[Click eStock] "Woori Financial Group, Surprise Q3 Earnings Signal Positive Outlook for Sale"

[Asia Economy Reporter Ji Yeon-jin] Hana Financial Investment announced on the 15th that it raised its earnings estimates and increased the target stock price of Woori Financial Group by 6.5% to 16,500 KRW, considering the expected earnings surprise in the third quarter. The investment rating was maintained as Buy.

Woori Financial Group's estimated net profit for the third quarter is expected to significantly exceed market expectations at 761 billion KRW, a 58.6% increase compared to the same period last year. This is even higher than the strong profit improvement seen in the second quarter.

The net interest margin (NIM) for the third quarter is expected to decline by 1 basis point, but with loan growth exceeding 2.5%, the surge in net interest income is expected to continue. Additionally, non-interest income is expected to be solid due to strong performance in the investment banking (IB) sector, including real estate project financing (PF). Credit costs are forecasted to be around 130 billion KRW. The credit cost ratio to total assets is estimated at 0.12%, the lowest among banks.

Even excluding the one-time pre-tax equity method valuation gain of 70 billion KRW from the K-Bank premium capital increase, the recurring net profit for the third quarter is expected to exceed 700 billion KRW. The annual estimated net profit for this year is expected to surpass 2.3 trillion KRW, with a return on equity (ROE) reaching 9.6%. The expected dividend per share (DPS) for this year is 800 KRW, with a total expected dividend yield of about 6.8%. The year-end dividend yield is also estimated at 5.5%.

Choi Jung-wook, a researcher at Hana Financial Investment, explained, "The reason Woori Financial Group's stock price performance was sluggish compared to other banks was due to concerns about potential overhang from the Korea Deposit Insurance Corporation's (KDIC) stake, but this discount factor is expected to be resolved soon." He added, "As a result of the Letter of Intent (LOI) submissions, a total of 18 investors participated at levels ranging from 4.8 to 6.3 times the sale volume (10%), signaling a positive outlook for the sale."

Although it cannot be ruled out that the atmosphere may change during the final bidding, the possibility of a successful sale is high. With the base interest rate entering an upward cycle, foreign investors' interest in domestic bank stocks is expanding, and since the announcement of the stake sale on September 9, the stock price has risen by about 10%, increasing the likelihood of higher bid prices from preliminary bidders. This has made it easier for the Public Fund Management Committee to decide on a full sale. If a full sale becomes more likely, the remaining stake after the sale will decrease, thereby reducing concerns about residual overhang. Therefore, it is analyzed that the KDIC's remaining 5.3% stake is unlikely to be released into the market for some time after this sale.