(The following statement was released by the rating agency)
Jan 18 - Standard & Poor's Ratings Services said today that its ratings on Woori Bank (Woori; A-/Stable/A-2) and Woori Finance Holdings Co. Ltd. (WFH; BBB+/Stable/A-2) would be unaffected by WFH's spinoff of Woori Bank's credit card business, which the Financial Services Commission preliminarily approved on Jan. 16, 2013.
In our view, the spinoff is unlikely to have a significant near-term impact on WFH's consolidated group credit profile, which is a key rating factor in our ratings on Woori. With recent tightening in the regulatory oversight of the credit card industry's expansion, we expect the group to increase its exposure to unsecured consumer credit at a reasonable pace and keep its total exposure to such credit at a manageable level. Generally, small credit card issuers with aggressive growth targets in a mature market may face intense competition that may drive down their profitability or increase their credit appetite, in our opinion. We consider Korea's household indebtedness high and this could pressure the financial sector and Woori's financial performance.
Under Korea's current laws and regulations, we believe the new credit card entity will have more flexibility than Woori Bank in expanding the credit card business, as well as other unsecured consumer lending businesses. Woori Bank's credit card business had assets of Korean won (KRW) 3.9 trillion, accounting for about 1.6% of Woori's total assets and an approximately 6.3% share of the total credit card transaction market in Korea by the end of September 2012.
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