Kookmin Shifts Gear to Aggressive Mode

Nation’s Largest Bank Close to Taking Over Hannuri Securities for 280 Billion Won

By Na Jeong-ju
Staff Reporter

Kookmin Bank has agreed to buy Hannuri Investment & Securities, a small brokerage firm based in Seoul, for some 280 billion won ($309 million) with its largest shareholder, J.D.K Investment Corp. of the United States, sources close to the deal said Monday.

Kookmin will take over the investment firm's 93-percent stake in Hannuri, and ensure job security for all Hannuri employees, the sources said.

The agreement came after SC First Bank, which had contended with Kookmin to buy Hannuri, dropped its bid. Kookmin earlier said it would cancel its bid, citing a high asking price, but rejoined the competition after price negotiations between J.D.K. Investment and SC First had failed.

The planned acquisition of the brokerage house underlines Kookmin Bank President Kang Chung-won's commitment to strengthening the bank's non-banking operations and a shift of his management policy toward a more aggressive mode going forward.

Sources said Kookmin has completed price negotiations with the U.S. firm and notified the result to financial regulators for approval. However, Kookmin officials said the deal is still in progress, and nothing has been decided yet.

``Kookmin and Hannuri concluded price negotiations last week, and have reported it to the Financial Supervisory Service (FSS),'' a source said. ``The FSS is expected to embark on surveys soon to decide on whether to approve the deal.''

An acquisition of Hannuri is in line with Kookmin's plan to grow the country's largest lender into a comprehensive financial services provider. Kookmin CEO Kang Chung-won, who started another three-year term last week, said he would pursue aggressive expansion in non-banking areas, such as insurance, securities and investment banking.

``Kookmin's bid for Hannuri shows major South Korean banks are stepping up efforts to expand their non-banking portfolios in order to diversity income sources,'' said Kim Hee-joon, an analyst at Dongbu Investment & Securities. ``Banks are expected to target many consumer financing firms, insurance firms and securities firms for mergers.''

Kim said acquiring an existing firm is the cheapest way for Kookmin to advance into the brokerage market, in which its rival banks have established positions. Kookmin considered setting up a new brokerage company instead of acquiring one as heated competition had raised bid prices for target firms.

Hannuri only deals with corporate customers and does not have any retail business networks. As of the end of June, it had some 271.5 billion won in assets and 110.9 billion won in capital.

Kookmin's aggressive strategy under the leadership of Kang, who started his three-year second term on Nov. 3, is alarming other smaller rivals as the leading bank's new campaign will result in a tighter interest margin.

The bank has unveiled new installment deposit products carrying annual interest rates of more than 6 percent and at the same time cut commercial loans for salaried workers of self-employed by as much as 0.7 percentage point.

Kookmin has sold nearly 20,000 accounts daily after the launch of the installment deposit products last Thursday.