The brokerage industry has downplayed some market observers’ prediction that some major financial firms will be severely damaged from the possible collapse of the 31 trillion won ($28.4 billion) urban development project in Yongsan, Seoul.

As the nation’s largest-ever project faced bankruptcy involving worries over capital erosion and liquidation of the state-controlled rail operator KORAIL, some critics commented on the feasibility that the financial services industry will go through heavy losses from their investment.

Dismissing the worries, research analysts in the brokerage sector, including Hyundai Securities and Shinyoung Securities, claimed Thursday that the Yongsan project’s negative effect on the financial sector would be marginal.

“The banking industry is not closely associated with the Yongsan development project. Reaction from the market is excessive,” said Hyundai Securities research Koo Gyoung-hoi.

Koo stressed that the banking sector has not made a huge investment in Dream Hub PFV, a special-purpose company established by KORAIL and 29 private investors to implement the project.

Woori Bank is the only commercial bank participating. Woori, without issuing loans, invested 20 billion won in the project via an asset management company.

While Woori Financial Group, the parent group of Woori Bank, and Hana Bank had issued loans totaling 18 billion won and 40 billion won, respectively, to Lotte Tour ― which invested 150 billion won in Dream Hub ― the analyst said “the sums would not negatively affect the two firms’ stock prices or financial status.”

Shinyoung Securities analyst Lim Il-song said the worries over the project’s failure have already been reflected in stocks of the banks.

“Chances of the overall risks in the financial sector are few,” he said.

For the insurance sector, Samsung Life and Samsung Fire & Marine are estimated to suffer losses of 14 billion won and 4.8 billion won, respectively, under the scenario that Dream Hub is liquidated.

Analyst Lee Tae-kyoung of Hyundai Securities, however, pointed that the sums take up only about 1 percent of the two insurance firms’ yearly operating profits, respectively.

By Kim Yon-se (kys@heraldcorp.com)