Beefing up the Non-Banking Sector

Chmn. Hwang: KB Financial Holding will seek M&As in the non-banking sector to balance Kookmin Bank's operation

Chairman Hwang Young-key of KB Financial Holding Co. said he will direct the company to acquire either a securities firm or an asset management company to expand its non-banking sector's operations.
The chairman said the company will reopen its drive to take over a securities firm after its move to acquire Eugene Securities was suspended, showing its intention to go after an individual firm rather than merge with a group.
Hwang said he expects some securities firms to be on the sale block when the economic crisis deepens and conglomerates restructure for the sake of their survival, making securities firms owned by conglomerates the priority targets in KB Financial Holding's quest for M&As.
The chairman stressed that KB Holding has no intention to go after Eugene Securities again, but it will surely try to take over a securities firm strong in such areas as investment banking and online business, adding that the company's moves will become clearer in March with 500 billion won allocated to finance a takeover.
Hwang said KB Holding is definitely looking for an asset management firm for take over in order to expand its growth following its first acquisition, in line with the need to expand the non-banking sector in case the banking sector's growth is limited, including that of Kookmin Bank, which accounts for a huge chunk of the group's operations. He said it's a similar situation to that of Shinhan Bank, which contributed 47.8 percent of Shinhan Holding's net income last year.
Since the launch of KB Holding last September, Hwang has been preoccupied with putting together the financial holding company, including manpower, and has now turned toward matters related to strengthening and expanding the non-banking sector of the holding company.
He assembled 50 staff from among the eight non-banking affiliates' CEOs and employees, including KB Investment Securities, KB Asset Management, KB Insurance and KB Futures, and travelled to Mt. Chukryong in Gapyong, Gyeonggi Province, on Jan. 8, to pray to the mountain gods to bring them good luck in the new year. The occasion was also an opportunity for them to unite for the improvement of the operations of the non-banking affiliates.
Hwang also decided to hold a meeting of non-banking affiliates' CEOs every Thursday to discuss managerial policies, while CEOs of all affiliates will meet once a month.
Chairman Hwang, in his New Year address, said the key management policy goal is "to build the growth base through inner substance management," with the 30,000 employees of KB Financial Holding and its affiliates united to overcome all of the difficulties on the way toward achieving the operational targets for this year.
The first step in moving toward the management objectives this year is maximizing synergy among affiliates, which should be realized with Kookmin Bank's customer satisfaction as a key base. All of the affiliates of KB Financial Holding should jointly share customer information and marketing channels to create synergy for profit.
Close cooperative exchange among all affiliates of the group is a prerequisite to joint marketing for the development of multiple financial products and the cross sales of those products among the affiliates, Hwang said.
He said the group will not spare any of its efforts to strengthen the products and services of its non-banking affiliates this year, in order to achieve the creation of higher degrees of synergy among the affiliates.
The second step is to strengthen risk management to solidify its growth base.
Risk management emerged as a key factor for all financial companies to survive the sweeping economic slowdown. The holding company will ensure its system for joint risk management by detecting early signs of dangerous assets so that preemptive measures can be taken for all affiliates.
The third step is to boost the effectiveness of expenses and management with a focus on profit. As the business climate worsens, the ability to make a profit will become more difficult as expenses rise. In order to cope with the problems, the group has been reducing expenses since last year, declaring crisis management, cutting remuneration for officers and freezing the salaries of employees on a voluntary basis. The entire group is united in cutting expenses and boosting management effectiveness.
The fourth step is to be flexible in its response to M&A market trends. The KB Financial Group has mid-to long-term strategic targets with global competitive power. Those strategies are for organic growth of all affiliates of the group and thorough preparation for conducting strategic M&As. nw

Chairman Hwang Young-key of KB Financial Holding Co.