"Woori Financial, Most Promising for Performance Improvement This Year"

NIM Sensitivity Highest... Advantageous During Base Rate Hikes
Differentiation in Non-Interest Income Through Strengthened M&A and Capital

[Asia Economy Reporter Minwoo Lee] Woori Financial Group is expected to show the most distinct profit improvement among financial holding companies this year. While most commercial banks are anticipated to maintain steady interest income, Woori Financial Group is likely to see the greatest increase in non-interest income due to its trend of strengthening non-bank affiliates through mergers and acquisitions (M&A).

On the 19th, Daishin Securities analyzed Woori Financial Group accordingly. Woori Financial Group is evaluated to have a high sensitivity to net interest margin (NIM). Among total won-denominated loans, 74% are variable rate loans, and within these, the proportion of loans linked to negotiable certificates of deposit (CD) and KORIBOR is 36%, which is higher than other banks, allowing it to quickly reflect changes in the base rate compared to COFIX.

Last year's fourth-quarter bank-based NIM was 1.42%, and if the base rate rises once more in the second half of this year, the NIM is expected to exceed 1.5%. Accordingly, Daishin Securities forecasts that Woori Financial Group's net interest income this year could increase by 15.3% from last year to 8.05 trillion won.

Subsidiaries and M&A activities are also growing rapidly. Since the internal rating system changed in November last year, the capital injection capacity has increased to between 2.5 trillion and 3 trillion won based on a common equity tier 1 (CET1) ratio of 10.5%. The top priority is acquiring a securities company, but before that, a capital increase for Woori Financial Capital is also being actively considered. Capital increased its capital by 200 billion won last year, raising total capital to 1.19 trillion won. With an annual net profit rising to 141 billion won last year, it is considered the fastest-growing subsidiary.

The card business recorded a net profit of 201 billion won last year. Due to the reduction in merchant commission rates, it is expected to decrease by about 55 billion won this year. However, by shifting from the BC Card network to its own network, costs are expected to be reduced, and marketing and data management will become more advantageous.

Researcher Hyejin Park of Daishin Securities said, "This year, commercial banks' NIM is expected to improve by about 8 to 12 basis points, so all financial holding companies' interest income will inevitably remain steady, making differentiation possible only through non-interest income. However, securities performance is likely to decline, and card companies will inevitably see profit decreases due to merchant commission rate cuts. Woori Financial Group is strengthening non-bank affiliates including through M&A, so the likelihood of increased non-interest income is high, and with high NIM sensitivity, differentiation is possible this year," she explained.

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