Good afternoon. I am Yi Jung Su [ph], Head of IR at Woori Financial Group. Let me begin by first thanking everyone for taking time to participate in this earnings conference call for the Woori Financial Group. On today’s call, we have the Woori Financial Group Chairman, Son Tae-Seung; President, Chun Sang-Wook, responsible for the group IR; group CRO, Jung Seok-Yong; group CSO and ESG Officer, Park Jong-il; and group CFO, Lee Sung-Wook, on the call today. For today’s call, group Chairman, Son Tae-Seung will deliver his remarks, after which, we will go into the presentation and then open the Q&A session. In addition, please note that for our overseas investors, we have simultaneous interpretation that is being provided. Now, let me hand it over to the group Chairman, Son Tae-Seung for his remarks.

Good afternoon. This is Woori Financial Group Chairman, Son Tae-Seung. Let me first begin by extending my sincere gratitude to everyone who is on this call for the 2022 Q3 earnings conference call. Before going into the presentation and the Q&A, I would like to take this opportunity to briefly go over the third quarter highlights and also future business direction. The group’s 2022 Q3 year-to-date net profit totaled KRW2,661.7 billion, which includes the third quarter net profit of KRW899.8 billion. This is a year-over-year increase of 21.1%. Moreover, we have already exceeded last year’s full year performance in only three quarters and the third quarter YTD performance is the strongest level in our history. This performance was driven by an increase in our non-bank revenue as our portfolio expanded and by stronger profit generation capabilities. In addition, in terms of third quarter asset quality, credit cost was 0.24% and the delinquency rate 0.22%, representing the strongest asset quality levels within the industry. As inflation in Korea and abroad led to deeper concerns about consumer price increases, preemptive efforts to improve business efficiency at the group has enabled the group in the third quarter to post a cost/income ratio of 40.5%, an improvement of 4.7% year-over-year. We only have around 2 months left in 2022. We will continue our efforts to the end of this year to end our business successfully and prepare for 2023. In 2023, we expect uncertain economic conditions to continue globally. By strengthening our attention to the bottom line, the Woori Financial wants to be in a position to take a big leap forward when economic conditions subside. Thus, it is building its 2023 business plan with a focus on further strengthening our fundamental competencies. Once the business plan is finalized and after discussion at the BOD, we will make sure to share our plans in more detail. The Woori Financial Group will continue efforts to broaden its portfolio and improve profitability through better efficiency. Moreover, we are also planning to highlight the social role of finance by engaging in ESG management and social contribution activities. Digital initiatives will also continue to enhance competitiveness. Through these efforts and based on the strong YTD performance, we will continue efforts to enhance our corporate value. I recently have had many opportunities to meet with investors in Korea and abroad. Amid an uncertain macro environment, I was able to confirm investor expectations about the performance and future of the group. I plan to more actively engage with our investors and will try to reflect the market’s diverse views in our operations as much as possible. So let me wrap up here. And next, for the details of our financial performance, President, Chun Sang-Wook, will now go through the presentation. Thank you.

Good afternoon. This is President, Chun Sang-Wook, and I am also responsible for the group’s IR activities. Let me go over the third quarter 2022 business performance of the group. And please refer to Page 3 of the presentation available on our website. First, let me discuss the group’s net income. On a 2022 third quarter year-to-date basis, the group’s accumulative net income was up 21.1% year-over-year at KRW2,661.7 billion. This is due to our stronger profit generation capabilities, stable asset soundness management and cost efficiency efforts. In addition, our third quarter only net income was KRW899.8 billion. Next, let me move on to our net operating revenue. The third quarter YTD accumulative net operating revenue was KRW7,263 billion, an increase of 17.5% year-over-year. Net interest income was KRW6,348 billion, while non-interest income was KRW915 billion. Though funding costs have increased, the group’s interest income has continued to grow due to our solid asset growth by core subsidiaries. On the non-interest income side, even though there were some non-cash valuation losses due to the movement in our FX rate, stronger synergies were created across affiliates, resulting in core fees driving solid performance. For the third quarter only net operating revenue, it was KRW2,377 billion, up by 11.3% year-over-year. Next is on costs, including group SG&A expenses and credit cost. YTD group SG&A edged up 5.2% year-on-year to KRW2.938 trillion, but the C/I ratio decreased 4.7% year-on-year to record 40.5%. This is ascribable to Woori Financial Group’s group-wide preemptive cost optimization efforts Meanwhile, YTD group credit cost recorded KRW622 billion, and credit cost ratio posted 0.24%, demonstrating the group’s stable risk management capabilities. Next, I will elaborate on group business results in more detail. Please refer to Page 4 of your materials. First is the group interest income and NIM or…

