“Aiming for 50% shareholder return,” Woori Financial shares soar after announcing valuation

[KOREA FINANCIAL TIMES, Lee Yongwoo] Woori Financial Holding is the first banking and financial holding company to unveil a plan to increase its corporate value, and the market is reacting. The company's stock price surged 8% in a single day as it announced specific plans to increase dividends, buy back shares, and burn shares. In terms of expanding non-banking affiliates, the company has decided to adopt a 'selective and focused' strategy for the time being. It will not look for additional acquisitions to boost the competitiveness of Woori Securities, which is set to launch next month.

According to financial media, questions during Woori's conference call to announce its first-half results on July 26 focused on valuation and portfolio strategy.

Woori Financial set its long-term valuation goal as “enhancing shareholder return capacity based on common equity ratio,” and revealed plans to achieve a sustainable return on equity (ROE) of 10%, common equity ratio of 13%, and total shareholder return ratio of 50%.

Regarding the value-up program, CFO Lee, Vice President and Chief Financial Officer of Woori Financial, said, “Further improvement of the common equity ratio will be possible if the exchange rate, which has been surging due to the recent strong dollar, stabilizes.” “Regarding shareholder return, we have elaborated a shareholder policy based on the common equity ratio, targeting a medium- to long-term total shareholder return rate of 50%.”

“Within the 40% total shareholder return ratio, we will pay out 30% cash dividends, and any excess dividends will be fully repurchased and burned,” said CFO Lee. ”Once we exceed the 40% total shareholder return ratio, we will increase our cash dividend and share repurchase policy in a balanced manner.”

“Woori Financial's dividend yield is at an all-time high,” said CFO Lee, ”and if we gradually expand the total shareholder return ratio, our shareholder value will be further enhanced beyond the level of our competitors.”

The market has responded favorably to Woori's shareholder return policy. On the 26th, Woori's stock price rose more than 8% intraday, setting a new 52-week high. Compared to the 3-4% rise in banking stocks on the same day, investors flocked to Woori Financial.

“We are not considering acquiring any additional assets outside of our securities.”

CFO Lee also assessed Woori Securities as having “its own growth potential”.

“Expanding the non-banking portfolio through M&A is an essential part of increasing the group's revenue generating power and improving profit stability,” he said. ”Since the launch of the holding company in 2019, Woori Financial has steadily expanded its business operations to include capital and asset trusts, and this August, Woori Investment & Securities re-entered the securities business for the first time in 10 years.”

“What I can say clearly in the M&A process is that Woori Financial will not overpay,” Lee emphasized, ”and we are not considering a capital increase, which investors are worried about in relation to our current expansion into the insurance industry.” This is a blind eye to the capital increase that investors are concerned about, as Woori Financial's stock price is undervalued more than its competitors due to market concerns about capital increase.

CFO Lee said the company is only focusing on the ongoing mergers and acquisitions of securities firms and insurers and is not considering any additional M&A in the short term. “In the case of merged securities companies, the assets held are not large and there is little impact on the capital ratio,” he said, adding, ”We will focus on our own growth for the time being (to grow) into a securities company strong in digital and IB.”

According to CFO Lee, the BIS calculations apply 250 percent of the investment amount as risk-weighted assets until the group's common equity capital ratio is within 10 percent, so acquiring a financial company will have a limited impact on the group's overall capital ratio. “If we acquire an insurance company without a capital increase, it will improve our return on equity (ROE) by increasing net income at the group level and help us return to shareholders,” he said.

“We are currently conducting due diligence on Dongyang Life and have no plans to acquire any additional insurers (besides Dongyang Life) in the near future,” he said.

Lee Yongwoo(lee@fntimes.com)