1

Woori Financial Group Chairman Lim Jong-ryong has ordered Woori Investment Bank to spearhead the efforts to boost the group's non-banking profitability, following a 1 trillion won capital injection through a paid-in capital increase last month to provide the securities arm with necessary ammunition.

Since its launch in August 2024, Woori Investment Bank's earnings contribution to the group has been marginal. Although it posted a net profit of around 14 billion won in the first quarter of this year, a significant performance gap remains when compared to the securities arms of rival financial groups. Its earnings also fell short of small and mid-sized brokerages with similar equity capital sizes.

Consequently, voices within the group's board of directors are reportedly pointing out that Woori Investment Bank's performance remains relatively sluggish despite the ongoing stock market boom driving robust earnings growth across the securities sector.

Given the massive support extended through the recent capital increase, Chairman Lim appears to have issued a stern demand for a rapid turnaround directly to Nam Ki-cheon, CEO of Woori Investment Bank.

According to financial industry sources on the 11th, Chairman Lim summoned CEO Nam and key executives of Woori Investment Bank early this month to urge intensive efforts toward enhancing profitability. This came just a month after their meeting in April—when the 1 trillion won capital injection was finalized—where Lim emphasized the need to sharpen capital market competitiveness. In a matter of weeks, he called the securities unit's leadership back to demand an increased contribution to group-wide earnings.

Woori Investment Bank, launched in August 2024, has yet to generate substantial earnings for the group. For Chairman Lim, who has aggressively pushed to bolster the non-banking portfolio, this underscores the persistent challenge of reducing the group's heavy reliance on its banking flagship.

The profitability gap is particularly glaring for Lim considering that rival firms—KB, Shinhan, Hana, and NH Financial Groups—have seen their earnings significantly buoyed by their respective securities subsidiaries. Woori Financial Group lost its position among the "Big 4" financial groups to NH Financial Group in the first quarter of this year. While the net profit gap between their banking units was slim, the stellar performance of NH's securities arm proved to be the deciding factor.

Woori Investment Bank recorded a net profit of 13.8 billion won in the first quarter, representing a jump of over 1,300% year-on-year. However, NH Investment & Securities, the brokerage arm of NH Financial, pulled in 475.7 billion won during the same period, contributing 280.3 billion won to its group net profit based on equity stake.

While a direct comparison is difficult since NH Investment & Securities is one of the industry's "Big 5" giants, it highlights why Woori Investment Bank's profitability remains a headache. Following the 1 trillion won capital increase last month, Woori Investment Bank's equity capital expanded to the 2.2 trillion won range, climbing to 11th place in the industry. Yet, its net profit gap remained wide even when compared to similarly sized small and mid-sized brokerages, such as Kyobo, Hanwha, Yuanta, Hyundai Motor, and iM Securities.

This has fueled dissatisfaction within the group's board. Outside directors recommended by Woori Financial's oligopolistic shareholders—including Eugene PE, Fubon Life Insurance, Korea Investment & Securities, and Kiwoom Securities—participate in governance through the board. Some of these directors have reportedly pointed out that Woori Investment Bank is failing to meet expectations at a time when the entire securities industry is riding a market boom to deliver high profitability.

The group's expectations for the 1 trillion won capital injection are remarkably high. Woori Investment Bank plans to leverage the secured capital to strengthen its capacity for large-scale deals and engage in aggressive investment banking (IB) operations to build a robust, non-interest-driven revenue structure.

An official from Woori Investment Bank stated, "Alongside investments to sharpen competitiveness, such as building a new securities IT system and recruiting industry experts, we are simultaneously working to normalize troubled project financing (PF) assets. As we pursue a shift toward a non-interest income-centered revenue structure and top-line growth, we will aim to achieve a 10% Return on Equity (ROE) by 2030 through a phased expansion of profitability."

Kim Ye-il and Kim Kyung-geun, senior analysts at Korea Investors Service, analyzed, "With this capital increase, the firm will possess the highest capital strength among general brokerages outside the 10 designated comprehensive investment banking business (IBB) providers. Backed by this capital competitiveness, it will be able to aggressively expand its business foundations across IB, retail, and trading segments." They added, "Given the group's strategic direction to diversify its non-banking business portfolio by expanding the securities arm, the strategic importance of Woori Investment Bank has risen. It is expected to further maximize business synergies through operational and financial support as well as collaboration among affiliates."

During the first-quarter earnings conference call, a Woori Financial Group official remarked, "We will continue to review phased additional capital injections, taking into account the timeline for acquiring the comprehensive IBB license. Our core focus this year and next is to build the growth foundation to leap forward as a comprehensive investment banking player and an ultra-large IB by gradually expanding core business infrastructure."

                                                                                                           Cho Eun-guk

                                                                                                         Han Sang-wook