Pepper Group (“Pepper”) today announced that it has completed the acquisition of a South Korean mutual savings bank. Founded in 1982, Evergreen Savings Bank has 2 retail branch locations in Ansan and Bundang, close to the South Korean capital in Seoul. The Bank currently has 29 employees, approximately 30,000 active customers, total assets of 186,955,298,473 KRW (US$175.9 Million) (including a corporate loan portfolio), and is primarily funded by customer deposits of 161,838,790,376 KRW (US$152.2 Million).
With respect to the application for the purchase of shares in Evergreen Savings Bank (to be renamed "Pepper Savings Bank") by PSB Investment Holdings Pty Ltd (a Pepper Group-controlled entity), the Financial Services Commission ("FSC") in South Korea approved Pepper’s application in accordance with Article 10-6 of the Mutual Savings Bank Act and Article 7-4 of the Enforcement Decree of the same Act on 16 October 2013.
The mutual savings bank (MSB) sector in South Korea was initially enacted via Government legislation in the early 1970s to facilitate competition in the South Korean banking market, promoting the delivery of traditional retail banking services (eg customer deposits, home loans, personal loans, auto loans, and small business loans) to individual households and small business owners across all regions within South Korea.
At its peak, the MSB sector comprised over 300 active mutual savings banks. Real estate lending, particularly project finance loans, led to the downfall of many mutual savings banks when defaults increased following the global financial crisis in 2008. Today, there are less than 100 active mutual savings banks operating in South Korea.
Pepper Group Co-CEO, Patrick Tuttle, commented: "We have been closely monitoring the mutual savings bank sector in South Korea for more than two years, looking for the right opportunity to invest in an established platform with a sound customer base and balance sheet. After completing detailed financial and legal due diligence on Evergreen Savings Bank, we believe we are acquiring a solid platform from which to launch a more traditional retail banking strategy in South Korea, with a view to taking the Bank back to more grass roots consumer and small business lending, backed by a competitive retail deposit book".
As explained by Mike Culhane, Pepper’s Co-Group CEO: "This acquisition marks Pepper’s first foray into the Asian financial services market. Evergreen Savings Bank, to be renamed "Pepper Savings Bank" from today, is the first mutual savings bank in South Korea to be acquired by an Australian institution. It is also the first regulated retail bank to be owned within the Pepper Group which is an important and exciting milestone for us in the context of our overall strategy".
According to Patrick Tuttle: "We have deliberately acquired a relatively small savings bank in terms of branches, employees and total balance sheet size in order to avoid many of the legacy problem loan issues that have been experienced by a number of MSBs in the past few years. We have also identified a world class executive team to be led by Matthew Chang who we strongly believe will deliver best-in-class management expertise to a sector which has faced considerable public and regulatory scrutiny as a result of poor management practices over the past few years. Pepper Group will also leverage its deep international experience in consumer lending, loan servicing, treasury management and risk management to deliver strong corporate governance and regulatory oversight of Pepper Savings Bank’s future business activities".
Pepper’s Korean business is led by Matthew Chang, CEO, who joins Pepper with over 20 years’ experience within retail and commercial banking in South Korea and the United States, including holding key executive roles within Standard Chartered First Bank, Korea.
Mike Culhane further commented: "This acquisition is highly strategic for Pepper and will enable us to establish a long-term presence in South Korea. The opportunity to establish a retail savings bank, led by a strong local management team, will enable Pepper to leverage its core skills in credit underwriting and asset management in a financial services market with strong regulatory controls and a proven appetite for competitive consumer deposit and lending products".