Woori Financial Group Inc - ADR Aktie

Good afternoon. I am Han Hong Sung, Head of IR at Woori Financial Group. Thank you to everyone for taking the time to participate in today's earnings call for Woori Financial Group. On today's call, we have the group CFO, Kwak Seong-Min; Group [indiscernible]; Group [indiscernible]; and the Group CRO, Park Jang-Geun. We will begin with the Group CFO, Kwak Seong-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 Woori Financial Group.

Good afternoon. This is Kwak Seong-Min, the CFO of Woori Financial Group. Allow me to present on the earnings results for Woori Financial Group for the first quarter of 2026. And please turn to Page 2 of the material, which is available on our website.

The group's Q1 2026 net income was KRW 603.8 billion coming in flat year-over-year driven by solid growth from Corporate Finance, particularly from the advanced strategic industry sector and 5 consecutive quarter uptrend in the bank's NIM, interest income displayed steady growth. At the same time, record high fee income and the inclusion of the insurance business drove sizable noninterest income, which led to balanced top line growth. However, due to ERP at the bank beginning of the year and one-off provisioning related to the local subsidiaries of the Global division, and FX loss and downsized gains from securities following sharp price in the FX rate and the market interest rate during the quarter, net income somewhat underperformed market expectation. But with such factors excluded, group's running basis income was around KRW 900 billion 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 stabilize.

Next, on the CET1 ratio. Q1 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. The sharp market volatility is 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 time line which helped to secure a steady foundation for Woori Financial Group to enable both sustainable and stable growth and shareholder returns.

Today, the BOD of Woori Financial Group decided on a quarterly dividend payout of KRW 221 per share, which is a 10% increase year-over-year. And as was the case last time, the full amount will be nontaxable. 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 nonbank competitiveness, growth momentum is building following the completion of the setup as a comprehensive financial group. Income from nonbank subsidiaries, including card capital insurance securities was up 185% year-on-year, widening the nonbank contribution to 9% of last year to 25%. For Woori Investment & Securities, the decision was made for KRW 1 trillion of capital increase initiating the Phase capitalization plan. Tongyang Life will be made fully owned subsidiary through which we intend to streamline the governance which will drive efficiencies and business management and solidify insurers competitiveness inside the group.

Next, group performance in greater detail. Please refer to Page 3 of the material. First, in net operating revenue and the NIM. Q1 '26 net operating revenue came in at KRW 2.7577 trillion, underpinned by diversified revenue sources and stable earnings capacity, that 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 of 2.3% year-on-year, reporting KRW 2.3032 trillion, 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 noninterest income up 26.6%, a sizable increase powering the earnings growth. Bank NIM in Q1 was 1.51%, up 2 basis points Q-on-Q and 7 basis points year-over-year, respectively. While including the card business, group NIM reported 1.76% up 6 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 of a potential NIM decline, but the uptrend continued on rise in market rates 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 ALM 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 KRW 338 trillion, up 1.2% year-to-date. Corporate loan growth was driven by advanced strategic industry, supported by productive finance, expanding 2% to report KRW 184 trillion, Solid demand from the nation's core industries, such as semiconductor, defense and biosector drove growth of lending to large corporations by 7.5% while we saw marginal dip Q-on-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 KRW 151 trillion. With Woori Financial Group's 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 we'll 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 [ capped ] target.

Next, I will go over the group's noninterest income. The group's 2026 Q1 noninterest income jumped by 26.7% Y-o-Y to KRW 454.6 billion. In Q1, due to sudden FX and market rate increases, there were some downside factors. However, as the group's portfolio was completed last year, profit diversification in nonbank subsidiaries marketing efforts led to a stable level of group-wide businesses. In particular, core fee income, which continuously grew every quarter, increased by 13% Y-o-Y, to KRW 576.8 billion, which is a record high for a quarter. Woori Financial Group will further work to continuously expand the bank's wealth management business and the HQs marketing activities while the nonbank subsidiaries strengthened 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 product of 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 synergy creation. By doing so, the nonbank subsidiary contribution to profit should improve. We will move beyond an interest income oriented additional profit structure to gradually increase the noninterest 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 KRW 1.4228 trillion, which is a 9% Y-o-Y increase. This brings the cost to income ratio to 45%. In this quarter, we incurred ERP-related cost of KRW 183 billion. Also, the SG&A expense of the insurance company, which came under the group on [ Berlin ], the second half of last year was KRW 25 billion. Also, the education tax hike was another KRW 17 billion 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 should show 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 costs and asset quality. The group's 2026 Q1 credit cost was KRW 526.8 billion, this includes the one-off large-scale provision of KRW 138 billion booked by the bank's overseas subsidiary. While credit costs rose by 20% Y-o-Y, it decreased by 10% Q-o-Q. Excluding the one-off, the group's credit cost goes down to about KRW 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 Q-o-Q 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 risk 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 2, 3 years, the nonbank subsidiaries have implemented an asset cleaning program. In the future, the group will concentrate on areas of asset quality concerns 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 cost 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 and the financial statements and market value and to provide more credible and decision-useful information to the market, group conducted a revaluation of the land assets held by major subsidiaries. In result, we recognized a revaluation surplus of KRW 1.8 trillion, lifting 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 CET1 ratio, even without the revaluation, would be 13%. [indiscernible] the goal of achieving the CET1 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 RoRWA-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 ratio. In addition, based on such capital ratios, productive finance and strategic investment by nonbank 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 KRW 221 per share. The record date is May 11. Following last year's dividend, this quarterly dividend will also be nontaxable, which is unique to Woori Financial Group 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 the competitive dividend yield will further strengthen our competitiveness as a leading dividend stock in the financial sector while also diversifying shareholder return method to strengthen our shareholder return policy. Thus before today's earnings call, the group made some important disclosures. I already spoke about the asset devaluation and quarterly dividends.

In addition, the Board of Directors of the group today approved an additional capital injection of KRW 1 trillion into reinvestment 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, reinvestment securities [indiscernible] paid and 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 the 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 Tongyang Life. Above all, we expect this to lay the foundation for pursuing business integration between Tongyang 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 Woori Financial Group's planning 2026 Q1 earnings call presentation. Thank you.

[Operator Instructions] We will take the first question from Hanwha Investment Securities. Do Ha Kim.

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 will be quite helpful. And also, is there any particular reason why you're choosing the time line as you have chosen, why 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 difference versus the expectation. But in terms of SG&A and the insurance-related issue and the -- if you take a look at the ERP and if you consider for the ERP, I think you still missed the market expectations. 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 to give us just one moment as we prepare for the answer.

Good afternoon. I am [ Lee Jung-soo ], President in charge of strategies at the group. Responding to your first question. Now July of 2025, after we, I guess, the merged or the 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 is -- 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 which is about 1.4% increase on a year-over-year basis. And if you look at SG&A, on a Y-o-Y basis, there was an increase of KRW 117 billion. Now if you were to exclude insurance and education tax, that is an increase of 5.8%. As one-off factors, as we've mentioned before, there is KRW 183 billion coming from the ERP impact that's coming from the bank. Now last year, there was a ERP-related expense of KRW 169 billion last year. So there is about KRW 12 billion increase. I'm sure this will be the case for our peers as well. There is about KRW 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 investments, which amounted to KRW 17 billion increase an uplift in the -- or the increase in the SG&A related to our brokerage business. And in July of 2025, as we included the securities business, on a year-over-year basis comparison, at the insurance level, there's about KRW 25 billion increase in SG&A. Due to these elements, the SG&A and cost ratio on a year-over-year basis, that 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 a 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 head count 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 longer-term perspective, through AI and digital investment, we will be making the right investment to make our investments and make our spending expenditures more efficient. Thank you.

The next question is from Yuanta Securities from Analyst Woo Do-hyung.

I have two questions. First question is about annual NIM guideline. If you can go over that, it will be appreciated. You have the CCR guideline at an early 40 bps. Is this -- does this include the first Q one-offs? And second question is about the securities company, the capital injection you are putting into your securities arm, what impact do you expect from the capital injection?

Thank you for the questions. And please just give us a second to prepare the answers.

Good afternoon. I am Kwak Seong-Min, CFO and I'll go over the NIM. It's 1.51% and it's about 2 bps Q-o-Q and Y-o-Y 7 bps increase. And for 5 executive quarters, NIM has been showing up trend. Major drivers include the market rate has been going up. So that is the biggest factor. And if you look at the -- we have been increasing efficiency of the funding, an increase in the core deposits. Also, I have been repeating myself, but we have been working on asset rebalancing. So profit generation from our asset base has been showing better trends as well. So we believe that this trend will continue in the second half. The asset rebalancing will continue to increase profitability, enhancing efficiency of funding, increasing core deposits are all positive factors to the NIM. However, in the second half, there can be some government and institutional factors. There can be some government regulations that are introduced from July onwards. And as we all know, the money moved is very visible in the market. So we are preparing to respond to that market trend. But overall, it is a downside factor to the NIM. So we will do utmost to prepare for any market trends that can underline the NIM. The BOK is expected to maintain the current BOK rates in the second half. If we assume that, the 1.46% annual NIM of last full year, I think, can be maintained and we will try to show improvement, something higher than 1.46% or around that level, I think, will be an appropriate expectation for this year.

And you asked about the CCR credit costs. In Q1, it was around 53 bps for the group. It is slightly relatively high. I did go through the factors. One of the bank's overseas subsidiary booked a one-off provision so KRW 91 billion increase from Y-o-Y. So that is around KRW 527 billion. But as also mentioned, it's about a 10% decrease of Q-on-Q KRW 57 billion. The Indonesian subsidiary, KRW 138 billion was the one-off that I mentioned. So it's around 39% and so it becomes a 40 bps credit cost ratio. So if you look at the [ MPM ] and delinquency ratios, it shows slight upward trend, but our coverage ratio is sufficient. As of year-end 2025, we are above the average of the peers and even for the Q1 2026, I think we have higher number than our peers. The Middle Eastern conflict causing oil price and possibility of it being prolonged can impact some of the borrowers and the sectors and there are concerns in the market that we are aware of. So we will make preemptive risk management efforts, and the global business of the bank, I think, have largely been cleaned up and provisioned against. So the asset quality of the global business has been enhanced as well. So I think 40 bps will be the appropriate expectation for 2026 credit cost ratio outlook. And the total [ 5 ] should be around 20% lower than last year. We will make those efforts in Q2, 3 and 4.

And today, the Board of Directors of the group decided to inject KRW 1 trillion capital into the securities company. So as of 2025, our securities company ranked 16 and after the injection, it will be around 11 in terms of capital base. And like I've mentioned earlier this year, we are trying to become a Mega IB in the mid long term. So it requires capital injections. Productive finance has become important issue these days. And so the venture capital supply by reinvestment securities can increase in the future. Based on the capital injection, the top line of the securities company this year can also, I think, increase significantly compared to last year. So based on the capital injection this year, I think even for this year, we will be able to outperform the original plan for 2026, and we will be making the almost effort to achieve that from Q1. Once the [ sale ] of the marketing base is stabilized, I think in the near future or in the mid, long term, ROE can be at around 10%. So we are actively supporting the securities company. And there may be additional capital injections down the road, but we will be making comprehensive considerations, for example, license and other business expansion in that process. So with the capital injection, we are hoping that Woori Securities Company will be able to have an expanded infrastructure including talent, capital and so on so that it can jump to become a Mega IB this year. That is one of the key goals of Woori Financial Group. And if that happens, by the business and the [ SMT ] business, can be expanded. And in the near future, it will turn to profit. IT is still being developed. So the retail business could take longer to start generating profit but we will be looking to expand the retail base along the way. And I think the core profit drivers will be IB, [ SMT ] and retail starting from early next year. We're going to implement a balanced profit structure with the securities company in the near future.

We will now take the next question, Ms. Hye-jin Park from Daishin Securities.

I would like to ask a question regarding the capital injection on your securities business and also the share exchange for the insurance company. Would like to understand what impact it would have on your CET1 ratio. The capital injection for the security business, you say that if I heard you correctly, that it will not impact your CET1 ratio. Is my understanding correct?

And the second question is that with this comprehensive share swap, for -- I understand that this is being done for the benefit of integrating Tongyang and ABL Life. And when these entities are fully integrated, what impact can we look forward to especially in terms of the earnings impact, what will be the tangible results?

And second aspect is the securities business, you would want to receive the license as a CFIB, the comprehensive finance investment business, when do you foresee you would be receiving that license as CFIB?

Thank you for the question. Just give us one moment.

Regarding the impact of capital injection into Woori Investment Securities and its impact on CET1 ratio. I remember talking about this before, the holding company, when they inject capital to its subsidiary, the capital increase itself is not going to have any impact on the CET1 ratio. Now having said that, when we -- if you look at the purpose of such capital injection, it is to further strengthen and cultivate the business of the brokerage arm and so in terms of RWA allocation, there's going to be more allocation that will be done towards the securities business. So for the risk-weighted assets, the RWA, if we take on a stance where we're more actively allocating this to our securities business, then before the time that the increase in the profit is going to offset this for that window of time, it may have a downward impact on the CET1 ratio. However, we did run internal scenario, and we expect that within 3 to 4 years' time, the P&L increase, the extent of that is going to be ample enough to offset that impact on RWA. And so ultimately, due to the increase in the P&L, we expect that there would be a certain level or a small contribution that will be made to the CET1 ratio. So that will be the financial planning that we will come up with.

