Woori's investor gap: Value trap or untapped potential?
Woori's foreign ownership lags KB, Shinhan, Hana as strategic shift stalls
While foreign investors have poured into South Korea's major banking stocks over the past year, Woori Financial Group remains an outlier. Unlike peers KB, Hana, and Shinhan— whose foreign ownership ranges from 60 percent to nearly 80 percent — Woori is the only top-tier financial group with les than 50 percent foreign ownership.
As of Tuesday, foreign investors' total stake in Woori stood at 46 percent, compared to KB Financial Group's 78 percent and Hana's 67 percent. The gap, despite a broad rally in Korean financial stocks, suggests that global investors may view Woori as less attractive than its peers.
One likely reason for Woori's relatively low foreign ownership is its unique shareholder structure, a legacy of its privatization.
To recover 12 trillion won ($8.81 billion) in public funds, the government sold shares to private investors, who would have board nomination rights, provided they held a more than 4 percent stake. Unlike its peers, Woori still has significant stakes held by domestic strategic investors.
Korea Investment & Securities, Fubon Hyundai Life, Kiwoom Securities and Eugene PE collectively hold about 14 percent. The Korea Deposit Insurance Corporation, which held 21 percent, fully exited last year. Woori's employee stock ownership association holds another 8.2 percent.
'Most of these major shareholders are domestic. It's rare for a Korean financial group to have this structure, which effectively keeps foreign ownership low,' said Kim Woo-jin, senior banking analyst at the Korea Institute of Finance. 'What matters more than the headline figure is the share of foreign holdings relative to the actual tradable float.'
While the exact figure wasn't disclosed, a company official noted that Woori's foreign ownership would be higher if measured against the float — the shares freely traded on the market.
This concentrated ownership not only reduces foreign accessibility but also raises overhang concerns — the risk that major shareholders could offload large amounts of shares.
But after another major shareholder IMM PE's recent exit, Woori's CFO said in a February earnings call that no further divestments by major shareholders are expected, adding, 'We believe Woori's overhang risk has been fully resolved.'
Woori's limited business diversification also weighs on sentiment. Over 90 percent of its profit comes from banking, compared to 60 percent at KB and 70 percent at Shinhan. Hana, while similarly reliant on banking, is still supported by more developed and balanced non-bank operations.
'Investors favor banks with diversified income and scalable growth beyond lending,' said Rena Kwok, senior credit analyst at Bloomberg Intelligence. 'Woori remains more domestically concentrated and may still be viewed as lagging in strategic clarity, particularly in expanding into non-banking businesses.'
Chairman and CEO Yim Jong-ryong has been trying to change that. Since taking office in March 2023, he has led the integration of Tongyang Life and ABL Life and relaunched Woori's securities business. Once the insurers are officially incorporated in July, the group expects its reliance on banking to decline to 82 percent.
Woori is also working to improve its financial fundamentals. It remains the only major Korean banking group with a Common Equity Tier 1 ratio below 13 percent, posting 12.42 percent in the first quarter. But it logged the largest CET1 gain among peers and aims to reach 12.5 percent this year and 13 percent by 2027.
Return on equity also trails peers. Woori posted just over 9 percent, excluding one-off expenses, compared to KB's 13 percent, Shinhan's 11.3 percent and Hana's 10.6 percent. The firm expects ROE to improve by up to 1 percentage point after the insurance integration.
'The key for Woori isn't short-term performance, but strengthening its earnings structure,' said KFI's Kim. 'It's not about whether non-bank units exist, but whether they generate solid returns. Strong operations, combined with credible leadership, can make Woori more appealing to global investors.'
Kim also noted growing investor confidence in leadership. Since Yim took office, Woori's stock has climbed 90 percent over three years. This year, it ranked among the top 10 most purchased by foreign investors, including a 10 percent gain in June alone.
'Ultimately, investors look at leadership—can the CEO deliver returns?' Kim said. 'Even if earnings are still catching up, investor confidence in leadership can drive capital inflows.'
A local market expert, speaking on condition of anonymity, echoed the sentiment, noting that Yim's combination of bureaucratic experience and successful leadership at NH NongHyup Financial Group has earned him credibility. 'If his leadership gains traction, it could send a strong signal to global investors. And with foreign ownership still low, there's room for additional inflows that could lift the stock.'
Kwok pointed to governance as another area in need of improvement. Woori came under legal scrutiny over alleged improper loans tied to its former chairman, resulting in a downgrade of its regulatory management rating and delaying its non-banking expansion.
