Prepared remarks
Good afternoon. I am Han Hong Sung, Head of IR at Woori Financial Group. Thank you to everyone for taking the time to participate in today's earnings call for Woori Financial Group. On today's call, we have the Group CFO, Kwak Seong-Min; Group CSO, Lee Jung-Soo; Group CDO, Oak Il-Jin; and the Group CRO, Park Jang-Geun. We will begin with the Group CFO, Kwak Seong-Min presenting on the earnings, followed by a Q&A session. Please also note that we're providing simultaneous interpretation during the call for the benefit of overseas investors. With that said, let us start the presentation on the first quarter 2026 earnings for Woori Financial Group.
Good afternoon. This is Kwak Seong-Min, the CFO of Woori Financial Group. Allow me to present on the earnings results for Woori Financial Group for the first quarter of 2026. And please turn to Page 2 of the material, which is available on our website. The group's Q1 2026 net income was KRW 603.8 billion, coming in flat year-over-year driven by solid growth from Corporate Finance, particularly from the advanced strategic industry sector, and five consecutive quarters of uptrend in the bank's NIM. Interest income displayed steady growth. At the same time, record-high fee income and the inclusion of the insurance business drove sizable noninterest income, which led to balanced top-line growth. However, due to ERP at the bank at the beginning of the year and one-off provisioning related to the local subsidiaries of the Global division, and FX loss and downsized gains from securities following sharp movements in the FX rate and the market interest rate during the quarter, net income somewhat underperformed market expectation. But with such factors excluded, the group's running basis income was around KRW 900 billion and, as the impact on bottom line was due to volatilities in the financial market and temporary in nature due to the external environment, we expect to see recovery once the market indicators stabilize. Next, on the CET1 ratio. Q1 2026 preliminary CET1 ratio for the group set a historical record at 13.6%, increasing 71 basis points year-to-date and 115 basis points from last year. The sharp market volatility was caused by external uncertainties; on the back of group-wide capital management efforts, i.e., asset rebalancing and revaluation of the group's tangible assets, we were able to achieve the above 13% CET1 ratio target ahead of the planned timeline, which helped to secure a steady foundation for Woori Financial Group to enable both sustainable and stable growth and shareholder returns. Today, the Board of Directors of Woori Financial Group decided on a quarterly dividend payout of KRW 221 per share, which is a 10% increase year-over-year. And as was the case last time, the full amount will be nontaxable. Also in light of sufficiently high capital ratio, we expect additional share buyback and cancellation to be most likely during the second half of the year in accordance with the corporate value enhancement plan announced at the start of the year. In terms of nonbank competitiveness, growth momentum is building following the completion of the setup as a comprehensive financial group. Income from nonbank subsidiaries, including card, capital, insurance and securities, was up 185% year-on-year, widening the nonbank contribution from 9% last year to 25%. For Woori Investment & Securities, the decision was made for KRW 1 trillion of capital increase initiating the phased capitalization plan. Tongyang Life will be made a fully owned subsidiary through which we intend to streamline the governance, which will drive efficiencies in business management and solidify insurers' competitiveness inside the group. Next, group performance in greater detail. Please refer to Page 3 of the material. First, on net operating revenue and the NIM. Q1 '26 net operating revenue came in at KRW 2.7577 trillion, underpinned by diversified revenue sources and stable earnings capacity; that was a 5.6% year-over-year increase. On the back of productive finance initiatives and ensuing growth driven by corporate finance, NIM continued to improve with interest income up 2.3% year-on-year, reporting KRW 2.3032 trillion, sustaining a solid uptrend. Following the completion of the portfolio as a comprehensive financial group last year, diversified revenue sources led to tangible results, driving noninterest income up 26.6%, a sizable increase powering the earnings growth. Bank NIM in Q1 was 1.51%, up 2 basis points quarter-on-quarter and 7 basis points year-over-year, respectively. Including the card business, group NIM reported 1.76%, up 6 basis points versus last year. At the start of the year, rate cut expectations and money movement on the back of a bullish equities market led to concerns of a potential NIM decline, but the uptrend continued on a rise in market rates driven by the broader backdrop and profit-focused lending management and funding cost efficiency efforts. Going forward, we will continue to expand core deposit base and actively manage ALM to sustain a steady margin trend. Next is on the loan book of the bank. As of end of March 2026, bank loans totaled around KRW 338 trillion, up 1.2% year-to-date. Corporate loan growth was driven by advanced strategic industry, supported by productive finance, expanding 2% to