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Woori Finance faces daunting task on 12th anniversary

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(Globalpost/GlobalPost)

South Korea's No. 1 banking group Woori Finance Holdings Co., which marked the 12th anniversary of its creation on Tuesday, faces a daunting task of putting itself in private hands in a smooth way, market watchers said.

Woori Finance was established in 2011 after merging four troubled banks -- Hanvit, Peace, Kwangju and Kyongnam -- and one merchant bank in the aftermath of the 1997-98 Asian financial crisis. Woori Finance is Korea's first financial services company.

Korea's banking sector underwent a sea change at that time as a wave of mergers and acquisitions reduced the number of local banks to seven from 17.

Woori Finance was created through an injection of 12.8 trillion won (US$ 11.5 billion) of taxpayers' money, a move made out of urgency to rescue the troubled banks from near bankruptcy.

Since then, the group has grown into South Korea's top banking group by assets through takeovers. Its 2012 net profit stood at 1.62 trillion won and the group's total assets stood at 410.6 trillion won as of end-2012.

Woori Finance has currently 13 affiliates, including the bank and the credit card unit, under its wing. The group's stand-alone card firm set sail on Monday with 864.3 billion won in paid-in capital.

Despite the group's external expansion, the government's previous attempts to privatize the group have been thwarted amid a lack of buyers and political wrangling, analysts say.

The sale of Woori Finance was one of the main initiatives by the administration of former President Lee Myung-bak as part of its broader plans to privatize state firms.

Between September 2004 and April 2010, the government had reduced its holdings four times via block sales. But since then, the government's efforts to dispose of its remaining 56.97 percent stake in the group faltered three times, a deal estimated at around US$ 6 billion.

At the March shareholder meeting, Woori Finance Chairman Lee Pal-seung expressed an unwavering will to push ahead with its privatization plan this year in an effort to bolster its market presence.

"Following the launch of the new government, Woori Finance will continue to make privatization efforts to become the world's 50th and Asia's 10th largest financial group," Lee said.

The government of President Park Geun-hye, which took office in February, is also set to accelerate the privatization of Woori Finance.

"It would be better to quickly privatize financial firms that received public funds," Finance Services Commission Chairman Shin Je-yoon said at his confirmation hearing held in March.

Shin said that the creation of a so-called mega bank could be also a possible option to privatize Woori Finance. The delay in the group's privatization somewhat helped sap vitality and led to lax management as its banking unit's lapse in investment judgment had incurred losses or made it set aside higher loan-loss reserves, analysts said.

Woori Bank, the group's banking unit, suffered heavy losses worth 1.62 trillion won in 2008 after the U.S. subprime crisis made sour its 2005-2007 investment in U.S. collateralized debt obligations (CDOs) and credit default swaps.

http://www.globalpost.com/dispatch/news/asianet/130403/woori-finance-faces-daunting-task-12th-anniversary