Align Partners: "Regional Banks in Crisis... JB and BNK Financial Groups Should Consider Merger"

Shareholder Letter Sent... Would Create Nation's Largest Single Regional Financial Holding Company
"Only Market-Driven Solution for the Long-Term Survival of Regional Banks"

Align Partners Asset Management has publicly proposed that two leading regional financial holding companies, JB Financial Group and BNK Financial Group, consider a merger. The company argued that, amid population decline and aging trends, such a market-driven solution is the most realistic way to ensure the long-term survival of regional financial institutions. If the merger succeeds, it would create South Korea's largest single regional financial holding company, with total assets reaching 234 trillion won.

Lee Changhwan, CEO of Align Partners, announced at a press conference in Yeouido on July 14, 2026, that he has sent an open shareholder letter outlining this proposal to the boards of both companies. Lee stated, "JB Financial Group and BNK Financial Group, the two remaining regional financial holding companies in South Korea, are facing structural crises," adding, "We are requesting that both companies establish special committees composed solely of independent directors and appoint a global investment bank and a strategic consulting firm as advisors to review the strategic and financial feasibility of the merger and publicly disclose the results."

He also requested that both boards respond with a decision on whether to initiate the review by August 7, and disclose the results by the third-quarter earnings release date. Align Partners currently holds 14.83% of JB Financial Group's shares and more than 1% of BNK Financial Group's shares.

This public proposal stems from the judgment that structural crises at regional banks are intensifying as local economic bases continue to shrink due to falling populations, aging demographics, and the concentration of economic power in the Seoul metropolitan area. The widening gap in scale between these regional financial groups and the major commercial banks has also made a transition to becoming a national commercial bank difficult, further strengthening the case for a merger. In the shareholder letter, Align Partners emphasized, "Only the integration of these two regional financial holding companies, whose business territories and portfolios are mutually complementary, can exert real competitive pressure on the oligopoly of national commercial banks. It is the only market-driven solution that can support national efforts for balanced regional growth and ensure the long-term viability of local banks."

Specific merger benefits outlined include: ▲ The launch of the largest single regional financial holding company which supports the survival of regional finance and achieves scale-up effects ▲ Enhancement of corporate value through profitability and cost synergy ▲ Acquisition of digital competitiveness and investment capabilities based on economies of scale ▲ Diversification of business portfolios and risk dispersion through complementary business integration ▲ Establishment of mutually reinforcing branch networks and expansion into new growth regions without self-cannibalization ▲ Improved investor accessibility and potential stock revaluation through index inclusion, among others.

Lee noted, "The merged entity is expected to be launched as the nation's largest single regional financial holding company with total assets of 234 trillion won (based on 2025 figures)," adding, "This is not a simple combination, but an integration that will create a competitive-scale financial group outside the Seoul region." He continued, "In terms of business portfolio, JB Financial Group is focused on the southwestern Honam region, while BNK Financial Group is centered in the southeastern Yeongnam region, thus the core territories and client bases differ. The non-banking portfolios, such as capital and securities, are also differentiated, so there is virtually no risk of self-cannibalization. The merged holding company will operate under a 'federated' model that maintains the regional brands and relationship-banking infrastructure of each core bank, thereby reinforcing the survival foundation of regional finance without creating service gaps."

More specifically, the combined market capitalization of the merged entity is expected to exceed 10 trillion won, which is comparable to KakaoBank (about 10.9 trillion won). If business synergies are realized, the figure could reach about 14.5 trillion won, and with an average P/E ratio of the four major commercial banks (KB, Shinhan, Hana, Woori) applied at 9.4x, it could expand to approximately 20.3 trillion won. The merged entity’s return on equity (ROE) is projected to rise from a simple sum of 9.1% to 12.8%, and the cost-to-income ratio (CIR) is expected to improve from 45.5% to 38.7%, enabling profitability that exceeds that of major national banks.

In addition, three major "mega-projects" worth 120.8 billion won are being pursued in the Honam and Yeongnam regions where these financial groups are rooted, a development expected to rapidly increase demand for financial services within their territories. Lee said, "If our capital base is expanded through the merger, the capacity to support such large-scale regional balanced development projects will be significantly strengthened."

Align Partners has already shared the details with both companies through investor relations (IR) prior to this public campaign. Lee stated, "Because this is a regulated industry, discussion and support from various stakeholders are necessary. We're not saying you must merge immediately in a hostile way; what we're asking for is an independent and professional feasibility review of the merger." Regarding what steps would be taken if the boards reject the proposal, he answered, "We will first look into the grounds for rejection in the board meeting minutes and other documents." As for concerns about local opposition, he said, "This is about merging the holding companies. Each individual bank will remain as it is."

On this day, Lee pointed out that such integration is not unprecedented. Just as today’s financial groups were formed through mergers and the adoption of a holding company structure, and through the acquisition of non-banking affiliates after the Asian financial crisis, this path is one that the South Korean banking industry has already taken. He also cited the precedent of regional bank consolidation in Japan, which faced similar structural challenges of population decline before Korea did.

Lee concluded, "Now is the right time to proactively consider integration, before the AI transformation heats up and the regional economic base weakens further. For JB Financial Group, it is an opportunity to expand its assets by approximately 3.2 times; for BNK Financial Group, it means asset growth of about 45%. For both, it is a chance to realize economies of scale that would be impossible through stand-alone growth."

This content was produced with the assistance of AI translation services.