[INTERVIEW] NongHyup seeks more deals in Southeast Asia

Hong Jae-eun, chief strategy officer of NongHyup Financial Group

Financial group mobilizes NH Investment, NongHyup Bank for global expansion

By Park Hyong-ki

NongHyup Financial Group is looking to either acquire a firm or set up a joint venture to launch investment banking operations in Indonesia next year, said Hong Jae-eun, the chief strategy officer (CSO) of the agriculture financial holding company.

He said the group is currently in talks with two potential companies in Indonesia, and it is seeking to acquire or establish a joint venture in investment banking with one of them.

"We may reach a substantial deal next year," Hong said in an interview with The Korea Times at his office in Seoul.

"The group wants to do more deals in Southeast Asia and China, following NongHyup Bank's recent acquisition of SAMIC for 10 billion won in Cambodia."

SAMIC, a Cambodian microfinance institution with 10 branches, was renamed NongHyup Finance Cambodia early September. The acquisition of SAMIC in August 2018 marks the group's first overseas deal.

The group will also likely set up a joint venture with China Co-op Group, part of All China Federation of Supply and Marketing Cooperatives, in China next year.

"Entering China via a joint venture partnership with China Co-op is an ideal way for NongHyup, given the huge size of the Chinese market," Hong added.

This is part of the group's 2022 roadmap for global expansion, said the executive, who is in charge of NongHyup Financial and its subsidiaries' global business strategy.

NongHyup Financial seeks to generate 10 percent of its consolidated profit from its overseas ventures by 2022, he noted.

"We have the plan envisioned by our Chairman Kim Gwang-soo, and so now it is time for action," Hong said.

"NongHyup seeks to expand mostly in Southeast Asia where it can help boost agriculture financing, investment banking, retail banking and microfinance. Our main Southeast Asian base will be Vietnam."

Vietnam's population is "young," with a vibrant agriculture industry, he explained, adding there are a lot of Korean companies seeking to enter the market there.

NongHyup Financial's NongHyup Bank opened a branch in Hanoi in 2016, and is preparing to launch another one in Ho Chi Minh City.

Under Vietnam's regulations, a foreign financial company can be incorporated there after opening two branches in two years.

"After the bank's incorporation in Vietnam, we could then pursue acquisitions to boost our retail banking operations," the CSO said.

It will further make inroads into other Southeast Asian markets where there are high agricultural populations and where they seek to modernize farming.

With the group's "ammunition" worth 200 trillion won ($180 billion) available for expansion, he said it will mobilize NongHyup Bank and NH Investment & Securities to identify, acquire and invest in targets as part of efforts to boost its investment banking in Southeast Asia.

NH Investment & Securities will be sourcing deals from its Hong Kong unit with financial backing from NongHyup Bank and the group.

But Hong noted it would most likely use global networks of professional services or accounting firms for deal making during its initial stages of expansion in areas such as Indonesia and Cambodia.

NongHyup Bank CEO Lee Dae-hoon, fourth from right, cuts the tape to launch NongHyup Finance Cambodia in Phnom Penh, Sept. 11, after acquiring SAMIC, a Cambodian microfinance institution, in August. Courtesy of NongHyup Bank

The group and the bank are looking to move into retail banking possibly through the acquisition of a small local bank in Cambodia, while they expand their microfinance operations, Hong said.

"We can also pursue acquisitions in Myanmar to get into retail banking," he said, noting the group is seeking to forge partnerships with HTOO Group, a Myanmar conglomerate in farming equipment leasing.

Launched with $3 million in capital in Yangon in 2016, NongHyup Finance Myanmar marks Seoul-based NongHyup Financial Group's first overseas microfinance unit. NongHyup Finance Myanmar will have more than 10 branches by the end of the year, Hong noted.

The group embarked on the journey to enter overseas markets two years ago as it saw limits to growth here.

"Even with our global expansion, our philosophy will remain the same, and that is to go where NongHyup can help boost agriculture, just as it was formed to do so here. This has always been our strength, and what set us apart from other financial companies," he said.

The chief strategy officer has been with NongHyup since 1986, working in areas such as asset management and investment banking.

NongHyup Financial is wholly owned by the NongHyup Agricultural Cooperative Federation.

The group posted a consolidated net profit of 857.3 billion won in the first half of 2018, up from 691.7 billion won a year ago, according to its semiannual financial report. This marks the highest since it transformed itself into a holding company in March 2012, the company said.