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October 03, 2005

Shinhan Grasps at Size


Shinhan's CEO says that the bank (given that the remainder of the FHC is irrelevant, that's what it amounts to) is considering the purchase of LG Card, KEB, or both.

LG Card would likely be a good fit if done at a reasonable price; the card companies belong with banks so that they can cross-sell and enjoy stable funding. I would question whether Shinhan has the existing credit talent to keep the business from going tits-up again, but that caveat applies to almost any domestic bidder.

KEB is a head-scratcher. The obvious motivation is that its acquisition would make Shinhan significantly larger than Kookmin and Woori, and thus itself secure from takeover and able to bask in the prestige of being #1. However, the typical benefits of in-market merger would seem not to apply, given that Shinhan still has yet to integrate the last large bank it bought - Cho Hung.

I'm certain the unions won't be any more pleased about the prospect of integrating KEB with Shinhan Bank, so it would likely be another extended co-habitation under the FHC, which destroys any prospect of cost savings.

The silver lining for shareholders is that I don't see how Shinhan could finance the KEB purchase anyway - Lone Star is not going to take anything but cash on the barrelhead.

Posted by The Banker at October 3, 2005 10:37 AM

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