[Click eStock] "Overly Hesitant Woori Financial, Heading for a 'Surprise Performance' in 1Q"

Moderate Growth Rate, NIM Increase... Reduced Costs Related to Private Equity Funds

[Asia Economy Reporter Minwoo Lee] Woori Financial Group is expected to deliver a 'surprise performance' in the first quarter of this year. The significant increase in loans and the rise in net interest margin (NIM), along with profit growth from the inclusion of Woori Financial Capital (formerly Aju Capital) into the group, are analyzed to be key factors.

On the 6th, Hana Financial Investment maintained its 'buy' rating and target price of 12,500 KRW for Woori Financial Group, citing these reasons. The closing price on the previous day was 10,050 KRW. Hana Financial Investment forecasted that Woori Financial Group would record a consolidated net profit of 573 billion KRW in the first quarter, a 10.6% increase compared to the same period last year, significantly surpassing the market consensus of 544 billion KRW.

Researcher Jungwook Choi of Hana Financial Investment explained, "With the loan growth rate exceeding 2.5% in the first quarter and NIM rising by 5 basis points (1bp=0.01%), net interest income is estimated to increase by 7.6% year-on-year. Additionally, the inclusion of Woori Financial Capital into the group is expected to contribute approximately 20 billion KRW in after-tax profit growth."

Unlike last year, when significant non-operating losses occurred due to costs related to derivative-linked funds (DLF) and Lime funds, this first quarter is expected to see almost no costs related to private equity funds. There is also no additional COVID-19 provisioning burden, so despite consolidation with Woori Financial Capital, loan loss provisions are expected to decrease to around 180 billion KRW. Additional cost recognition related to private equity funds is estimated to be limited to about 20 to 30 billion KRW this year. Researcher Choi analyzed, "Although the non-bank sector is weaker compared to other companies, strong performance is sufficiently achievable with the bank alone."

The anticipated additional approval of the internal ratings-based approach is also a positive factor. If additional approval for changes to the internal ratings-based approach for credit cards and external audit corporations (large and small enterprises) is obtained in the third quarter, the common equity tier 1 capital ratio is expected to increase by approximately 120 to 140 basis points. Researcher Choi stated, "Based on the secured capital capacity, Woori Financial will actively pursue shareholder-friendly policies such as interim dividends. The expected dividend yield for this year is projected to reach 6.3%."

This content was produced with the assistance of AI translation services.