Woori Financial Group Inc.

Good afternoon. I am Han Hong-sung, the head of IR at OOI Financial Group. Let me first begin by thanking everyone for taking time to participate in this earnings call for OOI Financial Group. On today's call, we have the Group CFO, Lee Sung-wook, Group CDO, Ok Il-jin, and Group CRO, Park Jang-geun. Before starting, let me walk you through today's agenda. We, a financial group, had a general shareholders meeting on March 24th, during which there was a significant change in our management team. Thus, we would like to take this opportunity to have the newly appointed chairman and CEO, Im Jong-young, to say some introductory remarks and go over the future management direction of the group. After his remarks, we will present the financial performance and then go into Q&A. Please note that the chairman will not be available during the Q&A session as he has other external commitments. And now, let me pass it over to Chairman Lim Jong-young for his introduction. Good afternoon. I am Uri Financial Group Chairman Lim Jong-young. I feel very happy and honored to have this opportunity to introduce myself to the stakeholders who have shown unwavering support and confidence in Uri Financial Group. The financial markets in Korea and globally are experiencing an increasing volatility on concerns about a global economic recession. Uncertainties that make it challenging to predict even the near future continue. In addition, the regulatory environment in the financial sector is changing and we need to be prepared to operate in a business environment different from the past, including increasing demands for larger social role by financial institutions. I would like to take today's call as an opportunity to share the key focus areas that we financial group would like to pursue in this quickly evolving environment. First, we are planning to reshape our corporate culture to dramatically improve our group fundamentals. In particular, we will continue bold innovation to create a new corporate culture, such as in the areas of internal control and corporate governance, to ensure we become the most trusted financial group in the market. It will be the starting point of our long-term efforts to become the most trusted financial group. Second, we will continue to strengthen the competitiveness of the group's non-bank business We will quickly expand our non-bank portfolio, such as securities and insurance, and diversify our business structure to create a more balanced profit structure for the group. By identifying the opportunities amid a crisis, we will accelerate the competition of our non-bank portfolio. Third, we will continue to enhance our risk management framework to ensure we identify a wide variety of risks in advance and address them appropriately. Due to the recent rate hikes, there has been concern about asset quality with focus on the non-bank financial sector. Refinance will exert all efforts in risk management and prepare for a market downturn by further strengthening our capital base to a more stable level. Fourth, in line with the new regulatory environment, we will continue to identify new growth drivers in non-financial areas to heighten our future competitiveness. The development of digital technology has led to the creation of new industries, and we expect the regulatory environment in the financial sector to also change dramatically. We will ensure the lower barriers between industries can become a new opportunity for our business. Lastly, we will try to fully support the Korean people and businesses. In order to provide real assistance to companies in a difficult situation and vulnerable populations, Woorie Financial Group will not only provide credit, but will also provide a wide range of other assistance, including business consulting. In addition, we will put in our best efforts to ensure this support can also lead to stronger confidence in our group. Dear investors, amid a challenging business environment in Korea and abroad, Woorie Financial Group has been able to continue posting solid performance. This was possible because of all of the interest and support that you have shown us across the years. Thus, on April 21st, our Board of Directors decided, for the first time since establishing the Holton Company, to buy back and cancel $100 billion in Treasury shares. Due to sound profit generation and stable asset quality management efforts, our CET1 ratio has improved to 12.1%, representing a stronger capital base. In addition, going forward, Rui Financial will continue to increase its loss absorption capabilities, to prepare for possible market downturns, while also continuing efforts to enhance shareholder value. In addition, I also want to have more opportunities to interact not only with investors in Korea and abroad, but also a wide variety of market participants, including analysts. Woori Financial will continue to strive to become the leading financial group in Korea, and we look forward to your continuous interest and support. Once again, I would like to thank everyone for participating on today's call. and hope you all the best in health and happiness. Thank you. Next, our group CFO, Lee Sung-wook, will give you a presentation on the recent earnings performance. Good afternoon. I am Lee Sung-wook, CFO of Ray Financial Group. Now let me dive into the first quarter 2023 performance of our group. please turn to page four of the presentation, which is available on our website. Let me first begin by going over our net income. For the first quarter of 2023, Rui Financial Group's net income was 911 billion won. This is a six point, sorry, 8.6% increase year over year. Even though market rates showed more volatility, we were able to post this performance due to stable profitability management and continuous efforts to increase cost efficiency, such as our cost-income ratio. In addition, our group net operating revenue was up by 7.6% YOY to close $2,551,000,000, maintaining healthy profit generation capabilities. Next, let me move on to expenses, such as SG&A and our credit costs. In the first quarter of 2023, the group SG&A was $1,037,000,000, representing an increase of 6.1% YOY, but the cost-income ratio was 40.4%, which is a 0.8% point decrease versus the previous year. In addition, first quarter 2023 group credit cost was $261,000,000, and the credit cost ratio was 0.31%.

