Nonghyup Issues Bond in London

Successful financial deal intended to buttress its BIS ratio to expand financial operations

The National Agricultural Cooperatives Federation (Nonghyup) has been promoting its plan to set up operations overseas by buying stakes in small banks in China and Southeast Asia, Kang Myung-goo, executive vice president of Nonghyup said recently in an interview with a foreign news media.
"We are looking for strategic alliances with foreign banks as we try to expand our overseas business,"Kang said. He is in charge of asset management business for Nonghyup, totaling some $45.95 billion.
He went on to say that Nonghyup is thinking about buying stakes in foreign banks in Southeast Asian countries like Indonesia and China.
Nonghyup, in the meantime, said it has successfully issued foreign exchange bonds amounting to $500 million in London, repayable in 10 years. The bond carried Libor plus 39.5 bp annual interest rate, the lowest in recent years among any rates charged on subordinated bonds issued by Korean financial institutions in the financial market in London, Nonghyup said. The bond is also repayable after five years, if Nonghyup wants to, according to the terms and conditions for the bond issuance. Nonghyup said the bond will be used to increase its BIS ratio by 0.42 percent this year, from 12.34 percent at the end of last year.
Managers for the bond issuance included ABN Amro, BNP Paribas, Citigroup, and HSBC and the fund will be used by Nonghyup to make foreign exchange loans and fund for overseas investment, Nonghyup said.
Nonghyup has no overseas branches for financial operations, although it has more than $200 billion in assets.
Kang who also led Nonghyup's international financial team said the NACF also planned to expand investment in overseas assets such as property funds and hedge funds to 2.5 trillion won this year from 2 trillion won last year.
The executive vice president is particularly upbeat on Vietnam's property market which is experiencing a construction boom, and said Nonghyup has contacted builders and developers.
Vietnam is in an early stage of fast economic growth, so you can profit wherever you make investments, he boasted.
The National Agricultural Cooperative Federation (NACF) has a thriving banking department as active as commercial banks in the country, although it remains very much unnoticed by the public. Its total banking assets amounted to 148 trillion won as of the end of June, up 7.4 trillion won from the end of 2005. "The Banker,"an international magazine on banks, listed Nonghyup among the 90th largest financial institutions in the world at the end of 2005. Its assets are projected to jump to 155 trillion won at the end of last year.
Its deposits totaled 107 trillion won as of the end of June, an increase of 7 trillion won from the end of 2005 and by the end of 2006; it was projected to hit 114 trillion won, a growth of 7.2 percent on year to year basis.
In the area of credit & banking, NACF dished out 85 trillion won in loans as of the end of June, 2006, up 6.3 percent from the end of 2005 and it is projected to reach 90.5 trillion won this year. Its project financing loans amounted to 3.196,2 trillion won as of the end of June,2006, up 19.4 percent compared to the same period 2005. NACF also invests and makes loans in international financial markets, which totaled $2.016 billion, up 37.1 percent at the end of June, 2006 from the same period 2005. Its private equity fund and investments in venture capital firms amounted to 100.8 billion won as of the end of June, 2006, up 39 percent from the same period 2005.
The finance department also has been considering a plan to make advances overseas out of the need to provide support for exports of farm produce and cope with changes in the financial environment. A branch is planned to be set up in New York and a representative office in Shanghai, China, under a gradual step in consultations with concerned authorities.
NACF will build a financial system tailored for farmers?needs and changes in the agricultural communities in the country, along with plans to expand the agricultural financing consultation services to improve farm household finances around the country.
Under the long-term credit & banking business development plan, the credit department will try to be among the 60 largest financial institutions in the world by 2010 with the ratio of non-performing assets below 1 percent. It will try to build an integrated financial group ultimately. Its assets would total 205 trillion won by 2010 as a representative financial institution in Northeast Asia with S & P credit rating of A+. Agricultural financing will be the root of its credit business and the farm financial support system segregated from commercial finance. NACF's credit & banking department will try to be an independent financial unit and not rely on government policies by finding its own support businesses for the agricultural communities in the country. It will also implement the government 119 trillion won in investment and loans to farmers without a hitch. It will ultimately operate card, securities, insurance and banking businesses as its core areas of business. nw

President & CEO Chung Yong-keun of NACF Credit and Banking Department