Woori Financial benefiting from K bank's accelerated IPO plans

From left are Woori Financial Group Chairman Son Tae-seung and K bank CEO Suh Ho-sung. Yonhap

By Lee Min-hyung

Shares of Woori Financial Group gained momentum for a strong rally after K bank shared its plans to move up the timeline of its initial public offering (IPO). Woori Bank is the second-largest shareholder of the internet-only lender.

Woori Financial Group extended a winning streak Tuesday after finishing with a gain of 6.49 percent on the previous trading day.

This situation came shortly after K bank delivered a request for proposals on its planned listing to a group of major securities firms here. Under the drive, the lender is set to go public as early as the end of 2022, advancing the timeline by one year.

K bank decided to do so, because the company is widely expected to achieve a major turnaround in 2021 after having reported an accumulated net profit of 8.4 billion won during the first three quarters combined last year.

Woori Bank holds a 12.68-percent stake in K bank. The mobile bank succeeded in expanding its user base and achieving outstanding earnings growth throughout 2021 on its partnership with the nation's most influential crypto exchange, Upbit.

K bank offers real-name bank accounts for Upbit users, and both platforms benefited from each other due to the burgeoning cryptocurrency industry.

With Dunamu, the operator of the exchange, recently acquiring a 1-percent stake in Woori Financial Group, rumors have spread that Woori Bank may sign a new partnership with Upbit on issuing bank accounts for the exchange's users. This partnership will allow the lender to expand its user base and build a more stable source of commission revenues, even if no specifics have been confirmed so far.

Nonetheless, it appears too early to say whether Woori Financial's stock will be on track for a stable rally, as there is a possibility that K bank will delay the IPO plan. The lender plans to pick its IPO underwriter sometime in February and discuss a more specific roadmap for its listing then.

Despite the uncertainty, market analysts still consider Woori Financial Group as one of the most promising bank stocks due to its stable earnings growth.

“Woori Financial Group will seek structural growth opportunities throughout 2022 on improved corporate governance and increased capital ratio,” eBest Investment & Securities analyst, Jun Bae-seung, said. “We maintain our view that Woori Financial is the most preferred bank stock, as the lender is expected to achieve continuous external growth and its profitability will continue to improve.”

The brokerage house set Woori's target stock price at 16,000 won.

Woori Financial Group is expected to generate a net profit of 252.4 billion won in the fourth quarter of 2021, and will continue its solid earnings growth on an expanded interest margin, the analysts said.

Woori recently cleared a major management risk by completing privatization after the state-run Korea Deposit Insurance Corporation finished the sale of its 9.33-percent stake in Woori.

This situation paved the way for the financial firm to tighten its management control and push for more independent decision-making for its expansion into untapped territories.

If K bank finishes its IPO by the end of this year, the IPO will help enhance Woori's stock value further at a time when demand for lending remains high, despite rising interest rates.

One risk factor is the sluggish growth of the local stock market. At the start of this year, the benchmark KOSPI plunged to below the symbolic 3,000-mark. With the U.S. Federal Reserve and the Bank of Korea set to increase its key rates this year, the main bourse and secondary Kosdaq are still facing downward pressure.