Woori Financial Group Inc.

Good afternoon. This is Han Hong-Sung, Head of IR at Woori Financial Group. Thank you for attending today's earnings call for Woori Financial Group despite your busy schedules. Joining us today on the call are Group CFO Kwak Sung-Min, Group CDO Ok Il-Jin, Group CRO Park Jang-Geun, and Head of Business Growth Support Yang Ki-Hyun. We will begin with the group CFO's presentation, which will be followed by a Q&A session. Please note that the session is being simultaneously interpreted for the benefit of overseas investors. With that, we will now hear from the CFO the earnings result presentation of URI Financial Group's first half 2026. Good afternoon, this is Kwak Seong-Min, Woori Financial Group CFO. Let me go over the group's earnings result for first half 2026. Please refer to page two of our earnings result material available on the website. First, the group's net income. Woori Financial Group's net income for Q2 2026 outperformed market expectations coming in at 1 trillion 4.6 billion won Up 66% QOQ. It has thus regained the quarterly net income of 1 trillion won level. This brings the half-year net income, YTD, to 1 trillion and 609 billion won, up 3.7% YOY. Our common equity ROE was 9.0%, excluding one of items, including the impact of changes in actual assumptions that are insurance subsidiaries. ROE was 10.3%. Our Q2 results demonstrate that the group has the foundation to take its recurring earnings capacity to the next level, potentially generating quarterly earnings of more than $1 trillion. This was driven by our strengthened capital position, which improved by 80 bps year-to-date, enabling us to focus on asset growth and productive finance, strengthening the core competitiveness of our subsidiaries, enhancing cost efficiency and risk management. The group posted record high net operating revenue in the first half, while the CIO ratio and credit cost ratio stabilized at lower levels, leading to the group's profitability improvement. During the first half, the benefits of long-standing efforts to diversify the group's earnings structure began to materialize. Despite a challenging operating environment with the sharp rise in exchange rates and market interest rates, as well as the impact of changes in actuarial assumptions in insurance, The group's non-interest income increased by 20% YOY, driven by stronger capital market performance, becoming the primary driver of earnings growth. The income exceeded $700 billion won for the first time on a quarterly basis, supported by solid growth in core fee businesses such as wealth management and CIB. In the first half, the non-bank's contribution to group net income more than tripled YOY from 6.9% to 22%. 22.3% indicating the start of tangible results with the setup of a comprehensive financial group. Looking ahead, we expect our non-bank businesses to become a new growth engine, further strengthening the group's earnings generation capacity. Now, shareholder returns. Today, the BOD approved an additional $150 billion share buyback and cancellation for the second half of the year, a first since the establishment of the holding company. The total amount of share buybacks and cancellations for 2026 will reach $350 billion representing the largest program in our history and more than twice the $150 billion won executed last year. This reflects the firm determination beyond cost and shareholder return policy as well as to minimize shareholder dilution Due to the acquisition of full ownership of Dongyang Life and protect shareholder value, Woori Financial Group approved the second quarter cash dividend of 221 per share, all non-taxable, further reinforcing our position as a leading dividend-paying financial stock. Just as we have consistently delivered on the commitments we have made, we'll continue to faithfully execute our corporate value program and strengthen investor confidence. A more detailed review on the group's financial performance by business segment on page 3. First, I will discuss net operating revenue and NIN. For the first half of 2026, the group's net operating revenue increased 6.0 YOY to a record 5,722,7 billion won. This was driven by balanced growth in both interest and non-interest incomes, each reaching an all-time high, demonstrating that the group's stable earnings generation capability has reached a new level. Q2 net operating revenue also increased 7.5% QQ to 2,965,001. The group maintained solid growth in interest income in the first half, up 3.2% YOY. This was supported by the full-scale expansion of productive finance, with corporate finance growing at a high 4%, as well as continued optimization in ALM, which lifted the bank's NIM by 7 bps YOY. Second quarter NIN remained at the same level from the previous quarter at 1.51%. Although funding cost pressures increased amid higher market interest rates, we minimized the downward pressure on NIN by expanding our core deposit base and continuing disciplined asset rebalancing. Going forward, as we enter a period of rising interest rates, URI will continue to broaden its customer base, further expand core deposits through strategic partnerships, and improve margins through profitability-focused loan portfolio management. Next, let me discuss the bank's loan book. As of June end, 2026, the bank's total loans grew 1.9% due to 344 trillion won. The growth is mainly due to corporate loans growing 2.8% due to primarily driven by large corporates and high quality SMEs supported by expanded productive finance for advanced strategic industries. To prepare for ongoing domestic and global uncertainties, we'll continue rebalancing low-margin and negative spread assets. In line with the government's household debt management policy, household loans will continue to be managed within our target range. Meanwhile, in June, the group expanded its commitment to productive and inclusive finance by an additional $10 trillion, increasing the size of future shared growth projects to a total of $90 trillion over the next five years. Through the initiative, we'll broaden our support beyond advanced strategic industries to include industry leaders, exporters, innovative companies, and startups, thereby strengthening the flow of capital into productive sectors while establishing a more resilient foundation for the group's long-term growth.

