Woori Bank to apply for card unit spin off

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Woori Bank to apply for card unit spin off

Korea’s top banking group Woori Finance Holdings plans to apply for regulatory approval next week for the spin off of its credit card unit, sources said yesterday.

The state-run bank holding company will likely submit an application to the Financial Services Commission, the country’s financial watchdog, after next Tuesday to get the nod for the separation, according to the sources.

“We have already completed preparations for the application,” said an official at Woori Finance Holdings.

Once an application is submitted later this month, Woori Finance Holdings is looking to receive a regulatory blessing around the end of this year, he said.

The banking group had sought to split off the credit card unit early this year, but it failed to win approval from the regulator, which feared it could lead to excessive competition in the local credit card industry.

Industry watchers said competition in the credit card industry would become fiercer if the credit card unit of Woori Finance Holdings gets the go-ahead for the spin off and joins the already saturated market.

The biggest fear is rehashing the credit card crisis in 2003 where the excessive competition among card companies led to issuing credit cards to even those who were incapable of paying their debts such as college students.

This resulted in a significant increase in credit card loans and a sharp rise of delinquency that put the entire financial market at risk.

According to a report by the Financial Supervisory Service, in 2011 the number of credit card loan borrowers on default stood at 176,000. This is a 29.2 percent increase from a year earlier.

The credit card unit of Woori currently holds a market share of about 8 percent, ranking fifth in the industry dominated by Shinhan Card, KB Kookmin Card and Samsung Card.

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