Reasoning behind bank selection of acquiring banks

  • FSC made recommendations to sound banks under a P&A arrangement to acquire banks which would most likely receive disapproval of rehabilitation plans

    • Shinhan Bank, Housing & Commercial Bank, Kookmin Bank, Hana Bank and Koram Bank prepared necessary acquisition procedures and with consideration of its long-range business plan made selections as to which bank to acquire

  • Kookmin Bank and Housing & Commercial Bank have maintained a comparative advantage in retail banking for households and SMEs.

    • Hence, they chose to acquire banks that specialize in SME business such as Dae Dong Bank and Dongnam Bank

  • Shinhan Bank, Koram Bank, Hana Bank have maintained a comparative advantage in corporate and high net-worth individual business

    • Hence, Shinhan Bank and Koram Bank preferred to acquire banks that have a strong branch network in the metropolitan area such as Dong Hwa Bank and Kyungki Bank

    • Hana Bank with a relatively small number of employees choose to acquire Chung Chong Bank which has the least number of branch offices among resolved banks and will be bestowed with the opportunity to transform into a leading bank

  • In order to stand out as a leading bank (Type A in the following diagram), Kookmin Bank, Housing & Commercial Bank (Type B) as well as Shinhan Bank, Koram Bank, Hana Bank (Type C) will each lead areas of which it has a comparative advantage and will exert to further expand its competitive edge

    • The banking industry will be transformed into a competitive one led by increased market discipline and prompt corrective actions by the regulators

    • To be ranked as a leading bank, it will have to strengthen corporate financing as well as international banking expertise and pursue scale and scope economy possibly through M&As.

<Appendix> Banking Business Evolution

  • Key Factors for Success

    • Corporate(small & medium/large): (broad-line distribution channel/strict loan concentration management)

    • Retail(mass/high net-worth individuals): (extensive channel reach, automation /highly differentiated channels)

  • Consolidating Principles for Enhancing Competitiveness

    • Appropriate coverage (customers, geography)

    • Maximizing cost reduction/scale

    • Managemnet skills