316140.KS

• Overall Profitability and Capital Position

  • Reported Q2 net income regained the KRW 1 trillion quarterly level, outperforming market expectations
  • Excluding one-off items, common equity ROE reached 10.3% for the first half, with the group's capital position improved by 80 bps YTD
  • The CET1 ratio of 13.71% is one of the highest in the domestic banking industry, supported by disciplined capital allocation

• Earnings Structure Diversification

  • Non-interest income grew 20% Y-o-Y, becoming the primary driver of earnings growth, with strong growth in wealth management (WM), corporate and investment banking (CIB) and capital market businesses
  • The group completed a KRW 1 trillion capital injection into its securities subsidiary in May 2026, and received regulatory approval to make Tongyang Life a wholly owned subsidiary
  • Management expects non-bank businesses to become the group's new core growth engine

• Loan Portfolio and Balance Sheet Management

  • Total bank loans grew 1.9% Q-o-Q to KRW 344 trillion as of end-June 2026, driven by a 2.8% Q-o-Q increase in corporate loans focused on large corporates and high-quality SMEs in advanced strategic industries
  • Net Interest Margin (NIM) increased 7 bps Y-o-Y to 1.51% in Q2, remaining flat Q-o-Q, supported by disciplined asset rebalancing and growth in the core deposit base that offset higher funding cost pressures from rising market rates
  • The group expanded its 5-year productive and inclusive finance commitment by an additional KRW 10 trillion, bringing the total commitment to KRW 90 trillion

• Shareholder Returns

  • The Board of Directors approved a Q2 cash dividend of KRW 220 per share (fully non-taxable) and an additional KRW 150 billion share buyback and cancellation for H2 2026
  • Total 2026 share buyback and cancellation reaches KRW 350 billion, the largest program in the group's history, more than doubling 2025's KRW 150 billion program
  • The additional buyback fulfills the group's corporate value-up commitment to repurchase shares once the CET1 ratio exceeded 13%, bringing cumulative cancelled share buybacks to over 10% of outstanding shares

• Cost Efficiency

  • Despite structural cost increases from insurance business consolidation, securities infrastructure build-out and higher education taxes, company-wide cost efforts kept the CI ratio flat Y-o-Y
  • Management is targeting a medium- to long-term CI ratio in the low 40% range, supported by AI-driven operational transformation and workforce/channel optimization

• The group maintains its full-year 2026 target to reduce total credit cost by 15% Y-o-Y and bring the recurring credit cost ratio to the low 40 bps range
• Management expects to gradually build recurring quarterly net income above KRW 1 trillion, with a target of sustainable group ROE improvement
• The NIM is positioned to expand in the second half of 2026 and early 2027: internal simulations show a 25 bps market rate increase would lift NIM by 4 bps, higher than prior estimates due to the group's larger share of CD rate-linked floating loans
• The group targets to maintain its CET1 ratio in the mid-13% range over the medium term, supported by planned regulatory risk weight rationalization for productive finance
• Management expects the total shareholder return (TSR) for 2026 will exceed the 50% target, after accounting for the fully non-taxable quarterly dividend and the KRW 350 billion total share buyback program, with clearer visibility to be provided with Q3 2026 earnings
• The group plans to consider making share buyback and cancellation a regular semi-annual program going forward

Woori Financial Group reported Q2 2026 net income of KRW 1.0046 trillion, up 66% quarter-over-quarter (Q-o-Q), bringing year-to-date (YTD) first half net income to KRW 1.609 trillion, up 3.7% year-over-year (Y-o-Y). First half net operating revenue grew 6.0% Y-o-Y to a record KRW 5,722.7 billion, with Q2 net operating revenue up 7.5% Q-o-Q to KRW 2.965 trillion. Non-interest income hit a record KRW 1,063 billion for the first half and KRW 628.9 billion for Q2, contributing 18.6% of total net operating revenue, up from prior year levels. Fee income reached a record KRW 1,278.8 billion for the first half (up 23.7% Y-o-Y), with Q2 fee income exceeding KRW 700 billion for the first time on a quarterly basis. SG&A expenses for the first half were KRW 2,632.8 billion, for a cost-to-income (CI) ratio of 42.8%, flat Y-o-Y. First half group credit costs totaled KRW 966 billion (slightly up Y-o-Y), with Q2 credit costs down 16.7% Q-o-Q to KRW 439.2 billion; the recurring credit cost ratio (excluding one-off items) was 39 bps, stable below prior year levels. As of end-June 2026, the group's Common Equity Tier 1 (CET1) ratio was 13.71%, up 11 bps quarter-over-quarter. Non-bank businesses contributed 22.3% of group net income in the first half, up from 6.9% Y-o-Y, more than tripling year-over-year.

