Woori Bank, South Korea's second-biggest bank by assets, on May 4 announced that it posted a 52 percent jump in first-quarter net profit from a year earlier on improved margins and lower costs.
For the three months ended March 31, Woori Bank's net profit soared to 443 billion won (US$390 million) from 291 billion won a year earlier, the bank said in a statement.
The net result was a higher than the average market forecast of 321 billion won.
"To survive record-low rates and other unfavorable business environments, we have focused on risk management by improving net interest margins and reducing costs involving nonperforming loans," a bank spokesman said.
The country's base rate now stands at an all-time low of 1.5 percent.
Operating profit soared 87 percent to 556 billion won in the first three months from 297 billion won a year ago. Sales rose 14 percent year-over-year to 1.509 trillion won.
Woori Bank said it was targeting to achieve 7 percent in returns on equity (ROE) this year, up from 5.7 percent last year. The ROE measures a company's profitability by showing how much profit it generates with the money shareholders have invested.
Despite unfavorable market conditions including low interest rates, profits increased for leading banking groups in the first quarter of this year, largely due to more household borrowing that continues to break new records and pre-emptive restructuring on insolvent corporate lending.
On May 4, the three major banking groups - KB Financial Group, Shinhan Financial Group and Woori Bank - announced their first-quarter performance.
Among the three, Woori Bank reported an earnings surprise, as its net profit surged 52.4 percent year on year to 443.3 billion won ($391 million). Compared to the previous quarter, net profit surged 102.4 percent.
“Even under difficult market conditions, loans grew at an appropriate level of 1.4 percent while the net interest margin improved, and this contributed to the increase in our earnings made from the interest difference,” a Woori Bank official said.
In the first quarter, the bank’s earnings, from the difference between loan interest they received from clients to deposit interest payments, grew 9.4 percent, or 106.9 billion won, to 1.24 trillion won. The bank said it was able to reduce overdue payments through pre-emptive risk management.
The situation is similar at Shinhan Financial Group. Although not as large as Woori’s, Shinhan’s net profit in the first quarter increased 30.3 percent to 771.4 billion won. Compared to the previous quarter, it surged 90.9 percent. Its flagship Shinhan Bank saw its net profit grow 47.4 percent year on year to 574.9 billion won. When compared to the previous quarter, it surged 142.7 percent.
The bank also reported an improved net interest margin and an increase in loans. The earnings it made from interest grew 4.8 percent year on year to 1.07 trillion won.
The stock price, which bottomed at 8,460 won on Feb. 12, had climbed up to 10,350 won on May 4. The stock price’s revamp followed foreign institutional investors’ purchase of Woori shares since early February.
The KDIC pumped in 12.7 trillion won in Woori Bank in 2001 to prevent the bank from going belly up after the 1997 financial crisis, and may want to sell off its near-50 percent stake, as the share price has mostly recovered.
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A view of Woori Bank building in downtown Seoul.(Photos:Woori Bank)
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