Good afternoon. This is Han Hong Sung, Head of IR Department at Woori Financial Group. I would like to express my sincere gratitude to you all for taking the time to join Woori Financial Group's earnings call today despite your busy schedules. In today's conference call, we have with us the Group CFO, Mr. Lee Sung-Wook; CTO, Mr. Ouk Il-Jin; CRO, Mr. Park Jang-Geun; Head of M&A and Business Portfolio, Mr. [indiscernible] and Woori Bank's Head of the Global Business, Mr. [indiscernible]. Today's call will begin with a presentation by the group CFO, Mr. Lee Sung-Wook followed by a question-and-answer session. Additionally, I would like to inform you that simultaneous interpretation is available for our international investors. Let us now begin Woori Financial Group's Third Quarter 2023 Earnings Presentation.

Good afternoon. I am Lee Sung-Wook, CFO and Head of the Financial division at Woori Financial Group. I will provide an overview of Woori Financial Group's performance for the third quarter of 2023. Please refer to Page 3 of the third quarter management performance material available on our website. First, let me elaborate on the group's net income. Woori Financial Group's cumulative net income as of third quarter of 2023 decreased 8.4% year-over-year to KRW 2,438.3 billion. While the group maintained strong earnings performance, this decrease can be attributed to preemptive expenses such as additional provisions in the second quarter. Meanwhile, third quarter net income increased by 43.9% quarter-on-quarter, reaching KRW 899.4 billion, which is in line with the performance year-on-year. This Q3 performance demonstrates Woori Financial Group's solid revenue generation and stable risk management capabilities that have once again proven to the market. Let me now move on to costs, including SG&A expense and credit cost. The group's cumulative SG&A expense amounted to KRW 3,048.4 billion, up 3.8% year-on-year. However, cost-to-income ratio remained stable at 40.6%. Despite ongoing global instability and resulting inflationary pressures, the group continues its efforts to enhance management efficiency. The group's credit cost as of third quarter recorded KRW 1,078.6 billion, with credit cost ratio of 0.41%. While large-scale preemptive provisioning led to a temporary but significant increase in credit costs in the second quarter, third quarter credit cost stands at KRW 260.8 billion, managed in a stable fashion within the expected range of current credit costs. As economic uncertainty is increasing, some preemptive provisioning took place in the third quarter. However, with improved performance of managed companies led to write-backs or reversals in provisioning, placing the group's key quality indicators well within manageable limits. Next is on the capital ratio and shareholder return policy.…

[Operator Instructions] From Hanwha Investment & Securities, Kim Do Ha, you have the floor.

I have 2 questions. So first of all, with regard to provisioning. I think that with regard to Kumho Tire I would like to ask how much was the write back in terms of the amount? And you've also mentioned about LGD. So in the fourth quarter, is there -- especially in terms of the area of collateral, are there additional provisioning plus alpha that would be necessary? And what would be the expected amount? And with regard to loan loss reserves, something that I would like to add is that next year, with regard to normalized CCR, how do you see the level for next year? And the second question that I have is with regard to RWA with regards to exchange rates and with corporate loans, I believe that it seemed higher than usual. So would we still be able to manage capital ratio? What would be your plans? And I believe there's a lot of interest in terms of total shareholder return. If you can give us more information on maintaining capital ratio, that would be great.

Yes. Thank you very much for the question. And please bear with us for a moment as we prepare to answer your question.

Good afternoon. I am Ouk ll-Jin in charge of Risk and the CRO. Let me answer your question. So with regard to Kumho Tire write-back in September, KRW 70 billion was the reversal that took place. With regard to credit LGD there was KRW 26 billion preemptive provisioning that took place. And in addition to that, in terms of the loans with the rolling of maturity, there was KRW 59 billion, which was on the base of COVID-19. So it was around KRW 85.5 billion of provisioning that was added to our loan loss reserves. In the case of the fourth quarter, in the case of real estate LGD out of the collateral LGD, within the fourth quarter, we're going to provide provisioning. We haven't yet decided on the amount. However, we believe that it will be within KRW 100 billion. And next year, with regard to CCR, the normalized CCR, we're thinking of 35 bps for next year. Yes. And as you have mentioned, Q3 risk assets increased by KRW 7 trillion. And one of the reasons behind this is that if you look at the bank asset growth, approximately KRW 3 trillion to KRW 4 trillion has been added, and the exchange rate impact -- as of June, there was an impact, which have added about KRW 1 trillion to KRW 2 trillion. So basically, as you have mentioned, corporate loan assets increased. And compared to retail corporate loans, their RWA is higher. Therefore, relatively speaking, our risk-weighted assets are to increase. However, in order to manage that, in terms of corporate loan growth, well, not only that, but in terms of non-use credit lines, retail loans and especially nonbank loans where risk management will be key would be areas of our focus, and we'll be actively managing our capital ratio going forward. So all in all, our target capital ratio is something that we would like to maintain in the long run, and we'll put in our best efforts to do that.

