This year will be tougher given its large exposure to companies amid rising solvency problems. But Hanvit is expected to pull through with a profit, according to Minister of Finance and Economy Lee Hun-jai. In particular, Hanvit will put aside 1 trillion won of its estimated 2.1 trillion won in estimated profit this year in loan loss reserves, while using 900 billion won in expenses. The bank has no serious NPL problem. Analysts are sceptical because of the group's high exposure to Daewoo group.
Analysts are undecided whether a merger with a stronger bank is the answer.
For one thing, merging Hanvit again would be admitting the first merger was a failure, some analysts say. And it's unlikely to stop the hemorhagging on its loanbook if other mergers are anything to go by. Indeed, evidence of forced mergers show that it is rarely successful in a distressed business environment and that the costs to strong banks can be extremely high unless they lock in specific guarantees on the acquiree's bad loan bill. Even then, the idea of the strong rescuing the weak will always remain popular for policy-makers but controversial for investors. Read our Privacy Policy and Terms and Conditions .