Banks in Need of Capital Expansion Conduct Consecutive Paid-in Capital Increases

NongHyup Bank to Proceed with 100 Billion KRW Rights Offering

NH Nonghyup Bank Exterior View

[Asia Economy Reporter Park Sun-mi] As the novel coronavirus disease (COVID-19) crisis continues for a prolonged period, banks are consecutively conducting paid-in capital increases for proactive capital expansion.

According to the financial sector on the 21st, NH Nonghyup Bank plans to carry out a paid-in capital increase worth 100 billion KRW by issuing 2,702,702 new shares at 37,000 KRW per share (par value 5,000 KRW) to its parent company NH Nonghyup Financial Group on the 11th of next month.

Following the approval of the 100 billion KRW paid-in capital increase plan at the Management Committee on the 13th and the Board of Directors' approval on the 18th, the final resolution will be completed at the extraordinary general meeting of shareholders on the 27th. After that, the paid-in capital increase will be implemented on the 11th of next month, and all related procedures and registration changes will be completed within the year.

The decision by Nonghyup Bank to increase capital was driven by the judgment that it is necessary to enhance future loss absorption capacity due to the prolonged COVID-19 crisis. Although sufficient reserves have been accumulated, given the uncertainty about how much longer the COVID-19 situation will continue, it was deemed necessary to proactively expand capital.

An official from Nonghyup Bank explained, "This paid-in capital increase is expected not only to improve the BIS ratio, a capital adequacy indicator, but also to have an annual net income improvement effect of about 1.6 billion KRW. Additionally, it is anticipated to enhance the role as a comprehensive Nonghyup profit center by strengthening mid- to long-term business competitiveness."

Earlier, Shinhan Financial Group conducted a third-party allotment of common stock worth 1.1582 trillion KRW (approximately 39.13 million shares). The allotment targets were Hong Kong-based private equity funds 'Affinity Equity Partners (AEP)' and 'Baring Private Equity Asia (BPEA)'.

Following last year's investment attraction from IMM Private Equity (IMM PE), a major domestic private equity firm, Shinhan Financial Group achieved consecutive successes in attracting investments from two global private equity firms. Through the paid-in capital increase, Shinhan Financial Group has strengthened its loss absorption capacity in preparation for the prolonged COVID-19 crisis and secured capital capacity to actively pursue the group's mid- to long-term growth strategy.

An official from Shinhan Financial Group stated, "We plan to utilize the increased capital to improve profitability and diversify the timing and methods of shareholder returns to enhance shareholder value. We also intend to communicate more actively with the market regarding our capital management direction."

Industrial Bank of Korea (IBK), which is at the 'frontline' of support programs for small and medium-sized enterprises (SMEs) and small business owners, has conducted four paid-in capital increases this year. These were to secure operating funds necessary for SME financial support programs, expanding its equity capital by 1.2688 trillion KRW through four rounds of paid-in capital increases in March, April, June, and July. The Ministry of Economy and Finance's shareholding ratio in IBK increased from 53.2% at the end of last year to 63.5% as of the end of July, immediately after the four paid-in capital increases.

Meanwhile, KakaoBank has resolved a third-party allotment of common stock worth 250 billion KRW ahead of its initial public offering (IPO). The issued shares amount to 10.64 million shares, priced at 23,500 KRW per share. The allotment target is the Hong Kong-based private equity fund Anchor Equity Partners. Since its establishment in 2012, Anchor Equity has been active mainly in China and other regions. Including the 750 billion KRW paid-in capital increase on the 27th of last month, the total amounts to about 1 trillion KRW. After completing the paid-in capital increase, the expected paid-in capital by the end of next month will increase by about 1 trillion KRW from the end of last month to 2.8256 trillion KRW.

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