[Click e-Stock] "Woori Financial Group Surpasses 1 Trillion Won in Q2 Net Profit...Earnings Surprise"

Daishin Securities Maintains Target Price of 43,000 Won

On the 27th, Daishin Securities maintained its 'Buy' investment rating and a target price of 43,000 won on Woori Financial Group, stating that the group's second-quarter net profit significantly exceeded market expectations. This analysis suggests there is a 39.4% upside potential compared to the closing price on the 24th (30,850 won).

Hyejin Park, a researcher at Daishin Securities, commented, "Woori Financial Group achieved an earnings surprise in the second quarter, with net profit greatly surpassing both our estimates and market consensus. This achievement is attributed to improved non-interest income." Park noted that the growth was led by a significant increase in bank asset management fee income, such as from trusts and funds, which boosted non-interest income.

In the second quarter, net profit attributable to controlling shareholders was 1.0046 trillion won, up 66.4% from the previous quarter and 7.5% year-on-year. Non-interest income reached a record high of 629 billion won, marking an increase of 38.3% quarter-on-quarter and 19.3% year-on-year. Interest income grew to 2.3361 trillion won, a rise of 1.4% from the previous quarter and 3.3% from a year earlier; however, the bank's margin remained steady at 1.51% compared to the previous quarter.

Researcher Park explained, "The limited improvement in the margin was due to a substantial increase in term deposits during April and May in preparation for base rate hikes in the second half of the year. If the base rate rises significantly going forward, the margin expansion will increase again." With an increased share of loans linked to the 3-month Certificate of Deposit (CD) rate, a 25 basis point base rate hike would now raise net interest income by 160 billion won (up from 140 billion won), and the net interest margin (NIM) would improve by 4 basis points (up from 3 basis points).

There are also risk factors. Non-performing loans (NPL) related to the Jungang Group amounted to 138 billion won, resulting in 44 billion won in newly reflected credit loss expenses. Nevertheless, total credit loss expenses in the second quarter dropped to 439.2 billion won, down 16.6% from the previous quarter and 13.7% from the same period last year, coming in below projections.

As of the end of June, the Common Equity Tier 1 (CET1) ratio stood at 13.7%, rising by 10 basis points quarter-on-quarter despite a stronger exchange rate. Based on this, the group decided to carry out an additional share buyback worth 150 billion won in the second half of the year.

Park stated, "If you add the cash dividend of 1.13 trillion won and the 350 billion won share buyback, the total shareholder return rate this year will reach 46.4%. With the share buyback schedule accelerated and the capital ratio improved, it is possible that the total return rate could reach 50% next year along with earnings improvement."

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