Executive Summary / Key Takeaways

• Woori Financial Group has achieved a significant milestone, with its preliminary Common Equity Tier 1 (CET1) ratio reaching 12.76% as of June 2025, surpassing its year-end target of 12.5% and accelerating towards a 13% market expectation. This robust capital position underpins enhanced shareholder returns, including a scheduled KRW 150 billion treasury share cancellation on September 19, 2025.
• The group is strategically transforming into a comprehensive financial services provider through key acquisitions, notably integrating Tongyang Life and ABL Life as affiliates in July 2025 and relaunching Woori Investment Securities in August 2024. This diversification aims to boost non-interest income and maximize group synergies.
• Technological innovation is a core differentiator, with the "UN Banking" super app targeting 9 million Monthly Active Users (MAU) by year-end 2025 and the successful launch of the KRW1 stablecoin in partnership with BDACS on September 18, 2025, positioning Woori at the forefront of digital finance.
• Despite a challenging economic environment, Woori demonstrated resilient Q2 2025 performance with net interest margin (NIM) expansion for both the bank and credit card segments, and strong non-interest income growth, though some gains were non-recurring.
• The outlook remains positive, with management guiding for stable NIM, gradually stabilizing credit costs, and continued cost efficiency, while proactively managing risk-weighted assets and focusing on high-quality asset growth.

A Diversified Powerhouse in South Korean Finance

Woori Financial Group, a venerable institution founded in 1899 in Seoul, South Korea, has evolved from a traditional commercial bank into a dynamic, comprehensive financial services group. Operating within a highly competitive South Korean banking sector, Woori's overarching strategy centers on expanding its non-banking portfolio, driving digital transformation, and maintaining robust capital management to enhance shareholder returns. This strategic evolution positions the group to capitalize on broad industry trends, including anticipated interest rate cuts and the burgeoning demand for digital financial solutions.

The group's journey since its establishment as a holding company in 2019 has been marked by strategic acquisitions, including Woori Financial Capital, Asset Trust, and F&I. A pivotal move was the re-entry into the securities market with the launch of Woori Investment Securities in August 2024, following the merger of Woori Investment Bank and F&I Securities. This was further solidified by obtaining an official brokerage license and launching its Mobile Trading System (MTS) platform in March 2025. The most recent strategic expansion saw the inclusion of Tongyang Life and ABL Life as affiliates on July 1, 2025, completing the group's lineup as a full-fledged financial services provider. This diversification is critical for enhancing income stability and generating synergies across the group's various segments.

Technological Edge and Digital Innovation

Woori Financial Group is actively leveraging technology to differentiate itself and capture new growth opportunities. Its core digital offerings include the "UN Banking" super app and the Woori Securities MTS platform. The UN Banking super app, launched last year, aims to increase its Monthly Active Users (MAU) from 8.5 million at the end of 2024 to 9 million by the end of 2025. This platform is designed to enable universal banking services across the group, attracting new customers and facilitating the launch of financial products. The securities arm is also set to join the super app in the first half of 2025.

A significant technological differentiator is the group's involvement in stablecoins. On September 18, 2025, BDACS launched the KRW1 stablecoin following a successful proof of concept with Woori Bank. Woori Bank acts as a strategic partner, safeguarding KRW1 collateral and supporting the core infrastructure. This initiative is exploring public-sector applications, such as low-cost payment and settlement systems for emergency relief disbursements, which could significantly reduce transaction fees. The KRW1 stablecoin is also expected to be considered a leading technical standard under Korea's forthcoming Digital Asset Basic Act. This positions Woori as an innovator in the evolving digital asset space, potentially creating new revenue streams and enhancing its competitive moat.

Further digital advancements include the Woori Securities MTS platform, launched at the end of March 2025, which has already attracted 20 new accounts in its first three months. This platform offers advanced features like Wealth Management, AI-based investment insights, and user-based interfaces. An integrated MTS and ATS market is planned for September 2025, with overseas stocks trading embedded in Universal Banking by December 2025. The Budget Telecom service, launched in Q1 2025, targets new customer acquisition, particularly among younger demographics (60% of its customers are in their 20s and 30s), and aims to increase activation of existing customers through differentiated bundled services like savings deposits linked with telecom services. These technological initiatives are crucial for enhancing customer engagement, improving operational efficiency, and diversifying non-interest income, thereby contributing directly to the group's long-term growth strategy and competitive positioning.