Thank you very much. [Operator Instructions] So for the first question, it will be from Yuanta Securities, Jeong Tae-joon.

I am Jeong Tae Joon. So thank you for your very strong performance. There are two questions that I would like to ask you. The first question is that in terms of the margins that you see, there continues to be an improvement. But in terms of the level, it seems to be slowing down. So what is your outlook on that area? And the second is that if there are any one-off events that took place in the third quarter, please elaborate what they were?

So Mr. Jeong, could you again verify or recap what the second question was. We weren’t able to hear.

So the question is that during the quarter, if you had any one-off events or one-off elements, could you please elaborate what they were?

Yes, Mr. Jeong. So you first asked a question about the overall margin outlook that we have going forward. And the second question would be in terms of the one-off elements or one-off factors that we had had. So if you could just wait while we are preparing the answers.

Yes, I am the CFO, Lee Sung-Wook, and maybe I can address the questions one by one. So, first to talk about the NIM outlook that we have to take your questions in order. So if you look at the third quarter NIM levels, it would be 1.62%. So on a Q-o-Q basis, it was a 0.04% improvement. And if you look at it in September, September was the highest level because it was around the mid 1.6% level. So if we go into the year end in terms of expectations, we do think that it will be at the upper level of 1.6%. So as a result of that, we do think that there – we would hope that NIM would expand more rapidly but because there is an economic slowdown and also we do think that in the core areas, there may be a slowdown there. And also as the loan deposit spread continues to be disclosed, we do think that there will be some issues related to that. So we do think that the overall growth going forward will be too moderate. So at the end of the year, we think that we will be at the upper band of the 1.6%. And then going into next year, that it will be at around 1.7%. So we do think that there will be a 0.1% point uplift from what we see this year. To talk about third quarter about one-off factors, the first is that in terms of the FX rate changes that we have seen, we did have a non-cash valuation loss of around KRW92 billion. And if we take that into consideration, there was around KRW70 billion in terms. So if we take that out of the overall equation that the overall net income level would be around KRW970 billion. So that would be the overall impact that we had from the one-off FX rate.

Thank you very much for the answer. Next, I would like to take second question from NH Securities, we have Mr. Jung Jun-Sup. You have the floor.

Hello. I am from NH. My name is Jung. Thank you very much for the opportunity to ask a question. I have a question about CET1 ratio. So Q3, you recorded 10.9%. So it’s not that high. And of course, you talked about the FX rates, and we understand the level. But I believe that there isn’t a sufficient buffer to sufficiently high level. So if FX rates don’t go as we wish, how do you plan to further manage the capital ratio? And also with regard to capital ratio, I understand that it’s going to be difficult to have M&A. So is there any M&A strategy changes going forward? Thank you.

Thank you very much for the question. So the question was the Q3 capital ratio and future management plans. Please bear with us as we prepare your answer.

