[Click eStock] Woori Financial Group, Record-Breaking Performance Makes Banking Sector Top Pick

▲Woori Financial Group stock price trend (Source=KB Securities)

[Asia Economy Reporter Kwon Jae-hee] KB Securities maintained its buy rating on Woori Financial Group on the 10th and raised the target price by 14.3% to 20,000 KRW.

Woori Financial Group's Q4 consolidated net income attributable to controlling shareholders last year was 390 billion KRW, exceeding market expectations. Although 181 billion KRW in voluntary retirement costs and 84 billion KRW in additional COVID-19 related provisions were reflected, their amounts were smaller than expected. Additionally, the net interest margin (NIM), a key revenue source for banks, rose by 7 basis points (bp), higher than anticipated, leading to a 7.4% quarter-on-quarter increase in the group's net interest income, which contributed to the strong performance. Consequently, after reflecting additional provisions, the credit cost ratio (CCR) stood at 27 bp (11 bp for the bank), maintaining a very low level of normal CCR.

Following a 4 bp NIM increase last year, Woori Financial Group is expected to continue improving net interest income with an additional 10 bp NIM rise this year.

Moreover, the higher profit contribution from banking operations compared to financial holding companies among competing commercial banks is also expected to sustain Woori Financial Group's competitive advantage.

However, Woori Financial Group's year-end dividend per share (DPS) was 750 KRW (900 KRW annually), falling short of expectations. The dividend payout ratio in 2021 was 25.3%, lower than 27% in 2019.

Seung-geon Kang, a researcher at KB Securities, stated, "We maintain Woori Financial Group as our top pick in the banking sector," and evaluated that "the pace of NIM increase and the CCR aspect of Woori Financial Group are positive."

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