report KRW 184 trillion. Solid demand from the nation's core industries, such as semiconductor, defense and biosector, drove growth of lending to large corporations by 7.5%, while we saw a marginal dip quarter-on-quarter for SME loans with continuing impact from asset rebalancing, focusing on property leasing businesses. We, however, believe that going forward, as large-scale projects start to kick in, funded by productive financing such as the National Growth Fund, loans to SMEs in the back end will further pick up. For household loans, on the back of active real estate market stabilization policies by the government and stringent loan management, the loan book for this segment was flat at KRW 151 trillion. With Woori Financial Group's leveled-up capital capacity and by actively leveraging the group's competitiveness in corporate finance, we will ramp up financing support towards the productive segment, and we'll also continue asset rebalancing to navigate the uncertain financial environment. On the retail side, we are aligned with the government's multifaceted efforts to control household loans and plan to drive growth that is adequate while complying with the aggregate capped target. Next, I will go over the group's noninterest income. The group's Q1 2026 noninterest income jumped by 26.7% year-on-year to KRW 454.6 billion. In Q1, due to sudden FX and market rate increases, there were some downside factors. However, as the group's portfolio was completed last year, profit diversification in nonbank subsidiaries' marketing efforts led to a stable level of group-wide businesses. In particular, core fee income, which continuously grew every quarter, increased by 13% year-on-year, to KRW 576.8 billion, which is a record high for a quarter. Woori Financial Group will further work to continuously expand the bank's wealth management business and the HQ's marketing activities while the nonbank subsidiaries strengthened their core competitiveness. The securities arm will consistently implement the capital injection plan to enhance market position and strengthen the group's capital functions. The insurance business will seek to stabilize its financial structure while expanding mid- to long-term profit base. The asset management arm is establishing a fund related to product finance and with the transfer of insurance LDI assets should achieve economies of scale to become a top 10 asset manager in terms of AUM. Also, based on stronger competitiveness, joint CIB underwriting, integrated WM branches and stronger LDI of the insurance are just some examples of collaborative full-fledged synergy creation. By doing so, the nonbank subsidiary contribution to profit should improve. We will move beyond an interest-income-oriented additional profit structure to gradually increase the noninterest income profit contribution. Next, I'll go over the cost. Please refer to Page 4. I'll go over the SG&A expense of the group. Q1 2026 SG&A expense of the group stood at KRW 1.4228 trillion, which is a 9% year-over-year increase. This brings the cost-to-income ratio to 45%. In this quarter, we incurred ERP-related cost of KRW 183 billion. Also, the SG&A expense of the insurance company, which came under the group umbrella in the second half of last year, was KRW 25 billion. Also, the education tax hike was another KRW 17 billion impact. In the future, like last year, portfolio expansion can lead to early infrastructure costs, while institutional factors such as the education tax can also have impact. As such, group-wide efforts to boost cost efficiency are being implemented with the great transformation into an AI-based management system. Corporate loan, client consultations, internal control and other key areas should show higher efficiency to improve the cost structure. Group-wide cost-saving efforts include consolidating and enhancing efficiency of branches and minimizing operating costs. These efforts should enable the mid- to long-term CI target of early 40%. I will now move on to credit costs and asset quality. The group's Q1 2026 credit cost was KRW 526.8 billion; this includes the one-off large-scale provision of KRW 138 billion booked by the bank's overseas subsidiary. While credit costs rose by 20% year-on-year, it decreased by 10% quarter-on-quarter. Excluding the one-off, the group's credit cost is about KRW 390 billion. The credit cost ratio is being managed stably at below 40 bps. In the bank's corporate loans, high-quality assets take up 84.8%, which is a slight quarter-on-quarter improvement. Provisions and provisional reserves to total loans is also robust at 1.6%, evidencing sufficient loss absorption ability. We will continue to supply loans to innovative growth companies and regional leading companies while increasing guaranteed loans and policy loans. We are pursuing a growth strategy in consideration of asset quality. Based on earlier expectations of global and domestic economic recovery, credit cost was expected to decrease. However, the geopolitical risk in the Middle East, leading to higher oil prices and exchange rates, have raised concerns on the slowing down of the real economy, emphasizing the need for asset quality management. For the past two to three years, the nonbank subsidiaries have implemented an asset cleaning program. In the future, the group will concentrate