Looking for Opportunities Amid Crisis

KB Financial to shop for European banks hurt by EU debt problems

Chairman Euh Yoon-dae of KB Financial Group is getting a plan ready to take over a foreign bank or buy stakes when banks impacted by the European debt crisis this year are up for sale.
The chairman, who is a former chancellor of Korea University, told local media that he expects about 10 percent of European banks to go belly-up this year or next and he will go after them when they come on the market.
Euh said the 2008 financial crisis was manageable, but the current debt crisis in Europe may be difficult to solve, as each EU member country should act in concert to solve the crisis, which is hard to do.
Therefore, he thinks opportunities will open for Korean banks to take over some of them or to hold stakes in a year or two. Right now, risk management is the priority for Korean banks, but they also look for M&A targets, although only a few European banks are on the market now.
Euh believes KB Financial should take over or hold a stake in a foreign bank instead of setting up an independent operation by itself since those banks can sell part of their operations. He also said he prefers the financial markets in Asia, as this type of M&A will come to the market in droves.
Euh also thought that Samsung or Hyundai Motor should be allowed to take over financial institutions abroad, which would sharpen the competitive strength of Korean financial institutions abroad.
The chairman stressed that KB Financial would focus on SMEs in domestic operations this year in going over the group's management strategy for 2012.
Euh said KB Financial kicked off its strategy to nurture 500 SMEs to be global enterprises under the "Hidden 500 Stars" last year and so far has selected 100 of them. He said 400 more SMEs will be chosen in the next two years and KB Financial will provide them with financial support so they can grow strong enough to undertake an initial public offering.
The chairman also said dividends will be paid to shareholders this year in line with the guidelines set by the Financial Services Commission, as the group's net profit amounted to 2.5 trillion won last year, erasing the losses incurred in 2010.
He feels sorry that share prices of Kookmin Bank and other affiliates have been lagging behind their actual performance, although he thinks there is nothing he can do since the European debt crisis involves financial institutions, thus restraining the prices of financial firms.
He said he is working for the transparent management of the group, which will pay off in the end by boosting the value of the group's affiliates such as Kookmin Bank.
In the meantime, President Min Byung-duk of Kookmin Bank said his New Year plan is to manage risks in light of the worldwide spread of the European debt crisis this year and to be cautious amidst the rising uncertainty in the world economy on top of the aftermath of North Korean leader Kim Jong-il's death.
He also said the bank should deepen its public trust among shareholders and the market for its long-term growth as it is the root of the financial business.
The bank will also focus on laying the groundwork for sustainable growth by strengthening management effectiveness as best it can this year. In order to make sure the plan will work, Min will check up on the basic operational capacity of the bank, especially in such areas as marketing and business activities including headquarters' support to branches and other banking outlets around the country.
Min said the bank will focus on risk management as its main task this year to protect customers' funds by managing assets safely, in particular with rising uncertainty and the sluggish economy around the world. "We ought to be able to prevent assets from turning bad before it happens," Min said. "The bank should also shake up its asset portfolio to achieve balance between household finance and corporate finance centered around healthy assets." nw

Chairman Euh Yoon-dae of KB Financial Group.

A view of the Kookmin Bank head office building in Yeouido, Seoul.