Woori Financial Group Inc.

So good afternoon. I am Han Hong-sung, head of IR at Ui Financial Group. Let me first begin by thanking everyone for taking time to participate in this earnings call for Ui Financial Group. On today's call, we have the group CFO, Lee Sung-wook, group CDO, Oh Gil-jin, and the group's risk management division senior general manager, Park Yeon-ho, on the call. On today's call, the Group CFO, Lee Seong-wook, will give a presentation on the earnings performance, after which we will have a Q&A session. Please note that the earnings call is being conducted with simultaneous interpretation for our overseas investors. Now let us start our presentation on URI Financial Group's earnings for the third quarter of 2025. Good afternoon. This is Lee Seong-wook, the CFO of Woorie Financial Group. Let me go over the third quarter performance for 2025. I do have a cold, so please understand if my voice is a bit rough, and please turn to page three of the presentation material that has been disclosed on our website. First, let me discuss net income. Woorie Financial Group's year-to-date net income as of the third quarter end was up by 5.1% to $2,796.4 billion, which was a YOY increase, as mentioned before, of 5.1%. Net income in the third quarter alone was $1,244.4 billion, representing a significant increase of $300 billion one quarter on quarter. Amid uncertain internal and external conditions, including the exchange rate and outcome of tariff negotiations, This net income was the result of balanced growth between our interest and uninterest income and the contribution from the insurance acquisition. In particular, due to continuous efforts to rebalance assets and optimize funding and investments, our NIM improved for the third consecutive quarter. Stronger marketing capabilities from key subsidiaries, such as the credit card and capital business, led to fee income for the quarter to reach an all-time high, And in addition, the newly acquired insurance business contributed, which further have diversified the group's profit structure. In the third quarter, we completed the revaluation of the fair value of Dongyang and ABL's assets and liabilities and included this in the group's performance. So the bargain purchase price and adjustments from consideration together is around 550 billion, while the decline in the CET ratio was only approximately five basis points, which enabled us to reconfirm that from a financial standpoint, it was an optimal M&A with almost no negative impact to our capital ratio. Moreover, in addition to the continuous asset rebalancing and active capital ratio management efforts that we have been making, we are now focusing on strengthening the stability of our financial structure by preemptively provisioning reserves for the vulnerable portions of our non-bank business. Based on these stable fundamentals, the group is planning to expand productive financing to support future sustainable growth. Next, let me discuss the group's capital ratios. As of September 2025, the group's preliminary CET ratio is 12.92%, showing a 12% basis point increase QOQ, an 80% point increase from the end of last year, far surpassing the 2025 year-end target of 12.5%. In addition to the insurance acquisition, the weaker one against the U.S. dollar led to a 7 basis point decline in the CET1 ratio, but the capital ratio actually increased, proving the sound capital management capabilities of the group. This is the result of concerted efforts to manage risk-weighted assets across all business areas of the group, such as being selective in asset growth and continuously decreasing exchange rate-sensitive assets. Going forward, the group will continue this capital management stance and swiftly execute value-up plans based on its CET1 ratio. For Woorie Financial Group, we relaunched our securities arm last year and also completed the insurance acquisition this year, completing the creation of a comprehensive financial services group. Thus, focusing on the three main pillars of the bank, brokerage, and insurance business, we are planning to maximize group synergies. For example, between the bank and securities business, after acquiring the securities license, the group was able to do a $3.9 trillion deal through CIB joint underwriting. And in wealth management, in just three months of acquiring the insurance business, Tongyang Life and ABL's percentage of sales from the Pankaj Transchana has grown from 9.8% to 22.5%. Moving forward, by balancing growth between bank and non-bank business lines and ranking up synergies across group companies, Rui Financial Group will further strengthen its competitiveness as a comprehensive financial services group and create a basis for sustainable growth. Next, let me delve into more details about earnings by business area, and please turn to page four. First, let me go over the net operating revenue and NIM. The group's third quarter year-to-date net operating revenue totaled $8,173.4 billion, up by 2.3% YOY. And in the third quarter alone, it was $2,773.3 billion, which is similar to the previous quarter. As financial market volatility and other internal and external