Chairman Cho Young-byeong of Shinhan Financial Group.

Shinhan Financial Group is about to take over ING Life Insurance Co., securing a 59.15 percent stake in the 6th largest life insurance firm for 2.4 trillion won, according to sources.

The sources said the financial group agreed with MBK Partners to take over the stakes for 2.4 trillion won, which comes to 50,000 won per share of the life insurance firm, easily the largest M&A in the insurance industry. The group is said to report the planned moves to its board of the directors on Aug. 16-17 for approval.

The financial group is expected to take over the top spot in net profit in the financial industry from KB Financial Group when the takeover is completed.

The financial group continues to lead the financial industry in the area of net profit since 2011 when the industry adopted the IFRS international accounting system, but yielded the position last year to KB Financial Group with its net profit amounting to 1.288 trillion won against 1.451,7 trillion won for KB Financial. In the first half of this year, KB Financial topped Shinhan Financial with its net profit coming to 1.915,2 trillion won against 1.817,1 trillion won for Shinhan Financial.

Shinhan Financial is set to reverse the situation with the take over of ING Life as its net profit came to 340 billion won in 2017, which would also diversify its operation centered largely on banking and credit card businesses.

 The financial group’s takeover of ING Life has been the move directed by Chairman Cho Yeong-byeong, who has been so eager to get the leading position back for the group from KB Financial. In 2007, the group took over LG Card to recapture the top spot in the financial industry from KB Financial.

KB Financial took over a number of financial institutions in 2015 and 2016 to wrest the top spot in the industry with LIG Non-Life Insurance and Hyundai Securities fulfilling their roles to help the group to take over the top position in the industry by logging 3.3 trillion won in net profit. Shinhan Financial did not have nothing to show for in the area of mergers and acquisitions since its take over of LG Card in 2007 for 6.7 trillion won which was dubbed the largest merger in history at the time.

In January of last year, the share price of Shinhan Group shares fell behind that of KB Financial for the first time. To make matters worse, at the end of last year, the share price of the group again fell below that of Hana Financial for the first time.

In the first half of this year, ING Life is projected to log 179.6 billion won in net profit, which will put Shinhan Financial 80 billion won ahead of its rival KB Financial in terms of net profit to regain its confidence back as the nation’s top financial group.

 A seismic change is expected in the life insurance industry with the takeover of ING Life by Shinhan Group as it is destined for merger with Shinhan Life. The merger will create a life insurer with 61 trillion won in assets, the 5th largest in the industry, with Shinhan Life ranked the 8th with total assets of 30 trillion won.

Shinhan Financial Group has the lowest NPL Ratio of the major South Korean banks as well as the highest NPL coverage ratio. Its Return on Equity is also the highest of the major Korean banks whilst its Return on Assets is the second highest. Despite its better-than-peers asset quality and strong capital levels, the bank’s stock does not trade at a substantial premium to that of its peers.

Shinhan’s risks of increased non-performing loans arising from its exposure to the Shipping and Shipbuilding Industry also remains manageable whilst its high NPL coverage ratio reduces the need for substantial additional loan loss provisioning.

It should be noted that all references to “Korean” in this article refer to South Korea and all figures referenced are in Korean Won unless the context indicates otherwise.

A view of the Shinhan Financial Group Building near South Gate in Seoul. A view of the building in the Jung-gu, Seoul, where ING Life Insurance Co. has offices. (Photos: SFG)