Good afternoon. I am [indiscernible], Head of IR at Woori Financial Group and I will be moderating the conference call from this quarter. 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 President, Chun Sang-Wook, who also oversees the Group IR function; Group CRO, Jung Seok-Young; Group CFO, Lee Sung-Wook; and Group CDO, Ouk Il-Jin. Today's call will start with a presentation from President Chun Sang-Wook on the earnings highlights. After which, we will have a presentation on the group's capital management and shareholder return policies. After that, we will have the Q&A session. Please note that this call is being simultaneously interpreted for overseas investors. With that, let us begin the earnings presentation for Woori Financial Group for 2022.

Good afternoon. This is Woori Financial Group President, Chun Sang-Wook. I will now present the fiscal year 2022 performance of the group. Please turn to Page 3 of the material that is available on our website. First, let me discuss the net income. For the full year of 2022, Woori Financial Group's net income was KRW3,169 billion. This is a 33.7% increase year-over-year. This healthy performance is the result of stronger profit generation capabilities, stable management of our [indiscernible] and cost control efforts. For the fourth quarter of 2022 alone, our net income was KRW508 billion. Next moving on to net operating revenue. The 2022 group net operating revenue was KRW9,846 billion, an increase of 18% Y-o-Y. Net interest income was KRW8,697 billion, while non-interest income was KRW1,149 billion. Due to efforts to improve our profit structure and provided by IR benchmark rate, group interest income grew consistently quarter-over-quarter. In addition, despite market uncertainties, non-interest income showed solid performance driven by core fee income as our subsidiaries focused on their core operations. Moving on to expenses like SG&A and credit costs. The Group's 2022 SG&A was KRW4,535 billion, representing an increase of 9.3% Y-o-Y, but the cost income ratio was 44.4%, which is a 3.1% point decrease versus the previous year. Groupwide efforts to control costs have been leading to the improvement in our cost income ratio. In spite of concerns of an economic recession, we have proven our stable risk management capabilities. The Group's 2022 credit cost was KRW848 billion and the credit cost ratio was 0.25%. Next let me discuss our dividends. Today, the BOD of Woori Financial Group in light of wide range of factors, including the 2022 financial performance and the Group's mid-term plan decided and disclosed a per share dividend of 2022 of KRW1,131 per…

Good afternoon. I am the group's CFO, Deputy President Lee Sung-Wook of Woori Financial Group. Based on the recent favorable performance forecast of major financial holding companies, we are witnessing rising demand and expectations for increased shareholder return in the market. Therefore, I would like to take this opportunity to elaborate in detail the group's capital management policy and the direction of our shareholder return policy that we have been preparing through continuous engagement and communication with the market. Please refer to Page 19. For your reference, this material was devised based on the discussion at our Board of Director proceedings. As President Chun Sang-Wook also mentioned, the 2022 year-end dividend is KRW981 per share and when including the interim dividend of KRW151, it is KRW1,131 with an annual dividend payout ratio of 26%. This is a KRW231 or 25.6% increase from last year's dividend of KRW901 per share and the dividend yield is at 8.8%, which is expected to be the highest amongst our competitors. The group has been continuously communicating with the market about actively promoting various shareholder return policies within the scope of maintaining capital adequacy. And this time around, we would like to definitize our approach to base our policy on CET1 ratio and push ahead with from this year and onwards, a shareholder return policy that takes into account the total shareholder return rate that includes dividends and share buyback and cancellation. The current regulatory requirement for common stock ratio was 8.0%. And when the countercyclical buffer of 0% is imposed at the maximum of 2.5%, it is 10.5%. Our provisional common stock ratio at the end of last year was 11.5%, which is significantly higher than the regulatory requirement. However, considering the possibility of rapid changes in the financial environment and deploy the role…

So now we will start the Q&A session. [Operator Instructions] So the first question will be coming from Daishin Securities. It will be Mr. Park Hye-jin. So please go ahead with your question.

So yes, this is Park Hye-jin from Daishin Securities. There are two questions that I would like to ask you. The first question is with regards -- first, I would like to thank you for your explanation about your capital management policy. If you look at the earnings calls of other companies, as you have just mentioned, for the CET1 ratio for the buffer, I think that was 150 basis points to 200 basis points that they are all taking into consideration. So in terms of the CET1 target, if we exceed more than 12% on the CET1 target, when do you think that a natural timing would be? And the second question is that if we look at 2023 in terms of your net interest margin outlook, what would that be?

