Nashinpyung "SK Securities, MS Sangho Savings Bank Acquisition Effect 'Question Mark'"

[Asia Economy Reporter Minji Lee] NICE Credit Rating on the 27th expressed the opinion that SK Securities' acquisition of MS Mutual Savings Bank would not have a significant impact on the company's financial structure, but the synergy effect resulting from the acquisition is uncertain.

On the 22nd, SK Securities announced its decision to acquire 93.6% of the shares of MS Mutual Savings Bank. The acquisition amount is 39.1 billion KRW, which corresponds to 6.8% of the company's equity capital of 570.8 billion KRW as of the end of last year. The acquisition date is undecided, and the plan is to acquire it in cash. MS Savings Bank is a small savings bank operating with its head office and two branches in the Daegu and Gyeongbuk regions. As of the end of last year, it had total assets of 417.8 billion KRW and a net profit of 600 million KRW, ranking 47th in assets and 77th in net profit among 79 savings banks.

Senior Researcher Kyuhui Lee of the Financial Evaluation Division 1 said, "Through this acquisition, the company expects to diversify its business portfolio and expand its revenue base by entering the savings bank business," adding, "While the financial burden from the acquisition is manageable, considering MS Mutual Savings Bank's operating area, profitability, and financial stability, the creation of synergy effects is uncertain."

In the short term, the acquisition of MS Mutual Savings Bank is expected to increase the financial burden. As the holding of subsidiary shares increases, the scale of operating net capital on a separate basis is expected to decrease, leading to a decline in the ratio of operating net capital to total risk amount. The simple leverage ratio is also expected to rise when acquisition funds are raised through external borrowing. However, considering that the acquisition price is about 12% of the cash and deposits (312.8 billion KRW) held by the company at the end of last year, the increase in financial burden is expected to be manageable.

The synergy effect with MS Mutual Savings Bank is expected to be limited because its business base is in the Daegu and Gyeongbuk regions, not the metropolitan area. Also, the BIS capital adequacy ratio is 10.6%, lower than the industry average of 14.3%. The ratio of non-performing loans classified as fixed or below is 6.8%, higher than the industry average of 4.2%.

Researcher Kyuhui Lee emphasized, "Considering the limitations of the operating area, inferior market position, and poor profitability, the possibility of creating synergy effects is uncertain," adding, "Compared to competitors, capital adequacy indicators are inferior, and after the change of major shareholders, a high dividend payout ratio has been maintained, causing continuous profit outflow, and the demand for funds is increasing during the process of pursuing business diversification."

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