Woori Financial Group Inc (WF) 2026 Q3 法說會逐字稿

Good afternoon. My name is Hong Sung Han, Head of IR at Woori Financial Group. Thank you for joining today for Q3 2026 Financial Group's earnings results. And we will begin with the presentation delivered by our Group CFO, Kwak Seong-Min, followed by a Q&A session.

And also be advised that for today's call, we are providing simultaneous interpretation for overseas investors. With that, let us begin Woori Financial Group's Q3 2026 Earnings Presentation.

Good afternoon. I am Kwak Seong-Min, Woori Financial Group's CFO. I will go over the group's earnings results for Q3 2026. Please refer to page 2 of the earnings presentation documents available on our website. First, our net income. For Q3 2026, Woori Financial Group recorded net income of KRW1,049.2 billion, up 4.4% Q-o-Q, exceeding KRW1 trillion for the second consecutive quarter.

So the group's quarterly earnings capacity has stabilized around KRW1 trillion. And as a result, YTD net income through Q3 reached KRW2,658.1 billion. This is an improvement from the same period last year when we recognized about KRW550 billion in bargain purchase gains from the acquisitions of Tongyang Life and ABL Life.

Excluding this one-off factor, it's an increase of 19% Y-o-Y. And supported by this enhanced earnings capacity, the group's common equity ROE stood at 9.9%, continuing its clear improvement.

This reflects our progress over the past several years through disciplined management of RWAs and strategic capital initiatives, including asset reevaluation, we have strengthened our capital position and deployed this into productive finance and high-growth nonbanking subsidiaries, laying the foundation for the group's medium- to long-term earnings growth.

As a result, both interest income and noninterest income reached record highs with noninterest income accounting for nearly 20% of total income. At the same time, group-wide cost efficiency initiatives helped stabilize cost-to-income ratio and credit cost ratio at progressively lower levels. With revenue growth and cost stabilization, YTD operating profit increased by nearly KRW570 billion Y-o-Y, further enhancing our sustainable earnings generation capacity.

Next, capital adequacy and shareholder returns. As of September end 2026, our preliminary CET1 ratio stood at 13.8%, maintaining the industry-leading position. This is a meaningful improvement, nearly 90 bps this year alone and 170 bps over the past two years. And this year, as part of productive finance, we significantly expanded corporate lending, guarantees and capital markets investments.

However, our capital capacity against external uncertainties has strengthened further, supported by solid fundamentals, disciplined asset balancing and the impact of a decline in exchange rates. Based on this, our BOD today approved a Q3 dividend of KRW221 per share, fully nontaxable. The record date is November 10, and the payment is scheduled for November 30.

With this, our quarterly dividends for the year have been completed, leaving only the year-end dividend. And for us, the year-end dividend accounts for more than 50% of the total annual dividend. The current dividend yield stands at about 2.2%, but given our dividend structure and the nontaxable benefits, shareholders' effective annual dividend yield for 2026 should be significantly higher.

With the additional KRW150 billion share buyback approved in July for the second half, we are confident that our total shareholder return for 2026 will be significantly higher than last year. And in addition, the Board resolved to cancel 57,269 shares we acquired and held for specific purposes, including comprehensive share exchanges in accordance with the amended Commercial Act.

Now let me go over the group's financial performance by business segment in page 3. First, net operating revenue and NIM. YTD net operating revenue through Q3 came in at a record KRW8,680.3 billion, up 6.2% Y-o-Y on the back of balanced growth in both interest and noninterest income.

YTD interest income reached KRW7,035.9 billion, up 4.5% Y-o-Y, maintaining solid growth. The main drivers were 25% increase YTD in large corporate lending as well as the improvements in group's NIM compared with the same period last year. However, the bank's NIM for Q3 stood at 1.43%, down 7 bps Q-o-Q.

Market rates increased more sharply than lending rates and our proactive efforts to secure funding ahead of additional rate hikes placed pressure on funding costs, but we expect NIM to recover as asset and liability reprice over time and the impact of higher funding costs gradually subsides. We will work to accelerate margin improvement by expanding high-quality new customer base, attracting low-cost deposits and maintaining a profitability-focused loan book.

Next, let me discuss the bank's loan portfolio. As of September end 2026, the bank's total KRWloans stood at KRW313 trillion, up 1.52% from the end of June. Corporate loans increased by 1.42% Q-o-Q to KRW156 trillion due to the acceleration of productive finance.

In particular, lending under the productive finance reached roughly KRW27 trillion, 1.5 times our full year target, which we achieved ahead of schedule. Retail loans stood at KRW154 trillion, up 1.4% Q-o-Q following the government's easing of household lending limits in August.

