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Rating Action: Moody's assigns A3 to Woori Card's proposed USD senior unsecured debt; outlook stableGlobal Credit Research - 08 Mar 2021Hong Kong, March 08, 2021 -- Moody's Investors Service has assigned an A3 foreign currency senior unsecured debt rating to the proposed USD bonds to be issued by Woori Card Co., Ltd. (A3 stable). The outlook on Woori Card is stable.Woori Card will use the net proceeds from the bond issuance to finance eligible social financing projects that benefit micro, small and medium-sized merchants as identified in the company's Social Bond Management Framework.The rating on the securities is subject to the receipt of final documentation, the terms and conditions of which are not expected to change in any material way from the draft documents that Moody's has reviewed.RATINGS RATIONALEThe A3 foreign currency senior unsecured debt rating is in line with Woori Card's A3 long-term issuer rating. The bond will rank pari passu with all other present and future unsecured and unsubordinated obligations of the company.Woori Card's A3 long-term issuer rating incorporates a three-notch uplift from its standalone assessment of baa3. This reflects (1) a two-notch uplift based on Moody's assessment of a very high likelihood of support from Woori Bank (Bank Deposit: A1, Senior Unsecured: A1, Baseline Credit Assessment (BCA): baa1, stable) via its parent Woori Financial Group Inc. (Woori FG), in times of need, and (2) a one-notch uplift based on a high likelihood of support from the Korean government (Aa2 stable), in times of need.Woori Card's standalone assessment of baa3 reflects the company's (1) stable profitability, supported by steady growth in transaction volumes and low funding costs, which helped to offset cuts in merchant fees that occurred in January 2019; (2) solid capitalization with a low leverage ratio; and (3) benign asset quality despite the coronavirus-induced economic shock.These credit strengths are offset by its heavy reliance on market funding. However, the risk is mitigated by its sizable committed credit lines as well as good liquidity management.The baa3 standalone assessment also takes into consideration the Korean credit card industry's operating environment, reflecting the card companies' (1) entrenched market positioning, (2) low product risk of obsolescence, and (3) their tight regulatory environments.The affiliate support uplift is based on Moody's assessment that the company will receive a very high level of support from Woori FG and Woori Bank in times of need, reflecting (1) Woori Card's 100% ownership by Woori FG; (2) its long-term strategic importance to the group and its sizable contribution to the group's financial performance; (3) the interconnectedness and consolidated risk management within the group; (4) shared reputational risks; and (5) Woori FG and Woori Bank's track record of support.The government support is based on Moody's assessment of a high level of support from the Korean government in times of need, reflecting (1) the fact that Woori FG and Woori Bank are designated as a domestic systemically important financial group and bank, respectively; and (2) the Korean government's track record of providing direct and indirect support to financial institutions. Moody's expects any government support for Woori Card will flow through Woori FG.FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGFACTORS THAT COULD LEAD TO AN UPGRADEMoody's could upgrade Woori Card's ratings if Woori Bank's ratings are upgraded or Woori Card's standalone assessment is raised.Moody's would consider raising Woori Card's standalone assessment if the company (1) significantly improves the coverage ratio for its 12-month debt maturities; (2) generates stable profitability by cutting costs and securing other sources of income; (3) maintains strong capitalization, with its tangible common equity/tangible managed assets above 21%; or (4) improves its asset quality, with its net charge-offs/average gross loans below 1.5% on a sustained basis.FACTORS THAT COULD LEAD TO A DOWNGRADEMoody's could downgrade Woori Card's ratings if the company's strategic importance to Woori FG declines or Woori Bank's BCA is lowered.Moody's would consider lowering Woori Card's standalone assessment if (1) its problem loans/gross loans increases to 3% and net charge-offs/average gross loans increases to 4% on a sustained basis; (2) profitability declines, with its return on average assets below 1% on a sustained basis; (3) capitalization deteriorates, with its tangible common equity/tangible managed assets below 14%; or (4) secured debt/gross tangible assets increases above 20%.PRINCIPAL METHODOLOGYThe principal methodology used in this rating was Finance Companies Methodology published in November 2019 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1187099. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.Woori Card Co., Ltd. is a wholly-owned subsidiary of Woori Financial Group Inc. and is headquartered in Seoul. Its consolidated assets totaled KRW10.8 trillion ($9.3 billion) as of the end of September 2020.REGULATORY DISCLOSURESFor further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. 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