Woori sees China unit by December

By Kim Soyoung

SHANGHAI (Reuters) - Woori Bank, South Korea's No.3 lender, expects to receive final approval this month to set up a wholly owned unit in China by December and is looking to buy Chinese lenders to speed its move into the world's fourth-largest economy.

The banking unit of Woori Financial Group (053000.KS: Quote, Profile, Research, Stock Buzz) won a preliminary nod from the China Banking Regulatory Commission in June to locally incorporate its operations in China -- a first for a South Korean lender.

Woori plans to incorporate locally with initial capital of $300 million by the end of December and aims to have 53 branches and a workforce of 900 by 2010, Hwang Rok, Woori Bank's head of global operations, told the Reuters China Century Summit.

"China's banking regulator approved our preparatory work for launching the unit on August 30, so we expect final approval this month," Hwang told the Reuters Summit in a phone interview from Seoul.

"Although competition is getting tougher, we are confident we can crack a niche market in China by targeting major South Korean corporate clients, a big number of Korean Chinese, as well as wealthy Chinese customers."

Woori and two other South Korean lenders are among a dozen foreign banks queuing to incorporate their operations in China, whose banking market was opened to overseas banks in late 2006 as part of Beijing's commitment to the World Trade Organisation.

Setting up China-incorporated subsidiaries enables foreigners to offer full-fledged banking services to Chinese customers and makes it easier for foreign banks to apply to open new branches, since Beijing gives priority to foreign banks with local incorporation.

"To speed up our expansion, we are looking for potential takeover targets among Chinese banks, although no negotiations are under way yet," Hwang said.

NICHE MARKET

South Korean lenders like Woori and Shinhan Bank are facing an uphill battle against entrenched global banks such as Citigroup Inc (C.N: Quote, Profile, Research, Stock Buzz) and HSBC Holdings (0005.HK: Quote, Profile, Research, Stock Buzz) (HSBA.L: Quote, Profile, Research, Stock Buzz) as well as regional rivals such as DBS Group Holdings Ltd (DBSM.SI: Quote, Profile, Research, Stock Buzz), which all won approval to start locally incorporated businesses.

Shinhan Bank (055550.KS: Quote, Profile, Research, Stock Buzz), South Korea's second-biggest bank, and fourth-ranked Hana Bank (086790.KS: Quote, Profile, Research, Stock Buzz) are also awaiting approval from China's financial regulator for their plans to set up wholly owned units in China, for $258.4 million and $129 million, respectively.

Woori, which currently operates five branches in China including in Beijing, Shanghai and Suzhou, will locate the headquarters of its china-incorporated subsidiary in Beijing, instead of China's financial hub, Shanghai.

"Most of foreign banks are setting up headquarters in Shanghai, so there's more competition there. Other reasons we chose Beijing are that it's closer to where about 2 million Korean-Chinese live, and that most Korean firms have China headquarters there," Hwang said.

Korean companies, led by technology players such as Samsung Electronics Co (005930.KS: Quote, Profile, Research, Stock Buzz) and LG Electronics Inc (066570.KS: Quote, Profile, Research, Stock Buzz), have rushed to invest in the neighboring country, hoping to share the more than 10 percent economic growth it has clocked in past years.

"To compete with local lenders, we need to target a niche market, like private banking services targeting individuals with at least $1 million in deposits. We also think there's going to be demand for Internet banking, which Korea is very strong at."