Woori Bank posted 516.9 billion won in net profit in the first half of the year, up 24 percent from the same period last year, with most of income coming from the sales of banccasurance , which is non-interest income for the bank.
The bank projected that earnings from loan interest would fall by 22 percent in the second quarter to 226.1 billion won, about the same as first quarter earnings amounting to 290.8 billion won if early retirement funds paid to the honorary retirees of the bank are accounted for.
The bank’s first half operating profit amounted to 2.799 trillion won, up 14 percent year-on-year, but its non-interest income came to 481.8 billion won, up 105 percent from the same period last year, while interest earnings totaled 2.317 trillion won, up 4.8 percent year-on-year, thanks to an increase in loans. Although the margin of interest rates and deposit interest rates fell 0.03 percent in the second quarter from the preceding three months, at 1.4 percent.
The bank stressed that the health of its assets has been improving with bad loan rates falling to 1.73 percent, down 0.21 percent. The bad loan rate minus the loans provided to four shipbuilding companies, including Seongdong Shipbuilding, stood at 1.35 percent. The bank’s loan default rate fell to 0.75 percent, improving by 0.15 percent from the preceding quarter.
The bank has also decided to pay a mid-term dividend this year, which will be 250 won per share as part of a strategy to boost the value of the bank. The idea is to raise the bank’s value now in order to get a better price when it is privatized sometime in the second-half of 2015. As well, the bank will try to improve its profitability and health in the second half in an attempt to maximize the return for the government.
In the meantime, Woori Card and Woori Integrated Finance netted 75.7 billion won and 6.9 billion won in net profits in the first half, respectively.
Woori Bank has done exceedingly well in the sale of banccasurance in the first half, overtaking NH Bank and Kookmin Bank, the two front-runners, in the sales of the insurance product handled by the commercial banks. Woori Bank’s commission earned from the sale of the insurance product came to 48.6 billion won in the first half of 2015, an 11.2 percent rise year-over-year, slightly less than NH Bank’s 48.9 billion won, but a way ahead in the commission earnings increase than NH Bank whose commission earnings increased only 4 percent year-over-year.
The bank explored niche markets in the sale of banccasurance, especially to scholarship foundations and religious groups, who had nowhere else to go to get high earnings for their cash, with the banks paying such a low rate on deposit interest. The bank successfully attracted them to buy banccasurance through them by convincing them they can make higher earnings than bank interest rates on deposits. As a result, Woori Bank almost beat NH Bank in banccasurance sales in the first half. NH Bank always led others in selling the insurance product because of its vast national network and by taking advantage of the National Agricultural Cooperatives Federation (NACF). Woori Bank beat Kookmin Bank, which traditionally came second in the sale of the insurance product to NH Bank. Its commission earnings fell 2.6 percent year-over-year in the first half coming to 45.4 billion won.
Woori Bank has been able to boost its commission earnings from selling banccasurance by persuading the scholarship foundations, religious organizations and other organizations flush with cash holdings to invest in banccasurance to make up for low interest that the banks pay on deposits.
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