PEF-backed Shinhan goes all in on investments

By Park Hyong-ki

Shinhan Financial Group is gearing up to make more deals and invest in the capital market through its ties with domestic and global private equity funds (PEF), according to sources with knowledge of the situation.

After becoming the country's biggest financial holding group by profits, assets and market cap, with IMM Private Equity joining its board, Shinhan Financial has “thrown down the gauntlet” to acquire shares in non-banking firms and real estate.

“With IMM on board, the private equity fund manager will be able to help Shinhan make better decisions on potential deals in the asset and alternative markets,” one source said.

“Shinhan will pursue deals abroad with KKR, and at home with IMM.”

The group will also invest in an IMM fund in the near future in a further foray into the capital and alternative markets where it is seeking to beef up its investment banking portfolio, the source added.

Shinhan Financial has issued convertible preferred shares to a fund managed by IMM, whose partners will start participating in the group's board meetings. After they turn into common shares, IMM will hold a 3.7 percent stake in the group.

Last year, KKR forged a strategic partnership with Shinhan Financial to seek investment opportunities in alternative real estate assets abroad.

Shinhan Financial Chairman Cho Yong-byoung said at the March 27 shareholder meeting that the group will strengthen its global and domestic businesses to become Asia's leading financial group by 2020.

And this can only be achieved by investing in the capital and alternative markets that can further boost Shinhan's size and non-banking capability, he added.

When Cho became the chairman in 2017, his vision was to generate 20 percent of the group's annual net profit from overseas markets especially in Southeast Asia by 2020.

He has noted the group cannot expand only with human resources in banking, and thus, it will bring in specialists into its organization.

The group has invited Huh Yong-hak, a former head of the Hong Kong Monetary Authority's private equity and real estate, to join its board. He also worked at JP Morgan and HSBC's investment banking units. Byeon Yang-ho, senior adviser at VIG Partners, has become one of the board's outside directors.

“There's a limit to becoming a market leader through organic growth. With the backing of private equity experts, Shinhan is expected to make further deals,” said another source.

Shinhan Financial has overtaken KB Financial Group in terms of net profit, regaining the top spot after just a year, as the former posted a consolidated net profit of 3.16 trillion won ($ 2.81billion) in fiscal 2018, up 237.9 billion won, or 8.2 percent, from the year before.