Building on our strong competitive position in corporate banking, we will continue to pursue loan growth focused on high-quality assets. And we will further enhance risk management by integrating AI across the entire lending process from credit assessment to post monitoring. By doing so, we will create a foundation for sustainable growth without compromising asset quality.

Let me now turn to the group's noninterest income. Noninterest income for the first nine months reached a record KRW1.6444 trillion. Core fee income rose 18.8% Y-o-Y to KRW1.898 trillion, driving earnings growth. Our nonbank subsidiaries increased their earnings contributions by strengthening group synergies and enhancing the competitiveness of their core businesses.

In particular, our securities subsidiary has expanded its IB business since its capital increase in May. Collaboration with the bank has also continued to grow with the two jointly arranging deals. As a result, underwriting and advisory fees for the first nine months rose to 2.4 times the level recorded a year earlier, reaching KRW151.4 billion.

The securities subsidiary accounted for half of this total. Our insurance subsidiaries also contributed significantly to noninterest income growth with insurance earnings increasing by approximately KRW100 billion Y-o-Y.

Stronger synergies with the bank helped increase the group's bancassurance earnings by approximately 10% from a year earlier. As a result, the nonbank share of noninterest income rose from 45% a year earlier to approximately 60% this year.

Meanwhile, the group's third quarter noninterest income declined 7.6% Q-o-Q to KRW581.4 billion. This reflected higher securities valuation losses amid rising interest rates and stock market volatility, together with a sharp decline in capital market fees.

However, higher foreign exchange earnings as exchange rates stabilize along a recovery in insurance earnings to first quarter levels helped contain the decline. Looking ahead, Woori Financial Group will continue to pursue business opportunities by harnessing synergies across its banking, securities, insurance and capital market subsidiaries by steadily increasing the contribution from noninterest businesses will move towards a more balanced earnings mix.

We will turn to costs. Please refer to page 4. This shows the group's SG&A expenses. Group SG&A expenses for the first nine months totaled KRW3.8575 trillion. Q3 expenses stood at KRW1.2246 trillion, broadly unchanged from the previous quarter. The group's cost-to-income ratio remained stable at 42.3%, in line with our full year target.

Looking ahead, we will proactively make essential investments to strengthen the group's future competitiveness, including expanding infrastructure for our insurance and securities businesses and upgrading IT security systems to guard against cyber attacks. At the same time, we will continue to improve cost efficiency across the group by optimizing our distribution channels and workforce and using AI to streamline operations.

Next, credit costs and asset quality. Credit costs for the first nine months of 2026 totaled KRW1.28 trillion, down sharply by 15.7% Y-o-Y. Q3 credit cost stood at KRW314 billion, a substantial decline of 28.5% Q-o-Q. The quality of our loan portfolio has improved as we have expanded lending to high-quality corporate borrowers and steadily rebalanced our assets over the past two years.

As a result, our credit cost ratio for the first nine months declined to 42 basis points. Woori Financial Group will remain focused through year-end on achieving our full year targets of reducing credit cost by 15% and bringing the credit cost ratio to the low 40 basis point range. Our asset quality indicators also remain sound as of end of Q3.

As of end September, high-quality loans continue to account for around 85% of the corporate loan portfolio. The NPL ratio also edged down Q-o-Q, supported by a decline in new NPL formation, reflecting our rigorous asset quality management.

To prepare for rising interest rates and macroeconomic volatility, we will further strengthen monitoring of vulnerable borrowers and proactively pursue NPL sales and write-offs to maintain sound asset quality across the group.

In closing, the key transformation underway at Woori Financial Group is this having strengthened our capital position. We're now entering a new phase of growth using that solid capital base to secure future growth opportunities, strengthen our earnings capacity and increase shareholder returns.

Our bank is reinforcing its earnings base by strengthening core businesses, including corporate banking and wealth management while improving cost efficiency. Following the acquisition of full ownership of Tongyang Life in August, we're now moving forward with the integration of our two life insurers.

Once completed, this integration will deliver cost synergies and economies of scale. Our securities subsidiary is steadily building its track record in IB. Obtaining the derivatives license currently being pursued will further strengthen the foundation for earnings growth. Our credit card, capital finance, asset management and key subsidiaries are also increasing their earnings contributions by enhancing their competitiveness and group synergies.

By delivering KRW1 trillion in quarterly net profit for two consecutive quarters, we have demonstrated that the group's earnings capacity has reached a new level. Looking ahead, we will further strengthen the group's fundamentals through sustainable improvements in ROE and share the benefits with shareholders through differentiated capital returns, reinforcing our competitiveness as a comprehensive financial group. This concludes Woori Financial Group's Q3 2026 earnings presentation. Thank you.

Statements in English on this transcript were spoken by an interpreter present on the live call. The interpreter was provided by the company sponsoring this event.