Woori Financial Group was overtaken by NongHyup Financial Group in first-quarter earnings, a rare shift that highlights the growing importance of nonbanking income, as a stock market rally boosts brokerage profits.
Industry data released Tuesday showed NongHyup Financial posted 868.8 billion won ($589 million) in net profit for the January-March period, up 21.7 percent from a year earlier, surpassing Woori Financial’s 603.8 billion won.
Woori, which has typically ranked fourth among Korea’s major financial groups, was the only one to report a decline in earnings, with net profit falling 2.1 percent on-year and missing market expectations of around 800 billion won.
By contrast, KB Financial Group, Shinhan Financial Group and Hana Financial Group posted profit growth of 12 percent, 9 percent and 7 percent, respectively, driven largely by strong brokerage income.
The divergence reflects the impact of a buoyant stock market. The benchmark Kospi surged roughly 50 percent in the first quarter, amplifying earnings for financial groups with well-established securities businesses.
Woori’s weaker performance underscores the limits of its bank-heavy structure. While the group has been rebuilding its brokerage arm through Woori Investment Securities, the unit remains small relative to peers. Even after posting more than 1,300 percent growth, its net profit stood at just 14 billion won.
By comparison, NH Investment & Securities delivered standout results with 475.7 billion won in net profit, up nearly 130 percent on-year. KB Securities followed with 350 billion won, while Shinhan and Hana Securities reported 288 billion won and 103 billion won, respectively.
The gap is becoming more pronounced as market conditions increasingly favor diversified financial groups. Banking accounts for 57 percent of earnings at KB Financial and 65 percent at Shinhan, while Hana has reduced its reliance to 82 percent from 84 percent. Woori remains the most bank-dependent among the major groups, with nearly 90 percent of its earnings tied to the banking unit.
To narrow the gap, Woori plans to inject 1 trillion won into Woori Investment Securities next month, raising the unit’s equity to 2.2 trillion won — around 11th in the industry. The brokerage aims to use the capital to expand investment banking, large-scale dealmaking and wealth management.
Analysts say progress in nonbanking operations will be key to improving Woori’s valuation.
“Woori’s fee income rose slightly, but remained fairly muted compared with rivals seeing explosive growth in brokerage-related fees,” said Choi Jeong-wook, an analyst at Hana Securities. “A rerating will depend on stronger competitiveness and a larger profit contribution from nonbank subsidiaries.”
By Choi Ji-won (jwc@heraldcorp.com)