on areas of asset quality concerns and conduct preemptive risk management on troubled sectors and vulnerable borrowers. We will also actively implement asset quality improvement measures on global business to achieve our financial plan of 20% reduction of credit cost against last year and a credit cost ratio of around 40 bps. I'll now move on to capital adequacy and the shareholder return policy on Page 5. As of March 2026, the group's preliminary CET1 ratio is expected to be around 13.6%. In order to address the difference between the book value in the financial statements and market value and to provide more credible and decision-useful information to the market, the group conducted a revaluation of the land assets held by major subsidiaries. As a result, we recognized a revaluation surplus of KRW 1.8 trillion, lifting the capital ratio by 60 bps. We were able to achieve capital ratios that are higher than peers without a paid-in capital increase. However, independent from this asset revaluation, despite unfavorable market factors such as high interest and FX rates, thanks to company-wide capital management efforts, this quarter's CET1 ratio, even without the revaluation, would be 13%. In result, the goal of achieving the CET1 ratio of 13% in early 2026 and then to stably maintain it at 13.2% has been effectively delivered in just one quarter, proving our commitment to enhancing corporate value. In the future, we will continue the RoRWA-based asset rebalancing efforts in a more meticulous and strategic manner. While disposal of the group's idle assets should further reduce the RWA, we will carry on multifaceted efforts to boost the capital ratio. In addition, based on such capital ratios, productive finance and strategic investment by nonbank subsidiaries will be actively pursued to establish a virtuous cycle of improved ROE and stronger shareholder return. Today, the board announced a quarterly dividend of KRW 221 per share. The record date is May 11. Following last year's dividend, this quarterly dividend will also be nontaxable, which is unique to Woori Financial Group in our sector. Individual investors will receive the full amount without any tax. It is even excluded from the comprehensive financial income tax, further significantly enhancing the effective dividend yield. The treasury stock purchase and cancellation program announced earlier this year will also be completed by June. Going forward, by maintaining a high dividend payout ratio and the competitive dividend yield, we will further strengthen our competitiveness as a leading dividend stock in the financial sector while also diversifying shareholder return methods to strengthen our shareholder return policy. Thus, before today's earnings call, the group made some important disclosures. I already spoke about the asset revaluation and quarterly dividends. In addition, the Board of Directors of the group today approved an additional capital injection of KRW 1 trillion into Woori Investment & Securities. The securities industry, thanks to the integration of the domestic capital market, is pursuing diversified growth, not only in the traditional brokerage business, but also in the capital-based IB business and the supply of venture capital. In response to these market trends, Woori Investment & Securities' paid-in capital raise will gradually strengthen key business infrastructure such as capital, talent and licenses to strengthen its core competitiveness. Meanwhile, we will also work to become a Mega IB. In relation to insurance, we have fully incorporated Tongyang Life as a wholly owned subsidiary with the resolution on share exchange. By establishing a governance structure aligned with the purpose of a financial holding company, we expect to boost management efficiency as well as to increase earnings as a result of the additional equity acquisition of Tongyang Life. Above all, we expect this to lay the foundation for pursuing business integration between Tongyang Life and ABL Life. As we have done thus far, by staying ahead, we will continue to make every effort to enhance corporate value through diverse measures. This will conclude Woori Financial Group's Q1 2026 earnings call presentation. Thank you.
Operator instructions: We will take the first question from Hanwha Investment Securities. Do Ha Kim.
Questions and answers
I have two questions that I would like to ask. First question has to do with turning Tongyang Life into a wholly owned subsidiary. I would like to understand the key purpose behind this move. If you could just provide us with the overall picture, that will be quite helpful. And also, is there any particular reason why you're choosing the timeline as you have chosen, why you are conducting this at this point? Second question is that your earnings actually underperformed our expectation. I can understand that there could be some difference versus the expectation. But in terms of SG&A and the insurance-related issue — if you take a look at the ERP and if you consider the ERP, I think you still missed the market expectations. So I would like to understand why we are seeing that mismatch in expectation, especially for the SG&A line item?
Thank you very much for your question. I understand your question to be on two different topics. Give us just one moment as we prepare for the answer.