Next, let me move on to the group's non-interest income. The group's non-interest income amounted to $1,263.1 billion for the first half and $628.9 billion for the second quarter, marking record high results on both a half-year and quarterly basis. Accordingly, the proportion of non-interest income to total net operating revenue increased to 18.6%. Supported by greater group synergies and stronger business performance across our subsidiaries, both the banking business and the non-bank businesses, including insurance, securities, and investment banking asset management, delivered balanced earnings growth, offsetting factors that reduce earnings, including trading and valuation losses resulting from the high exchange rate and high interest rates, as well as changes in actuarial assumptions in the insurance business. In particular, the group's fees and commissions amounted to 1,278.8 billion won, supported by the bank's WM business and growth in the securities investment banking. On the back of strong capital market conditions increasing 23.7% YOY, second quarter fee income amounted to 702 billion won, up 22% from the previous quarter, surpassing 700 billion won for the first time on a quarterly basis, and this also reflects our strategic efforts over the past several years to expand fee-based earnings. Meanwhile, to drive growth in the group's non-bank business, So that each subsidiary can strengthen its core competitiveness and take the next step forward in its business, the group completed a $1 trillion capital injection into our security subsidiary last May. And today, the making of Dongyang Life, a wholly owned subsidiary, has also been approved. Going forward, leveraging our diversified group portfolio, we will continue to increase the earnings contribution from our non-bank businesses, thereby further improving quality of the group's earnings fixed. And I'll now move on to the group's expenses. Please refer to page 4. I will now move on to the Group's SG&A expenses in the first half of 2026. The Group's SG&A expenses amounted to $2,632.8 billion won, and the cost-to-income ratio was 42.8%. This year, despite structural cost increases including the consolidation of the insurance business, the build-out of our security subsidiaries' infrastructure, and the higher education tax rate, we maintained the cost-to-income ratio at the same level as the same period of the previous year through company-wide cost-efficiency efforts. Meanwhile, SG&E expenses for the second quarter amounted to $1,210,000,0001, down 15% from the previous quarter. Even excluding one-off voluntary retirement expenses, SG&E expenses declined 2.4% from the previous quarter, continuing on the downward trend. Going forward, while continuing to invest in future growth, including AI transformation and the build-out of our security subsidiaries infrastructure, we'll further enhance productivity in our core operations through the transformation to an AI-driven management system and optimize our workforce and channel operations. Through these cost-efficiency efforts, we will do our utmost to achieve our medium-to-long-term CI ratio target of the low 40% range. Next, I will cover the group's credit costs. Group credit costs for the first half of 2026 amounted to $966.1 billion, up slightly year over year. However, in the second quarter, credit costs amounted to $439.2 billion, down 16.7% to QOQ, continuing on a downward trend. In addition, excluding large one-off factors in the first half, the group's recurring credit cost ratio was 39 bps and has been managed stably at a level lower than last year. By maintaining this trend, we will achieve our full-year target announced at the beginning of the year of reducing credit costs by 15% and bringing the credit cost ratio to the low 40 BIPs range. Meanwhile, despite strong loan growth this year through a selective asset origination strategy focused on asset quality, the proportion of prime corporate loans remained at around 85% as of the end of June. In addition, the ratio of loan loss reserves and regulatory reserves to total loans also remained at around 1.5%, providing sufficient loss-absorbing capacity against potential credit losses. However, as the importance of risk management has increased further following the July policy rate hike, we will further strengthen monitoring of vulnerable borrowers and focus on proactive risk management to further strengthen the group's asset quality. Next, let me move on to capital adequacy and shareholder return. Please refer to page 5. As of the end of June 2026, the Group's preliminary CET-1 ratio stood at 13.71%, up 11 bps from the previous quarter. Despite the continued 1,501-plus exchange rate during the second quarter and continued strong loan growth in support of productive finance, we achieved one of the highest CET-1 ratios in the industry, supported by our disciplined capital allocation and risk-weighted asset management capabilities. Based on our strengthened capital position today, the Board of Directors of the Group approved a second quarter dividend of $221 per share, which is fully non-taxable. The record date is August 10th, and the payment date is scheduled for August 31st. In addition, for the first time since the establishment of the holding company, we approved an additional $150.1 billion share buyback and cancellation for the second half of the year, increasing the year's total share buyback to $350.1 billion across two rounds. As a result, we have fulfilled both commitments we made through our corporate value-up plan announced last February. First, to additionally consider share repurchase encapsulation in the second half once our CQ1 ratio exceeds 13%, and the second, to increase our shares to more than 10% within a short period of time. Going forward, we will also consider making