So thank you for your question. And maybe if you could give us a few couple of -- a short period of time while we prepare for your questions.

Yes. This is the CFO, Lee Sung-Wook. And in the fourth quarter, if you look at our capital adequacy versus the end of September, we actually had an above – that was 63 (ph) basis points, and that means that there was an impact of KRW170 from the actual exchange rate difference and also the increase of risk weighted assets as the changes in the interest rate and we took active risk management capabilities. So as a result of that, for the capital adequacy ratio in itself, there was a significant improvement versus September. So going forward, when will we be able to reach 12% in the CET1 ratio? As we have mentioned during our dividend policy, we do think that on asset growth, that would be around 4% to 5%. So that means that there will be around 20 basis points to 30 basis points improvements taking place next year. So as a result of that, we do expect that, of course, there can be some volatility within the market environment and we don't know what will happen going forward. But we do think that as of the end of 2024, that is the timing at which we will be able to achieve our target level. In terms of our NIM outlook and maybe if I could talk to that question also. So if you look at 2022, there was a continuous increase in the interest rate. And so as a result of that, there was an increase of around 1.59% in the NIM, which is around 20 basis points higher than that. And if we look at the situation during the fourth quarter, it was at 1.68%, which was a 6 basis point increase Q-o-Q. So we do think that going forward, if you look at our expectations in terms of the monetary policy trend, it is slowing down and the long-term market rate has also started to fall on. In addition to that, if we look at the -- there is a lot of core deposits that have been moving over to other products. So as a result of that, we do think that there are -- the one question (ph) in our margins. So if you look at October during the conference call at that time, we did said that the 1.7% target or above would be what we would be able to achieve for this year. But if we look at the full year, we do think that if, as mentioned before, the slowdown in monetary policy, also the core deposits slowing down and all things taken into consideration, we think that we will be at the upper range of the 1.6% level in terms of our year-end performance. Thank you very much.

Yes. Thank you very much. So the next question will be coming from NH Securities, it will be Jung Jun-Sup. So please go ahead with your question.

Hi. Yes. Thank you. I’m Jung Jun-Sup, [indiscernible] Securities. Thank you very much for this opportunity. I have two questions. For the first question, as you have already mentioned with regard to CET1. So this year, there are many macro factors that we have to look into, but especially Basel III. I don't know that it's going to be most stringent. So with regard to that, what kind of impact do you think it will have on the bank or the financial group? Just some more information on that is my first question. And my second question is, as we refer to the other earnings calls from other groups, in the fourth quarter, we've seen a great increase in credit cost, there could be many reasons behind that. And depending on the group I know that in terms of capabilities to manage risk, it may differ, but you can see that for our credit costs and corporate activity, it increased versus previous quarter, but it wasn't a great jump. So in the future, with regard to provisioning, I would like to go and ask for your reference on the outlook for provisioning?

Yeah. I am Jung Seok-Young, in charge of risk. So let me first answer your first question with regard to the Basel III, the credit risk cost that would be introduced and what kind of impact that will have on our capital. So as of the end of January, or as of the end of December, we've looked into this tentatively. And as for the bank, it will be a 30 to 40 BP improvement effect. And in this financial holding, it will be 10 to 20 BP improvement effect. But of course, in the first quarter, we will have to go into the calculation once again. But tentatively speaking, unlike other groups, based on Basel III standards, our capital ratio, we think will improve And the second question has to do with credit costs for provisioning. Is that correct? So with regard to provisioning, as of last year, in the case of last year, in consideration of the future economic outlook and whether we can actually absorb vender losses what we wanted to do was strengthen our management. So it was about KRW270 billion that we have added in provisioning for the group, and it will be, as was mentioned in the earnings call, it would be about a 20 BP increase in the CCR and the 25 BP in total last year. But this year, as you all know, with the rate hikes, it had an impact on retail, SOHO and also for SMEs and it is to have an impact going forward. So that may lead to a sluggish economy and then it would, of course, exacerbate the earnings for companies, and we believe that it would be about 25 BP of credit cost that would have to increase due to the economic conditions. Thank you.

