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Japan: Financial Market Braces for M&As, Restructuring |
| Source: |
koreaherald.com |
| Source Date: |
Friday, December 31, 2010 |
| Focus: |
Electronic and Mobile Government, Citizen Engagement, Internet Governance
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| Country: |
Japan |
| Created: |
Jan 04, 2011 |
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The nation’s financial market underwent a series of big events in 2010 and unresolved issues are likely to continue attracting attention in 2011.
Among the highlighted sectors are mergers & acquisitions, raising profitability, and revamping of the management structure.
The M&A issue involves Hana Financial Group’s planned acquisition of Korea Exchange Bank and the sale of Woori Financial Group. The Korea Development Bank will also be placed on the auction block.
Hana Bank has been picked to take over KEB and the government plans to sell its stakes in Woori and KDB next year.
Hana’s acquisition would catapult the fourth-largest lender into third place, not far behind the top two ― Kookmin and Woori ― heralding fierce jockeying for the No. 1 slot.
Banks are striving to adapt to new regulations imposed in the wake of the global financial and economic crisis of 2008-09.
Regulators are poised to enhance control of banks’ capital and liquidity and tighten restrictions on excessive loan asset growth especially in the household and construction sectors.
The new environment has banks focusing on profitability and risk management in their new-year plans. To survive the tougher competition they are also looking to diversify portfolios, speed up overseas expansion and boost synergy through the holding company structure.
Major Korean banks have successfully overcome the impact of the worldwide crisis and domestic slowdown.
Kookmin Bank, the industry bellwether, saw its third-quarter net profit fall 53.2 percent from a year earlier to 81.3 billion won ($72 million) after setting aside more provisions against bad property and construction loans.
The market expects the nation’s largest bank’s bottom line to improve early next year after the ongoing reform drive of KB Financial Group chairman Euh Yoon-dae.
The reform projects include massive staff downsizing, the spin-off from Kookmin of its card unit, and unloading of troubled loans.
Euh has been restrained from expansion while concentrating on putting the bank’s house in order.
Woori Bank, like its competitors, also saw losses snowball from the sales of derivatives during the crisis. Nevertheless, the bank’s CEO Lee Chong-hwi said he thought it would be unreasonable if banks were reluctant to invest in the investment banking sector due to the experience.
In terms of promotional strategies, he said that the core of IB is specialized and trained manpower. “While well-equipped systems ensure the success of retail banking, human resources are more important for IB.”
Woori is gearing up to widen its investment in overseas markets including Indonesia, Dalian in China, Chennai in India, Sao Paulo in Brazil and Sydney in Australia.
Korean banks are bracing for tougher competition with Hana Financial Group’s planned takeover of KEB, which is currently controlled by U.S.-based Lone Star Funds.
The takeover will result in the emergence of the third-largest lender here, with a similar asset size, number of workers and branches to Woori, Kookmin and Shinhan banks.
Hana’s inking with Lone Star last November for a majority stake in KEB is set to expand its asset size from 200 trillion won to 316 trillion won, placing it just behind the state-run Woori and No. 2 Kookmin.
Shinhan Financial Group decided Thursday to scrap its co-CEO system in an effort to improve governance following recent top-level scandals.
The post of CEO has been shared by its chairman and president, often leading to conflicts between top leaders.
The proposed shift to a single CEO system was approved at an extra board meeting which was convened to discuss its future direction following the resignation of Shin Sang-hoon last week as president and CEO. Former chairman Ra Eung-chan stepped down in late October.
The Shinhan Bank CEO also resigned as the prosecution indicted him for embezzlement.
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Japan: Financial Market Braces for M&As, Restructuring The nation’s financial market underwent a series of big events in 2010 and unresolved issues are likely to continue attracting attention in 2011
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