Will Woori Bank save K-bank?

Woori Financial Group Chairman Sohn Tae-seung

By Jhoo Dong-chan

Woori Bank has been attracting more attention from financial market analysts and bank officials over whether it will help the underfunded K-bank, industry analysts said Sunday.

Woori Bank is the internet-only bank's largest shareholder with a 13.79 percent stake.

KT, K-bank's second-largest shareholder with 10 percent, had planned to salvage the bank by participating in its recapitalization, but hit a snag when the Fair Trade Commission charged the mobile carrier with bid rigging.

Under a related act regarding internet-only banks, major shareholders should not have violated financial laws, including antitrust and tax laws, in the previous five years.

If KT is convicted and fined for bid rigging, the mobile carrier will not be allowed to raise its 10 percent K-bank stake to 34 percent.

K-bank originally planned to raise 592 billion won ($499 million) with KT's participation in the internet-only bank's recapitalization in April. But the Financial Services Commission immediately halted its review of KT's plan due to the antitrust probe.

The internet-only bank said it plans to raise 41.2 billion won by issuing new stock this month to help normalize its loan service, but industry observers said this was not enough.

“K-bank originally aimed to raise nearly 600 billion won,” an industry observer said. “The 41.2 billion won won't make any difference.

“I understand the bank is experiencing difficulties in providing loans. It is impossible for a bank to stay afloat without a loan service. If KT is out, Woori Bank would be the only option.”

Separate from its plan to raise the 41.2 billion won, an industry insider said K-bank is also encouraging shareholders to participate in another recapitalization plan to raise 300 billion won.

“K-bank's starting capital was 500 billion won,” the insider said. “In a bid to smoothly provide loan services, it requires at least 1 trillion won.

“The 41.2 billion won is a temporary measure. K-bank's shareholders are closely discussing a possible burden-sharing plan to keep the internet-only bank afloat.”

A Woori Bank official said nothing has been decided.

“There are other issues that should be addressed regarding financing the internet-only bank,” the official said.

According to the Korea Federation of Banks, K-bank suffered a 24.1 billion won net loss in the first quarter of the year, up 28.1 percent from a year ago.

The bank said it aims to turn a profit by 2020 but has posted more than a 20 billion loss every quarter since it was set up two years ago.