[Click eStock] "Woori Financial Group, Uncertainty in Shareholder Returns... Target Price Down"

Hanwha Investment & Securities on the 25th lowered the target price for Woori Financial Group from the previous 17,000 KRW to 16,000 KRW.

Woori Financial Group recorded an operating profit of 1.2522 trillion KRW and a net income attributable to controlling shareholders of 911.3 billion KRW in the first quarter. This is in line with market expectations. However, the net interest margin (NIM) turned downward for the first time in six quarters, with the holding company down by 1 basis point (bp) and the bank down by 4 bp. The won-denominated loan balance decreased for the second consecutive quarter as household loans fell by 2%. The normalized credit cost ratio is estimated at 0.32% annually.

Nonetheless, with the increased likelihood of securities firms being put up for sale in the market, expectations for mergers and acquisitions (M&A) involving Woori Financial Group remain valid.

Woori Financial Group has independently set its target common equity tier 1 (CET1) ratio at 10.5?12% and announced plans to increase the shareholder return ratio. However, with the regulatory authorities announcing the introduction of a new item called 'stress buffer capital,' there is a possibility that the target CET1 ratio will be raised. Assuming Woori Financial Group’s dividend payout ratio this year is 26.7%, the shareholder return ratio, including the ongoing 100 billion KRW share buyback, is 30.0%. The dividend yield is expected to total 9.6% by the end of the year.

However, this is subject to uncertainty from the investors’ perspective, as it may vary depending on the level of the stress buffer capital and whether the target capital ratio is revised.

Kim Doha, a researcher at Hanwha Investment & Securities, stated, "Considering the difficulty in securing NIM, we have adjusted the interest income and expense estimates and lowered Woori Financial Group’s profit estimates by 3% for this year and 5% for next year," adding, "Accordingly, we are lowering the target price due to the expected decline in return on equity (ROE)."

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