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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)
- Credit Rating (Moody’s/Standard & Poor’s/Fitch): A1 / A+ / -
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Fundamental View
AS OF 07 Mar 2024Woori 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, being affected by not only the kitchen sinking provisioning exercise but also uniquely amongst the FGs, taking a hit on its other non-interest income.
Asset quality was a strength with the lowest NPL ratios and credit costs among the four FGs but has deteriorated since 2Q23. Capital standing is a relative weakness with the CET 1 ratio at 11.9% compared to 13.1-13.6% at peers.
The company signed an agreement with KDIC to purchase all of Woori FG’s shares owned by KDIC (current ownership ~1.2%) by 2024. Government support continues to be assured if required.
Business Description
AS OF 07 Mar 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 the 'Big Four' commercial banks in Korea. 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. The group wants to acquire more non-bank financial businesses, particularly in the securities and insurance segments.
Risk & Catalysts
AS OF 07 Mar 2024Woori 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 will purchase all the remaining shares by 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. It has been looking for acquisitions, but it has to be particularly mindful of its CET1 ratio, which is still the lowest among the four FGs.
Due to new regulatory guidance on stress buffers, Woori FG has adjusted its mid-to-long-term CET1 ratio target from 12% to 13% in 4Q23.
The group is under investigation for mis-selling equity linked products to retail investors in 2021; fines and regulatory actions may ensue.
Key Metric
AS OF 07 Mar 2024| KRW bn | FY19 | FY20 | FY21 | FY22 | FY23 |
|---|---|---|---|---|---|
| Pre-Provision Profit ROA | 0.90% | 0.75% | 0.99% | 1.15% | 1.10% |
| ROA | 0.58% | 0.47% | 0.72% | 0.76% | 0.68% |
| ROE | 9.4% | 7.1% | 11.5% | 12.7% | 10.5% |
| Provisions/Loans | 0.14% | 0.28% | 0.17% | 0.26% | 0.53% |
| NPL Ratio | 0.45% | 0.42% | 0.30% | 0.31% | 0.35% |
| Woori Bank CET1 Ratio | 11.0% | 13.1% | 13.0% | 12.7% | 13.2% |
| Equity/Assets | 7.05% | 6.70% | 6.45% | 6.58% | 6.71% |
| Net Interest Margin Bank + Card | 1.70% | 1.57% | 1.62% | 1.84% | 1.82% |
CreditSight View Comment
AS OF 30 Apr 2024Woori 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, with net income down 19.9% YoY due to weaker non-interest income and higher provisions. Woori FG has a lower CET 1 ratio target of 13%. Its rapidly growing corporate loan book may lead to higher RWA growth and make it less likely for its CET1 ratio to catch up with its peers in the near future. The group is assessing opportunities to bolster its non-bank competitiveness and is considering an entry into new sectors, such as insurance.
Recommendation Reviewed: April 30, 2024
Recommendation Changed: April 24, 2017
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