This Memorandum Of Understanding was signed by Choi Young-hwi, Director & Deputy President of Shinhan Bank and Head of the Holding Company Establishment Office, and Philippe Cottus, BNP Paribas Regional CEO for Asia Pacific in Singapore. The Memorandum states that BNP Paribas will take a stake in Shinhan to ensure a long-term partnership between Shinhan Financial Holding Company (tentative name) to be established in the near future, and BNP Paribas.
Also on June 28, Shinhan Bank, Shinhan Securities, Shinhan Capital, and Shinhan Investment Trust Management held simultaneous Board of Directors meetings to shift their operations under the Shinhan Financial Holding Company, which will be established in the near future. They decided to start legal procedures to establish the holding company by transferring shares, voted on procedures to establish the holding company, agreed to hold a shareholders' meeting on August 9 for the approval of the shares transfer which will actually happen on September 1. In addition, the Boards of Directors also voted on approval of article of association of the holding company.
The Holding Company Establishment Committee, which has been in charge of preparations for establishing the holding company, submitted an application for preliminary permit of holding company establishment to Financial Supervisory Commission at the same time as the Board of Directors resolution.
According to the Memorandum of Understanding, BNP Paribas will take a 4% stake in Shinhan Financial Holding Company. This amount represents an ownership ceiling for any single shareholder in accordance with the current financial holding company act. BNP Paribas will appoint one director to participate in the holding company's management. Timing for the investment in the holding company shall not be later than 6 months after the establishment of the holding company.
Furthermore, the Memorandum of Understanding states that Cetelem and Cardif, both wholly-owned by BNP Paribas, will be able to enhance their presence on the Korean consumer credit and bancassurance markets each through 50-50 joint ventures with Shinhan Group:
- Cetelem is N°1 in consumer credit in Europe and is famous for its excellent capabilities in credit rating, risk management and marketing. These capabilities, combined with Shinhan Group's customer base and distribution channels, will allow the future joint-venture to provide highly advanced consumer finance products to its customers.
- Cardif sells insurance products through partnership agreements with banks and financial institutions, as well as through brokers and independent financial advisors.
BNP Paribas ranks 4th among French life insurance companies with its two subsidiaries Cardif and Natio Vie. 20% of their premium income is earned outside France, in 24 countries. Although bancassurance is not yet fully permitted in Korea, Shinhan Financial Holding Company and BNP Paribas agreed that, with deregulation likely to take place in the near future, their joint-venture will sell Cardif's bancassurance products (credit protection insurance, individual protection type insurance, etc.) to all customers of Shinhan Group including Shinhan Bank.
This partnership will maximize synergies, offer top-of-the-line services to Korean customers within each party's business scope, and provide BNP Paribas with the opportunity to strengthen its position and capabilities in the Asian Market. Shinhan Financial Holding Company offers its strong brand and extensive network in the local market, and BNP Paribas offers advanced capabilities and technology. The two parties agreed on a mutually beneficial alliance while pursuing the maximization of shareholder value, customer value and employee satisfaction.
In addition, Shinhan Financial Group and BNP Paribas announced that they intend to extend cooperation in the near future in such areas as securities services and private banking to strengthen their bilateral comprehensive partnership. The timing of investment for each business unit will be based on the final investment contract.
This strategic partnership with BNP Paribas is different from foreign capital inducement conducted by other Korean financial institutions because it involves an operational investor seeking comprehensive and long-term enhancement of corporate value through capability and resource sharing between the two companies across all business areas to be included in Shinhan Financial Holding Company. This partnership is expected to serve as a breakthrough in the on-going restructuring in the financial sector and improvement of the Korean financial industry.
Lee In-ho, President of Shinhan Bank said, "Since early this year, we have conducted many discussions and negotiations to find a right strategic partner to help innovate our core competencies such as product development, sales, and risk management capabilities of each subsidiary of Shinhan Group. I am very glad that we finally found the right partner, who can seek long-term growth together with us." He also showed strong confidence in synergies to be created from the partnership and commented, "BNP Paribas is a leading European financial institution. 80 out of world top 100 companies are customers of BNP Paribas. Through this strategic partnership, the customers of Shinhan Financial Holding Company will experience advanced financial services entirely different from those existing in Korea. Accordingly, shareholder value of the holding company will increase."
Michel Pébereau, Chairman and Chief Executive Officer of BNP Paribas, commented: "I am very glad of this agreement to establish joint-ventures between Cetelem and Shinhan on one hand, Cardif and Shinhan on the other hand. This is a tremendous opportunity for Cetelem to become a major operator in consumer credit in Korea, and for Cardif to take advantage of further developments in the opening bancassurance market in that country. I am confident that this is the beginning of a successful long-term partnership."
BNP Paribas, a leading financial services group in Europe and one of France's foremost companies, has leading positions in Asia and an active presence in the United States. BNP Paribas develops 3 core businesses: Corporate and Investment banking; Private Banking, Asset Management, Securities Services and Insurance; and Retail Banking. BNP Paribas Capital spearheads the Private Equity Business. BNP Paribas is the second most profitable bank in the Euro zone, with net income of EUR 4.12 billion for the year 2000, and a return on equity of 20.9%. The group employs 80 000 people worldwide and operates in 87 countries. Its presence in Korea includes among others BNP Paribas banking branch, Cetelem Korea specialized in consumer credit, and Cardif local branch.
Shinhan Group (including Shinhan Bank, Shinhan Securities, Shinhan Investment Trust Management, Shinhan Capital and Shinhan Life Insurance) is one of the leading financial groups in Korea, offering a broad range of products from retail banking to credit cards, investment trust and middle-market and corporate banking services.
Shinhan bank is the second largest bank in Korea in terms of market value and is a market leader in performance and asset quality, total net earnings of bank amounted to Euro 327 million in 2000. Shinhan bank is a market leader in the middle market banking, it is also a leader in online banking, offering innovative products to its customers. Currently Shinhan Bank has 328 branches serving 5.2 million customers
By enhancing transparency in management and learning advanced financial techniques through its strategic alliance with such a global and leading financial institution as BNP Paribas, Shinhan Financial Holding Company will be engaging itself into a clearly proactive and forward-looking development expected to provide a breakthrough for the Korean financial industry.