[Click eStock] "For Woori Financial, Capital Ratio Management under 'Productive Finance' Is Key to Further Valuation Gains"

On October 30, Shinhan Investment Corp. stated that “further valuation gains for Woori Financial Group depend on the creation of synergies with its non-banking subsidiaries and successful capital ratio management under a productive finance policy.” The firm maintained its “Buy” investment rating and a target price of 28,500 won.

Eun Kyungwan and Park Hyunwoo, analysts at Shinhan Investment Corp., commented, “Woori Financial Group has overcome its lack of earnings power and capital strength through successful mergers and acquisitions (M&A) and the implementation of reduced dividends.”

Woori Financial Group’s net profit attributable to controlling shareholders in the third quarter was 1.24 trillion won, significantly exceeding consensus estimates. The inclusion of 556 billion won in profit and loss related to the acquisition of Tongyang Life Insurance and ABL Life Insurance played a key role. However, several expenses were also incurred, including 33 billion won in foreign exchange valuation losses, 152 billion won in provisions for trust company book-based business sites, 32 billion won in additional provisions related to currency option products, and 39 billion won in impairment losses on goodwill from asset trust operations.

The bank’s net interest margin (NIM) rose by 3 basis points compared to the previous quarter, while Korean won loan growth remained at a conservative 0.5%. Nevertheless, increased fee income and M&A effects are driving improvements in non-interest income. Credit loss expenses, excluding one-off factors, remain within a stable range.

Of particular note, the common equity tier 1 (CET1) capital ratio rose by 10 basis points to 12.92% compared to the previous quarter. Thanks to efforts to reduce risk-weighted assets, the group is now positioned to achieve its mid- to long-term target of over 13% next year. The resulting increase in total shareholder return is also expected to help close the valuation gap.

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