Daegu Bank "Leading Loans for SMEs Overlooked by Major Banks"

'Financial Market Catalyst' to Transition to Commercial Banks This Year
Resolving Disadvantages for Regional Banks, Promoting Competition in Banking Sector, Revitalizing Local Areas
"Active Lending to Medium Credit Rating SMEs"

Hwang Byung-woo, President of Daegu Bank, is speaking at a press conference held at the Daegu Bank headquarters in Suseong-gu, Daegu on the 6th.

DGB Daegu Bank, which is changing its signboard from a regional bank to a commercial bank, has announced its goal to expand loans to medium-credit small and medium-sized enterprises (SMEs). This means actively absorbing the loan demand of SMEs that were unable to borrow funds due to low credit ratings at existing large commercial banks. Daegu Bank has declared that it will become a 'catfish' to shake up the existing market dominated by the top five banks (KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup) by becoming a commercial bank with a nationwide branch network within the year.

On the 6th, Hwang Byung-woo, president of Daegu Bank, held a press conference at the Daegu Bank headquarters in Suseong-gu, Daegu, stating, "We will pursue 'win-win management for SMEs' targeting medium-credit grade companies and individual business owners who have been marginalized by large commercial banks."

He explained, "By transitioning to a commercial bank, we will lower funding costs and use our SME financial expertise to promote competition among banks targeting SMEs in wide regions such as the Seoul metropolitan area, Gangwon-do, and Chungcheong-do." He also mentioned that loans to individual business owners will be offered with limits and interest rates based on an in-house credit evaluation model.

President Hwang cited expensive funding costs as one of the disadvantages Daegu Bank faced as a regional bank. Daegu Bank's credit rating is AAA, the same as Shinhan Bank and Kookmin Bank. Nevertheless, it has raised funds at interest rates about 0.04 percentage points higher for senior bonds and 0.21 to 0.25 percentage points higher for subordinated bonds and hybrid capital securities compared to commercial banks.

Regarding the price-to-book ratio (PBR), an indicator comparing stock price to net asset value per share, DGB Financial Group's PBR is 0.21 times, which is lower than the average PBR of 0.32 times for commercial financial holding companies. President Hwang said, "Despite having financial structure and creditworthiness on par with commercial banks, we have been excessively undervalued due to being a regional bank. Once we transition to a commercial bank within this year, the regional bank discount will be resolved."

They are also planning cooperation with fintech companies. President Hwang stated, "We will become partners with innovative companies like fintech and strengthen digital competitiveness through collaboration." The headquarters will remain in Daegu, signifying the intention to reinvest profits earned from the nationwide network back into Daegu and Gyeongbuk. They plan to attract core nationwide deposits to lower funding costs and provide financial support to key industries in Daegu and Gyeongbuk as well as projects like the new airport.

The financial authorities set a goal to break the oligopoly of the top five banks and promote competition, launching the 'Banking Sector Management and Business Practice Improvement Task Force (TF)' in March and creating policies accordingly. Daegu Bank expressed its intention to transition to a commercial bank during this process. All legal requirements for the transition have been met.

The financial authorities have decided to expand the entry of 'new players' into the banking sector. Previously, the structure was such that after the authorities announced their licensing policy, applications and reviews would proceed. Going forward, if a business operator with sufficient soundness and a business plan applies, they will be reviewed and granted a banking license. The scope of mergers and acquisitions (M&A) among savings banks will also be expanded to enhance deposit and loan competitiveness by increasing the size of savings banks. Up to four companies will be allowed without regional restrictions if the purpose is restructuring or if the savings banks are non-metropolitan. For simple mergers, up to four acquisitions are allowed considering the business area.

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