The next question we will take is from Hanwha Securities, Kim Do Ha from Hanwha Securities. Please go ahead.

Yes. Thank you for the opportunity to ask question. I would like to ask an additional question about your capital plan. So on CET1, you did break it down into three different areas. And so I think that you're saying that the break is about 10% to 12% or above 12% and then when it's under then 10.5%. So with regards to the possibility of being under 10.5%? I do think that, that could also be a situation that may take place going forward because if you do acquire security arm and it's a very attractive asset. And I do think that there could also be an issue that there could be a temporary fall under 10.5%. Of course, I don't believe that, that would be an issue. But if it does follow under 10.5%, what happens to your capital management plan? What would be the situation there? And secondly, in terms of your dividends, I do think that you're saying that you want quarterly dividends to take place to try to enhance the overall visibility of dividend, but what would be the situation and how would that take place in terms of the actual?

So maybe if you could just wait for a second, please. So for your first question about what happens when our CET1 falls under 10.5%, in actuality just a quick to the answer, I think that if it goes down to 10% or below 10.5%, realistically, I don't think that this would be possible because right now, it's 11.5% as of now. If it was a deflation of around 1% point then that would be the buffer that we would have. If it's 1%, then that means that in terms of risk-weighted assets, that's around KRW20 trillion in assets, corporate. So that would mean that it would have to be a very large-size securities company. And if it's just a midsize, then in actuality, I think it would have an impact of around 50 basis points to 60 basis points. So we don't believe that in actuality the CET1 would fall under 10.5%, and there will be a very strict internal management about this topic, so I don't think that this should be concern. And about the quarterly dividend payout in terms of what the size would be and what the way going forward would be, it has not been determined yet. But in general, I do think that on a per year basis on a per quarter basis, this is something that needs to be at the BoD level. But I think that the breakdown will probably be like four to one in terms of the quarterly payments versus the year payments, but this again is something that we will have to discuss and then determine.

So this is Chun Sang, the President that is in charge of the group IR. So maybe just to elaborate a bit on the first question to answer, in terms of the numbers, of course, the CFO has talked about the numbers in themselves, but I do think that we are looking at M&A opportunities, and we are interested in acquiring securities or brokerage firms. But one of the main principles that we have is that we will maintain an appropriate level of capital adequacy ratios and also be able to have enough room to look at shareholder returns. So that would be the basic fundamental principle. So as a result of that, for the scenario that you just mentioned, we do not believe that, that would be a likely scenario taking place. Thank you very much.

Next question is by Baek Doosan from Korea Investment & Securities. Please go ahead with your question.

I am Baek Doosan from KIS. I have two questions. So first, with regard to AC, it's about 105% and I can see that there is significant buffer with the LCR and then I think that in the case of NIM, by utilizing this, we may be seeing NIM to turn to a positive choice? Is there a possibility on that. I would just like to see that, I'd like to understand the exposure by subsidiary and how you are to manage this exposure? Thank you.

Thank you. Just bear with us for just a moment, as we prepare to answer your question.

I am Lee Sung-Wook, CFO. So with regards to LCR, 105%. So you can see that we still have a significant buffer versus the requirements. Last year, LCR due to the volatility so that we actually had a significant amount, but considering the capital market and the situation we don't think that it will be the major issue to lower LCR because the situation has stabilized. So what we're going to do is really we can -- we will probably see an improvement in NIM and also to make sure to protect the downside.

I am Jung Seok-Young, in charge of Risk Management. So you asked a question on the PF or real estate. As of the end of last year, in the group, it was about KRW2.8 trillion of exposure. And you can see, it was about 1.7% and versus total it's slightly higher. And then versus the total loan book, it's about 0.8%. So it's less than 1% in terms of the proportion. So you can see that the exposure is not that significant. And particularly, out of the KRW2.8 trillion, [indiscernible] guarantee is about KRW1.7 trillion. So you can see that with regard to the risk exposure, the PF risk is about KRW1.7 trillion basically. So in the case of the group, the real estate PF starting from the second half of last year, we've been closely monitoring this and managing this with our subsidiaries and especially the real estate bridge loan where the local projects, we've been very much stringent and prudent on loan management, and we will continue on with such monitoring and assessment and management. And with the existing PF, we will be following the policies of the government. And it is for what we were going to do is at the time we will find a way to enable settlement in installments and other alternatives where it can be paid back. And then in the case of the subprime, especially for areas where there are untold loss and where there is a delay in construction. So in the case of these real estate projects that have issues, we're going to speak with the creditor group to find the way for restructuring or for any other ways to service the debt. So we will be looking into the right responses and policies to respond accordingly. Thank you.

