The South Korean government’s bank privatisation plan will continue to face challenges as the sector faces a difficult operating environment in 2015, says Fitch Ratings.
In spite of that, Fitch said it expects government to continue with efforts to reduce its stake in everal key banks, due to rising fiscal pressures and budgetary commitments.
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In a report, the rating agency said the failure of the recent block sale of a controlling stake in Woori Bank, reportedly valued at $2.7bn, is indicative of the difficulties South Korea is facing in its bank divestment plan.
The government has long been interested in divesting of its stake in Woori, but the sale was suspended on 4 December 2014 after it received only one bid – less than the minimum two that were required.
The agency opined that South Korea’s banking sector is facing a number of headwinds from a subdued operating environment and intense competition, which is dampening banks’ profitability and growth prospects.
Fitch forecasts that 2015 RoA for commercial banks to be similar to that estimated for 2014, at 0.4%.
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By GlobalDataThe rating agency added that the government is likely to remain focused on selling down its stakes in Woori and IBK to align with its economic policy to boost growth and make the banking system as a whole more commercially driven.