• Elevated external uncertainties include sharply rising exchange rates, higher market interest rates, the July policy rate hike, inflationary pressure from the Middle East conflict, and stock market volatility that could impact capital positions and earnings
• Vulnerable borrower credit risk is increasing amid rising interest rates, requiring heightened proactive monitoring and risk management
• Interest rate competition for productive finance loans could pressure margins, though management notes portfolio rebalancing and policy guarantees mitigate this concern
• Changes to government policy around retirement ages and industry regulation could impact future early retirement program costs and capital planning
• There is still execution risk in building out the retail securities business from a 0 base and gaining necessary regulatory licenses for new product lines

Q: What are Woori's mid- to long-term plans to grow its retail securities brokerage business, and what are the capital usage plans for the recent KRW 1 trillion capital injection for the securities subsidiary, including future plans for further capital increases?

A: The securities business launched in 2024 from a 0 base, so it currently has a smaller retail network and customer base than competitors. Retail net revenue grew KRW 10 billion Y-o-Y to KRW 26.6 billion, and the group will continue opening new complex branches in key locations to grow customer count and AUM. The group plans to secure a derivatives license by 2027 to enable additional cross-business synergy, and will continue investing in IT infrastructure to support retail profitability. The KRW 1 trillion capital injection has been allocated across IB, S&T and retail, with IB seeing the fastest profitability growth: operating revenue for securities IB grew KRW 38 billion Y-o-Y to KRW 45 billion. Future capital increases will be done phased based on improving ROE targets, with timing and size tied to license acquisition and growth needs.

Q: How was the KRW 130 billion Tongyang Group workout exposure reflected in second quarter credit costs, and what is the credit cost ratio target for H2 2026 and full year 2026?

A: The entire KRW 130 billion exposure to 6 Tongyang Group companies that filed for workout was classified as NPL in Q2, and the group booked an additional KRW 44 billion in provisions against this exposure. All of the group's exposure is backed by first-lien real estate collateral. The group maintains its full-year 2026 target of a 15% Y-o-Y reduction in total credit cost and a recurring credit cost ratio in the low 40 bps range. While rising rates create risk from vulnerable borrowers, proactive risk management and a focus on high-quality productive finance loans will keep credit cost increases muted, and management is confident it will hit the full-year target.

Q: Why has NIM remained stable amid rising market rates and expanded productive lending, and is profitability a concern for this lending expansion? What is the outlook for NIM in the second half?

A: NIM remained stable at 1.51% Q-o-Q because the group preemptively increased long-term deposit sourcing in April and May ahead of expected policy rate hikes, which delayed the impact of higher funding costs, and reduced short-term deposits by KRW 15 trillion to optimize ALM. The group also has a larger share of CD rate-linked floating loans (15% of corporate loans, 4% of household loans) that reprice higher with market rates, supporting net interest income. Productive finance expansion is done via portfolio rebalancing, not just adding new low-yield assets: the group shifts capital from lower-margin existing loans to advanced strategic industries, and most productive finance loans carry policy institutional guarantees that lower credit risk and capital burdens. Woori's long corporate lending expertise also enables synergy with non-interest income businesses. Internal simulations show a 25 bps market rate increase would lift NIM by 4 bps, so NIM is positioned to rise in the second half.

Q: After making Tongyang Life a wholly owned subsidiary, what core role will it play within the Woori group going forward?

A: The top priority is strengthening the core profitability of Tongyang Life's life insurance business to directly contribute to group net income. The group has completed internal due diligence and identified key improvement areas, starting with shoring up K-ICS capital adequacy and optimizing sales channels. Starting in 2027, the group will accelerate sales growth and profitability improvements, while also capturing group synergies from supporting bancassurance distribution for WM and acting as a limited partner for group IB activities.