UPDATE 1-Shinhan Bank to exercise all call options in 2009

SEOUL, Feb 13 (Reuters) - South Korea's Shinhan Bank said on Friday that it would exercise options to call back both domestic and foreign subordinated bonds on their call dates this year, including a combined $400 million of debt maturing in 2014.

The announcement comes after rival Woori Bank made a surprise decision on Wednesday not to recall $400 million in junior-ranked debt, sparking a guessing game of who might be next.

'Most investors tend to buy hybrid securities and subordinated debt with expectations that the issuer will call them back before maturity,' Shinhan said in a statement.

'Therefore, whether to exercise a call option or not will have a big impact on a financial institution's reputation and overseas funding conditions.'

The bank will call back $50 million of foreign subordinated debt in February, as well as $400 million debt with call dates in early November.

Those subordinated bonds were issued in 2004 with a maturity of 10 years, with callable options at the mid-point.

Woori's decision has effectively shut down the overseas market for new Asian subordinated bonds, a favourite financing option for banks, even as regional lenders struggle to find fresh funding in the face of a deepening global economic downturn and persistent credit crunch.

But analysts had expected to Shinhan to buy back its debt.

Other South Korean banks with callable subordinated debt include the Industrial Bank of Korea, which has $300 million of bonds, and National Agricultural Cooperative Federation (Nonghyup), with $250 million. Call dates for the issues are in May and June, respectively.

Shinhan, a unit of Shinhan Financial Group , also said it would call back a combined 272.5 billion won of won-denominated debt this year.

The bank, ranked behind Kookmin and Woori by assets, named Lee Baek-soon, a vice president of parent Shinhan Financial Group, as its chief executive earlier this week.

Shinhan Financial posted a smaller-than-expected net profit of 283.7 billion won for the quarter ended in December, while Woori Finance Holdings, parent of Woori Bank, swung to a quarterly net loss of 664.8 billion won.

(Reporting by Kim Yeon-hee; Editing by Jonathan Hopfner) Keywords: SHINHAN/BONDS ([e-mail]; [phone]; Reuters Messaging: [e-mail]) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.