In terms of when we expect to gain that approval as a CFIB, now in 2024, August, that is when we launched the securities business, previously the Woori Merchant bank the license was for 10 years, so until July of '34. So the merchant bank was able to engage in the issuance of the notes by July of '34. So the issuance of such notes is a key business that is being done by the merchant bank. So based upon the assumption that we have the permit to run the issuance of the notes business up until July of '34, basically, if we were to inject KRW 1 trillion of capital increase, then later on, though, the securities companies will be able to drive earnings. And if need be at a later date, there is need for additional capital injection. We basically buy next year would have to satisfy the KRW 3 trillion level in order for us to go through the process of receiving a license as CFIB. So our plan is to achieve the KRW 3 trillion of capital for this business and will file for the permit or license and up until 2034, we would be eventually be getting that approval as a CFIB. So that is the time line under which we are currently working under. We will look at whether there is any additional need for capital injection or capital increase along the way.

I am [ Lee Jung-soo ]. Now just adding on to the CFO's answer to your question. And just to clarify, your question had to do with the integration of our insurance business, consolidation of the insurance business. Now the comprehensive share exchange and the assumption that it is successful. So once Tongyang Life becomes a fully owned subsidiary of the group as part of our efforts to strengthen our competitiveness, basically, we are at this point, reviewing the possibility of merging the two entities. And through that merger, so having two life insurance arm under one group will be the configuration and by achieving that, we want to eliminate the inefficiencies so that we can achieve economy of scales for the insurance business and reduce operational costs and also enhance the quality of capital management. We believe that those are the positive impact that will come through. However, this has to be decided by the BOD of each of the entities. So at this point, I have to say that we do not have a definitive direction forward because we still have to go through the deliberation of the BOD and there are relevant laws and regulation that we have to work under. And once the final decision is made, we will come back to you and inform you with more details.

This is Kwak Seong-Min, the CFO. Just to elaborate a little more on the comprehensive share swap and what impact it will have on our CET1 ratio, with the respect to that question, our CSO has provided you with the answer. And if I were to just add, the group CET1 ratio we have put in a lot of thought into ways in which it will minimize the impact of the CET1 ratio. So we've decided to select the comprehensive share exchange and share swap because it will have minimal impact on CET1. The way you calculate solvency ratio for the insurance is quite different compared to other financial businesses. And so within CET1 ratio of 10% and whatever is in excess, there is some accounting treatment issue where you would have to deducted from the capital. So we have put in a lot of thought on how we're going to do this because of the BIS calculation aspect. So by making that additional acquisition of Tongyang Life's equities. There is a bit of a deduction, but through new issuance of shares, we believe that we will be able to offset it by KRW 300 billion. And so the CET1 ratio impact, I can tell you is almost minimal. And once it becomes wholly owned, there is no impact. Now going forward, there may be need for asset revaluation, which is KRW 1.8 trillion on a post-tax basis, there is an asset impact. So within the year, most likely August or September, once the entity turns wholly and we would have to do the calculation once again. But at that point in time, there is also a possibility that it could actually lift the CET1 ratio.

Next question is from NH Investment & Securities from Jung Jun-Sup.

Good afternoon. I am from NH Securities. I have two questions. Another question about the CET1 ratio. You, just talked about the capital injection of the securities firm and the insurance company as well, the share swap. You said that CET1 impact would be minimal. But in Q1, you did the asset appraisal that lifted the CET1 ratio. Government is really pushing on the productive finance. And I think that would have already had impact on bank and group. And I think that can continue to have impact. So assuming that, what would be the CET1 expectations or the impact on the CET1 ratio? I think capital ratio has improved significantly. How would that impact your shareholder return policy then? Would the current policy be continuously effective? Or would you amend the current one to reflect the higher capital ratios?

Second question is about the K Bank. I think you still have about 9%. And according to the press, there's possibility of you disposing the equity that you have in K Bank. What are your plans for that? It would be greatly appreciated if you could share that with us today.

Thank you for the questions. Do please give us a moment to prepare to answer.

Good afternoon. I'm Park Jang-Geun, CRO. You talked about the government's new or amended regulations on capital, I think market risk is minimum for us. So we are thinking about whether we're going to apply for that. For the operational risk, the [ LF and the LS ], I think, is a big part of that. So it's about loss recognition rationalization, and there is an application process in the FSS. But internally, CET1 ratio, I think, is around 17 bps positive impact. And before that, in Q1, in terms of the RWA reduction of the non-listed companies, that was included in Q1 and as time passes, within 3 years, there can be some additions. So it will be reflected accordingly. Thank you.

As for the shareholder return policy, I am CFO, Kwak Seong-Min. In principle, we will continue our value program, so DPS annual, 10%. And for the next 5 years, nontaxable dividends and we will be increasing treasury stock to around 10% in a speedy manner. And briefly mentioned during the presentation, CET1 ratio of 13%. And if that's higher than that, we will be reviewing cancellation of treasury stock in the second half. So those commitments will be carried on in 2026. And I think we'll be able to adhere to those commitments in 2026. So the quarterly dividend in Q1 is around 50% of last year and equally paid dividends throughout the year, that's around 10% increase, KRW 221 per share. And I think we will be paying the equal dividend, KRW 221 per share for Q1, 2, 3 and 4. And this year, we mentioned that KRW 200 billion treasury stock purchase and cancellation by June is the deadline that we had. We're already around KRW 100 billion, and we plan to purchase KRW 100 billion additional shares and cancel the full KRW 200 billion by June. And then second half, we will be reviewing additional treasury stock purchase and cancellation. And so after the Q2 results are released, I think we will be having such discussions in the board. And hopefully, we will be able to communicate some positive news to the market. For 2025 total shareholder return, I think, would be lower than 2026. The 2026 total shareholder return would be much higher than the previous year. And in the near future, I think we will be able to have similar levels as peers in the market. We already mentioned the insurance company and how we're turning that into a fully owned subsidiary and the capital injection of the securities company, those two elements do not have a significant impact on our CET1 ratio. So it should not become a hurdle in terms of keeping the promises that we made to the market regarding shareholder return.

And then you mentioned K Bank. So as you know, fifth of March, it listed successfully on [indiscernible]. And the price was KRW 8,300 and we are the second largest shareholder. After the IPO, 9.2% was locked up. Other than the locked-up shares, we disposed at around 2% of the shares that's around KRW 19 billion of funds coming in Q1. And then in March, we still have 9.2%. We're still the second largest shareholder, but the equity ownership is below 10% now. So the accounting treatment has been changed from equity method to [ SBOCI ]. So whether we would strategically hold or whether we would dispose some of the shares have not been determined yet. But if we decide to dispose some of the shares, depending on the market price after the lockup period, the RWA would be reduced, and that will be a positive factor to our capital ratios. So as of today, we hold 9.2% of K Bank. And after the lot of period, we will be having discussions on how to handle the K Bank equity ownership that we have. We will be thinking about the most efficient way to use this within the bank and the group. If we decide to dispose and the RWA will be reduced and will have a positive impact to our capital ratios.

Next question, please, from HSBC, Won Jaewoong.

I have two questions regarding your subsidiaries. With regards to that comprehensive share swap, I think you mentioned that there could be some costs that may be incurred. And I'm thinking that, that has to do with the appraisal, right, exercise of appraisal rights. I would like to understand as to if that expense is incurred, when would you be recognizing that? And what would be the extent of that expense? And also, you've made capital injection into your securities business. In my view, looking at brokerage and unsecured loans will be some of the business areas that you must want to expand into. So if that is the case from RoRWA basis compared to the bank, the RoRWA may be higher, and that may be able to improve on your CET1 ratio. So I would like to understand, where would be your key focus on your investment securities? And to what extent is RoRWA going to improve?

Thank you for your question. Just give us one moment.

This is CSO, [ Lee Jung-soo ]. Mr. Won, your question related to our wholly owned subsidiary initiative and also asked about potential exercise of appraisal rights et cetera. Now just to check whether I understood your question correctly. And based on my understanding of the question that you asked, the size of the -- well, depending on the size of the appraisal right, in terms of the liquidity, we believe that there may be certain level of expense that may be incurred that is aligned with the size of the appraisal rights. And so that would be -- for instance, if you were to compare with our previous cases and the size in which there was an appraisal, right, that was exercised, based upon our previous experience there will not be any liquidity-related constraints or any crunches that you may be concerned of in light of our past experiences.

Regarding capital injection, where the capital would be utilized? Would it be for unsecured loans or other businesses? And what is the possibility of a potential increase in risk on return on RoRWA? So because this investment in securities has just launched in terms of the size of the asset, and the capital, it is relatively smaller. So up until last year, RoRWA, compared to the group's average, it was slightly lower. However, as we were coming up with this capitalization plan, the capital that will be injected into the securities business and how that's going to be allocated is what is being currently simulated for IB and [ SMT ] and retail, how it will be allocated across these businesses is what is being currently studied at this point. And as I've mentioned before, on the brokerage side, we still have more work to do on setting the IT system. So it will be quite difficult for us to give brokerage the priority but in terms of extending the credit and also guaranteed or asset-backed loans, stock-backed loans, because we have the license to engage in such business for credit loans, if you look at the capital that is allocated to that business, we believe that more than 50%, we will be able to gain more room through the capital injection, and that is based upon the plan of the investment securities. And we recently see that there is a credit loan or the stock-backed loans where we see a significant demand up trend these days. So if we were to allocate the capital to that business, we think that, that will have a positive impact on RoRWA, of course. And the capital increase for Woori Investment Securities it will not end here. It would take place in phases. There's Phase I, Phase II and onwards. We're in the process of coming up with the business strategy for this business. So we think that within this year, we will be able to see RoRWA on par with bank. And after that point in time, the securities business, brokers business, works under the assumption that its RoRWA has to be higher than the banking business, and that is the premise upon which our business plan sits on. So we believe there will be a meaningful increase in RoRWA to meet the level of the bank. After that point in time, we will come up with the business allocation, especially allocating more capital on the retail business, and that's incorporated in the business planning of our investment securities business. so that RoRWA contribution from the securities business is going to expand as we go forward.

And I think this will be the last question. It will be from DAOL Investment Securities from Kim Jiwon.

I have a short question. So it's about group RoRWA. With the capital injection to reinvestment securities, I would like to know the impact it has on the RoRWA. You say you will have a phased capital injection plan. But for the entire group on the RoRWA, what is the allocation among the group subsidiaries?

And second question is about the insurance. So you have Tongyang and ABL, the merger of the two, I think, is related to the noninterest income of the group. If they are merged, you are you thinking of additional capital to improve their K-ICS ratio? Or if you are running them independently, will you still be supportive in terms of capital injection to boost their K-ICS ratio?

Thank you for the questions. Just please give us a minute to prepare the answers.

Hello, I am CSO, [ Lee Jung-soo ] and I will first try to give you an overall answer to your questions, and I think there will be some comments added by my colleagues here. I think the backdrop of your question I can refer back to one of the answers that I've made earlier today about the boosting our efficiency, improving capital and K-ICS ratio and I think there is an assumption that this is the main reason for the merger if the merger happens. And then what kind of objectives and if necessary additional capital boosting measures would be required. I think that's the essence of your question.

In the short term if I repeat my answer, that I gave earlier, one of the main purposes of the review that we are conducting on the merger is about efficiency and it's really to your question, stable and effective K-ICS ratio and primarily in terms of additional capital supplements, we do not have any confirmed measures in the group. So if the merger can help maintain stable K-ICS ratio and help them with their sales and marketing activities, I think that will be one of our key priorities.

And regarding the RWA allocation and especially regarding the securities company, according to -- when we were developing the financial plan for 2026, the RWA allocation to the securities company was higher than the bank and other subsidiaries. Even in early 2026, the growth of RWA was highest in the securities company. So in terms of growth rate, will be around more than 60% compared to 2025. Around 20% or more has been concentrated in the securities company. So RWA growth of the securities company, I think, will be stronger than previous years. And so of course, all of those numbers were assuming the capital injection. So capital injection has been on our plan. Early on in 2026, the RWA growth rate of the securities company should be around 64%. And I think that will be sufficient for the securities company to leverage its RWA to deliver significant growth of profits and net income. And even after that, the nonbank subsidiaries and the bank's RWA, I think will be short -- so to summarize, I think the securities company will continue to show higher RWA growth compared to the banks and other subsidiaries so that it can play a critical role as our main capital markets player. And I think that will be continue to be supported by the group.

We do not have any more questions in the chat box. So we will conclude the earnings call here. If you have additional questions, please contact our IR team. This will conclude the Q&A session and the 2026 Q1 Earnings Call of Woori Financial Group. Thank you for your participation today.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]

Good afternoon. I am Han Hong Sung, the Head of IR at Woori Financial Group. Let me first begin by thanking everyone for taking time to participate on this earnings call for the Woori Financial Group. On today's call, we have the Group CFO, Kwak Seong-Min; the Group CTO, Oak Il-Jin; and the Group CRO, Park Jang-Geun.

We will first start with the Group CFO, Kwak Seong-Min's presentation on the earnings performance and then also present the corporate value enhancement plan, after which we will have a Q&A session. Please note that the call is being conducted with simultaneous interpretation for our overseas investors.

Now let us start our presentation on the earnings for the full year of 2025.