Next question is from Jeong Tae Joon from Yuanta Securities.

I am Jeong Tae Joon from Yuanta Securities. I have a question about M&A. In the press there is talk of [indiscernible] Savings Bank acquisition. And have you reviewed anything in detail, please share that with us? And could you share with us your future M&A strategies.

I am [indiscernible] and you did ask about the acquisition of [indiscernible] Savings Bank and whether we are reviewing that option. Yes, we are reviewing this and we do have Woori Savings Bank, and it's based in the Chungcheng area. And at FSC they gave us some -- and one of the possible candidates for M&A is they gave us some recommendations as to acquisition of further Savings Bank, where -- and as for the future M&A strategies, is there any change compared to the past it is still consistent savings bank, securities, insurance, if there are good candidates, then we are going to go for the acquisition.

Next question is from KIS, Mr. Baek Doosan.

I am Baek Doosan from Korea Investment & Securities. I have a question with regard to your margins. In the case of this quarter, with regard to the margin. I would like to understand the impact of that. And recently, with regard to deposit -- time deposits, I do know that it's nearing maturities. So with regard to that and also with the increase of market rates in terms of management returns and loans, I would like to understand for this quarter? And going forward, what would be the NIM prospects of the group.

I am Lee Sung-Wook, CFO. Recently with regard to Iran deposits, we had around KRW 1 trillion. It was a low rate deposit, but it did have an impact on NIM. And the reason why for the decrease of NIM had to do with the rates -- interbank rates. And then the funding rates also increased quite significantly, as you have indicated. And in addition to our core deposits, we've been seeing this increase in retail, but because of the high interest rates, it showed that the proportion of core deposits also went down. So the NIM for 3Q was 1.5. So it was a decrease of 4 bps Q-o-Q. And in the case of [ term ] deposits compared to the previous quarter, it increased by 6 bp and also KRW loans, the rates increased by 3 bps. So with regard to the margin, it decreased by 3 bps between deposits and loans for KRW. So with the interest rates on the rise, we believe that the current situation in the fund rates will continue on. And then with regard to the margin and disclosure-related requirements and also the loan service and reservicing service would, of course, lead to further competition amongst the banks. Therefore, we believe that there will be downward pressure continuously on NIM. But as was mentioned, we have corporate loans with higher interest rates. Compared to retail, corporate loans have a higher interest income. And in addition to that, if we do increase corporate loans, we believe that we will have more active corporate customers, which will help us minimize any NIM decrease through the assets coming in from the corporate side. So as you have already mentioned, the fourth quarter of [ 2007 ], it was 1.55%, but we believe that the margin decrease will be more modest for the fourth quarter, but it will go down further, and we believe that it will be in the lower side of 1.5% or so. And in 2024, what we anticipate -- well, it's very difficult to anticipate, but we believe that 1.5% would be what we would like to maintain and safeguard. We'll do our best to do that.

From NH Securities, we have Jung Jun-Sup on the line.

Hello. I am Jung Jun-Sup from NH Securities. I have 2 questions to ask of you. One is, according to the recent media global contribution is 25% and compared to other financial groups, what is your differentiation strategy for your global business? And what will -- how this will affect your capital ratios? And the second question has to do with shareholder return. And as you mentioned earlier, you now signed an agreement with the stock transfer with KDIC and that will probably take place next year as treasury buyback? And is this included in your next year's shareholder return? So including that, what will be the shareholder return ratio? What is your target?

