JB Financial Group(175330) put on the board agenda the demand to review a merger with BNK Financial Group(138930) proposed by the activist fund "Align Partners Asset Management." The market views the chances as low, but some say a long-term review is needed due to the shrinking operating environment for regional business.
On the 27th, according to the financial sector, JB Financial Group is discussing whether to formally review a merger plan with BNK Financial Group at the board. JB Financial Group plans to announce the outcome through disclosures once the board discussions are wrapped up.
Align Partners recently delivered an official shareholder letter to JB Financial Group asking the board to review the possibility of a merger with BNK Financial Group. Align Partners is the No. 2 shareholder, holding 14.83% of JB Financial Group stock. It also owns more than 1% equity in BNK Financial Group. Align Partners requested that, if a merger review is undertaken, the results and future plans be disclosed before this year's third-quarter earnings announcement. As the proposal comes from the No. 2 shareholder, JB Financial Group's board is set to discuss whether to review it.
If the two financial holding companies merge, a regional financial group with total assets of 234 trillion won (as of the end of March) would be born. That is twice the total assets (113.89 trillion won) of iM Financial Group.
However, the market sees the likelihood of a merger between the two financial holding companies as low. There are many hurdles, including opposition from labor unions and local communities, shareholder consent, and the calculation of the merger ratio. Even if these issues are resolved, it is uncertain whether the financial authorities would grant approval.
An official at the financial supervisory authorities said, "When DGB Financial converted into a commercial bank, there was strong opposition from the local community. A merger is an even bigger problem."
In the industry, there is a view that regional financial holding companies need to craft new growth strategies in light of declining local populations, regional economic slowdowns, and weak nonbank portfolios. Align Partners raised the need for a merger because it judged that regional banks have hit a ceiling in growth potential. Regional banks have recently been falling behind internet-only banks in profitability.
An official at a regional bank said, "Customers are steadily decreasing as local clients move to the greater Seoul area. We are discussing with the authorities ways to bolster the competitiveness of regional banks, including reorganizing business zones and strengthening cooperation."