Good afternoon. This is Kwak Seong-Min, the CFO of Woori Financial Group. Let me go over the 2025 full year performance. Please turn to Page 2 of the material, which is available on our website. The group's 2025 net income was KRW 3,141.3 billion, representing a Y-o-Y increase of 1.8%. The ROE was similar to last year at 9.1%. Amid uncertainties in the financial market regarding interest rates and FX rates and concern about a slowdown, balanced top line growth and the insurance acquisition enabled the group to achieve a high -- record a -- record high net operating revenue and stable profits. In particular, we set sizable reserves for future loss factors, including payoff projects with completion guarantee of trust company and adjust uncertainties such as fully provisioning against LTV-related fines, further solidifying the group fundamentals.

In addition, we completed the insurance acquisition without any negative impact on our capital ratios and established a growth foundation for the securities business by acquiring the final license and launching MTS Group, completing the portfolio as a comprehensive financial group. Using this, we are starting to generate group synergies such as investment banking joint underwriting, open integrated wealth management branches and expanding bancassurance operations. Another noteworthy achievement of 2025 is the significant improvement in our capital ratios.

As of 2025 end, the tentative group CET1 ratio is 12.9%, up 77 basis points versus 2024 and exceeding the 2025 target of 12.5%. Across higher macro volatility, the insurance acquisition and the higher year-end dividends, the group will still be able to improve its capital ratio through asset rebalancing to stabilize our financial structure, and we are able to show our strong capital management capabilities to the market. Based on this, the BOD today has decided on year-end dividends of KRW 760 and share buybacks and cancellations of KRW 200 billion.

Next, let me provide more detail about specific areas. Please turn to Page 3 of the material. First, let me go over net operating revenue and NIM. The 2025 net operating revenue was 5% year-over-year at KRW 10,957.4 billion. Due to stable profit generation from more diversified revenue sources and the inclusion of the insurance business, we posted a record high performance. Interest income for the year was KRW 9,030.8 billion, and top line growth was moderate, but NIM improved quarter-over-quarter throughout the year, which led to better asset quality and growth. On noninterest income, we recorded a record level of fee income and balanced growth across securities, FX trading and insurance income, which led to a jump of 24% year-over-year at KRW 1,926.6 billion.

In addition, Woori Bank's 2025 NIM was 1.46% and the group NIM, including the credit card business, was 1.73%, each representing an increase of 2 and 3 basis points, respectively. Though there were 2 base cut rates during the year, NIM grew on the back of asset origination focused on profitability and asset quality and funding cost efficiencies. The recent movement in the equity market has led to money movements and market rates are rising, which is creating a more challenging funding environment. But the group will continue to expand its core deposit base, rebalance its portfolio to focus on profitable, high-quality assets and actively manage ALM to secure stable margins in the future.

Next, let me go over the loan book. As of 2025 end, the bank's loans totaled KRW 334 trillion, flat year-over-year and around 1% higher quarter-over-quarter. In terms of corporate loans, they were slightly declined versus 2024 end at KRW 180 trillion. Loan demand from large corporates was strong throughout the year, but the decrease came from the efforts to decrease SME sector business exposures and actively rebalancing assets to focus on new growth and high-quality companies. On the retail side, the portfolio grew around 0.5% quarter-over-quarter or 4% year-over-year to KRW 150 trillion, mainly driven by real demand such as policy mortgages.

Last year, against an uncertain business environment, including a weak one, the group was able to achieve profitable growth via prudent RWA management with a focus on capital adequacy. This year, as discussed in our future core growth project planned last September, we will leverage the group's corporate finance competitiveness to increase financial support for more productive areas of the economy. In addition, for retail loans, fully reflecting the government's policy stance, we will focus on the real demand to manage our assets in a stable manner.

Next, let me talk about the group's noninterest income area. In 2025, noninterest income was KRW 1,926.6 billion, a record high level and a large increase of 24% year-over-year. In particular, core fee income showed balanced growth across bank and nonbank businesses, totaling more than KRW 500 billion each quarter. In addition, against market -- increased market volatility in interest rates and FX rates, the insurance income contribution from the comprehensive financial group portfolio provided more stability to our noninterest income profile. Leveraging this portfolio, we will strengthen the core competitiveness of our nonbank subsidiaries, such as our securities and insurance business and generate stronger synergies across businesses in areas like wealth management, investment banking and also asset management to gradually expand our noninterest income contribution.

Next, let me go over expenses and costs. Please turn to Page 4 of the presentation. So to discuss SG&A, in 2025, SG&A totaled KRW 5,180.5 billion. When excluding the ERP and the insurance business, it grew 10.8% year-over-year, representing a cost/income ratio of 45.7%. During the year, the group spent to strengthen its business portfolio by building out the securities infrastructure and acquiring the insurance business. In addition, there were other upfront costs such as ordinary wage labor costs. We believe these investments for portfolio expansion were essential for sustainable future growth, and we will look at the cost increase from ordinary wage as a one-off expense, which we will try to minimize the impact by increasing future productivity. In addition, going forward, we will continue to engage in general cost-saving efforts like leveraging AI-based operation efficiencies to lower cost and achieve our mid- to long-term CI ratio target of below 40%.

Next, let me move on to credit cost and asset quality. In 2025, the credit cost was KRW 2,086.2 billion, and the credit cost ratio was 0.53%. Although the base rate was cut place, market rates have remained high and any concern about a slower economy continues. The group recognized around KRW 430 billion in one-off credit cost, including preemptive provisioning related to completion guarantee of trust company projects and strengthened its loss absorption capabilities. So when excluding these one-off factors, the group's credit cost ratio was 0.42%. For the past 2 to 3 years, we have preemptively managed weak assets such as real estate project finance and completed an asset cleanup of the nonbank side, including the previous merchant banking business, savings bank and asset trust. Thus, we expect any additional costs to be limited. And this year, we are targeting a credit cost that is 20% or around KRW 420 billion lower on a year-over-year basis.

In addition, for Woori Bank, the corporate prime asset ratio stands at 84.1%. It is increasing loans to new growth sector manufacturing companies and continues to rebalance assets with a focus on asset quality. Quality indicators are recently improved, but since uncertainties still persist, we will focus more on asset quality management based on preemptive buffers created last year to maintain the credit cost ratio within the 40 basis point range.

Next, let me go over capital adequacy and shareholder return. Please turn to Page 5. The 2025 year-end tentative group CET1 ratio is 12.9%. When we launched in 2019, the group started with a CET1 ratio of 8.4%, and it has improved it each and every year. In 2025, even though we had a large M&A, i.e., the insurance acquisition, solid profit growth and asset rebalancing, a reduction in FX-sensitive assets and RoRWA linked KPI systems, we -- this all resulted in a significant reduction of 80 basis points year-over-year. Thus, we have been able to achieve our promise of reaching a CET1 ratio of 12.5% and prove our commitment to enhance our corporate value.

At the BOD today, in light of the 2025 financial performance and our shareholder return policy, the Board decided on a year-end dividend of KRW 760 per share and a KRW 200 billion share buyback and cancellation. The full year total dividend per share increased 13.3% year-over-year to KRW 1,361, which meets the qualifications of a high dividend company. In particular, the year-end dividend will also be in the form of a nontaxable dividend, the first of its kind from a bank-led financial holding company. The KRW 200 billion share buyback and cancellation also increases a 33.3% increase year-over-year and the group's total TSR ratio, including the nontaxable dividends will stand at 39.8%. Other details of our shareholder return will be discussed when we present our 2026 corporate value enhancement plan in more detail.

Next, I will go over the productive finance strategies of the future co-growth project announced in September. For the next 5 years, we plan to provide support of about KRW 73 trillion, excluding inclusive finance of KRW 7 trillion. KRW 17 trillion will be allocated to investments, including the National Growth Fund, KRW 56 trillion will be supplied as loans to advanced strategic industries such as AI, semiconductors and defense. To secure growth momentum, we are operating the Advanced Strategic Industry Financial Committee as a task force. And recently, with Hanwha Group, we signed a financial support agreement for building an advanced strategic industry ecosystem, which shows that we are already delivering meaningful results. We are also leveraging our competitiveness in corporate finance and network to preempt high-quality clients and efficiently expand funding support.

To this end, with the financial authorities capital regulation rationalization policy and by promoting the group's internal efforts such as asset rebalancing, we plan to secure sufficient capital headroom. Also, we will establish an AI-based risk management system that encompasses the entire process from loan review to post-loan management to build a strong growth foundation without undermining capital ratios and asset quality.

That was the end of the 2025 annual earnings presentation. We will now move on to the next section.

Today, Woori Financial Group disclosed the 2026 corporate value enhancement plan on KRX. Kwak Seong-Min, CFO, will continue to go over the main elements of the 2026 corporate value enhancement plan.

Today, we announced the corporate value enhancement plan to review the progress made in 2025 and share with the market our new strategies for 2026. The value enhancement plan has incorporated feedback from the market and shareholders. And after thorough discussion, it has been reported to the Board of Directors to be announced today. We especially thought long and hard about how to effectively use the significantly improved capital ratios as basis for growth and shareholder return. So let me go through the material on our corporate value enhancement program, which has also been distributed today through the disclosure.

I will first go over the financial indicators for 2025. Please refer to Page 4. ROE, thanks to balanced top line growth and the acquisition of the insurance company was maintained at above 9%. However, as the cleanup at nonbank subsidiaries caused ROE to slightly decline. The CET1 ratio despite the acquisition of insurance, LTV penalties and higher shareholder return is expected to annually improve by 77 bps to 12.9% to comfortably exceed the 2025 target of 12.5%. Annual DPS for this year should increase by 13.3% Y-o-Y to KRW 1,361, which is similar to high dividend company levels. Of this amount, the year-end dividend of KRW 760 is nontaxable. When considered, dividend payout reaches 35%, which is top notch in the industry.

The size of share buyback and cancellation have also increased by 9.7% since 2024 to KRW 150 billion. The 2025 TSR of Woori Financial Group when considering nontaxable dividends reaches 39.8%. Page 5 is on nonfinancial indicators. In 2024, we launched the securities companies. And in 2025, we successfully incorporated the insurance company, thereby completing the group business portfolio. Synergy is the fundamental reason why we exist as a financial group. Based on the completed portfolio, wealth management, CIB, capital markets and other key areas will be the focus as we concentrate our efforts to create synergies. Meanwhile, for financial consumer protection, we are the first financial group in Korea to appoint a dedicated Chief Consumer Officer to take the lead in delivering social value.

Also advancing the CEO succession program and establishing a new decision-making support process for the Board of Directors to protect shareholder interest are some examples of our efforts to improve corporate governance, which is the key focus in today's capital markets.

I'll now move on to the 2026 corporate value enhancement plan on Page 6. In 2026, we plan to achieve a CET1 ratio of 13% ahead of schedule and then maintain it stably at around 13.2% or higher. While continuing the RoRWA-based asset rebalancing efforts, quarterly flexible RWA management and selective resource allocation across sectors and businesses, these are some sophisticated and strategic efforts we are making to manage the CET1 ratio. In addition, we will be disposing idle real estate held by the bank and insurance company to reduce RWA. We will also be deploying diverse methods to efficiently manage and use real estate from a financial perspective to enhance capital ratios.

Regarding the pioneering future co-growth project, assuming approximately KRW 80 trillion of productive and inclusive financial support across 5 years, we expect about 40 bps annual impact on our capital ratios. We believe this impact is fully manageable by strengthening the RWA management process, quality enhancement of investment and loan portfolios and utilizing the lending capacity secured from the rationalization of capital regulations. By executing the future co-growth project in a balanced manner within the scope of rigorous capital management, we will work to achieve harmony between capital stability and mid-long-term growth.

I will move on to Page 7 on the group's sustainable ROE enhancement strategy. As repeatedly mentioned, for this year, based on the group's complete portfolio, we will focus on cementing the competitiveness of each subsidiary within their respective sectors. And the 3 pillars: Bank, securities and insurance, will start to generate synergy in earnest, which should boost nonbank profit contribution to about 20%. With the continuous capital injection plan, the securities firm will elevate its position in the industry. For insurance, given the business environment, we will prioritize financial stability and focus on laying the foundation for mid- long-term profit. The asset management arm will launch a productive finance-related fund and with the transfer of LDI insurance funds should realize economies of scale and climb the industry rankings.

Also on top of traditional methods such as cross-selling and client referral, we are planning to implement diverse synergy strategies such as CIB joint underwriting, wealth management integrated centers and strengthening LDI. In addition, by transforming into productive finance centered around advanced strategic industries, we aim to secure growth momentum. We will move beyond the traditional interest income-driven profit structure and invest in innovative companies to share its profits. Also, we will move the pillar of financial support from household and real estate to corporate finance in order to contribute to the recovery of dynamism in the Korean economy. Also with large-scale transformation into an AI-based management system, corporate loans, wealth management, customer consultations, internal control and other key areas will experience elevated productivity, thereby structurally improving ROE and achieving quality growth at the same time.

Lastly, I'll go over the shareholder return policy on Page 8. Traditionally, Woori Financial Group has shown a high dividend payout and a competitive dividend yield, making us one of the leading financial dividend stocks. We will solidify our competitiveness as a dividend stock while diversifying shareholder return methods to lead the expansion of the investor base in the Korea's capital market. First, we will introduce nontaxable dividends from year-end 2025. The related resources as of year-end 2025 is around KRW 6.3 trillion, which we expect to use across 5 years. The nontaxable dividends will boost dividend payout by around 6 percentage points. For retail individual shareholders, the real impact will be an 18.2% increase of dividend income. In both 2024 and 2025, dividend payout was at least 25% and total dividend payment increased by more than 10%. As such, the company effectively satisfies high dividend stock requirements pursuant to the act and restriction on special cases concerning taxation.

