Agenda Review Subcommittee to Convene Early Next Week
Re-examination of Capital Adequacy Expected
Conditional Approval Likely to Be Discussed
The Financial Services Commission has postponed discussions regarding Woori Financial Group's acquisition of insurance companies to next week. At the third meeting, it is expected that the committee will re-examine matters related to capital expansion and decide whether to grant approval.
According to financial authorities on April 25, the Financial Services Commission will convene its agenda review subcommittee early next week to discuss the approval of Woori Financial Group's acquisition and merger (M&A) of Tongyang Life Insurance and ABL Life Insurance.
Generally, if the matter is minor, the subcommittee concludes discussions in a single session. However, it is reported that the members wanted to scrutinize Woori Financial Group's M&A more thoroughly. This is because the conclusions reached by the subcommittee are often upheld at the regular meetings of the Financial Services Commission.
Previously, Woori Financial Group received a grade 2 in the management status evaluation. In principle, a grade 3 in the management status evaluation makes it difficult to acquire subsidiaries. However, if conditions such as capital expansion are met, a conditional acquisition is possible. The subcommittee of the Financial Services Commission is reportedly focusing its discussions on this aspect.
During the previous review, there were reportedly many questions regarding capital adequacy indicators. As of the end of last year, Woori Financial Group's CET1 ratio was 12.13%, an improvement from 11.95% in the third quarter of last year. This is lower than other financial groups such as KB Financial Group (13.51%), Shinhan Financial Group (13.03%), and Hana Financial Group (13.13%), and only slightly exceeds the financial authorities' recommended level of 12%.
A Woori Financial Group representative reportedly focused on explaining plans to improve capital adequacy indicators in the event of acquiring the insurance companies. As part of this effort, the group plans to sell seven idle real estate properties this year. At the end of last year, it also sold six idle real estate properties. Idle real estate is included in risk-weighted assets (RWA), so disposing of these assets helps improve the Common Equity Tier 1 (CET1) ratio.
In terms of internal controls, Woori Financial Group is said to have received positive evaluations for its commitment to improvement and sufficient system enhancements. The group is focusing on reform by establishing an Ethics and Internal Control Committee within its board of directors and implementing an abnormal transaction detection solution in its IT system.
If Woori Financial Group completes the acquisition of the insurance companies, it is expected to move away from a revenue structure that is heavily dependent on banking. Among major financial groups, its reliance on banking is the highest at 90%. Woori Financial Group's net profit for last year was 3.086 trillion won, the second highest on record. Of this, the banking division accounted for 3.039 trillion won.
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