'Scandals in Korea's financial sector tend to have repercussions, and Woori's handling of the fallout has exposed broader governance weaknesses. It evidently needs stronger board independence, better succession planning and tighter internal control systems," she said, adding Woori must also improve transparency in decision-making to align with global standards.
jwc@heraldcorp.com
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Korea Herald
10 hours ago
- Korea Herald
At 60, Seoul, Tokyo toast to what's next — not what was
Anchored by the slogan 'Joining Hands for a Better Future,' the reception commemorating 60 years of diplomatic normalization between Korea and Japan spotlighted a clear shared commitment to transform the two countries' relationship into a forward-looking, strategic partnership fit for today's turbulent world. Beneath the chandeliers of a ballroom brimming with guests from all walks of life — from diplomats and business leaders to young students — the air buzzed with optimism and the clinking of glasses at a reception hosted by the Japanese Embassy at the Lotte Hotel in Seoul on Monday evening. South Korea and Japan signed the Treaty on Basic Relations on June 22, 1965, and exchanged instruments of ratification on December 18 of that year, formally normalizing diplomatic ties. The year 2025 marks the 60th anniversary of that milestone. "The fact that Japan-Korea relations are becoming closer and developing is something no one can deny,' Japanese Ambassador to South Korea Koichi Mizushima told participants during the reception on Monday. "Amid today's shifting strategic environment, the importance of Korea-Japan relations continues to grow — and the relationship has now reached an irreversible stage." Back in 1965, annual travel between the two countries stood at just around 10,000. In 2024, it surpassed 12 million, averaging more than triple the 1965 total in a single day. Japan's investment in Korea has also soared, from $500,000 in 1965 to $6.12 billion in 2024, making it Korea's largest investor, Mizushima said. "Sixty years corresponds to a full cycle — a hwangap — in the East Asian cultural sphere where Japan and Korea are both located. In other words, one full cycle has passed since the normalization of Japan-Korea diplomatic ties,' Mizushima said. 'This signifies that Japan-Korea relations now stand at a new starting point. We must not remain complacent with the present, but instead support the next generation who will carry the future of both nations, and begin the next cycle to dramatically advance Japan-Korea relations with full momentum.' The evening vividly illustrated how far the two countries have come since the 1965 treaty, as relations evolved from government-to-government dialogue into a broad web of economic, cultural and people-to-people exchanges. The ballroom was filled with music as students at the Seoul Japanese School choir performed, including a Korean rendition of Spring in My Hometown. Arirang, a beloved Korean folk song, was also performed, sung and arranged by Japan's Mikage Project, a group dedicated to composing and reinterpreting traditional Japanese folk music. Korean pianist Lee Kyung-mi, who spent seven years in Japan from the age of nine and made her musical debut there, performed at the event, continuing her long-standing role as a cultural bridge between Korea and Japan through friendship concerts — even during strained diplomatic times. The event also featured a joint performance by Korean trot singer Kim Da-hyun and Japanese artist Azuma Aki. Both appeared on Korea-Japan King of Singers, the first-ever joint Korean-Japanese music competition show, co-produced by Korea's MBN and Japan's Fuji TV to promote friendship through music. "I hope that Korea-Japan relations will continue to develop in a stable and future-oriented manner based on the achievements and progress made thus far,' South Korean President Lee Jae Myung said in his congratulatory video message, adding that 'the two countries are important partners who must seek responses together amid rapidly changing international circumstances.' 'Joining hands for a better future — let us move forward together!' Akihisa Nagashima, special advisor to Japanese Prime Minister Ishiba Shigeru, underscored that "close communication and expanding the scope of cooperation between the two countries is not a choice but a necessity in light of today's grave international environment." Ryu Jin, chair of the Federation of Korean Industries and chair of Poongsan Corp., offered a toast on behalf of the Korean side, following a kagami-biraki ceremony — a traditional Japanese ritual that involves breaking open a sake barrel to symbolize harmony and new beginnings. 'The Korean business community is fully committed to supporting President Lee Jae-myung's new pragmatic administration in further developing future-oriented cooperation between our two countries,' Ryu said. 'Today, Korea-Japan relations stand at a new starting point for the next 60 years.' dagyumji@
Korea Herald
11 hours ago
- Korea Herald
Woori's investor gap: Value trap or untapped potential?