We will continue to increase EPS every year by at least 10%. The share buyback and cancellation policy has been gradually expanding since its first introduction in 2023. However, it was still about mid-4% of profits. We fully understand that the impact of treasury stock policy is maximized when the PBR is below 1x. Therefore, we will increase the buyback and cancellation portion to about 10% in a speedy manner. Today, we announced share buyback and cancellation of KRW 200 billion, which is a 33.3% increase from the previous year. If we expect the CET1 ratio to exceed 13% this year, we are planning to implement additional buyback and cancellation in the second half. In the future, if the CET1 is maintained stably at over 13.2%, we will review exercising a balanced shareholder buyback and cancellation program twice a year once each half.

To ensure that we remain a flagship financial dividend stock, we will stay one step ahead of competitors and implement diverse measures to strengthen shareholder return in a sincere manner. Lastly, in 2025, we acquired an insurance company to complete our nonbank portfolio to become a comprehensive financial group. Company-wide efforts, including all of our employees have led to the highest improvement of the CET1 ratio in the industry to reach almost 13%. Thanks to these achievements, we have received strong interest from investors from home and abroad and have been positively recognized by the market. Our share prices outperformed the KOSPI and market cap has more than doubled since early 2025.

In 2026, Woori Financial Group will move beyond the period of management and maintenance to take a leap forward to enter a period of great transformation. While combining core competitiveness and group synergy to advance as a complete comprehensive financial group, we will leverage our key strength, which is corporate finance to deliver the great transformation towards productive finance. In addition, we will continue to communicate with the market and carry on differentiated efforts as a leading financial dividend stock.

This will conclude the earnings presentation of Woori Financial Group for 2025. Thank you.

Yes. Thank you very much. Now we will start the Q&A session. [Operator Instructions].

So today, the first question will come from Hanwha Investment Securities, Kim Do Ha.

So for 2026, for this year in terms of your margin and growth in terms of your profits, if you could provide some guidance on that and in terms of the overall direction and why you believe that this would be possible, that would be appreciated. And in addition, for the dividend, I do believe it's larger than market expectations. And I do think that the competitive outlook is also good. However, I don't think I can fully understand your dividend policy. So going forward, with regards to your corporate value up plan. If you look at Page 8 of the presentation, right now for 2026, is the target to increase your DPS by 10%. If that is so, then in terms of your quarterly dividend for each quarter and also in terms of the year-end dividend, what would be the breakdown? Would it be similar to what you have done to date? Or do you actually believe that there will be any changes? If you could explain that in more detail, that would be appreciated also.

Yes. Thank you for your question. And if you give us a minute, then we will try to prepare your answer.

Yes, this is Kwak Seong-Min, the CFO, and maybe I can address your question. So if we look at 2025, as mentioned before, in terms of our CET1 ratio, there was a significant improvement. And as a result of that, we did have a stance to try to have more moderate growth. In addition to that, according to the overall government household debt policy, there was a lower household growth that we also see. But on the Korean won side, there was only a 0.2% growth in that area. In 2026, on the Korean won loans, in terms of the risk-weighted assets, we want to have it at around 0.5%. So that would be the business plan for this year. In addition, if we look at the nominal GDP growth rate and then also take into consideration the factor of the inclusive financing that we will have, we do think that there will be around 5% growth. And even in 2024 there was around 3% in terms of the plans that we had for the year. But on the corporate side, because there was asset rebalancing and other effects, in terms of the corporate loan growth as a whole, it was a bit more sluggish and retail was a bit more sluggish.

So as a result of that, in 2026 as a whole, we want to secure growth potential. So on a Y-o-Y basis, we want to have around 5% growth in total for our assets. If we look at our margins, I think that the stance would be is that for 4 quarters consecutively, we will actually be able to see a NIM increase. And for the full year, it was around 2 basis points. So on the margin side, we do think that we have defended ourselves very adequately. And at the Research Institute side, if you look at the forecast that they have set out for this year, we do actually think that the BOK will cut rates at least this year. So that was one of the assumptions. And also in 2026, we think that our margins will, on a Y-o-Y basis, be slightly weaker in terms of the business plan assumptions. However, then thereafter, if you look at the recent side, market rates are being maintained at a high level. The BOK also might cut rates in the second half rather than the first half.

So it's going to be pushed back in terms of the timing. And there's also, I think, that conflicting views about rate cut possibilities going forward. So if market rates were not to fall, then we do believe that on a Y-o-Y basis, that NIM will be maintained at, at least this year's level. And in terms of our profitability and asset rebalancing that we're taking, also increasing our core deposits, if this all comes into play, then we do think that there is a possibility that there could be a slight upside to what we're planning and seeing today.

In terms of our noninterest income, this is an area that we were very focused on. There was a lot of growth that we had achieved. And we do think that this year, the growth will be similar so that on the noninterest income side, we think that we will be able to see around 20% growth. The insurance company being acquired also. On the security side, we have a final license, and we started business in March of 2025. So we do think that we will actually have a higher contribution coming from the nonbank side. So going forward, in 2026, we think that we can actually see an increase at around 18% on the noninterest income side also.

On the SG&A side, in 2025, this was an area in which I do think that we left a bit. However, SG&A, as mentioned before, is also reflecting the insurance acquisition and also the securities firm, we did beef up the IT investments and also increase the headcount there. So on the nonbanking side, there was some concentration of cost increase factors that did take into play. So for this year, again, this is another factor that we will have to take in consideration.

So we do think a dramatic decrease on a Y-o-Y basis will not be possible. However, if we look at the other areas outside of these business areas, we are going to be more prudent in terms of management, whether it be the number of branches, the headcount and also other SG&A-related items. I do think that this year, again, not only for the 2026 business plan, but also according to our mid- to long-term plan. In formulating those plans, we will take a fundamental rereview. So in terms of our mid- to long-term target of reaching a CI ratio of 40%, we will try to look at initiatives to enable us to achieve that and actually execute that in 2026 so that at least in terms of the SG&A side that there could be a decrease on a Y-o-Y basis.

In terms of our credit cost in 2026, in actuality for 2026, the target would be to maintain a normalized CCR of around 40%. And therefore, that would mean that around -- we have decreased the overall credit cost by around KRW 420 billion or around 20%. So this is the business cost that we will execute and also maintain our CI ratio at 40%. And in terms of the outlook, maybe that could be the overall answer to the question. And then I think that you talked about our capital adequacy ratio and capital policy. In '24 and '25, again, in terms of the total dividends, it did increase by a total of 10% year-over-year in terms of the total amount. And so for this year, if you look at the high-growth qualifications that the actual government has laid out, we would be qualified. However, because our dividends are nontaxable, there are more benefits that we give to our shareholders. But with regards to the DPS target, we do want to have 10% targets going forward.

So this is something that we will apply for 2026 and also continuously target going forward. However, that have been said, in terms of the 10% DPS in order to reach that level, if we do a simulation about how we can achieve that, on the net income side, if we increase it by 10%, that itself would enable us to reach a 10% DPS target. So therefore, I think that for the target of having a DPS of 10%, it's not going to be a difficult target to achieve. And therefore, that's why we have set the target at that level. And in addition to that, if we look at our dividend policy, I think that when we talked about this before, we did say that in terms of the quarterly dividend, we would equally distribute it across the first, second, third quarter. And then for the year-end, we would look at our capital ratio and then set the year-end dividend. That's what we did this year. And then for 2026, I think that, that approach will remain the same. As of now, that would be our stance.

And in terms of the year-end dividend, I do think that it will be KRW 1,361 per share. So if we look at the same situation, I think that for Q1, Q2 and Q3, you can expect in general, where the dividends will sit. And then in terms of the year-end dividends for 2026, again, we would look at whether the CET1 ratio is above 13% as our general target is. And assuming that is the situation, we would determine what the year-end dividends are. So in terms of our quarterly dividends and our year-end dividends in terms of the approach that we take, that will not in itself change.

So for this year, if our CET1 ratio does maintain a level that is comfortably above 13%, then based upon that, then from 2027, I do think that we will be able to see equal contributions across the first to fourth quarter or each and every quarter, similar to our competitors. However, rather than splitting it out across all quarters, we don't necessarily believe that, that is the most efficient manner. We do believe it's more important to satisfy the commitments that we had made to the market. And in terms of the CET1 ratio that we have, being able to satisfy the needs that our customers have in light of where our capital ratios sit. So up until 2026, we're going to maintain the stance that we currently have.

And we'll move on to the next question from KIS, Baek Doosan.

I am Baek Doosan from KIS, and I also have a question regarding dividends. You talked about the nontaxable dividends and the relevant resources amount to KRW 6.3 trillion. Last year, we brought in around KRW 3 trillion. So I would like to know how the size of the resources increased.

Thank you for the question. I'm Kwak Seong-Min, CFO. And let me answer your question. In 2025, in our corporate value up plan at the shareholder meeting in 2025 March, we transferred KRW 3 trillion of capital surplus to retained earnings. So that is all publicly available information. But lesser known is that is another aspect of the shareholder meeting agenda. So 4 years ago, in 2021, we transferred KRW 4 trillion from capital surplus to retained earnings. And the reason we did that back then was because in 2019, the financial group was relaunched. And according to the IFRS accounting standards, we relaunched the financial group with share exchange. And so the separate and consolidated financial statements need to be integrated. And unlike the competitors, the capital structure of the separate and consolidated financial structure was there. But in reality, there was no reason for it to be different. It was only because of accounting standards. And as you know, the resources will come from the separate financial statements according to commercial code, not the consolidated financial statements.

So in conclusion, so we had an unreasonable situation at that time where we needed to normalize the situation. So in 2021, KRW 4 trillion of capital surplus was transferred to retained earnings, and then we increased the payable resources. And then from 3 years ago, since we have been making efforts to increase the dividends. So out of the KRW 4 trillion, KRW 700 billion we already used. So we have about KRW 3.3 trillion as outstanding balance. So to make sure we satisfy all of the legal requirements and the tax requirements to ensure that we do not have any issues that pop up in the future, this we received legal interpretation and tax interpretation that we can use this resource for nontaxable dividends. So out of the KRW 4 trillion, we still have KRW 3.3 trillion.

And then in 2025 March, we put in KRW 3 trillion. So total KRW 6.3 trillion is the available resources. So after KRW 5,580 dividends, we believe that around KRW 5.7 trillion will remain. In 2026, we will be using the KRW 5.7 trillion for the quarterly dividends and all of the dividends. So it will all be nontaxable. So in 2025, nontaxable dividend was only for the year-end dividend. So the impact would have been relatively small. But from 2026 onwards, the quarterly dividend will also be nontaxable. So the actual impact will increase in 2026.

Yes. The next question will come from Daishin Securities, Park Hye-jin.

This is Park Hye-jin from Daishin Securities. And I would like to ask about the KRW 189 billion nonoperating loss that you have, if you could break it down for this. And also in your corporate enhancement -- value enhancement plan, I do think that the nonbank side contribution is around 20%. What do you look about -- how do you see the outlook going forward? Because it does seem to be that on the brokerage side that there is a more favorable environment. So maybe in terms of your mid- to long-term plan, there could be an acceleration of the realization of that. So in general, if you look at the overall business outlook, including your nonbanking business, if you could discuss that, that would be appreciated.

Yes. Thank you for your question. If you give us some time, we will answer.

Yes, talking about the nonoperating income side and the overall line item there. So for the competitors, I do think that this was mentioned already. With regards to the bad bank, there was a KRW 50 billion contribution. And in addition to that, on the LTV fine, we have around KRW 52 billion, another minus or deducting side there. So in terms of the KRW 52 billion, this is fully provisioned against, and we do set aside at other provisions. So it's fully provisioned against already. And our competitors, we understand there could be various legal views. We didn't do a partial recognition. We fully provisioned. So I think that if we do take in consideration what their view would be in terms of the fines on this side and also according to how the litigation plays out, we actually believe that there could be a reversal. So we do think that there's a possibility that we would be able to see some upside from that taking place.

And in addition to that, on the security side, to talk about any rights offerings, I do think that, that was something that was mentioned, and I did see the press reports. So if you look at the situation right now, the overall total capital base is around KRW 2.2 trillion. And so for the securities side, according -- different from the insurance business strategy, we do want to grow this business ourselves. So over the mid- to long term, to be a mega IB and also to be mega securities, we do think that it's inevitable that there will have to be capital increases that take place. For the license periods and taking all things into consideration, we do think that it is inevitable. So this is something that is under review. But for the company as a whole, we are going to look at the mid- to long-term capital management plan and then gradually implement any increases that are necessary.

So over the mid- to long term to become a mega IB, we do understand that we will have to make more contributions. So in terms of the application, in terms of the licensing itself, this is all something that takes time. So again, it will be a gradual process. And according to that process, we will take gradual action. So we don't have any specific size or timing that we're thinking about as of now. But in terms of becoming a mega IB, according to that schedule, it is under review as of now.

So on the securities side, if there is a capital increase, Then, of course, in light with the support for productive financing and also in terms of the future co-growth program, we do want to have more support for venture capital. So even if we do make capital increases; on the security side, it will not have an impact on our CET1 ratio. And we also believe that we have more room to put in more capital versus our competitors. There's no legal restrictions. So through doing so, we will try to pursue the top line growth of the securities firms so that we can have a contribution on our top line from the nonbank side. So over the midterm horizon, we will set a business plan forth to this aim and try to achieve it.

