Hana has until Friday to settle KEB balance

Korea’s No. 4 banking group, Hana Financial Group, is set to complete its purchase of Korea Exchange Bank (KEB) shares as early as this week as it moves to integrate the two lenders after receiving the long-awaited regulatory nod, market watchers said yesterday.

On Friday, the Financial Services Commission approved Hana Financial’s acquisition of the country’s fifth-largest bank, a move which cleared a pending 3.9 trillion won ($3.5 billion) deal to buy a 51.02 percent stake in KEB.

Under the deal with Lone Star Funds, KEB’s major shareholder, Hana Financial is obliged to meet its payment by Friday, or within five operating days following the approval by the financial regulator.

Hana Financial is also set to purchase an additional 6.25 percent stake, worth 479.4 billion won, from policy lender Korea Export-Import Bank, which would bring the bank’s stake in KEB to 57.27 percent.

While legal procedures for Hana Financial and KEB’s overseas units will take more time, industry watchers predict that the stake acquisition will be finished by the end of the week. Such a move would enable Hana to better compete with banking giants Woori Finance Holdings and KB Financial Group.

Upon completion of the deal, Hana Financial will be able to take control of the biggest overseas network run by a domestic lender, and the second-largest local operational network with assets totaling 331 trillion won.

Analysts painted a rosy picture of the financial group, raising their share price targets on hopes the acquisition would lead to a profitable mix of retail and corporate banking.

“The expansion will bolster both Hana Financial’s retail finance and KEB’s corporate finance sectors. Overall, Hana Financial’s value is expected to rise on the back of synergy effects and the cheap takeover cost,” said Kim In, an analyst at Eugene Investment & Securities.

KEB’s selling price is cheap compared to what Shinhan Financial Group and Citigroup paid to buy Choheung Bank and KorAm Bank, respectively, he said.

But market watchers raised concerns about looming risks, such as difficulties in integrating and dogged opposition from KEB’s labor union.

On Friday, the labor union released a statement in which it pledged to continue fighting the takeover.

In a press conference the same day, Hana Financial chief Kim Seung-yu said he is not considering a forced restructuring and will instead push for a smooth integration under a “two-bank” system.Yonhap