Sh Suhyup Bank is moving to acquire Sangsangin Securities. Following its acquisition of an asset management firm last year, the bank plans to bring a securities firm into its fold as well, expanding its non-bank portfolio and accelerating the establishment of a financial holding company structure.
According to the financial industry on the 6th, Sh Suhyup Bank signed a memorandum of understanding (MOU) with Sangsangin Group last month to acquire Sangsangin Securities. The bank has secured exclusive negotiating rights, under which it will negotiate solely without seeking additional buyers through the third quarter, and is currently conducting due diligence.
"Entering the securities business has long been regarded as a long-term task, and we have reviewed it for a long time," a senior Sh Suhyup Bank official said. "We will be able to generate various synergies not only with the bank but also with the asset management firm we acquired last year."
Specific terms, including the final transaction price and the stake to be acquired, have yet to be finalized. The largest shareholder of Sangsangin Securities is Sangsangin, with the largest shareholder's stake, including related parties, at about 65%.
The market values Sangsangin Securities at around 100 billion won. Based on the closing price the day before the acquisition news became known, its market capitalization was about 80 billion won. However, the industry believes the actual price tag for Sangsangin Securities could rise to around 200 billion won. With few securities firms available for sale in Korea and new securities firm licenses being effectively difficult to obtain, a management control premium is likely to be reflected.
"I understand that Sangsangin Securities significantly narrowed its losses last year and then successfully turned to a profit in the first half of this year," a financial industry official said. "Considering the improvement in earnings, there is a possibility it will be traded at a higher price than the market valuation."
Sh Suhyup Bank is pursuing the securities firm acquisition to expand its non-bank business and to build a financial holding company structure over the medium to long term. Securing a securities firm would enable collaboration with the bank in capital market sectors such as investment banking (IB), wealth management (WM), bond and stock brokerage, and alternative investment. The ability to diversify a bank-centered earnings structure, which sees large volatility depending on the interest rate environment, is also an expected benefit.
However, procedures remain before the deal can be closed, including consultation with the Ministry of Oceans and Fisheries and approval of the change in major shareholder by the Financial Services Commission. As Sh Suhyup Bank is a specialized bank wholly owned by the National Federation of Fisheries Cooperatives, it must undergo consultation with the Ministry of Oceans and Fisheries and obtain FSC approval. If negotiations between the two sides are smoothly concluded, the deal is expected to close as early as the end of the year.
Its capital soundness is assessed as sufficient. Sh Suhyup Bank saw its capital ratio significantly improve as its risk-weighted asset (RWA) burden decreased following the adoption of the internal ratings-based approach this year. As of the end of the first quarter this year, its total capital ratio under the Bank for International Settlements (BIS) standard stood at 19.03%, up 3.94 percentage points from a year earlier. Accordingly, observers say the capital burden from the securities firm acquisition will also be limited.
