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Indicative Year-to-Maturity: 5.108% (Indicative as of March 2)
Woori Financial Group
- Sector: Financial Services
- Sub Sector: Banks
- Country: Korea
- Bond: WOORIB 4.875 28
- Indicative Yield-to-Maturity (YTM): 5.108% (Indicative as of March 2)
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Fundamental View
AS OF 22 Aug 2024- Woori FG’s performance record had been less consistent than some of its more commercially focused peers but improved in FY21-22. However, its FY23 performance lagged behind its peers, affected by not only the kitchen sinking provisioning exercise but also uniquely amongst the FGs, taking a hit on its other non-interest income. 1H24 results were decent, partially thanks to not having the ELS compensation issue which hit the other three FGs.
- Asset quality used to be a strength with the lowest NPL ratios and credit costs among the four FGs but has deteriorated since 2Q23, and we no longer see a gap with the other FGs.
- Capital standing is a relative weakness with the CET 1 ratio at 12.0% compared to 12.8-13.6% at peers in 2Q24.
Business Description
AS OF 22 Aug 2024- Woori's predecessor banks were rescued by the Korea Deposit Insurance Corporation (KDIC) following the 1997 Asian Financial Crisis.
- Woori Bank is one of Korea's 'Big Four' commercial banks. It previously owned two regional banks, Kwangju and Kyongnam, but these were spun off in 2014. Woori also sold its stake in Woori Investment Securities and its savings bank and life insurance arms to NH Financial Group.
- Woori set up a HoldCo (Woori FG) in January 2019 to expand into more diversified business lines, particularly investment banking. It used to have a HoldCo, but it was dissolved in 2014 when it was merged with Woori Bank.
- Its main subsidiaries are 100%-owned Woori Card, Woori Financial Capital (auto leasing), Woori Investment Bank and 72.3%-owned Woori Asset Trust. Recently the group acquired Korea Foss Securities, with a plan to merge it with Woori Investment to create a new securities entity. The group is in discussions to acquire an insurance company.
Risk & Catalysts
AS OF 22 Aug 2024- Woori FG was for many years majority-owned by the Korean government via the Deposit Insurance Corporation (KDIC), but KDIC has steadily been selling down its shareholding, and Woori purchased and cancelled the remaining shares in 2024. That said, Woori FG remains a large, systemically important bank with strong potential government backing if needed.
- Woori FG is less diversified than its peers, with most of its earnings coming from the bank and small contributions from the card and leasing businesses. The group has accelerated its M&A pace, acquiring Korea Foss Securities this year and doing due diligence on an insurance target.
- Its CET 1 ratio is ~1% behind the other three FGs. Due to new regulatory guidance on stress buffers, Woori FG has adjusted its CET1 ratio target from 12% to 13%. Given the group’s business expansion plans, the group’s CET 1 ratio is expected to remain behind the peers at least until 2025.
Key Metric
AS OF 22 Aug 2024| KRW bn | FY20 | FY21 | FY22 | FY23 | 1H24 |
|---|---|---|---|---|---|
| Pre-Provision Profit ROA | 0.75% | 0.99% | 1.15% | 1.10% | 1.26% |
| ROA | 0.40% | 0.66% | 0.70% | 0.54% | 0.71% |
| ROE | 5.9% | 10.6% | 11.5% | 8.3% | 10.8% |
| Provisions/Loans | 0.28% | 0.17% | 0.26% | 0.53% | 0.42% |
| NPL Ratio | 0.42% | 0.30% | 0.31% | 0.35% | 0.56% |
| Woori Bank CET1 Ratio | 13.1% | 13.0% | 12.7% | 13.2% | 13.2% |
| Equity/Assets | 6.70% | 6.45% | 6.58% | 6.71% | 6.91% |
| Net Interest Margin Bank + Card | 1.57% | 1.62% | 1.84% | 1.82% | 1.74% |
CreditSight View Comment
AS OF 29 Oct 2024We have an M/P recommendation on Woori FG and the bank. Woori FG was for some years the weakest of Korea’s Big 4 Financial Groups with a less consistent track record of managing risk and returns. Operating performance had shown an improvement for the past few years but disappointed in FY23. 9M24 results have showed some improvement, mainly supported by non-interest income. The group has been seeking opportunities to expand its non-bank businesses. Its new securities entity launched in August and the group is finalizing a deal to acquire Tongyang and ABL. The capital impact of the two transactions is small. Both the group and the bank CET1 ratios are behind peers. KDIC’s stake in the group has been completely sold.
Recommendation Reviewed: October 29, 2024
Recommendation Changed: April 24, 2017
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