Hana likely to snap up remaining KEB shares

Hana Financial Group is expected to be the beneficiary of the remaining stakes the government has in Korea Exchange Bank.

The Ministry of Strategy and Finance and the Bank of Korea jointly announced on Friday that the central bank’s 6.12 percent stake in KEB will be put up for sale starting Tuesday when the market opens.

The stock market is closed today as it is a national holiday.

The central bank will decide on how the shares will be sold in the market. In the case of trading on the main bourse, the government has included a regulation that will ban the trading of related derivative products to minimize the impact the selling of KEB’s shares would have on the stock market.

Additionally, when selling over the counter through open bidding or designating a buyer, financial holding companies are to be allowed to take part. The government did not set a deadline on the sale.

“When the central bank first bought the shares of Korea Exchange Bank, they were priced at 10,000 won ($8.44),” said Choi Jung-wook, an analyst at Daishin Securities.

“Considering that KEB’s current value is 8,280 won per share, the possibility that the shares will immediately be sold [to other investors] is low.”

Choi said the possibility of Hana being the sole buyer of the shares is high since to completely turn KEB into one of its affiliates, the financial group has to secure 100 percent of the stakes.

In February, Hana Financial Group became the second-largest banking group by assets as it wrapped up the takeover of a combined 57.27 percent stake in KEB for 4.4 trillion won from U.S. buyout fund Lone Star and the state-run Export-Import Bank of Korea.

The analyst, however, noted that Hana will likely purchase the stakes at a relatively low price since the government will unlikely insist on selling the shares at its initial value.

“For years, the bank’s shares have failed to see value expand and especially it is no longer attractive since it is now an affiliate of Hana,” Choi said.

The KEB shares have been a burden to the central bank for decades. The central bank was the largest shareholder when KEB was established in 1967 as a state-owned financial institution.

The purpose was to appropriate capital for the newly founded bank. In the process of privatizing KEB, the central bank’s holdings have shrunk and as of May last year it fell to 39.5 million shares, or 6.12 percent.

However, by law, the central bank is not to own a profit-seeking corporation or financial institution. Yet the central bank kept its shares since Korea’s stock market back then was small. Since KEB’s share value never grew significantly, selling the shares would have resulted in losses.

The government for this reason has made an exception in allowing the central bank to keep its stake in the bank. The decision to sell its remaining stake in KEB came after Hana acquired KEB.

KEB shares on Friday remained almost unchanged.

By Lee Ho-jeong [ojlee82@joongang.co.kr]