[Edaily Reporter PARK MIN ] On the 26th, SKSecurities assessed that WooriFinancialGroup(316140)posted robust third-quarter earnings that exceeded market expectations, driven by a significant improvement in the loan loss provision ratio despite a decline in the net interest margin (NIM). Noting that the likelihood of achieving a 50% shareholder return rate ahead of schedule has increased thanks to strengthened capital ratios, the firm maintained its “Buy (BUY)” investment rating and target price of 43,000 won. This represents an upside potential of 42.9% compared to the previous trading day’s closing price (30,100 won).

Jang Young-im, an analyst at SKSecurities, stated in an earnings analysis report released today, “WooriFinancialGroup’s third-quarter net income attributable to controlling shareholders rose 4.4% quarter-over-quarter to 1.0492 trillion won, exceeding the market consensus (988 billion won) by 6.2%.”

A sharp decline in loan loss provisions was cited as the key factor driving the strong earnings. Provisions for loan losses in the third quarter totaled 314 billion won, a 28.1% decrease from the previous quarter.

Analyst Jang stated, “The burden of provisions is easing as the effects of asset rebalancing—focused on loans to high-quality companies—become apparent,” adding “The third-quarter credit cost ratio (CCR) stood at 30 basis points (1 bp = 0.01 percentage point; cumulative 42 bp), an improvement of 13 bp from the previous quarter and the lowest level since 2024. Additionally, the net increase in non-performing loans (NPLs) prior to write-offs and sales is being managed stably,” he assessed.

On the other hand, the net interest margin (NIM), a key profitability indicator, saw a sharp decline due to rising funding costs. The Group’s and the Bank’s NIMs fell by 7 basis points each from the previous quarter to 1.68% and 1.43%, respectively. This was driven by a steeper rise in funding rates—primarily for one-year bank bonds—amid a high proportion of CD-linked loans (70%), as well as a 5.8% decrease in low-cost deposits offset by a 5.8% increase in time deposits.

However, Analyst Jang noted, “Since won-denominated loans grew by 1.5% compared to the previous quarter, net interest income maintained a slight upward trend,” adding, “As the effects of the benchmark interest rate hike are reflected in loan rates, a rebound in NIM is possible starting in the fourth quarter.”

In the non-interest income segment, while trust fees declined due to a slump in the stock market, this was partially offset by non-monetary foreign exchange gains (140 billion won) resulting from a weaker exchange rate and the positive impact of consolidating insurance affiliates such as TONGYANG LIFE INSURANCE and ABL Life.

Improvements in capital ratios were also notable. WooriFinancialGroup’s Common Equity Tier 1 (CET1) ratio for the third quarter stood at 13.80%. Analyst Jang noted, “Considering that the temporary impact of corporate tax payments and corporate transactions at the end of the quarter (-15 basis points) was resolved in early October, the actual CET1 ratio stands at around 13.95%,” adding, “Having demonstrated a high capital ratio, the company now has sufficient capacity to rapidly increase its shareholder return ratio to 50%.”

He continued, “While we currently conservatively estimate that the company will reach a total shareholder return ratio of 50% in 2028, an early expansion to 50% in 2027 would trigger a strong valuation re-rating,” adding, “Given the normalization of profits in the banking sector and the full-scale contribution of insurance company earnings next year, the stock remains in an attractive range.”