uncertainties continue, margin improvements and selective growth led to solid interest income. In addition, the contributions from the insurance business led to better non-interest income, which has further solidified the group's revenue base. In addition, if we look at Wari Bank's third quarter NIM, it was 1.48%, which is three basis points higher QOQ and eight basis points more than the end of last year. It is the third consecutive quarterly improvement this year. This is the result of active funding cost savings and asset rebalancing efforts, which consistently improved our profitability. In the fourth quarter, even if the base rate is cut further, the bank is planning to expand its core deposit base and systematically manage ALM to continue stable NIM trends and maintain a level of 1.5% for the year. Next, let me go over the loan books. As of the third quarter end, the bank's loans totaled $331 trillion, slightly increasing versus the end of June. On the corporate loan side, growth strategies focused on new growth areas and high-quality corporates, which led to the loan book to remain flat quarter over quarter at $178 trillion. On the retail loan side, in light of the government's policy to control total loan growth, The bank was more selective in loan origination, which resulted in loans growing 150% quarter to 1.5 trillion won. Looking ahead, URI Financial, in line with the government's policy direction, will manage total household loan growth within the target level while also utilizing its corporate finance competitiveness via the future co-growth project, increasing the flow of capital to more productive areas within the economy. In particular, We will join in efforts by the financial authorities to make capital regulation more reasonable and continue efforts by the group to rebalance assets to secure more capacity on capital ratios. In addition, risk management across all processes from underwriting to loan management will be strengthened to ensure future growth can continue with any impact on capital ratios and asset quality.

Next is on the group's non-interest income. As of the third quarter, the group's cumulative non-interest income amounted to $1,441.5 billion. of 4.6% year-on-year, and on a quarterly basis, it rose 5.3% from the previous quarter to $555.2 billion. Despite a decline in foreign exchange rate gains due to the rise in exchange rates, the group continued to post solid growth in non-interest income supported by robust fee income and the inclusion of the insurance subsidy various performance starting this quarter. In particular, core fee income driven by improvements across all business lines of both the banking and non-banking segments including the wealth management business, credit card and lease, was up 7.9% versus previous quarter to $563.7 billion, reaching a record quarterly high. Going forward, Woody Financial Group, through expanding the retail customer base centered on the insurance business and strengthening collaboration between the bank and securities IB segments, will actively pursue new business opportunities to enhance the group's proportion of non-interest income and to achieve balanced growth between banking and non-banking operations. Next, I will elaborate on expense. Please refer to page 5. Turning to the group's SG&A expense, as of the third quarter of 2025, the group's cumulative SG&A expense amounted to $3,690.3 billion, while third quarter SG&A expense stood at $1,211.2 billion, a slight increase of 3.2% from the previous quarter. Accordingly, the group's cost-to-income ratio is 43.1%. Looking ahead, while we will continue to invest in the group's AX initiatives, enhancing digital competitiveness and strengthening brand value, we will also maintain disciplined cost management at the group level through reducing recurring operating expenses, optimizing channels and workforce, and leveraging AI to improve operational efficiency. Next, I will discuss the group's credit costs and asset quality. As of the third quarter of 2025, the group's cumulative credit costs amounted to $1,517.6 billion. Third quarter credit costs totaled $574.3 billion, an increase of 13.1% from the previous quarter. This amount, including $98 billion in provisions associated with completion guaranteed projects booked as part of the group's proactive risk management efforts from the previous quarter, incorporates approximately $150 billion in one-off items. With this, most of the provisioning issues related to completion guarantee projects appear to have been largely resolved. Excluding these one-off factors, credit costs remain at a similar level to the previous quarter, and the group's credit cost ratio is well managed within the target range at 0.42%. Amid continued uncertainty, such as exchange rate volatility, trade negotiations, and concerns over a slowdown in the real economy, the group, through active NPL negotiations, NPL sales and write-offs and proactive risk management in the non-banking sector is conducting more thorough risk management than ever before, maintaining the proportion of prime corporate loans at around 84% and managing the ratio of loan loss reserves and