Woori Financial Group Inc.

Good afternoon. My name is Han Hong Sung, head of IR at Woori Financial Group. Thank you for joining today for Q3 2026 Financial Group's Earning Results. And we will begin with the presentation delivered by our Group CFO, Kwak Sung-Min, followed by a Q&A session. and also be advised that for today's call, we are providing simultaneous interpretation for overseas investors. With that, let us begin Woori Financial Group's Q3 2026 earnings presentation. Good afternoon, I am Kwak Seong-Min, Woori Financial Group's CFO. I will go over the group's earnings results for Q3 2026. Please refer to page 2 of the earnings presentation documents available on our website. First, our net income. For Q3 2026, Moody Financial Group recorded net income of $1,049.2 billion of 4.4% QOQ exceeding $1,001,000,000 for the second consecutive quarter. So the group's quarterly earnings capacity has stabilized around 1 trillion won. And as a result, YTD net income through Q3 reached 2 trillion 658.1 billion won. This is an improvement from the same period last year when we recognized about 550 billion won in bargain purchase gains from the acquisitions of Dongyang Life and ABL Life. Excluding this one-off factor, it's an increase of 19% YOY. And supported by this enhanced earnings capacity, the group's common equity ROE stood at 9.9%, continuing its clear improvement. This reflects our progress over the past several years through discipline management of RWAs, and Strategic Capital Initiatives, including ESSA re-evaluation. We have strengthened our capital position and deployed this into productive finance and high growth non-banking subsidiaries, laying the foundation for the group's medium to long-term earnings growth. As a result, both interest income and non-interest income reached record highs, with non-interest income accounting for nearly 20% of total income. At the same time, group-wide cost efficiency initiatives helped stabilize With revenue growth and cost stabilization, YTD operating profit increased by nearly 570 billion won YOY, further enhancing our sustainable earnings generation capacity. Next, capital adequacy and shareholder returns. As of September end 2026, our preliminary ZT1 ratio stood at 13.8%, maintaining the industry-leading position. This is a meaningful improvement, nearly 90 bps this year alone, and 170 bps over the past two years. And this year, as part of productive finance, we significantly expanded corporate lending guarantees and capital markets investments. However, our capital capacity against external uncertainties has strengthened further, supported by solid fundamentals, disciplined asset balancing, and the impact of a decline in exchange rates. Based on this, our BOD today approved a Q3 dividend of 221 per share, fully non-taxable. The record date is November 10th, and the payment is scheduled for November 30th. With this, our quarterly dividends for the year have been completed, leaving only the year-end dividend. And for us, the year-end dividend accounts for more than 50% of the total annual dividend. The current dividend yield stands at about 2.2%, but given our dividend structure and the non-taxable benefits, shareholders' expected annual dividend yield for 2026 should be significantly higher. With the additional $150.1 billion share buyback approved in July for the second half, we are confident that our total shareholder return for 2026 will be significantly higher than last year. And in addition, the Board resolved to cancel 57,369 shares we acquired and held for specific purposes, including comprehensive share exchanges in accordance with the amended Commercial Act. Now, let me go over the group's financial performance by business segment in page 3. First, net operating revenue and mean. YTD net operating revenue through Q3 came in at a record $8,680.3 billion won of 6.2% YUY on the back of balanced growth in both interest and non-interest income. YTD interest income reached 7,035.9 billion won of 4.5% YOY, maintaining solid growth. The main drivers were 25% increase YTD in large corporate lending, as well as the improvements in group's name compared with the same period last year. However, the bank's name for Q3 stood at 1.43%, down 7 bps QQ. Market rates increased more sharply than lending rates, and our proactive efforts to secure funding ahead of additional rate hikes placed pressure on funding costs. But we expect NIM to recover as asset and liability reprice over time, and the impact of higher funding costs gradually subsides. We will work to accelerate margin improvement by expanding high-quality new customer base, attracting low-cost deposits and maintaining a profitability-focused loan book. Next, let me discuss the bank's loan portfolio. As of September end 2026, the bank's total KRW loans stood at 313 trillion won, up 1.52% from the end of June. Corporate loans increased by 1.42% QQ to 156 trillion won due to the acceleration of productive finance. In particular, lending under the productive finance reached roughly $27 trillion won, 1.5 times our full-year target, which we achieved ahead of schedule. Retail loans stood at $154 trillion won of 1.4% QOQ following the government's easing of household lending limits in August. Building on our strong competitive position in corporate banking, we will continue to pursue loan growth focused on high-quality assets. And we will... further enhance risk management by integrating AI across the entire lending process from credit assessment to post-monitoring. By doing so, we will create a foundation for sustainable growth without compromising asset quality.

