WFG Profitable Again

Woori Financial Group recovers financial health in Q2 thanks to selling stake in Hyundai Construction

Woori Financial Holdings Co. saw its operations turn around in the second quarter with profits running to 791.3 billion won on operating profit of 1.213 trillion won, thanks largely to the one-time non-banking profit from the sale of its stake in Hyundai Engineering & Construction giving the company a cash income of 960.8 billion won.
Other factors that helped the company turn around were the reduced loan loss provisions from 3 percent to 2.6 percent in Q2, although the company spent a lot for the health of its finances, amounting to 1.668 trillion won, including 772 billion won worth of bad debts sold and the write-off of other non-performing assets amounting to 896 billion won.
Officials of the company said they wrote off and sold bad debts in a bid to improve the health of assets during Q2, a move that will be kept up until yearend, which will defray any concern over the health of the assets.
Woori Bank, a major affiliate of the group, also posted an operating profit of 1.810 trillion won and net profit of 765.3 billion won.
In the meantime, the group said its net income in Q1 amounted to 540.7 billion won on the financial statement made based on the International Financial Reporting Standards. The group said the statement included all allowances of doubtful accounts of insolvent construction companies and shippers with no one-income profit. The group's profit is expected to rise in the future.
Total assets rose to 346 trillion won, up 20 trillion won from the previous year, remaining at the top position in the industry at home. The BIS ratio and basic equity-to-asset ratio were 14.1 percent and 10.6 percent for the bank and 12 percent and 8.6 percent for the group respectively, the officials said.
NIM in Q1 was 2.53 percent. It had been 2.18 percent in Q3 2010 and 2.39 percent in Q4 2010 as of K-GAAP. Despite the difference between the two accounting standards, the figure shows to be improving.
The substandard & below ratio and the delinquency ratio were 3.5 percent and 1.15 percent, respectively, due mainly to the credit crunch of some insolvent companies since the end of 2010 and WFG's acquisition of a savings bank.
However, the group's operating performance is expected to sharply improve as it is spurring the improvement of asset quality and huge profits are anticipated by the disposal of shares of Hyundai Engineering & Construction.
An official of Woori Financial Group said, Then corporate governance is solved by the quickening of privatization, we anticipate our stock price, which was underperforming at 20,441 won per share at the end of Q1 2011, to find its place. Securing more profit sources and improving profitability will also be promoted in addition to the enhancement of the non-banking sector's capability and global competitiveness. Furthermore, we will actively practice management innovation and the OneDo goal, a strategic cost reduction program. The operating performance of major affiliates are as follows:
Woori Bank achieved 1.48 trillion won in operating revenue and 507.5 billion won in net income.
ROA and NIM in Q1 2001 were 0.87 percent and 2.44 percent, respectively. They increased 0.54 percent and 0.15 percent compared to the end of last year as of K-GAAP, respectively. Meanwhile, substandard & below ratio increased 0.08 percent from the end of last year to 3.42 percent at the end of March 2011.
An official of Woori Bank said, We will continue to secure a stable profit base by achieving more non-interest profits from fund, bancassurance and pension fund products as well as innovatively improving asset quality. Meanwhile, the net incomes of other affiliates in Q1 2011 were 28.7 billion won for Kwangju Bank, 41.6 billion won for Kyongnam Bank, 60.4 billion won for Woori Investment & Securities and 18.6 billion won for Woori F&I.
Woori Financial Group said it signed a memorandum of understanding (MOU) for a strategic partnership with Bank of Communications, one of China's five major commercial banks.
This strategic partnership has been promoted not only to spur the global operation of the group with the goal of entering the global top 50 by 2015, but to pave the way for sustainable growth. This contract includes customer recommendations, the cross-selling of products, global partnerships, support for fundraising and sharing information, etc.
In particular, great synergetic effects are expected come from the operational capacities of WFG subsidiaries and the vast financial network of the Bank of Communications. Woori Bank China, a local subsidiary, also expects to carry forward diverse businesses in the region.
Taking the contract opportunity, both companies plan to expand business categories such as the cross-selling of products and the settlement of China's currency.
The Bank of Communications, uniquely rooted in Shanghai among China's five major banks, has played a leading role in the development of the Chinese financial market for a long time. In 2005, it became the first bank to be simultaneously listed on Hong Kong and Shanghai exchanges. Total assets reached 697 trillion won as of the end of March 2011, among the world's top 50.
An official of Woori Financial Group said, We are expecting this contract and partnership to be a solid foundation for consolidating the leadership in financial markets in each country and for enhancing global competitiveness. nw

Chairman Lee Pal-sung of Woori Financial Group.

Photo on Courtesy of Woori Financial Group