Subscribe
E-Paper
 |
By Kim Bo-eun
Major financial groups are in a race to scale up their business portfolios to boost non-banking revenue as profit margins in the banking sector have been squeezed amid low interest rates.
Three of the four main groups are eyeing insurers, after Shinhan acquired ING Life Insurance Korea in February and re-branded it Orange Life. The acquisition of Orange helped Shinhan solidify its leading position in the financial industry after taking the title from KB in the fourth quarter of 2018.
Currently, Shinhan is the largest financial group by both total assets and earnings, followed by KB, Hana and Woori.
Hana Financial Group is negotiating with the Korean Teachers Credit Union to acquire The-K Non-Life Insurance owned by the latter. The insurer specializes in auto insurance. Hana does not have a non-life insurance unit.
The group declined to comment, but this is seen as a move to strengthen its non-banking affiliates.
KEB Hana Bank's net profit accounted for 87.8 percent of the group's earnings in the first three quarters of the year.
KB Financial Group, which owns life and non-life units, has expressed an interest in additional acquisitions, to strengthen its existing units which are minor players in each industry.
The group appears to be interested in acquiring Prudential Life Insurance Company of Korea, which its parent firm Prudential Financial is putting up for sale.
"We are keeping an eye on offerings in the market that can be beneficial to the group," a group official said.
Woori is actively seeking to equip itself with non-banking units after its holding company was launched in January.
For Woori, the bank still takes up 97 percent of the group's earnings. This year, the group acquired Tongyang Asset Management and ABL Asset Management, as well as Kukje Trust, a real estate management company.
Next it will complete the acquisition of Aju Capital and then eye opportunities to take over a brokerage unit and an insurance unit.
The M&A race for non-banking units is expected to continue, as financial groups face slowing earnings.
Shinhan, on the back of its acquisition of Orange Life, saw its net profit for the first three quarters of the year grow 9.6 percent year-on-year.
But KB and Woori saw their net profits fall by 3.2 percent and 12.5 percent, respectively, from the same period a year earlier.
Hana saw a 7.8 percent growth, but this is attributed to the sale of its building in central Seoul.
Securing sources of non-interest income has become more important for financial groups, amid low interest rates that cap the net interest margin of banks.
All of the groups saw their net interest margins fall in the third quarter ― that of Woori and Hana each fell by 0.09 percentage points from the previous quarter and that of Shinhan fell 0.04 percentage points and KB 0.03 percentage points, quarter-on-quarter.
Shinhan's non-interest income for the first three quarters of the year grew 37.3 percent from the same period a year earlier.
