Woori Financial Group Inc.

Good afternoon. I am Han Hong-sung, head of IR at Woorie Financial Group. Thank you to everyone for taking the time to participate in today's earnings call for Woorie Financial Group. On today's call, we have the group CFO, Kwak Sung-min, group CSO, Lee Jung-soo, group CDO, Oh Gil-jin, and the group CRO, Park Jang-geun. We will begin with the group CFO, Kwak Sung Min, presenting on the earnings, followed by a Q&A session. Please also note that we're providing simultaneous interpretation during the call for the benefit of overseas investors. With that said, let us start the presentation on the first quarter 2026 earnings for Woorie Financial Group. Good afternoon. This is Kwak Sung Min, the CFO of Uri Financial Group. Allow me to present on the earnings results for Uri Financial Group for the first quarter of 2026. And please turn to page two of the material, which is available on our website. The group's Q1 2026 net income was 603.8 billion won, coming in flat year over year. Driven by solid growth from corporate finance, particularly from the advanced strategic industry sector and five consecutive quarter uptrends in the bank's NIM, interest income displayed steady growth. At the same time, record high fee income and the inclusion of insurance business growth sizable, not interest income, which led to balanced top-line growth. However, due to ERP at the bank's beginning of the year and one-off provisioning related to the local subsidiaries of the global divisions, and FX loss and downsize gained from securities following sharp rise in the FX rate and the market interest rate during the quarter, that income somewhat underperformed market expectations. With such factors excluded, group's running basis income was around 900 billion KRW, and as the impact on bottom line was due to volatilities in the financial market and temporary in nature due to the external environment, we expect to see recovery once the market indicators stabilised. Next on the CET1 ratio. June 2026 preliminary CET1 ratio for the group rewrote historical record at 13.6%, increasing 71 basis points year-to-date and 115 basis points from last year. Despite sharp market volatilities caused by external uncertainties on the back of group-wide capital management efforts, i.e., asset rebalancing, and revaluation of the group's tangible asset, we were able to achieve above 13% CET1 ratio target ahead of the planned timeline, which helped to secure a steady foundation for Udi Financial Group to enable both sustainable and stable growth and shareholder returns. Today, the BOD of Udi Financial Group decided on a quarterly dividend payout of 221 per share, which is 10% increase year over year. And as was the case last time, the full amount will be non-taxable. Also, in light of sufficiently high capital ratio, we expect additional share buyback and cancellation to be most likely during the second half of the year in accordance with the Corporate Value Enhancement Plan announced at the start of the year. In terms of non-bank competitiveness, growth momentum is building following the completion of the setup as a comprehensive financial group. Income from non-bank subsidiaries, including card capital, insurance, securities, was up 185% year-on-year, widening the non-bank contribution to 9% of last year to 25%. For URI investment in securities, the decision was made for 1 trillion won of capital increase, initiating the phased capitalization plan. Tongyang Life will be made fully-owned subsidiary, through which we intend to streamline the governance, which will drive efficiencies in business management and solidify insurance competitiveness inside the group. Next, group performance in greater detail. Please refer to page 3 of the materials. First, the net operating revenue and the NIM. Q126 net operating revenue came in at 2,757,700,000,000 won. Underpinned by diversified revenue sources and stable earnings capacity, there was 5.6% year-over-year increase. On the back of productive finance initiatives and ensuing growth driven by corporate finance, NIM continued to improve. with interest income up 2.3% year-on-year, reporting 2,303.2 billion won, sustaining a solid uptrend. Following the completion of the portfolio as a comprehensive financial group last year, diversified revenue sources led to tangible results, driving non-interest income up 26.6%, a sizable increase powering the earnings growth. Bank NIM in Q1 was 1.51%, up two basis points Q and Q, and seven basis points year-over-year, respectively. While including the card business, Group NIM reported 1.76%, up six basis points versus last year. At the start of the year, rate cut expectations and money movement on the back of bullish equities market led to concerns over potential NIM decline, but the uptrend continued. on rise in market rate driven by broader backdrop and profit-focused lending management and funding cost efficiency efforts. Going forward, we will continue to expand core deposit base and actively manage ALMs to sustain a steady margin trend. Next is on the loan book of the bank. As of end of March 2026, bank loan totaled around 338 trillion won, up 1.2% year-to-date. Corporate loan growth was driven by advanced strategic industries supported by productive finance, expanding 2% to report 184 trillion won. Solid demand from the nation's core industries, such as semiconductors, defense, and biosector, drove growth of lending to large corporations by 7.5%. While we saw marginal dip Q&Q for SME loans, with continuing impact from asset rebalancing, focusing on property leasing businesses. We, however, believe that going forward, as large-scale projects start to kick in, funded by productive financing such as the National Growth Fund, loans to SMEs in the back end will further pick up. For household loans, on the back of active real estate market stabilization policies by the government and stringent loan management, the loan book for this segment was flat at 151 trillion won. With URI financial groups leveled up capital capacity and by actively leveraging the group's competitiveness in corporate finance, we will ramp up financing support towards the productive segment and will also continue asset rebalancing to navigate uncertain financial environment. On the retail side, we are aligned with the government's multifaceted efforts to control household loans and plan to drive growth that is adequate while complying with the aggregate cap target.

