À̹ÌÁö È®´ë South Korea¡¯s financial holding entities have bulked up by nearly 4 trillion won ($3.4 billion) this year to strengthen their capital base and build ammunitions for M&As to achieve economies of scale.
Woori Financial Group which transformed into a holding entity at the beginning of the year lately raised 500 billion won ($421.5 million) in perpetual bonds at a coupon rate of 3.32 percent. The Korean won-denominated bond was attached with an option to call five years after issuance. The financial group in July had issued 500 billion won in perpetual form at 3.49 percent.
A perpetual bond is a bond with no maturity date, which is regarded as an asset rather than a debt in the balance sheet. The new capital of 1 trillion won can raise its Bank of International Settlement (BIS) capital adequacy ratio to 11.55 percent from 11.1 percent recorded at the end of June.
The financial group separately in June sold 300 billion won worth and another 400 billion won last month in subordinated bonds, which also are booked assets and not debt.
Others also have been active in the debt market this year in high demand on expectations for rate cuts.
KB Financial Group Inc. sold 400 billion won in perpetual bonds in May. Shinhan Financial Group Co. raised 750 billion won by offering convertible preferred shares in April, 200 billion won in perpetual bonds in June, and 590 billion won in subordinated bonds.
Four financial majors have raised new capital worth 3.64 trillion won in total.
The fund-raising scheme would have improved their BIS capital adequacy ratio - the minimum capital adequacy ratio that banks must attain under the Basel III standard.
À̹ÌÁö È®´ë As of the end of June, KB had the highest 14.94 percent, Hana 14.69 percent, and Shinhan 14.27 percent. Woori¡¯s BIS ratio stood at 11.1 percent, which the bank needed to bring up to 11.5 percent or higher by March next year under local financial authorities¡¯ guidance. The goal has been achieved with the latest offerings.
The industry believes the big names will rev up M&A drive with the new capital fuel.
Woori, which added two asset managers and one real estate investment trust this year, will likely go after Aju Capital Co. and Aju Savings Bank early next year. The financial group¡¯s key unit Woori Bank already owns a 50 percent stake in Aju Capital through a private fund. Aju Savings Bank is a fully owned subsidiary of the capital company.
Shinhan is also expected to use its newly added funds to acquire remaining stakes in Orange Life Insurance. The financial group in February acquired a 59.15 percent stake in the insurance company at 2.3 trillion won. Shinhan reportedly plans to make Orange Life Insurance a fully-owned subsidiary.
By Moon Il-ho and Cho Jeehyun
[¨Ï Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]