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Korea Herald
16 hours ago
- Business
- 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@
Yahoo
19-02-2025
- Business
- Yahoo
Singapore banks hand billions of surplus capital to investors
By Chanyaporn Chanjaroen (Bloomberg) – United Overseas Bank joined larger rival DBS Group in returning excess capital to shareholders after delivering record-high earnings for the year. Southeast Asia's third-largest bank will distribute S$3 billion ($2.2 billion) over the next three years via share buybacks and special dividends, the Singapore-based firm said Wednesday. DBS also last week unveiled a quarterly dividend program, on top of a S$3 billion buyback plan announced in November. Both stocks have been hitting new highs with the news, putting the spotlight on Oversea-Chinese Banking Corp that has so far kept its capital plans close to its chest. The region's second-biggest lender reports earnings Feb. 26. UOB's capital return plan 'is prudent and optimises its capital structure,' Bloomberg Intelligence credit analyst Rena Kwok said in a research note. The move is leaving a S$600 million surplus capital above its 14% common equity tier 1 operating range post-distribution, she said. UOB also reported Wednesday that net income for the three months ending December rose 3% to S$1.54 billion from a year earlier, largely in line with analysts' estimates of S$1.5 billion. UOB shares were trading slightly down. The results were supported by lending growth, as fee income and other non-interest income were relatively unchanged from a year ago. Allowance for credit and other losses spiked 50% as new soured loans rose. Chief Executive Officer Wee Ee Cheong said a rise in new non-performing loans is 'manageable' and maintained the 2025 outlook for credit costs around 25 to 30 basis points. He is also expecting high single-digit loan growth and double-digit fee growth for the year. It's also the last earnings that Chief Financial Officer Lee Wai Fai presents. Lee will step down in April after two decades in the role and Leong Yung Chee, head of group corporate banking, will succeed him. (Updates with more details throughout) More stories like this are available on ©2025 Bloomberg L.P.
