Prepared remarks
Good afternoon. This is Han Hong Sung, Head of IR at Woori Financial Group. Thank you for attending today's earnings call for Woori Financial Group despite your busy schedules. Joining us today on the call are Group CFO, Kwak Seong-Min; Group CTO, Oak Il-Jin; Group CRO, Park Jang-Geun; and Head of Business Growth Support, Byung-Gyu Kim. We will begin with the Group CFO's presentation, which will be followed by a Q&A session. Please note that the session is being simultaneously interpreted for the benefit of overseas investors. With that, we will now hear from the CFO, the earnings result presentation of Woori Financial Group's First Half 2026.
Good afternoon. This is Kwak Seong-Min, Woori Financial Group CFO. Let me go over the group's earnings results for first half 2026. Please refer to Page 2 of our earnings results material available on the website. First, the group's net income. Woori Financial Group's net income for Q2 2026 outperformed market expectations coming in at KRW 1.0046 trillion, up 66% Q-o-Q. It has thus regained the quarterly net income of KRW 1 trillion level. This brings the half year net income YTD to KRW 1.609 trillion, up 3.7% Y-o-Y. Our common equity ROE was 9.0%. Excluding one-off items, including the impact of changes in actuarial assumptions at our insurance subsidiaries, ROE was 10.3%. Our Q2 results demonstrate that the group has the foundation to take its recurring earnings capacity to the next level, potentially generating quarterly earnings of more than KRW 1 trillion. This was driven by our strengthened capital position, which improved by 80 bps year-to-date, enabling us to focus on asset growth and productive finance, strengthening the core competitiveness of our subsidiaries, enhancing cost efficiency and risk management. The group posted record high net operating revenue in the first half, while the CI ratio and credit cost ratio stabilized at lower levels, leading to the group's profitability improvement. During the first half, the benefits of our long-standing efforts to diversify the group's earnings structure began to materialize. Despite a challenging operating environment with the sharp rise in exchange rates and market interest rates as well as the impact of changes in actuarial assumptions in insurance, the group's non-interest income increased by 20% Y-o-Y, driven by stronger capital market performance, becoming the primary driver of earnings growth. Fee income exceeded KRW 700 billion for the first time on a quarterly basis, supported by solid growth in core fee businesses such as wealth management and CIB. In the first half, the non-bank contribution to group net income more than tripled Y-o-Y from 6.9% to 22.3%, indicating the start of tangible results with the setup of a comprehensive financial group. Looking ahead, we expect our non-bank businesses to become a new growth engine, further strengthening the group's earnings generation capacity. Now shareholder returns. Today, the Board of Directors approved an additional KRW 150 billion share buyback and cancellation for the second half of the year, a first since the establishment of the holding company. The total amount of share buybacks and cancellations for 2026 will reach KRW 350 billion, representing the largest program in our history and more than twice the KRW 150 billion executed last year. This reflects the firm determination behind cost and shareholder return policy as well as to minimize shareholder dilution due to the acquisition of full ownership of Tongyang Life and to protect shareholder value. Woori Financial Group approved a second quarter cash dividend of KRW 220 per share, all non-taxable, further reinforcing our position as a leading dividend-paying financial stock. Just as we have consistently delivered on the commitments we have made, we'll continue to faithfully execute our corporate value-up program and strengthen investor confidence. A more detailed review on the group's financial performance by business segment on Page 3. First, I will discuss net operating revenue and NIM. For the first half of 2026, the group's net operating revenue increased 6.0% Y-o-Y to a record KRW 5,722.7 billion. This was driven by balanced growth in both interest and non-interest income, each reaching an all-time high, demonstrating that the group's stable earnings generation capability has reached a new level. Q2 net operating revenue also increased 7.5% Q-o-Q to KRW 2.965 trillion. The group maintained solid growth in interest income in the first half up 3.2% Y-o-Y. This was supported by the full-scale expansion of productive finance with corporate finance growing at a high 4% as well as continued optimization in ALM, which lifted the bank's NIM by 7 bps Y-o-Y. Second quarter NIM remained at the same level from the previous quarter at 1.51%. Although funding cost pressures increased amid higher market interest rates, we minimized the downward pressure on NIM by expanding our core deposit base and continuing disciplined asset rebalancing. Going forward, as we enter a period of rising interest rates, Woori will continue to broaden its