[INTERVIEW] Hana to pursue two-track growth strategy

Hana Financial Group Chairman Kim Jung-tai

This is the fourth and last in a series of interviews with chairmen of the nation's top four financial groups ― Shinhan, KB, Woori and Hana ― to mark the beginning of New Year 2020. ― ED.

Chairman vows to turn group into data-based digital firm

By Lee Kyung-min

Hana Financial Group Chairman Kim Jung-tai has vowed to pursue a two-pronged growth strategy in 2020 by putting equal weight on organic and inorganic growth in a bid to perfect the group's strategy to become a digital, global leader.

Kim plans to increase spending on manpower and resources to strengthen IT capabilities, a prerequisite for the group to become a data-based information services firm run by digitally savvy workers.

At the same time, Kim said that he will pursue inorganic growth by pushing for aggressive mergers and acquisitions (M&As) of payment service providers, securities firms and insurers.

Boosting those non-banking business will help Hana diversify its business portfolio by reducing its reliance on KEB Hana Bank, the group's largest and most lucrative subsidiary.

The group plans to increase non-banking business income to 30 percent of its total revenue by 2025.

"The 10 years starting from 2020 will be a fundamentally different from the past decade," Kim said.

"Customer priorities and technological development will change at a rapid pace. Hana's growth strategy will seek to best meet consumer needs while increasing our capabilities in the process."

Internet-only bank

The group's innovation initiative will gain momentum once the nation's third internet-only bank Toss Bank will launch its business in July. KEB Hana Bank, the flagship of the group, has a 10 percent stake in the consortium led by Toss, a mobile money transfer app owned by Viva Republica.

"Toss, an online platform operator with 16 million users, taking advantage of KEB Hana's various digital businesses will create the most optimal environment for creative innovation, promoting mutual growth," Kim said.

This will be further boosted by the groups' Global Loyalty Network (GLN), a digital platform set up using blockchain-based technology that enables customers to make digital transactions regardless of their location, via the decentralized system.

The integrated platform network allows financial services firms, retailers and card point management firms to use shared digital platforms to exchange digitally convertible commodities including points and mileage.

Hana plans to launch the GLN service in Japan, Vietnam and Singapore, a move to strengthen its global network in 17 countries.

Cooperation with fintechs

Apart from Toss, the scope of cooperation will be broadened to include a greater number of financial service providers including fintech startups, and capital-heavy investors among many other strategic partners.

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"Overseas expansion will not rely only on Southeast Asian nations, the relatively untapped market with ample growth potential, but also countries with advanced financial services to beef up the group's overall capabilities," Kim said.

KEB Hana Bank has bright prospects in Vietnam. The bank holds a 15 percent stake in the Bank for Investment and Development of Vietnam (BIDV), following a July 22 deal under which the Korean bank bought 603 million shares in the Vietnamese lender for 1 trillion won ($856 million).

The strategic partnership is less costly a move than an outright takeover, and yet just as profitable given the largest lender in the Southeast Asian country has over 1,000 branches.

The 15 percent stake could translate into a net profit of up to around 50 billion won.

"The sheer net profit figure aside, BIDV's strong and comprehensive network will help us expand services with locals including cards, payments, credit loan and digital transactions. This will diversify our business portfolio, leading to an increase in overseas profits," he said.

Similar efforts to boost its global investment portfolio are ongoing in New York, London, Singapore and Hong Kong, all of which have investment banking channels.

"International banking and capital markets in advanced countries are key areas, a source of greater profit. What we learn there will translate into higher performance," he said.

KEB Hana plans to expand its presence further in Indonesia, a key area of growth where its corporate entity PT Bank KEB Hana Indonesia has been established.

The plan will be facilitated through cooperation with online app developer LINE, best known for its messenger service.

The Tokyo-based subsidiary of the internet search engine Naver holds a 20 percent stake in PT Bank KEB Hana Indonesia, the bank's second-largest shareholder.

Hana will initiate digital banking there by fully capitalizing on LINE's strong brand recognition, user-heavy platform and rich content.

Another key task for Kim is to bolster the non-banking sector by increasing the number of performance-boosting subsidiaries via M&As.

The group is in talks with the Korea Teachers Credit Union (KTCU) about a takeover of The-K Non-Life Insurance, a deal that will make it a comprehensive financial services provider with a full business portfolio.

Hana plans to acquire the KTCU-owned non-life insurer specializing in auto insurance once they iron out differences over the takeover price, which many expect will be set at somewhere between 100 billion won and 150 billion won.

Attracting foreign investment

Kim also plans to make further efforts to attract more foreign investment.

The group is always open, Kim said, to building relationship with new investors, a crucial stance to maintaining stable operations at the firm amid global and domestic uncertainties.

"We maintain close communications with our valued investors, coupled with various efforts to find new ones. This is illustrated by 67.05 percent equity ownership held by foreign investors as of Nov. 26, the highest among Korean financial groups," he said.

Kim plans to strengthen what he calls a "shareholder return policy," a way for the firm to value investors.

"We bought back 300 billion won worth of company shares in 2019. Similar moves will be taken under consideration as well as ways to increase dividends, all among our efforts to share profit with our shareholders," Kim said.