When Hana Financial Group incorporated Korea Exchange Bank under its umbrella back in 2012, it gave its word to the KEB’s labor union that it would guarantee the bank’s managerial independence for the ensuing five years.
But it looks like the promise may be broken as Hana Financial chairman Kim Jung-tae ― pressed by a combination of the ongoing market slump and rising competitors ― may attempt to merge KEB with Hana Bank ahead of schedule.
“It may now be time to start discussing the integration (of Hana Bank and KEB),” Kim told reporters over a luncheon on Thursday.
|Hana Financial Group chairman Kim Jung-tae|
Though he stressed that nothing has been put into motion as of yet, his remarks were enough to rekindle the industry’s rampant speculations that Hana Financial will not be maintaining its two-bank structure for long.
Further fanning the speculations, Kim also said, “In an era marked by sluggish growth and low interest, global financial companies are struggling to survive,” hinting that Hana Financial must take up a bigger initiative to spur growth.
There are other signs that Kim is in a rush, such as his dwelling upon Japan’s No. 2 Mizuho Financial Group, which significantly cut its costs last year by merging Mizuho Bank with Mizuho Corporate Bank. He also elaborated on his recent visit to Indonesia, where Hana Bank and KEB had to be merged on account of local laws. Kim described it as being “more successful than anticipated.”
Kim has his reasons to be anxious, as the domestic banking industry has been on a steady decline over the past couple of years, with the aggregated net profit of the top seven banks more than halved from 9.5 trillion won ($9.4 billion) in 2011 to 4 trillion won in 2013. The net interest margin during the corresponding period dropped from 2.2 percent to 1.73 percent.
The sense of crisis fell particularly heavy on Hana Financial.
Despite its position as the nation’s second largest financial unit in terms of total assets, its net profit last year stood at 934 billion won, which was less than half that of its main rival Shinhan Financial Group. KEB also saw a 77 percent fall in net profit in 2011-2013.
Kim continued to claim that the integration process needs further discussion, but his recent moves have now set off the KEB labor union.
“Chairman Kim’s remarks directly violate the 2012 labor-management-government agreement (not to merge the two banks until 2017),” the union said Thursday through a statement.
However, with Hana Bank president Kim Jong-jun bracing for heavy sanctions from the financial watchdog on improper loans, it remains to be seen if the merger can happen ahead of schedule.
By Bae Hyun-jung (firstname.lastname@example.org)