customer base, further expand core deposits through strategic partnerships and improve margins through profitability-focused loan portfolio management. Next, let me discuss the bank's loan book. As of June end 2026, the bank's total loans grew 1.9% Q-o-Q to KRW 344 trillion. The growth is mainly due to corporate loans growing 2.8% Q-o-Q, primarily driven by large corporates and high-quality SMEs, supported by expanded productive finance for advanced strategic industries. To prepare for ongoing domestic and global uncertainties, we'll continue rebalancing low margin and negative spread assets. In line with the government's household debt management policy, household loans will continue to be managed within our target range. Meanwhile, in June, the group expanded its commitment to productive and inclusive finance by an additional KRW 10 trillion, increasing the size of the future co-growth project to a total of KRW 90 trillion over the next 5 years. Through the initiative, we'll broaden our support beyond advanced strategic industries to include industry leaders, exporters, innovative companies and start-ups, thereby strengthening the flow of capital into productive sectors while establishing a more resilient foundation for the group's long-term growth. Next, let me move on to the group's non-interest income. The group's non-interest income amounted to KRW 1,063 billion for the first half and KRW 628.9 billion for the second quarter, marking record high results on both half year and quarterly basis. Accordingly, the proportion of non-interest income to total net operating revenue increased to 18.6%, supported by greater group synergies and stronger business performance across our subsidiaries, both the banking business and the non-bank businesses, including insurance, securities and investment banking. Asset management delivered balanced earnings growth, offsetting factors that reduced earnings, including trading and valuation losses resulting from the high exchange rate and high interest rates as well as changes in actuarial assumptions in the insurance business. In particular, the group's fees and commissions amounted to KRW 1,278.8 billion, supported by the bank's WM business and growth in the securities and investment banking on the back of strong capital market conditions increasing 23.7% Y-o-Y. Second quarter fee income amounted to KRW 702 billion, up 22% from the previous quarter, surpassing KRW 700 billion for the first time on a quarterly basis, and this also reflects our strategic efforts over the past several years to expand fee-based earnings. Meanwhile, to drive growth in the group's non-bank business so that each subsidiary can strengthen its core competitiveness and take the next step forward in its business, the group completed a KRW 1 trillion capital injection into our securities subsidiary last May. And today, the making of Tongyang Life a wholly owned subsidiary has also been approved. Going forward, leveraging our diversified group portfolio, we will continue to increase the earnings contribution from our non-bank businesses, thereby further improving the quality of the group's earnings mix. And I'll now move on to the group's expenses. Please refer to Page 4. I will now move on to the group's SG&A expenses in the first half of 2026. The group's SG&A expenses amounted to KRW 2,632.8 billion, and the cost-to-income ratio was 42.8%. This year, despite structural cost increases, including the consolidation of the insurance business, the build-out of our securities subsidiary's infrastructure and the higher education tax rate, we maintained the cost-to-income ratio at the same level as the same period of the previous year through company-wide cost efficiency efforts. Meanwhile, SG&A expenses for the second quarter amounted to KRW 1.210 trillion, down 15% from the previous quarter. Even excluding one-off voluntary retirement expenses, SG&A expenses declined 2.4% from the previous quarter, continuing on the downward trend. Going forward, while continuing to invest in future growth, including AI transformation and the build-out of our securities subsidiary's infrastructure, we will further enhance productivity in our core operations through the transformation to an AI-driven management system and optimize our workforce and channel operations. Through these cost efficiency efforts, we will do our utmost to achieve our medium- to long-term CI ratio target of the low 40% range. Next, I will cover the group's credit costs. Group credit costs for the first half of 2026 amounted to KRW 966 billion, up slightly year-over-year. However, in the second quarter, credit costs amounted to KRW 439.2 billion, down 16.7% Q-o-Q, continuing on a downward trend. In addition, excluding large one-off factors in the first half, the group's recurring credit cost ratio was 39 bps and has been managed stably at a level lower than last year. By maintaining this trend, we will achieve our full year target announced at the beginning of the year of reducing credit cost by 15% and bringing the credit cost ratio to the low 40 bps range. Meanwhile, despite strong loan