Good afternoon. I am Lee Jung-Soo, President in charge of strategies at the group. Responding to your first question: in July of 2025, after we merged or acquired the insurance entity, our key focus was strengthening our insurance business. On the financial aspect as well as the overall sales capacity, we have taken a very detailed review. And based upon what we have learned, we are undertaking processes to improve our capabilities. In that process, we also considered an option of turning Tongyang Life into a wholly owned subsidiary. That decision will provide us with flexibility in business management, and we believe that this was an essential step for us to drive more synergies from that perspective. From a mid- to longer-term perspective, we believe that by turning Tongyang Life into a wholly owned subsidiary, we could actually retain their earnings capacity 100% within the group. Now moving on to your second question on SG&A results. If you look at Q1 2026, the CI ratio is 45%, which is about a 12.4% increase on a year-over-year basis. And if you look at SG&A, on a year-over-year basis, there was an increase of KRW 117 billion. Now if you were to exclude insurance and education tax, that is an increase of 5.8%. As one-off factors, as we've mentioned before, there is KRW 183 billion coming from the ERP impact that's coming from the bank. Last year, there was an ERP-related expense of KRW 169 billion last year. So there is about KRW 12 billion increase. I'm sure this will be the case for our peers as well. There is about KRW 17 billion impact from increase in the education tax. And as you will be aware, for our securities and brokerage business, with the launch last year, we have been in the process of expanding the business, and we have done some new hires. There was also IT-related investments, which amounted to KRW 17 billion increase in the SG&A related to our brokerage business. In July 2025, as we included the securities business, on a year-over-year basis comparison, at the insurance level, there's about KRW 25 billion increase in SG&A. Due to these elements, the SG&A and cost ratio on a year-over-year basis rose, reaching 45%. But in terms of insurance and educational tax, if we were to carve out those impacts, it's still at about 5.8%. So the management does understand that our CI ratio is comparatively higher compared to our peers. That is why we're putting in a lot of effort both from a short-term perspective and a mid- to longer-term perspective. We're really focusing on cutting down on unnecessary spending and also making our branch network as well as our headcount more efficient. As of today, basically, we are putting an effort to consolidate our branches; we consolidated 37 branches as of July 2025. From a longer-term perspective, through AI and digital investment, we will be making the right investments to make our expenditures more efficient. Thank you.
The next question is from Yuanta Securities. Analyst Do-hyung Woo.
I have two questions. First question is about the annual NIM guidance. If you can go over that, it will be appreciated. You have the CET1 guideline at early 13% or the CI guideline at early 40 bps. Does this include the first-quarter one-offs? And second question is about the securities company, the capital injection you are putting into your securities arm — what impact do you expect from the capital injection?
Thank you for the questions. Please give us a second to prepare the answers.
Good afternoon. I am Kwak Seong-Min, CFO, and I'll go over the NIM. It's 1.51%, about 2 bps quarter-on-quarter and 7 bps year-over-year increase. For five consecutive quarters, NIM has been showing an uptrend. Major drivers include the market rate has been going up, so that is the biggest factor. We have been increasing efficiency of funding and increasing core deposits. Also, we have been working on asset rebalancing, so profit generation from our asset base has been showing better trends as well. We believe that this trend will continue in the second half. Asset rebalancing will continue to increase profitability; enhancing efficiency of funding, increasing core deposits are all positive factors to the NIM. However, in the second half, there can be some government and institutional factors. There can be some government regulations introduced from July onwards. Money movement is very visible in the market. So we are preparing to respond to that market trend. But overall, it is a potential downside factor to the NIM. We will do our utmost to prepare for any market trends that can undermine the NIM. The Bank of Korea is expected to maintain the current rates in the second half. If we assume that, the 1.46% annual NIM of last full year can be maintained, and we will try to show improvement — something higher than 1.46% or around that level, I think, will be an appropriate expectation for this year. You asked about the credit costs. In Q1, it was around 53 bps for the group; it is slightly relatively high. One of the bank's overseas subsidiaries booked a one-off provision, so KRW 91 billion increase year-on-year. So that is around KRW 527 billion. But as also mentioned, it's about a 10% decrease quarter-on-quarter, KRW 57 billion. The Indonesian subsidiary's KRW 138 billion was the one-off that I mentioned, so it becomes around a 40 bps credit cost ratio. If you look at the NPL and delinquency ratios, they show a slight upward trend, but our coverage ratio is sufficient. As of year-end 2025, we are above the average of peers and even for Q1 2026, we have higher coverage than our peers. The Middle Eastern conflict causing higher oil prices and the possibility of it being prolonged can impact some of the borrowers and sectors and there are concerns in the market that we are aware