이 기사는 2020년 01월 09일 08:00 thebell 에 표출된 기사입니다.

While all eyes are on Prudential Life Insurance Company of Korea, private equity (PE) firms that have strong interest in the two-trillion-won deal are said to be contacting Woori Financial Group to form a consortium.

U.S.-based Prudential Financial and its lead sale manager Goldman Sachs will hold a preliminary bidding on January 20, according to industry sources on January 6. It is said financial investors are continuously contacting Woori among top five financial groups in Korea – Shinhan, KB, Hana, Woori and NongHyup - to form a consortium.

PE firms are paying attention to Woori as the group has to borrow money to if the group decides to participate in the deal.

Woori needs strong Bank for International Settlement (BIS) capital adequacy ratio to actively pursue M&As, but the firm’s M&A capability is in question as it is subjected to the standardized approach. The standardized approach is regarded as a tougher set of risk parameters compared to an internal ratings-based (IRB) approach, as the former’s risk weight for claims are heavier than the latter.

Market watchers see this issue as one of the challenges for the group to rev up M&A drive. Some investment banking industry sources say Woori has postponed the acquisition of Aju Capital and Aju Savings Bank due to the risk of the fall in BIS capital adequacy ratio.

In addition, the group needs to bring its BIS capital adequacy ratio up to 11.5 percent or higher under local financial authorities’ guidance. As of the end of September of 2019, the group’s capital adequacy ratio stood at 11.46 percent.

South Korea’s financial authorities are expected to review the adoption of the IRB approach when assessing the group’s capital adequacy. Industry watchers say the group may receive approval from financial authorities after March, although it’s difficult to predict the exact timing.

“[Woori] has to receive approval for the IRB approach so that its risk-weighted assets can be lowered to a level of a bank, which results in higher capital adequacy ratio. Until then, it would be hard for Woori to go for M&As aggressively, and FIs who see through the situation are approaching to the group,” said an IB industry source.

(By reporter Rho Arrum)