[1mm Financial Talk] Woori Financial Completing Non-Bank Portfolio's 'Last Button'

Woori Financial Group, which is strengthening its non-bank sector, is leaving the acquisition of an 'insurance company' as the final piece to complete its portfolio. Whichever option it chooses, if Woori Financial acquires an insurance company, it is expected to transform into a financial group with a comprehensive portfolio including banking, securities, and insurance for the first time in five years since the revival of its holding company system.

According to the financial sector on the 28th, since the re-launch of the holding company system in January 2019, Woori Financial has been expanding its size by consecutively acquiring and establishing non-bank subsidiaries such as Woori Asset Management and Asset Trust (2019), Woori Financial Capital and Savings Bank (2021), Woori Venture Partners and Woori Financial F&I (2022), and Korea POS Securities (2024).

The reason Woori Financial has steadily acquired and established these non-bank subsidiaries is due to its relatively weak non-bank portfolio. At the time of the holding company's establishment, the non-bank sector accounted for only about 10% of Woori Financial's net profit. In other words, about 90% of the net profit was earned from banking. Last year as well, the banking sector accounted for 93% of Woori Financial's net profit. This was partly due to the poor performance of non-bank subsidiaries caused by the high interest rate environment, but the lack of core non-bank portfolios such as securities and insurance was also a major cause.

An official from a major commercial bank said, "In major financial holding companies like KB and Shinhan, the banking sector's contribution to net profit is large, but overall it fluctuates around 60%. However, Woori Financial, which lacks major non-bank subsidiaries, has a banking contribution exceeding 90%," adding, "This means that its revenue base is not stable."

Of course, Woori Financial did not originally have a weak subsidiary portfolio. During the era of the old Woori Financial Group before its dissolution, it had a solid lineup of subsidiaries including the current Woori Bank, Gwangju Bank (currently under JB Financial Group), Kyongnam Bank (currently BNK Kyongnam Bank), Woori Investment & Securities (currently NH Investment & Securities), Woori Futures (currently NH Futures), Woori Aviva Life (currently iM Life), Woori Financial (currently KB Capital), the old Woori Financial Savings Bank (currently NH Savings Bank), and Woori F&I (currently Daishin F&I). These former subsidiaries of Woori Financial still generally maintain leading positions in the industry today.

However, this portfolio was not so much Woori Financial's own will but rather a structure intentionally built to achieve the goal of restructuring insolvent financial institutions through public fund injections, making it difficult to sustain for a long time. After repeated failures in privatization, the authorities dismantled the old Woori Financial Group by separating and selling off each subsidiary. Only Woori Bank and some subsidiaries remained.

A financial sector official said, "When the old Woori Financial Group's subsidiaries were sold, NH Nonghyup Financial Group, which was an industry leader, acquired Woori Investment & Securities along with futures and savings banks, finding new growth engines and rising to the ranks of the top five financial holding companies," adding, "It is quite ironic that the then chairman of NH Nonghyup Financial was the current chairman of Woori Financial, Im Jong-ryong."

Since Chairman Im's administration, Woori Financial has been committed to acquiring core non-bank portfolios such as securities and insurance companies. Regarding the re-entry into the securities business, which faced a 'lack of available assets,' the strategy shifted to acquiring a small- to mid-sized securities firm, Korea POS Securities, and merging it with Woori Comprehensive Financial, the only comprehensive financial company in Korea, to increase scale. After going through regulatory approvals, the plan is to launch the new securities company in the third quarter. There is also a possibility of acquiring additional securities firms to foster the securities business. The new securities company has already been tentatively named 'Woori Investment & Securities,' seemingly to restore its former prestige.

The final piece, the acquisition of an insurance company, is also on track. After participating in the preliminary bidding for Lotte Non-Life Insurance, which is rumored to have a sale price of 2 to 3 trillion won, Woori Financial recently signed a non-binding memorandum of understanding (MOU) with China-based Dazhong Insurance, the major shareholder of Tongyang Life and ABL Life, and plans to proceed with due diligence. A Woori Financial official said, "No concrete decision has been made yet regarding the acquisition of an insurance company," adding, "The principle of not making an excessive overpayment remains unchanged."