Woori Financial Group Inc.

Hello, good afternoon. I am Han Ong-Sung, head of the IR department at Woorie Financial Group. Let me first begin by thanking everyone for taking time to participate in this earnings call for Woorie Financial Group. On today's call, we have Group CFO Lee Seong-wook, Group CDO Ok Il-jin, and Group CRO Park Jang-geun participating. For today's call, the CFO, Lee Seong-wook, will present the earnings performance for the group, and then after that, we will have a Q&A session. In addition, please note that today's call is being interpreted simultaneously for our overseas investors. Now, let us start with the presentation on Ui Financial's Group 2024 Q1 Business Performance. Good afternoon. I am Lee Seong-wook, CFO, of URI Financial Group. Let me dive into the 2024 Q1 performance of our group. Please turn to page three of the presentation, which is available on our website. First, let me touch upon the net income of the group. In the first quarter of 2024, URI Financial Group's net income was $824.5 billion. Amid a higher for longer interest rate environment and high inflation, the group utilized its strong profit generation capabilities and stable cost management to achieve a group ROE of 10.3%, which is better than the end of last year. In addition, the group's net operating revenue increased 9% QOQ to 2,548.8 billion won. Against continuous entities in Korea and abroad, This performance was the result of a balanced growth in interest income generated from the growth in high-quality corporate loans and also non-interest income focused on core fees. Next, let me move on to expenses such as SG&A and credit cost. The Q1 group SG&A was $1,032,001, a decline of 0.5% year-over-year. The cost-income ratio was 40.6%, and it is being maintained at a stable level. In addition, if we look at the Q1 group credit cost, it was $367.6 billion, and as local and global uncertainties continue, credit cost is being managed within the range set in the group's financial plan. Next, let me discuss our capital ratios and quarterly dividends. As of the end of March 2024, the group's CET1 ratio is expected to be around 12%. Even though the Korean won weakened significantly during the quarter, the group was able to maintain the CT ratio at the same level as last year due to solid performance and active risk-weighted asset management. In addition, today, the group's BOD decided to pay quarterly dividends of 181 per share for the first quarter. Moreover, at the end of March, the group acquired the stake that the KDIC held of 1.29% of the group, and all the shares were canceled. Going forward, the group to address uncertainties in the financial market is planning to continuously improve its capital adequacy and also expand its shareholder return policy. Next, let me delve into the performance of each area in more detail. Please refer to page four of the presentation. First, let me go over our net operating revenue and net interest margin. Q1 net operating revenue was up by 9% quarter over quarter at $2,538.8 billion. In addition, the bank's Q1 NIM was 1.5%, which is three basis points higher QOQ, while group NIM, including the credit card business, was 1.74%, or up by two basis points QOQ. In contrast to the fourth quarter of last year, the time deposit cost ratio stabilized and core deposits increased resulting in the increase in NIM. Recently, the political instability in the Middle East and concerns about inflation have weakened expectations about a policy rate cut, which is expected to extend to the stable trend in NIM in the second quarter. Wray Financial Group will continue to increase the proportion of core deposits and optimize its asset liability structure to prepare for a full-fledged rate cut cycle in the future and actively prepare to adjust downward pressure on NIM. Now let me move on to our assets. The total loans of Uri Bank as of the end of March totaled 316 trillion won, which is a 1.7 increase versus the end of last year. On the corporate loan side, large corporate loan demand is still strong and high quality SME loans growth also solid. So this led to corporate loans posting 175 trillion or up by 2.9% versus the end of last year. To take a look at retail loans, the continuation of the government's household debt management policy and impact of a slower recovery on the real property market led to retail loans decreasing 0.2% versus the end of 2023 to total $136 trillion. The group is planning to focus on the corporate loan side, but we will expand the portfolio with a focus on high-quality assets in consideration of the return on RWA to achieve profitable growth. In addition, the bank will continue to maintain its percentage of high-quality assets in the corporate loan book, which currently stands at 86.7%. Next, let me talk about deposits. As of March, Woolley Bank's total Korean Won deposits totaled 305 trillion Won. The growth in time deposits has moderated, but Korean Won deposits, which showed a decline last year, turned around this quarter. In addition, in particular, to secure a stable funding base and expand margins, the bank is actively planning to increase core deposits to focus on NIM management. And in addition, as of the end of March, the bank's loan-to-deposit ratio is 97.2%, representing a sufficient room. Next, let me go over non-interest income and expenses, and please refer to page five of the presentation.

