KB Financial Group, Inc. (ADR) (KB), Woori Finance Holdings Co., Ltd. (ADR) (WF) & More Korean Banks With ADRs That Deserve Interest

Business challenges and opportunities

While the Korean economy is expected to grow healthily in 2013 and beyond, there are certain challenges such as households over-burdened with debt and a mini housing bubble. The new president, Park Geun-hye, has promised to liberalize the economy further while improving the welfare of Koreans.  One of the tools that Park’s administration is implementing is the creation of a multibillion fund to help low-income defaulted borrowers restructure their loans. The fund will not use public money and will issue long-term bonds to obtain financing. This should strengthen the financial and housing sectors.

On a company specific level, KB Financial Group, Inc. (ADR) (NYSE:KB) sees opportunities from expanding overseas. It has had recent challenges from its shareholding in POSCO and Hyundai Merchant Marine and an investment in Kazakhstan Bank Center Credit. Similarly, Woori Finance Holdings Co., Ltd. (ADR) (NYSE:WF) incurred losses from its loans to the bankrupt STX Shipbuilding. It will likely benefit from a premium due after its complete privatization (57% of its shares are held by the Korea Deposit Insurance Corporation) and its international growth in Vietnam and China. Finally, Shinhan is planning to expand its non-banking business as it has a high quality life insurer and asset management businesses. Also, it is a company whose CEO is not likely to be replaced in the near future (as long as the political situation remains stable). On the negative side, the bank had exposure to the shipbuilding and construction industries.

Conclusion

The challenges facing KB Financial Group, Inc. (ADR) (NYSE:KB), Woori Finance Holdings Co., Ltd. (ADR) (NYSE:WF) and Shinhan seem to be short-term or already accounted for in the banks’ conservative estimates for losses. On the other hand, the opportunities from international growth, a growing local economy and demand for diverse financial services, and the new business friendly government bode well for a continued solid long-term investment performance. This, combined with share prices that are attractively priced, make KB, Woori and Shinhan ADRs worth considering.

The article Three Korean Banks With ADRs That Deserve Interest originally appeared on Fool.com and is written by Delian Naydenov.

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