Bloomberg News

Woori Finance Quarterly Profit Rises 8.3% as Provisions Drop

November 01, 2011

(Updates with analyst comment in fourth paragraph.)

Nov. 1 (Bloomberg) -- Woori Finance Holdings Co., the owner of South Korea’s second-largest bank, said third-quarter profit rose 8.3 percent last quarter as provisions against bad loans dropped and lending margins widened.

Net income climbed to 520 billion won ($466 million) in the three months ended Sept. 30 from a revised 480 billion won a year earlier, the company said today in an e-mailed statement.

Woori joins rival KB Financial Group Inc. in reporting higher earnings helped by a decline in bad-loan costs. Combined provisions at 18 South Korean lenders dropped to 2 trillion won last quarter from 3.3 trillion won a year earlier, when banks set aside more funds to cover soured construction loans, the Financial Supervisory Service said on Oct. 28.

“Woori and other banks’ provisions normalized last quarter from unusually high levels a year earlier,” said Sung Byung Soo, an analyst at Seoul-based Tong Yang Securities Inc. “Those costs are likely to climb in the fourth quarter as the economy weakens.”

South Korea’s gross domestic product expanded at slower pace of 0.7 percent in the third quarter, compared with 0.9 percent three months earlier, the Bank of Korea said last week. It will be difficult to meet the central bank’s full-year growth forecast of 4.3 percent, Kim Young Bae, a central bank official, said Oct. 27.

Woori’s provisions for bad loans and other potential losses fell to 450 billion won last quarter from 603 billion won a year earlier, according to the statement.

Net interest margin, a key measure of profitability from lending, widened 38 basis points to 2.56 percent last quarter. The margin was 3 basis points higher than three months earlier. A basis point equals 0.01 percentage point.

Shares of Woori fell 1.8 percent to 10,650 won at the close of trading in Seoul ahead of the earnings announcement. The stock has fallen 31 percent this year compared with benchmark Kospi index’s 6.9 percent drop.

--Editors: James Gunsalus

To contact the reporter on this story: Seonjin Cha in Seoul at scha2@bloomberg.net

To contact the editor responsible for this story: Chitra Somayaji at csomayaji@bloomberg.net


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