DLF fiasco casts cloud over Woori's privatization - The Korea Times

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DLF fiasco casts cloud over Woori's privatization


By Kim Bo-eun

Questions are arising over whether Woori Financial Group's privatization will face a setback after the price of its shares fell following a scandal surrounding the bank's mis-selling of financial derivative products.

Among the two banks involved in the case, Woori sold most of the options known as derivative-linked funds (DLFs) that incurred major losses for investors.

Woori Financial's share price began to fall in early August, when media reports over the case began.

Trading of Woori's shares as a financial group began on Feb. 13, at 15,400 won per share. The highest price was 16,000 won on Feb. 14 but it entered a downward trend from then onwards.

Woori's stock price did not fluctuate much for months but plunged in August, marking its lowest price at 11,100 won on Aug. 29.

In attempts to boost the price, Woori Financial Group Chairman Sohn Tae-seung bought back 5,000 shares in July for the fifth time this year, bringing his total stockholding to 63,127. However, the share price has stayed well below its peak of 16,000 won. It closed at 12,200 won, Monday.

Behind the move is the plan to privatize Woori, of which the state-run Korea Deposit Insurance Corporation (KDIC) owns the majority of shares.

In June, the government unveiled plans to sell the KDIC's 18.3 percent stake in Woori by 2020.

The KDIC included proceeds from the planned sales of 7 percent of Woori's shares in its budget plan for next year. However, it is unclear whether the sale will take place as planned.

"This is a calculation based on our phase-out plan that 18.3 percent of Woori's shares are sold over three years," a KDIC' spokesman said. "However, the actual sale will depend on factors such as the price of shares and investors' willingness to purchase them."

It is also uncertain whether the price of Woori's shares will rise to the extent the government wants. The KDIC spokesman said there was no set price level. Reports have stated that the share price needs to be above 13,000 won for the government to be able to retrieve the funds it poured into Woori.

Sanctions that are set to be imposed on Woori over the DLF case may further affect the share price.

A two-month inspection by the Financial Supervisory Service showed Woori and KEB Hana banks were found to have engaged in mis-selling of the options.

The financial authorities are set to unveil punitive measures against the banks this month. The chiefs of the banks may come under separate sanctions for their responsibility in the case.

Some investors of options tied to yields of German treasury bonds saw the entirety of their investments wiped out due to a fall in interest rates.



By Kim Bo-eun

Questions are arising over whether Woori Financial Group's privatization will face a setback after the price of its shares fell following a scandal surrounding the bank's mis-selling of financial derivative products.

Among the two banks involved in the case, Woori sold most of the options known as derivative-linked funds (DLFs) that incurred major losses for investors.

Woori Financial's share price began to fall in early August, when media reports over the case began.

Trading of Woori's shares as a financial group began on Feb. 13, at 15,400 won per share. The highest price was 16,000 won on Feb. 14 but it entered a downward trend from then onwards.

Woori's stock price did not fluctuate much for months but plunged in August, marking its lowest price at 11,100 won on Aug. 29.

In attempts to boost the price, Woori Financial Group Chairman Sohn Tae-seung bought back 5,000 shares in July for the fifth time this year, bringing his total stockholding to 63,127. However, the share price has stayed well below its peak of 16,000 won. It closed at 12,200 won, Monday.

Behind the move is the plan to privatize Woori, of which the state-run Korea Deposit Insurance Corporation (KDIC) owns the majority of shares.

In June, the government unveiled plans to sell the KDIC's 18.3 percent stake in Woori by 2020.

The KDIC included proceeds from the planned sales of 7 percent of Woori's shares in its budget plan for next year. However, it is unclear whether the sale will take place as planned.

"This is a calculation based on our phase-out plan that 18.3 percent of Woori's shares are sold over three years," a KDIC' spokesman said. "However, the actual sale will depend on factors such as the price of shares and investors' willingness to purchase them."

It is also uncertain whether the price of Woori's shares will rise to the extent the government wants. The KDIC spokesman said there was no set price level. Reports have stated that the share price needs to be above 13,000 won for the government to be able to retrieve the funds it poured into Woori.

Sanctions that are set to be imposed on Woori over the DLF case may further affect the share price.

A two-month inspection by the Financial Supervisory Service showed Woori and KEB Hana banks were found to have engaged in mis-selling of the options.

The financial authorities are set to unveil punitive measures against the banks this month. The chiefs of the banks may come under separate sanctions for their responsibility in the case.

Some investors of options tied to yields of German treasury bonds saw the entirety of their investments wiped out due to a fall in interest rates.


Kim Bo-eun bkim@koreatimes.co.kr


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