Let me now turn to the group's non-interest income. Non-interest income for the first nine months reached a record 1.6444 trillion won. Core fee income rose 18.8% YOY to 1.898 trillion won driving earnings growth. Our non-bank subsidiaries increase their earnings contributions by strengthening group synergies and enhancing the competitiveness of their core businesses. In particular, our securities subsidiary has expanded its IB business since its capital increase in May. Collaboration with the bank has also continued to grow with the two jointly arranging deals. As a result, underwriting and advisory fees for the first nine months rose to 2.4 times the level recorded a year earlier, reaching $151.4 billion won. The secretive subsidiary accounted for half of this total. Our insurance subsidiaries also contributed significantly to non-interest income growth, with insurance earnings increasing by approximately $100 billion won Y.O.Y., Stronger synergies with the bank helped increase the group's bank assurance earnings by approximately 10% from a year earlier. As a result, the non-bank share of non-interest income rose from 45% a year earlier to approximately 60% this year. Meanwhile, the group's third quarter non-interest income declined 7.6% QOQ to 581.4 billion won. This reflected higher securities valuation losses and made rising interest rates and stock market volatility together with a sharp decline in capital market fees. However, higher foreign exchange earnings as exchange rates stabilized along a recovery in insurance earnings too. First quarter levels helped contain the decline. Looking ahead, Rudy Financial Group will continue to pursue business opportunities by harnessing synergies across expanding securities, insurance, and capital market subsidiaries. By steadily increasing the contribution from non-interest businesses, we will move towards a more balanced earnings mix. We will turn to costs. Please refer to page 4. This shows the group's SG&A expenses. Group SG&A expenses for the first nine months totaled 3.8575 trillion won. Q3 expenses stood at 1.2246 trillion won, broadly unchanged from the previous quarter. The group's cost-to-income ratio remained stable at 42.3%, in line with our full-year target. Looking ahead, we will proactively make essential investments to strengthen the group's future competitiveness, including expanding infrastructure for our insurance and securities businesses and upgrading IT security systems to guard against cyber attacks. At the same time, we will continue to improve cost efficiency across the group by optimizing our distribution channels and workforce and using AI to streamline operations. Next, credit costs and asset quality. Credit costs for the first nine months of 2026 totaled 1.28 trillion won, down sharply by 15.7% YOY. Q3 credit costs stood at 314.1 billion, a substantial decline of 28.5% QOQ. The quality of our loan portfolio has improved as we have expanded lending to high-quality corporate borrowers and steadily rebalanced our assets over the past two years. As a result, our credit cost ratio for the first nine months declined to 42 basis points. Woody Financial Group will remain focused through year-end on achieving our portfolio targets of reducing credit costs by 15% and bringing the credit cost ratio to the low 40 basis point range. Our asset quality indicators also remain sound as of end of 2-3. As of end September, high-quality loans continue to account for around 85% of the corporate loan portfolio. The NPL ratio also edged down to a Q, supported by a decline in new NPL formation, reflecting our rigorous asset quality management to prepare for rising interest rates and macroeconomic volatility, which will further strengthen monitoring of vulnerable borrowers and proactively pursue NPL sales and write-offs to maintain sound asset quality across the group. In closing, the key transformation underway at Oodi Financial Group is this. Having strengthened our capital position, we're now entering a new phase of growth using that solid capital base to secure future growth opportunities, strengthen our earnings capacity, and increase shareholder returns. Our bank is reinforcing its earnings base by strengthening core businesses including corporate banking and wealth management while improving cost efficiency. Following the acquisition of full ownership of Dongyang Life in August, we are now moving forward with the integration of our two life insurers. Once completed, this integration will deliver cost synergies and economies of scale. Our securities subsidiary is steadily building its track record in IB, obtaining the derivatives license currently being pursued will further strengthen the foundation for earnings growth. Our credit card, capital finance, asset management, and key subsidiaries are also increasing their earnings contributions by enhancing their core competitiveness and group synergies. By delivering 1 trillion won in quarterly net profit for two consecutive quarters, we have demonstrated that the group's earnings capacity has reached a new level. Looking ahead, we will further strengthen the group's fundamentals through sustainable improvements in ROE and share the benefits with shareholders through differentiated capital returns, reinforcing our competitiveness as a comprehensive financial group. This concludes OODI Financial Group's 2-3-2026 earnings presentation. Thank you.

