Woori Bank head eyes better earnings this year

SEOUL, Feb. 16 (Yonhap) -- Woori Bank is expected to post better earnings in 2009
than last year as it is unlikely to suffer big investment losses despite a rise
in provisions, the bank's chief said Monday.

The net profit of Woori, South Korea's third-largest lender, tumbled 86 percent
on-year to 234 billion won (US$165.5 million) last year due to a surge in
loan-loss reserves and large losses from investment in U.S. subprime-related
derivatives.
"I hope that our bottom line will improve considerably this year as we stand to
lose no money from derivatives investments," Woori President Lee Chong-hwi told a
press conference.
"However, business will be tough this year and our loss provisions are likely to
increase because of a corporate restructuring drive," he said.
Last year, the state-owned bank had to set aside almost 1 trillion won in
loan-loss reserves and lost nearly 400 billion won from investment in U.S.
subprime-related derivatives.
Woori and other South Korean banks saw their fourth-quarter earnings tumble, with
some even posting net losses as they put aside more money to brace for the
economic downturn and subsequent corporate restructuring.
In mid-January, local banks decided to end support to two ailing companies and
reschedule debts at 11 builders and three shipbuilders to keep potential defaults
from rattling the slumping economy. They are in the process of singling out more
troubled construction firms and shipbuilders.
Lee said the bank aims to increase loans for smaller firms by 6.1 trillion won
this year. "Although economic conditions are difficult, I think it would not be
difficult for the bank to meet the target."
On Sunday, the Financial Services Commission, the country's financial watchdog,
said nine local banks have agreed to roll over maturities on all loans for
smaller firms due during 2009 and pledged to provide loans to smaller firms.
Lenders' use of a recapitalization fund and the expansion of state credit
guarantees will help bank efforts to limit their falling capital adequacy ratios,
the commission said.
The financial watchdog is seeking to set up a 20 trillion won fund in the first
quarter to help local banks raise their capital base. The fund will be used to
buy subordinated bonds and hybrid debt from lenders. Details of the
recapitalization fund will be announced this week and as part of such plans, the
watchdog will start with a fund worth about 5 trillion won.
Lee reiterated earlier pledge that Woori Bank will tap the fund in a bid to raise
more than 2 trillion won in capital.
sooyeon@yna.co.kr
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