Chairman Yoon Jong-kyoo of KB Financial Group.

KB Financial Group is already reaping benefits from the planned acquisition of Hyundai Securities, as its share price rose as soon as it was named as the priority bidder on March 31.

Although the takeover bid drew criticism from some quarters of the securities industry saying the price tag of 1.25 trillion won is too high, the industry in general sees a great synergy effect for the group from the takeover, which is already happening.

The financial group has seen its share price rising around 9.6 percent since the announcement that the group was named as the priority bidder, much higher than its rival financial groups such as Shinhan Financial and Hana Financial.

Officials of the financial group said the investigation of Hyundai Securities financial conditions before settling the takeover price has been going as planned.

The financial group did well in the first quarter with its earnings rising 57 percent from the preceding quarter at 54.5 billion won and up 28.3 percent YoY.

The financial group is expected to borrow some 900 billion won to pay for the securities firm through the issuance of bonds, but financial sources said it would not negatively effect the group’s overall financial health. 

Fitch said the financial group would have no trouble securing funds to take over the securities firm as planned, as the increase in its debts will be minimal. It will maintain the “A” grade for the financial group’s credit situation and “stable” for its financial outlook.

KB Financial Group Chairman Yoon Jong-kyoo said recently that the group's winning bid to buy a controlling stake in Hyundai Securities would be "a milestone for KB in becoming a leading financial group."

During the group's morning assembly, Yoon said winning the bid was another significant step to joining the leaders in the Asian financial market, following its acquisition of LIG Insurance last year and a plan to build a new office for its flagship KB Kookmin Bank in Yeouido, Seoul.

KB Financial Group offered more than 1 trillion won to become the preferred bidder for a 22.56 percent stake of the securities firm, owned by Hyundai Merchant Marine (HMM), Hyundai Group's shipping unit, which is selling the stake to pay off some of its 4.3 trillion won debt.

Once KB Financial Group wraps up the Hyundai Securities' acquisition, it will have a securities unit with 3.9 trillion-won in assets, which will place it third from the top in Korea. The group said it expects the potential acquisition to be a chance to diversify its sources of income as well as creating synergy among its affiliates.

Earlier last month, the group said that it will build KB Financial Town, a 25-story headquarters for KB Kookmin Bank, in Yeouido, Seoul, in order to integrate its headquarters functions, which have been dispersed between its Myeongdong and Yeouido offices. The building is scheduled to be completed in 2020. Given that the group's other affiliates are located in Yeouido, the group expects it will help all its affiliates to better cooperate with each other.

The group sees the acquisition of Hyundai Securities as the "completion of its business portfolio" and seeks to emulate the Bank of America's (BoA) takeover of Merrill Lynch. After acquiring Merrill Lynch in 2009, BoA's share of corporate and investment banking in its overall profits rose from 16 percent to 38 percent. The ratio of wealth management also jumped from 10 percent to 21 percent.

"After the failure to acquire KDB Daewoo Securities, the group has taken keen efforts to improve its readiness to acquire Hyundai Securities," an official at the group said. "Also the board directors fully supported the move." Last year, KB Financial Group joined other competitors to bid for KDB Daewoo Securities but lost to Mirae Asset Securities. In 2013, KB lost its bid to acquire Woori Investment & Securities to NH Financial Group.

During the morning assembly, Yoon also called for an improvement in its net interest margin (NIM), which is the key index gauging a bank's profitability.

“A bank which fails to make profits befitting its asset growth will fall into a vicious cycle of lessening its capital ratio hampering further asset growth," Yoon said. "This means that banks are in the survival game and this is the reason why we have to make great efforts to improve our NIM."

The two buildings in Seoul where KB Financial Group, right, and Hyundai Securities have their offices.(Photos:KB Financial)