Potential bidders include Hyundai, Korea Investment and Kiwoom


Competition to take over distressed savings banks has grown heated among investors after financial authorities began the process of selling six savings banks on Friday.

The stock brokerage sector has emerged as the most active investor in the ongoing M&A competition, while more and more securities firms are set to expand their assets to become big investment banks.

Following Daishin Securities, which took over three ailing savings banks ― Domin, Joongang Busan, and Busan 2 ― in May, Hyundai Securities has been in talks with the Korea Deposit Insurance Corp. to acquire Daeyeong Savings Bank.

Hyundai Securities, which recently conducted due diligence on Daeyeong Savings Bank, is considering signing a memorandum of understanding with the state-run KDIC on an M&A in the coming weeks, according to industry sources.

Hyundai Securities, which is third in the local brokerage industry in terms of equity capital, reportedly has been focusing on the deposit business of savings banks to become a competitive investment bank.

Others such as Korea Investment & Securities and Kiwoom Securities have also expressed their interest in participating in the savings banks auction.

Daishin Securities was the first player to invest in the secondary banking sector after the Financial Services Commission unveiled its policy to foster big investment banks domestically.

Among the major players targeting the big IBs are Woori Investment & Securities, Samsung Securities and Daewoo Securities.

As per chief financial regulator Kim Seok-dong’s commitment, the FSC has stressed that it would ease a variety of regulations to realize its goal.

The FSC said it would revise laws on the capital market and financial investment business to allow bigger securities firms to issue loans to conglomerates.

Meanwhile, E-land Group, a major retailer, has allegedly scrapped its earlier plan to acquire Prime Savings Bank.

E-land had sought to acquire the debt-ridden Prime Savings in a bid to control a finance-oriented subsidiary.

The retailer reportedly pulled out their delegation for due diligence on the savings bank after the low-key M&A talks were made public on Wednesday.

The KDIC made a public notice for the sale of the ailing savings banks Friday and potential bidders are required to submit a letter of intent by Oct. 21.

The savings banks are Daeyeong, Prime, Tomato, Jeil, Ace and Parangsae. The KDIC is considering finalizing the sale of them by the end of the year.

After choosing preferred bidders in November, the agency is seeking to finalize the respective deals around mid-December.

For a speedy sale process, the deposit insurance corp. decided to raise the minimum eligibility for bidders. A potential bidder should meet the requirement for company assets of 2 trillion won ($1.69 billion).

The six suspended banks failed to raise their capital adequacy ratios above 1 percent, according to the FSC which halted their operations in September.

So far this year, 16 savings banks have been suspended by the financial regulator.

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