regulatory reserves to total credit at 1.6%, thereby securing a stable loss absorption capacity. This year, Woody Financial Group will conduct a comprehensive review of the group's risk factors, and after securing sufficient risk management capabilities, will pursue sustainable growth grounded in solid asset quality. I will now move on to capital adequacy and shareholder return policy. Please refer to page six. As mentioned earlier, as of the end of September 2025, the group's common equity tier one ratio is expected to be 12.92% on a preliminary basis. Despite factors such as the insurance subsidiary acquisition and the impact of a stronger exchange rate, the Group CET1 ratio improved significantly by approximately 80 basis points versus last year end, demonstrating the Group's strong capital management capability. Woody Financial Group will not remain complacent with this achievement and aims not only to stably exceed a CET1 ratio of 12.5% by the end of 2025, but despite ongoing uncertainties home and abroad, such as exchange rate volatility and potential regulatory fines, will also pursue swift and proactive capital management with the goal of achieving a 13% CET1 ratio ahead of schedule in 2026. Meanwhile, the Board of Directors of Woody Financial Group, at its meeting held on October 24th, approved a quarterly cash dividend of $201 per share with a record date set for November 10th, as previously announced. In this quarter, Woody Financial Group successfully completed the acquisition of an insurance subsidiary, a process that has been underway for over a year. Through this acquisition, we have faithfully upheld our commitment to the market to minimize any negative impact on our capital ratio and to avoid overpaying for the transaction. Now, with a diversified business portfolio and enhanced group synergy, we'll begin in earnest our transition toward becoming a comprehensive financial services group. Furthermore, in connection with the future co-growth project announced last September, we intend to leverage our corporate finance expertise to support the real economy, focusing on new growth and advanced strategic industries. And through this, we will not only fulfill the essential role of finance, but also establish a sustainable foundation for the group's long-term growth. Since the announcement of our corporate value of initiative, Woody Financial Group has faithfully implemented most of the plans presented to the market. Discussions and deliberations led by the Board of Directors on how to enhance corporate value are ongoing and will continue in the future. Through these efforts, we will focus the group's capabilities on enhancing long-term shareholder value. This concludes Woody Financial Group's third quarter of 2025 earnings presentation. Thank you.

Yes, thank you for the presentation. And now we will, before starting the Q&A session for this year, because there were some factors related to the presentation, including the insurance acquisition, there will be some additional comments related to the performance by the CFO. Yes, if we look at the third quarter this year, if you look at our performance, as you can see, there has been a lot of volatility. So overall, there were some one-off factors, and maybe I did believe that maybe touching upon these first would be appropriate. So, of course, there was the inclusion of the insurance business, but also with regards to the preemptive provisioning, there were also some one-off factors there. So in the third quarter in total, if we look at the insurance business, of course, the profits increases there, but in terms of risk management, there were a lot of efforts that we have made. So please take that into consideration and listen to what I have to say. So first on the insurance acquisition side, Because of the bargain acquisition gains, after we included the insurance business from July 1st, we did the PPA, and as a result of that, there was a $580 billion gain that we had recognized. And, of course, for the next one year, because of the accounting for that, there could be some adjustments to this. However, with regards to the adjustments for consolidation, there was a negative $25 billion that was recognized, So at the end of the day, the bargain gains in total was around $556 billion. So in addition to that, there was also a $33 billion negative impact that was also reflected. And in the third quarter, for the completion guarantee trust, there was also $98 billion that we have recognized in terms of provisioning. So as a result of that, in total for this year, there was around $200 billion that we have recognized. On the bank side, there are some areas in which there were collateral value decreases, and in light of that, there was some preemptive provisioning that we had did that was around $54 billion. And recently, there were some press reports about the situation. But with regards to Kitco, there was a litigation in 2028, and the final litigation, Results have came out, and there were some areas in which we lost. So there was a $32 billion additional provision that we have set aside for that purpose. In addition, on the non-operating