Finding Niche Market Overseas

Kookmin Bank to expand its operations overseas to increase profit

Kookmin Bank is a representative bank in Korea. Its assets totaled 211 trillion won at the end of last year with over 26 million customers across the country, more than half of the country's population. The top retail bank in the country has an extensive banking network including 1,018 individual banking service branches, 96 corporate banking branches and 18 private banking service units, totaling some 1,132 across the country. Last year, the bank netted 2.471 trillion won in profit, the largest in the financial industry, up 9.8 percent from 2005, the year the bank for the first time saw its annual net profit reaching 2 trillion won. 2006 was a bumper year for the bank in terms of achievements in various areas. The bank is very proud of its top ranking in the national customer satisfaction index compiled by the Korea Productivity Center.
President and CEO Kang Chung-won, since he took over as the bank's top manager in 2004, has always stressed the better service for customers more convenient and effective than rival banks if the bank wants to continue to lead the banking industry. He called for the best customer service as the top priority item for reform and has been pushing strongly the reform activities. His sustained drive to improve customer service paid off in 2005 with the bank ranking second in the NCSI's banking sector and last year Kookmin came on top in the index. President Kang was impressed enough to say that the top ranking in the index was the most proud event for the bank for him during last year. "It was the most fulfilling one"he recalled during the year-end ceremony for officials and staff at the bank's head office. Kookmin has been strengthening its products and services to continue to be a leading bank with an array of brand-name products, not just being a bank with a dominant market share. The bank wants to be recognized as a top partner for its customers'success, not just providing "convenience"armed with professional financial know-how. In order to be such a bank, the bank became the first financial institution in the country to launch mobile banking service and issue an electronic bank book for the first time in the world to lead Korea's banking community in services. The bank issued "KB Card"for banking and credit card services, "KB Bancassurance"for insurance services and "KB Foreign Exchange and Money Transfer Service,"to be a full service bank in the country.
Kookmin will build a system to launch its banking business in southeast Asia in the next two to three years, said the bank's President and CEO Kang in explaining the bank's management plan at the outset of this year.
The CEO of the largest commercial bank in the country said the bank has completed its plan to launch its overseas operations.
CEO Kang has successfully managed to merge the labor unions of the three companies into one and for the first time, net profit of the bank exceeded two trillion won in 2005. In addition Kang also played a big role in Kookmin nomination as the priority bidder in the bidding for the Korea Exchange Bank in March last year, although the MOU signed with the KEB has now been invalidated due to the prolonged investigation into Lone Star, the U.S. hedge fund's purchase of the KEB in 1998 during the financial crisis.
With the attempt to expand Kookmin's domestic operation limited due to too much competition, CEO Kang has decided to focus on overseas operations to increase profit for the bank in the future.
"From a long-term prospective, the bank has a better chance to increase its profit overseas than at home,"President Kang concluded to explain the bank's swift turn to overseas for expanded profit.
The top manager of Kookmin Bank is cautious about the bank's moves to expand its overseas operations and go slow on such big moves as mergers and acquisitions overseas. But it does not mean that the bank has given up on its attempt to acquire KEB. The bank will again make bids if KEB is put on the sale block because it has already spent a year to wait for the time to take over the KEB with strong corporate banking operations.
CEO Kang said he doesn't think the banks would try to focus on quantity growth as they did last year, but compete on quality growth this year, looking at overseas financial markets to expand their operations and find a "Blue Ocean"in new niche markets where competition will grow harder.
The bank will put stress on strengthening its future growth engines and in order to do that it will strive to expand operations, reform its profit structure, realize a clean bank and develop a global standard capacity.
Kang will be out to tighten the bank's operation, especially, the management of loans, aware that the domestic economy will be sluggish, which will hit the bank's profitability and soundness.
Kookmin will continue to improve its profit structure focusing on the expansion of the sale of funds, bancassurance products, foreign exchange service and derivative products for increases in fee incomes.
Kang's 3-year term of office expires in November, but he plans to continue to consolidate the bank's operations so that it could still be the largest and representative bank in the country even 10 years from now. nw

Kookmin Bank President Kang Chung-won.