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[News Focus] Korean banking giants accelerate mergers and acquisitions in non-banking sectors

By on March 11, 2021 0
The main South Korean banking groups are actively seeking mergers and acquisitions to develop their non-banking activities, with the aim of diversifying their income given the volatilities of the main banking sector.

In the face of government efforts to lower lending rates, banks have focused on diversifying their portfolios, focusing on acquiring non-bank financial companies, such as loan service providers and card companies. credit.

The latest decision was taken by KB Financial Group, which officially joined the takeover bid for Lotte Capital, the loan services unit of Lotte Group. Lotte Capital is Korea’s fourth largest funder and has been rated as a high profitability company.

With products ranging from installment and business loans to consumer loans, Lotte Capital has a diversified business portfolio and a stable profit model. In 2017, the company’s net profit was 117.5 billion won ($ 105 million), up 57.1 percent from three years ago.

By acquiring Lotte Capital, KB Financial could further strengthen its non-bank lending business led by KB Capital, which mainly specializes in auto loans. Lotte Capital, with strong installment loans and credit financing, could diversify KB’s lending portfolio.

KB has so far established itself as a serious candidate for the deal with Lotte Capital, as other banking groups have decided not to join. Nonetheless, KB faces a fierce bidding war with private equity firm MBK Partners, which is pursuing a global deal to buy the three Lotte companies currently on the market, including Lotte Capital.

Meanwhile, Hana Financial Group has joined the offer for Lotte Card, another financial company owned by Lotte and put up for sale. Other significant bidders for the credit card company include Korean conglomerate Hanwha Group, which sells ammunition at retail.

By successfully acquiring the Lotte card, Hana Financial could be placed just behind the No.1 card of player Shinhan, who holds a 22.73% market share in the first half of 2018.

As for Woori Financial Group, which restructured into a financial holding at the start of the year under the chairmanship of Sohn Tae-seung, the main objective for this year is to acquire small companies in the management of assets, real estate investment companies and savings banks.

Woori is reportedly currently considering Tongyang Asset Management and Hi Asset Management, as well as Kukje Trust as potential candidates. The banking group also has the possibility of exercising its right of first refusal to buy more shares of Aju Capital and acquire its wholly-owned subsidiary Aju Savings Bank.

With well-chosen mergers and acquisitions, Woori Financial Group’s goal is to increase its banking-to-non-banking activity ratio to 7: 3 and ultimately to 6: 4, according to the chairman.

Meanwhile, Shinhan Financial Group recently completed a number of high profile acquisitions, including the purchase of Orange Life Insurance and Asia Trust. Its next goal is to deepen the scrutiny of applicants for overseas mergers and acquisitions, according to a spokesperson for the company.

In his latest move, Shinhan announced this week that he is forming a consortium with Toss, Korea’s leading mobile money transfer app, to establish an internet-only bank in Korea. Other tech startups, including car rental app operator SoCar and mobile real estate app operator Dabang, are also expected to join the consortium.

Viva Republica, the operator of Toss, will be the new bank’s largest shareholder, while Shinhan will become the second, according to Shinhan. The Toss-Shinhan consortium is a serious contender for one of two online banking operational licenses to be issued by the Financial Services Commission.

At present, Kakao Bank led by local mobile messaging giant Kakao and K bank led by telecom provider KT are the only two web-only banks operating in Korea. But a new regulatory change allowing non-financial institutions to own and operate online banks has recently come into force, paving the way for the introduction of new players.

By Sohn Ji-young ([email protected])

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