The report cited information released by the Ministry of Strategy and Finance in reporting that the government is planning to formulate the privatization plan which had been put off due to financial market crisis.

The government holds a 65.13% stake in IBK, the listed South Korea-based lender, and Korea Development Bank is a financial firm wholly owned by the government.

Source: Seoul Economic Daily (translated)

No related posts.

The South Korean local newspaper cited Chin Dong-soo, president of the Financial Services Commission, who said in a press meeting that the state-run financial firm has delayed the announcement because of a mismatch over the schedules of the main public fund committee members.

Chin noted that the committee members would finish discussions over the privatization plans after the middle of July.

See here for all posts on the privatization of Woori Finance.

Source: E-Daily (translated)

More From privateequitykorea

• Woori Finance could be merged prior to privatisation
• Government considering splitting Woori Finance stake
• Korean government starts sell-side due diligence on Woori Finance

Ask privateequitykorea To Recommend Your Posts

No related posts.

Euh Yoon-dae, KB Financial Group's new chairman (JoongAng Daily)

The soon to be appointed new head of KB Financial, has reignited speculation on the government’s plan to create a Korean ‘mega-bank’, at a time when other global leaders are seeking to limit future “too big to fail” scenarios.

Talks of a Korean mega-bank, able to compete with global giants, have been going on for some time now, but received fresh impetus this week with the appointment of Euh Yoon-dae (pictured) as the new chairman of KB Financial Group.

Mr. Euh,  a proponent of a Korean mega-bank, stated that he wants KB to be among the world’s top 50 financial institutions as he expressed support for a merger with Woori, which is being privatized by the government.

“Woori Bank is better diversified than Kookmin Bank. I will consider participating in the competition to take over Woori Bank when it is up for sale,” Euh told reporters at a recent press conference.

It has been evident that the Lee Myung-bak government supports the establishment of a mega-bank, with officials saying that it would improve the strength of the Korean financial sector, which they claim is now weak compared to the size of its economy.

KB is the country’s No. 1 commercial lender with 273.8 trillion won ($227.9 billion) in assets last year, but a merger with Woori would raise its assets to above 500 trillion won. This would place it among the world’s top 50 banks, and ninth largest in Asia

Korea's National Competitiveness vs. Korea's Financial Industry Competitiveness (Korea Economic Daily)

However, the establishment of a ‘mega-bank’ has faced much criticism, as it contradicts the global trend toward slimming down banks in the wake of the recent global financial crisis.

Analysts, unions, and international organizations have disputed the need for a giant bank when the concept is being questioned in advanced economies, where the large size of their banks has caused financial problems for governments, which has been forced to bail them out with rescue packages.

The Korean government’s contrarian approach comes at a difficult time, as the U.S. and European governments seek to include the  introduction of new rules aimed at tackling “too big to fail” banks as a global agenda at the G20 Summit in Seoul later this year.

Paul Volcker (Business Week)

Currently, the U.S. government is pushing for a legislative proposal, known as the Volcker Rule, which intends to block banks from mergers that would give them more than a 10 percent share of the U.S. banking system, among other things.

As of the end of 2008, the combined assets of the Korea’s top three banks – Kookmin, Shinhan and Woori – accounted for 78.3 percent of the nation’s GDP. That is already far higher than the figure in the United States, where the top players’ assets were worth about 38.8 percent of the country’s GDP.

This has lead critics of the mega-bank initiative warn that mega-banks, if allowed, would create the potential for unusually large systemic risks in the financial industry as well as the national economy should they fail.

Chin Dong-soo, FSC Chairman

Korea’s Financial Services Commission (FSC), the top financial regulator, which is expected to unveil by the end of this year a detailed plan for the sale of the government’s 57 percent stake in Woori, has also questioned the need for a mega-bank, with chairman Chin Dong-soo (pictured) stating,

“If I have to choose between size and competitiveness, the latter must come first..

…take Hyundai and Samsung Electronics as examples. They have not gained competitiveness because they are large, but they have become large because they have competitiveness.”

Added to this, the Organization for Economic Cooperation & Development (OECD) recently voiced a warning against the mega-bank idea.

“Fostering financial institutions that would be large by international standards could create concerns, given recent experience in a number of countries,” the OECD said in a recent report on Korea.

“The efficiency gains from large institutions appear to be small, while the moral hazard associated with ‘too big to fail’ can be severe,” the OECD added.

The market has also questioned the rationale, with investors dumping KB shares this week after Euh announced his plans. It is thought that investors fear that a KB-Woori merger could be complicated since the banks have overlapping operations and consolidation could cause labor problems due to threatened job losses.

This lead to Euh, who is scheduled to take over as KB chairman on July 13,  telling an audience of bankers on Friday, that,

“I will work on increasing productivity to raise the value of the company and then business diversification…the mega-bank thing is next after that.”

Euh’s focus on improving KB’s share price appears to reflect a desire to conduct a merger with Woori through a stock swap. The higher the value of KB shares, the less expensive it would be for KB to conduct the merger.

Mega-bank or not, the next twelve months or so are shaping up as the most important in Korea’s financial industry since the Asian financial crisis, as after Woori, the government plans to privatize Korea Development Bank, while the U.S. private equity firm Lone Star’s sale of its 51 percent stake in Korea Exchange Bank, is also still ongoing.

Sources:

Woori deal to face delay? – JoongAng Daily, April 29, 2010
Debate likely to rise on mega-bank issue – JoongAng Daily, June 18, 2010
Mega bank in Korea: Good or bad? – Korea Herald, June 18, 2010
Rising share price is key to KB’s plan for merger – JoongAng Daily, June 19, 2010
한국 금융은 초등생 수준…규제풀어 중학교만큼 끌어올려야 -  한국경제, February 3, 2010

No related posts.

