'Building a Global United Front' Kim Jeong-tae and Jo Yong-byeong... Steering Overseas Business Cooperation

Two-Track Approach of Support and Cooperation
Vietnam Chooses Shinhan, Indonesia Chooses Hana
In Markets Where the Other Party Has Strengths
Restrain Overcompetition with 'Support'
Seek Joint Ventures for Overseas M&A

On the 25th, at Lotte Hotel in Jung-gu, Seoul, Kim Jung-tae, Chairman of Hana Financial Group (left), and Cho Yong-byeong, Chairman of Shinhan Financial Group, are taking a commemorative photo at the business agreement ceremony to strengthen global competitiveness between Hana Financial Group and Shinhan Financial Group. Photo by Hana Financial Group

[Asia Economy Reporters Haeyoung Kwon and Minyoung Kim] In 1988, at the Shinhan Bank Seoul Yeongdeungpo Branch, 37-year-old Senior Assistant Manager Kim Jeong-tae and 32-year-old Junior Assistant Manager Cho Yong-byeong worked as bankers responsible for checking accounts and foreign exchange, respectively, at a newly established bank that had been founded just six years earlier. Although they were five years apart in age, they shared many commonalities. Both had a straightforward personality and grand dreams as bankers. After a busy day, the senior and junior colleagues would share soju and bond like brothers. Thirty-two years later, having grown into major figures leading the domestic financial industry, the two reunited once again. They pledged a decisive alliance in global business. Kim Jeong-tae, Chairman of Hana Financial Group, and Cho Yong-byeong, Chairman of Shinhan Financial Group, thus created a turning point in the Korean financial industry.

The reason Chairman Kim and Chairman Cho joined hands in global business is due to the increasingly challenging business environment faced by domestic banking. With low growth and low interest rates reducing profit-making capacity, they turned their eyes overseas, but even there, market saturation, excessive competition, and regulatory barriers made the situation difficult. Both sides decided to seek new breakthroughs in overseas markets by pursuing common interests such as large-scale mergers and acquisitions (M&A) through pooling capital and know-how, rather than engaging in self-destructive competition. The 'global alliance' initially discussed by Shinhan Bank President Jin Ok-dong and Hana Bank President Ji Seong-gyu expanded significantly as the personal relationship between the two chairmen, who had been close for 32 years, was added.

Kim Jung-tae, Chairman of Hana Financial Group

The global business cooperation model between Shinhan Financial and Hana Financial is expected to proceed in a 'two-track' manner. While exploring large-scale M&A and joint venture establishment, they are also expected to refrain from excessive competition in markets where each company has competitiveness.

A Shinhan Financial official stated, "With this MOU signing, we plan to explore all possible cooperation methods beyond overseas financial company M&A from multiple angles. Also, both companies will refrain from excessive competition and support each other to leverage each other's strengths."

First, they plan to support each other to maximize strengths in markets where each has competitiveness. Rather than engaging in market share battles through reckless business expansion, they agreed to avoid excessive competition so that the party with advantages in customers, networks, and market share can perform better. Instead of expanding business indiscriminately in all overseas markets, they intend to focus on 'selection and concentration.' There is also speculation about possible equity swaps and network integration in countries or companies where investments have already been made. They also plan to share know-how regarding regulations, issues, and business environments in each country. For example, Shinhan Bank has achieved great success in the Vietnam market, while Hana Bank has done so in Indonesia. Sharing each other's know-how will enable them to enhance competitiveness more quickly.

They will also actively explore cooperation in large deals such as overseas M&A, joint venture establishment, and syndicated loans. By combining their strengths, the two financial companies can expand capital and even challenge acquiring large local financial companies overseas. Especially in overseas M&A, domestic financial companies often compete fiercely, driving up prices, but this alliance is expected to avoid such destructive competition. In recent years, excessive competition has occurred in cases such as domestic banks acquiring Vietnamese state-owned banks and Cambodian microfinance institutions (MFIs). An official from an overseas branch said, "Domestic banks suffer heavy losses from the overseas M&A stage and face overlapping investments due to excessive competition and regulatory compliance costs, which is a significant national waste. For example, in Indonesia, at least two financial companies must be acquired, and there are many restrictions from financial authorities regarding the number of home country employees and local staff deployment, making regulatory costs substantial."

Cho Yong-byoung, Chairman of Shinhan Financial Group

Although both sides say there are no concrete results yet, there is hope that visible outcomes will emerge within the year in major deals, given that the CEOs have signed the MOU.

In the mid to long term, there is cautious speculation that the two sides may seek collaboration domestically as well. For example, in a situation where management efficiency is the biggest challenge, they might even consider opening joint branches. In fact, in the UK, Lloyds, Barclays, and the Royal Bank of Scotland operate joint branches.

Chairman Cho said, "This agreement goes beyond overcoming the good-natured competition between Shinhan and Hana and building a cooperative relationship; it presents a new financial paradigm." Chairman Kim also emphasized, "Through this agreement, both groups will lay the foundation to compete confidently with global financial institutions."

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