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Preparing for Increased Competition
Banks and financial groups are gearing themselves up for new business environments in 2010
Preparing for Increased Competition
  • By matthew
  • January 15, 2010, 11:06
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Korean banks and financial groups unveiled their business strategies and plans for the upcoming Year of the Tiger. They predicted that many uncertainties still surround the Korean economy and that competition among financial institutions will become fiercer due to changes in systems and policies. Accordingly, they vowed to wage a sales war in order to become the No.1 bank in Korea while also pursuing quality-oriented growth.

Competition in the Korean financial industry is expected to get fiercer this year following the introduction of new regulations and laws, predicted Kang Chung-won, President of KB Kookmin Bank. Lee Baek-soon, President of Shinhan Bank, predicted that after M&As among banks are finalized, mega banks will come to dominate the banking industry. On the other hand, Lee Jong-hui, President of Woori Bank suggested a new takeoff through qualitative growth, highlighting expansion of the bank’s profit base as the first step to achieve this.

The KB Financial Group emphasized qualitative management with the aim of making 2010 a year of challenge and creation in order to create the highest value for future growth. By doing so, the KB Financial Group plans to maximize its value by pursuing the substantial growth of its non-banking subsidiaries. Shinhan Financial Group meanwhile said that it will catch changes quickly and devise proper measures, putting them into practice smartly and nimbly.

Hot issues for the financial industry in 2010 include the privatization of Woori Financial Group, the sale of Korea Exchange Bank, sales competition among financial institutions and fusion between finance and telecommunication.

Most of all, financial regulators will push forward with the privatization of Woori Financial Group. In December 2009, Korea Deposit Insurance Corporation (KDIC) sold approximately 7% of its equities (56.42 million shares) in the Woori Financial Group to Korean and foreign institutional investors at 15,350 won per share. KDIC is planning to sell off an additional 16% of equities in the first half of 2010. The remaining 50% of equities plus one share, the minimum number of shares to make a managerial decision, will be sold off shortly afterwards.

In early January, Financial Services Commission Chairman Jin Dong-su said, “The privatization of Woori Financial Group will inevitably bring changes,” hinting that privatization will be executed before the end of 2010. The government is considering marrying Woori Financial Group with a bank, resulting in the creation of a mega bank.

Despite wanting to take over Woori Financial Group, many doubt that Hana Financial Group can afford the eight trillion won expected price tag, However, many financial experts predict that SK Telecom may still emerge as a white knight, claiming that is why the company participated in the management of Hana Card at the end of 2009. Hana Financial Group gave SK Telecom 49% equities in a capital increase system.

KEB is also likely to find itself with a new owner this year. “A big picture on the sale of KEB will be revealed in the first half of 2010 when legal uncertainties are cleared up,” said an executive at a commercial bank in Seoul. Potential buyers of KEB are KB Financial Group, KDB Financial Group, Hana Financial Group and NH Nonghyup.

In terms of a sales war, banks are expected to become more aggressive in expanding sales in an attempt to take the lead after the advent of the global financial crisis. Banks that performed well in 2009 are preparing for the upcoming sales war by making little change in their executive positions, while banks that did poorly have been observed replacing old executives in preparation. Banks are also planning on opening new branches following strong signs of an economic recovery. Six major commercial banks are planning to open approximately 130 new branches in 2010.

The new year will also see the fusion of finance and telecommunications. Following the debut of the i-Phone in the Korean market last year, banks have created a smart mobile banking market in Korea, with mobile service operators tying the knot with financial firms. In 2010, the market will be become bigger and more dynamic. Of late, Hana Bank has led the way in the fusion between finance and telecommunications, with it being the first to introduce a mobile banking service exclusively for i-Phone users in early December 2009. However, this was soon followed by IBK which unveiled its own i-Phone banking service later the same month.