Woori Financial Group, Will They Move to Acquire a Securities Firm After Capital?

Accelerating Expansion in Non-Bank Sector
Recent Capital Increase of Woori Investment & Securities
Expected Transition to Mid-to-Large Securities Firm

[Asia Economy Reporter Kangwook Cho] Woori Financial Group is accelerating the expansion of its non-bank portfolio. Starting with the acquisition of Ajou Capital and Ajou Savings Bank, it has recently been pushing for a paid-in capital increase of Woori Comprehensive Financial, showing an unstoppable stance in mergers and acquisitions (M&A). The market expects that the moves of Sohn Tae-seung, Chairman of Woori Financial Group, who has aimed to become the 'No.1 comprehensive financial group,' will head toward the acquisition of a securities firm.

According to the financial sector on the 13th, Woori Financial recently completed a paid-in capital increase of 100 billion KRW for its affiliate Woori Comprehensive Financial. This capital increase was conducted through shareholder allocation followed by a partial public offering. Payment was completed on the 5th, and the new shares are scheduled to be listed on the 17th. In 2017, Woori Financial also executed a 100 billion KRW paid-in capital increase for Woori Comprehensive Financial, which had the effect of increasing Woori Comprehensive Financial's equity capital and profits by about 2 to 3 times. Woori Financial plans to use the funds raised through this capital increase to expand businesses such as investment banking (IB) operations and bond management.

The market views this recent paid-in capital increase of Woori Comprehensive Financial as part of a plan to acquire a securities firm and simultaneously convert Woori Comprehensive Financial into a securities company, merging them to quickly rise as a mid-to-large securities firm. Previously, Woori Financial had reviewed plans for both converting Woori Comprehensive Financial into a securities firm and acquiring a securities firm to merge with Woori Comprehensive Financial. When Chairman Sohn took office in December 2017, he declared plans to build a complete comprehensive financial group, stating, "To become a comprehensive financial group, we must have high-quality non-bank subsidiaries." Woori Bank does not currently have a securities affiliate, having sold Woori Investment & Securities along with Woori Aviva Life Insurance as a package to NH Nonghyup Financial Group in 2013.

Especially amid this year's stock market boom and the steady performance of securities firms, movements to acquire small and medium-sized securities firms are stirring, which lightens Woori Financial's steps that had refrained from pursuing M&A due to the COVID-19 pandemic. In the financial sector, it is known that DGB Financial Group, which has Daegu Bank as its main affiliate, recently inquired about the willingness to sell DB Financial Investment, Hyundai Motor Securities, and KTB Investment & Securities. Hi Investment & Securities, acquired by DGB Financial in 2018, recorded a net profit increase of 87% year-on-year as of the third quarter this year, playing a significant role in defending the group's performance.

Earlier, on the 23rd of last month, Woori Financial held a board meeting and resolved to acquire Ajou Capital, and three days later, on the 26th, it purchased 74.07% of Ajou Capital's shares through an over-the-counter transaction. Recently, it also submitted an application to the Financial Services Commission to incorporate Ajou Capital as a subsidiary, showing swift moves to make Ajou Capital a subsidiary within this year. By acquiring Ajou Capital, Ajou Savings Bank, which is 100% owned by Ajou Capital, will also be incorporated as a grandchild company of Woori Financial. The biggest reason for the acceleration is that the performance of each financial holding company is determined by its non-bank portfolio. Considering that Woori Financial holds a 78% stake in Ajou Capital, which posted a net profit of 101.6 billion KRW last year, Daishin Securities projected that an annual profit of 80 billion KRW will be added starting next year.

A financial sector official said, "The biggest reason Woori Financial Group ranked behind Nonghyup Financial for two consecutive quarters is that it lacks a securities subsidiary and thus missed out on the windfall profits from the stock market boom," adding, "Considering that expanding the business portfolio through large-scale M&A is Chairman Sohn's long-cherished goal, Woori Financial is expected to accelerate its acquisition of securities firms."

This content was produced with the assistance of AI translation services.