China's Bank of Communications, Woori Finance tie

By Se Young
June 8, 2011
Source: Market Watch

(Updates with background about South Korean banks' overseas expansion aims in fourth-sixth paragraphs, Woori's JV talks in Cambodia in last paragraph.)

SEOUL (MarketWatch) -- South Korea's Woori Finance Holdings Co. said Wednesday it and China's Bank of Communications Co. (601328.SH) have agreed to a strategic tie-up, marking the latest effort by a South Korean lender to boost its presence in China.

Woori said in a statement the tie-up will help it take advantage of Bank of Communications' strong presence in China, which the Korean lender said will bolster its business in the country. The two sides have agreed to a broad strategic alliance including cross-selling of products, global co-operation and sharing of information among the two lenders' subsidiaries.

"This agreement will allow Woori to strengthen its operations in China, while Bank of Communications will be able to boost its business in Korea as well," a Woori official told Dow Jones Newswires. Woori is South Korea's largest lender by assets, while Bank of Communications is China's fifth-largest bank by the same measure.

The agreement comes amid efforts by South Korea's largest lenders--Woori, KB Financial Group Inc., Shinhan Financial Group Co. and Hana Financial Group Inc.--to find new sources of growth as domestic competition intensifies. They are seeking to strengthen their operations in emerging Asian economies including China and Indonesia, but their efforts so far haven't yielded tangible contributions to their bottom line.

The Bank of Communications-Woori tie-up is the latest strategic alliance between a Chinese and a Korean bank. Industrial & Commercial Bank of China Ltd. and KB Financial Group Inc. have been in talks to set up an investment banking joint venture, while Hana Financial Group Inc. and China Merchants Bank Co. signed an agreement on business collaboration earlier this year.

Analysts and regulators say that Chinese banks are looking to expand their operations in South Korea as two countries have become major trading partners. While it may be difficult for the Chinese lenders to establish a foothold in the country's already hypercompetitive retail banking market, they could develop their corporate banking businesses in South Korea.

Woori, like other domestic rivals, is making other efforts to increase its international presence. A Woori official told Dow Jones Newswires last week the lender was in talks with the Cambodian government about jointly establishing a bank in the Southeast Asian country. Talks remain at a preliminary stage, he said, but the Cambodian government and Woori may jointly inject $50 million into the venture based on current discussions.