By Kang Seung-woo
The local banking industry is likely to see a big bang this week.
Hana Financial Group’s takeover of Korea Exchange Bank (KEB) is close to being finalized, while the privatization of Woori Financial Group will be fully disclosed. Credit rating agency Moody’s gave a positive reading on Hana’s takeover of KEB.
In addition, the investigation into the management scandal at Shinhan Financial Group is expected to come to an end within this week.
According to officials in the financial industry on Monday, Hana is wrapping up the deal to acquire a controlling stake of KEB from Lone Star Funds. The U.S. private equity fund is seeking to sell a 51.02 percent stake in KEB and its stake is estimated at about $3.8 billion (4.5 trillion won) based on KEB’s current share price. KEB is the nation’s fifth-largest lender and it accounts for a 40 percent share in the foreign exchange sector in Korea.
The group is likely to sign a deal as early as Wednesday, according to sources.
“We are in the final stages of acquiring KEB and a board meeting on the agenda may be held as early as Wednesday,” a Hana Financial official said.
However, the exact date of the board meeting could be delayed, the official said.
So now it is a matter of today or tomorrow to see whether Hana will seal the deal or not.
When the M&A is completed, the financial holding firm will not combine KEB with its flagship banking unit, Hana Bank, in the wake of strong opposition from KEB’s labor union, which lambasted Hana Financial for its takeover attempt, insisting that KEB will not prosper under Hana.
“Hana Financial does not have the capabilities to manage KEB well, given that Hana Financial, with bigger assets and workforce, posted earnings amounting to only one-third of KEB’s net income last year,” the union said.
If Hana acquires KEB, it will become the country’s third-largest banking group by assets. As of the end of September, Hana had assets of 200 trillion won, while KEB’s assets reached 116.2 trillion won.
As for Woori’s privatization, the deadline for hopeful bidders to submit a letter of intent (LOI) to purchase a minimum 4 percent share or more in Woori Financial Group will end Friday.
Although Hana, which originally openly expressed interest in merging with Woori, has been omitted from the prospective bidder roster, the government believes that the process for Woori’s privatization will go without a hitch.
“We expected that there would be some investors interested in Woori Financial,” said an official of the financial authorities.
The state-run Korea Deposit Insurance Corp. (KDIP) holds a 56.98 percent stake in the nation’s No. 1 financial holding company by assets and the government is seeking to sell at least a 28.5 percent stake, or slightly over half of its total holding will be put up for sale.
If a public tender falls through, the government will consider a private contract.
Woori Financial prefers other non-banking firms to jointly buy the stake.
“For the sake of independent privatization, domestic and foreign big investors, Woori Financial employees and bank customers should form a consortium,” Lee Chong-hwi, the CEO of Woori Bank, said in a monthly speech to bank employees.
“From today, along with bank executives, I will meet with Woori Bank customers and aggressively ask and invite them to invest.”
Woori Bank has been known to secure investments worth 6 trillion won.
“Foreign buyout funds are reportedly interested in buying stakes in Woori Financial and at least more than five have the possibility to submit an LOI,” said an official in the banking sector.
As for other flurries in the financial world, prosecutors’ probes into the top three chief executives of Shinhan Financial are nearing a close.
Following an investigation into group CEO Shin Sang-hoon last week, Shinahan Bank CEO Lee Baek-soon was summoned Monday on suspicions that he took 300 million won out of 1.5 billion won in consulting fees that should have been paid to the group’s honorary chairman between 2005 and 2009. He is also charged with receiving 500 million won from shareholders in Japan in return for selling leftover portions of new stocks.
In addition, prosecutors will summon former Chairman Ra Eung-chan this week to look into allegations that he has kept bank accounts under borrowed names in violation of the real-name financial transaction law, with hopes of wrapping up probes within this month and determine proper punishments.