Woori Financial moves to acquire brokerage to fortify non-banking sector

Woori Financial Group Chairman Yim Jong-yong / Yonhap

Woori Financial Group has officially declared its bid to acquire a brokerage, a move to fortify its non-banking sector and offset a significant dent in profit last year, market watchers said Wednesday.

Entities up for sale in the industry will be reviewed regardless of size, the group said during a conference call, Tuesday.

“The one frequently mentioned is obviously on the list of candidates to undergo our review, since it specializes in online sales of products and has little impact on the group’s capital ratio,” a Woori official said.

It was a clear reference to Korea Foss Securities, an online-only brokerage established in 2013.

The Korea Securities Finance Corp., the largest shareholder of the brokerage, has since sought to generate profit, mostly through joint business projects with industry leaders, but failed to achieve any meaningful outcome.

Woori can expand its presence in the securities industry, first by obtaining licenses for a securities business. It then can merge the entity with Woori Investment Bank, the group's subsidiary.

Woori Investment Bank will move its headquarters this year to Yeouido, the capital's financial district, from central Seoul.

The entity was able to raise its equity capital to 1.1 trillion won ($828 million), buoyed by 500 billion won in equity financing last year. The figure is comparable to one held by the 17th-largest player in the industry.

However, the probability is low that the envisioned Woori brokerage will immediately post outstanding performances.

This is because the equity capital of securities subsidiaries of the country’s top financial groups average about 4 trillion won.

“KB, Shinhan, Hana and NH each have well-established brokerage subsidiaries. The Woori entity will certainly struggle for at least the first couple of years," an industry analyst said.

Woori Financial registered a net profit of 2.51 trillion won last year, down 19.9 percent from 3.14 trillion won in 2022.

Interest income came to 8.74 trillion won, up 0.5 percent from a year earlier.

Non-interest income stood at 1.94 trillion won, down 4.7 percent. The drop reflects hefty government-mandated spending on financial aid packages for low-income earners and small businesses. Were it not for the one-off unexpected expenditure, the year-on-year increase in non-interest income would have been 10 percent.