[Click eStock] "Woori Jonggeum, Profit Expected to Decrease This Year... Investment Opinion Neutral"

BNK Investment & Securities Report

On the 16th, BNK Investment & Securities maintained a neutral investment opinion and a target price of 950 KRW for Woori Financial.

Woori Financial's net profit for the fourth quarter of last year was 23.7 billion KRW, significantly exceeding market expectations (16.0 billion KRW). This represents an 87.9% increase compared to the same period last year. Despite an expansion in deposit liabilities (up 16.8% year-on-year), increased interest expenses due to high interest rates (174.2%), and a slowdown in loan growth due to risk management (18.6%), the increase in interest income (61.3%) from rising loan interest rates offset these factors, resulting in a satisfactory 10.2% growth in interest income. Additionally, despite a reduction in new project financing (PF) loans, strong fee income inflows from existing businesses and some reversals led to a substantial increase in fee income (256%) compared to expectations.

Loan demand in the first quarter remains favorable, but due to ongoing risk management amid concerns of economic slowdown, the loan balance is expected to see limited growth through the first half of the year. Interest income is anticipated to remain at a level similar to that of the fourth quarter of last year, considering the high loan interest rates. Kim In, a researcher at BNK Investment & Securities, stated, “Due to the burden of high interest rates and increased uncertainty in the business environment, a reduction in PF loans is inevitable, and fee income is expected to decrease.” He added, “Net profit for the first quarter is projected to be 22.4 billion KRW.”

The total net profit for this year is forecasted to decrease by 9% year-on-year to 84.2 billion KRW. This is expected due to continued risk expansion from high interest rates, concerns over economic slowdown, and a reduction in PF growth. Researcher Kim In explained, “Although there may be benefits from strategic changes related to securities firms within the group, the relatively high price-to-book ratio (PBR) of 0.9 within the financial sector is a burden.”