Back on Track Again

Woori Financial Group returns to profitability in H1 by selling stakes in Hyundai Construction

Woori Financial Group (WFG) posted 3.948 trillion won in operating profit in the first half with a net income of 1.237 trillion won, the group said recently.
Woori Financial Holdings Co. saw its operation turn around in the second quarter with a net profit of 765.3 billion won from operating profit of 1.213 trillion won thanks largely to the one-time non-banking profit from the sale of Hyundai Construction giving the company a cash income of 965.3 billion won.
Net interest margin in the second quarter improved a little at 2.45 percent from the previous quarter.
Other factors that helped the company turn around were the reduced loan loss provisions from 3 percent to 2.42 percent in Q2, although the company spent a lot for its financial health, amounting to 1.668 trillion won, including 772 billion won worth of bad debts sold and write-offs of other non-performing assets totaling 896 billion won.
Officials of the company said they wrote off bad debts and sold them in a bid to make the remaining assets healthier during Q2 and the move will be kept up until year end, which will defray any concerns about the health of the assets.
Woori Bank, a major affiliate of the group, also posted an operating profit of 1.81 trillion won and a 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 preceding 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 improvement.
Substandard & below ratio and delinquency ratio was 3.5 percent and 1.15 percent, respectively, due mainly to the credit crunch of some insolvent companies since the end of the previous year and Woori's acquisition of a savings bank.
An official of the group said, "When corporate governance will be solved by quickening the privatization, we anticipate our stock price will be underperforming compared to the 20,441 won per share price at the end of the first quarter of 2011. 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."
Operating performances 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 2011 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 Q1 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 the 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 also to pave the way for sustainable growth. This contract includes customer recommendations, the cross-selling of products, global partnerships, supports for fundraising and information sharing.
In particular, great synergy effects are expected 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 China's financial market for a long time. In 2005, it became the first bank to be simultaneously listed on the Hong Kong and Shanghai Exchanges. Total assets were 697 trillion won as of the end of March 2011, maintaining its spot in the world's top 50. nw

Chairman Lee Pal-seung of Woori Financial Group

Photo on Courtesy of WFG