Fate of Woori Bank causes concernsOnce again the financial industry’s attention is centering on the long-awaited sale of Woori Financial Group, as the presidential transition team is to be briefed by financial regulators later today.
According to industry insiders, the incoming administration may consider selling the nation’s largest financial group by asset by splitting it up through block sales.
This is a distinctively different stance to that of the Financial Service Commission (FSC), which has been steadfast on selling the financial group as a whole.
The FSC has argued that selling the financial group as a whole will not only maximize recouping the government’s investment but also speed up the privatization of Woori.
The FSC says it will also contribute to the development of the financial industry at large.
The financial regulator warned that the process of selling the financial company in blocks is not only complicated but it also raises the instability of the sales, which lowers the possibility of the sales from actually succeeding.
If the new incoming government pushes for a sale within the year it will be the government’s fourth attempt.
Since 2010, the outgoing Lee Myung-bak administration has been trying to recover the 12.7 trillion won ($12 billion) state investment made in 2001.
Between 2001 and 2010 the government was able to recollect 5.3 trillion won in selling 43 percent of its stakes in four different block sales. It still has 7 trillion won to recover.
The outgoing Lee administration first put Woori up for sale in October 2010. However, the sale never followed through as there were no buyers interested due to the 10 trillion won or so price tag.
Hana Financial Group at first showed interest but was put off by the cost as well as public opposition to the creation of the nation’s first megabank. It quickly switched its target to the much smaller Korea Exchange Bank.
The government once again tried in the following year in May. Three months later the only interested party that turned in an application to the government before the deadline was a private equity fund. The government scrapped the sale.
Thinking the third time might be the charm, the government tried again last year. The nation’s second-largest financial group by asset KB was finally showing a hint of interest.
In the past two years Euh Yoon-dae, KB Financial Group chairman and close aide to President Lee, had denied having any interest in buying Woori on the grounds that the majority of the two financial companies’ businesses overlapped and that although buying Woori would create the nation’s undisputed megabank, it would be inefficient.
Euh’s change in position raised eyebrows. However, KB quickly backed out before the deadline as then-presidential hopeful and ruling party leader, Park Geun-hye, firmly said she believed that the sale of the bank should be discussed by the incoming government and not rushed within the current administration.
“If the Park administration pushes with sales this year the biggest challenge would be finding a buyer who is not a nonfinancial company, private equity fund or a foreigner,” said a bank official requesting anonymity.
“The 10 trillion won or so price tag on the total sale of Woori will be a burden, especially at a time of recession when financial companies home and abroad are struggling to stay afloat.”
The banker said if the bank is once again put up for sale without splitting it into block sales its fourth attempt will likely fail.
Furthermore, the incoming government is also putting pressure on the sale as another postponement would only shrink the amount of profit it could recover as the bank’s share value has been falling since it was first put up for sale three years ago.
The market capitalization of the financial group currently stands at roughly 9.2 trillion won. This is a sharp drop from the 12 trillion won that it enjoyed in October 2010.
As news that the Woori sale was once again being discussed, the financial company’s share yesterday moved up adding 1.32 percent to close at 11,500 won. Yet this is less than the 15,000 won range it was traded at in October 2010.
By Lee Ho-jeong [email@example.com]