UPDATE 2-S.Korea Woori Fin sees capital increase for 2 units
(Adds analyst comment, closing share prices)
SEOUL, June 30 (Reuters) - South Korea's Woori Finance Holdings (053000.KS) plans to increase capital at its brokerage and consumer finance arms, its chairman said on Monday, signalling its intention to raise stakes in the two units.
Shares in Woori Investment & Securities (005940.KS) and Woori Financial (021960.KS) fell sharply after the announcement, on concerns that possible new share issues by the two companies would dilute the value of existing shares.
Lee Pal-seung, who took the helm at the financial group this month, aims to boost its non-banking business significantly and cut the group's dependence on banking from the current 80 percent. Woori Finance runs the country's No. 3 bank.
"The securities industry will be at centre of our non-banking business growth," Lee told reporters at a news conference.
"We want to grow Woori Investment & Securities as a multiple investment financial company, and if we have reserve profits, we are planning to increase capital at Woori Investment and Woori Financial."
Woori Financial is a leasing and installment-financing company, which the group bought from private equity fund MBK Partners for 271 billion won ($259.6 million) last year.
The holding group, 73 percent owned by the government, has a controlling 35 percent stake in Woori Investment & Securities and 50 percent in Woori Financial.
Lee, 64, who led the securities company until 2005, did not elaborate on how much further the group wanted to lift its holdings in the two units.
An analyst at a domestic brokerage said Woori Finance's ownership in the securities house was too low compared with other business groups or banks, which hold almost 100 percent or at least a majority of their brokerage units.
"The chairman's remarks seem to indicate the group's plan to raise its stake in Woori Investment, instead of raising cash for the brokerage unit which already has good operating capital," said the analyst who asked not to be named.
But he remained cautious about the capital increase plan until further details were provided, adding the group could be offered new Woori Investment shares or convertible bonds under a private placement, or be able to buy shares back from the market.
DOUBLING ASSETS
Shares in Woori Investment closed down 1.55 percent at 19,000 won, after falling as much as 3.4 percent, underperforming the broader market which edged down 0.6 percent.
Woori Financial shares declined 4.26 percent to end at 12,350 won, while the holding group lost 1.48 percent to 16,650 won.
The group aims to double assets to 600 trillion won ($574.8 billion) and net profit to 4 trillion won by 2011 through domestic and foreign acquisitions, while the government is trying to privatise Woori and two other state-owned banks.
The Capital Markets Integration Act, to be in place from next February, is designed to give securities companies a bigger role in reshaping the financial sector, as depositors shift to investment assets for higher returns.
Lee expressed concern about weaker lending margins and the capital base at Woori's banking arm, as well as tighter liquidity in the capital market.
"We are concerned about lending. Our ratio measuring loans versus deposits has risen to 130 percent," he said, when asked about the effect of high inflation on the lending business.
"I think 80-90 percent is an appropriate level," he added, which a group executive interpreted as the group's plan to control lending growth.
President Lee Myung-bak told ministers last week to make the fight against inflation a top national task as he faces calls for a swift response to rising prices.
($1=1043.8 Won)
(Reporting by Kim Yeon-hee; Editing by Jonathan Hopfner)
