[Financial Essay] JT Savings Bank Sale Push... Will It Bring a Breeze to the M&A Market?

[Asia Economy Reporter Kim Min-young] As JT Savings Bank begins searching for a new major shareholder, attention is focused on whether a favorable wind will blow in the savings bank merger and acquisition (M&A) market.

According to the savings bank industry on the 5th, the Japanese major shareholder J Trust Group recently selected a law firm as an advisor and has started the process of selling JT Savings Bank by sending sale investment prospectuses to potential buyers.

JT Savings Bank was established in December 2006 as Yea-reum Savings Bank, changed its name to Korea Standard Chartered Savings Bank in 2008, and was 100% acquired by J Trust Group in 2015. J Trust Group also operates JT Capital and JT Chinhae Savings Bank domestically.

Originally, the acquisition of two savings banks was intended with a future merger in mind, but due to the financial authorities’ disapproval of the merger, it is rumored that they have decided to sell the relatively smaller JT Savings Bank.

In the market, JT Savings Bank is considered a prime asset. JT Savings Bank is headquartered in Seongnam, Gyeonggi Province, and operates one branch each in Gwangju and Mokpo, Jeonnam Province. The ability to operate in the metropolitan area is regarded as a strength. As of the end of last year, the bank’s total assets amounted to 1.4164 trillion KRW, and it posted a net profit of 18.1 billion KRW last year. Its capital adequacy ratio based on the Basel Committee on Banking Supervision (BIS) standards is 11.18%, and its delinquency rate is 2.15%, both at healthy levels.

However, the inability to operate in Seoul and the restriction that financial companies already operating savings banks cannot make additional acquisitions pose obstacles to the sale. The financial authorities are blocking M&A between savings banks to prevent the enlargement of savings banks.

Even if a buyer appears, they must undergo a stringent major shareholder suitability review by the financial authorities, and even after becoming a major shareholder, they must undergo suitability reviews every two years and periodic inspections by the Financial Supervisory Service, which are also considered deterrents for potential buyers.

Recently, in the savings bank market, elderly founders and foreign major shareholders have repeatedly attempted sales but failed. Due to various stringent regulations restricting savings banks, commercial banks are strengthening their business with small business owners and SMEs, who are major customers of savings banks, and competitors such as Saemaeul Geumgo and credit unions are engaging in aggressive marketing, raising doubts about the future growth potential of savings banks and increasing the number of those expressing such concerns.

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