I [indiscernible] in charge of Global Business at Woori Bank. And as for the contribution of global profits our differentiation strategy vis-a-vis other financial groups is we want to be selective, and we want to target in areas where we can be more profitable and we want to increase the weight of the business in those key strategic markets. And as for how that will impact the capital ratio with the Basel III adoption this year, recapitalization and M&A -- well, compared to the previous years, the impact has reduced by 1/3. There is KRW 500 million of recapitalization and the impact was about 9 bps. So that has been lessened compared to the past. So going forward, I think we can be more proactive in our M&A efforts. Yes. You did talk about the global business, and I'd like to add to that. The 25% is our long-term target and in the global businesses, the top 3 areas will expand, but we will still be selective and be concentrating and that will not affect the overall capital ratios. And as for the dividends by acquiring the KDIC shares KRW 100 billion of treasury buyback took place. So KRW 110 billion and probably early next year, when the final decision is made, the treasury buyback maybe we could replace that with the acquisition of shares from KDIC. It's not been finally decided yet. And that's how we will figure out the shareholder return ratio. As of now, the 30% is being maintained as we speak. The CET1 ratio as of September end was 12.1%, and we cannot predict accurately year-end, we have not exceeded much higher than 12%. So we believe that the shareholder return of the TSR will be around 30%, and we have some buffer capital. If that is in place, then we will be reviewing further options.

Seol Yong Jin from SK Securities.

I want to ask a question with regard to dividend for this year. In Q2, you've had a preemptive provisioning, which has impacted the performance and through the acquisition of the Investment Bank and BC right to issue common stock. And I think that this has actually led to an impact on the DPS. So I'd like to understand how are you going to deal with DPS going forward for this year? So some more information on that, please.

I'm Lee Sung-Wook, CFO. At year end the quarterly dividend was KRW 360 billion, and we have the year-end dividend to go -- so if we do go for TSR, buyback of treasury stocks and dividend would be all brought together and taken into consideration and currently, the DPS is KRW 360 billion. And in 2Q, the provisioning did take place, as mentioned. And therefore, there would be an impact coming from this preemptive provisioning. However, we still have to discuss this over with the regulatory body, but we will do our best to make sure that we can maintain the DPS.

[indiscernible] Motor Securities.

I only have one question. Starting this year, it seems that there are some changes made to your dividend policies for year-end dividends, will that be changed? Could you share your plans with us.

Hello, I'm the CFO. Last year I did talk about -- and we did improve the dividend process by changing the articles of incorporation. And as was just mentioned, that will be the after confirmation of the dividend by the investors, then they will be making the investments accordingly. So following that, starting with this year's dividend, we will implement the revised dividend process for the year-end dividend. And for the quarterly dividends. The Capital Market Act is being revised. So after the revisions are completed, we will be adjusting the articles of incorporation next year. And if that is delayed, then it will be reflected accordingly to the schedule.

The next question is from Won Jaewoong of HSBC Securities.

I have 2 questions. First with NPL coverage ratio. It seems that it's going down quite rapidly. So I would like to understand was there a reason why there is an increase in the substandard and below loans. And with regard to delinquency rate, I can see that it's also on the rise quite quickly. So I would like to understand what are the reasons behind this increase in delinquency rates?

I am Park Jang-Geun, let me answer your question. So with regard to NPL coverage ratio, it's 180%. And yes, there was increase in substandard and below. And this was not in the bank side more so on the nonbank side that where we've seen the increase. But in the nonbank side, we have some credit loans and real estate PF, where we've been seeing delinquencies. So with regard to that, the amount with the scale of the PF is not that big. And then the credit loans ratio is not that high, the proportion. So we're thinking of write-offs on that, which will actually in terms of NPL coverage ratio and NPL it can be managed within manageable limits. And then delinquency in banks, there wasn't a great increase on the bank side. However, in the retail side and corporate side, there were interest costs due to the high interest rates. So especially marginal companies have actually suffered from that. But in terms of the size or scale, there wasn't a great increase on the banking business. And as I already mentioned, the high interest rates and with the persistence of the rates that has actually been overwhelming for the borrowers that had led to the rate to increase.

There are no more questions on queue. With this, we would like to end the Q&A. If you have any additional questions, please contact the IR team, and we'll do our best to answer your questions. With that, we will conclude the earnings presentation for Woori Financial Group Q3 2023. Thank you. [Statements in English on this transcript were spoken by an interpreter present on the live call.]