November 23, 2024

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From left: KB Kookmin Bank CEO Lee Jae-keun, Shinhan Bank CEO Jung Sang-hyuk, Hana Bank CEO Lee Seung-lyul, Woori Bank CEO Cho Byung-kyu and NongHyup Bank CEO Lee Seok-yong (KB Kookmin, Shinhan, Hana, Woori, NongHyup)

The terms of the CEOs at South Korea's five major commercial banks all end on Dec. 31, and speculation is mounting over their reappointments.

Strong earnings across the sector, driven by high revenue and profits, may boost some CEOs' chances for an extension. However, others face uncertainty due to ongoing financial scandals and management issues, prompting regulators to call for tighter oversight. Additionally, CEOs' relationships with their respective holding group will also be a crucial factor.

KB Kookmin Bank CEO Lee Jae-keun is a candidate for a third term, but reappointment is not guaranteed.

The bank reported a second-quarter net profit of 1.12 trillion won ($840 million), a 20 percent increase on-year and a 187 percent rise from the previous quarter.

However, this follows a severe downturn linked to the misselling of equity-linked securities tied to a Hong Kong index that had led to substantial losses. KB Kookmin was the largest seller of these derivatives, with an outstanding balance of 8 trillion won.

Recurring financial issues, including a 1.6 billion won fine for improper loans and multiple large-scale embezzlement cases, also cloud Lee's chances.

Despite these challenges, industry watchers view that Lee’s decisive risk management during the ELS chaos and solid performance — 15 percent profit growth in 2022 and a 9 percent rise in 2023 — could favorably impact his reappointment.

Woori Bank CEO Cho Byung-kyu faces a tougher outlook. While the bank achieved a record half-year net profit of 1.67 trillion won, the performance is being overshadowed by significant embezzlement and scandals.

Notably, the local financial watchdog recently uncovered improper loans totaling 35 billion won involving relatives of former Woori Financial Group Chairman Son Tae-seung, which extended into Cho's term.

Financial Supervisory Service Gov. Lee Bok-hyun has strongly condemned Woori Financial Group, stating he has "lost all faith" in the organization and underscoring the severity of the issue. With the investigation ongoing, there is the possibility that the group will replace Cho to demonstrate a commitment to organizational improvement.

NongHyup Bank CEO Lee Seok-yong is also facing challenges due to financial scandals, including an 11.7 billion won embezzlement case stretching over four years. As NongHyup Bank is a subsidiary of the National Agricultural Cooperative Federation, NongHyup Chairman Kang Ho-dong will play a decisive role in the reappointment process. Kang recently indicated he will restrict the reappointment of subsidiary CEOs involved in financial misconduct.

In contrast, Shinhan Bank CEO Jung Sang-hyuk and Hana Bank CEO Lee Seung-lyul are viewed as strong candidates for reappointment by the industry.

Shinhan Bank reported a net profit of 2.05 trillion won in the first half of the year, as the only commercial lender to exceed the 2 trillion won mark. Its overseas subsidiaries also performed well, with a 14 percent on-year increase in net profit. Shinhan's solid performance, coupled with the absence of major financial scandals, underscores Jung's effective leadership and strong internal control.

Hana Bank CEO Lee has solidified the bank's position, achieving the industry's top net profits in both years of his tenure. However, with Hana Financial Group Chairman Ham Young-joo’s term ending in March, Lee’s reappointment may hinge on Ham’s potential reappointment.

Suhyup Bank and Standard Chartered Bank Korea are also approaching the end of their CEOs' terms.

Suhyup Bank on Thursday started accepting applications for the CEO spot, as Kang Shin-sook’s term ends on Nov. 17. Kang drove record earnings last year and is expected to maintain a strong performance. However, reappointments have been rare at Suhyup Bank, particularly since the bank’s spinoff from the National Federation of Fisheries Cooperatives in 2016.

SC Bank Korea announced on Tuesday that CEO Park Jong-bok will retire on Jan. 8 next year, concluding his 10-year tenure.

Meanwhile, as local financial regulations require CEO succession processes to start three months before a term ends, evaluations for the five major banks are expected to begin next month.

By Choi Ji-won (jwc@heraldcorp.com)