Woori Bank will have its equity capital stretch by 1 trillion won ($821.2 billion) through assigning new shares to its parent Woori Financial Group, rebooting its firearms to back state campaign to rescue companies in distress from coronavirus fallouts.

The holding group will hold a board of directors’ meeting this month to finalize the plan, according to industry sources on Tuesday.

Shares of Woori Financial Group gained 6.7 percent to 10,350 won on Wednesday. Woori Bank is not listed.

The recapitalization will shore up Woori Bank’s capital adequacy ratio, which weighs up a bank’s capital against its risks, to 15.4 percent. Its capital adequacy ratio stood at 14.8 percent in the January-March quarter this year, down 0.6 percentage point from the previous year. Its ratio is the lowest among the country’s major lenders – Shinhan with 15.5 percent, KB Kookmin 15.0 percent, and Hana with 15.6 percent. The Bank of International Settlements (BIS), international institution of central banks, recommends lenders to maintain the ratio at 8 percent or above.

The fall in Woori Bank’s capital adequacy ratio was due to an increase in risk-weighted assets, which rose on growth in loans extended to both big and small companies under the government’s coronavirus relief measures. While the outstanding balance of corporate loans at the bank grows larger, loan default rate is projected to rise as well from the latter half of this year to require the lender to bump up its equity capital in advance.

Woori Financial Group has been building up its ammunition to boost its economies of scale as the latecomer to the holding category. It has raised 2.35 trillion won since last year by issuing a series of subordinated debts and hybrid securities, which are categorized as other assets for combining the characteristics of both debt and equity.

By Lee Seung-hoon and Cho Jeehyun

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