We will move on to the next question from NH Investment Securities, Jung Jun-Sup.

I am Jung Jun-Sup Jun from NH Securities. I have a question regarding CET1 ratio, and it improved significantly this year. 2026, you are working to achieve 13% ahead of schedule. So you talked about the shareholder buyback, and I think it's up to June. So I think you are looking to conduct the share buyback program in the second half. When do you think that will actually happen? When do you think you can actually achieve 13%? If you have the guidance for CET1 in the second half, I think I'll get a better idea of the size of the share buyback. And can you also give us more color on the different strategies that you have? For example, you'll be disposing the marketable securities? Or are there plans to have a paid-in capital increase and so on?

Thank you for the question. And just give us 1 minute while we prepare the answer.

I am CFO, Kwak Seong-Min. Regarding the CET1 ratio, we mentioned earlier today, as of 2025 year-end, it was 12.9%. Those are preliminary numbers. So we are close to 13% at the moment. So in 2026, we feel that like mentioned earlier, I think I was a little bit more cautious, but we do believe we can comfortably achieve 13% in 2026. In terms of the timing, probably we will be able to achieve that in the first half, and our financial business plan is based on that assumption. The government is improving the overall institutional framework to encourage productive finance. And I think that can contribute to our own efforts as well. On top of that, we have internal efforts that we are making. We are developing those plans for 2026. So it's a little bit too early to share that with you today, but we are currently developing the plans.

For example, you have the idle real estate disposal that was included in the corporate value enhancement plan, but we are making multifaceted efforts to ensure that we can reach early 13%. And if we progress as expected, we are quite confident that we can reach and go over 13% in the first half. That is why, like you said, the KRW 200 billion that we announced is a 4-month trust contract. So it's from February to June, the purchasing will happen during that period. And by the end of June, we plan to cancel those shares. And the details are in the disclosure. Then if -- we mentioned that if we expect CET1 to go over 13%, we can review additional shareholder buyback in the second half. So I think that is quite a realistic plan that we have. So in Q1 or in first half earnings call, I think we may be able to share some positive news regarding that topic.

So the next question will be from HSBC, Won Jaewoong.

Thank you for your strong performance amidst a challenging environment. And with regards to TSR, also, it does seem that you have given a lot of thought about this and have come up with a detailed plan. So thank you for that. However, in terms of the news reports, because it's already out and also because there's a question, this is a question that inevitably, I think I have to ask. If you look at the news reports; on the security side, right now, there is talk about a KRW 1 trillion capital increase each and every year so that you would be able to fill in your capital base. So in terms of the CET1 ratio, you said that it would not have an impact there. However, if you do make a KRW 1 trillion contribution in terms of the CET1 ratio targets that you have, is it possible to do so without impacting your CET1? So how should we look at these 2 numbers because I think that we would need a bit more comfort about this issue?

And second, I think that if you look at ABL, if you look at their core capital ratio, maybe it's around 30% or 40% right now. And in the case of Tongyang also, it's being maintained at around 53%. So for Tier 1, if this is something that is introduced, then I do think that you will actually have to take more additional action. So this also would it not have an impact on your CET1 ratio? If you could elaborate a bit more about that, that would also be appreciated.

Yes, thank you very much. And while we prepare, if you could just wait for a minute.

Yes. On the security side and the capital increases, I do understand that there was an article by a press outlet. So we did talk to them about that. But I do think that it was over exaggerated somewhat. So in terms of the article in itself, I think that you should just understand it's a news article. And in terms of our organic growth, we want to grow our overall securities firm. And according to that strategy, on a step-by-step basis, of course, there will be a capital increase. In terms of that, that's the principle that we have. So from this year, whether it will start this year or whether it will start next year is something that we're still reviewing.

Once we have made a determination and according to the size, then it could be subject to disclosure, maybe not. But we will fluidly communicate with the market, so the market can recognize the situation and be aware of it. And as mentioned before, right now, it's not only being designated as a mega IB because, of course, that would be something that we would be pursuing under the process that we want. There is a preliminary license that is required. There's a 2-year grace period.

So as mentioned before, it's KRW 1.2 trillion. So even if it goes to KRW 2 trillion, KRW 3 trillion, going step by step, there are time requirements that you need to fulfill. So according to that and according to the government's overall rules, we need to follow that process. So it's not a short-term situation. It's more of a midterm type of situation and the capital increases cannot help but take place in a gradual manner because of that. And therefore, once the capital increases are decided, then through our IR department or through other outlets, we will try to communicate as much as possible. And I did mention that it would not hit the CET1 ratio.

And what that's making is that the action in itself does not have an impact on our CET1 ratio at the holding company level. However, if the securities company does engage in S&T businesses or investment banking businesses, as they utilize that capital, of course, there will be asset growth that will take place. And because the asset growth would increase our RWA, we do think that the impact of that from the capital increase that they do enjoy, we do think that they would be able to engage in activities that would offset the increase in the RWA from the profitability that they enjoy from doing so. So at the end of the day, we do think that there would not be an impact on the CET1 ratio in itself. And I think that if they are able to generate an ROE, then that should not be a situation that would be negative at the group level.

And on the insurance side, it's not the K-ICS ratio, but there is going to be a core capital ratio or maybe Tier 1 ratio that's going to be introduced. In terms of the timing of that, it's not '26, but it's 2027. And at the government level also, they are trying to look into avenues that giving maybe a brief period until 2030, so that it would not impact the insurance company's operations. So because it's not a disclosure factor yet, I can't go into the details because the K-ICS ratio in itself is official while other numbers are not. But I think that internally, if you look at the situation, we are preparing for this.

And at the insurance company level also, of course, from 2027, they will be managing their core capital ratio. So for the 50% ratio in itself, we do think that as of now, as of the end of '25, if we do our own calculations, we actually are comfortably above that in our insurance businesses. So in terms of this core capital ratio, as of now, I don't think that there would be any request that we would have to make for an exemption or a delay. Even with what we have right now in terms of the operations, both companies, we do believe we'll be able to maintain a ratio that would be above the required amount.

Thank you for that. We do not have any further questions at the moment. For this quarter, we have also received questions on our website, especially regarding shareholder return. But I think our presentation today regarding our corporate value enhancement plan and the Q&A session have supplied sufficient information on that topic. So we will not go through the individual questions right now. If there are no further questions, we will end the Q&A session here.

This will conclude the annual earnings call for 2025 of Woori Financial Group. Thank you for your time today.

Good afternoon. I am Han Hong Sung, Head of IR at Woori Financial Group. Let me first begin by thanking everyone for taking time to participate in this earnings call for Woori Financial Group.

On today's call, we have the group CFO, Lee Sung-Wook; Group CDO, Oak Il-Jin; and the group's Risk Management division, Senior General Manager, Park Jang-Geun on the call. On today's call, the group CFO, Lee Sung-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 Woori Financial Group's Earnings for the Third Quarter of 2025.

Good afternoon. This is Lee Sung-Wook, the CFO of Woori 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 3 of the presentation material that has been disclosed on our website.

First, let me discuss net income. Woori Financial Group's year-to-date net income as of the third quarter end was up by 5.1% to KRW 2,796.4 billion, which was a Y-o-Y increase, as mentioned before, of 5.1%. Net income in the third quarter alone was KRW 1,244.4 billion, representing a significant increase of KRW 300 billion 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 noninterest 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 Tongyang 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 KRW 550 billion, while the decline in the CET ratio was only approximately 5 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 nonbank 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 Q-o-Q and [ 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 won 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 of plans based on its CET1 ratio.

For Woori 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 3 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 KRW 3.9 trillion deal through CIB joint underwriting. And in Wealth Management in just 3 months of acquiring the insurance business, Tongyang Life and ABL's percentage of sales from the Bancassurance channel has grown from 9.8% to 22.5%.

Moving forward by balancing growth between bank and nonbank business lines and ranking up synergies across group companies, Woori Financial Group will further strengthen its competitiveness as a comprehensive financial services group and create a business for sustainable growth.

Next, let me dive into more details about earnings by business area, and please turn to Page 4. First, let me go over the net operating revenue and NIM. The group's third quarter year-to-date net operating revenue totaled KRW 8,173.4 billion, up by 2.3% Y-o-Y. And in the third quarter alone, it was KRW 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 noninterest income, which has further solidified the group's revenue base.

In addition, if we look at Woori Bank's third quarter NIM, it was 1.48%, which is 3 basis points higher Q-o-Q and 8 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 where -- which consistently improved our profitability. In the fourth quarter, even if the base cut is -- 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 book. As of the third quarter end, the bank's loans totaled KRW 331 trillion, slightly increasing versus the end of June. On the corporate loan side, growth strategy is focused on new growth areas and high-quality corporates, which led to the loan book to remain flat quarter-over-quarter at KRW 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% (sic) [ 1.5% ] quarter-over-quarter to KRW 1.5 trillion (sic) [ KRW 150 trillion ].

Looking ahead, Woori 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 noninterest income. As of the third quarter, the group's cumulative noninterest income amounted to KRW 1,441.5 billion, up 4.6% year-on-year. And on a quarterly basis, it rose 5.3% from the previous quarter to KRW 555.2 billion. Despite a decline in foreign exchange-related gains due to the rise in exchange rates, the group continued to post solid growth in noninterest income, supported by robust fee income and the inclusion of the insurance subsidiaries performance starting this quarter. In particular, core fee income, driven by improvements across all business lines of both the banking and nonbanking segments, including the wealth management business, credit card and lease, was up 7.9% versus previous quarter to KRW 563.7 billion, reaching a record quarterly high.

Going forward, Woori 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 noninterest income and to achieve balanced growth between banking and nonbanking 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 KRW 3,690.3 billion while third quarter SG&A expense stood at KRW 1,211.2 billion, a slight increase of 3.2% from the previous quarter. Accordingly, the group's cost-to-income ratio was 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 cost and asset quality. As of the third quarter of 2025, the group's cumulative credit cost amounted to KRW 1,517.6 billion. Third quarter credit costs totaled KRW 574.3 billion, an increase of 13.1% from the previous quarter. This amount, including KRW 98 billion in provisions associated with completion-guarantee projects booked as part of the group's proactive risk management efforts from the previous quarter, incorporates approximately KRW 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 uncertainties, such as exchange rate volatility, trade negotiations and concerns over a slowdown in the real economy, the group, through active NPL sales and write-offs and proactive risk management in the nonbanking 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, Woori 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 6. As mentioned earlier, as of the end of September 2025, the group's common equity Tier 1 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.

Woori 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, we'll 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 Woori Financial Group at its meeting held on October 24, approved a quarterly cash dividend of KRW 200 per share with a record date set for November 10, as previously announced.

In this quarter, Woori 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 towards 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 the corporate value of initiative, Woori 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 Woori 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. So 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 profit increase is 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 1, we did the PPA. And as a result of that, there was a KRW 580 billion gain that we had recognized. And of course, for the past -- for the next 1 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 KRW 25 billion that was recognized. So at the end of the day, the bargain gain, in total, was around KRW 556 billion.

So in addition to that, on the -- there was also a KRW 33 billion negative impact that was also reflect. And in the third quarter, for the completion-guarantee trust, there was also KRW 98 billion that we have recognized in terms of provisioning. So as a result of that, in total for this year, there was around KRW 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 KRW 54 billion. And recently -- there was some press reports about the situation. But with regards to KIKO there was a litigation in 2028, and the final results have came out, and there were some areas in which we lost. So there was a KRW 32 billion additional provision that we have set aside for that purpose.

In addition, on the nonoperating 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 KRW 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 business and others was on a nonoperating basis. So if we look at the net income basis, at the end of the day, there was one-off factors of around KRW 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 do 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 before we went to the Q&A.

[Operator Instructions] So for the first question will be from NH Securities. It will be Jung Jun-Sup.

There are 2 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 2 separate entities, we believe that having it together and then also making sure that it would be a full subsidiary 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. 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 Tongyang Life shareholders, they're also very interested in that also. So as of now, we did the -- and completed the acquisition as of July 1 for Tongyang 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 Tongyang Life, making it a 100% subsidiary or merging the 2 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 a 100% subsidiary or whether we will merge the 2, if there's any major decisions that are made, of course, we will make sure to disclose to 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&A 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 noninterest income side.

So with regards to the nonbank 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-weighted asset 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 directors. So by doing this and doing -- 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.

The next question is by Baek Doosan from Korea Investment & Securities.

Yes. I am Baek Doosan from Korea Investment & Securities. I also have 2 questions. The very first question has to do with the completion-guarantee project. I can see that it has been largely resolved. But in addition to that, I can see that there were still quite hefty preemptive provisioning. So taking that into consideration, I'd like to understand if there's any guidance in terms of the improvement going forward in terms of credit cost?

And second, the Future Co-Growth Project that was launched and with regard to the funding, the plans that you have for key industries, this project in itself is a massive project. And therefore, in terms of capital ratio or noninterest income or corporate loans, I think that it will have an impact on all of these numbers. So we'd like to understand what are the plans? What's the forecast you have going forward?

Yes. Thank you very much for the question. So please bear with us for just a moment as we get ready to answer your question.

I am Park Jang-Geun, Senior General Manager from the Risk Management division. First, let me talk about credit cost. The third quarter credit cost increased by 3 bps to 52 bps. And that was already mentioned. In second quarter, KRW 86 billion for the trust and this quarter, KRW 98 billion, that was the provisioning in terms of managing our assets.

