“Privatized Kookmin Bank Will Be Under Transparent Management,” CEO Says

“Kookmin Bank will be placed under control of neither foreign capital nor a ‘dictatorial CEO,’ but under a transparent ownership structure,” said CEO Kim Jung Tae of Kookmin Bank in an exclusive interview with Dong-A Ilbo after the bank became privatized as the government sold its 9.1 percent share in the financial institution.

The interview, which took place in Kim’s residence, lasted about two hours.

-What are the implications of the complete privatization of the bank?

“In Korea, if the government has a share in a bank, it will be allowed to conduct a variety of audits into the bank, including one conducted by the Board of Audit and Inspection. A publicly owned company is not efficient. Suppose the company buys a pack of orange juice. All you need is to buy a reasonable one, but you have to solicit bids first. That’s why I wanted a 100 percent privatized bank.

-How will you treat treasury stock shares the bank has issued?

“With the 9.2 percent share we acquired from the government, we now control 9.22 percent in treasury stock. But that ratio is too small for a strategic investor to control the management yet it is of too much interest for him to sell. I will search the world for buyers for 4-5 percent next year. If I fail to find one, I will split the shares into three percent apiece or more and look for several buyers.

-With the government share dissolved, there are concerns that foreign shareholders, such as Capital Group and ING will likely exert more influence on the bank.

“It depends. Some remain silent about the privatization while others frequently send letters or email messages. There is a set of rules on Wall Street. If they don’t like management, all they have to do is sell off their shares. ING has only two seats-- one permanent and one non-permanent – on the board of directors. How can a bank be called foreign-controlled when foreigners have no managerial control?

-What would you do if the government asks for cooperation on the pretext of financial market stability?

“It will have to convince us first. I won’t reject it unilaterally. I will proactively cooperate with the government as far as the market system is concerned. But I won’t if it concerns just a certain corporation in trouble.

-Does that mean you will have more power?

“They believe so because they don’t understand about the inner workings of Kookmin. Even a non-permanent member of the board of directors will lose his seat if he fails to get a recommendation from a fully independent advisory committee. There are just four permanent seats on the board, which by themselves fall short of even forming a board.

- Do you have a new post-privatization strategy for next year?

“I will put stress on soundness. There won’t be anything that is limited to figurative growth. I expect the bank to grow at about the same rate of the country’s GDP growth next year. I will strengthen such business lines as bank assurance, beneficiary certificates as well as non-banking fields. Not acquiring a stock brokerage won’t pose a problem. We will make inroads into Asia more proactively. We will acquire a Japanese bank in two or three years. We will penetrate China with a 5-6 year perspective.

-What do make out of the current credit card crunch?

“There is no alternative. The economy and personal income should improve first. The issues over LG Card Co. will likely be resolved soon. It is time for anyone with interest in the credit card company to bet boldly on the risks. A well-planned restructuring of the company will be tremendously rewarding to him. The acquisition of LG by a bank will likely solve the credit card company’s liquidity problems and turn it into an attractive business.

Asked about his health after recovery of acute pneumonia, he offered an indirect answer meant to brag about his newfound health by saying, “I am doing farming on a ‘weekend farm.’” Kim went on say that his daughter will come back home soon from the U.S. where she is studying in an academic exchange program and concluded, “The point in children education is about maximizing their autonomy while stressing the importance of living an honest life.” Asked whether or not that point resonates in his management of the bank, he just smiled.

Keuk-In Bae bae2150@donga.com