Woori's foreign ownership lags KB, Shinhan, Hana as strategic shift stalls While foreign investors have poured into South Korea's major banking stocks over the past year, Woori Financial Group remains an outlier. Unlike peers KB, Hana, and Shinhan— whose foreign ownership ranges from 60 percent to nearly 80 percent — Woori is the only top-tier financial group with les than 50 percent foreign ownership. As of Tuesday, foreign investors' total stake in Woori stood at 46 percent, compared to KB Financial Group's 78 percent and Hana's 67 percent. The gap, despite a broad rally in Korean financial stocks, suggests that global investors may view Woori as less attractive than its peers. One likely reason for Woori's relatively low foreign ownership is its unique shareholder structure, a legacy of its privatization. To recover 12 trillion won ($8.81 billion) in public funds, the government sold shares to private investors, who would have board nomination rights, provided they held a more than 4 percent stake. Unlike its peers, Woori still has significant stakes held by domestic strategic investors. Korea Investment & Securities, Fubon Hyundai Life, Kiwoom Securities and Eugene PE collectively hold about 14 percent. The Korea Deposit Insurance Corporation, which held 21 percent, fully exited last year. Woori's employee stock ownership association holds another 8.2 percent. 'Most of these major shareholders are domestic. It's rare for a Korean financial group to have this structure, which effectively keeps foreign ownership low,' said Kim Woo-jin, senior banking analyst at the Korea Institute of Finance. 'What matters more than the headline figure is the share of foreign holdings relative to the actual tradable float.' While the exact figure wasn't disclosed, a company official noted that Woori's foreign ownership would be higher if measured against the float — the shares freely traded on the market. This concentrated ownership not only reduces foreign accessibility but also raises overhang concerns — the risk that major shareholders could offload large amounts of shares. But after another major shareholder IMM PE's recent exit, Woori's CFO said in a February earnings call that no further divestments by major shareholders are expected, adding, 'We believe Woori's overhang risk has been fully resolved.' Woori's limited business diversification also weighs on sentiment. Over 90 percent of its profit comes from banking, compared to 60 percent at KB and 70 percent at Shinhan. Hana, while similarly reliant on banking, is still supported by more developed and balanced non-bank operations. 'Investors favor banks with diversified income and scalable growth beyond lending,' said Rena Kwok, senior credit analyst at Bloomberg Intelligence. 'Woori remains more domestically concentrated and may still be viewed as lagging in strategic clarity, particularly in expanding into non-banking businesses.' Chairman and CEO Yim Jong-ryong has been trying to change that. Since taking office in March 2023, he has led the integration of Tongyang Life and ABL Life and relaunched Woori's securities business. Once the insurers are officially incorporated in July, the group expects its reliance on banking to decline to 82 percent. Woori is also working to improve its financial fundamentals. It remains the only major Korean banking group with a Common Equity Tier 1 ratio below 13 percent, posting 12.42 percent in the first quarter. But it logged the largest CET1 gain among peers and aims to reach 12.5 percent this year and 13 percent by 2027. Return on equity also trails peers. Woori posted just over 9 percent, excluding one-off expenses, compared to KB's 13 percent, Shinhan's 11.3 percent and Hana's 10.6 percent. The firm expects ROE to improve by up to 1 percentage point after the insurance integration. 'The key for Woori isn't short-term performance, but strengthening its earnings structure,' said KFI's Kim. 'It's not about whether non-bank units exist, but whether they generate solid returns. Strong operations, combined with credible leadership, can make Woori more appealing to global investors.' Kim also noted growing investor confidence in leadership. Since Yim took office, Woori's stock has climbed 90 percent over three years. This year, it ranked among the top 10 most purchased by foreign investors, including a 10 percent gain in June alone. 'Ultimately, investors look at leadership—can the CEO deliver returns?' Kim said. 'Even if earnings are still catching up, investor confidence in leadership can drive capital inflows.' A local market expert, speaking on condition of anonymity, echoed the sentiment, noting that Yim's combination of bureaucratic experience and successful leadership at NH NongHyup Financial Group has earned him credibility. 'If his leadership gains traction, it could send a strong signal to global investors. And with foreign ownership still low, there's room for additional inflows that could lift the stock.' Kwok pointed to governance as another area in need of improvement. Woori came under legal scrutiny over alleged improper loans tied to its former chairman, resulting in a downgrade of its regulatory management rating and delaying its non-banking expansion. 'Scandals in Korea's financial sector tend to have repercussions, and Woori's handling of the fallout has exposed broader governance weaknesses. It evidently needs stronger board independence, better succession planning and tighter internal control systems," she said, adding Woori must also improve transparency in decision-making to align with global standards. jwc@
Korea Herald
11 hours ago
- Korea Herald
Can South Korea afford a 4.5-day workweek?
