KB on the Stump
in Kazakhstan

Kookmin Bank to take over Center Credit Bank in Central Asian country

Kookmin Bank is in the process of taking a 30-percent stake in Center Credit Bank, the sixth-largest commercial bank in Kazakhstan, for 600 billion won.
According to financial authorities and banking sources, the largest commercial bank in Korea will take over an additional 20 percent stake in three years by paying 400 billion won to gain a controlling stake and begin running the bank from 2011 as stipulated in the option clauses of the contract.
The bank will pay a total of 1 trillion won to buy 50.1 percent of the Central Asian bank on a gradual basis. But, the bank's board of directors should approve the plan before the bank carries out talks with major shareholders of the bank including Vladislav Lee, who is of Korean descent and owns a 7.8 percent stake in the bank.
Central Credit Bank is the sixth largest bank among 30 banks in the central Asian country in terms of assets as of 2006, equal to about one-fourth of the assets of the largest bank in Kazakhstan, Kaz Commerz.
Kaz Commerz managed to grow 23 percent annually in recent years, but Center Credit outpaced the bank with 63 percent growth, the highest among banks in the country.
The bank's net income against assets recorded 26 percent and return on assets was 1.9 percent as of September last year, higher than Kookmin Bank's 1.44 percent ROA. The Kazakh bank posted a 6 percent net profit, twice that of Kookmin Bank.
The financial sources said Center Credit has a very good profit record, but as with many banks in developing countries, the non-performing loan rate is high at 5.8 percent, much higher than the 0.77 percent for Kookmin Bank.
Center Credit has 160 local branches across Kazakhstan and has three local subsidiaries taking care of such financial businesses as pension funds, leasing and stock brokerage.
The bank has a foreign subsidiary in the Netherlands for the purpose of procuring foreign funds.
Kookmin Bank officials said 99 percent of the central Asian bank's loans are backed by collateral, so the high rate of non-performing loans doesn't matter much. The bank would be a bridgehead for Kookmin in Central Asia since it has high profitability.
In addition, they said Center Credit has its outstanding loans divided between individuals and corporate customers in a ratio of 6 to 4, which is similar to that for Kookmin.
Center Credit's outstanding personal loans is high, as it took over a local bank specializing in housing loans in 1998. Kookmin took over the Korea Housing Bank in 2001. Financial authorities said they expect Kookmin to submit the application for its takeover move sooner rather than later. They said the takeover would be the largest M&A for a Korean financial company at 600 billion won.
M&As completed by Korean banks so far include the takeover of North Atlanta National Bank by Shinhan Bank for $429 million and Hana Bank's merger with Commonwealth Business Bank, formerly owned by a Korean-American business man, for $39 million. In 2003, Woori Bank took over Pan-Asia Bank for $34.5 million. Kookmin Bank bought a stake in BII Bank in Indonesia for 70 billion won.
Kookmin Bank said, in the meantime, at its investor relations session, that its net profit amounted to 2.74 trillion won, the highest in its history last year, up 11.1 percent over the previous year. The ROA recorded 1.32 percent and ROE was 18.05 percent.
The bank's total assets, including assets in trust, amounted to 232.1 trillion won at the end of last year, up 12.1 percent from a year earlier. Its outstanding loans totaled 152.5 trillion won, up 14.6 percent from last year.
To break down loans by sectors, personal loans amounted to 88.9 trillion won, up 4 percent from last year, and corporate loans recorded 63.6 trillion won, up 33.6 percent from last year. nw

President Kang Chung-won of Kookmin Bank.