After Wilfred Horie arrived as the new president and CEO of Korea First Bank in January 2000, the staff couldn,t help but notice that he was different.
By Kevin Hamlin
February 2001
Institutional Investor Magazine
Their American boss walked around in his shirtsleeves, ate at the company canteen and turned over his exclusive elevator for general use.
“The people were quite shocked that the CEO would do the things that I,ve done here,” says Horie, 55. “In many banks in Asia, the CEO is an individual who is almost inaccessible to the employees.”
Horie’s installation came courtesy of Newbridge Capital, a U.S. private equity firm that in early 1998 became the first foreign majority shareholder in a South Korean bank, purchasing 51 percent of KFB for 500 billion won ($398 million). In late 1999 Newbridge hired Horie to move to Seoul and run the bank, which had received almost 6 trillion won in government funds through a series of bailouts before it was purchased by Newbridge.
Horie estimates that it took about six months to win over KFB’s staff. He finally broke the ice with a beer party to celebrate the bank’s 75th anniversary. “I think the employees recognized that, ,Hey, this guy isn,t so bad after all,,” he says.
Building trusting relationships outside the bank is likely to take a little longer. Local newspapers initially asked how a Japanese-American who couldn,t speak Korean and had never worked in the country could succeed in turning around a South Korean bank. Last month it wasn,t just the scribes who were upset. Horie turned down a government request to participate in a 25 trillion won program to help weak companies roll over their debt. In a country where the government has historically held sway over bank decision making, Horie instantly became known as the American who uttered an unprecedented “no.”
The state-owned Korea Development Bank had packaged the companies, debt into new bonds, improved the securities, credit quality and asked South Korean banks to pick up 20 percent, or 5 trillion won, of the tab. Every bank agreed to invest in the package , except KFB, in which the government maintains a 49 percent stake.
Horie, who’s trying to diversify the bank,s activities to include more small business and consumer lending, has a straightforward explanation for his refusal. “The credits included work-out companies, and it is our position that we would not want to buy bonds on weak credits,” he says. Following the rebuff, newspapers quoted a government official as saying that the Financial Supervisory Commission, South Korea,s watchdog agency for the financial sector, would sanction KFB. To date, no official penalties have been levied.
There’s no doubt, however, that the government remains piqued. Cho Won-dong, deputy director general for economic policy coordination in the Ministry of Finance and Economy, says the government has no plans to influence companies to shun KFB but adds, “Korean corporations are not fools. They will choose which bank best looks after them when they are in need.” Horie responds that by declining to go along with the development bank’s request, KFB was taking care of its shareholders , the South Korean government included.
The recent dustup gives Horie a sense of déjà-vu. He recalls that when he moved to Tokyo in 1979 to set up operations for Irving, Texas,based consumer finance company Associates First Capital (now part of Citigroup), Japanese newspapers asked, “What does this guy know, who can,t speak the language?” By the time he left Japan in 1996, Horie had built a 350-branch bank , and learned Japanese. He spent the next three years building Associates, nascent international operations into a business with assets of $13 billion.
It’s premature to predict a similar success in South Korea, but KFB is making progress. The bank recorded a profit of 204 billion won for the nine months through September, and Horie says the full-year number should hit 280 billion won. That’s a far cry from 1999, when KFB recorded a full-year loss of 1 trillion won.
