Three of four major financial groups to own secondary banking unit


KB Financial Group and Shinhan Financial Group are expected to take over major savings banks, as they won bidding competitions for the distressed sector.

The state-run Korea Deposit Insurance Corp. said Tuesday that it selected Shinhan Financial Group as the preferred bidder for Tomato Savings Bank, the No. 2 player in the secondary banking sector.

KB Financial Group has been picked as the preferred negotiator for Jeil Savings Bank.

The KDIC also allowed BS Financial Group to acquire two players ― Prime Savings Bank and Parangsae Savings Bank ― as a package deal.

Woori Financial Group yielded to Shinhan Financial in the auctioning Tomato Savings. Hana Financial Group lost the bidding competition to take over Jeil Savings and Prime-Parangsae.

As Woori Financial acquired Samhwa Mutual Savings Bank in the first half, three of the four largest financial groups ― KB, Woori, Shinhan and Hana ― are about to own the secondary banking subsidiaries.

Hana Financial, which has been striving to take over Korea Exchange Bank from U.S.-based Lone Star Funds, does not seem to have been active in the savings bank M&A competition.

With the coming acquisition of the distressed savings banks, KB and Shinhan are likely to attract more lower-income customers in their lending businesses and more depositors aiming at high interest rates.

Busan-based BS Financial is focusing on expanding its presence over the country by taking over Seoul-based Prime Savings and South Gyeongsang Province-based Parangsae Savings.

The KDIC is considering finalizing their sales by the end of the year.

The agency is seeking to finalize the respective deals around mid-December after letting the preferred bidders conduct due diligence on the M&A targets.

The suspended savings banks failed to raise their capital adequacy ratios above 1 percent, according to the Financial Services Commission which halted their operations last September.

So far this year, 16 savings banks have been suspended by the financial regulator for their weak management conditions.

Following the initial round of restructuring for the sector in the first half, financial regulators ― since last July ― have carried out examinations on the overall savings banking industry tarnished by involvement of some banks in a corruption scandal.

The FSC and the Financial Supervisory Service made inquiries into 85 out of 98 savings banks for about two months under the policy to normalize the debt-saddled sector.

Since the 2008 global financial crisis, many savings banks saw their capital health tumble due to their massive lending to builders who failed to pay back loans because of a slumping property market.

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