share buyback encapsulation a regular semi-annual program and continue to faithfully execute our corporate value enhancement plan while consistently delivering on our commitments to the market. Finally, today, the Board of Directors of Woody Financial Group approved the comprehensive share exchange to make Dong-Yang Life a wholly owned subsidiary. Once the share exchange process is completed in August, we expect to further accelerate our efforts to strengthen the competitiveness of our insurance business through enhanced operating efficiency, improved capital adequacy, and greater group-wide synergies. In the second half, we will also accelerate our efforts to drive and improve sustainable group ROE. In the banking business, we will strengthen our core business drivers, including core deposits, corporate banking, and wealth management, while enhancing cost competitiveness to build a stable earnings base. In the non-bank businesses, we will further strengthen the core competitiveness and market position of each subsidiary, thereby transforming our earnings structure from one centered on the banking business to a more balanced earnings portfolio. Through these efforts, we will gradually strengthen the group's earnings power to more than $1.21 per quarter, while further strengthening the group's stable and sustainable earning space. In addition, we will place even greater focus on expanding productive finance and inclusive finance. As you know, Woody Financial Group has a long-standing legacy in corporate banking, which remains one of our core strengths and key source of competitive advantage. As we have already committed to provide an additional $10 trillion won through the future co-growth project, including $9.4 trillion won for productive finance and $600 billion won for inclusive finance, we will execute these funds more swiftly, thereby supporting the real economy, fulfilling the fundamental role of finance by growing together with the market and steadily securing the group's future growth drivers. This concludes Woody Financial Group's 226th 2026 first half earnings presentation. Thank you very much.

Thank you very much. And now we will begin the Q&A. If you wish to ask a question, please press star and 1 on your phone. And in order to cancel, please press star and number 2. We will stand by to wait for the question. Yes, the first question from DB Securities, Nami Nook. Please go ahead. Thank you. Thank you. Congratulations on the good performance. I have two questions on the securities. Compared to the other competitors, their sales network or they are getting better performance and in retail, The network and the products are differentiated. So in the mid to long term, what are the ways to enhance your brokerage? And secondly, one trillion capital increase was done. So it's used in your IP business. and what are your future plans for capital usage and when do you think you will reach 3 trillion won? Thank you. Thank you very much. I would like to address those two questions. Yes, this is Kwak Sung-Min, the CFO. The first question about the securities, retail, wealth management, the plans going forward. We were established in August 2024, and as for the network and the retail base is absent, we started out from a zero base. And so recently, Looking at the large players and the competitors of securities arms, they have suffered large losses, but we have an absolutely smaller size in the market. I did mention the P&L for the securities, but in retail, our income was $11 billion, and it was 15 billion, so 26.6 billion of net revenue and so it was 10 billion increase YOY. Of course, compared to the others, we don't have the retail and the sales network that much, but in Gangnam area, Yeouido, and in Gwangju, There will be complex branches, and there will be the fourth one, and continuously we will open up these complex branches and stores. So with these networks, we'll work on the number of customers and more AUM, and there's the need. So through these networks, We will increase our sales and retail base with higher number of customers and assets. And as for the derivatives, we have not gotten the license yet, and we will be pushing for that license in 2027. So as for the pending licenses, we will try to get that. and through collaboration with retail, I hope that we can get synergy and we will try to get the license as soon as possible. And with these elements ready, S&T and other businesses, we will be able to have a more synergy effect coming in. And as for retail, there will be continuous expansion and in IT, the retail, so there will be complete environment so that we can enhance more profit in retail and as for the capital increase, as was mentioned in May, we had an increase of 1 trillion won. Basically, for a holding company, the principle is it has to help In terms of ROE, that's the basic principle. And so I did mention it in last quarter's earnings call to be designated as CFIB. We will do the capital injection. And so for securities, ROE needs to be improved. So we will move toward that direction. and the group as a whole will lend support and there will be concentrated effort. So we will nurture the securities business that will be our priority and we will also improve the profitability and we will continue with the capital increase phase by phase. And as for getting the additional license, we will take that into consideration and make Thank you for your attention. increased to $800 billion and so there has been capital allocation and in IB there has been internally capital allocated so for IB in securities the profitability improvement is the highest and we have earned $45 billion in operating revenue, which is increased by 38 billion won. And so IEB is enjoying the biggest and the quickest benefit from the capital increase. Thank you.