Competitive Landscape and Strategic Positioning

Woori Financial Group operates in a fiercely competitive South Korean financial market, contending with major domestic players such as KB Financial Group (KB), Shinhan Financial Group (SHG), and Hana Financial Group (HFG), as well as indirect competitors like digital-only banks (e.g., Kakao Bank, Toss Bank) and fintech platforms. Woori's extensive branch network and strong brand recognition provide a foundational competitive advantage, fostering customer loyalty and recurring revenue, which can lead to superior margins and robust growth. This physical presence helps counter the digital strengths of competitors like KB Financial Group by offering personalized services and potentially improving pricing power in retail segments.

However, Woori's reliance on traditional banking models can result in higher operating costs compared to more digitally focused rivals, impacting profitability and cash flow. While Woori's NPL ratio of 0.21% for the bank in Q3 2024 was among the lowest in the industry, indicating strong asset quality, competitors like KB and Shinhan often demonstrate faster digital adoption and innovation cycles, which can lead to greater efficiency and market share capture in evolving segments. For instance, Shinhan Financial Group's focus on global expansion and digital banking, coupled with its international network, provides a distinct edge in cross-border transactions and product diversification. Hana Financial Group, with its customer-centric approach and efficient cost structure, often exhibits strong efficiency metrics.

Woori is actively addressing these competitive dynamics through its strategic diversification and digital investments. The expansion into securities and insurance, coupled with the development of its super app and stablecoin initiatives, aims to create new revenue streams and enhance its competitive standing. The group's commitment to a balanced portfolio, focusing on prime corporate loans and future growth industries, alongside proactive risk management, is designed to ensure qualitative asset growth and asset soundness. The recent Zacks Rank #2 (Buy) upgrade for Woori Bank, driven by an upward trend in earnings estimates, reflects a positive market sentiment regarding its strategic direction and earnings outlook.

Financial Performance and Capital Strength

Woori Financial Group has demonstrated a mixed but generally resilient financial performance, particularly in the face of economic uncertainties. For the first half of 2025, the group reported a net income of KRW 1,551.3 billion, an 11.6% year-on-year decrease. However, excluding one-off expenses related to an early retirement program and preemptive provisions, net income was comparable to the previous year. The net operating revenue for the first half of 2025 increased by 2.3% year-on-year to KRW 5400.1 billion, driven by asset rebalancing, improved margins from funding optimization, and a notable increase in core fee income from the Wealth Management business.

The second quarter of 2025 saw net income of KRW 934.6 billion, a KRW 300 billion increase from the first quarter, though it did not meet market expectations. The bank's Net Interest Margin (NIM) for Q2 2025 was 1.45%, and the group's NIM (including the credit card business) was 1.71%, both increasing by 1 basis point quarter-over-quarter. This marked the second consecutive quarter of NIM expansion, totaling 5 basis points for the first half of 2025, attributed to active funding cost management and asset rebalancing amidst falling interest rates. Noninterest income for the first half of 2025 was KRW 886.3 billion, maintaining a similar level year-on-year, but saw a sharp 47% quarter-over-quarter rise in Q2 2025 to KRW 527.3 million, with cumulative core fee income exceeding KRW 1 trillion.

Expenses have been a focus area. The SG&A expense for the first half of 2025 increased by 18% year-on-year to KRW 2479.1 billion, resulting in a cost-to-income ratio (CIR) of 42.8%. This increase was primarily due to one-off factors such as early retirement costs and investments in the newly launched securities business and digital capabilities. Credit costs for the first half of 2025 amounted to KRW 944.5 billion, with Q2 2025 credit costs of KRW 509 billion including a KRW 86 billion preemptive provision for completion guarantee projects. Excluding these one-time factors, the credit cost ratio was maintained at a stable 0.42%.