of. So we will make preemptive risk management efforts, and the global business of the bank, I think, has largely been cleaned up and provisioned against. So the asset quality of the global business has been enhanced as well. I think 40 bps will be the appropriate expectation for 2026 credit cost ratio outlook. And the total credit cost should be around 20% lower than last year. We will make those efforts in Q2, Q3 and Q4. Today, the Board of Directors decided to inject KRW 1 trillion capital into the securities company. As of 2025, our securities company ranked 16th and after the injection, it will be around 11th in terms of capital base. As I mentioned earlier this year, we are trying to become a Mega IB in the mid to long term. That requires capital injections. Productive finance has become an important issue these days. Venture capital supply by Woori Investment & Securities can increase in the future. Based on the capital injection, the top line of the securities company this year can increase significantly compared to last year. Based on the capital injection this year, I think even for this year, we will be able to outperform the original plan for 2026, and we will be making the utmost effort to achieve that from Q1. Once the sales and marketing base is stabilized, I think in the near future or in the mid- to long-term, ROE can be around 10%. We are actively supporting the securities company. There may be additional capital injections down the road, but we will be making comprehensive considerations, for example, license and other business expansion in that process. With the capital injection, we hope Woori Investment & Securities will be able to have an expanded infrastructure, including talent and capital, so that it can move to become a Mega IB. That is one of the key goals of Woori Financial Group. If that happens, IB business and SME business can be expanded, and in the near future it will turn to profit. IB is still being developed, so the retail business could take longer to start generating profit but we will be looking to expand the retail base along the way. I think the core profit drivers will be IB, SME and retail starting from early next year. We're going to implement a balanced profit structure with the securities company in the near future.
We will now take the next question. Ms. Hye-jin Park from Daishin Securities.
I would like to ask a question regarding the capital injection into your securities business and also the share exchange for the insurance company. I'd like to understand what impact it would have on your CET1 ratio. Regarding the capital injection for the securities business, you said that it will not impact your CET1 ratio. Is my understanding correct? Second, with this comprehensive share swap, I understand that this is being done for the benefit of integrating Tongyang and ABL Life. When these entities are fully integrated, what impact can we look forward to, especially in terms of the earnings impact — what will be the tangible results? Also regarding the securities business, you would want to receive the license as a CFIB, the comprehensive finance investment business. When do you foresee you would be receiving that license as CFIB?
Thank you for the question. Please give us one moment.
Regarding the impact of capital injection into Woori Investment & Securities and its impact on CET1 ratio: when the holding company injects capital to its subsidiary, the capital increase itself is not going to have any direct impact on the group's CET1 ratio. Having said that, when we look at the purpose of such capital injection, it is to further strengthen and cultivate the business of the brokerage arm and so in terms of RWA allocation, more allocation will be done towards the securities business. For risk-weighted assets, if we actively allocate to our securities business, then before the increase in profit offsets the higher RWA, it may have a downward impact on CET1 ratio. However, we ran internal scenarios and expect that within three to four years, the P&L increase will be ample enough to offset that impact on RWA. Ultimately, due to the increase in P&L, we expect there would be a small positive contribution to the CET1 ratio. That will be the financial planning we will come up with. In terms of when we expect to gain approval as a CFIB: we launched the securities business in August 2024. Previously, the Woori Merchant Bank license was for 10 years, until July 2034. The issuance of notes by the merchant bank is a key business. If we inject KRW 1 trillion of capital now and later increase capital further, by next year we would have to satisfy a KRW 3 trillion capital level in order to file for the CFIB license. Our plan is to achieve KRW 3 trillion of capital for this business and file for the permit; up until 2034, we expect to be eligible for approval as a CFIB. We will look at whether additional capital injections are needed along the way.
I am Lee Jung-Soo. Adding to the CFO's answer regarding the consolidation of our insurance business: if Tongyang Life becomes a fully owned subsidiary as part of our efforts to strengthen competitiveness, we are reviewing the possibility of merging Tongyang Life and ABL Life. Through that merger, having two life insurance arms under one group will allow us to eliminate inefficiencies, achieve economies of scale for the insurance business, reduce operational costs and enhance the quality of capital management. We believe these are positive impacts that will come through. However, this has to be decided by the Boards of Directors of each entity. We still have to go through the deliberation of the Boards and comply with relevant laws and regulations. Once the final decision is made, we will inform the market with more details.
