Industry captains face off in finance

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Industry captains face off in finance

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Among the titans of Korean industry, Samsung Group governs the tech world while Hyundai Motor Group rules automobiles, with both Hyundai Motor and Kia Motors under its wing.

But now the two top dogs are drawing new battle lines in the financial industry.

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According to the Fair Trade Commission’s annual official roundup of Korea’s conglomerates, Samsung Group ranked first in total assets, with 230.9 trillion won ($205 billion) as of April. Hyundai Motor Group trailed with 126.7 trillion won.

However, Hyundai Motor’s bullish earnings this year have given it the momentum to threaten Samsung’s generous lead at the top of the industrial food chain, especially as it exceeded the latter’s net profits during the first six months.

With Hyundai Motor inking a deal last month to acquire Green Cross Life Insurance, a small insurer that ranks 17th out of 23 in terms of assets, the group now has a full fleet of financial companies at its disposal to oppose Samsung, which is well established in all financial sectors save commercial banking.

“Hyundai Motor Group has achieved a complete portfolio of financial businesses with Hyundai Card, Hyundai Capital, HMC Investment & Securities and now an insurance company,” the group said in a statement. “A synergistic effect with the entire group can be expected in line with future growth.”

The group began building up a full suit of financial affiliates from scratch. When Hyundai Group was carved up among the descendants of founder Chung Ju-yung in 2000, it had some financial companies, such as Hyundai Securities. But none were apportioned to the entity that later became Hyundai Motor Group.

However, within one year, Hyundai Motor had acquired the company that would become Hyundai Card. It added a securities brokerage, subsequently renamed HMC Investment & Securities, in 2008.

In contrast, Samsung’s financial affiliates are firmly positioned as leaders in their respective sectors. Samsung Life is Korea’s largest life insurer, with a whopping 148.4 trillion won in assets as of June. Meanwhile, the assets of general insurer Samsung Fire & Marine (33.9 trillion won) far outclass the paltry 2.9 trillion won of Hyundai Motor’s newly-acquired Green Cross Life Insurance (tentatively named HMC Life Insurance) as of March this year.

Among securities brokerages, Samsung Securities also outweighs HMC Investment & Securities four to one in terms of assets as of June.

However, Hyundai Motor’s considerable clout in certain nonfinancial sectors has spurred growth among its financial affiliates in the past. In the lucrative corporate pension market, HMC Investment & Securities rose from being the 16th largest player in May 2010, in terms of the amount of pension funds managed, to the second-largest player this June.

This was due to a calculated move by the group’s subsidiaries to drive most of their business to their affiliate brokerage when choosing corporate pension managers, with 89.6 percent of pension funds managed by HMC Investment & Securities, or 1.7 trillion won, coming from Hyundai Motor affiliates.

The size of the corporate pension market, said to be worth 38 trillion won in October, is expected to grow to 105 trillion won by 2015, according to Samsung Life, making it the latest gold mine for local financial companies.

However, the fiercest battleground between the two conglomerates’ financial companies remains the credit card sector, where Hyundai Card and Samsung Card are jostling for the No. 2 spot behind Shinhan Card.

The two rivals are roughly neck-and-neck in terms of credit card usage, as Samsung Card’s 18 trillion won trailed Hyundai Card in the third quarter by 40 billion won. But when prepaid and debit cards are taken into account, the situation changes dramatically, and Samsung Card’s 19.04 trillion won gives it a 1 trillion won advantage.

Hyundai Card, which started off with a market share of 1.8 percent in 2001, rapidly gained ground to reach 12 percent last year. Samsung Card saw its fortunes go the other way, as its share plummeted from over 20 percent in 2001 to roughly 12 percent this year, as tabulated from each company’s total amount of card usage.

Although the financial companies of the two groups may not be on a level footing yet, industry insiders say this could change.


By Lee Jung-yoon [joyce@joongang.co.kr]

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