South Korea's largest lender Kookmin Bank declared "war" on Citigroup Thursday as the US group's acquisition of a major local bank sparks tougher competition in retail banking.
"We must win the war against Citibank even through an alliance with an (international) partner who can compete one-on-one with the US group in the global market," Kookmin president Kim Jung-Tae told his staff.
Hana Bank, the country's fourth largest lender, disclosed similar plans to compete with Citigroup through a strategic alliance with international lenders.
Citigroup agreed a month ago to take over Koram, South Korea's sixth largest lender, with the acquisition prompting Kookmin to announce a six-month austerity program aimed at strengthening its domestic services.
"We are carrying through our strategies in preparation for Citigroup's acquisition of Koram Bank," Kim said.
Citigroup's inroads into the domestic banking industry may lead South Korean banks to keep interest rates lower, he said, adding Kookmin should step up efforts to reduce bad loans.
Kookmin posted a net loss of 612 billion won (532 million dollars) last year against a profit of 853.5 billion won in 2002 due to its troubled credit card unit and bad corporate loans. Hana president Kim Seung-Yu said he would seek a strategic alliance with international financial firms to provide better services and cope with competition from Citigroup.
"We will pursue a strategic alliance with global financial companies for better services," Hana will transform itself into a holding company to develop new financial products combining bank, brokerage, insurance and communication services, he said.
"Domestic banks want to become financial services groups to satisfy the diverse needs of customers and cope with the changed environment of the industry," Lee Jae-Yon, a researcher at the Korea Institute of Finance, told Yonhap news agency.
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