Value context and insight. lkm@koreatimes.co.kr
Financial watchdog puts brakes on Woori's acquisition of Tongyang Life, ABL Life
Financial Supervisory Service Governor Lee Bok-hyun / Yonhap
By Lee Kyung-min
Woori Financial Group’s acquisition of Tongyang Life and ABL Life could be in jeopardy, as indicated by Financial Supervisory Service (FSS) Governor Lee Bok-hyun’s thinly veiled disapproval, market watchers said Thursday.
Further clouding the acquisition are precedents whereby the FSS delayed the approval of corporate expansion plans until after the head of the financial entities in question had been dismissed. Cases in point include Shinhan Financial Group’s takeover of Orange Life in 2019 and DGB Financial Group's acquisition of Hi Investment & Securities in 2018.
The acquisition could fail if the firm receives a grade of three or lower on a scale of five in evaluations of business plan feasibility, financial condition and overall management.
Market watchers say Woori’s healthy capital and financial condition will be insufficient to mitigate the legal risks that will linger throughout the sale process.
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“The stock purchase agreement between Woori and Dajia was news I learned of from the newspaper,” Lee said during a meeting of lenders, market experts and borrowers at a branch of KB Kookmin Bank in Yeouido, Seoul.
“My knowledge was limited to Woori’s efforts to acquire life insurers, which in and of itself amplifies the risk far greater compared to adding a brokerage to the corporate portfolio, for example. Whether the bout of risks were fully reflected in the overall risk management of Woori Financial and its subsidiaries draws concern.”
The rare comments were part of responses to a question on the FSS inspection next month that has been advanced by a whole year. Many view this as a rushed move to intensify scrutiny of the group’s questionable lending and business practices surrounding its former Chairman Son Tae-seung.
The prosecution searched the bank’s headquarters last week over suspicions that relatives of the former group chairman were granted a total of 35 billion won ($26 million) in poorly evaluated loans between April 2022 and Jan. 16.
The FSS said the remaining outstanding balance of the loans came to 30.4 billion won, as of July 19. Over 88 percent, or 26.9 billion won, is backed by collateral but is non-performing. Up to 15.8 billion won will be unrecoverable, according to Woori Bank.
Shinhan Financial Group was able to acquire Orange Life and merge it into Shinhan Life in January 2019, but only after the group’s board dismissed then Shinhan Bank CEO Wi Sung-ho over perjury allegations in a bribery trial in 2008.
In the so-called “300 million won Mount Nam scandal,” former Shinhan Bank Lee Baek-soon handed over the amount to former lawmaker Lee Sang-deuk, the older brother of then President Lee Myung-bak. The money was handed over in a parking lot of Mount Nam, under the instruction of former Shinhan Group Chairman Ra Eung-chan to congratulate Lee Myung-bak on his election victory.
Similarly, DGB Financial Group’s acquisition of Hi Investment & Securities was approved in September 2018, after Park In-gyu had stepped down as group head amid a prosecution probe over allegations of creating a slush fund and irregularities in hiring.
Woori’s acquisition of the two Chinese life insurers is a long-harbored ambition, since the selloff of Woori Aviva Life to NH NongHyup Group in 2014.
Excluding Woori, the remaining four of the country's top five financial groups have their own insurance subsidiaries.