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Woori Financial Feared to Lose More Ground to IBK in Market Cap

The Industrial Bank of Korea (IBK) is on course to overtake Woori Financial Group in market capitalization, as the latter’s weak earnings outlook continues to weaken investor sentiment.

This is a major twist from about half a year earlier when the nation’s fourth-largest financial holding firm was close to attaining a symbolic market cap of 10 trillion won ($7.55 billion). While Woori reports disappointing earnings results in the first half, the IBK has gradually recovered its stock performance on robust profit growth.

Woori generated a net profit of 1.53 trillion won between January and June, down 12.6 percent from a year ago, but the IBK succeeded in achieving a surprising net profit growth of 19 percent on solid revenues from corporate lending business.

Unfortunately, Woori’s struggle is widely forecast to continue until the end of this year at a crucial time when the company has to diversify its revenue streams for more stable earnings growth.

Yim Jong-ryong, head of the group, pledged to go all-out to do so by acquiring securities and insurance firms after taking office in March. But the much-touted plan shows little sign of progress, further shedding a dim light on its potential earnings recovery. Yim has not bought the company shares since taking leadership. This is in stark contrast to his predecessor Son Tae-seung who obtained more than 83,000 Woori shares over 16 separate occasions by the time he retired early this year.

In comparison, the state-run lender is bolstering its presence in the financial circle. It widened its market share in the lending market for small- and medium-sized enterprises (SMEs) in the first half. The figure set a record high of 23.4 percent.

Brokerage houses expected Woori to extend its lukewarm stock performance, as the company is unlikely to carry out strong shareholder return policies in the latter half due to the weak earnings.

A report released by Yuanta Securities forecasts Woori Financial Group to chalk up an annual net profit of 2.64 trillion won in 2023, down 15.8 percent from the previous year, as the holding firm and its subsidiaries do not have any clear momentum for business rebound to offset the earnings fall in the latter half.

“Woori’s weaker-than-expected earnings performance was attributable to its preemptive compounding of bad debt allowances worth 263 billion won and another 54-billion-won bad debt allowance set to compensate for losses that incurred from its Hong Kong real estate fund investment,” Jeong Tae-joon, an analyst at the securities firm, said.

Woori’s stock price hit this year’s high of 13,500 won per share in January but has since fallen to a range of around 11,500 won. IBK fell to this year’s low of 9,390 won in January and recovered to around 10,500 won as of Wednesday.

Source: The Korea Times