On the Road to Globalization
Kookmin Bank named priority bidder to acquire Korea Exchange Bank

Kookmin Bank, the largest commercial bank in Korea, is set to have another spectacular year following up on their performance last year. As part of its expansion plan, the bank has made a tender offer to take over the Korea Exchange Bank(KEB) and has been named the priority bidder. The KEB, with its large network of corporate banking, will make Kookmin truly the largest bank in Korea in the true sense of the word by adding its wholesale banking network to the vast retail operation of Kookmin Bank when the takeover is completed.
The bank feels that it should build its base for continuous growth this year given the growth of the banking industry remaining low with only one digit growth last year and both interest and non-interest incomes falling. The conclusion of FTAs with increasing number of foreign countries in particular with the U.S., will open the country's service sector to foreign investment making competition tough for domestic banks. So the bank has decided to seek both organic and inorganic growth of the bank at the same time this year to make itself stand up in the tough banking environment. KB will try to keep its market share the same as last year, strengthening its business capacity, organizational effect, and achieve its clean bank image.
The acquisition of KEB is part of KB's strategy to build its power to compete with foreign rival banks on its way to globalize its operation and position itself as a representative Korean bank in the world. KB plans to overcome its growth limit and make advance into the Asian financial market and globalize its operation.
Total assets at the end of last year amounted to 179.6 trillion won, the same as in the preceding year. Loans in local currency fell 3.3 percent at the end of last year totaling 118.6 trillion won, compared to 122.7 trillion won in 2004. Total liabilities stood at 167.2 trillion won last year, down 1.9 percent from 170.4 trillion won in the previous year. Currency deposits, in the meantime, totaled 131.6 trillion won last year, up 1.9 percent from the preceding year. Total stockholders equity recorded 12.4 trillion won, up 34.8 percent compared to 9.2 trillion won in the preceding year.
Operating income totaled 3,015.6 billion won at the end of 2005, up 74.7 percent from the previous year, which recorded 1,726.3 billion won. Non-operating income totaled 212.4 billion won, compared to 1,096.3 billion won at the end of 2004. Net income amounted to 2,252.2 billion won at the end of 2005, up 524.7 percent from 960.5 billion won at the end of 2004.
NIS recorded 3.35 percent, NIM 3.36 percent, the return on assets 1.24 percent, and the return on equity 20.35 percent. Total loans for NPL management totaled 137,521.5 billion won up 0.9 percent from the same period in the previous year. Substandard and below loans amounted to 2,388 billion won last year, down 35 percent from the previous year. Allowances for loan losses amounted to 2,468.4 billion won in 2005, down 21.6 percent from the previous year. Coverage ratio recorded 105.6 percent in 2005, up 18 percent from the preceding year of 87.6 percent.
Delinquency ratio recorded 1.7 percent last year, compared to 2.67 percent in the preceding year.
Kookmin Bank has long been the undisputable leader in commercial banking in Korea. Refraining from complacency about its position, the nation's largest lender is ready for a second take-off. President and CEO Kang Chung-won pledged to further improve its asset quality and strengthen profitability in order to solidify the top position in the country, he said in a recent interview with media. "Facing unprecedented challenges internally and externally, we will do our utmost in terms of profitability, the improvement of asset quality, and the development of new earnings sources in various fields,"he said in the interview.
Since he took the office in November, 2004, he has made efforts to transform Kookmin into a whole new entity. To produce greater synergy, the first step he preceded was the integration of three separate labor unions, Kookmin Bank's, Housing & Commercial Bank's, and Kookmin Card's. On January 1, the merged bank's single labor union was launched after three years of disharmony. He made the decision of integration in only days after he took charge of the Kookmin Bank.
The bank plans to develop new clients among small-and-medium-size enterprises (SMEs) with sound finances and strong growth potential. The lender has recently allowed its branches to lend SMEs up to 10 billion won from previous lending limit of 7 billion won.
Kookmin has 26 million customers base with 1,100 employees nationwide. It aims to become the second largest in terms of market capitalization in Korea behind Samsung Electronics. nw

Kookmin Bank President Kang Chung-won