Kwon Kwang-seok, Woori Bank President, Extended for 1 Year... Challenges of Performance Recovery and Organizational Stability

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[Asia Economy Reporter Wondara] Kwon Kwang-seok, CEO of Woori Bank, will serve another year as the bank’s president. Attention is focused on whether CEO Kwon, who achieved organizational stabilization last year, can lead a performance turnaround this year despite uncertainties caused by COVID-19 and setbacks such as the private equity fund scandal.

According to Woori Financial Group on the 5th, Woori Bank held an Executive Candidate Recommendation Committee (ECC) and a board meeting in the afternoon to confirm CEO Kwon’s reappointment. The day before, Woori Financial held a Subsidiary CEO Candidate Recommendation Committee (SCC) and recommended CEO Kwon as the final candidate for the next Woori Bank president.

Like last year, the term is one year. Compared to competing banks that usually grant a three-year term in a 2+1 format, the 1+1 format is seen as unexpected. Under current commercial law, the maximum term for a bank president is three years. This is interpreted as a move to observe performance for one year under the controlling shareholder system, but there are also criticisms that the term is too short consecutively.

With the SCC officially stating that it will give an opportunity to make up for poor performance, the challenges to be addressed have become clearer.

The most urgent task is performance recovery. Woori Bank’s net profit last year was 1.3632 trillion KRW, down 9.5% from the previous year’s 1.505 trillion KRW. Although external factors such as the prolonged COVID-19 pandemic and shrinking loan-deposit margins played a significant role, CEO Kwon is expected to focus on strengthening sales capabilities as there is no room to retreat. This year, he is determined to compete through digital innovation and channel innovation, which were set as management keywords.

In January, the bank introduced the ‘Gati Group (VG) system,’ a collaboration framework among branches, and plans to expand the newly established asset management channel ‘PCIB Branch’ to secure non-interest income.

Also, with the management goal of ‘company-wide digital innovation and leading the digital financial market,’ it is expected that efforts to strengthen digital platform competitiveness will accelerate. Earlier, CEO Kwon established the ‘Digital Transformation (DT) Task Force’ to respond swiftly to the rapidly changing digital environment. Whether profitability improves this year will serve as a test of his management capabilities after reappointment.

Meanwhile, Woori Financial will decide on the dividend payout ratio at today’s board meeting. Financial companies can autonomously distribute dividends within regulatory ratios (Common Equity Tier 1 ratio 8%, Tier 1 capital ratio 9.5%, total capital ratio 11.5%). However, since Woori Financial’s bank segment is dominant and it earned 1.3073 trillion KRW last year, the dividend payout ratio is expected to be not very high. This is a 30.18% decrease compared to the previous year.

Earlier, the Financial Services Commission passed a capital management recommendation urging banks to lower their dividend payout ratio to within 20% by June. A financial industry official said, “Woori Financial is taking time to carefully consider between the financial authorities’ recommendation of 20% and enhancing shareholder value amid declining performance, but it is highly likely to follow the financial authorities’ recommendation.”

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