Hana Bank, South Korea's fourth-largest lender, may buy state-run Daehan Investment & Securities on its own if talks with Singapore's Temasek Holdings collapse.
Hana on Monday signed a contract to buy the country's leading asset manager for Won475bn ($477m), as part of its diversification strategy. Temasek, Singapore's state investment agency, is Hana's largest shareholder with a 10 per cent stake.
Temasek, which can take up to a 49 per cent stake in Daehan, demanded Hana guarantee a 10 per cent return on its investment as a condition for the joint takeover, which Hana said was “unacceptable”.
“If we fail to reach an agreement with Temasek, we will take it over on our own,” Kim Jong-yeol, Hana's chief executive, told reporters on Monday.
He said Hana would have no problems paying for the acquisition by the end of next month, as the bank had Won800bn-Won900bn in surplus cash. The government was also planning to inject Won1,140bn to recapitalise Daehan.
A deal will complete the restructuring of the country's troubled asset management firms following the sale of Korea Investment & Securities to Dongwon Financial Holding and Hyundai Investment & Securities to Prudential Financial of the US.
The acquisition of Daehan will make Hana's asset management operations the biggest in South Korea, with a combined market share of 13.4 per cent. The bank's move into the non-banking sector comes as it faces intense competition from global entrants such as Citibank and Standard Chartered, and bigger domestic rivals such as Kookmin Bank and Shinhan Financial Group. Hana reported a 10 per cent drop in first-quarter profit to Won182.4bn. Hana has said it plans to form strategic alliances with foreign investors to strengthen investment banking and asset management. It wants to set up a holding company in November to oversee its diverse businesses. Non-banking services are expected to generate 40 per cent of the holding company's revenue by 2008.
The lender is also eyeing LG Card and Korea Exchange Bank in an expansion drive in one of Asia's biggest retail banking markets. Hana has said it would consider buying them after completing the takeover of Daehan.
Daehan, which has $22bn in assets under management, reported a preliminary net loss of Won284.7bn in the fiscal year ended March 31.