Cheap bank, harder credit test
- Woori ended 2025 with a 12.9% CET1 core capital ratio, just below the 13% return trigger.
- Non-bank subsidiaries grew their earnings share from 9% to roughly 25% by the end of 2025.
- SME loan charge-offs rose from ₩342 billion in 2024 to ₩762 billion in 2025, even as that loan book shrank.
- The Bank of Korea cut its policy rate to 2.50% by May 2025, which pressures lending margins.
- Finn sees the stock as cheap, but financial health is the weak spot because credit and currency risks are rising.
Value plan meets bad loans
The bull case is simple. Woori is trying to turn from a mostly bank story into a broader financial group. Cards, capital, securities, and insurance now matter more. Management said non-bank subsidiaries moved from 9% of group earnings to roughly 25% by the end of 2025.
Capital is the other part of the story. The group ended 2025 at a 12.9% CET1 ratio. CET1 is the main bank safety buffer. Management wants to stay above 13%, which would open the next tier of shareholder returns, including a target of 10% of earnings for buybacks.
The bear case is not about the plan. It is about whether credit losses eat the plan first. SME loan charge-offs more than doubled to ₩762 billion in 2025 from ₩342 billion in 2024. That is worse because the SME portfolio was shrinking, so the loss signal is loud.
The stock screens cheap, which fits Finn's high valuation score. But the low financial health score also fits the facts. Lower rates, a weaker Won, and rising SME losses can slow capital build even if the Value-Up Plan is working.
Bank spread plus new fees
Woori makes most of its money the normal bank way. It takes deposits, lends to companies and households, and earns the spread between loan income and funding cost. The best version of this model is prime corporate lending, where losses are lower and capital use is cleaner.
Management is pushing profit per unit of risk, not just loan growth. It calls this RORWA-based growth, which means return on risk-weighted assets. Risk-weighted assets are loans and investments adjusted for how risky regulators think they are. Woori is also trying to keep risk-weighted asset growth tight, with a prior target to keep group growth within 4%.
The non-bank push gives Woori more ways to earn fees and insurance income. Woori Investment Securities received its brokerage license in March 2025 and launched its mobile trading platform. Tongyang Life and ABL Life became affiliates on July 1, 2025.
The model breaks if credit costs rise faster than income. It also breaks if lower interest rates squeeze the net interest margin, which is the profit spread on lending. The Bank of Korea rate cuts to 2.50% by May 2025 make that a real watch item.
What Woori sells
Woori Bank corporate and SME loans
This is the core engine. It brings interest income, but SME credit is now the biggest visible stress point.
Retail banking and housing-related assets
These products add scale and deposits. They also tie Woori to Korean household credit and housing conditions.
Woori Card and Woori Financial Capital
These units add non-bank earnings and fee income. Management says the cleanup of some non-bank real estate project finance assets is largely complete.
Woori Investment Securities
The securities arm received its official brokerage license in March 2025 and launched its mobile trading system. This gives Woori a bigger role in trading, investment products, and capital markets fees.
Tongyang Life and ABL Life
These insurers became Woori affiliates on July 1, 2025. They are central to the non-bank earnings push, but the merger still has integration risk.
Budget Telecom
This is a customer acquisition tool for digital channels. The goal is to bring in younger users and later convert them into financial customers.
Still bank-led
Mix uses management's Q4 2025 comment that non-bank subsidiaries contributed roughly 25% of group earnings by the end of 2025. This is an earnings mix, not a revenue mix, and Woori Bank still drives most of the group.
What can go wrong
SME credit losses keep rising
High impact · High oddsWoori's Won-denominated SME charge-offs rose from ₩342 billion in 2024 to ₩762 billion in 2025. That happened while the SME loan balance decreased, which points to worse credit quality, not just a bigger book. If this continues, capital returns may get delayed.
Rate cuts squeeze lending margin
High impact · Medium oddsThe Bank of Korea cut its policy rate to 2.50% by May 2025. Lower rates can reduce the spread banks earn on loans, especially if deposit costs do not fall as fast. Woori needs fee income and cost control to offset this pressure.
Won weakness hits capital
High impact · Medium oddsManagement said the Won's move in the fourth quarter of 2024 reduced CET1 by 40 basis points. A weaker Won can raise foreign currency debt servicing costs and slow capital build. Political instability in Korea has also been named as a source of currency volatility.
Insurance merger friction
Medium impact · Medium oddsTongyang Life and ABL Life are now part of Woori. That helps diversification, but insurance brings different capital rules, systems, and sales cultures. Management has said it wants to manage insurance capital through asset rebalancing rather than group capital injections.
Real estate project finance returns
Medium impact · Low oddsManagement says the cleanup of non-bank real estate project finance assets is largely complete and expects related 2026 credit costs to be limited. That lowers near-term risk, but it does not remove it. A weak property market could bring new provisions.
In one breath
Is Woori Financial Group mostly a bank?
Yes. Woori Bank is still the main driver, but the group is adding more non-bank earnings. By the end of 2025, management said non-bank subsidiaries contributed roughly 25% of group earnings.
Why does the 13% CET1 ratio matter for Woori?
CET1 is a key measure of bank capital strength. Management has tied a higher capital level to stronger shareholder returns, including a target of 10% of earnings for buybacks once the next tier is unlocked.
What is the biggest risk for Woori right now?
The clearest risk is SME credit quality. SME charge-offs more than doubled in 2025, which could reduce earnings and slow capital growth.
Why is Woori adding insurance and securities?
The goal is to depend less on bank lending spreads. Securities, cards, capital, and insurance can add fees and more stable non-bank earnings if integration goes well.