Woori eyes savings bank market share with Sangsangin acquisition

Woori Financial Group is reviewing a potential acquisition of Sangsangin Savings Bank, aiming to expand its market share in the sector. Other potential bidders include OK Financial Group and Welcome Savings Bank.

Woori Bank office in central Seoul [WOORI]

Woori Financial Group is vying to expand its market share through the acquisition of the two Sangsangin savings banks, which combined, are the seventh largest market player.

Woori operates Woori Savings Bank, which currently ranks 30th. With the acquisition of Sangsangin Savings Bank, as well as Sangsangin Plus Savings Bank, it is expected to jump to number four.

“We’re reviewing the acquisition of the Sangsangin savings banks,” confirmed Kim Gun-ho, vice president at Woori Financial Group’s Future Business Promotion Division, during the company’s conference call late last month.

Woori has been striving to expand non-banking business following the appointment of the new group chairman Yim Jong-yong in March. Its review of Sangsangin is widely seen as part of such efforts.

Back in October, Financial Services Commission (FSC) ordered Sangsangin to sell at least 90 percent of its stake in its savings banks by April. The regulator said that the firm failed to meet regulatory requirements, and that its major shareholder reaped unfair profits.

Sangsangin owns a 100 percent stake in the savings banks.

The FSC imposed a penalty on Sangsangin in 2019 for filing false regulatory reports about credit offering ratios and allowing the major shareholder to acquire convertible bonds at a lower price.

Woori has already hired accounting firm Samil PricewaterhouseCoopers to review the acquisition, according to local media reports.

Other potential bidders include OK Financial Group and Welcome Savings Bank, though neither has released an official statement on the matter.

The Sangsangin acquisition would broaden Woori's sales network across Korea.

Woori Savings Bank, headquartered in Cheongju, North Chungcheong, has to raise at least 30 percent of its credit ratio in Chungcheong every month. The restriction has limited its operation outside the region.

Sangsangin Savings Bank operates branches in Gyeonggi, which is part of the greater Seoul area. Sangsangin Plus Savings Bank runs branches in Daejeon and Cheonan, South Chungcheong.

“Background behind the review [of the acquisition] is because Woori Savings Bank is based in Chungcheong region,” Kim from Woori added during the conference call.

Woori may seek to acquire only Sangsangin Savings Bank to expand its business network outside Chungcheong region, according to some media reports.

“The orders to sell the stake in the two savings banks are two separate orders,” said an FSC official who wished to speak on the condition of anonymity. “Whether they are acquired separately or bought together and merged with an entity, all seems possible.”

Sangsangin Savings Bank’s assets total around 3.3 trillion won ($2.4 billion), which is around double the 1.6 trillion won held by Woori. Sangsangin Plus Savings Bank's assets total around 1.6 trillion won.

Despite their large asset size, the banks are struggling with losses.

Sangsangin Savings Bank and Sangsangin Plus Savings Bank reported 15.1 billion won and 14.5 billion won in net loss, respectively, in the first half of this year, amid a surge in bad debt expenses.

Savings banks, in general, have been struggling amid restrictive monetary policy and real estate project financing risks.

Pessimistic outlooks continue to persist in the industry.

Savings banks' net profits swung into the red, to a 96.2 billion won in deficit, in the first half of this year, compared to 895.6 billion won in the same period last year, data from the Financial Supervisory Service (FSS) showed.

The FSS attributed a drastic decline in interest margin that fell 522.1 billion won and a sharp jump in bad debt that rose 629.2 billion won over the same period.

“Savings banks that reported a deficit this year are projected to likely continue to suffer losses [next year] due to competition with banks on deposit rate and potentially insolvent real estate project financing loans,” according to a 2024 outlook on the finance industry that Hana Bank’s research institute released last month.

BY JIN MIN-JI [jin.minji@joongang.co.kr]