Korea First Bank (KFB), the country’s seventh largest lender, has finally been sold to UK-based Standard Chartered bank.
KFB had been up for sale for a while, with a heavy volume of rumour circulating the industry. Until the last minute, speculation pointed to HSBC as the most likely buyer.
The 3.4 trillion won ($3.2bn) purchase from Newbridge Capital is the largest-ever foreign investment in the nation’s financial sector – outdoing Citibank’s purchase of Koram Bank in 2004.
“The acquisition provides a very strong platform for growth in the world’s 10th-largest economy,” said Kai Nargolwala, Standard Chartered’s executive director, at a press conference in Seoul immediately following the announcement of the deal.
The acquisition is expected to be finalised in April.
With the deal, Standard Chartered stands to gain 44.8 trillion won in assets, 404 branches nationwide, 3.5 million retail customers and 1.1 million credit cards.
However, Koreans are afraid that the country may lose more than that. Fear of foreigners taking over is hardly new, not just in Asia’s third-largest economy, but in emerging markets all over the world.
As local experts point out, excessive competition spurred by the entrance of overseas-based financial institutions may see off local lenders. Worse, some are concerned that to survive, banks may start cutting down on corporate loans.
The fact that Citibank and Standard Chartered have both pledged to focus on retail banking signals that these concerns are not groundless.
With the Korean economy still in the doldrums, the country cannot afford to have banks shunning corporate customers, experts say.
Of course, the positive impact cannot be ignored.
“The KFB deal will have a positive effect on the local financial sector in a sense that lenders will be stimulated into enhancing profitability and compete to offer more diverse products, which they might not have thought before the entrance of foreign players,” said Ji Dong-hyun, a research fellow at the state-run Korea Institute of Finance.
