Shinhan Bank seeks merger with retail banking specialist

Shinhan Bank, which had insisted on remaining independent, announced plans to seek a merger with a leading bank in the retail banking sector starting in May.

In another development in the local financial sector, Industrial Bank of Korea (IBK) said it was considering forming a holding company in cooperation with Korea Exchange Bank (KEB), which said it would push for the merger after disposing of KEB Card Co.

Hanvit, Peace, Kyungnam, and Kwangju banks, all of which are to be placed under a government-led financial holding company, will hold a general shareholders` meeting on March 2 to officially launch the business entity and select a CEO.

The moves are part of efforts to cope with the rapidly changing financial environment in the wake of Hanvit Bank`s creation of a holding company and the merger of Housing & Commercial Bank (H&CB) and Kookmin Bank. Against this backdrop, the second round of bank mergers this year is expected to be even more brisk than the first phase last year, changing the very shape of the domestic banking industry.

Noting that Shinhan bank would inaugurate a financial holding company in May and push for a merger with other commercial banks, bank vice president Choi Young-Whi said, ``We originally considered merging after 2003, but it became inevitable for us to pursue a bigger merger in order to effecttively deal with the new financial market conditions.``

``We are looking at merging with a bank that has superior competitiveness in the retail banking and small and medium-size corporate banking sectors,`` he added, indicating that KorAm Bank was a likely merger partner.

Banking sector analysts forecast that Shinhan Bank`s move to merge would lead to marriages among other Korean banks.

Park Hyeon-Jin witness@donga.com