And due to the sluggish economy in the sluggish construction sector, with regard to collateral loans at the banking sector, that was a total of KRW 54 billion of provisioning and one-off items amounted to KRW 152 billion. And therefore, the coverage rate also increased to 130%. So if we exclude these one-off items, the credit cost ratio is 42 bp.

However, considering that there has been a delay in the rates -- the rate cuts, we believe that the cost -- the normalized credit cost will still be quite high. But we -- as mentioned, the completion-guarantee projects has been mostly resolved. So therefore, there wouldn't be any significant provisioning to follow going forward.

And with regard to prime assets, especially in the banks, if we look at the corporate loans, we've been seeing a downturn in terms of new defaults in terms of corporate loans. Ever since 2024, we believe that there will be -- the impact of rate cuts is something that we are continuously monitoring at the Risk Management division. And in the future, with the economic boost, stimulus package with the government and with regards to the rate policy going forward, we believe that in the fourth quarter, credit costs will stabilize. So that is all for me.

Yes, this is the CFO, Lee Sung-Wook. And so with regards to the Future Co-Growth Projects, this is a very big project. I do think that with regards to capital and also in terms of the capital ratios, there may be some concern about such a situation.

But with regards to this, maybe just elaborating a bit will help you out. So from us, we do want to transfer into providing more productive financing. So as of the end of September, we announced our future core growth project, and across the group for the next 5 years, there will be around KRW 80 trillion that we will be supplying and supporting. And so according to this project right now, in terms of the asset growth and the impact of this, this was all taken into consideration before we made the announcement to the market.

So for the KRW 80 trillion across the 5 years, if you look at the impact on our risk-weighted assets, it will be around half. And on this, of course, how we can offset it against the capital ratio is probably an issue that you will be focusing on. And this year, if you look at the overall asset rebalancing efforts that we have made for the next 5 years, due to that, this is an effort that we will continue for the next 5 years.

And in addition to that, because regulations are being eased at the financial authority side. And in addition to that, we also have a CET1 ratio target of 13%. So the trends that we see in our capital ratio was all taken into consideration before we formulated this plan.

In addition to that, on the corporate loan side, we -- during the financial crisis, we have accumulated a loss. There's a very strong underwriting standards and price. So as a result of that, we do think that we can manage our capital ratio properly and still continue growth in this area. So within the year, I think that if you look at the capital ratio trends that we have seen, there has been an 80 basis point increase versus the end of last year. And this is even after the acquisition of the insurance arm. So we do think that we do have a credible trend that we are creating, and this is something that we have fully discussed with the BOD, and we will come up with our business plan accordingly.

In addition, going forward, we will continue to also manage our loan balance through asset rebalancing and also manage the retail balancing side. So we're also planning to make other efforts. So for the shareholder value programs, this is something that we will continue to implement without issue and continue to provide total -- better total shareholder return.

The next question is -- will be by Kim Do Ha from Hanwha Investment & Securities.

I have a question with regard to the acquisition. So when we had the acquisition ahead of us, you talked about the purchase -- market purchase gains is going to be utilized for a total shareholder return. And I believe that within a limit of 10% -- if it's within that, I've heard that the gains would be utilized for shareholder returns. So right now, we have around KRW 580 billion or so of gains and I would like to understand, would this be included in the shareholder return plan of this year? And I understand that the TSR will be maintained as such because rather than providing a dividend at year-end, after November, it could be in the treasury stock related plans that you may have? Or would it be something that would be utilizing next year? So if you can give us some more information on that, that would be great.

And the second question is, around the world, these days, we've been witnessing security issues, hacking issues. So with regard to that, are there any investments being made right now to prevent or any cybersecurity-related prevention methods or plans that you have in place.

Yes. Thank you very much for those questions. Please wait before we answer your questions.

Yes. With regard to the bargain purchase gains, it's a total of KRW 580 billion and it's included in the net income. So in the first half, IR last year, based on our corporate value plan, in terms of our TSR, we've mentioned that we're putting our best efforts to have that included. And with regard to the insurance acquisition, the impact it has on the capital ratio, it was quite limited and minimized.

But with regard to TSR, year-end, we have -- we want to see the CET1 and the overall financial volatility, and the TSR will be decided as such. And in the market, there are expectations, and we will try to cater to the expectations as much as possible, and we'll do our best to make sure that we can cater to those expectations. Thank you.

I am Oak Il-Jin, CDO. So recently, there were major security-related issues at telcos and financial firms. And that's why there was a company to review across all subsidiaries, and there were no issues identified. Recently, there was, let's say, multi-authentication and security patches, terminal-related security issues. These were the shortcomings and we were able to understand that we were following all of the internal policy when it comes to security.

And in addition to that, with regard to personal information and IT security, let's say, accidents. To prevent all this, what we've done was, in August until year-end, with security firm and the company, we will make sure to understand whether there are any loopholes. And for the recent 3 years, the government's investment into security is 11% when it comes to total IT investments. And it's 8.8% for financial funds and insurance firms. In the case of the U.S., it's 10.5% and it's higher than that at 11%. So with regard to information security investments, we will continue on to increase that portion in our investments.

Yes, the next question is from HSBC, Won Jaewoong.

Amid a challenging environment, thank you for your strong performance. And there are 2 questions that I would like to ask you. The first question is with regards to an early retirement. So if we look at last year, we actually reflected into the first quarter of this year. So for this year's early retirement, would it be fourth quarter or would it be first quarter of next year? So if there any plans, if you could share that with us, that would be appreciated. So in terms of the CET1 assumptions or in terms of the overall profitability, it would be easier to assume or make the estimates. So if you could share the plans on this, that would be appreciated.

And second, with regards to portfolio diversification, you have successfully acquired 2 insurance companies. And I do believe that you will properly manage this business going forward. But as far as I understand, the 2 insurance companies, after being acquired, next year in terms of the profit contribution, it will be 1% of the ROE. So that means that the overall contribution would be about KRW 300 billion.

But up into the third quarter, if you look at the net income, right now, it has been around KRW 150 billion. So for ABL, I don't know what the third quarter numbers is. So I'm not 100% accurate, but I do think that it would be around this level. So do you think that it could be larger next year?

And in terms of the bargain gains this year, it was around KRW 550 billion. So for next year, in terms of these gains, how much contribution do you think will actually be made on the net income line? So your thoughts on this topic would be appreciated.

Yes, thank you for your questions. So maybe if you give us a few minutes, we'll answer your question.

First, in terms of early retirement, in the case of last year, we actually did it in the first quarter of this year. And the reason why we did it that way is because it's based upon the agreement with the labor union. So therefore, there could be some difference of opinions. And as a result of that, that is why it was -- it took place in the first quarter. So right now, if you look at the discussions with the labor union that are ongoing right now, I think that it is something that we will have to see in terms of how it happens going forward. So it could be in December, it could be in January. But I think that because it needs an agreement, we will have to wait and see how it actually plays out.

And with regards to insurance acquisition, as you have just mentioned, in 2025, if you look at most of the companies, their profits were very large. And then this year, also, there are some that are showing strong performance. But in terms of the K-ICS ratio or other product structures, I do think that with regards to the assumptions, there are some changes that are taking place.

So this year, as we have continuously talked and mentioned, after the acquisition of the insurance business, the first thing that we have actually done is that we are doing a business investigation to look at how we can fundamentally change the competitiveness of the business in itself and it changes accordingly.

So in 2026, we do think that, of course, there will be some profit contribution from the insurance side. But in terms of the K-ICS ratio, but on the capital side, we think that up and strengthening that up will be our top priority to make sure that the burden on the group from that would be minimal as small as possible.

And also, we want to stabilize the organization. So in 2024, if you look at right now, there was around KRW 400 billion. And in terms of the percentage, it would be around KRW 300 billion in contribution that we would have seen. But for next year, we think that it would be difficult to reach that level in the net income side.

So right now, in terms of priority, it will [ B2B ] the fixed ratio and the other sides. And then thereafter, I think that we could actually look at how we can expand our business going forward. So that have been said, so the ROE, 1%, is something that was based upon 2024. So though we will not go to that ratio, we do think that there will be a contribution that we will be able to see in full fledged manner from next year. Thank you.

Next question will be by Jeong Tae Joon of Mirae Investment Securities.

Yes. I'm Jeong Tae Joon from Mirae Asset. I also have a question with regard to the insurance arm. So with regard to the profitability and as well as the interest cost and the securities, I can see that this has been reflected all separately in separate items. But in terms of net income and profitability, I'd like to understand what was the contribution in total this quarter?

And it's similar to the previous question, where the bargain purchase gain was quite significant, more than expected. So then based on consolidation, it means that it's not as high based on consolidation. And that in terms of the contribution, it may be a bit difficult to book in it's significant absolute terms. But of course, I do know that the management diagnosis is still underway. But I think that if you can please give us a ballpark figure, it would help us better our understanding.

Yes. Thank you for the question. Please wait. We will soon answer your question.

Yes. So with regard to the income from the insurance arm, so we have investment income and insurance income. So all in all, if we combine the 2 companies, it is around KRW 70 billion to KRW 80 billion. And in terms of net income, it's around KRW 50 billion in terms of the contribution from these 2 firms.

And in the future, with regard to adjustments from consolidation, that's how it would be booked. So in terms of insurance accounting, as was already mentioned, after the acquisition, within the insurance, there's an accounting that would follow, and there's also an accounting for the holding company because we went through the PPA process. So based on PPA, it will be a dual accounting, a dual booking. So in the future, we're going to run a simulation. And based on that, of course, it will all differ by year, but we believe that it will be around KRW 30 billion to KRW 40 billion annually, a positive, a plus KRW 30 billion to KRW 40 billion. So there could be some volatility or variances throughout the years. But based on our long-term simulation, we believe that there will be a plus KRW 30 billion to KRW 40 billion of contribution that can be booked.

Yes, next question. In terms of the next question will be from Daishin Securities, Park Hye-jin.

Yes. And the question that I would like to ask you is that with regards to the [ bargain ] gains, I do think that there cannot help be a lot of questions. So with regards to the preliminary announcement of the PPA, and you said that for the next 1 year, there could be adjustments. So related to that, in terms of the adjustments that could take place, what would that actually be? So if there is an adjustment to that, I would like to understand what it would be in more detail.

And the second would be with regards to the margin. So because of the asset rebalancing, I do think that the margins are being well defended. But with regards to the joint growth, you did say that you would continue such a situation. So for next year, in terms of margin, what is the outlook? And also lastly, for the securities side, also, I do think that there is probably some capital gains that you would have to actually conduct. So for those capital increases, what would be the outlook of that?

Yes. Thank you very much. There are 3 questions that you have provided, and maybe we can answer your questions. Yes. With regards to the bargain gains, I do think that this is an accounting issue. So during the next 1 year, there is the room for adjustments to take place. So right now, for the first 3 years, there will be some refining. And then after that, that will be done. So if there -- we don't think that there will be a lot of fluctuation. But if there is any, then the main area is probably going to be and what we estimate, it would be with regards to some of the fines. So for example, that could be one of the items. But this accounting to the accounting standards, there is some that we have already reflected because we have made some assumptions there. So if that realizes, then we do think that, that would lead to some changes. But we don't think that there will be any big changes in itself.

And secondly, with regards to the securities, this year, after being included into the group on August 1 and what we had actually invested into was manpower and also IT. And as a result of that, the SG&A had actually increased by KRW 50 billion. So in actuality, if you look at the net income as a result of that on a Y-o-Y basis, there was a slight increase, but not very significant.

So this year, we do think that when we talk about productive financing, of course, we do think that securities arm will have a big role to play. And from next year in terms of the net income contribution also, we think that it will significantly contribute at a much higher level. So right now setting our targets, but we do think that on a Y-o-Y basis, it will be at a much higher level than what is contributing this year. So from next year, we do think that the overall growth level that we will be enjoying will be much larger.

And then on the NIM, I think that for this year, there was a 3 basis point increase this year. And the biggest influence there was the asset rebalancing that we have done, some of the asset growth was more prudent. And in addition to that, the CET1 ratio was another area that we put a lot of attention to. So as a result of that, on the funding side, I think that we have a more favorable funding structure, and the funding cost also has gone down, which has led to the improvement in our net interest margin.

So going forward, if you look at the NIM outlook, I think that, of course, we do believe that the benchmark rate will fall going forward. But for the NIM, if you look at the long-term rates, it's already something that is already priced into the market. So in the fourth quarter or whatever happens thereafter, even if rates are further cut, we don't think that, that will further decline the long-term rates. But this year was 1.45%. And then 2026, even if there are further rate cuts, we don't believe that the impact will be very large. And in general, we do believe that around 1.4% is something that we can maintain for NIM for the time being.

Yes. Thank you. I believe that there are no more questions. So let us now respond to the questions that were posted on the website this quarter. From the 13th to the 24th of October, we received questions via our website. And in addition to our performance, AI, TSR, there are many questions across a number of domains. And we will exclude the redundant questions, but -- and 2 questions that were not addressed as of yet. One has to do with the total return on the dividend-related policy and also with regard to AI services.

So with regard to the nontaxable dividend, the CFO will respond, and the CDO will respond to the second question.

Yes. So first, with regard to the nontaxable dividends and during the AGR in March, we've talked about the KRW 3 trillion that has been written back. So from the '25 dividend or retained earnings, that's when we will start to provide the dividend. So based on our corporate value of plan, we will engage in buybacks, cancellations and actively engage in shareholder return.

