Four Major Financial Holding Companies and Banks Secure 2.4 Trillion Won in Funds... Within 3 Months This Year (Comprehensive)

Issuance of New Capital Securities
Hana Financial Expands by 1 Trillion Won
KB Financial Also Issues Subordinated Bonds
Enhancing BIS Ratio and Ensuring Soundness
Securing Funds for M&A Purposes

[Asia Economy Reporter Jo Gang-wook] It has been revealed that the four major domestic financial holding companies and banks have raised over 2 trillion won in capital in less than three months since the beginning of this year. This is interpreted as securing funds for mergers and acquisitions (M&A) of non-bank financial companies amid fierce competition to secure financial soundness, comply with the revised loan-to-deposit ratio regulations, and find new growth engines.

According to the financial sector on the 4th, among the four major financial holding companies, KB Financial Group, Woori Financial Group, and Hana Financial Group, as well as their main affiliated banks?Shinhan Bank, Hana Bank, and Woori Bank?a total of six companies have raised capital amounting to 2.39 trillion won this year through issuing hybrid capital securities and subordinated bonds.

Among them, Hana Financial Group has been the most aggressive in capital expansion this year. Hana Financial Group announced through a disclosure yesterday that it decided to issue 500 billion won worth of amortizing contingent convertible bonds (hybrid capital securities). Hana Financial Group explained, "The capital increase aims to improve the group’s core capital ratio and the Bank for International Settlements (BIS) ratio," adding, "The raised funds will be used for operating expenses and other purposes." Additionally, on the 4th of last month, Hana Bank disclosed that it decided to issue subordinated bonds worth 500 billion won. Combined, the capital expansion scale has already reached 1 trillion won.

KB Financial Group issued subordinated bonds worth 400 billion won on the 18th of last month. This is the first subordinated bond issuance since the establishment of the holding company. The initially planned issuance amount was 300 billion won, but due to strong interest from institutional investors, with a subscription rate about 2.2 times the planned amount (660 billion won), the issuance amount was increased.

Woori Financial Group successfully issued hybrid capital securities worth 400 billion won on the 6th of last month. In the demand forecast conducted on January 29, effective demand reached 555 billion won, far exceeding the registered amount of 250 billion won in the securities registration statement, leading to an additional issuance of 150 billion won. Woori Bank also plans to issue its first subordinated bonds of up to 300 billion won this year.

Shinhan Bank issued hybrid capital securities worth 290 billion won on the 25th of last month. The initially planned issuance was 250 billion won, but due to active participation from institutional investors, the final amount was increased to 290 billion won. Shinhan Bank expects its capital adequacy ratio to rise by 16 basis points through this issuance.

The reason financial holding companies and banks are expanding capital is not only to improve the BIS ratio and secure financial soundness but also to prepare for domestic and international bank and non-bank sector mergers and acquisitions (M&A). Last year, the five major financial holding companies expanded their perpetual capital available for M&A to about 5 trillion won. This is why there are expectations that the M&A battle to strengthen the non-bank sector, including the Prudential Life acquisition, will ignite from the beginning of the year.

Additionally, the spread of the novel coronavirus (COVID-19) pandemic has led the entire financial sector to actively support companies and self-employed individuals affected by the crisis, which is also cited as a reason for capital expansion. In fact, on the 2nd, IBK Industrial Bank of Korea signed a committed line increase and extension contract worth about 600 billion yen with Japan’s Mitsubishi UFJ Financial Group (MUFG) Bank and Mizuho Bank, explaining that the credit limit increase was decided to respond to the expanding domestic and international uncertainties such as COVID-19.

A financial sector official said, "The capital expansion by financial holding companies and banks has exceeded 2 trillion won in the first quarter alone," adding, "As banks face limited growth, the search for breakthroughs through the non-bank sector is fierce, and with increasing domestic and international uncertainties, the funds appear to be for M&A as well as for preparation in case of emergencies."

This content was produced with the assistance of AI translation services.