Yes, this is Lee Sung-Wook, CFO. So as we mentioned during the presentation, again, the interest income increased. However, the capital adequacy ratio dropped, our CET1 ratio dropped because we have a high portion of banking, this led to the CET1 ratio decline, and this is because of the bonds that we have and FOCs debt valuation led to a decrease in our ratio. And we also have foreign currencies and also derivatives, and that’s with the bank and FX rate skyrocketed to KRW1,400 per dollar, and we also have our investments in derivatives and because of the valuation changes, we do have a lot of RWAs, but I believe that if the FX rates come down, this is going to automatically raise cover. But the FX rates are very strong, and we believe that this is going to last for a long time. So when it comes to foreign currency assets and PIBI and other RWAs will be strongly managed so that we can manage them at a stable level. For your information, in 2023, we believe that FX rates will stay really high, therefore, we are going to also approach our business plans in a very conservative way. So in 2023, we are going to focus on risk management. And when it comes to FX rates and interest rates, if they come down, then we believe that our CET1 ratio is going to recover, then we will seek growth strategies. When it comes to M&A, there were some issues with PS soundness. So PVR in the secondary market declined significantly. So if you think about small M&As, it’s not going to require massive capital. But I believe that large securities companies will require a lot of capital. In those cases, we will have to see collaboration. So overall, we have no changes to our M&A strategy or plans. Thank you.

Thank you for your answer. Next, from Daishin Securities, we will have Park Hye-jin. So please go ahead.

Yes, I am Park Hye-jin from Daishin Securities. I have two questions that I would like to ask you. So recently, related to real estate PS, project financing, there is a lot of concerns within the market. So, we also have our [Technical Difficulty] and why that was the situation.

So maybe if – while we are preparing our answers, if you could just wait for a second, that would be appreciated.

Yes. This is the CRO, Jung Seok-Yong, and maybe I can thank you for your questions. First, for the real estate project financing, I think that on overall grounds, if you look at the group as a whole in terms of the exposure, the amount would be around KRW1.8 trillion and around KRW1 trillion of that is on the bank side, and there is no insolvencies on that side at all. And then at the capital side and the investment bank side, would be the remaining balance of where the exposure is. So on a whole, if we look at the substandard and below, it would be around KRW40 billion, and we have a reserve of around KRW20 billion. So on an LTV basis, on a case-by-case situation, of course, it’s being managed at the per company level. But at the group level, we don’t manage the LTV as a whole. But if we look at the market concerns on the beach loan side, where there is the most concerned, I don’t think we have a lot of exposure in that area. But on the capital side and the reason why the credit cost increased there. And the second question that you asked on the capital business for Woori Capital, there was some preemptive measures taken because they were working in line with a lowering or decreasing growth rate environment. So as a result of that, it’s not because it has more insolvencies or that they had more bad debt, but rather they took preemptive measures to provision more. So that’s why the overall credit cost level at the capital business increased.

Thank you very much. Next question is from Hanwha Securities. Mr. Kim Do Ha. Kim, you have the floor.

Yes, I have a question regarding 4Q. In December, how do you see the future economic outlook and COVID-19-related issues? So if you have any special plans related to retirement and also additional provisioning. And also your earlier answer was it on PS? Please clarify.

Yes, thank you very much. Because of the choppy sound, we could not really understand your question. So allow me to summarize your question. So your first question had to do with 4Q additional provisioning possibility. So that’s our understanding. And with regard to cost, I believe that you’ve asked your second question?

Yes, regarding ERP and additional provisioning plans in the 4Q and your real estate exposure, are you talking about PS? Please clarify with regard to your third question and answer.

Yes, thank you very much for your clarification. Please bear with us as we prepare your answer.

Thank you very much. I am on Lee Sung-Wook, CFO. Every December, yes, we did have ERPs. And with regard to business management plan, we do have some ERP plans included. But taking into consideration our financial circumstances, we will make a final decision on ERPs, and we also need a Board approval. So it’s not fixed rate. Yes, but we have it on the plan though. With regard to additional loan loss provisioning, currently, we do have some plans at the group. But with regard to that, I think that it’s premature to say at this point in time, we will be deciding it towards the end of this year. Thank you.

I am Jung Seok-Yong, CRO, with regard to your second question, real estate PS. Yes, I was referring to the one PS number. Thank you.

