By Cho Jin-seo
Staff Reporter
The chief of Kookmin Bank (KB) emerged from months of reticence and vowed to push for mergers or acquisitions with other banks.
The so-called ``mega bank’’ plan is in line with the government’s latest initiative to increase the size of banks.
Kang Chung-won, CEO of Kookmin Bank, was full of energy in his monthly speech to employees, Friday, despite a recent series of difficulties facing him and his bank.
``If the mega-bank initiative is to be realized and the Korean financial industry is to take a big leap, then Kookmin Bank should play a leading role,’’ Kang said in the speech, which was also released to the press.
The confident comment came two days after the nomination of Choi Joong-kyung as senior presidential secretary for economic affairs. Choi has insisted that the government should create a super-size bank by merging two or more retail outfits.
The ingredients for mega-banks are all in place. The government this year plans to sell its shares in Woori Bank and Korea Development Bank. Lone Star Funds, the major shareholder of Korea Exchange Bank, is also looking for buyers so they can cash out. Market analysts believe that the most likely scenario is the restructuring within the industry through mergers and acquisitions. The three largest banks ― KB, Shinhan and Hana ― are natural candidates to be buyers.
In ordinary situations, an M&A deal should be an exciting affair for bank leaders like Kang. But these are not ordinary times. He has kept a low profile since January, after the financial regulators forced him to withdraw his bid for the chairmanship of the KB Financial Group.
The bank has been under intense auditing by regulators, and in the course of the inspection one mid-level manager killed himself by jumping off a bridge.
Regulators have admitted, though unofficially, that the unusually tough audit was to prevent Kang from increasing his influence further. A senior official at the Financial Supervisory Commission told The Korea Times that Kang’s influence was too big with the boardroom filled with his supporters. At that time, critics cited the case as the government’s attempt to keep banks under its control. Thus, Kang and KB have been avoiding further controversies with the regulators. On Friday, KB was still cautious. The bank’s public relations office said that Kang’s speech was to announce that the bank intends to lead the latest trend in the market, not follow it.
``In his speech, he was encouraging employees that they should prepare themselves for possible mergers because KB is the leader in the banking industry,’’ a spokesman said.
As Korea is proud of having champions in manufacturing sectors such as Samsung Electronics in the electronics industry and Hyundai Heavy Industries in the shipbuilding and heavy machineries industry, government officials in finance-related departments have long dreamt of having Korean versions of Citibank or Goldman Sachs.
In fact, Korean banks are neither big nor global compared to the size of its economy. According to a roadmap jointly published in February by three state-run financial research institutions, none of the Korean banks are on the list of top 80 global banks by asset. The roadmap then suggests that the country has to create one or two global-sized banks through mergers and acquisitions within domestic banks.
But being small does not mean being bad. Many economists and bank managers have opposed mergers just for the sake of size. One of them is Yun Yong-ro, CEO of the Industrial Bank of Korea. ``Making a bigger bank does not solve every problem,’’ he said during a conference last month. ``Is a big bank necessarily a better bank? If so, what is the ideal number of banks Korea should have?’’
Critics also point out that KB itself is a result of a merger between the old Kookmin Bank and the Korea Housing Bank nine years ago, but the benefits of such a merger are open to dispute.
Even if the government allows and encourages KB to buy other banks, attaining shareholders’ permission would be the next hurdle. KB is wholly owned by the KB Financial Group. The holding company’s largest shareholders are Citibank, the National Pension Service of Korea, and ING Bank, which respectively hold 10.4 percent, 5.2 percent and 5.0 percent in shares. Being financial investors, these three shareholders do not engage in the day-to-day business of the bank, but they are not likely to allow unprofitable mergers or acquisitions to take place.