Moody's gives negative outlook on Woori Bank

HONG KONG, Aug. 22 (Yonhap) -- Moody's Investors Service said Monday it has cut its outlook on Woori Bank, a flagship unit of South Korea's Woori Finance Holdings Co., to "negative" from "stable," citing recent failure to privatize the No. 1 banking group in South Korea.
Last Friday, the South Korean government decided to suspend its sale of Woori Finance after only one bidder submitted a preliminary bid to acquire the government's stake in Woori Finance.
"The government indicated that the bidding process is unlikely to proceed, as it wants at least two bidders to ensure it is effective," said Choi Young-il, vice president at Moody's.
"Delaying privatization and maintaining government ownership weakens the bank's competitiveness and is credit negative for Woori Bank."
The Friday result marks the latest failure in the government's attempt to privatize Woori Finance. The Lee Myung-bak administration has been seeking to privatize financial institutions, including state-run Korea Development Bank, to raise the local financial sector's competitiveness.
The sales failure was largely attributed to a botched attempt to revise a law on financial services groups by the top financial regulator, the Financial Services Commission (FSC).
Due to the South Korean law that requires financial services groups to purchase at least a 95 percent stake in a state-run holding firm, no banking group had submitted letters of intent for the Woori Finance deal, market analysts said.
"Woori's privatization is likely to remain challenging over the next several quarters, unless the government changes its policy priorities for bank privatization and plays a stronger role in building a consensus among politicians in the National Assembly," Choi said.
"It is not clear to us how the government prioritizes its three objectives in privatizing banks of maximizing sales proceeds, early privatization, and development of financial services industries, when it cannot achieve all at once."
ygkim@yna.co.kr