On the Road to
Kookmin Bank looks to overseas markets to diversify its income sources
Kookmin Bank, the largest retail bank in Korea, is set to have another spectacular year this 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 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 June amounted to 192 trillion won, up 6,9 percent from the end of last year. Loans in local currency rose 3.2 percent at the end of H1 totaling 126.2 trillion won, compared to 122.3 trillion won in 2005. Total liabilities stood at 192 trillion won, up 6.9 percent from 179.6 trillion won at the end of the previous year. Currency deposits, in the meantime, totaled 131.2 trillion won at the end of June, down 0.3 percent from the end of last year. Total stockholders equity recorded 13.8 trillion won, up 11.3 percent in the H1 compared to 12.4 trillion won in the preceding year.
Operating income totaled 1,917.1 billion won at the end of in H1, up 55 percent y-o-y, which recorded 1,237.1 billion won during the same period last year. Non-operating income totaled 264.8 billion won, up 262.7 percent compared to 73 billion won during the same period last year. Net income amounted to 1,580 billion won at the end of June, up 77.5 percent from the same period last year.
NIM recorded 3.87 percent down from 3.88 percent last year, the return on assets(ROA) 1.71 percent, up from 1.24 in 2005 and the return on equity(ROE) 23.52 percent from 29.35 percent last year.
Delinquency ratio improved to 1.29 percent at the end of June, compared to 1.7 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 commercial entity in Korea in terms of market capitalization in Korea behind Samsung Electronics. nw
President Kang Chung-won of Kookmin Bank