Next, I will go over the group's non-interest income. The group's 2026 Q1 non-interest income jumped by 26.7% worldwide to 454.6 billion won. In Q1, due to sudden effects and market rate increases, there were some downside factors. However, as the group's portfolio was completed last year, profit diversification and non-bank subsidiaries' marketing efforts led to a stable level up of group-wide businesses. In particular, core fee income, which continuously grew every quarter, increased by 13% YY to 576.8 billion won, which is a record high for a quarter. RE financial group will further work to continuously expand the bank's wealth management business and the HQ's marketing activities, while the non-bank subsidiaries strengthen their core competitiveness. The securities arm will consistently implement the capital injection plan to enhance market position and strengthen the group's capital functions. The insurance business will seek to stabilize its financial structure while expanding mid- to long-term profit base. The asset management arm is establishing a fund related to productive finance and with the transfer of insurance LDI assets should achieve economies of scale to become a top 10 asset manager in terms of AUM. Also, based on stronger competitiveness, joint CIB underwriting, integrated WM branches, and stronger LDI of the insurance are just some examples of collaborative full-fledged energy creation. By doing so, the non-bank subsidiary contribution to profit should improve. We will move beyond an interest income-oriented traditional profit structure to gradually increase the non-interest income profit contribution. Next, I'll go over the cost. Please refer to page 4. I'll go over the SG&A expense of the group. 2026 Q1 SG&A expense of the group stood at $1 trillion for $22.8 billion, which is a 9% YOY increase. This brings the cost-to-income ratio to 45%. In this quarter, we incurred ERP-related costs of $183 billion. Also, the SG&A expense of the insurance company, which came under the group umbrella in the second half of last year, was $25 billion. Also, the education tax hike was another 17 billion won impact. In the future, like last year, portfolio expansion can lead to early infrastructure costs, while institutional factors such as the education tax can also have impact. As such, group-wide efforts to boost cost efficiency are being implemented. With the great transformation into an AI-based management system, corporate loan client consultations, internal control, and other key areas, it's a higher efficiency to improve the cost structure, Group-wide cost-saving efforts include consolidating and enhancing efficiency of branches and minimizing operating costs. These efforts should enable the mid-long-term CI target of early 40%. I will now move on to credit cost and asset quality. The group's 2026 Q1 credit cost was $526.8 billion won. This includes the one-off large-scale provision of $138 billion booked by the bank's overseas subsidiary. While credit costs rose by 20% YOY, it decreased by 10% QOQ. Excluding the one-off, the group's credit cost goes down to about $390 billion. The credit cost ratio is being managed stably at below 40 bps. In case of the bank's corporate loans, high-quality assets take up 84.8%, which is a slight QOQ improvement. Provisions and provisional reserves to total loans is also robust at 1.6%, evidencing sufficient loss absorption ability. We will continue to supply loans to innovative growth companies and regional leading companies while increasing guaranteed loans and policy loans. We are pursuing a growth strategy in consideration of asset quality. Based on earlier expectations of global and domestic economic recovery, credit cost was expected to decrease. However, the geopolitical risks in the Middle East, leading to higher oil prices and exchange rates, have raised concerns on the slowing down of the real economy, emphasizing the need for asset quality management. For the past two to three years, the non-bank subsidiaries have implemented an asset cleaning program. In the future, the group will concentrate on areas of asset quality concern and conduct preemptive risk management on troubled sectors and vulnerable borrowers. We will also actively implement asset quality improvement measures on global business to achieve our financial plan of 20% reduction of credit costs against last year and a credit cost ratio of around 40 bps. I'll now move on to capital adequacy and the shareholder return policy on page 5. As of March 2026, the growth preliminary CET1 ratio is expected to be around 13.6%. In order to address the difference between the book value on the financial statements and market value, and to provide more credible and decision-useful information to the market, the group conducted a revaluation of the land assets held by major subsidiaries. In result, we recognized a revaluation surplus of 1.8 trillion won, listing the capital ratio by 60 bps. we were able to achieve capital ratios that are higher than peers without a paid-in capital increase. However, independent from this asset revaluation, despite unfavorable market factors such as high interest and FX rates, thanks to company-wide capital management efforts, this quarter's C21 ratio, even without the revaluation, would be 13%. In result, the goal of achieving the C21 ratio of 13% in 2026 early and then to stably maintain it at 13.2% has been effectively delivered in just one quarter, proving our commitment to enhancing corporate value. In the future, we will continue the RO-RWA-based asset rebalancing efforts in a more meticulous and strategic manner. While disposal of the group's idle assets should further reduce the RWA, we will carry on multifaceted efforts to boost the capital ratios. In addition, based on such capital ratios, productive finance and strategic investment by non-bank subsidiaries will be actively pursued to establish a virtuous cycle of improved ROE and stronger shareholder return. Today, the Board announced a quarterly dividend of 221 per share. The record date is May 11th. Following last year's dividend, this quarterly dividend will also be non-taxable. which is unique to URI financial groups in our sector. Individual investors will receive the full amount without any resale tax. It is even excluded from the comprehensive financial income tax, further significantly enhancing