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Issuer Flash: Woori Bank

Issuer: Woori Bank | Document: Issuer Flash | Date: 2026-08-03 | Event: 2q2026

Report date: 2026-08-03 Event date: 2026-07-24 Event title: 2026 First Half Results

1. Flash Conclusion

Woori Bank's 2Q26 results leave the senior-credit view broadly stable, but they sharpen the asset-quality questions already identified in the May 2026 issuer summary. The operating bank reported a recovery in quarterly earnings from 1Q26 and retained a wide deposit base, a loan-to-deposit ratio below 100%, and stronger reported regulatory-capital ratios. Those features remain important protection for senior creditors. At the same time, standalone non-performing loans (NPLs) rose and NPL coverage fell materially, so the case for a stable view now relies more clearly on the bank's ability to absorb a further normalisation in credit costs without eroding capital or funding confidence.

The key distinction remains scope. Woori Financial Group's consolidated 2Q26 net income increased 9.2% year on year to KRW1.03 trillion, but Woori Bank's standalone quarterly net income was KRW842.8 billion, down 8.1% year on year despite improving from KRW521.8 billion in 1Q26. Group earnings are relevant to the wider franchise and capital-allocation context, but they do not replace analysis of the operating bank that services bank-issued debt. The release does not indicate a near-term funding or capital break; it does, however, make NPL formation, reserve coverage, SME/SOHO performance and the reliability of reported capital headroom more important monitoring items.

2. 2Q Results in Context

The official 1H26 Fact Book shows Woori Bank's quarterly net income at KRW842.8 billion in 2Q26, compared with KRW916.7 billion in 2Q25 and KRW521.8 billion in 1Q26. The year-on-year decline means that the quarter should not be read simply as an earnings recovery, even though the sequential increase is substantial. The bank's quarterly net interest margin (NIM) was 1.51%, broadly unchanged from 1Q26, while the 1H cumulative NIM was also about 1.51%. The broadly stable NIM is consistent with continued support for core earnings from the bank's funding franchise, although the current materials do not separately establish the respective contributions from asset yields and funding costs.

At group level, quarterly net income was KRW1.03 trillion and net income attributable to controlling interests was KRW1.00 trillion. The group result was stronger than the prior-year quarter, but its credit relevance to Woori Bank is indirect: it may support consolidated internal capital generation, yet group non-bank expansion, insurance integration and capital allocation should remain separate from the bank's standalone repayment capacity. The current disclosure does not provide evidence that the group result has removed those structural considerations.

For the operating bank, the reported return on equity improved sequentially to 9.1% from 6.9% in 1Q26, but remained below the 11.2% reported for 2Q25. The cost-to-income ratio also improved sequentially to 47.7% from 54.0%. These changes are constructive for near-term internal capital generation, but their credit significance is limited by the lower year-on-year bank profit and the rising asset-quality burden. The appropriate credit reading is therefore that the franchise continues to generate meaningful earnings, not that it has demonstrated a completed recovery in profitability. Future results need to show that income can absorb a higher normal level of provisions without a sustained weakening in capital buffers.

3. Capital and Funding Remain Supportive

Standalone Woori Bank reported a common-equity Tier 1 (CET1) ratio of 15.3%, a Tier 1 ratio of 16.1% and a BIS ratio of 17.8% at 2Q26, compared with 14.9%, 15.7% and 17.4%, respectively, in 1Q26. Total capital increased to KRW33.9 trillion while risk-weighted assets were broadly flat at KRW190.7 trillion. These results provide a stronger reported buffer than in the prior quarter and are supportive for senior debt.

That conclusion requires a qualification. The Fact Book states that 2Q26 capital ratios are estimates and that detailed figures will be provided in the next quarter. Investors should therefore use the ratios as a directional indicator rather than as a final measurement of regulatory capital headroom. At group level, CET1 increased to 13.7%, while the group BIS ratio declined by 20 basis points to 16.5%; this remains a relevant context for group capital policy but should not be conflated with the operating bank's ratios.

Funding also remains an important stabiliser. Standalone bank deposits rose to KRW315.2 trillion at 2Q26 and loans were KRW306.2 trillion, implying a loan-to-deposit ratio of 97.2%. The Fact Book reports a low-cost-deposit ratio of 38.8% and a core-deposit ratio of 29.0%; the materials reviewed do not specify their precise denominators in the disclosure extract used for this flash. Together with the separate deposit, loan and loan-to-deposit figures, those reported measures are consistent with a deposit-led funding model rather than heavy reliance on wholesale funding. However, the materials reviewed do not provide detailed latest-period LCR, NSFR or foreign-currency liquidity metrics, so they cannot establish the full liquidity-buffer position under market stress.

The funding data should also be read alongside the currency composition. Total funding was KRW412.3 trillion, including KRW356.0 trillion of won-denominated funding and KRW56.4 trillion of foreign-currency funding. The increase in foreign-currency funding from the prior quarter does not, on the disclosed information, demonstrate a liquidity weakness; nonetheless, it reinforces the need to obtain the missing foreign-currency liquidity metrics before assuming that the bank's domestic deposit strength fully translates into resilience in an external funding-stress scenario. This limitation is particularly relevant for bondholders because a deposit-led domestic franchise and a robust all-currency liquidity profile are related but not identical credit protections.

4. Asset Quality Is the Main Counterweight

Standalone asset quality deteriorated during the quarter. Total credit increased to KRW344.4 trillion, while reported NPLs rose to KRW1.35 trillion from KRW1.10 trillion in 1Q26. The NPL ratio increased to 0.39% from 0.33%, and the precautionary-and-below ratio rose to 0.93% from 0.82%. The movement is still from a low absolute NPL base for a large commercial bank, but it is directionally adverse and is more consequential because reserve protection weakened at the same time.

Loan-loss-reserve coverage of NPLs declined to 132.9% from 161.1% in 1Q26 and 172.6% at end-2025. Credit-loss reserves increased to KRW2.15 trillion, but not at the same pace as NPL formation. This does not demonstrate that losses will exceed the bank's capacity to absorb them; it does mean that a stable senior-credit assessment should not depend solely on the reported capital-ratio improvement. The more relevant test through the next results is whether delinquency and NPL formation, especially in SME and SOHO portfolios, drive recurring provisions high enough to offset earnings and consume capital concurrently.

The composition of the increase also argues for caution rather than a categorical negative conclusion. The Fact Book reports higher exposures in the substandard and doubtful categories, but it does not, in the materials reviewed, provide enough detail to attribute the movement to a single borrower segment or to determine the ultimate loss severity. Investors should therefore avoid extrapolating the quarterly NPL increase into a definitive impairment scenario. The more useful monitoring framework is cumulative: whether NPL and delinquency ratios continue to rise, whether reserve coverage stabilises or falls further, and whether higher credit costs occur at the same time as weaker margins or group-related capital demands. A sustained adverse combination across those measures would be more meaningful for senior-credit risk than the isolated change in any one ratio.

5. What To Watch Next

6. Sources