StanChart, struggling in S. Korea, may sell consumer finance units
HONG KONG Aug 7 (Reuters) - Standard Chartered Plc said it could sell two South Korean consumer finance units after taking a $1 billion writedown on its business there, underscoring the diminished potential of what the Asia-focused bank calls its most difficult market.
The bank has been hit by regulatory changes that have forced the sector to forgive loans by highly indebted individuals, a slowing economy and high labour costs that have proven fiendishly tricky to alter.
But it is not planning a broad-based exit, betting that cross-border financing opportunities provided by leading companies like Samsung Electronics Co Ltd will make riding out the current flurry of ill winds worthwhile.
When StanChart acquired Korea First Bank in 2005 the industry saw returns on equity of 18 percent, but they have now fallen to 4 percent.
"It's going through a lean patch that wasn't the case when we bought it, and we hope it won't stay the case forever," Asia Chief Executive Jaspal Bindra told Reuters in an interview.
"We have 380 outlets in Korea, we are very committed. As the 12th largest economy in the world and 6th largest exporter it plays entirely to our strengths."
He said the two units that are under consideration for sale make up less than three percent of the firm's business in South Korea. The units, SC Savings Bank and SC Capital, were mainly used to fund a mortgage book that has since been significantly reduced.
Domestic media has said SC Capital has some 1.5 trillion won ($1.3 billion) in assets while SC Savings Bank has 550 billion won in assets.
While StanChart is persevering with Korean consumer banking, rival HSBC has given up, saying this month it would close its branch network in the country leaving only the global banking and markets unit that serves corporate clients.
That leaves Citigroup Inc, which bought KorAm Bank in 2004, as StanChart's only foreign rival with a nationwide consumer presence in Korea.
StanChart's $1 billion goodwill writedown, largely due the government's debt rehabilitation scheme, dragged down the bank's first-half profits 16 percent.
High labour costs continue to remain an issue in the heavily unionised country where other global firms like General Motors Co are often at odds with labour unions. In 2011, StanChart suffered a month-long strike after trying to introduce performance-related pay.
Outside South Korea, Bindra said that while China saw the most severe pressure on margins of any of the bank's markets, the country's economic slowdown should not result in a hard landing and may actually yield business opportunities.
The domestic slowdown is forcing state-owned companies to expand internationally which plays to the bank's strengths, he said.
China is now the biggest contributor to the bank's network income, a measure of revenue generation from companies outside their home markets, at $353 million in the first half of the year.
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