Shinhan and Hana to team up on overseas expansion

Hana Financial Group Chairman Kim Jung-tae, left and Shinhan Financial Group Chairman Cho Yong-byoung sign an MOU on Monday on joint global expansion in central Seoul. [SHINHAN FINANCIAL GROUP]

Shinhan Financial Group and Hana Financial Group announced Monday they will work together to jointly expand their global business in an unprecedented move for two of the biggest players in Korea's highly-competitive financial market.

Shinhan, the No. 1 player in Korea by net profit, and Hana, the No. 3 player, said they have signed a memorandum of understanding on Monday to jointly foster competitiveness in their overseas businesses, which have not been as successful as expected. The possibility that the two groups would enter new markets or pursue mergers and acquisitions together was raised, but both companies said no specific details have been decided yet.

“The latest agreement points to more than just Shinhan and Hana overcoming its friendly rivalry to build a cooperative relationship, but extends to suggesting a whole new financial paradigm,” said Cho Yong-byoung, chairman of Shinhan Financial Group.

“Both groups are expected to fortify competitiveness to make a new breakthrough in the uncertain global financial market.”

Advancing into the overseas market has been a longstanding challenge for big players in Korea as the saturated domestic market can no longer provide new sources of profit. However, entry barriers to overseas financial industries have prevented rapid expansion in the global market.

Shinhan Financial Group, for example, hasn’t been able to expand into a new market for the past four years, although profitability has risen.

Its had advanced into 20 countries as of 2016, and the figure still stands at 20 as of February 2020, although the size of its network has increased from 165 locations to 221 over the cited period. Its profit-loss ratio was 9.5 percent in the first quarter of this year, up from 5.7 percent at the end of 2016.

“Domestic financial groups have rolled out diverse methods of investment to advance into the overseas market but haven't been able to overcome the concentration in certain specific regions and localization of network outside Korea, as well as stalling expansion,” the two financiers said in statements Monday.

“To overcome such shortcomings unnecessary competition should be removed, while working for qualitative growth and innovation through cooperative relationships should be pursued.”

Shinhan Financial Group’s overseas operations are largely concentrated on Southeast Asian countries such as Vietnam, Indonesia, Malaysia and Cambodia where its bank, card, investment and life insurance businesses all have a foothold.

Hana Financial Group has advanced into 24 countries with 216 locations as of the first quarter of this year with China and Indonesia being its biggest markets. It’s profit-loss ratio stands at 17.2 percent as of the first quarter, up from 9.5 percent a year ago.

“The latest agreement is expected to become a stepping stone for domestic financiers to go head-to-head with global financial groups in the future,” Kim Jung-tae, chairman of Hana Financial Group, said on Monday.

BY JIN EUN-SOO [jin.eunsoo@joongang.co.kr]