Stocks stable despite intent to sell Woori stake

Korea’s top regulator has declared its intention to sell the government stake in Woori Financial Group by this year, but the stock market remained unconvinced.

Woori Finance Holdings’ stock closed at 11,900 won ($10.59) yesterday, down 0.42 percent, or 50 won, from the previous day’s close, after fluctuating between 12,150 won and 11,900 won during trading.

The lack of dramatic movement was notable as it came after a local economic newspaper quoted Kim Seok-dong, the chairman of the Financial Services Commission, declaring his intention to sell the government’s controlling stake.

“[The sale of Woori Financial Group] will end up being postponed for a long while if it’s not completed during this administration,” Kim was quoted as saying. “When there is a change of administration and new management comes in [at Woori Financial], privatization may become more difficult.”

Despite such an emphatic statement, stock prices failed to react as analysts expressed doubts that the top regulator’s intentions would pan out without a concrete plan and buyers.

“The talk is still theoretical,” said one banking sector analyst. “The uncertainty [surrounding Woori Financial] can be removed only when the government moves beyond reiterating its intention to sell [Woori Financial] and outlines a realizable plan.”

Similar sentiments could be found within the company itself. “Internally, many believe it will be unlikely that [Woori Financial] can be sold this year,” a Woori Financial spokesperson told the Korea JoongAng Daily. “Woori Financial Group’s size is too big to find buyers without selling it in pieces.”

As it came to power in 2008, the Lee Myung-bak administration made it its goal to off-load the banking group, first created in 2001 as a holding company for lenders rescued following the 1997 Asian financial crisis, to promote banking industry competition.

Put on the table for the first time last year, Woori Financial’s privatization was foiled as prospective bidders such as KDB Financial Group and KB Financial Group were turned away from rules barring a banking group from owning less than a 95 percent stake in another bank, and it ended up attracting a single bid from a private equity fund.

Critics have claimed that the sale was ultimately foiled by the government’s insistence that the deal satisfy three conflicting criteria - earliest possible privatization, maximum recovery of bailout funds and benefit to the development of Korea’s financial industry.

By Lee Jung-yoon [joyce@joongang.co.kr]