Woori Financial’s net profit of 603.8 billion won falls about 200 billion won short of consensus
Bank shows weak loan and WM growth; brokerage misses out on stock market rally
Woori Bank CEO Jung Jin-wan, left, and Woori Investment & Securities CEO Nam Gi-cheon. <Each company>
[Insight Korea = Park Ji-hun]
Woori Financial Group Chairman Yim Jong-yong’s trusted executives — Woori Bank CEO Jung Jin-wan and Woori Investment & Securities CEO Nam Gi-cheon — delivered weaker-than-expected results, contributing to the group’s first-quarter “earnings shock.”
The two executives took charge of the group’s two key subsidiaries under Yim’s leadership, but failed to prevent a decline in first-quarter earnings. Woori Financial posted net profit of 603.8 billion won in the first quarter, down 2.1% from a year earlier and far below the market consensus of 815.2 billion won.
Woori Bank offsets gains from life insurance acquisitions
The group’s earnings decline came as a shock because Tongyang Life Insurance and ABL Life Insurance newly contributed to group earnings, posting first-quarter net profits of 42.8 billion won and 12.1 billion won, respectively. The two life insurers were incorporated into the group in July last year, meaning they made no contribution to first-quarter results a year earlier.
The group’s earnings contraction was largely due to Woori Bank’s weak performance. Woori Bank’s first-quarter net profit plunged 16.2% to 531.2 billion won from 634 billion won a year earlier, mainly due to a decline in loan assets. As of the end of March, corporate loans increased by 3.669 trillion won, led by loans to large companies, but the increase was not enough to make up for last year’s decline of 8.314 trillion won.
Another factor was the bank’s failure to generate the benefits of lower funding costs. As of the end of March, core low-cost deposits had fallen 0.1% from the end of last year. By contrast, Hana Bank increased corporate loans by 3.226 trillion won in the first quarter, mainly to more profitable small and medium-sized enterprises, while expanding core low-cost deposits by 5.2%, helping lift interest income by more than 120 billion won.
Despite a buoyant stock market, Woori Bank’s wealth management performance lagged behind rivals. Its wealth management fee income stood at 89 billion won in the first quarter, up 4.2% from the fourth quarter of last year. Hana Bank, meanwhile, saw the figure surge 54.5% over the same period, from 115.5 billion won to 141.9 billion won.
IB-focused strategy causes missed opportunity in stock market boom
Woori Investment & Securities, which the group is working to nurture as a key growth engine, also failed to provide meaningful support to group earnings. The brokerage posted net profit of 14 billion won in the first quarter, more than 10 times higher than a year earlier, but the figure remained disappointing given its capital base.
Other bank-affiliated brokerages, including KB Securities and Shinhan Securities, recorded returns on equity approaching 20%, while Woori Investment & Securities’ ROE remained in the single digits.
Nam Gi-cheon, CEO of Woori Investment & Securities, failed to benefit meaningfully from the stock market rally in the first quarter. The number of retail clients stood at 755,000 last year, up by only about 100,000 from a year earlier.
Analysts say this reflects the downside of the brokerage’s investment banking-focused strategy. Nam, who has expertise in IB areas such as alternative investments, has placed emphasis on strengthening IB competitiveness by recruiting a large number of IB professionals from Mirae Asset Securities and Korea Investment & Securities.
“Woori Bank has strengths in corporate finance, so Woori Investment & Securities also built its business structure around IB. But the first-quarter figures show that performance depended on retail competitiveness,” an official at a securities firm said. “Woori Investment & Securities cannot operate like Toss Securities, but its failure to put enough weight behind retail will likely remain a regret.”
With the first-quarter results, Woori Financial has fallen to the bottom among bank-affiliated financial groups. NH NongHyup Financial, which had been challenging Woori’s fourth-place position, posted net profit of 868.8 billion won in the first quarter thanks to strong earnings at NH Investment & Securities, far outpacing Woori Financial.
IBK Industrial Bank of Korea, which consolidates earnings from group companies including IBK Securities, also recorded 666.3 billion won in first-quarter net profit. Although that marked a decline from a year earlier, it still slightly exceeded Woori Financial’s result.
Meanwhile, Woori Financial plans to accelerate productive finance while focusing on strengthening the competitiveness of subsidiaries in securities and insurance. To that end, it will gradually inject 1 trillion won in new capital into Woori Investment & Securities to bolster its business base and capacity to supply risk capital.
For Tongyang Life Insurance, the group is pursuing full ownership through a comprehensive share swap with the holding company. The goal is to bring the insurer fully under the group, create synergies with affiliates and fully reflect the profits generated within the group’s earnings.
Jung has risen rapidly since Yim took office in March 2023. At the end of 2022, he was head of the VG sales division at Woori Bank’s headquarters branch. Six months later, in June 2023, he became head of the small and medium enterprise group, and another six months later, in December that year, he was promoted to executive vice president. A year later, he was appointed CEO of Woori Bank, becoming the youngest head of a major commercial bank in Korea.
Nam also joined Woori Financial Group after Yim took office. A former CEO of Multi Asset Global Investments, Nam became CEO of Woori Asset Management in March 2023. A year later, he moved to Woori Investment Bank, where he led the acquisition and merger of Korea Foss Securities and the launch of Woori Investment & Securities.
A Woori Financial official said, “Based on a balanced business portfolio, we will ensure that both banking and non-banking divisions evenly drive group growth.” The official added, “Over the medium to long term, we plan to complete a virtuous cycle of improving ROE and expanding shareholder returns.”
-This article was translated by ChatGPT. (이 기사는 챗GPT가 번역했습니다.)
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