[Operator Instructions]

Because I do believe that you haven’t asked this question yet, but in terms of our digital direction going forward, maybe CRO, Jung Seok-Yong can take. Jung Seok-Yong, the President maybe can take an opportunity to discuss about our digital strategy, while we are waiting for other questions.

Yes. This is the President, Chun Sang-Wook. And in terms of our digital strategy, I think that maybe just go over in the big picture that we have. While it would be similar to other groups that we have, but to enable universal banking is the big trend that we want to ensure it takes place. So, that is the big initiative that we have. And then on a consolidated basis across the bank and non-banking side, we want to be able to have a comprehensive service that covers all areas. So, that is the platform that we want to create for the future. But one thing that I would like to highlight is that recently, there is a lot of discussion about super apps or one apps or maybe if you have separate apps for each of your affiliates, what’s the best approach, I think is a discussion that is taking place. In the case of our Woori Financial Group, I think that it would be a hybrid approach. So, that would be in that for each of the subsidiaries that we have, they would have their own dedicated applications. And at the same time, at the group level or at the bank level, we would have a consolidated one banking application that would cover more of a universal scale, so that customers can be approached through that and that there will be a hybrid approach for how we face our customers. So, that would be the big picture that we have for our digital strategy going forward.

Thank you. Maybe we can the next question. So the, next question will be from CLSA, Shim Jong-Min.

Yes. This is CLSA, Shim Jong-Min. Thank you for the opportunity to ask the question. So, with regards to the PS exposure that you had and you mentioned before, I would like a question asked about that. For the real estate market as a whole, it continues to weaken. And as a result of that, related to real estate exposure, I do think that there are increasing concerns. So, on the household side, of course, because the LTV is very low and it’s being more diligently managed, I think that there are less concerns on that side. But on the corporate side, especially on the SOHO side, I do think that there is a higher level of concerns within the overall market. So, related to this issue on the SOHO side, how is asset quality being managed? And also, if the continued market weakening continues, then at Woori Financial Group level, how are you planning to deal with this and address with this issue, that would be the question that I would like to ask?

Yes. So, just to summarize the question with regards to the loans that we have within the corporate loan book for the whole loans that we have, what would be the risk management strategy and what is the future direction of addressing this issue? If you could just wait for a second, then we will address your questions soon?

Yes. Thank you for your question. This is the CRO, Jung Seok-Yong. And not only on the bank side, but on Woori Capital and then on the investment bank side and for other areas of our group, within the group as a whole, if we talk about real estate exposure, this is something that we are monitoring very cautiously. So, in the first half of the year, since the first half, we have been focusing on the prime borrowers and also in terms of the LTV, as recognizes, we keep it as a standard 60% level. So, we are being very selective in taking on new borrowers and only high-quality borrowers. So, as a result of that, even if the real estate market would worsen versus the current situation, we do think that in terms of asset quality or in terms of our overall impact, it would be very limited. And in terms of this trend, we do think that this is something that may continue until the beginning of next year in terms of the market in itself. So, that’s the view that we hold. Thank you very much.

Thank you very much. Because of limited time, I believe that we can entertain two more questions.

Next question is going to be from GS Investment and Securities [indiscernible].

Yes. Good afternoon. I have one question. Now if you look at recent news because of the FX rate. And if you look at the financial flow, I think that there can be some pressure with regard to interim dividend. So, if you can comment on the issue of dividend, please do so.

Yes. Thank you very much. Please bear with us as we prepare your answer.

Yes, this is Lee Sung-Wook, CFO. From the regulatory side, there is no particular guideline as to what we are going to do with our dividends. We conduct a stress test. And if you look at the data that we have submitted to the regulatory side, we believe that we satisfy all the regulations so with regard to capital adequacy and soundness, so external and internal economic outlook and environment we are going to do our best in order to maintain a stable dividend payout ratio. With regards to details, I am just helping the lease out, but we will have go through the DOT [ph] at the end of this year when our earnings are fixed? Thank you.

Thank you. Yes, thank you very much. I think that we said that we would take two questions. However, I think that before that, there was one more question that was added on. So, now I think that we really have two last questions. So, next would be from Korea Investment Securities, Baek Doosan [ph]. Please go ahead.

