April 25, 2024

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[THE INVESTOR] Woori Bank, which has announced plans to adopt a holding company system by early 2019, saw its share boosted on May 21 as investors gave their thumbs-up.

Korea’s third-largest commercial bank by assets said on May 20 that it would transform itself into a holding company, saying that “as the only non-holding commercial bank in the country, we have been placed at a disadvantage for expansion of our non-banking and global businesses.”

Following the news, shares of Woori Bank rose almost 2 percent in morning trade on May 21. They closed 3.62 percent higher at 15,750 won, outperforming the benchmark KOSPI’s 0.20 percent gain.

Woori Bank's headquarters in Seoul Woori Bank

Analysts said the transformation would boost the the bank's balance sheet as it can now expand into non-banking businesses including asset management, real estate and financial services.

“Under the current system, the bank’s portfolio is limited because it holds only up to 20 percent of its assets in its affiliate,” Yoo Seung-chang, an analyst at KB Securities, said in a report. “Transforming into a holding company system will provide it with mid- and long-term growth engines.”

Woori currently owns seven subsidiaries, but only two -- Woori Card and Woori Investment Bank – are profitable.

“Considering its existing investments in affiliates the bank can use additional 680 billion won (US$628.32 million) of its assets for investments, but as a holding company, this could rise to more than 4.5 trillion won,” SK Securities analyst Kim Do-ha said. This will allow the bank to acquire a sizable financial institution, Kim added.

The bank’s transformation to a holding company system has been delayed as the government tries to sell a 18.5 percent stake in the bank. However, the government has decided to sell the remaining stake held by Korea Deposit Insurance Corp. after the company undergoes a transformation, Choi Jong-ku, chairman of the Financial Services Commission, told reporters on May 21. 

He added that the government will "swiftly" pursue the stake sale once the bank makes the switch to a holding company structure.

In the aftermath of the 1998 Asian financial crisis, the government bailed out Woori Bank by injecting 12.8 trillion won (US$11.8 billion), owning a controlling 51 percent stake. The government’s attempts to sell its stake to private investors had failed due to the massive size and a global economic downturn. But it sold its 30 percent stake to six buyers including IMM Private Equity and Mirae Asset Global Investments in December 2016. 

Its plans are subject to approval by the Financial Services Commission.

By Park Ga-young (gypark@heraldcorp.com)