Get a glimpse of Woori's intriguing privatisation plan

2 banks will be spun off.

According to Nomura, the Public Fund Oversight Committee (PFOC) has announced Woori Finance Holdings’s (WFH) privatization plan. PFOC noted that Kyongnam Bank and Kwangju Bank will be spun off, with the Korea Deposit Insurance Corporation (KDIC) holding 57% of the newly created two holding companies. 

As well, PFOC is planning on selling Woori Investment and Securities (Woori I&S) held by WFH along with Woori Asset Management. 

Here's more from Nomura:

We see a higher chance of success of privatization this time given that: 1) FSC Chairman has said that he will put his job on the line to completion of the sale; 2) the government enjoys strong public approval early in the presidential term and 3) there are more potential buyers when sold in pieces.

We believe WFH is trading at 0.45x current book value because investors are concerned about its asset quality and do not know the exact shape of the book.

In order to ease the market concern and increase the price of Woori Bank, PFOC could embark on a massive asset cleanup, we believe. 

In addition, we expect a fundamental improvement when the bank is no longer controlled by the government which has been running the bank more like a policy bank such as Korea Development Bank.