Thank you. Now we are going to begin our Q&A session. If you would like to submit your question, please press star N1. And if you wish to cancel your submission, please press star N2. So we are going to wait until the question comes. So the first question comes from IB Securities, Seo Kyung Jin. Please go ahead and ask your question. Hello. Thank you for giving me the opportunity to ask questions. I have two questions. The first of all, for the margin side, there was a slight significant decline this quarter. So what was the impact on the asset management as well as the funding side? And also we have, starting from July, we have some impact that reflects in some extent related to fixed margin payout. And the second question is for the Jong-Yong Life. I understand that you ran it quite strongly. Was the purpose of your merger to secure liquidity, or did you think that it was more profitable than the authorities were concerned about? And I'd like to ask you what you did. If possible, at the time of our return rate, which is 10%, I would appreciate if you could explain what level of the hedging you are using. Yes, we got the two questions. Could you repeat your second question again? So I have a question about the Dongyang Life. So in September, it looks like you did a 700 release quite strongly. Was it because to obtain the liquidity, or did you think that it was okay for your profitability? And also the 100%, the reversal timing, when do you expect that that will be? So please give us a moment as we prepare our response. So my name is Kwak Sang-Hee, CFO. For the first question, it was about our margin. So YTD basis, the margin is about 1.3 dips. So it's quite high YOY. I think what you're asking is based on true Q. So I think that I covered this before once, but Q3 this year, I think that there was a burden with the funding costs for all banks. And that was the same for us as well. There was an increase in the funding cost because of the increase in funding rate. But for Uri Bank, we have a CD linked loan, which accounts for 70%, which is quite high. So for Uri Bank, compared to our competitors, we had to endure the increase in funding rate, but we also had a bigger gap. between long and short term. So to further explain on that, as you know, the market rate, the CD rate, as well as the funding rate. So the CD rate, it went up about 41 bps by end of September. For one year, the funding, the bond, it actually increased about 132 bps. So there was a difference between long and short term interest rate and because of that spread, we had an impact on our Q3 earnings. So and from September and early October, the long term rate actually increased more sharply than the short term. So there is a gap between long and short interest rates that had impact on our bank because The CD-Linked loan that accounts for 70% of our total loans. So that is impacting Q3. So by early next year, the BOK, we have an expectation that the BOK will continue to increase the rate. But we do think that the rate might decrease afterwards. So I think that over time, this risk or this factor will actually start to fade. And to be more specific, there was a decline in core deposits, which actually led to 2 bps impact. And the low and short interest rate spread that I just covered, that actually had about 5 bps impact. So in Q2, we had a decline of about 7 bps. For this quarter, we had a decline of about 7 bits. But if you look at just the Q3 only, there's a decline of 7 bits, as I covered. So that may look like a significant drop. But if you look at the first half of this year, compared to the end of last year, during the first half of this year, Woori Bank had a YTD of 1.46%, and the first quarter, the second quarter, it was 1.51%, respectively. So YTD compared to the end of last year, it's an increase of 5 bps for NIMS. So you can compare the figures yourself. It was a slightly increase in NIMS compared to our competitors for the first half of this year. So I think that, you know, you could also consider that fact. And as you know, we will also cover the loan growth later. But the Korean won loan increased about 12 trillion won YTD. The 8 trillion came from the corporate lending, and we also covered it in IRC. So corporate lending growth is supported by our principle or the strategy, which is only margin. So we actually focused on the productive finance, and we increased the large corporation corporate lending. So we not only looked at the rate, but we also tried to increase the non-interest income from those transactions. So as we increase the corporate ending, we also try to increase the fee or the FX related fee income. The IB fee income went up significantly because of that. And as you know, the IB, we mostly focus on large corporations. And in this process, we have an opportunity to source the IB deal, which could increase the IB related fee income. So under that strategy, we tried to capture not just the interest income, but also the non-interest income. So that was our only margin strategy. However, there was a slight burden on the mean for this quarter. Overall, we increased the corporate lending to increase both interest and non-interest income. And that was part of our strategy. Starting from Q4, I believe that this downward trend will no longer be there. And Q4, we will at least remain or have a slight increase. And starting from 2027, we are going to start asset refreshing, which will improve the mean. So that's the answer for the first question about the mean. So for the second question, insurance related question, you mentioned Dong Yang Life. But I think that it covers both Dong Yang Life and IBL Life because we ended insurance as of September. I'm not sure if I am able to share the reason why here. But as I know from the regulators, we were told to stop to sell this life insurance. And I think that this not only applies to us, but it also applies to other insurers as well. So the whole life insurance that we stopped selling, it was more from the AVL life rather than the Dong-Yang life. So there could be an impact for ABL life. So we just started back in September. So we had an internal meeting with our insurers. But this is coming from the regulators, so we need to obviously comply with this. But we decided to create an alternative product which can replace this. and we will try to launch this as soon as possible within October. So for us, it's a product mostly sold by AEDL Live, so not so much impact for the Jong-Yong Live, but bigger impact for AEDL Live. So there are 20 products or other solutions. We are currently working on it to make sure that we do not lose the profits.