So within -- in 2025, improving the CET1 by 80 bps to improve the TSR was the planned action taken. So we have continued on to engage in buyback and cancellation of treasury stock, and we have put in our best efforts to enhance shareholder return. And going forward, we will continue on to improve the CET1 and engage in our corporate value of plan and putting our best efforts to maximize shareholder return. Thank you.

I'm Oak Il-Jin, CDO. So with regard to the AI services, Woori Financial Group, for our customer and for our employees, for the first time we've launched many services. And already, we -- based on Gen AI, we've actually launched our deposit-related products. And right now, we do have mortgage loans. And also, we have -- we will be expanding our AI advisory when it comes to real estate-related plans and loans. And at last year-end, we launched Woori TPT. And we actually see an accuracy rate of 90% plus for even complex jobs and work.

And starting from the second half of this year, our focus, particularly would be on AI agent. So we want to enhance the productivity of our employees by utilizing the AI agent. Internally, when it comes to corporate loans and RM support, especially 5 domains that we have pinpointed in order to introduce the AI agent. It has been already been laid out.

And starting from early next year and in the first half of next year, we are going to particularly engage in Phase 1 for work that can apply this immediately. And then moving forward, we're going to engage in a number of innovative product launches when it comes to Gen AI, especially for productive finance, especially for corporate loans, especially auto underwriting and in terms of reducing default amongst, let's say, high default rate borrowers, we are going to make sure that we can provide accurate and timely due diligence and underwriting utilizing AI. So basically, it's about utilizing AI agents to enhance productivity, and we're going to reengineer our work process so that we can make full use of this technology. Thank you.

Yes, I am the CFO. And with regard to the overall earnings, I would like to share with you the prospects, especially for 2026. But before that, in 2025, what we've done in terms of our business portfolio is the workforce IP system for the securities arm, acquisition of the insurance arm to complete our portfolio.

So in terms of overall completeness of our business, we do have the nonbanking, including asset trust where it was about focusing on preemptive provisioning, completing all that. And then also, we have been able to significantly improve CET1 in 2025. So with regard to future growth and to enhance corporate value, I believe that this was a pivotal year in terms of making sure of putting in place the foundation. And we'll make sure to manage our asset quality in the remainder of the year.

In terms of 2026 in the case of the nonbanking sector, as was already mentioned, the insurance acquisition impact will kick in, in earnest. In terms of the security side, we'll be seeing increased sales from that side. In the case of the existing nonbanking, it would be about preemptive risk management, which will lead to better performance and earnings.

So in terms of the nonbanking operations, we will -- and we expect significant improvement in performance. And in terms of banking sector, this year, we've been getting an aggressive asset rebalancing, and a preemptive risk management foundation has been in place, which will enable a stable revenue.

And in terms of the productive finance, we'll be expanding upon that to actively grow upon that. But when it comes to capital ratio as well as asset quality ratio, we're going to make sure that we maintain this stably, so that we achieve the ratio numbers. And with regard to our value of plan and our shareholder return plan, we'll do our best to make sure that we implement the plans that have been laid out. Thank you very much.

Yes. Thank you. And this brings us to the end of Woori Financial Group's Third Quarter of 2025 Earnings Presentation. If you do have any further questions, please call the IR department, and we'll make sure to entertain your questions. Thank you very much.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]

Good afternoon. I am Hong Sung Han, Head of IR at Woori Financial Group. Let me first begin by thanking everyone for taking time to participate in this earnings conference call for Woori Financial Group. On today's call, we have the group CFO, Sung-Wook Lee; Group CDO, Il-Jin Oak and Group CRO, Jang-Geun Park as participants. On today's call, the group CFO, Sung-Wook Lee Wu, 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 Woori Financial Group's earnings for the first half of 2025.

Good afternoon. This is Sung-Wook Lee, the CFO of Woori Financial Group. Let me go over the first half performance for 2025. Please turn to Page 3 of the presentation material that has been disclosed on our website. First, let me discuss net income. For the first half of 2025, Woori Financial Group's net income was KRW 1,551.3 billion, representing a Y-o-Y decrease of 11.6%. When excluding the one-off expenses related to the early retirement program conducted at the beginning of the year and preemptive provisions for a completion guarantee of Trust company, net income is similar to last year.

In the first half, conservative loan loss management to address the slowdown in the economy and SG&A to expand the nonbank portfolio of the group did increase costs, but the net operating revenue, which shows the profit generation capability of the group, still maintain steady growth amid a challenging business environment. Bottom line growth based on asset rebalancing and better margins driven by funding optimization amid a falling market rate resulted in stable interest income while core fee income from the Wealth Management business and an increase in noninterest income, derived on capital market activities generated the top line performance.

Second quarter net income was KRW 934.6 billion, which is KRW 300 billion higher than the first quarter. That did not beat market expectations. Next, let me discuss how we achieve the group's capital target -- capital ratio target. As of June 2025, the group's preliminary CET1 ratio is 12.76%, showing around 60 basis points increased from the end of last year and exceeding 12.5% for the first time in the history of the group. Amid a uncertain financial backdrop, the group was able to generate total profits, build an optimal portfolio based on RWA prudently managed asset sensitive to the FX rate and conduct performance assessments focused on RoRWA. These company-wide initiatives to improve the capital ratio has led to the significant improvement. The exchange rate also contributed. But even when excluding this factor, the CET1 ratio is still well above 12.5%.

As we have mentioned many times, Woori Financial Group has earmarked 2025 as the year of capital ratio improvement and has been focusing all group efforts to achieve the CET1 ratio target. Based on the C2 ratio of 12.76% this quarter, the group is planning to outperform the year-end target of achieving a CET1 ratio of 12.5% and will be accelerating efforts to achieve the market expectation of 13%.

Next, let me discuss our efforts to expand our business portfolio. One year after the group signed the SPA for Tongyang Life and ABL Life in August last year. As of July 1, we have included the 2 companies as affiliates of the Woori Financial Group. We are currently in the process of reevaluating all assets and liabilities held by the 2 companies at fair value. Once this is completed, we will finalize the financial impact of the acquisitions.

Against a rate cycle environment, we understand the market is concerned about the capital adequacy and Insurance business outlook. However, we are planning to focus on sound capital adequacy management by maintaining a K-ICS ratio that comfortably exceeds the regulatory guideline and on profitable management focusing on financial stability to put priority on securing stable business fundamentals for both companies and ensuring the soft land as part of the group.

For the securities arm, we continue to strengthen our competitiveness by acquiring the final approval for the investment trading business and launching the MTS platform. In addition, we will be fully utilizing the merchant bank license and bank corporate customer network to engage our full-fledged marketing activities. Woori Financial, with the acquisition of the Insurance and Securities businesses have completed its lineup as a comprehensive financial services group. We will strengthen the core competencies of each subsidiary and generate full synergies across the group to upgrade the fundamentals and actively satisfy the expectations of the market.

Next, let me delve into more detail about earnings by area. Please turn to Page 4. First, let me go over the operating revenue and NIM. The group first half 2025 net operating revenue was KRW 5400.1 billion, up by 2.3% Y-o-Y. In the first quarter, it was KRW 2,789.2 billion, up by 6.8% quarter-over-quarter. The group faced affects in Korea and abroad, including [indiscernible] tariffs and a challenging business environment due to concerns about a slowdown in the economy. But it is still able to achieve profitable growth and defend its margin to generate sound interest income and improved noninterest income mostly core fee income to achieve stable top line growth.

The bank's second quarter NIM was 1.45% and the group's NIM including the credit card business was 1.71%, which represents an increase of 1 basis point, respectively, quarter-over-quarter. In the first quarter, as there was a cut in the interest rates and even a amidst the falling interest environment due to active funding cost management and asset rebalancing, we were able to improve the loan yield. And as a result of that, for the second consecutive quarter had an increase in NIM, reaching 5 basis points for the first half in total. Although we do believe that the interest rates will continue to fall, we will continue to put in efforts to expand our core deposits and also defend the downward pressure on NIM.

Let me now move on to our Loan portfolio. As of the end of June 2025, bank loans totaled KRW 329 trillion, remaining at a similar level to the end of March. In terms of corporate loans, while demand from large corporations remained solid, portfolio improvements centered on prime SME loans, brought the total to KRW 179 trillion. Retail loans increased by approximately KRW 3.7 trillion from the end of March, reaching KRW 148 trillion. Going forward, in line with the government's policy direction on household debt management, Woori Financial Group will continue to focus on managing volume of household loans. At the same time, we will strengthen financial support for future growth industries to ensure that market funds flow into more productive sectors thereby fulfilling our core role as a financial institution.

In preparation for continued internal and external uncertainties, we will pursue sound and sustainable qualitative growth based on the asset rebalancing efforts that have been underway since last year. Next is on the group's noninterest income. The group's noninterest income for the first half of the year came in at KRW 886.3 billion, maintaining a similar level year-on-year. On a quarterly basis, however, it rose sharply by approximately 47% from the previous quarter, reaching KRW 527.3 million. As for core fee income growth in the Wealth Management segment was particularly notable, thanks to balanced growth between the bank and nonbank segments, the group achieved a stable quarterly level of around KRW 500 billion, resulting in cumulative first half performance exceeding KRW 1 trillion.

Amid favorable market conditions such as falling interest rates and exchange rates, gains related to securities and FX valuation increased significantly. However, this was partially offset by a decline in gains from sale of loan receivables due to weakness in the NPL market. Looking ahead in an environment where interest rate cuts in capital market revitalization are expected, Woori Financial Group will work to uncover new business opportunities to expand related noninterest income. Also, as of early July, the group completed the insurance company acquisition and with a now diversified nonbank portfolio, we will aim to maximize synergies within the group and continue the growth of noninterest income.

Next, I will speak about expenses and please refer to Page 5. Moving on to the group's SG&A expense. For the first half of 2025, the group's SG&A expense was KRW 2479.1 billion, representing an 18% increase Y-o-Y. The resulting cost-to-income ratio stands at 42.8%. This increase was mainly due to one-off factors such as early retirement costs at the bank earlier this year, investments to enhance the last year's newly launched securities business, expenses related to ordinary wage settlements finalized at the end of last year and expanded group-wide investment in digital and IT capabilities.

Going forward, while we will continue investing in areas such as digital and IT competitiveness and enhancing the group's brand value for future growth, we will also actively pursue cost efficiency through workforce and channel optimization, process enhancement using IT and the reduction of unnecessary recurring expenses.

Let's now move on to credit costs and asset quality. Credit costs for the group in the first half of 2025 stood at KRW 944.5 billion. In the second quarter, credit cost was KRW 509 billion, up 16.9% from the previous quarter, and this increase reflects a preemptive provision of KRW 86 billion related to the completion guarantee projects. During the first half, we recognized some one-off credit costs, including preemptive provisioning for completion guaranteed trust projects and additional provisions for borrowers such as [indiscernible], which have recently drawn market attention. Excluding these onetime factors, the group's credit cost ratio is being maintained at around 0.42%.

Despite the downward trend in interest rates since second half of last year, concerns of an economic slowdown due to ongoing domestic and global uncertainties persist. As a result, delinquency and NPL ratios, especially in vulnerable industries continue to rise, Woori Financial Group is working to ensure a self-lending for high-risk assets and is thoroughly managing sectors of concerned and vulnerable borrowers. Through these more proactive risk management efforts than ever before, it is maintaining the proportion of prime corporate loans at around 85% and the proportion of loan loss reserves and regulatory reserves to total credit is also being managed at an elevated level of 1.6%, ensuring the group's ability to absorb potential losses in a stable manner.

Furthermore, considering the government's strong commitment to economic stimulus, reflected in active supplementary budget planning and the likelihood that the low interest rate trend will continue for the time being, we expect credit cost to gradually stabilize from the third quarter onwards.

Next is on capital adequacy and shareholder return policy. Please refer to Page 6 of the materials. As of the end of June 2025, the group's common equity Tier 1 ratio stood at as mentioned, at a preliminary 12.76%, showing a significant improvement of approximately 60 basis points from last year-end. This result reflects not only favorable external conditions such as weaker exchange rate, but also the group's continued group-wide efforts to rebalance assets and proactively manage risk-weighted assets along with solid earnings growth. Given the continued potential for volatility in interest exchange rates in the second half and the possibility of changes in regulatory capital requirements, the group will not be complacent and will do its utmost to achieve a stable CET1 ratio of over 12.5% for 2025 and reach the market expected level of 13% as early as possible.

Through this enhancement and capital ratio, we aim to enhance our ability to absorb losses while also expanding shareholder returns based on the strengthened CET1 ratio. In line with our dividend policy to distribute 50% of the previous year's annual dividend evenly on a quarterly basis, the Board of Directors today approved a quarterly dividend of KRW 200 per share. As previously announced, the record date will be August 10.

In the first half of 2025 despite rising domestic and global uncertainties, Woori Financial Group demonstrated strong profit generation and solid cost control capabilities. Notably, the significant improvement in our capital ratio boosted confidence in our ability to meet CET1 targets and expand shareholder returns, thereby strengthening market trust. With the completion of the insurance company acquisition, the group's portfolio is fully established, we will now take concrete steps toward becoming an integrated financial services company by pursuing balanced growth between banking and nonbanking businesses and maximizing synergies across affiliates.

Furthermore, the group will continue to increase financial support for productive setters and actively promote inclusive finance for small business owners and financially vulnerable groups. This concludes with Woori Financial Group's earnings for the first half of 2025. Thank you.

[Operator Instructions]

The first question today will be from NH Securities, Jun-Sup Jung.

