(M&A clock turning again) Savings bank M&A squirming… card companies uncertain

Mergers and acquisitions (M&A) of savings banks are attracting attention, centering on OK Financial Group. Among credit card companies, Lotte Card was listed as a major seller for the first time in two years.

According to the savings bank industry on the 13th, OK Financial completed its due diligence to acquire Sangsangin Savings Bank last month. Negotiations regarding the acquisition are expected to proceed after reviewing the results of the due diligence.

Sangsangin Group has been pursuing the sale of its affiliated savings banks, Sangsangin Savings Bank and Sangsangin Plus Savings Bank, since 2023. Disposal of shares is inevitable due to severe punishment from financial authorities. In 2019, the Financial Services Commission imposed a fine of 1.521 billion won on Sangsangin for illegal lending and suspended Sangsangin CEO Jun-won Yoo from his duties for three months. As a result of the fine, the company was ordered to dispose of its shares in two savings banks for violating the requirements for maintaining majority shareholder eligibility.

If OK Financial’s acquisition of Sangsangin Savings Bank goes through, it will rise to first place in terms of assets and change the landscape of the industry. As of the third quarter of last year, OK Savings Bank’s total assets were 13.7843 trillion won, and Sangsangin Savings Bank’s was 2.7554 trillion won. If merged, it will surpass SBI Savings Bank (KRW 14.8211 trillion), which is currently ranked first in assets. Currently, OK Financial’s business rights are in three areas: Seoul, Gwangju, Jeonnam, Jeonbuk, Jeju, and Daejeon, South Chungcheong, and North Chungcheong, and it will also have business rights in the Gyeonggi and Incheon regions.

The key is the selling price. When Woori Financial Group was exploring the acquisition of Sangsangin Savings Bank in October 2023, the desired price proposed by Sangsangin was known to be 250 billion won. However, soundness indicators have worsened since then due to sluggish business conditions. OK Financial is accelerating its business expansion by completely withdrawing from the lending business, including closing two lending companies earlier this month. An OK Financial official explained, “We are currently in the stage of completing due diligence and reviewing the data.”

There are a lot of potential properties for sale in the savings bank industry, but only a small number of them are actually carrying out M&A work. Last year, it was expected that M&A work would become more active as the financial authorities revised the savings bank licensing standards, but sales discussions are not gaining momentum. Joon-tae Park, a researcher at the Korea Institute of Finance, said, “The need for restructuring of savings banks is emerging, but M&A of savings banks is not active due to no takers appearing,” adding, “In case of insolvency in savings banks whose asset size has expanded through M&A, “Because the influence on the market can increase, revitalization measures need to be combined with strengthening regulations on internal control,” he analyzed.

Among credit card companies, Lotte Card was put up for sale for the first time in two years. MBK Partners, currently the largest shareholder, selected UBS as the lead manager for the sale early last month. It has been two years and six months since the sale began in June 2022 with JP Morgan as the lead manager. Poor performance and sale price are raising concerns. Lotte Card had the lowest performance among all credit card companies in the third quarter of last year, with a cumulative net profit of 102.5 billion won. It is said that the one-time disposal profit generated from the sale of its subsidiary Loka Mobility in the first half of last year had an effect on the sharp decline in performance, but it was the only credit card company to see a sharp decline in profit and loss. Due to the recession in the credit card industry, including lower credit card fees, it is difficult for external acquirers to appear. This is why major financial holding companies that currently have credit card companies as affiliates are being mentioned as takeover candidates. The ransom price set by MBK Partners based on the value of the entire stake in Lotte Card is known to be at least 3 trillion won, but some say that for actual discussions to continue, it should go down to around 2 trillion won.

Reporter Choi Jeong-seo adien10@segye.com