the effective dividend yield. The Treasury Stock Purchase and Cancellation Program announced earlier this year will also be completed by June. Going forward, by maintaining a high dividend payout ratio and a competitive dividend yield, we will further strengthen our competitiveness as a leading dividend stock in the financial sector, while also diversifying shareholder return methods to strengthen our shareholder return policy. Just before today's earnings call, the group made some important disclosures. I already spoke about the asset revaluation and quarterly dividends. In addition, the board of directors of the group today proved an additional capital injection of 1 trillion won into URI investment and securities. The securities industry, thanks to the integration of the domestic capital market, is pursuing diversified growth, not only in the traditional brokerage business, but also in the capital-based IB business and the supply of venture capital. In response to these market trends, URI investment securities, with a paid-in capital raise, will gradually strengthen key business infrastructure such as capital, talent, and license to strengthen its core competitiveness. Meanwhile, we will also work to become a mega IB. In relation to insurance, we have fully incorporated Tongyang Life as a wholly owned subsidiary with a resolution on share exchange. By establishing a governance structure aligned with the purpose of a financial holding company, We expect to boost management efficiency as well as to increase earnings as a result of the additional equity acquisition of Dongyang Life. Above all, we expect this to lay the foundation for pursuing business integration between Dongyang Life and ABL Life. As we have done thus far, by staying ahead, we will continue to make every effort to enhance corporate value through diverse measures. This will conclude Refinancial Group's 2026 Q1 earnings call presentation. Thank you.

Thank you very much. We would now like to begin the Q&A session. For those of you with questions, please press star and number one on your phone. And if you wish to cancel your questions, please press star and number two. Give us one moment as we wait for the questions to come in. We will take the first question from Hanha Investment Securities. Toha Kim, please go ahead with your question. Thank you for taking my question. I have two questions that I would like to ask. First question has to do with turning Tongyang Life as a wholly owned subsidiary. I would like to understand as to the key purpose behind this move. If you could just provide us with the overall picture, that would be quite helpful. And also, is there any particular reason why you are choosing the timeline as you have chosen while you are conducting this at this point? Second question is that your earnings actually underperformed our expectation. I can understand that there could be some issues. difference versus the expectation, but in terms of SG&A and the insurance-related issue, and if you take a look at the ERP and if you consider for the ERP, I think you still missed the market expectation. So I would like to understand as to why are we seeing that mismatch in expectation, especially for the SG&A line item? Thank you very much for your question. I understand your question to be on two different topics, so give us just one moment as we prepare for the answer. Good afternoon. I am Lee Jong-soo, president in charge of strategies at the group. Responding to your first question, now July of 2025, after we, I guess, merged or acquired the insurance entity, basically our key focus was strengthening our insurance business. On the financial aspect as well as the overall sales capacity, we have taken a very detailed review. And based upon what we have learned, we are undertaking process to improve on our capabilities. And in that process, we also considered an option of turning Tongyang Life as a wholly owned subsidiary. And that decision will provide us with a flexibility in business management and we believe that this was an essential step for us to drive more synergies. From that perspective, from mid- to longer-term perspective, we believe that by turning Tongyang Life as wholly-owned subsidiaries, we could actually retain their earnings capacity 100% within the group. And now moving on to your second question on SG&A results. If you look at Q1 2026, the CI ratio is 45%, which is about 1.4% increase on a year-over-year basis. And if you look at SG&A on a YOY basis, there was an increase of $117 billion. If you were to exclude insurance and education tax, that is an increase of 5.8%. As one of factors, as we've mentioned before, there is $183 billion coming from the ERP impact that's coming from the bank. Now, last year, there was an ERP-related expense of $169 billion last year, so there is about $12 billion increase. I'm sure this will be the case for our peers as well. There is about $17 billion impact from increase in the education tax. And as you will be aware, for our securities and brokerage business, with the launch last year, we have been in the process of expanding the business and we have done some new hires. There was also IT-related investment, which amounted to $17 billion increase and uplift or the increase in the SG&A related to our brokerage business. And in July of 2025, as we included this securities business, on a year-over-year basis comparison, at the insurance level, there's about $25 billion increase in SG&A. Due to these elements, the SG&A and cost ratio on a year-over-year basis, there was 1.5% increase, reaching at 45%. But in terms of insurance and educational tax, if we were to carve out those impact, it's still at about 5.8%. So we do see the management does understand that our CI ratio is comparatively higher compared to our peers. That is why we're putting in a lot of effort both from short-term perspective and to mid- to longer-term perspective. We're really focusing on cutting down on unnecessary spending and also making our branch network as well as our headcount more efficient. So as of Today, basically, we are putting an effort to consolidate our branches to 37, which is a number as of July of 25. From a long-term perspective, through AI and digital investment, we will be making the right investments to make our investments and make our spending expenditures more efficient. Thank you.