The Dilemma of 'Naver, Jeju Bank Acquisition Rumors'

Both Sides Denied, but Urgent Change Needed to Overcome Current Situation

[Asia Economy Reporter Seong Giho] The rumors of Naver acquiring Jeju Bank have brought the internal situations of the two companies into the spotlight. Although both sides have denied the rumors, reducing it to a simple incident, the circumstances of the two companies are complex. Because of this, there is speculation that these companies may reemerge at the center of acquisition rumors in the financial sector.

According to the financial sector on the 22nd, under current law, non-financial major shareholders like Naver cannot acquire more than 15% of shares in regional banks (4% for commercial banks) due to the principle of separation between industry and finance. If Jeju Bank is converted into an internet-only bank, up to 34% can be secured, but the company must not have received fines or higher sanctions under the Fair Trade Act in the past five years. Naver was fined twice by the Fair Trade Commission last year. Even if the acquisition is successful, there are many hurdles to overcome.

Nevertheless, the acquisition rumors have surfaced because of the dilemmas faced by both companies. From Shinhan Financial Group’s perspective, Jeju Bank is one of its major challenges. Among large financial holding companies, Shinhan Financial is the only one with two first-tier financial subsidiaries, known as the ‘Two Banks’ system. Profitability is also an issue. Jeju Bank’s cumulative net profit from Q1 to Q3 last year was 15.8 billion KRW, less than Shinhan Savings Bank’s 23 billion KRW. Its position is shrinking due to aggressive expansion by other banks. According to the Financial Supervisory Service, Jeju Bank’s local loan market share dropped from 26.95% in 2017 to 25.77% in 2018. As of August 2019 and 2020, it further declined to 24.85% and 24.28%, respectively.

Naver is anxiously watching the gradually growing tech-finance market. Naver Financial launched the Naver Bank account last June in partnership with Mirae Asset Daewoo, but it has faced criticism as a ‘financial product made by Naver’ and has been restricted in marketing and other areas. It also experienced setbacks, such as being eliminated after applying for a public sector certification pilot project following the government’s abolition of the public certification system.

An industry insider said, "The high interest in this acquisition rumor is evidence that the circumstances of the two companies make it plausible for them to agree to an acquisition," adding, "There is a high possibility that various acquisition rumors centered on these two companies will continue to emerge."