Woori Financial Group Inc. Q3 FY2026 earnings call

• Earnings & Capital: Net income exceeded KRW 1 trillion for two consecutive quarters; CET1 ratio improved to 13.8%, an industry-leading position.
• Corporate Banking: Large corporate lending grew significantly, achieving 1.5x the full-year productive finance target ahead of schedule. The bank is focusing on high-quality assets and integrating AI into credit assessment.
• Nonbank Synergies: Nonbank subsidiaries contributed ~60% of noninterest income. Securities underwriting/advisory fees rose 2.4x Y-o-Y due to IB business expansion. Insurance earnings increased by ~KRW 100 billion Y-o-Y.
• Insurance Integration: Full integration of Tongyang Life and ABL Life is on track for October 1, focusing on IT, HR, and financial system consolidation to achieve cost synergies without further capital injection.
• Asset Quality: NPL ratio edged down; high-quality loans account for ~85% of the corporate portfolio. Proactive monitoring and NPL sales are ongoing to maintain sound asset quality.

The Group recorded YTD net operating revenue of KRW 8,680.3 billion (up 6.2% Y-o-Y), with interest income at KRW 7,035.9 billion and noninterest income reaching a record KRW 1.64 trillion. Net income was KRW 1,049.2 billion for Q3 (up 4.4% Q-o-Q) and KRW 2,658.1 billion YTD. SG&A expenses totaled KRW 3.86 trillion YTD, maintaining a cost-to-income ratio of 42.3%. Credit costs declined sharply to KRW 1.28 trillion YTD (-15.7% Y-o-Y), with a credit cost ratio of 42 basis points.

• NIM Recovery: Management expects NIM to recover in Q4 and improve starting 2027 via asset refreshing, following temporary pressure from funding costs and rate spreads.
• Credit Cost Target: Aim to reduce credit costs by 15% and bring the credit cost ratio to the low 40 basis point range by year-end 2026.
• Dividend Policy: Maintain DPS growth of >10% annually. Continue nontaxable dividends with sufficient funds secured for 3-4 years; reassess additional nontaxable capacity around 2028.
• Shareholder Returns: Target nominal Total Shareholder Return (TSR) exceeding 50% next year, supported by capital ratio maintenance and earnings growth.

• Interest Rate Volatility: Sharp increases in long-term rates vs. short-term CDs pressured Q3 NIM; continued rate hikes could impact funding costs and RWA valuations.
• Regulatory Changes: Regulators mandated a halt on certain life insurance sales (primarily affecting ABL Life), requiring product replacements to mitigate profit impact.
• Consumer Credit Delinquency: Card delinquency rates rose due to write-offs and vulnerable borrowers in a high-rate environment; management is closely monitoring this segment.
• One-off Accounting Impacts: Temporary fluctuations in CET1 were caused by corporate tax payment timing and specific vendor transactions, which are expected to resolve quickly.

Q: Analyst asked about the cause of the 7 bps QoQ NIM decline and the rationale behind the Tongyang Life merger/liquidity moves. / A: CFO explained the NIM drop resulted from a widening spread between rising long-term bond rates (+132 bps) and short-term CD rates (+41 bps), impacting the 70% CD-linked loan book. Regarding insurance, he clarified that regulators halted specific life insurance sales primarily affecting ABL Life, not Tongyang. The group is developing alternative products to offset profitability losses while proceeding with the planned insurer integration.