KEB Hana Bank is achieving robust performance through equity investments in Vietnam and China. Instead of securing local corporate licenses, the bank’s decision to opt for minority stake acquisitions has proven successful. KEB Hana Bank is further expanding its collaborations with invested banks to enhance profitability.
According to the audit report released by KEB Hana Bank on March 21, the bank generated profits of 122.8 billion won (US$92.23 million) from its investment in the Bank for Investment and Development of Vietnam (BIDV) last year. Additionally, it accrued 40.9 billion won in equity method gains from its investment in the Bank of Jilin. The equity method gains from these two banks account for about 30 percent of KEB Hana Bank’s total global performance, which amount to 553.2 billion won.
KEB Hana Bank’s minority stake investments have been evaluated as successful so far. Since acquiring a 15 percent stake in the BIDV in 2019, the bank has realized a stake method profit of 424 billion won over four years. Similarly, it has earned 123.8 billion won from its investment in the Bank of Jilin during the same period.
The steady net profits are attributed to the performance growth of the BIDV and the Bank of Jilin. Thanks to the expansion in performance, the book value of the stakes held by KEB Hana Bank has also increased during the same period. Specifically, the book value of the stake in the BIDV increased from 1.19 trillion won to 1.75 trillion won, while that of the Bank of Jilin increased from 758.8 billion won to 897 billion won.
KEB Hana Bank has also secured dividend income. It received 13.9 billion won in cash dividends from the Bank of Jilin for its performance last year. Furthermore, it received cash dividends of 22.8 billion won in 2020 and 6.3 billion won in 2021 from the BIDV.
However, there are also assessments indicating that the actual gains are minimal. While equity method gains are recognized as accounting profits, they are not directly linked to cash flow in the short term. Although receiving dividends generates cash flow, it’s challenging to anticipate stable dividends due to local financial authorities and policies of financial institutions. In reality, the BIDV, a Vietnamese state-owned bank, prefers stock dividends over cash dividends as demonstrated by its decision to distribute only stocks instead of cash dividends last year. Similarly, the Bank of Jilin also initiated cash dividends for the first time in five years since 2018.
In response, KEB Hana Bank plans to expand cooperation with the two banks to enhance actual profits. It aims to increase synergy by utilizing the BIDV’s position as Vietnam’s largest bank with over 1,000 channels. Specifically, the bank has established Korea Desks at the BIDV’s branches in Hanoi and Ho Chi Minh City and intends to conduct joint marketing activities targeting Korean companies and reputable local enterprises in collaboration with KEB Hana Bank’s Ho Chi Minh City branch and others. Additionally, it is exploring the possibility of launching a specialized foreign remittance product in collaboration with the Bank of Jilin.