A significant highlight is the group's robust capital adequacy. As of June 2025, the preliminary CET1 ratio reached 12.76%, a substantial 60 basis point increase from the end of last year, exceeding the 12.5% target for the first time in the group's history. This improvement was driven by solid profit generation, optimal portfolio composition, prudent management of FX-sensitive assets, and a focus on Return on Risk-Weighted Assets (RoRWA). The group is committed to enhancing shareholder returns, having approved a quarterly dividend of KRW 200 per share for Q2 2025 and executing a KRW 150 billion treasury share cancellation scheduled for September 19, 2025.

Outlook and Strategic Trajectory

Woori Financial Group's outlook is characterized by a determined push towards its capital and profitability targets, underpinned by strategic diversification and digital innovation. The group aims to outperform its year-end 2025 CET1 target of 12.5% and accelerate efforts to achieve the market expectation of 13%, a goal initially set for 2027. This ambition is supported by continued asset rebalancing and diligent management of risk-weighted assets. Management anticipates NIM to remain stable in the mid-to-low 1.4% range for the second half of 2025, with a full-year 2025 NIM expected to be around high 1.3%, despite projected interest rate cuts. This will be achieved through active funding cost management and expanding core deposits.

Credit costs are expected to gradually stabilize from the third quarter of 2025 onwards, with the full-year 2025 credit cost ratio projected to be in the low to mid-40% range, potentially falling below 40 basis points next year. This forecast assumes continued government economic stimulus and a prolonged low interest rate environment, alongside the group's proactive risk management and shift towards lower-risk prime assets. The cost-to-income ratio is expected to be around 40% for the full year 2025, with a long-term target of below 40% from 2026 onwards, driven by ongoing cost efficiency initiatives and digital investments.

The strategic expansion into insurance and securities is expected to yield significant benefits. The insurance acquisitions are projected to have a minimal impact on the group's capital ratio, while contributing an anticipated annual profit increase of KRW 300 billion to KRW 400 billion and approximately a 1 percentage point improvement in ROE. The securities arm, Woori Investment Securities, is set to play a pivotal role in non-banking business growth, with its operating income improving quarter-over-quarter and significant contributions expected in the future. The group's commitment to its Corporate Value-Up Plan, including a mid-to-long-term Total Shareholder Return (TSR) target of 50%, underscores its dedication to enhancing shareholder value through a balanced approach of cash dividends and share buybacks.

Risks and Considerations

While Woori Financial Group presents a compelling investment thesis, several risks warrant consideration. The persistent concerns about an economic slowdown, both domestically and globally, could lead to continued volatility in delinquency and NPL ratios, particularly in vulnerable industries. The potential for fluctuations in interest and exchange rates, alongside possible changes in regulatory capital requirements, could impact the group's financial performance and capital targets. The integration of newly acquired insurance companies, while strategically beneficial, comes with inherent integration costs and "some impact" on capitalization levels, although management does not foresee the need for a capital increase for these entities.

Furthermore, the competitive intensity in corporate loans and the ongoing restructuring of the real estate PF market could exert pressure on lending margins and credit costs. While the group is proactively managing these risks through asset rebalancing, enhanced risk management capabilities, and a focus on high-quality assets, these external factors remain critical to monitor. The non-recurring nature of some of the recent non-interest income gains from favorable market conditions also highlights the need for sustained growth in core fee income.

Conclusion

Woori Financial Group stands at a pivotal juncture, transforming into a diversified financial powerhouse with a strong emphasis on capital adequacy, strategic expansion, and technological leadership. The achievement of a 12.76% CET1 ratio, exceeding its 2025 target, provides a solid foundation for accelerated shareholder returns and future growth. The strategic acquisitions in insurance and the re-established securities business, coupled with pioneering digital initiatives like the KRW1 stablecoin and the UN Banking super app, are poised to diversify revenue streams and enhance the group's competitive moat.

While the South Korean financial landscape remains challenging, Woori's proactive risk management, focus on qualitative asset growth, and commitment to cost efficiency position it for resilient performance. The group's clear guidance on capital, NIM, and credit costs, alongside its ambitious shareholder return policy, underscores a management team focused on long-term value creation. Investors looking for exposure to a well-capitalized, diversifying, and technologically forward-thinking financial institution in South Korea may find Woori Financial Group a compelling opportunity.