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An illustration of an AI data center equipped with LG Electronics' cooling solutions, including high-performance chillers. / Yonhap

As artificial intelligence (AI) data centers emerge as a new destination for productive finance, Meritz Financial Group has recorded no activity in either arranging financing or directly participating in data center financing over the past five years. Regional financial groups, including BNK, iM and JB, have also shown limited activity, with no financing arrangements or amounts of around 100 billion won. This contrasts with major financial groups actively supporting data center projects, including Shinhan Financial Group, which has arranged more than 15 trillion won in financing. As demand for AI infrastructure investment grows, a clear divide is emerging among financial groups in their participation in such projects.

According to the office of Rep. Park Hong-bae of the Democratic Party of Korea, a member of the National Assembly's Political Affairs Committee, on Oct. 26, a review of data center financing by 10 financial groups participating in the productive finance consultative body — KB, Shinhan, Woori, Hana, NH, BNK, iM, JB, Korea Investment and Meritz — from 2022 through August this year found that only Meritz Financial Group and JB Financial Group had no record of arranging financing. Shinhan Financial Group led with 15.1 trillion won, followed by KB Financial Group with 3.8 trillion won, NH NongHyup Financial Group with 2.6 trillion won, Hana Financial Group with 2.5 trillion won and Korea Investment Financial Group with 2.4 trillion won. Woori Financial Group arranged 600 billion won, while BNK Financial Group and iM Financial Group each recorded 100 billion won.

Meritz Financial Group was also the only financial group with no record of direct financial participation. In terms of funding provided by affiliates, KB Financial Group ranked first with 5.8 trillion won, followed by Shinhan Financial Group with 2.8 trillion won, Woori Financial Group with 2.2 trillion won, NH NongHyup Financial Group with 1.7 trillion won and Hana Financial Group with 900 billion won. BNK Financial Group and JB Financial Group each recorded 100 billion won, while iM Financial Group contributed 200 billion won.

Major financial groups are increasing their support for AI data center financing through cooperation among their affiliates. Shinhan Financial Group arranged financing for the AI Hub Data Center in Samjeong-dong, Bucheon, Gyeonggi Province, while Hana Financial Group provided funding for a data center project in Gwangju's Advanced District 3. NH NongHyup Financial Group has also been expanding its investment activities by providing funding for data center development projects in South Korea and overseas.

Recently, Woori Financial Group joined an AI data center development project in Pohang, North Gyeongsang Province, with a total project cost of 600 billion won. Woori Bank is jointly arranging financing with KB Kookmin Bank, while Woori Asset Management and Woori Investment & Securities are participating in asset management and financial advisory services, respectively, demonstrating cooperation among group affiliates.

"This is an example of bringing together the group's comprehensive financial capabilities across banking, securities, asset management, capital financing and trusts to support the development of core infrastructure for the AI era," a Woori Bank official said. "We will continue to expand productive finance through cooperation among group affiliates so that funds can flow into advanced strategic industries and regional economies."

Meritz Financial Group's lack of participation in data center financing appears to have been influenced by the high risks associated with such projects. Securing sufficient electricity supplies and attracting tenants can be difficult, while existing data centers also face substantial vacancy risks. "Given the same returns, investors may prefer other assets that carry no risk," a financial investment industry official said.

Regional financial groups say data center financing has taken a relatively lower priority because they have focused on providing financial support to local small and medium-sized enterprises and small business owners. "We plan to expand financial support into various sectors, including data centers, going forward," a JB Financial Group official said.

Meanwhile, industry observers say that developing data center financing into a major component of productive finance will require not only thorough assessments of project feasibility but also conditions that encourage private capital investment.

"AI data centers are essential infrastructure supporting the country's AI competitiveness, so the financial sector must also play an active role in supplying capital to future industries," Rep. Park said. "Financial authorities need to establish the institutional frameworks necessary to encourage productive investment by private financial institutions."

                                                                                                                 Lee Bo-ra