side, related to the completion guarantee trust, there was a significant provision that we have set aside. So therefore, for the goodwill, there were some impairment losses that we have also recognized of around $39 billion. So in total, if you look at the overall impact of this, If you look at the bargain gains that we have enjoyed and everything above that was on the operating basis and others was on a non-operated basis. So if we look at the net income basis at the end of the day, there was one-off factors of around $360 billion in total. So with regards to the completion guarantee trust impact, there may be some small changes going forward, but we don't believe that there will be any significant provisioning that will be required. So I did believe that this is probably a question that you were very curious about, so I thought that it would be good to talk about this first and before we went to the Q&A. Yes, thank you very much. So now we will start the Q&A session. So for anyone who has a question, please press star and 1. And if you would like to cancel, please press star and 2. So we will wait for questions. Yes, so for the first question will be from NH Securities. It will be . So please go ahead with your question. Yes, thank you for the opportunity to ask a question. There are two questions that I would like to ask you. So first would be that in the third quarter, because you did the insurance acquisition was completed, and I would like to know what the next phase is. So in terms of more efficient capital management, Rather than being two separate entities, I would believe that having it together and then also making sure that it would be a full subsidy of the group as a whole. So with regards to the information that you can share with us, any more details that you could share would be appreciated. Second is that after the acquisition, if you look at the capital ratios, it still looks like their capital ratios are very sound. So even if it's not in the immediate future, but going forward, Are there any M&A opportunities that you would be looking at in terms of interest areas? So maybe not in the immediate future, but even down the road, are there any areas that you would be interested in in terms of M&A opportunities? So thank you for your questions, and maybe we can answer your questions. Yes, this is the CFO, Lee Sung-wook. And so first, in terms of the insurance, in terms of the merger and also the follow-up after the acquisition, I do think that this is an area that a lot of the investors are interested in. And also in terms of the Dongyang Life shareholders, they're also very interested in that also. So as of now, we did the and completed the acquisition as of July 1st for Dongyang and ABL Life. And since then, for the mid- to long-term direction, this is something that we're doing a diagnosis about in terms of the overall business operations. So for Dongyang Life, making it 100% subsidiary or merging the two entities, This is something that we are still reviewing, but we have not made any decisions yet. And in addition, we do believe that it will require a bit more time for us to come to a conclusion. And in addition to that, whether we should make it 100% subsidiary or whether we will merge the two, if there's any major decisions that are made, of course, we will make sure to disclose to you and share to you. And in addition to that, we will look at the laws and regulations to make sure that everything is done according to the due process. Secondly, about your question about the M&A side, I think that this is something that we continue to talk about. But after the brokerage company, insurance company being added on, in terms of our business portfolio, we think that it has been completed. So over the mid to long term, I think that if you look in terms of focusing on strengthening the competitiveness of the companies that we have and also maybe expanding our presence, M&As could be an option, but right now on the security side and insurance side, because we have been newly added and we do believe that our overall business portfolio is complete right now, if there are any M&As that require capital, I think that being interested in, rather than being interested in that, I think that we're more interested in strengthening our market competitiveness in the areas in which we're doing business already, particularly on the non-interest income side. So with regards to the non-bank businesses of securities and insurance companies, We want to strengthen that further, so that would be one of the main focus. And in addition to that, we will also continue to conduct our value program and also manage our risk-related assets and also conduct and successfully complete our future co-growth projects. So in the middle, I did talk about this during the presentation, but achieving the CET1 ratio of 13%, this was the target year was 2027, but we have accelerated that to 2026. So this is something that we are discussing with our directions. So by doing this and putting against our best efforts, we think that we can efficiently manage our capital and still also achieve the best outcome for the business. Thank you.