InBang joins hands to overcome local financial crisis
Gwangju Bank joins hands with Toss Bank
Jeonbuk Bank, a subsidiary of JB Financial Group, is introducing a ‘joint loan’ with an internet bank following Gwangju Bank. This is to secure new customers through collaboration with internet banks. There is an analysis that Kim Ki-hong, Chairman of JB Financial Group, has overcome the crisis of local banks caused by population decline and local economic contraction through partnerships with platform companies.
View larger image According to the financial sector on the 14th, Jeonbuk Bank and Kakao Bank are preparing to apply for designation as a joint loan innovative financial service to the Financial Services Commission.
Joint lending was discussed as a way to revitalize competition in the banking sector in the ‘Banking Sector Management, Sales Practices and System Improvement Plan’ announced by the financial authorities in July of last year. The belief is that by combining the advantages of an internet bank with customer attraction power and a local bank with good lending capacity, it is possible to supply bank loans at lower interest rates.
Gwangju Bank, a subsidiary of JB Financial Group, and Toss Bank launched ‘Together Loan’, a joint loan product, through designation as an innovative financial service in August. Together Loan, a credit loan for office workers, exceeded KRW 70 billion in loan volume within one month of its launch with a minimum annual interest rate of 4%.
“Overcoming the crisis of local extinction by increasing customers”… JB Financial, ‘alliance’ with InBang and Fintech
Local banks, limits to expansion of deposits and loans… Gwangju·Jeonbuk Bank, joint loan with Inbang
Kim Ki-hong, chairman of JB Financial Group, is pursuing a ‘plug-in’ strategy of joining hands with internet banks and fintech platforms. This is due to the judgment that new customers can be secured by supplying JB Financial products to the platform. Even though Jeonbuk Bank, following Gwangju Bank, a subsidiary of JB Financial Group, has begun a ‘joint loan’ with an internet bank, there is an underlying judgment that it is urgent to expand customers amidst the crisis of local extinction.
Among local financial holding companies, ‘progress alone’
According to the Financial Supervisory Service on the 14th, the average demand deposit balance of five regional banks, including Busan iM Bank (formerly Daegu), Gyeongnam, Gwangju, and Jeonbuk, in the first half of this year was 24.097 trillion won, a decrease of nearly 1 trillion won compared to the end of last year. If low-cost deposits, such as demand deposits with an interest rate of only 0.1% per annum, are withdrawn, the bank’s funding costs will rise.
Local banks are also struggling to expand lending. The average balance of won-denominated loans in the first half of the five local banks was 195.1406 trillion won, an increase of only 1.1% compared to the end of last year. It is less than the growth rate of won-denominated loans (4.7%) of the five major banks, including Kookmin Shinhan Hana and Woori Nonghyup, as well as internet banks (24.2%). A vice president in charge of credit at a local bank said, “Wealthy customers are leaving for the five major banks, and young customers who are familiar with mobile devices are leaving for internet banks.”
Chairman Kim, who has extensive experience in the public and private financial sector, including as Vice President of the Financial Supervisory Service and Senior Vice President of Kookmin Bank, has been promoting ‘platform collaboration’ and ‘strengthening non-banks’ to overcome the crisis of local banks since taking office in 2019. A new wind was brought in by recruiting a vice president from Shinhan Bank to head the digital division of Gwangju and Jeonbuk banks, which have a strong culture of purity, including regionalism and academic ties. JB Financial is most actively partnering with external platforms compared to local banks as well as commercial banks. Jeonbuk Bank has entered into a strategic business partnership with Naver Pay starting in 2021 and is selling savings and credit loan products. JB Financial also joined hands with Finda, a loan brokerage fintech company, in July last year to develop joint products and alternative credit evaluation models.
Net profit 150% ↑ in 4 years
The performance of non-bank affiliates is also driving JB Financial’s performance. While the performance of the capital industry deteriorated due to insolvency in real estate project financing (PF), JB Woori Capital’s net profit in the first half of this year recorded KRW 123.6 billion, a 21.4% increase from the same period last year. It exceeded the net profit of Jeonbuk Bank (KRW 112.7 billion) and accounted for nearly 77% of Gwangju Bank (KRW 161.1 billion). JB Woori Capital, a former affiliate of Daewoo Motors that focused on new car installment financing, succeeded in improving its structure by switching its business portfolio to used car finance and corporate and investment finance after Chairman Kim took office.
Thanks to the effects of platform partnerships (Gwangju and Jeonbuk Bank) and expansion of corporate finance (JB Woori Capital), JB Financial is achieving its highest ever performance. JB Financial’s net profit, which was only 241.5 billion won in 2018 just before Chairman Kim took office, surged 148.9% in four years to 601 billion won in 2022. This year’s net profit forecast also reaches a record high of 655 billion won. Return on equity (ROE, 14.7%) and return on total assets (ROA, 1.17%), which are indicators of profitability, are also at the highest level among financial holding companies.
Chairman Kim set a goal of attracting 2.6 million foreigners residing in Korea as new customers. JB Financial is expanding cooperation with Hanpass, an overseas remittance platform with an annual remittance amount of 1.4 trillion won. Chairman Kim said, “Through collaboration with the platform, we will secure young and foreign customers and overcome the limitations of local financial groups.”
Reporter Kim Bo-hyung kph21c@hankyung.com
