Chairman Lee Pal-seung of Woori Financial Group said “clean assets” to improve the group’s financial statement is the key objective of the group as it celebrated its 11th anniversary on April 2.

“We have to dust off the risky and non-performing assets as much as possible to make our financial statement cleaner,” Chairman Lee said at the ceremony marking the founding of the group 11 years ago.

With its combined assets now totaling over 400 trillion won, the chairman stressed that the non-performing assets have been hurting the group, especially Woori Bank, in further boosting its annual profits.

The amount of bad loans not earning interest fell to 0.71 percent against total assets, but it began to rise again since then to 1.24 percent in 2008 and to 3.33 percent in 2010 due to a large increase in the number of corporate borrowers put under court management due to the financial crisis in 2008 and with Woori Financial Group taking over half of the total loans provided to businesses in Korea. Last year, the bad debt ratio was cut to 1.97 percent through tough management of the risky assets.

Chairman Lee said the financial group should be taken over by one or more private firms and returned to the financial market now that its been 11 years since the group was revived with the infusion of government funds.

The group’s financial conditions improved substantially enough last year with its performance records hitting record highs, while its bad debt ratio decreased to 1.97 percent from 3.33 percent in 2010. 

Chairman Lee said since his arrival at the group in 2008, some 9.762 trillion won was spent to take care of bad debts or non-performing assets, mainly of Woori Bank, and he sees three major tasks that remain for the group including privatization, improvement of the health of its assets and the financial industry’s future stability.

First and foremost, the group should expand its overseas operations, especially Woori Bank, at this time when many large business groups are operating overseas with high credit ratings, meaning that they don’t have to deal with Korean banks and they always have easy access to foreign banks with advanced financial products. He said the group would be able to find its way out by providing project financing loans to SMEs, but he said the group would not wind up like savings banks, which lost a lot of money as many of their loans turned out to be uncollectible.

The chairman knows that a lot of risks are involved in operating overseas. Lee believes that domestic banks should have wholly-owned subsidiaries and hire as many local employees as they can.

The local subsidiaries can be protected by local laws and regulations, and if they need financial support during financial crises, they can get them from local financial authorities under the local financial laws. That’s certainly true in the United States, he said. If they want to withdraw from the foreign countries in which they operate, they can sell their assets, not liquidate, and withdraw, Lee said.

Lee noted that having overseas subsidiaries would be a big help in the area of state financial security. When financial crises hit, foreign financial institutions and investors withdraw from Korea with their money, jeopardizing the nation’s economy. But having overseas subsidiaries would be of great help under these circumstances, he said. “We should set up financial subsidiaries overseas like many global financial institutions do and seek to expand their presences in the markets not yet tapped by Korean banks,” Lee asserted. Woori would be able to take over from two to three foreign financial institutions soon, he expected.

Our financial institutions should strengthen their risk management. China, at the same time, shows signs that it will further open its financial market, providing chances for Korean financial institutions operating in China to expand their shares of the Chinese financial market. He said the problem is how the Chinese borrowers would look at Korean financial institutions, which is why it is important to set up local subsidiaries to win the support of local customers.