Sale of Woori still going nowhere

The privatization of Woori Bank still seems as far away as ever, even with a fifth attempt pending.

On Monday, the Public Fund Oversight Committee held a discussion over the sale of the government’s majority stake in the bank. But no progress was made.

After the meeting, the Financial Services Commission (FSC) said it will come up with a grand plan for the sale within a month. The local financial industry is more than skeptical of whether the government will succeed given its track record.

Since April, the government has been searching for potential buyers, but it seems none have shown any interest.

According to local financial industry insiders, the government is considering offering parcels of between 4 and 5 percent to multiple buyers instead of selling the entire 51 percent stake to a single buyer. Yet even with such a new approach, the response has been lukewarm.

“Other than a few private equity funds, it seems as though there aren’t many parties interested,” said a FSC official. “But we can’t wait forever.”

The government has made four attempts to sell its majority stake in the bank since 2010. In the last attempt, which took place last year, the government decided to sell 30 percent of the shares and guarantee management rights. But that didn’t work.

A Korean regulation that prevents nonfinancial industrial companies from investing in banks has also limited potential buyers.

The last option seems to be to sell the shares in small parcels and let the bank be managed under a cooperative body of major shareholders.

The National Pension Service and foreign sovereign wealth funds, which are long-term investors, were considered potential candidates, but even those investors have shown scant interest.

“Unlike in the past, foreign sovereign wealth funds, including those in the Middle East, are less aggressive due to low crude prices,” said a financial industry insider. “There are also many investors who have raised questions over the low profitability of Korea’s financial industry, excessive regulations and government control.”

To make matter worse, Woori Bank’s share price has been hitting bottom. For the government to recover the public money it injected into the bank, it needs to get at least 13,500 won ($11.81) per share. But as of Tuesday, Woori Bank shares were selling for 9,450 won. If the government sells at the current price, it will be criticized for selling one of the nation’s leading banks for peanuts.

The government will be criticized if it sells to a private equity fund or a Chinese investor, which are considered speculative profit sharks.

The government’s three principles for the sale - privatize early, maximize recovery of public money and contribute to the development of the local financial industry - now seem impossible to achieve. These three principles have become major shackles in unloading the stake.

It’s not only the government that feels an urgency to privatize Woori-Woori is feeling it, too. The environment is becoming harsher for the bank. While its stock value continues to retreat due to the stalled privatization, it can’t make new profit sources as it has sold off its brokerages, asset management and nonbanking financial companies.

It has reached a limit in producing new profits from its banking business alone.

Experts say the situation will only get worse as the standoff continues.

“The share value of Woori Bank will depend on who is interested in buying,” said Koo Kyung-hee, an analyst at Hyundai Securities.

Some analysts say that the government needs to sell a portion of its shares early to show its determination or increase incentives for bidders.

“[The government] needs to impose a call option that will allow bidders to buy additional stakes at the initial price in the future, or provide incentives like allowing investors with only few shares to recommend an outside director,” said Kim Woo-jin, a researcher at Korea Institute of Finance.

BY KANG BYONG-CHOL [lee.hojeong@joongang.co.kr]