KDB Financial's failed bid is credit positive for Woori Bank

SEOUL, June 20 (Yonhap) -- The financial regulator's recent decision not to allow KDB Financial Group Inc. to bid for a controlling stake in Woori Finance Holdings Co. is positive for the credit rating of state-owned Woori Finance, global credit appraiser Moody's Investors Service said Monday.
The government is scheduled to accept bids for its 56.97 percent stake in Woori Finance by June 29 in order to find a private owner for the second-largest local banking group, saved with taxpayers' money from bankruptcy a decade ago.
State-run policy lender KDB Financial, headed by former finance minister Kang Man-soo, had openly expressed its intention to take over Woori Finance, but the top financial regulator Financial Services Commission blocked KDB Financial's participation last week by saying it determined it was right to block KDB Financial from joining the auction.
"These events are credit negative for KDB Financial, but positive for Woori Financial and the banking system overall," Moody's senior analyst Choi Young-il said in a report.
"Many politicians and academics opposed the creation of a giant state-owned bank that could stifle competition," the analyst said, adding that a combined entity of Woori Finance and KDB Financial would give rise to a bank with around a 20 percent share of banking system assets, higher than No. 1 player Kookmin Bank's 15 percent share.
Choi said one feature of Korea's banking system that negatively affects creditworthiness of local banks is government influence, referring to a series of government-forced acquisitions of loss-making savings banks by commercial banks.
Meanwhile, he also said KBD Financial's failed plan to buy Woori Finance is credit negative for the policy banking group since it has lost a much-needed chance to improve its franchise and commercial competitiveness through a bank takeover.
KDB Financial is striving to beef up commercial banking functions before the government executes its plan to privatize the state-owned group from 2014.
"The acquisition would have been a good opportunity for KDB to diversify its customer base, expand its small domestic network of 47 branches, and improve its modest customer deposit base," Choi said.
Moody's currently holds a "A1" ratings for Woori Bank's deposits with a "stable" outlook while keeping the same rate for Korea Development Bank's deposits with a "negative" outlook.
pbr@yna.co.kr