[Click eStock] "Woori Financial Group, Stock Undervalued Despite Continued Strong Performance Outlook"

[Asia Economy Reporter Ji-hwan Park] Korea Investment & Securities maintained its investment opinion of 'Buy' and target price of 17,000 KRW for Woori Financial Group on the 11th, expecting a favorable earnings trend driven by an improvement in net interest margin (NIM).

Baek Doo-san, a researcher at Korea Investment & Securities, stated, "Fourth-quarter net income attributable to controlling interests is expected to increase by 62% year-on-year to 269.8 billion KRW," adding, "Firstly, interest income remains solid. The bank's NIM in the fourth quarter is estimated to have risen by 4 basis points from the previous quarter to 1.40%." Considering the NIM sensitivity related to interest rate fluctuations, despite the termination of the LCR relaxation extension at the end of March this year, it is analyzed that NIM will further improve by 3 basis points in the first quarter.

Loan loss expenses and selling and administrative expenses are within the expected range. The fourth-quarter loan loss ratio is expected to be moderate at 0.23% despite a conservative provisioning stance. Researcher Baek emphasized, "Due to the favorable economic conditions, additional provisioning related to future economic outlook is difficult," and added, "For borrowers with repayment deferrals, proactive provisioning has been completed not only for the deferred loans but also comprehensively for other loans held by those borrowers."

Throughout the year, with a 10 basis point increase in NIM and expanded non-bank earnings from credit cards, mutual savings banks, and F&I (newly established), the return on equity (ROE) is expected to reach 10.6% this year. However, the price-to-book ratio (PBR) is only 0.40 times. Researcher Baek said, "Shareholder return policies will be further strengthened," and added, "With the sale of a 9.3% stake by the Korea Deposit Insurance Corporation (KDIC) in December last year, the company has crossed the critical threshold toward full privatization." The remaining KDIC shares are expected to be sold at 10,193 KRW per share, significantly lower than the current stock price, making full privatization likely within this year as all public funds are recovered.

Researcher Baek also noted, "The implementation of shareholder-friendly policies has become possible," and said, "The approval of the second phase of the internal ratings-based approach in November last year improved the common equity tier 1 capital ratio by 1.3 percentage points, which is positive in terms of dividend capacity."