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Banks vie to take over LG Card (Part 1)
Writer : Sender
Jun 27, 2005
Back in 2003 and 2004, LG Card was technically bankrupt as its capital was completely wiped out by bad assets. The nation's leading card issuer was eventually bailed out by a series of financial aid led by the government and a number of banks.
At that time, Kookmin Bank and most of the other banks were reluctant to help the weak card firm. The government was at the center of criticism from the media and industry analysts for the bailout programs, which they said run counter to market principles.
But about one year later, major banks are competing to take over the nation's second largest card issuer, which is expected to be put up for auction later this year.
LG Card posted a 292 billion won ($292 million) net profit in the first quarter, posting profits for the second straight quarter and reversing as much as 482 billion won in losses in the second quarter of 2004. Its first quarter result was the biggest among local card firms.
Woori Financial Group, Shinhan Financial Group and Hana Bank have expressed interest in LG Card.
The card firm has about 10 million clients, equivalent to about 40 percent of the Korean adult population.
Shinhan Financial Group Chairman Ra Eung-chan said that the financial group is interested in LG Card. Woori Financial Group Chairman Hwang Young-key also expressed interest during the financial holding company's recent investor relations session in New York.
Hana Bank president Kim Jong-ryul said the bank will use mergers and acquisitions to expand its business scope and better compete with bigger rivals, indicating that it will also take part in the bidding for the card firm.
Among the nation's top commercial lenders, Kookmin Bank and Citibank Korea have been taking a more cautious approach toward the possible acquisition of the card firm.
But analysts believe that they will not be able to sit idly by if the rival bank succeeds in taking over LG Card as it will emerge as a big threat to their smaller card operations.
LG Card will provide a great synergy for a domestic bank to become the strongest financial group in the future.
But the problem is that the price of the card company is going up on rising stock prices with its market capitalization reaching more than 4 trillion won.
The Korea Development Bank (KDB), other creditors and the LG Group have spent a combined 4.5 trillion won to bail out the card issuer.
KDB holds the largest stake of 22.93 percent, followed by the National Agricultural Cooperative Federation with 14.59 percent, Kookmin Bank with 11.98 percent, Woori Bank with 8.7 percent and the Industrial Bank of Korea with 5.95 percent.
(Part 1 of 2)
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Banks vie to take over LG Card (Part 2)
