Standard Chartered Korea has agreed to sell its capital and saving bank units to Japan-based finance company J Trust as part of a restructuring plan to find a breakthrough in the stagnant market.
According to the deal signed on Monday, the 100 percent stake in both SC Savings Bank and SC Capital will be sold for 151 billion won ($148 million), the bank said in a statement.
The deal still requires approval from financial regulators from both South Korea and Japan but is expected to be finalized by the end of 2014, the bank said.
The sale of the two affiliates was widely expected as their weakening profitability was quickly becoming a significant threat to the U.K.-based banking group.
SC Korea suffered a $1.0 billion write-down in its value in August and has since undergone a restructuring plan that includes the closure of some 70 of its roughly 350 branches.
This has resulted in rumors that SC Bank is looking to end operations of its consumer banking branches in South Korea.
Market watchers say the sale of its nonbanking units will further intensify rumors about the U.K. bank’s withdrawal from the Korean market.
But Ajay Kanwal, chief executive of Standard Chartered Korea, dismissed the rumors by stressing that the deal is “part of our strategy to reshape our business in Korea as we improve returns by focusing on the client segments and products where we are competitively differentiated.”
“We are pleased to have reached this agreement with J Trust, which is clearly committed to taking both businesses to the next stage of their respective development,” he said in the statement.
Kanwal, who took over the CEO post in April, reiterated in May that SC Korea will continue investing in digital banking and expand global financial services to Korean businesses in a bid to reverse the bank’s weakening profitability.
Market watchers say SC Korea, however, is likely to face strong protests and backlash from its employees, who are concerned about their job security, over the next months.
A labor union official from SC Savings Bank claimed that the bank had “ignored” the union as a “negotiation partner,” and signed the deal in closed-door negotiations with the Japanese financial firm.
J-Trust is a Japanese consumer lender listed on the Tokyo Stock Exchange’s Second Section.
The Japanese lender also acquired the troubled Mirae Savings bank in 2012, and has since been making forays into the nonbanking sector in South Korea, purchasing small-and midsized financial firms like KJI Capital and Hi Capital. As of December 2013, SC Savings Bank has 580 billion won in assets. SC Capital has some 1.09 trillion won in assets.
By Oh Kyu-wook (firstname.lastname@example.org)