Just to elaborate a little more on the comprehensive share swap and what impact it will have on our CET1 ratio: we put a lot of thought into minimizing the impact on CET1. The way you calculate solvency ratio for the insurance is quite different compared to other financial businesses. Within CET1 calculations, certain excesses are subject to different accounting treatments and deductions. We selected the comprehensive share exchange and share swap because it will have minimal impact on CET1. By acquiring Tongyang Life's equities, there is a deduction in the calculation, but through new issuance of shares, we believe that we will be able to offset it by about KRW 300 billion. So the CET1 ratio impact is almost minimal, and once it becomes wholly owned, there is no impact. Going forward, there may be asset revaluation effects, such as the KRW 1.8 trillion revaluation on a post-tax basis. Most likely in August or September, once the entity turns wholly owned, we would have to do the calculation again. At that point, there is also a possibility it could actually lift the CET1 ratio.
Next question is from NH Investment & Securities. Analyst Jun-Sup Jung.
I am from NH Securities. I have two questions. Another question about the CET1 ratio: you just talked about the capital injection into the securities firm and the insurance company via the share swap. You said that CET1 impact would be minimal. But in Q1, you did the asset reprisal that lifted the CET1 ratio. The government is really pushing on productive finance, and I think that would already have an impact on the bank and group and can continue to have an impact. Assuming that, what would be the CET1 expectation going forward? The capital ratio has improved significantly. How would that impact your shareholder return policy then? Would the current policy be continuously effective? Or would you amend the current one to reflect the higher capital ratios? Second question is about Kbank. I think you still have about 9%. According to the press, there's a possibility of you disposing of the equity that you have in Kbank. What are your plans for that? It would be greatly appreciated if you could share that with us today.
Thank you for the questions. Please give us a moment to prepare the answers.
Good afternoon. I'm Park Jang-Geun, CRO. You asked about the government's new or amended regulations on capital. Regarding market risk, we assess the impact to be minimal. For operational risk, DLF and DLS are a consideration; there is an application process with the FSS regarding loss recognition rationalization. Internally, we estimate the CET1 ratio impact at around 17 basis points positive. In Q1, the RWA reduction from non-listed companies was included, and as time passes, within three years there can be additional adjustments that will be reflected accordingly. Thank you.
As for the shareholder return policy: in principle, we will continue our Value-Up program. This year's annual target is a 10% increase. For the next five years, dividends will be nontaxable and we will be increasing treasury stock to around 10% in a speedy manner. We set a CET1 ratio of 13% and aim to maintain it; if it's higher, we will review cancellation of treasury stock in the second half. Those commitments will be carried on in 2026. The quarterly dividend in Q1 is KRW 221, representing a 10% increase; we intend to pay the same amount for Q1, Q2, Q3 and Q4. This year, we mentioned a KRW 200 billion treasury stock purchase and cancellation by June as the deadline. We're already around KRW 100 billion purchased, and we plan to purchase an additional KRW 100 billion and cancel the full KRW 200 billion by June. In the second half, we will review additional treasury stock purchases and cancellations. After the Q2 results are released, we will discuss this at the Board and communicate any developments. For 2025 total shareholder return, it would be lower than 2026. The 2026 total shareholder return will be much higher than the previous year. In the near future, we expect to have similar levels as peers in the market. Regarding the securities and insurance transactions, the capital injection into the securities company and the insurance share swap do not have a significant impact on our CET1 ratio, so they should not be a hurdle to keeping the promises we made to the market regarding shareholder return. Regarding Kbank: as you know, it listed successfully on KOSPI on March 5. The initial price was KRW 8,300 and we were the second-largest shareholder. After the IPO, 9.2% was locked up. Other than the locked-up shares, we disposed around 2% of the shares, generating around KRW 19 billion in proceeds in Q1. After the IPO, we still hold 9.2% and remain the second-largest shareholder, but the equity ownership is below 10% now. The accounting treatment has been changed from equity method to FVOCI. Whether we will strategically hold or dispose of the shares has not been decided. If we decide to dispose some shares after the lock-up period depending on the market price, RWA would be reduced and that will be positive for our capital ratios. As of today, we hold 9.2% of Kbank. After the lock-up period, we will have discussions on how to handle our Kbank equity. We will consider the most efficient use within the bank and the group. If we dispose, the RWA will be reduced and that will positively impact our capital ratios.