Yes. Doosan from Korea Investment & Securities. I would like to ask a question related to Woori Capital. So, you talked about project financing, you did provide a general overview. But if you look at refinance capital right now, if you look at there is around KRW3.2 trillion. That is related to the real estate book. So, it could be bridge loans, it could be acquisition financing, it could be project financing. I do know that it’s a multiple array of projects. So, related to these corporate loans, in terms of what the assets are and what the distribution would be, if you could provide more detail that would be appreciated.

Yes. Thank you very much. While we prepare the answer, if you could wait for a second. Thank you.

Yes. Thank you for your question. This is the CRO, Jung Seok-Yong. And with regards to capital, of the numbers, if we talk about real estate PS and also real estate mortgage loans, I think that they are different. So, on the corporate side, as mentioned before, of the KRW3.2 trillion that we have around half of it would be real estate related for the project financing. So, some of it is project financing, and there is also some mix of mortgages or real estate secured loans in that book. So, to give you the specifics, unfortunately, I don’t have that data on hand. But around KRW1.7 trillion would be real estate-related credit. And when we talk about credit, it would be real estate secured loans, real estate project financing in total would be the balance. So, KRW1.7 trillion would be the real estate-related credit.

Thank you very much. Maybe for the last question from Tower Investment Securities, Kim [indiscernible] I could take the last question. So, please ask your last question.

Yes. Thank you for the opportunity to ask questions. I would like to ask you a question about your funding side. So, if you look at the bank funding right now, on a Q-o-Q basis, it does seem to be that the overall funding volume has decreased. And it’s not a high-growth area right now, but in the fourth quarter of next year. And if you go into next year, on the funding side, how much do you want to squeeze because I do think that, that could determine how much margin expansion you are able to experience also. So, you did talk about your overall margin expectations for the year, but what do you think the funding side would look like? And how do you think that, that would impact your overall margin profile and the view there?

Yes. So, to summarize the question, you are asking about on the banking side, how much funding, what would be the funding mix for the future in terms of our strategy, our plans and how we are going to manage our margins in light of that overall profile that we want to create. So, while we prepare this answer, if you could just wait for a second. Thank you.

Yes. This is the CFO, Lee Sung-Wook. So, if you look at the funding costs recently, it has increased, and this is something that you are well aware of. So – and the reasons behind that would be that, of course, the interest rate environment in general is at a higher level. So, as a result of that, our core deposits have decreased. And in addition to that, if we look at the loan-to-deposit spread, and also the LCR regulations, they have been tightened. So, from October, it goes into 92.9%. So, as a result of that, they offer more funding requirements that we face as a result. So, if we look at the financial authorities and what they are recurring, there was a leeway of around six months that they have provided for the normalization of the LCR. So, that does give us a bit more breathing room. So, right now, at the banking sector as a whole, if you look at the LCR or LDR, so for LDR, it would be 100% and try to be managed stably in that manner. So, as of now, under the current environment, right now, if there are more – not more deterioration in the environment, I do think that we can have a very stable funding profile. That would be the expectations going forward. So, as you have just mentioned, in terms of the funding cost rising, of course, in the fourth quarter, we do think that it will continue to rise. But if that stabilizes, and then for next year, as mentioned before, in the market rates in the first quarter, if it peaks-out as we expect, then we do think that in terms of the base rate or the market rate, if it does peak out, then we do think that the decline in the core deposits that we are experiencing will reverse and go to uplift, and that will actually improve our margins. And as mentioned before, on the core ratio side, as we are managing that, if we are moderating out our overall asset growth, then I do believe that as we have expected that we will be able to meet the target levels that we talked about in [indiscernible] or maybe even actually outperform that level. End of Q&A:

So with this, we would like to wrap up the Q&A session. And with this, we would wrap up the 2022 third quarter earnings conference call. Thank you for your attention today. And next quarter, we hope to look with you and meet you back with better performance. Thank you very much.