Woori Investment Securities posts W3.4b Q3 net profit as IB fees drive 27.3% cumulative gain

Woori Investment Securities posted a net profit of 3.4 billion won ($2.57 million) in the third quarter of this year. Although the quarterly figure fell from the previous quarter, cumulative net profit through the first three quarters rose 27.3 percent year-on-year, driven by growth in investment banking fees.

According to the company's earnings release Friday, third-quarter net profit came in at 3.4 billion won, with operating profit reaching 1.8 billion won.

Woori Investment Securities said rising interest rates and a deteriorating bond-trading environment weighed on trading revenue during the quarter. A slowdown in new IB deal activity also reduced non-interest income from the previous quarter, pulling down both operating profit and net profit.

Cumulative net profit for the first three quarters stood at 28.2 billion won, up 27.3 percent from the same period a year earlier. Operating profit climbed 72.2 percent to 31.2 billion won, while net operating revenue — combining interest and non-interest income — rose 46.0 percent to 203.5 billion won.

Growth in IB fee income drove the earnings improvement. Cumulative non-interest income through the third quarter reached 101.4 billion won, up 94.2 percent year-on-year. IB-related fees in particular surged 163.5 percent to 67.2 billion won, boosted by a pickup in large-deal mandates following a 1 trillion won rights offering in May. Interest income also grew 17.2 percent to 102.1 billion won.

Cost pressures persisted. Stricter assessments of real estate project financing assets originated before the firm's launch as a securities company, combined with the deterioration of some projects, pushed cumulative credit loss provisions to 39.3 billion won — a 105.3 percent increase from the same period last year. The company said it has cut its non-performing PF assets by more than 50 percent since its launch as it works to improve asset quality.

Investment in building out the firm's securities business also continued. Spending on a proprietary IT system and the recruitment of specialist staff pushed cumulative selling and administrative expenses up 31.7 percent year-on-year to 133.1 billion won. The company said upfront investment costs and expenses related to managing legacy non-performing PF assets remain a burden.

Woori Investment Securities recorded a net profit of 24.7 billion won and operating profit of 29.4 billion won in the first half of this year. Fee income from IB and related businesses reached 49.1 billion won during that period, a 206 percent increase year-on-year, and was the primary driver of the earnings improvement.

The company expects earnings to improve in the fourth quarter as large IB transactions close. Over the longer term, it plans to pursue full-scale growth from 2028, when the cost burden from early-stage investment and legacy non-performing PF assets is expected to ease.

"Even as we bear the costs of proactive investment to build our securities business and secure competitiveness, as well as expenses from managing non-performing PF assets inherited from before our launch, we remain focused on revenue growth centered on IB," a company official said. "From 2028, when our early investments begin to bear fruit, we will move onto a full growth trajectory and work toward our goal of becoming a comprehensive financial investment firm by 2030."