Foreign Investors To Buy Korean Banks

South Korea will complete the takeover of its two most indebted commercial banks next month and then sell them to foreign investors, the government said Friday.

Korea First Bank and Seoul Bank were left with $2.67 billion and $2.14 billion, respectively, in bad loans when a series of South Korean conglomerates collapsed last year, triggering a financial crisis.

The Ministry of Finance and Economy announced Friday that it will take a controlling interest in the banks by early February by investing $738 million in each. Then, it will put the banks up for sale.

South Korean news media, without giving sources, reported Friday that Citicorp’s Citibank was interested in Korea First Bank and that Chase Manhattan was eyeing Seoul Bank.

However, Chase officials in New York declined to comment on the report, but a source told the Associated Press that a purchase of Seoul Bank was highly unlikely. A Citicorp spokesman denied the report.

The South Korean reports said the U.S. banks are interested in taking over the ailing Korean banks by themselves or forming joint ventures with South Korean conglomerates.

The government already has poured $1.5 billion into Korea First Bank and $1.2 billion into Seoul Bank to write off 56 percent of the banks’ bad loans.

The announcement reflects South Korea’s efforts to boost international confidence by restructuring its financial sector and opening it to foreign investment.