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Woori to re-enter brokerage business with acquisition of Korea Foss Securities

Financial group expects merger with digital brokerage house would give edge in mobile stock trading services

By Choi Ji-won

Published : May 3, 2024 - 19:13

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(From left) Woori Investment Bank CEO Nam Ki-cheon and Woori Financial Group's Deputy President of Strategy Planning Unit, Lee Jung-soo, and Senior General Manager of the group's Business Portfolio Department, Yang Ki-hyeon, hold a press conference about Woori Investment Bank and Korea Foss Securities' merger deal at the Woori Financial Group headquarters in Seoul on Friday. (Woori Financial Group) (From left) Woori Investment Bank CEO Nam Ki-cheon and Woori Financial Group's Deputy President of Strategy Planning Unit, Lee Jung-soo, and Senior General Manager of the group's Business Portfolio Department, Yang Ki-hyeon, hold a press conference about Woori Investment Bank and Korea Foss Securities' merger deal at the Woori Financial Group headquarters in Seoul on Friday. (Woori Financial Group)

Woori Financial Group said Friday that it will launch a new brokerage arm in the third quarter by acquiring digital brokerage firm Korea Foss Securities and merging it into its existing investment banking subsidiary.

The tie-up plan between Woori Investment Bank and Korea Foss Securities marks the financial giant's return to the stock trading business after a decade.

Woori Financial Group's long-term goal is to become one of the country's top 10 brokerage firms within the next decade, said Deputy President of Woori Financial Group's Strategy Planning Unit Lee Jung-soo during a press conference Friday.

"We might consider additional acquisitions if we identify strategic opportunities or find a suitable target," he added.

Woori aims to give its securities business a competitive edge in mobile brokerage and investment banking by combining its subsidiary’s corporate business expertise with Foss Securities’ digital capabilities.

Both companies held board meetings that day to approve the merger and finalize the agreement. They expect to receive approval from the Financial Services Commission by July, with a projected launch date for operations around August.

Technically, the conglomerate is not acquiring Korea Foss Securities, officials from Woori explained. The merger will see Foss absorb Woori Investment Bank as the surviving entity, thus becoming part of Woori Financial Group. This approach is required because the surviving entity must hold a securities business license.

The expected merger ratio is approximately 0.34 shares of Foss Securities for every share of Woori Investment Bank, giving Woori Financial Group a 97.1 percent stake in the combined entity, thereby making it the dominant shareholder. Woori intends to eventually acquire complete ownership by buying out minority shareholders.

This deal marks Woori Financial Group's return to the brokerage business after selling Woori Investment & Securities to NH Financial Group in 2014. Woori is currently the only one among the top five Korean financial institutions without a brokerage subsidiary.

Korea Foss Securities, the country's leading online-only brokerage service, manages 6.5 trillion won ($4.77 billion) in assets, with about 280,000 clients using its "Fund Supermarket" platform. Korea Securities Finance Corp. holds a 51.68 percent stake in Foss.

Woori Financial Group announced that the newly integrated entity would be positioned as a mid-sized securities firm, with a net capital of 1.2 trillion won, making it approximately the 18th largest in the industry.

Initially, the merged firm will operate based on the existing businesses and customers of both companies. However, it plans to gradually expand its investment banking operations through collaboration with other Woori subsidiaries, while also building the infrastructure for mobile trading and retail brokerage by leveraging Foss’ digital assets.

"The focus will be digital, but we aim to stand out by emphasizing robotics and artificial intelligence. Our AI division will be a key differentiating factor," said Nam Ki-cheon, the CEO of Woori Investment Bank.

Woori officials announced that a task force will be set up to develop a mobile retail brokerage service, which could launch as early as the end of this year.

Additional synergy is expected with the launch of Woori's unified app "New Won" in November, which will consolidate all financial services of Woori affiliates onto a single platform. "The super app will have a combined user base of about 20 million, and our goal is to convert them into our securities clients," said Lee.

In line with its focus on digital services, the company has no plans to expand its physical branch network beyond the four currently operated by Woori Investment Bank.

"The industry trend in mass marketing is shifting toward a digital focus, and our smaller branch footprint is actually an advantage," Nam said. He explained that existing branches will concentrate on face-to-face services for high-net-worth clients, such as private banking and wealth management, while mass marketing efforts will be predominantly digital.

The merger is Woori's latest step in broadening its footprint in the nonbanking sector, as the group aims to reduce its reliance on traditional banking and diversify its revenue streams.

As the only major financial group without an insurance division, Woori Financial Group is currently considering entering the insurance sector by acquiring Lotte Insurance. Last week, it was reported that Woori submitted a preliminary bid to purchase JKL Partners' 77 percent stake in Lotte Insurance, with due diligence ahead to determine the insurer's value.

Lee underscored the group's interest in the deal but reaffirmed that they would "not overpay" for any acquisition, including this one.

"If we proceed with due diligence, we will thoroughly evaluate the company to determine a fair valuation. However, we have no intention of acquiring at unreasonably high prices and do not consider any deals that would harm our current common equity tier 1 ratios," Lee stated.