Next, let me touch upon details on share buyback and cancellation. As the Chairman aforementioned, on the 21st, Woody Financial Group's Board of Directors confirmed and announced a share buyback and cancellation plan worth $100 billion equivalent to 3.2% of the annual profit in 2022. Meanwhile, as of the end of March 2023, the Group's CET1 ratio is expected to reach 12.1%, placing the ratio in excess of 12% for the first time in the group. Such result was driven by solid net income growth and all-around risk management efforts that have been pursued thus far, leading to improvements in market risk as well as credit risk. Let me now elaborate on the group's business performance in further detail by category. Please refer to page 5. First, allow me to go into the group's net operating revenue and net interest margin. In the first quarter of 2023, the group's net operating revenue increased by 7.6% year-on-year to 2,551,000,000 won. Meanwhile, the bank's first quarter NIM stood at 1.65%, down 3 BP from the previous quarter, and the group's NIM, including the card business, was 1.91%, down 1 BP quarter-on-quarter. With the drop in market interest rates, Further improvement in loan yields was limited, and increased funding costs resulting from a decrease in low-cost deposits led to narrowing margins. As the base rate hike is expected to come to an end, we will further strengthen our efforts to improve our profit structure. Let me now move on to asset growth and loan portfolio. As of the end of March 2023, bank loans totaled 293 trillion won, down 0.8% from previous year end. Due to rising interest rates and a decrease in housing transactions, retail loans decreased 2.2% from last year end to $131 trillion. On the other hand, corporate loans continued its robust growth, rising 0.6% versus last year end to $159 trillion. As economic uncertainty grows, stable management is key. Accordingly, Woody Financial Group will continue to maintain its record high prime asset rate at 85% and above while, in line with economic conditions, faithfully fulfill its role as a liquidity provider. Next is on the group's non-interest income. The group's first quarter non-interest income recorded $332.1 billion. In the second half of last year, market volatility greatly increased, and thus impacted the size of non-interest income. However, in the first quarter of this year, the continued growth trend centered on fees and commissions and improvements in head office business performance led to an even growth in all non-interest income categories. Woody Financial newly incorporated Woody Venture Partners as a subsidiary in March. Going forward, by expanding the non-banking sector through M&As, The group plans to lay the foundation for a balanced profit structure between interest income and non-interest income. I will now elaborate on expense and capital adequacy. Please refer to page 6. So this is on the group's SG&A expense. In the first quarter of 2023, the group's SG&A expense increased by 6.2% year-on-year to $1,037,000,000,000, and the cost-to-income ratio stood at 40.4%. Inflation concerns are growing worldwide, and the group's SG&A expense is under increasing pressure. However, Woody Financial Group's company-wide efforts to reduce SG&A expense over the past few years have paid off, resulting in a continuous improvement in its cost-to-income ratio. This year as well, the group, while making bold investments for future growth through efficient cost management, plans to manage the annual cost-to-income ratio below the mid-40% range. Moving on to credit costs. In the first quarter of 2023, the group's credit costs recorded $261.1 billion, with the credit cost ratio standing at 31 bps, still stably controlled within the manageable range. Due to the recent steep hikes in interest rates and sluggish real estate markets, Concerns over the asset quality of related loans such as real estate PF are increasing. There may be a temporary increase in the delinquency rate during the rising interest rate period. Referring to various indicators, we are witnessing increased delinquency rates centered on the non-banking sector, and considering the expeditious rate of increase, a more active response is necessary. Accordingly, Woody Financial Group, since the second half of last year, has already shifted the group's business focus to risk management and is further strengthening monitoring by individual industry, borrower, and project. As uncertainties home and abroad are expected to continue for the time being, the group, based on the risk-focused sales culture well established within, plans to focus its capabilities on asset quality management. Let me now move on to capital adequacy. As of the end of March 2023, the group's CT1 ratio is expected to reach 12.1%, up 0.5 percentage point from previous year end. In the meantime, Woody Financial Group has dramatically improved its profit generation and risk management capabilities, resulting in a rapid increase in its capital adequacy indicators. Recently, asset quality and liquidity risks surrounding the financial environment are on the rise, and thus greater importance is being placed on capital adequacy indicators. The group plans to further improve capital adequacy through solid financial performance, but as we mentioned in our last earnings call, we will continue to pursue and promote the group's capital allocation and mid- to long-term shareholder return policy. Dear Investors, With the launch of a new management team, Woody Financial Group, particularly in the first half, will focus its capacity on not only robust capital and risk management, but also mutually beneficial business management and corporate cultural innovation as a way of building the foundation for a greater leap forward. We ask for your interest and encouragement in Woody Financial Group's strong leap forward this year as well. This concludes Woody Financial Group's earnings presentation for the first quarter of 2023. Thank you.