Workers cheer shorter week, but employers warn of hidden costs With President Lee Jae Myung now in office, one of his most eye-catching campaign pledges — introducing a 4.5-day workweek — is facing questions over whether it can really work. For many workers, the proposal is a welcome one. 'I can't even describe how much I hope this happens,' said Kim Ji-eun, a 39-year-old office worker in Seoul. 'Right now, I leave work exhausted every Friday evening and have barely enough time to rest, let alone enjoy life or take care of my kids. Just half a day more would mean a real chance at balance.' Kim's view is widely shared. According to a recent survey by business networking platform Remember, 7 in 10 salaried workers out of more than 11,000 surveyed said they would prefer a four-day workweek. In a different survey by Saramin, 86.7 percent of employees said they prefer a four-day workweek, and of those more than 60 percent said they would take the shorter hours even if it meant a lower salary. But the reality is more complicated. South Korea is widely known for its grueling work culture. In 2022, South Koreans worked an average of 1,901 hours annually — 149 hours more than the OECD average. The country's job market is also notoriously rigid, largely due to labor laws that make it difficult for employers to dismiss regular workers, contributing to a stark divide between secure, permanent jobs and unstable, non-regular employment. "Shaped by decades of regulations that prioritize employment stability over labor market agility, rigid legal frameworks and cultural norms make it difficult for companies to reward excellence or address underperformance. This makes it risky for businesses to experiment with reduced work hours," Kim Seong-hee, a labor professor at Korea University, told The Korea Herald. At the same time, the country ranks low in terms of labor productivity. According to the Korea Labor Institute, South Korea placed 33rd out of 38 OECD countries in 2023, with hourly productivity at $44.4 — just 57 percent of the United States' output at $77.9 and 65 percent of Germany's. Employers worry that without a significant leap in productivity, a reduced workweek would only add to their burden. 'Some pioneering firms might adopt a four-day or 4.5-day workweek to attract talent,' said Sohn Kyung-shik, chairman of the Korea Employers Federation, at a presidential forum last month. 'But for many companies, this change would be a serious strain.' Mixed signals from labor and business South Korea's largest labor union, the Federation of Korean Trade Unions, has taken the opposite stance. At a press conference in April ahead of the presidential election, the union pushed for the introduction of a four-day workweek. 'Seventeen percent of Korean workers still put in more than 48 hours per week — more than twice the EU average of 7.3 percent,' the group said, citing long work hours as a pressing national issue. Pointing to successful pilot programs in countries like Iceland, France, the UK and the US, the union argues that advances in automation, AI and platform labor models demand an overhaul in how working time is structured. 'If work is changing, then the standard of what we consider acceptable labor hours must also evolve,' the federation stated. If implemented, the 4.5-day week would reduce the legal workweek from 40 to 36 hours. Coupled with another Lee campaign pledge to abolish the fixed-salary overtime system known as the 'inclusive wage system,' business groups say they fear a compounded cost burden. Law firm Lee & Ko warned that just as the adoption of the five-day workweek in 2003 imposed added costs without wage cuts, the proposed shift — especially with inclusive wage reform — could significantly impact corporate operating costs. Still, labor law experts say shorter work hours may be inevitable. 'A reduction in working hours aligns with global trends, and no major political party in Korea is actively opposing the idea,' the firm noted in its report after the election. The firm expects phased implementation alongside flexible work arrangements. Addressing structural gaps The road ahead is not without conditions. Law firm Yulchon emphasized in a recent report that labor productivity must improve first. With Korea's low hourly labor productivity, the firm argued that 'reducing working hours without lowering wages is only socially sustainable if accompanied by productivity growth.' Park, a labor expert at a law firm, advised that companies prepare for the change by adopting practical measures, such as encouraging the use of annual leave, offering more flexible working hours, and updating existing legal frameworks to maximize the use of flexible work arrangements. 'From redesigning work environments and staffing plans to ensuring fair compensation levels, the private sector must begin preparing for structural transformation," Park said. However, labor experts warn that without careful planning, a reduced workweek could exacerbate inequality in Korea's dual labor market — one dominated by secure jobs in big corporations and the public sector, and another filled with low-paid, unstable work in small businesses and services. The service sector's low productivity adds to the challenge. According to the Korea Productivity Center, the value-added productivity per service worker is only 64 percent of the OECD average, while manufacturing productivity exceeds the OECD average — illustrating Korea's dichotomy of 'developed manufacturing, underdeveloped services." This imbalance means shorter workweeks could result in reduced income and job insecurity for the vast majority of workers in the service sector if reforms do not also address deeper structural issues. Experts agree that any meaningful attempt to adopt a 4.5-day workweek must go hand-in-hand with comprehensive labor reform — one that considers the realities of small businesses, non-regular workers and platform-based labor. 'In today's changing work environment, the old formula of 'more hours equal more productivity' doesn't hold up, especially in manufacturing,' said Kwon Hyuk, a labor professor at Korea University. 'What matters now is when and how effectively the work is done.' Kwon warned that implementing a shorter workweek only at large firms or government offices could deepen inequality. 'We need to strengthen the competitiveness of small businesses and fix the labor market's dual structure before we move forward with such a policy,' he said.
