DEALTALK-Western stakes in S.Korea banks eyed amid sell-downs

* ING may be tempted to offload KB Financial

* BNP, Goldman may take more time until shares recover (For more Reuters DEALTALKs, click [DEALTALK/])

By Kim Yeon-hee

SEOUL, March 30 (Reuters) - Western banks may be tempted to sell their stakes in South Korean banks as they focus on their core operations at home, but a dearth of buyers and weak markets mean sellers are unlikely to fetch attractive prices.

ING Group (ING.AS), BNP Paribas (BNPP.PA) and Goldman Sachs (GS.N) own stakes in three major South Korean banking groups worth a combined $1.4 billion.

Financial firms from New York to London have recently sold shares in Chinese banks to free up cash amid the economic downturn. Speculation is building that shareholders are looking to pursue a similar path in South Korea. [ID:nN23297847]

Analysts doubt BNP or Goldman are planning an imminent exit but say Dutch group ING (ING.N) is more likely to cash in its 5 percent stake in KB Financial Group (105560.KS) after it ended cross-ownerships of insurance and asset management companies with KB last year.

Rumours swirled this month that ING was looking to sell its stake worth about 609 billion won ($453 million) at current prices. ING denied the talk but the market saw a possibility, and shares in KB, the parent of Kookmin Bank, South Korea's largest bank, fell more than 6 percent in a single day.

"ING could very well put the KB stake up for sale, even though the current prices are not good enough," said Park Jeong-hyun, a Hanwha Securities analyst.

ING received a 10 billion euro injection and guarantees on 22 billion euros worth of risky debt assets from the Dutch government in October. In February, it said it would focus on fewer businesses and markets after posting a fourth-quarter loss.

A senior KB Financial official told Reuters the market price was unlikely to tempt the Dutch group to sell KB shares, even though foreign financial investors have expressed interest.

Shares in KB Financial have lost about a quarter of their value since listing last October, far worse than the wider market's .KS11 4.5 percent fall in the same period.

BNP, GOLDMAN SEEN STICKING IT OUT

BNP Paribas, France's biggest bank, is more likely to sit on its 8.1 percent stake in Shinhan Financial Group (055550.KS) until share prices recover, analysts say. Goldman, too, is seen in no rush to sell and is expected to ride out its 8.9 percent stake Hana Financial Group (086790.KS).

BNP Paribas and Goldman declined to comment. Shinhan spokesman Son Byeong-kwan said the strategic relationship with BNP was expected to last, citing BNP's subscription to Shinhan's $1 billion rights offering in March.

Hana also sees Goldman as a long-term investor, noting the U.S. bank holds a board seat in the South Korean banking group.

But if anything has become apparent in the current wave of stake sales in the slowing region, it is that no shareholding is sacred.

"Those stakes can be put up for sale when markets recover. But the currency rate is a key factor," said Young Chung Mok, head of research of the Royal Bank of Scotland in Seoul.

The soft won KRW= could indeed be a deterrent to selling South Korean assets now, as the currency is now about 10-30 percent below the level when the banks acquired the stakes.

Downbeat valuations for South Korean banks may also keep foreigners from selling down their stakes in domestic lenders.

Major South Korean lenders are trading at between half and 0.8 times book, far below the valuations of Chinese rivals.

Analysts forecast some major South Korean banks will post losses in the current quarter, due to snowballing bad loans, tightening interest margins, and poor sales of investment funds.

Hana has seen its market value wiped out more than half since Goldman's investment in late 2005, with Shinhan shares also down by roughly half since BNP raised its stake in 2006.

Selling Hana shares now would lead to losses for Goldman, while ING would see a profit from a possible sale of KB shares.

"Fetching high prices is important, but financial conditions at those foreign companies may force them to offload stakes in South Korean banks soon," said a fund manager at a Seoul-based firm, declining to be named due to the sensitivity of the matter. ($1=1344.0 Won) (With additional reporting by Michael Flaherty in HONG KONG, Sophie Taylor in PARIS, Saeed Azhar in SINGAPORE; Editing by Tony Munroe and Lincoln Feast)