[Click eStock] "Woori Financial Group, Capital Ratio Improvement Is the Key Variable"

Korea Investment & Securities diagnosed on the 28th that the key variable for Woori Financial Group is whether the capital ratio improves. The investment opinion 'Buy' and the target price of 20,000 KRW were maintained.

Woori Financial Group recorded a controlling net profit of 903.6 billion KRW in the third quarter, exceeding market expectations by 5%.

Baek Doosan, a researcher at Korea Investment & Securities, explained, "Due to the decline in market interest rates and the expansion of loan growth, the net interest margin (NIM) of the bank decreased by 7bp (1bp=0.01 percentage point) from the previous quarter to 1.40% as the interest rate spread between deposits and loans narrowed. Won-denominated loans increased by 5.4% quarter-on-quarter, mainly in household loans and small and medium-sized corporate loans." He added, "The group's quarterly loan loss rate rose by 5bp from the previous quarter to 0.48%, and increased by 19bp year-on-year, with the credit card delinquency rate remaining high, maintaining the overall normal loan loss rate at a high level of around 0.4%. Also, although the capital ratio increased by about 0.2 percentage points due to the decline in the exchange rate, the common equity tier 1 capital ratio remained at 12.0%, the same level as the previous quarter, due to a significant increase in assets centered on loans."

Researcher Baek further explained that the improvement of the capital ratio is the key variable. He said, "It is positive that a sound profit capacity of around 900 billion KRW per quarter is being maintained. Meanwhile, the improvement in soundness indicators is expected to be gradually realized from next year." He pointed out, "Ultimately, the core issue is whether the common equity tier 1 capital ratio will exceed 12.5% by the end of 2025, allowing the shareholder return rate to improve significantly compared to the current level. There is still uncertainty surrounding the achievement of this figure."