Woori eyes takeover of SK, Yuanta or eBest Securities in 2022

Woori Financial Group Chairman Son Tae-seung / Courtesy of Woori Financial Group

By Lee Min-hyung

Woori Financial Group is stepping up its efforts to take over one of the nation's medium- to small-sized securities firms ― such as SK Securities, Yuanta Securities or eBest Investment & Securities ― as part of the group's major growth strategies this year.

Even if Woori hopes to acquire a major brokerage house to enhance its non-banking portfolio, there stands little chance for such a company to be put up for sale, at a time when securities firms generate record earnings on pandemic-era liquidity and prolonged low interest rates.

But the investment industry leaves open the possibility that Woori may be able to clinch a takeover deal with one of the medium- to small-sized securities firms, as the stock market is not expected to continue its bullish run this year.

Investors are losing their confidence in the Korean stock market, with main bourse KOSPI extending losses for more than a week since the beginning of 2022.

Industry sources pointed out that the key lies in whether Woori will be able to find a middle ground in the takeover price this time, after failing to do so for the past few years when the stock market was overheated.

“Given Woori Financial's aggressive movement to launch a securities business, one of the most realistic scenarios is that the company takes over a mid-tier securities firm and finds a way to maximize its valuation by merging it with Woori Investment Bank, the asset management arm of the financial holding firm,” an industry source said.

Woori Financial Group Chairman Son Tae-seung also reiterated the group's strong desire to achieve “outstanding growth” in expanding its non-banking businesses this year.

“We will engage in a more aggressive expansion into the non-banking portfolio and achieve eye-catching growth in the area,” Son said in a New Year's address.

Unlike Woori's rivals ― such as KB, Shinhan and Hana ― Woori's profit structure is heavily reliant on the banking sector, due to its lack of major non-banking arms in securities and insurance. Woori Bank accounted for more than 82 percent of the group's total net profit during the first three quarters combined last year.

This heavy concentration in banking is not the case for KB and Shinhan. Shinhan Bank's net profit only reached 57 percent of the group's total profit during the same period.

The market is paying attention to the likelihood that SK Securities and eBest Investment & Securities are put up for sale, as private equity firms (PEF) are major shareholders of the two securities firms. In 2018, SK Securities was sold to J&W Partners. Global & Associates is also the largest shareholder of eBest Securities.

As most PEFs prefer to sell their acquired firms when their valuation hits the ceiling, Woori Financial will be able to speed up its negotiation with the two brokerage houses if the stock market continues to lose steam.

But some others also argued that Woori does not have to be in a rush to acquire a minor securities firm at an unreasonable price amid weakening investment sentiment here and abroad.

“The stock market is unlikely to continue its bullish run this year, so Woori does not have to remain hasty in taking over a small brokerage house unless its price is attractive enough,” another source from the financial industry said.

SK Securities' operating profit came in at 12.3 billion won in 2020, and that of eBest Securities reached 154.2 billion won in the same year.