Korea Development Bank Seen to Acquire LG Card

The Korea Development Bank (KDB) will likely acquire LG Card Co., a defunct credit card company that has been on the auction block, as the two most likely buyers, Hana Bank and Woori Financial Group, are increasingly shying away from the takeover.

“It will be a different story if the conditions for the acquisition change. However, we won’t bid for LG at least not now,” said Kim Seung-yu, the CEO of Hana Bank. “LG Card has 7.3 trillion won in one month old or older delinquent payments while its allowance for bad loans is just about two trillion won,” another Hana executive said, adding, “We can hardly take over LG if it gives money to finance the deal.”

Woori is also unlikely to bid for the acquisition.

“Woori Financial Group is not capable to make another acquisition as it is preparing to take over Woori Card Co.,” a Woori executive said on condition of anonymity. Woori CEO Lee Deok-hoon on several occasions expressed interest in the purchase of the defunct card company. He can hardly proceed if Woori Holding Co. opposes the bid.

“It is too risky for a single bank to bid. I believe KDB will be the sole bidder,” said LG Investment analyst Cho Byung-mun.

KDB’s bid, a state lender, would be seen as an effort to stabilize the financial market, but it would also raise concerns of an indirect injection of public funds into a bankrupt private company.

If KDB sells LG to a bank after acquiring it, this could bring seismic changes to the credit card industry. More credit card companies might be merged into banks, which will intensify competition over cheaper interest rates.

Kookmin Card merged into Kookmin Bank in August. Woori Card will be merged into Woori Financial by March of next year. Korea Exchange will be absorbed into Korea Exchange Bank by February, and Shinhan Card will merge with CHB Card next year. Samsung Card will acquire Samsung Capital, a consumer lender, to better compete with bank-owned credit card companies. “Banks can offer interest rates two or three percent lower than credit card companies. With their aggressive marketing, the landscape of the industry will change,” an industry insider said.

Keuk-In Bae Suk-Ho Shin bae2150@donga.com kyle@donga.com