Next question is from HSBC. Analyst Won Jaewoong.
I have two questions regarding your subsidiaries. With regards to the comprehensive share swap, I think you mentioned that there could be some costs that may be incurred, and I'm thinking that has to do with the appraisal right exercise. I would like to understand if that expense is incurred, when would you be recognizing that? And what would be the extent of that expense? Also, you've made a capital injection into your securities business. In my view, looking at brokerage and unsecured loans will be some business areas that you must want to expand into. If that is the case, from an RoRWA basis compared to the bank, RoRWA may be higher, and that may improve your CET1 ratio. I would like to understand where your key focus is for Woori Investment & Securities, and to what extent RoRWA is going to improve?
Thank you for your question. Give us one moment.
This is CSO Lee Jung-Soo. Regarding the wholly owned subsidiary initiative and potential exercise of appraisal rights: depending on the size of any appraisal rights exercised, there may be a corresponding expense that relates to the size of those rights. Based on our previous cases, we do not expect any liquidity constraints in light of our past experience. Regarding the capital injection and where capital will be utilized: because the investment in securities was launched recently, the asset and capital base is relatively small. Up until last year, RoRWA compared to the group's average was slightly lower. As we develop the capitalization plan, how capital will be allocated across IB, S&T and retail is being simulated. On the brokerage side, we still have work to do on IT systems, so brokerage will be more difficult to prioritize immediately. In terms of credit lending, guaranteed or asset-backed loans and stock-backed loans are areas where there is significant demand. If we allocate capital to that business, we think it will have a positive impact on RoRWA. More than 50% of allocated capital could create room for growth in credit loan-related businesses based on the current plan. The capital increase for Woori Investment & Securities will occur in phases: Phase 1, Phase 2 and onwards. We're developing the business strategy. We expect within this year to see RoRWA on par with the bank, and after that the securities business' RoRWA should be higher than the banking business. That is the premise of our business plan. We believe there will be a meaningful increase in RoRWA to meet the level of the bank. After that point, we will allocate more capital to the retail business as part of the business plan so that RoRWA contribution from the securities business expands as we go forward.
I think this will be the last question. It will be from DAOL Investment Securities. Analyst Kim Jiwon.
I have a short question about group RoRWA. With the capital injection into Woori Investment & Securities, I would like to know the impact on group RoRWA. You say you will have a phased capital injection plan. For the entire group, what is the allocation of RoRWA among the group subsidiaries? Second question is about insurance: you have Tongyang and ABL — the merger of the two is related to the noninterest income of the group. If they are merged, are you thinking of investing additional capital to improve their K-ICS ratio? Or if you are running them independently, will you still be supportive in terms of capital injection to boost their K-ICS ratio?
Thank you for the questions. Please give us a minute to prepare the answers.
Hello. I am CSO Lee Jung-Soo. I will first try to give an overall answer to your questions. Regarding the merger and its objectives: one of the main purposes of our review is efficiency and maintaining a stable and effective K-ICS ratio. Primarily, in terms of additional capital supplements, we do not have any confirmed measures in the group at this point. If the merger can help maintain stable K-ICS ratios and help sales and marketing activities, that will be a key priority. Regarding RWA allocation, when we were developing the financial plan for 2026, the RWA allocation to the securities company was higher than the bank and other subsidiaries. Early in 2026, the RWA growth rate was highest in the securities company. In terms of growth rate, it will be around more than 60% compared to 2025. Around 20% or more growth has been concentrated in the securities company. So RWA growth of the securities company will be stronger than previous years. All those numbers assume the capital injection. Early in 2026, the RWA growth rate of the securities company should be around 64%. That should be sufficient for the securities company to leverage its RWA to deliver significant growth of profits and net income. After that, the nonbank subsidiaries and the bank's RWA will be managed accordingly. To summarize, the securities company will continue to show higher RWA growth compared to the bank and other subsidiaries so that it can play a critical role as our main capital markets player, and we will continue to support it.
We do not have any more questions in the chat box. So we will conclude the earnings call here. If you have additional questions, please contact our IR team. This concludes the Q&A session and the Q1 2026 Earnings Call of Woori Financial Group. Thank you for your participation today.