The gap in non-bank businesses among financial groups is widening. KB Financial Group and Shinhan Financial Group have built stable profit bases in their non-bank units, while Hana Financial Group still appears unable to break away from its reliance on banking. Hana Financial has recently moved faster to bolster its portfolio, including joining the race to acquire Yebyeol Non-life Insurance.

The financial sector said on Feb. 3 that Hana Financial recently took part in the open sale of Yebyeol Non-life Insurance, a bridge insurer for MG Non-Life Insurance, and appears to have launched a full-scale push for insurance mergers and acquisitions.

Hana Financial moved to pursue an additional acquisition despite already owning Hana Non-life Insurance, in what is seen as reflecting a sense of crisis that its current non-bank portfolio has limits in supporting the group’s profit structure. Hana Financial said on Jan. 30 that its non-bank units contributed 12 percent of net profit last year. This is a wide gap with KB Financial and Shinhan Financial, which are estimated to be in the mid-to-high 30 percent range.

Hana Financial Chairman Young-ju Ham (함영주) also publicly pointed to the weakness in the non-bank unit, stressing, "We cannot go on like this." The judgment is that strengthening non-bank businesses, centered on insurance, is unavoidable because banking results alone have limits in competing for rankings among financial holding companies and defending corporate value. Yebyeol Non-life Insurance is a bridge insurer that has cleaned up troubled assets, which is seen as making it a practical option for Hana Financial because the acquisition price burden is relatively low and part of the cost of normalising capital can be supported publicly.

KB Financial, by contrast, posted balanced results across securities, non-life insurance, card and life, generating 37 percent of cumulative net profit through the third quarter of last year from its non-bank units. KB Non-life Insurance in particular has become a key subsidiary within the group and is earning stable profits as a top-tier non-life insurer. The structure, which has significantly reduced reliance on banking, is seen as driving the group’s ability to retain its position as a leading financial company.

Shinhan Financial is also consistently pushing a strategy to strengthen non-bank businesses centered on insurance and securities. Shinhan Life led results as its cumulative net profit through the third quarter of last year recorded double-digit growth. Shinhan Financial has previously set out a goal of lifting the non-bank share of profit to around half in the mid-to-long term. The non-bank share, now around 30 percent, is emerging as a key variable in the competition for leadership going forward.

Woori Financial has also joined the competition to expand non-bank businesses in earnest, completing a comprehensive financial group system through the acquisition of an insurer. Chairman Jong-ryong Lim (임종룡) has put growth in the non-bank business as the top priority for the second phase of management after securing a second term, and is laying out a plan to nurture it into a substantive profit source beyond simple expansion of scale. A sense is spreading across financial holding companies that failing to move away from a bank-centered structure could bring long-term growth limits.

It is unclear whether Hana Financial’s insurance M&A will translate into results immediately. It has past experience of failing to achieve a clear expansion in market standing after acquiring an insurer, and the gap in scale with large insurers remains significant. Even so, the decision to join the Yebyeol Non-life Insurance acquisition process is seen as highly symbolic in that a sense of crisis over the difficulty of securing future competitiveness without strengthening non-bank units has been put into action.

The industry expects competition over insurance M&A to intensify further. As a slowdown in banking profitability becomes more pronounced, non-bank businesses, especially insurance, are emerging as key variables that determine group results and corporate value.

A financial industry official said, "Now, the essence of competition among financial holding companies depends not on banks but on how stable a profit engine they have in non-bank businesses." The official added, "The gap here is likely to become the structure that separates the hierarchy of financial holding companies, and it will become more entrenched."