Woori Financial Group is struggling to follow in the footsteps of KB Financial and Hana Financial by spinning off a credit card business from Woori Bank.
In 2011, KB Financial Group launched a stand-alone credit card firm after the money-spinning unit was merged with the bank in 2003. In 2010, Hana Financial Group spun off Hana SK Card and began marketing cooperation with several SK Group subsidiaries.
An official in the Financial Supervisory Service said Friday that the regulator was making inquiries into financial soundness of the credit card unit and eligibility of Woori Financial as the biggest shareholder.
Woori Bank president & CEO Lee Soon-woo (center) poses with customers during an event to celebrate the 114th anniversary of the financial firm’s foundation at its headquarters in downtown Seoul on Friday. Its former entity was Daehan Cheonil Bank, established in 1899 with funds from then-Korean Emperor Gojong. (Woori Bank)
“The FSS has been probing a variety of data tendered by the financial group over the past two months,” he said. “It would be necessary to consult with President-elect Park Geun-hye’s presidential transition team as Woori is a state-invested financial firm and the largest player in terms of total assets.”
Though Woori Financial had failed to spin off its credit card unit due to financial regulators’ former policy to curb loan issuance, the group re-applied to do it at the end of October.
While regulatory officials no longer appear skeptical about the group’s plans, the Financial Services Commission, the decision-making entity of the FSS, is scheduled to decide whether to endorse the Woori’s proposal by the end of January.
One bone of contention for the proposed sale, is the protests from the company’s union, which is arguing that a spin-off would bring weaker profitability of the bank unit. The unionized workers are also raising concerns about the uncertainties shrouding the competitiveness of “Woori Card.”
But the union also has said it could support the plan if the group guarantees favorable employment terms for workers and establishment of a union at the credit card unit.
In September 2011, the board of directors of Woori Financial approved the group’s project to launch the credit card subsidiary.
Though Woori Credit Card had been an independent unit of the group, the card issuer was absorbed into Woori Bank in the wake of the 2002-2003 credit card fiasco. Woori initially made the project public in the stock market in April 2011.
Some analysts forecast that the authorities would eventually support the spin-off, citing the FSC’s long-standing policy of privatizing Woori Financial Group.
The FSC has failed to attract many potential bidders due to unfavorable sale terms and the high value of Woori Financial, which has total assets of about 10 trillion won ($930 million).
By Kim Yon-se (
kys@heraldcorp.com)
