By Choi Kyong-ae
Korea Exchange Bank’s (KEB) union has refused to accept the terms of integration with Hana Bank proposed by Hana Financial Group.
The KEB union’s opposition to the terms is posing a major hurdle to Hana Financial’s plan to integrate the two banks by March.
Hana and the KEB’s union confirmed Wednesday the latter’s objections but said talks for the planned integration are still underway.
Hana has made three major offers to the 6,000-member KEB union: change the job status of 2,000 non-permanent workers to permanent positions within one month of the merger; pay the same level of wages as their current salaries; and give promotions according to regular performance reviews.
“The union wants an immediate increase in wages and guaranteed promotions even before the merger takes place. But it is a tall order for the bank amid growing uncertainties and declining profitability,” a Hana spokesman said.
If all of the 2,000 contract workers at KEB get a promotion, it will cost the bank more than 60 billion won ($54 million) a year. Such huge additional costs could deal a heavy blow to KEB whose profitability is already low mainly due to a prolonged dispute with management, he said.
KEB saw a 35 percent plunge in net profit for the January-September period last year at 163.15 billion won from 252.40 billion won a year earlier.
But the union released a statement Wednesday afternoon to refute the bank’s stance towards the ongoing integration efforts.
“Hana Financial and the KEB union agreed in October 2013 to discuss wage increases and promotions for KEB’s contract workers in 2014. But the bank failed to keep its words and the talks are still ongoing in 2015,” KEB union spokesman Kim Bo-heon said.
“Position changes without wage increases and promotions are total nonsense for the workers. We want immediate action by management.”
Meanwhile, Hana Financial also offered to change the contract positions of 1,400 Hana Bank workers into permanent ones after the merger due March 1. Hana is required to file documents this month to the Financial Services Commission to receive a preliminary approval for the two banks’ merger.
In February 2012, Hana Financial bought a controlling 51.02 percent stake in KEB for $3.8 billion from Lone Star Funds based in Dallas. Hana Financial, KEB and its union then agreed to pursue integration over five years ending in February 2017.
But now, management at both banks wants integration to occur earlier than this for survival. Hana Bank is a major affiliate of Hana Financial, the country’s second-biggest financial group by assets after KB Financial Group.
“The banking industry has been struggling with low growth and low margins since the 2008 financial crisis. The current two-bank system composed of Hana and KEB does not guarantee profitability and survival in the long term. So the earlier-than-expected merger could be a solution,” Hana Financial said.
KEB was delisted from the Korea Exchange, the country's main bourse, in January 2013.