Patience wins out in a crisis

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Patience wins out in a crisis

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When the British financial behemoth Standard Chartered acquired Korea First Bank in 2005 and renamed it Standard Chartered First Bank, few anticipated the ailing lender would expand its presence in the local market so quickly.

But in the past four years, the bank once pushed to the brink of bankruptcy during the 1997-98 Asian financial crisis has emerged as one of the most financially sound lenders in the country. Now, Standard Chartered Korea, the first foreign-owned financial holding group here, is set to increase its presence via a series of mergers and acquisitions in Korea’s rapidly-growing financial industry.

The history of the bank, which dates back to 1929, is full of ups and downs that reflect the equally eventful history of Korea’s financial industry. Chosun Savings Bank was founded in 1929, during the 1910-45 Japanese colonial rule of Korea. It survived the Korean War and was renamed Korea First Bank in 1958, building a reputation as a pioneer in the wholesale banking sector. Korea’s rapid industrialization from the 1970s to the 1990s was a bonanza for Korea First Bank, which lent heavily to major conglomerates here that were expanding their interests here and abroad. The bank posted the biggest annual net profits in the domestic industry from 1991 to 1993, and its assets exceeded 20 trillion won ($16.3 billion) in 1995 for the first time among Korean lenders.

Everything seemed to be going smoothly for the bank until the Asian currency crisis began sweeping the region in 1997. In the period that followed, a flurry of firms collapsed, or were pushed to the brink of bankruptcy, which weakened the lender’s financial health. The bank’s once-formidable corporate customers, including Daewoo Group and Hanbo Group, went belly up one by one, fanning fears that the bank would face equally serious cash flow problems. Nearly half of its 8,400 employees were forced to leave the workplace during the painful corporate restructuring process that followed, and the bank was sold to U.S. private equity fund Newbridge Capital in 2000. Five years later, Newbridge sold the bank to the British financial group Standard Chartered, which in September 2005 renamed it SC First Bank, starting it on a path to becoming what is now Korea’s sixth-largest lender.

Merging the corporate cultures and systems of the two institutions has not been easy. Its assets have grown relatively slowly, from 57 trillion won in late 2005 to 75.7 trillion won late last year - 33 percent - while its bigger peers beefed up their assets by 40 or 50 percent in the same period. But it was the firm’s cautious approach that put its growth percentage in the double digits in 2008 as the devastating fallout of the global credit crunch squeezed rivals harder than ever. The bank posted a net profit of 211.1 billion won in the first quarter of this year, which was more than any other Korean lender in the same period.

SC First Bank went so far as to restructure itself into a financial holding group in June, joining a growing number of lenders that did the same to manage their sprawling business portfolios and attract customers with a wider range of services.

“This is an important step for us, but it is also an important step for Korea. It is a good demonstration of Korea’s openness,” said David Edwards, chief executive of SC First Bank and the new holding company, at a press conference in June, when the holding company kicked off.

The new group, Standard Chartered Korea, has five subsidiaries: its flagship unit SC First Bank, SC First Fund Service, SC Capital, SC Mutual Savings Bank and SC Securities. Many were born after SC First Bank had acquired local firms and brought them into the SC franchise in 2008.

The group has assets of 74.2 trillion won, while its net income stands at 259.1 billion won. Soon, the group may seek to buy other financial companies, such as an insurer, to expand its business portfolio, which is currently dominated by its banking unit.

Edwards said in June he would investigate acquisition opportunities to support the firm’s organic growth.

A quick rundown of the new group’s top executives reveals a mix of globe-trotting financiers and non-banking professionals from around the world, veterans from the Standard Chartered Group, Citigroup and fixtures of Seoul’s financial scene. This list also includes two female executives, still an extreme rarity in the local banking sector. There are seven female vice presidents in the Korean banking industry, including four from SC First Bank, which also has three other female executives not mentioned here.

Edwards, who has led SC First Bank since 2007, once oversaw Standard Chartered Bank’s wholesale banking risk management division and served in the bank’s Middle East and South Asia operations. Before joining Standard Chartered Bank in 1999, Edwards worked with British lender NatWest Bank for 25 years.

Ruth Naderer, vice president of corporate affairs for both the holdings firm and the bank, has worked primarily with the bank’s investors and in public relations in Singapore, Hong Kong and mainland China since she joined the company in 1997. When she came to Korea last year, the 38-year-old was also the youngest bank vice president in Korea.

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Tim Miller, chairman of the board of Standard Chartered Korea, wishes the new company luck during a traditional Korean ritual for new openings at the firm’s headquarters in Seoul on July 15. Provided by the company

Manikantan Venkataramani, Standard Chartered Capital’s chief executive, is also a longtime Standard Chartered standby who once oversaw the bank’s risk management and finance divisions for its India, Singapore and Korea units.

Charles Ahn, vice president in charge of wholesale banking, origination and client coverage, is one of many executives who came to the bank from Citigroup. Before joining SC First Bank last year, Ahn spent over 20 years at Citibank in charge of wholesale banking operations.

Kim Jong-mahn, chief risk officer for the bank and its holding company, is also a Citibank veteran who was in charge of risk management for its Seoul and Singapore units before he joined SC First Bank last year.

Kang Myung-ju, CEO of SC Mutual Savings Bank, also once worked at Citibank before moving to MetLife Insurance and finally joining SC First Bank, which in 2008 named her head of the subsidiary.

Kim Young-il, SC First Bank vice president for consumer banking, gained decades of experience in retail banking at Korea Housing Bank, which is one of Korea’s oldest banks and later became Kookmin Bank.

David YS Jung, CEO of Standard Chartered Securities Korea, is considered a giant in the local investment banking and brokerage industries, particularly for derivatives and bonds, while working for Daewoo Securities and Goodmorning Shinhan Securities.


*“Faces inside Korea’s conglomerates,” a regular weekly series about key figures in the nation’s major companies, will also feature major figures within Korea’s large financial groups.

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By Jung Ha-won [hawon@joongang.co.kr]
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