Shinhan, IBK pursue regional banks

Two major banks submitted letters of intent to take part in the bidding process for Woori Financial Group’s regional bank affiliates, according to industry sources.

Yesterday was the deadline for preliminary bidders to submit proposals to acquire two regional banks - Kyongnam and Kwangju - following the Korea Deposit Insurance Corporation’s announcement in July that it would accept bids as part of the first sales process to privatize Woori Financial Group. The sales price of Kyongnam Bank is estimated to be as much as 1.2 trillion won ($1.1 billion) and 1 trillion won for Kwangju Bank.

Among others, Shinhan Bank submitted a letter of intent to the KDIC to bid for Kwangju Bank, while the Industrial Bank of Korea submitted its own proposal to for Kyongnam Bank.

“So far, Shinhan Financial Group’s [business] portfolio was focused mainly on the Seoul metropolitan area and less on the Honam [southwestern] region,” said an official from Shinhan Financial Group.

An official from IBK also said that since its main role is to financially support small and midsize companies, it has decided to expand its business to the Gyeongsang region.

“In the South Gyeongsang region, the difference between the amount of loans given out and deposits received is 5 trillion won,” said the IBK official. “Kyongnam Bank has networks in the region that will allow us to expand our business there.”

Along with IBK, BS Financial Group, which owns Busan Bank, and DGB Financial Group, which owns Daegu Bank, submitted letters of intent yesterday. A group of businessmen based in the South Gyeongsang and Ulsan regions have also taken part in a plan to form a private equity fund consortium with Jabez Partners.

Residents in the South Gyeongsang region are known to be supportive of IBK taking part. They say that if they were to choose a bidder other than a group of South Gyeongsang-based businessmen, it would be IBK rather than their regional rivals from Busan and Daegu.

However, if IBK, in which the government owns a controlling stake, acquires Kyongnam Bank then it would go against the government’s plan to privatize the regional bank.

“We believe that from the mid- and long-term perspective, if the privatization of IBK is realized, then Kyongnam Bank will also be privatized naturally,” the official said.

As for Kwangju Bank, JB Financial Group and a group of businessmen based in Gwangju and South Jeolla are expected to compete along with Shinhan Bank.

BY LEE EUN-JOO [angie@joongang.co.kr]