A report carried by Edaily cited an unspecified insider at the state-run Financial Services Commission (FSC) as saying the government may sell subsidiaries, such as Woori Investment & Securities or regional banks held by Woori Finance, to a different buyer than the one for the Woori Finance stake.

According to a related item in the Korea Herald, the government is expected to speed up the privatization process which was slowed due to elections that held on 2 June.

The Korea Herald report also provided some back story -

The state-run Korea Deposit Insurance Corp. currently owns 57 percent of Woori. The KDIC has reduced its 100 percent stake in the financial group through five rounds of block deals since 2002. It most recently offloaded 9 percent on April 8 and plans to hand over more than 50 percent this year or next.

The unsourced report said that the government is planning to push forward in-depth plans for the sale of its 57% stake in Woori Finance.

Previously, on May 28 it was reported that the Korean government was considering splitting Woori Finance stake, and further back on April 29, it was reported that the privatization of Woori Finance could be delayed until next year.

Source: Edaily (translated)

More From privateequitykorea

• Woori Finance could be merged prior to privatisation
• Hyundai E&C sale to start after Daewoo E&C sale
• Government considering splitting Woori Finance stake

Ask privateequitykorea To Recommend Your Posts

No related posts.

The unsourced report claimed that the government has been preparing to divest its stake in Woori Finance, the listed South Korean financial holding company since earlier this year and was planning to complete the anticipated divestment by early next year.

The report claimed the government is expected to start the same process for Korea Development Bank around that time.

For more stories on privatization within Korea’s financial industry see here.

Source: Maeil Business (translated)

No related posts.

The report cited a Woori insider with knowledge of the situation as saying that it would be much more desirable for Woori Finance to be privatized via a merger with another financial firm, but if this is not feasible in the market situation, the government may consider the stake-splitting option.

The report speculated that Korea Deposit Insurance, the state-run holder of a 57% stake in Woori, could sell several 5~10% stakes to different sovereign or pension funds or institutional investors.

Selling smaller portions to the public via market trading was also mentioned as an option, the report added.

A report April 29, stated that the privatization of Woori Finance will likely spill over to next year, citing Jin Dong-soo, the chief of regulator Financial Services Commission (FSC).

See here for all posts on the privatization of Woori Finance.

(Source: Yonhap News)

More From privateequitykorea

• Woori Finance could be merged prior to privatisation
• Government delays Woori Finance sale announcement
• Government could sell subsidiaries separately in Woori privatization

Ask privateequitykorea To Recommend Your Posts

No related posts.

The report cited a person close to the matter as saying the state-run financial service firm initially planned to sell a 7% stake but it finally sold a 9% stake due to a strong response from investors.

A total of 72,540,000 shares were sold at KRW 16,000 per share, yesterday’s closing price.

KDIC raised KRW 1.16tn (USD 1.03bn) from the sale, the report estimated. After the sale, KDIC holds a 57% stake in Woori, it added.

Meanwhile, a working group has begun studying potential merger in a course of privatisation of Woori Finance.

According to a report in Financial News Daily, which cited financial sector sources, the South Korean Public Fund Oversight Committee has formed a working group to study a potential merger of Woori with several other Korean financial companies like KB Financial and Hana Financial.

The process is to figure out a merger process of Woori with each financial firm and effect of the merger. If Woori Finance merges with KB Financial, the merged entity would have domestic market share of 40.6% and the figure could be 31.5% if it merges with Hana, the report said.

See here for previous posts on the privatization of Woori Finance.

(Sources: Yonhap News, Financial News Daily)

No related posts.

The report cited an unspecified insider at Korea Deposit Insurance who has knowledge of the situation as saying it is hard to determine the sale at this level of share price – and if the share price remains at the same level, the stake sale may take place after May.

Woori Finance’s share price was KRW 15,350 per share as of yesterday’s (March 17) market closing.

The state-run Korea Deposit Insurance in 2009 sold a minority stake at KRW 16,050 per share.

The stake sale itself could be canceled if the share price does not recover to the level of KRW 17,000 per share even after May, an unsourced part of the report speculated.

As reported, the South Korean government, which holds a 66% stake in Woori Finance, through Korea Deposit Insurance, is considering selling a part of its holding through the stock market.

(Source: Seoul Economic Daily)

No related posts.

The United Arab Emirates sovereign wealth fund is believed to be interested in buying anything between a minority holding to a controlling stake in Woori, the newspaper stated, without citing a source.

The South Korean government holds a 66% stake in Woori Finance through the Korea Deposit Insurance Corporation.

For previous stories on the privatization of Woori Finance see here.

(Source: Seoul Economic Daily)

No related posts.

The unsourced report claimed that the government has drafted the amount as part of non-tax income this year.

The government holds a 65.13% stake in IBK, the listed South Korea-based lender, out of which, it plans to sell a 14.13% holding and keep the rest to retain management rights, the report noted.

According to the report, the government is believed to have held talks with financial advisor Samsung Securities, to find the right time and conditions for the sale.

Though details of the discussion were not known, the report cited an unnamed insider at South Korea’s Ministry of Strategy and Economy as saying that shares in IBK were trading at over KRW 21,000 last year, and the expected sell price should be at that level. Shares in IBK closed at KRW 13,350 at the end of yesterday’s, 3 March, trading.

The sale is expected to take place via a block deal to institutional investors, in order to minimise impact on IBK’s share price, the report claimed.

According to IBK’s 2009 Earnings Release, the company had net income of KRW 710.5 billion in 2009, down from KRW 767 billion in 2008.

(Source: Edaily)

No related posts.