China Merchant Bank expected to boost Korean group’s expansion


Hana Financial Group has established a strategic partnership with China Merchant Bank, the country’s sixth-largest lender, beefing up ammunition for its planned portfolio diversification and expansion of China operations.

The Korean financial group said Tuesday that the agreement will involve cooperation on a range of joint financial services and interchanges of staffers.

The two sides also agreed to activate mutual investment. “The latest collaboration is essentially part of our cooperation plans needed for future global sales,” the group said in a statement.

Among the detailed fields for coordination are corporate financing, retail banking, foreign exchange services, investment banking and credit card issuance.

Hana Financial expects the tie-up with China Merchant Bank would have positive effect on Hana SK Card as the strategic partner captures a 23 percent share in the Chinese credit card market.

Established in 1987, China Merchant has total assets at $342.5 million (383 billion won) and operates 776 branches nationwide.

The agreement came ahead of Hana’s planned takeover of Korea Exchange Bank.

But the group said the Chinese bank will not participate in the financing of the 4.7 trillion won ($4.2 billion) purchase.

A group official said the bank cannot participate in the KEB takeover funding since it needs about six months for regulatory approval in China to hold other financial company’s shares.

Hana signed an agreement with U.S.-based Lone Star Funds in November to take over a 51.02 percent stake in KEB and has since looked for investors willing to provide funds for the deal.

The group is expected to announce its investment partner in the coming weeks. According to sources, U.S.-based private equity fund Carlyle Group has tentatively reached a deal with Hana to join the planned takeover of the Korean bank.

Sources raised the possibility that Carlyle may raise its investment, to be worth more than 1 trillion won from U.S.-based Lone Star Funds, which is about to sell its controlling stake in the Korean bank to Hana.

Hana plans to raise some of its takeover funds by issuing bonds and other methods.

More than five investors including Carlyle, Corsair Capital and MBK Partners had reportedly submitted letters of intent for the funding participation.

Meanwhile, the labor union of KEB is bracing for an all-out struggle, including a general strike, to block Hana Financial from acquiring the lender, which they fear could lead to a massive restructuring, sources said.

The KEB employees are waiting for the outcome of the ongoing inquiry by the Financial Services Commission into whether Lone Star was eligible to become the majority shareholder of the bank in 2003, a source said.

A leader of the unionized workers also said they would closely monitor if FSC Chairman Kim Seok-dong will keep his word, who said a week ago that “the financial authority plans to conclude the issue in a way that the public could accept.”

By Kim Yon-se (kys@heraldcorp.com)