Woori Finance Holdings Co., Ltd. Q3 FY2026 earnings call

• Capital & Returns: CET1 ratio stood at 13.8%, an industry-leading position improved by ~90 bps this year. Approved a Q3 dividend of KRW 221 per share (fully nontaxable) and approved an additional KRW 150 billion share buyback.
• Corporate Lending Strategy: Accelerated 'productive finance' with corporate lending reaching KRW 156 trillion. Productive finance lending hit KRW 27 trillion, 1.5x the annual target, ahead of schedule.
• Noninterest Income Growth: Core fee income rose 18.8% Y-o-Y to KRW 1.898 trillion. Securities subsidiary IB fees reached KRW 151.4 billion (2.4x prior year), driven by synergies with the bank. Insurance earnings increased by approx. KRW 100 billion Y-o-Y.
• Cost Efficiency: SG&A expenses stabilized at KRW 3.8575 trillion YTD. Cost-to-income ratio remained stable at 42.3%, meeting full-year targets.
• Asset Quality: Credit costs declined 15.7% Y-o-Y to KRW 1.28 trillion. NPL ratio edged down, with high-quality loans comprising ~85% of the corporate portfolio. Credit cost ratio dropped to 42 basis points.
• Insurance Integration: Full ownership of Tongyang Life acquired; integration with ABL Life is on track for completion by October 1, focusing on IT, HR, and financial system consolidation without further capital injection.

Net Income: KRW 1,049.2 billion (up 4.4% Q-o-Q), exceeding KRW 1 trillion for the second consecutive quarter. YTD Net Income: KRW 2,658.1 billion (up 19% Y-o-Y excluding one-off bargain purchase gains). ROE: 9.9%. Total Income: Record highs achieved, with noninterest income accounting for nearly 20% of total income. Noninterest Income Share: Increased from 45% to approximately 60% year-over-year due to strong contributions from securities and insurance subsidiaries.

• NIM Recovery: Expect NIM to recover in Q4 and increase slightly, with asset refreshing starting in 2027 to further improve margins.
• Credit Cost Targets: Aim to reduce credit cost by 15% and bring the credit cost ratio to the low 40 basis point range for the full year 2026.
• Dividend Policy: Commitment to continue increasing DPS by more than 10% annually via the Value Up Plan. The nontaxable dividend framework covers at least 3-4 years (total KRW 6.3 trillion), with potential reassessment around 2028.
• Shareholder Returns: Target nominal Total Shareholder Return (TSR) to exceed 50% next year, leveraging improved CET1 ratios and earnings growth starting from 2027.

• Interest Rate Volatility: Sharp increases in long-term funding rates impacted Q3 NIM due to the high proportion (70%) of CD-linked loans. Long-short rate spreads created temporary margin pressure.
• Card Delinquency: Delinquency rates in the card business increased due to higher write-offs in a rising interest rate environment, though management expects stabilization in Q4.
• Regulatory Constraints: Regulators ordered a halt to certain life insurance sales (primarily affecting ABL Life), requiring the development of alternative products to mitigate profit impact.
• Temporary Capital Factors: Specific technical issues regarding corporate tax payments and overseas loan transactions temporarily affected RWA calculations and CET1 ratios as of September end.

Q: Why did NIM decline 7 bps Q-o-Q despite YTD strength? What is the outlook?

A: The decline was driven by a widening spread between short-term CD rates (+41 bps) and long-term bond funding rates (+132 bps), impacting the 70% CD-linked loan book. Core deposits also contributed a 2 bps drag. Management expects NIM to stabilize or rise slightly in Q4 as long-term rates peak, with significant improvement expected in 2027 through asset refreshing.

Q: What is the strategic rationale and timeline for integrating Tongyang Life and ABL Life?

A: Integration aims to achieve cost synergies and economies of scale to become the #5 life insurer. IT, HR, and financial systems are merging by October 1. No further capital injection is planned. The group is developing alternative insurance products to replace those halted by regulators (mainly affecting ABL Life) to protect profitability.

Q: How will the sale of ABL Tower impact CET1 and shareholder returns?

A: The sale is targeted for completion by year-end with a preferred buyer. Proceeds will boost CET1 after retaining profits, though immediate calculation differs from bank metrics. For shareholder returns, management targets a nominal TSR exceeding 50% next year. The effective yield is significantly higher due to nontaxable dividends, potentially surpassing 50% when tax benefits are included.

Q: What drove the increase in card delinquency rates, and what is the CCR outlook?

A: Delinquencies rose due to proactive write-offs of vulnerable borrowers in a high-rate environment, not new poor underwriting. Management expects NPL and delinquency rates to drop in Q4. The full-year Credit Cost Ratio (CCR) is guided to remain in the early 40 basis point range, achieving the 15% reduction target.

Q: Can you detail the long-term dividend strategy beyond 2026?

A: The company commits to increasing DPS by >10% annually. The current nontaxable dividend pool (KRW 6.3 trillion) secures payouts for 3-4 years. Management may reassess and secure additional funds for nontaxable dividends around 2028, depending on ROE improvements and nonbanking earnings growth.