Woori Bank to Strengthen Deposit Base
CEO Lee Seeks to Take Lead in Corporate Restructuring
By Kim Jae-kyoung
Staff Reporter
There has been a major shift in Woori Bank's management policy since CEO Lee Chong-hwi took the helm of the state-funded lender in June 2008.
The first thing he did following the inauguration was to put a brake on expansion in the investment banking and credit card sectors, shifting policy focus to asset soundness from asset growth to fix its balance sheets.
The shift is in line with Lee's management philosophy. Since Lee is a lifetime banker, spending his whole career at Woori, he attaches great importance to the basics of banking ― asset quality and profitability. In particular, he values a strong deposit base above everything else.
In an exclusive interview with The Korea Times, Lee said that the key culprit behind the current financial turmoil was a weakening customer deposit base caused by lenders' growing dependence on marketable securities.
``Many local lenders relied upon financial market loans and bonds to expand their balance sheet instead of building up their assets from traditional customer deposits,'' Lee said.
``In 2009, I will place more focus on improving loan-to-deposit ratio by strengthening our customer deposit base,'' he said. ``The optimal level for the ratio is around 100 percent.'' Currently, the average loan-to-deposit ratio at local banks stands at around 130 percent.
Lee pointed out that the real issue is how fast such a paradigm shift in management policy makes its way to employees.
Woori Bank is now being gripped by the legacy of two former Woori Bank CEOs, Hwang Young-key and Park Hae-choon, who took the helm of the lender during 2004-2007 and 2007-2008, respectively. Under the leadership of Hwang and Park, Woori Bank, the flagship firm of Woori Financial Group, enlarged its size aggressively at the expense of asset soundness.
His emphasis on the customer deposit base is based on concerns that even if the bank's assets are stable, an increase in the bank's liabilities caused by the inability to roll over debts or issue bank paper or bonds could cause just as serious a crisis as the unexpected withdrawal of cash by bank depositors.
He said that coupled with a change in management, demand contraction triggered by the deepening economic downturn will slow growth in investment banking and lending to large firms this year.
However, Lee stressed that Woori Bank will take the leading role in supporting struggling small firms and households by making more credit available, once nonviable firms are weeded out through corporate restructuring.
In addition, he added that the lender will take the initiative in corporate restructuring, with know-how and experience accumulated during the course of overcoming the 1997-1998 financial crisis.
The nation's corporate sector is facing large-scale restructuring as many local shipbuilders and construction firms are on the verge of going belly up due to a liquidity crunch caused by the prolonged economic slump.
The veteran banker said that two key phrases for 2009 are ``risk management'' and ``belt tightening.''
``This year, management will focus on soundness, liquidity and profitability,'' he said. ``To that end, we will continue to make efforts to improve efficiency through consolidation of unprofitable branches, cost reduction and payroll cuts.'' The bank seeks to garner one trillion won in net profit this year.
In the meantime, Lee said that the state-run lender plans to tap the envisioned bank recapitalization fund if its liquidity situation gets worse in line with the deepening economic slump.
He pointed out that the current crisis is one of confidence as banks and businesses don't trust each other's balance sheets. He stressed that to get over this, more efforts should be made to clear away uncertainties through quick restructuring.
Regarding economic issues, he said the economy will go through a tough time in the first half before rebounding in the second half in line with a gradual rise of the won against the dollar.
He added that the volatile property market is one of the biggest threats to the economy this year, given rising default risks of project financing and loans extended to construction firms.
Lee started his career at Hanil Bank (the precursor to Woori) in 1970 and served as general manager of sales branches and finance department before becoming an executive in 2001. Since then, as vice president, he has worked in various units including credit management, corporate banking and finance.