KB Falls After Dropping Bid for ING Korea Life Unit: Seoul Mover

KB Financial Group Inc., the owner of South Korea’s largest lender, fell the most in more than three weeks in Seoul trading after its board scrapped a plan to buy ING Groep NV’s South Korean life-insurance unit.

The shares declined as much as 2.9 percent, the biggest intraday drop since Nov. 28, to 37,100 won and traded at 37,500 won as of 11:22 a.m. on the Korea Exchange. That compares with the Kospi Index’s 0.2 percent gain.

KB Chairman Euh Yoon Dae on Dec. 18 failed to win majority backing from the company’s board for his bid to buy the Dutch firm’s South Korean life insurance operations, dealing a blow to his goal of cutting KB’s reliance on banking. Seoul-based KB joined the race to buy ING’s assets in July after dropping a plan to acquire the government’s stake in bigger rival Woori Finance Holdings Co. earlier that month.

“KB has lost an opportunity to boost its non-banking business -- the firm’s weakness against other rivals,” Lee Chang Wook, a Seoul-based analyst at Taurus Investment Securities Co. wrote in a report today. “The decision also highlights KB’s weak governance and decision-making process.”

Lee cut his six-month stock price estimate by 6.9 percent to 42,000 won and maintained his buy rating on KB.

Critical Timing

Euh, who took office in July 2010 for a three-year term with pledges to cut costs and boost earnings, said in September that KB aims to increase non-banking profit to 30 percent of earnings. Its Kookmin Bank unit accounted for 85 percent of total profit for the nine months through September.

“KB Financial’s board deemed that this is a critical time and it’s important to maintain a high capital-adequacy ratio amid the economic uncertainty,” KB said in a statement following the board’s meeting.

The decision is also a setback to ING’s plan to raise about $2 billion from the asset sale following a 2008 Dutch government bailout. ING Chief Executive Officer Jan Hommen is divesting ING’s insurance units after winning more time from European regulators in November to complete the sales and repay state support.

Under the agreement, ING has to sell more than half of its Asian insurance and investment-management operations by the end of next year and dispose of the rest by the end of 2016.

ING said on Dec. 18 that it continues to explore all options for divesting the Korean unit.

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