Chairman Kim Yong-hwan of NH Financial Group.(Photo:NH Financial)

Chairman Kim Yong-hwan of NH Financial Group said on May 3 that the group may ask for increased down payments on loans from shipbuilders and maritime shipping firms whose financials have gotten poor. NH Financial is also considering calling in loans and selling them to get them off their books.

He made the statement at a news conference commemorating his initial year as the head of the financial group at the Korea Federation of Banks building in Myeongdong, Seoul.

He said the group will be careful about providing new loans to companies in industries that are hard hit, and their outstanding loans will be reduced unless they restructure their operations voluntarily or opt to rework their loans.

The chairman said the group completed the screening of the financial conditions of the borrowers in such industries as shipbuilding, shipping, steel, construction and petrochemicals, which have been hit by severe a slowdown and are struggling to make with loans payments, which could cause them major problems within two years time.

The group even figured out what it should do in the worst-case scenario in calculating the amount of funds to supplement its loan-loss provision.

Final decisions on the amount of funds to supplement the loan-loss provisions for outstanding shipbuilding loans for firms that are about to go under restructuring will be made based on the progress of the restructuring of those firms.

Kim said NH Bank had to take a “big bath” to clean up sour loans provided to shipbuilding and shipping firms. He can’t be sure how much more loan-loss provisions should be increased for loans provided to those borrowers in the days ahead, although the bank increased the loss provisions in the first quarter. NH Bank is the third largest lender to those firms in the five largest industries exposed to various risks ignited by the global economic slowdown, after the Korea Development Bank and the Export-Import Bank of Korea.

NH Financial Group’s net profit for 2015 fell 64.2 percent to 32.2 billion won from the previous year after increasing its loan loss provision to be ready for the defaults of its borrowers like Changmyung Shipping, STX Shipbuilding and Hyundai Merchant Marine.

NongHyup Financial Group Chairman Kim Yong-hwan said on May 3 that the group will reach Asian markets by cooperating with regional players, seeking to find new revenue sources outside the country.

Kim said that the country's second-largest financial group by assets is exploring business opportunities in China, Vietnam, Myanmar, Indonesia and Cambodia, considering buying stakes in local financial firms and setting up joint ventures.

"Globalization is our new strategy. The local market is being saturated quickly, forcing us to reach out overseas," said Kim in a press conference at the Bankers' Club in downtown Seoul, celebrating the first anniversary of his inauguration as chairman. "We are more interested in stake investments, joint ventures or project financing, rather than establishing branches or liaison offices."

His announcement came as the domestic financial market loses its attractiveness, hit by low interest rates and sluggish economic growth. Net interest margin, a barometer of a bank's profitability, is also dropping sharply, burdening the group's performance.

The bureaucrat-turned-banker said that the group set up a support center in Hong Kong, which helps its business in Asia. NongHyup is in talks with a Chinese financial group to establish a joint banking arm in the country.

He also said that he would cooperate with state-run agencies, such as the Korea International Cooperation Agency (KOICA) and the Export-Import Bank of Korea (Eximbank), in reaching overseas markets by helping their activities in rural areas.

Regarding NH Financial’s domestic business, he admitted that the group suffers from heavy exposure to troubled shipbuilders and shippers, but vowed to deal with bad loans by making provisions.

He also said that the agricultural industry has huge potential for growth, if it receives timely and sizeable financial support. NongHyup originally started as a farmers' cooperative.