.

"The expansion will bolster both Hana Financial's retail finance and KEB's corporate finance sectors. Overall, Hana Financial's value is expected to rise on the back of synergy effects and cheap takeover cost," said Kim In, an analyst at Eugene Investment & Securities Co.

The price tag on KEB is relatively cheap compared with what Shinhan Financial Group Co. and Citigroup Inc. paid to buy Choheung Bank and KorAm Bank, respectively, he said.

Market watchers, however, raised concerns on looming risks such as difficult organizational integration and dogged opposition from KEB's labor union.

On Friday, the labor union released a statement in which it pledged to keep up its fight against the takeover.

In a press conference the same day, Hana Financial chief Kim Seung-yu said he is not considering a forced restructuring and will instead push for a smooth integration under a "two-bank" system. (Yonhap)