Let me go into the group's non-interest income. The group's non-interest income for the first quarter was 350.6 billion won, up 5.7% year-on-year. In the first quarter in particular, the income grew 13.6% quarter-on-quarter and 20.3% year-on-year, driving the growth in non-interest income. In addition to the solid growth in branch sales such as wealth management and foreign exchange trading, HQ sales such as IB and trading also showed robust growth leading to significant growth in non-interest income. In the case of Hong Kong H-Index ELS, which has been in the news recently, the group's customer-centric product launch strategy and systemized sales process have reduced our exposure and financial impact to a very minimal level. In the future, Woody Financial Group plans to further actively promote sales in the wealth management segment based on a full and robust sales process of investment products, and enhanced wealth management capabilities, as well as continue to expand growth in non-interest income segments that do not involve risky assets. Let me move on to the group's SG&A expenses. In the first quarter of 2024, the group's SG&A expenses decreased by 0.5% year-on-year to $1.32 trillion, and the cost-to-income ratio remained stable at 40.6%. As inflation uncertainty triggered by geopolitical risks is expected to continue for the time being, Woody Financial Group plans to sustain core investments for future growth, such as in digital and IT, while continuing to pursue cost efficiency centered on recurring expenses. Next is credit cost. In the first quarter of 2024, the group's credit cost recorded $367.6 billion. Due to the prolonged high interest rate environment and rising delinquency rates centered on non-bank subsidiaries, credit costs have been increasing year on year. In addition, there are concerns that asset quality may further deteriorate depending on the future PF market environment as the cleanup of distressed real estate PF businesses is in full swing. However, since last year, Woody Financial Group, based on its risk-oriented corporate culture, has been focusing its capabilities on asset quality management and improving loss absorption capacity. And as a result, the group and the bank's asset quality-related indicators, including the NPL ratio, which stands at 0.44% and 0.2%, and NPL coverage ratio recording 191% and 294%, respectively, is managed at a good level. Furthermore, in the case of real estate PF loans, which have recently become a growing concern in the market. The combined amount of PF loans and bridge loans is approximately 3.7 trillion won. Of this amount, 1.7 trillion won is secured by public guarantees such as HUG, and if this amount is excluded, the loan volume would be 2 trillion won. In the case of bridge loans, which are considered relatively high risk, capital and investment bank subsidiaries hold approximately 0.4 trillion won, which is a slight decrease compared to last year end. Going forward, Woody Financial will continue to systematically focus its management on high-risk assets, such as PF and overseas commercial real estate, as well as the vulnerable pockets of each subsidiary, and closely monitor changes in major risk factors, such as interest rates and exchange rates, to actively respond to market conditions. Next, allow me to go into the group's capital adequacy and shareholder return policy. Please refer to page 6 of the materials. As of the end of March 2024, the group's common stock ratio is 12%, which is expected to be similar to previous year end. Despite the recent surge in exchange rates, selective asset growth and solid profit growth enabled us to maintain our capital adequacy, and going forward, through active risk-weighted asset management that takes into account economic conditions such as interest rates and exchange rates, we plan to continue to improve our capital ratio. Meanwhile, today, Woody Financial Group, considering the company's quarterly dividend policy and market expectations, decided on a quarterly dividend of $181 per share. Also in March, Woody Financial purchased the remaining 1.24% stake in the company held by KDIC for $136.6 billion in completed cancellation of the shares, which is an increase of approximately 37% compared to last year. This year, Woody Financial Group's shareholder return program will be even stronger than last year. In response to the government's recent corporate value-up program to eliminate the Korean discount, we will communicate with the market with more active corporate value enhancement measures and shareholder return policies. We believe that Woody Financial Group this quarter, despite a challenging internal and external environment, demonstrated solid profit generation and stable risk management capabilities. In response to the challenging financial environment, including interest rates, exchange rates, and the real economy, we will continue to actively manage our capital ratio and enhance long-term corporate value, and also strengthen communication with investors. This concludes Woody Financial Group's first quarter of 2024 earnings presentation. Thank you.