I am Jun-Sup Jung from NH Securities. So there are 2 questions that I would like to ask you. The first question is related to what you have talked about before, which would be the acquisition of the insurance arm. So in terms of your direction going forward and strategy, this is something that I am very curious about. So it might not be an urgent issue, but you have acquired 2 companies. And there are some interest about whether you will merge the 2 entities or maybe delist the listed entity.

So with regards to these issues, have you made any decisions? Or are there any consideration or options that you are reviewing? In addition to that, if there are any capital gains from the acquisition, how much do you believe that, that would represent in terms of value? The second question that I would like to ask you is in terms of your capital ratio and also TSR. So your CET1 ratio has improved a lot. And also with regards to what you have said, you all have also said that you were trying to achieve 13% as early as possible. So does this mean that the year-end target would be 13%? Because according to what level of the CET1 ratio sits at, then the TSR could differ. So if you achieved 13% at the end of the year, then is there any possibility that we could look forward to additional TSR measures such as purchasing treasury shares?

So for the 2 questions that you have asked, thank you very much. Maybe we can prepare a second and then address your questions. Yes. Thank you for the question. So I think that with regards to the acquisition of the insurance arm, I do think that it's a very comprehensive question touching upon a lot of different issues. So maybe I can give you a brief question. I do think that this is a topic of interest for many. So maybe we can share what we're thinking about right now and also in terms of the direction going forward. So I do think that it might be a lengthy answer.

So that have been said, with regards to the insurance acquisition right now, in August of last year, we did sign the FDA. And then of May this year from the FFC, we did receive the approval to include it as a subsidiary. So as of July 1, we have completed the inclusion. So, with regards to the strategy going forward for the insurance arm, I think that basically, what we can say is that we are going to focus on sound capital management to ensure that we are able to have a stable marketing fundamentals to ensure that we can have sustainable growth.

So in the short term, we're currently doing a business assessment. And after this is completed, we will be actually looking at the K-ICS ratio and also the improvements that would be necessary for the capital adequacy and also the key agenda items to strengthen the fundamental competitiveness of the arms. So this is something that we are going to do to fundamentally improve the business. So right now, in terms of the K-ICS ratio and also in terms of securing the capabilities, that would be the short term.

Over the longer term, we're looking at the customer channels, also asset management and operations to generate more profit generation and also with regards to the K-ICS ratio and the new CSM, to improve the competitive edge so that we can have group synergies in new business areas. So doing a business assessment, we are going to look at how much K-ICS ratio improvement is necessary and also looking at where our business expansion efforts will need to be made.

In addition to that, if we look at the impact on the overall capital ratio, so July 1 was the date in which we included it. And right now, we're in the purchase price allocation process. So right now, the PPA process is in place. So as of now, it is difficult to estimate what the impact would be because there are various variables that are related to this issue. So as of the end of July -- June, rather, once we do have a definitive PPA, then we can talk about what the impact would be. And I do think that this would be something that would be available when we do our Q3 earnings conference call. So I do think that it is something that we would be able to announce there.

So if you look at CET1 ratio as of the end of June, it's 12.7%. And of course, we do think that there will be some impact from the acquisition of the Insurance business. So taking this into consideration, we will try to make sure that it's managed at an appropriate level. And in addition to that, I think that whether we would merge it or have it as a full subsidiary, so in the news recently, I do think that there has been some discussion about this and July 1, we did include Tongyang and ABL as subsidiaries of the group. And since then, I do think that, as mentioned before, we're initially doing the business assessment first.

So with regards to the merger of the 2 entities within the group right now, we haven't decided anything yet or have made any reviews of such a situation. So I think that going forward, whether it will be merged or whether we will have 100%-owned subsidiaries. These are all options that we will be looking at in the future. And as we decide, we will make sure to communicate with the market.

So, with regards to the insurance side, I think that I've covered all of the topics. And then around the target of 13%. In the second half of the year, I do think that there are a lot of volatility. So, if we look at what areas there could be, there could be the FX volatility and also with regards to government regulations, there could be some changes. So in the end of 2025, if you look at the CET1 ratio, stably managing at 12.5% would be the target. So what we mean by stably managing 12.5% is meaning that we do want to overachieve this target. So that's how you should interpret it.

And in the beginning, when we talked about 13%, what this is, is that by 2027, this was the target that we had, and this is something that we mentioned before. I think that after we acquired the insurance arm, this was something that was known and we are currently doing a lot of asset rebalancing and we're also looking at all of our risk-rated assets. So as of the current situation, because there are FX volatilities and other issues -- so versus our initial plans, we do think that there may be a possibility that we could achieve it earlier than expected. So we're trying to look at the measures that would enable us to do so.

And if we do so in the second half, take into consideration the changes, we do think that at the end of 2025, during the conference call that we do in February, I do think that we can take a comprehensive assessment and then talk about the way going forward in terms of the more details to the areas that you would have interest in. Thank you very much.

Next question is Yong Jin Seol of SK Securities.

So, I do want to understand the MTS service, some updates on -- from the -- your brokerage business. I know that we have fierce competition in that domain. So that to understand what were the performance achievements and also what's the future time schedule as to -- are you looking into scaling or making inroads into specific markets?

I'm Il-Jin Oak the CTO. With regard to the MTS, it was launched at the end of June or rather it was the end of March. And for 3 months, we've opened 20 new accounts. And we are opening the services one by one. And in April, we had OTC funds and 1 RP and Universal Banking in June. Within one banking, we do have one bank -- we do have the MTS [indiscernible] banking, so for Wealth Management or AI-based investment insights, or user-based interfaces are some of the differentiators that we do offer. And in September, we do have a new integrated MTS and an ATS market to open.

And in December, within Universal Banking, so for overseas stocks trading service that will also be embedded into the system. And within Universal Banking, MTS has been seeing some new climate clients coming in, so I can say that it is effective in terms of attracting clients.

And also with regard to Woody Investment Securities, if I may share with you the strategy that we have for our brokerage arm. So, we have IB and digital capabilities, and we're actually focusing on enhancing our competitiveness. So we're putting together the system and we do have the human resources right now, and we're continuing to complement the systems and the facilities and we are continuing to expand on our sales organization. And we are, of course, actively managing risk assets.

But with regard to securities and especially when it comes to risk assets, I do want to mention that we are actually engaging in a very aggressive allocation of assets, and we're trying to actively engage in deal structuring and referrals and moving on from corporate finance to asset management, basically providing a one-stop financial service is what we do want to offer. So compared to the first quarter, in the second quarter in terms of operating income, in terms of overall performance, of course, we're seeing SG&A going in. However, we're seeing the ratio improving going forward. So we are scaling and in the future, Woori Investment Securities, especially in the nonbanking business, we think that's going to play a pivotal role. And we consider the IT systems and so forth. Next year is going to be completely different. We do believe that it's going to be a different story going forward with more contributions coming from Woori Investment Securities.

The next question will come from KS, Doosan Baek.

This is Doosan Baek from KIS. So I would like to ask you a question about stable coins. So in July, or June, there was the framework act on digital assets. And I do think that there will be additional proposals that will be submitted next week. So in terms of the legalization, it does seem to be that it is gaining speed. So with regards to stable coins, what is your approach? What would be -- how are you going to address this opportunity?

Thank you very much, and let us address your question. So this is the CTO. So for stable coin, I do think that as of now in terms of the legal framework, it is something that is still in process. So we're looking at what's the overall trends are. So in terms of the qualifications for issuers, it's still a bit uncertain. So we're still something that we're monitoring very closely. And as of now, the bank level, of course, we are looking at the OBDIA. So we are looking at a joint issuance with the OBDIA other members. And related to that, in terms of our business model, infrastructure, establishing and also our business model is something that we are currently looking at. Thank you.

Next question from Do Ha Kim from Hanwa Investment & Securities.

I have a question with regard to Loan portfolio and margins. And could you provide us with the guidance with regard to the targets that you have for the second half? And the next question has to do with Insurance. As was already mentioned, I can see that you're currently reviewing the current status, and I know that it's a bit hasty to provide us with a detailed response. However, if we look at the Insurance, there are, of course, consider with regard to the capital ratio of the company. And so we would like to understand and rest assured that we don't have to go to the point of capital increase. So if you look at the total capital ratio, there is the basic ratio and there are regulations.

So with regard to that, and we're seeing some stricter regulations on the basic capital ratio. So we would like to understand if you can maybe lay out some of the measures that you have that you can actually cover for that without a capital increase. So it could be a very rough plan, but if you can share that with us, I think that we would rest assured. So with regard to this, is there anything that you can add, please?

Yes, first on margin. The NIM of the second quarter was 1.4%, and it was increased by 1 bps -- 1 bp. And as mentioned, the market rates did go down the loan interest rates went down. However, with asset rebalancing as well as, increase of core fee income, we were able to see an increase of 1 bp in terms of NIM. But what this really has to do with our asset growth. And I will be giving you some more information on this. But this year, it was on managing risk assets -- risk-weighted assets. And it was about managing this below nominal GDP and we're very much focused on asset quality.

So in the second half, it will be similar, more or less the same at 1.4%. Of course, there will be a further reduction in rates, but we don't think that it's going to be higher than the 1.4%. So it would be more or less in the early end of 1.4% in the second half as well, mid- to low level. And then in the case of assets, in terms of RoRWA, we've been actively managing the risk assets and especially in the second half, there are tariffs, there's also FX fluctuations. And at the end of June, it was dipping down and it's been slightly going up. So there are a lot of volatility right now. So with regard to assets because we're going to continue on to manage this. So we will be focusing on asset growth. But once again, we do have nominal growth in the case, some retail loans were household -- it's true that there is active government policy in place, and we're going to take that in mind in terms of our active management. In terms of corporate loans, in terms of risk assets. That's how we will manage, how we will be engaging in asset rebalancing so that we can focus on small business owners as well as future growth industries.

And with regard to your last question, it has to do with the insurance firm on the possibility of a capital increase. So if you look at the K-ICS ratio at the end of June, there are no disclosures with regard to insurers. But based on what we know, there's 150% guidance and it has already exceeded this guidance of 150% and in the future in terms of understanding the management status and also in putting together the mid- to long-term plan, the premise and the critical factor would be on maintaining the K-ICS ratio.

So in the second half, in the KPI for both companies, the basic K-ICS ratio and capital adequacy would be a key agenda item going forward to manage. So in many aspects, right now in the current state, the K-ICS ratio -- and if we look into other indicators, we do assess that a capital increase would not be required, and we would have to engage in mid- to long-term assessment, and we have to plan out going forward. But at this point in time, we do believe that a capital increase is not required. And in the future in the mid- to long run in order to minimize any burden on the group, that would be the focus in terms of how we do manage the subsidiaries. And once again, we will have to engage in an accurate management assessment, and it's going to take around 2 to 3 months. So in the mid- to long run, in terms of what kind of the effect it will have on the group, we will, of course, make sure that it is well minimized going forward. Thank you.

The next question will be from Daishin Securities, Hye-jin Park.

I would like to ask about credit costs. So if we look at the credit cost trend in the first half, it continues to be a wait on the operations. So of course, there were some one-off issues like the completion guarantee trust. But in terms of the normalized level, it does seem to be that there seems to be an increase. So for the full year for the CCR guidance, how -- what would the level be for our expectations? If you could share that number, that would be appreciated.

So this is the CRO, Jang-Geun Park. So if we look at the second quarter, it was 49 basis points. So it was a 3 basis point increase at the group level. And of course, if we -- there was KRW 86 billion in one-off preliminary provisions for the credit guarantee Trust. If we exclude that amount, it's actually at 42 basis points. So it's a very stable level. However, in terms of the normal level of credit cost, it is trending up. And going forward, right now, there are ongoing asset rebalancing. We're focusing on the lower risk prime assets.

So right now, the portfolio transitions that we have made will come into effect in the second half. And also from June, we have an asset quality TFT that we are operating at the bank level and if all of those measures are put in place, then from the second half of the year, we do think that there will be improvements that we will be able to see. So as a result for our 2025, if we look at CCR, at the beginning of the year, we said it was around low to mid-40%, and we do think that we will be able to manage it at that level for the full year.

Currently, we do not have a queue right now. So we have received questions in advance via our website. So let us cover these questions. So before the earnings presentation, we have been receiving questions via our website. And with regard to frequently questions during the conference call, we did announce that we will be addressing them if and when possible. With regard to shareholder return and the insurer acquisition and for the first time, there are also questions that came in on the stable coin. And most of the questions have been covered. But one question also had to do with the scheduling of the treasury share cancellation. So we would like to ask the CFO to respond to this question.

Yes, I am Sung-Wook Lee. So with regard to the scheduling of the share cancellation, in 2023, ever since we became a holding company, we've engaged in cancellation of KRW 100 billion and KRW 136.7 billion and KRW 150 billion. So every year, we have been engaged in cancellation for the 3 years. So we have engaged in the share buyback and now in September 11, the trust contract is to be concluded. And then after that, we will be canceling the entire shares. And then with regard to share buyback and calculation, after the KRW 150 billion cancellation, we will take into consideration CET1 ratio as well as the financial environment and conditions and then decide on how we will go ahead with it. Thank you.

Yes. There does not seem to be any more questions. So we would like to wrap up the Q&A here. So if you do have any questions, please do not hesitate to contact the IR team. We will make sure to answer any questions you may have. So with this, we would like to wrap up the Q&A session and also the first half 2025 Earnings Conference Call for Woori Financial Group. Thank you for your attention.