Yes. The next question will come from DS Investment Securities, [indiscernible]. So please go ahead, with your question.

Yes. Thank you. I am [indiscernible] from DS Investment Securities. Thank you for the opportunity to ask questions. There are two questions that I would like to ask you. First is, with regards to your capital management plan. If you look at other banks right now, I do think that in terms of the overall stance that they are looking at rather than paying a cash dividend doing a share buyback and try to provide shareholder return in that effort. So from our stance in terms of our cash dividends versus the dividend -- the overall share buyback what is the direction that you would be moving and going forward? And how much do you believe each area would represent? And the second is that in terms of your quarterly dividend once the BoD has approved, when would the quarterly dividend actually start? What would be the timing for that?

So if you give us such a period of time, if we could prepare and then answer that would be appreciated. Thank you.

Yes. So this is the CFO, Lee Sung-Wook. So in terms of the 26% dividend payout ratio and also the 4% treasury share buyback that we're going to do for this year, in actuality for our investors on the dividend side, there are some that for cash dividends and for long-term investors, some actually prefer share buybacks. So in actuality, we do think that there needs to be an appropriate balance. So around 26% or so would be the dividend amount. And then if we do have more capital room then we are planning to look at trying to increase the amount of share buybacks that we do and a portion of that going forward. And secondly, in terms of the quarterly dividend payouts, this year, it would be newly introduced in terms of our policy. So for the first quarter, we do think that there could be a very steep slowdown in the economy. So as a result of that, we think that maybe towards the second quarter would be the first quarter in which we would start our quarterly dividend. This again is not determined yet. But once we discuss at the BoD and finalize, that's the general sense that we have as of now.

So due to time, I think that we can just take a couple of more questions. Shim Jong-Min from CLSA Securities. Please go ahead with your question.

Hello. I am Shim Jong-Min from CLSA. Thank you for the opportunity. I have two questions. The first question has to do with asset growth. You've mentioned that it will be managed at 4% to 5% levels. So again, in the case of loan growth, would that be lower than that, would that understanding be correct? And with regard to loan growth for next year, could you give us some more information on that? Thank you. And the second question has to do with M&A. So I know that in terms of the securities firm. If there are maybe a medium or large-sized security firm, that depending on the candidate, I note that recently, there was some small venture capital M&A strategies that made your strategy at the current time. So could you give us some more color on the M&A strategy that you have for the group? Thank you.

Yes, with regards to asset growth, CFO Lee Sung-Wook will answer the question.

In 2022, it was already disclosed. So the group assets overall, you can see that it's 6% for banks to support SMEs; and for non-banks, it's about 7.5% growth overall. And in the case of one loan, 8.5% increase for corporate and decreased 3.6% for mutual loans, there was about a 2.5% increase year-over-year. And next year, overall, I mentioned that we'll be managing at 4% to 5% levels and based on risk-weighted assets, that's the case. But in actuality if we look at the banks, it would be -- 4% would be the stable guidance that we have because banks take on the lion share. So to recap, the one denominated loans would be about 4% increase that we'll be seeing going forward. Thank you.

I am Chun Sang-Wook, in charge of IR. Let me give you some information on the M&A possibilities. As I've already mentioned, with regard to our M&A principles. We have two principles. First is within the capital adequacy ratio, and it's about finding ways to maximize shareholder returns. And of course, it's not about -- we don't have a set scale or volume or size of the target company. But it's about being able -- that's favorable to create synergy as a wealth management company, for instance, and there would be particularly a retail-based type of securities firm that would help us provide balanced profitability. And as mentioned, there would be within these two principles in terms of identifying the right target that befits the criteria. Thank you.

So today, due to the time for additional questions, I don't think that there are any other requests, so we will wrap up the Q&A session here. So if you do have any other questions, please do not hesitate to contact our IR team, and we will make sure to get back to you. So with this, we would like to wrap up the 2022 Woori Financial Group earnings conference call. Thank you very much.