Woori Financial vows higher shareholder returns, value-up after record Q2

Woori Financial Group Inc., South Korea’s fourth-largest financial services holding company, plans to significantly enhance its shareholder value via a corporate value-up program after posting its highest-ever operating profit in the second quarter.

On Thursday, Woori posted 931.4 billion won ($672 million) in net profit in the April-June quarter, up 49% from 625.2 billion won a year earlier.

The profit came in above the market consensus of 803.4 billion won.

Company officials said that the higher-than-expected profit came even after the financial group set aside heavy loss provisioning against market uncertainties such as dubious property project financing (PF).

Its second-quarter net interest income was 2.2 trillion won, down 0.1% from the previous quarter.

Affiliate Woori Bank’s net interest margin (NIM), the difference between interest received and paid, was 1.47%, down 0.03 percentage point from the first quarter.

“Our net interest margin declined due to a fall in market interest rates. However, our loans to corporate clients posted strong growth, resulting in a higher net profit,” said a Woori Financial official.

NON-INTEREST INCOME GAINS

Woori’s outstanding corporate loans reached 183 trillion won at the end of June, up 13.8% from a year earlier. Its loans to large companies gained 15.4% from the year-earlier period.

Besides hefty interest gains from its corporate loan business, Woori Financial also saw strong non-interest income gains from the asset management, card and lease businesses.

The financial group, whose affiliates include Woori Bank, Woori Card, Woori Capital and Woori Investment Bank, posted 534.8 billion won in second-quarter non-interest income, up 92% from 278.4 billion won in the year-earlier period.

Second-quarter wealth management commissions increased by 30% from a year ago, it said.

MAXIMIZING SHAREHOLDER VALUE

On Thursday, Woori Financial announced an aggressive shareholder return policy as part of efforts to its corporate value-up program launched by Woori Financial Group Chief Executive and Chairman Yim Jong-yong.

Under the program, the company aims to achieve a total shareholder return (TSR) of 50% to maximize shareholder value. It didn’t provide the timeframe.

TSR is a measure of financial performance, indicating the total amount an investor reaps from an investment – specifically, equities or shares of stock.

Under the mid-to-long-term value-up plan, Woori said it hopes to achieve a sustainable return on equity (ROE) rate of 10%, a return on common equity of 13% and a total shareholder return ratio of 50%, which includes dividends and treasury stock purchases.

Woori Financial, at its board meeting, also approved a quarterly dividend of 180 won per common stock.

In early Friday trade in Seoul, shares of Woori Financial surged, boosted by the company’s announcement to raise shareholder returns the previous day.
Woori Financial rose as high as 8.6% to a 52-week high of 15,780 won, outperforming the benchmark Kospi index’s 0.8%B rise.

TONGYANG LIFE ACQUISITION

Lee Sung-wook, Woori Financial’s chief financial officer, said during a conference call with analysts on Thursday that the company would not “pay too much” to acquire Tongyang Life Insurance Co.

To strengthen its non-banking businesses, Woori recently signed an initial agreement to acquire Tongyang Life and ABL Life Insurance Co. from China’s Dajia Insurance Group Co., the revamped entity of China’s embattled Anbang Insurance Group.

In May, it also acquired Korea Foss Securities Co., paving the way for its reentry into the domestic brokerage services market a decade after it pulled out of it.

Write to Jae-Won Park at wonderful@hankyung.com
In-Soo Nam edited this article.