Announcing a 50% Increase in Total Shareholder Return Rate
Former Holding Company Chairman Involved in Improper Loan Scandal
Stock Price Ends Slightly Lower Despite Negative News
Woori Financial Group, which had set the wheels in motion to enhance corporate value by announcing shareholder reinforcement measures, has been hampered by an improper loan issue. Investors who trusted and bet on Woori Financial Group, which presented a roadmap to expand the total shareholder return ratio to 50%, have been thrown into confusion. However, despite the improper loan incident involving former Chairman Sohn Tae-seung, the stock price closed slightly down.
According to the Korea Exchange on the 12th, Woori Financial Group's stock price surged to 16,180 KRW (closing price) on July 26, reaching a 52-week high, fueled by the announcement of its corporate value enhancement plan last month. At that time, Woori Financial was the first financial holding company to present a corporate value enhancement plan that included △a mid-to-long-term return on equity (ROE) target of 10% △mergers and acquisitions (M&A) strategies. Following the value-up disclosure, Daishin Securities positively evaluated Woori Financial's progressive dividend policy and raised its target price by 11% to 20,000 KRW.
However, as expectations for value-up gradually weakened, the stock price fell below 14,000 KRW to 13,980 KRW on the 5th of this month. From the 6th to the 12th, except for eight days, the stock price showed an upward trend again, recovering to the 14,000 KRW range.
Subsequently, Woori Financial accelerated its value-up drive. On the 8th, it held the 'Woori Financial Analyst Day' at the Woori Investment & Securities headquarters in Yeouido, inviting 26 domestic and international securities financial analysts. At this event, Woori Financial announced a shareholder return policy to achieve a common equity tier 1 capital ratio of 12.5% ahead of schedule by 2025 and to expand the total shareholder return ratio up to 50% if the common equity tier 1 capital ratio exceeds 13.0%.
Chairman Lim Jong-ryong of Woori Financial Group, who made the announcement in person, said, "This is a clear disclosure of Woori Financial's commitment to executing the corporate value enhancement plan (value-up measures). We will focus the group's capabilities on enhancing corporate value by generating financial performance that exceeds market expectations through strengthening core business competitiveness and a solid business portfolio."
However, this announcement was overshadowed by an incident. An improper loan scandal involving relatives of former Woori Financial Chairman Sohn Tae-seung broke out. According to the Financial Supervisory Service, Woori Bank executed loans totaling 61.6 billion KRW (42 cases) from April 2020 to January this year to borrowers related to former Chairman Sohn's relatives. This means that the internal control system, which is paramount in the banking sector where transparency and trust are top priorities, did not function at all. As the company is embroiled in controversy over poor internal controls, shareholders are concerned that the stock price, which had been boosted by the value-up effect, may lose its upward momentum.
However, on the 12th, when the negative news broke, pension funds and others net purchased Woori Financial Group shares worth 887 million KRW. As a result, the stock price closed at 14,750 KRW, up 0.55% (80 KRW) from the previous trading day.
Park Hye-jin, a researcher at Daishin Securities, said, "Although the improper loans related to the former chairman's relatives are an issue that damages Woori Financial Group's credibility, it does not appear to be an issue that would affect annual performance or fundamentals, which is why the stock price did not react significantly. It also indicates that market expectations for the corporate value enhancement plan that Woori Financial has announced to pursue remain strong."
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