growth this year through a selective asset origination strategy focused on asset quality, the proportion of prime corporate loans remained at around 85% as of the end of June. In addition, the ratio of loan loss reserves and regulatory reserves to total loans also remained at around 1.5%, providing sufficient loss absorbing capacity against potential credit losses. However, as the importance of risk management has increased further following the July policy rate hike, we will further strengthen monitoring of vulnerable borrowers and focus on proactive risk management to further strengthen the group's asset quality. Next, let me move on to capital adequacy and shareholder return. Please refer to Page 5. As of the end of June 2026, the group's preliminary CET1 ratio stood at 13.71%, up 11 bps from the previous quarter. Despite the continued KRW 1,500 plus exchange rate during the second quarter and continued strong loan growth in support of productive finance, we achieved one of the highest CET1 ratios in the industry, supported by our disciplined capital allocation and risk-weighted asset management capabilities. Based on our strengthened capital position today, the Board of Directors of the group approved a second quarter dividend of KRW 220 per share, which is fully non-taxable. The record date is August 10, and the payment date is scheduled for August 31. In addition, for the first time since the establishment of the holding company, we approved an additional KRW 150 billion share buyback and cancellation for the second half of the year, increasing the year's total share buyback to KRW 350 billion across two rounds. As a result, we have fulfilled both commitments we made through our corporate value plan announced last February: first to additionally consider share repurchase and cancellation in the second half once our CET1 ratio exceeds 13% and second, to increase shares to more than 10% within a short period of time. Going forward, we will also consider making share buyback and cancellation a regular semiannual program and continue to faithfully execute our corporate value enhancement plan while consistently delivering on our commitments to the market. Finally, today, the Board of Directors of Woori Financial Group approved the comprehensive share exchange to make Tongyang Life a wholly owned subsidiary. Once the share exchange process is completed in August, we expect to further accelerate our efforts to strengthen the competitiveness of our insurance business through enhanced operating efficiency, improved capital adequacy and greater group-wide synergies. In the second half, we will also accelerate our efforts to drive and improve sustainable group ROE. In the banking business, we will strengthen our core business drivers, including core deposits, corporate banking and wealth management while enhancing cost competitiveness to build a stable earnings base. In the non-bank businesses, we will further strengthen the core competitiveness and market position of each subsidiary, thereby transforming our earnings structure from one centered on the banking business to a more balanced earnings portfolio. Through these efforts, we will gradually strengthen the group's earnings power to more than KRW 1 trillion per quarter while further strengthening the group's stable and sustainable earnings base. In addition, we will place even greater focus on expanding productive finance and inclusive finance. As you know, Woori Financial Group has a long-standing legacy in corporate banking, which remains one of our core strengths and key source of competitive advantage. As we have already committed to provide an additional KRW 10 trillion through the future co-growth project, including KRW 9.4 trillion for productive finance and KRW 600 billion for inclusive finance, we will execute these funds more swiftly, thereby supporting the real economy, fulfilling the fundamental role of finance by growing together with the market and steadily securing the group's future growth drivers. This concludes Woori Financial Group's 2026 First Half Earnings Presentation. Thank you very much.
Questions and answers
Thank you very much. And now we will begin the Q&A. The first question from DB Securities, Na Min Wook.
Congratulations on the good performance. I have two questions on the securities business. Compared to other competitors, their sales network and retail product offerings are differentiated, and they are getting better performance. In the mid- to long-term, what are the ways to enhance your brokerage? And secondly, the KRW 1 trillion capital increase was done. It was allocated to your IB business. What are your future plans for capital usage? When do you think you will reach KRW 3 trillion in capital?
Thank you very much. I'd like to address those two questions. Yes. This is Kwak Seong-Min, the CFO. First, regarding securities, retail and wealth management plans going forward. Our securities subsidiary was established in August 2024. As for network and the retail base, we started from a zero base. Recently, when looking at large players and competitors' securities arms, some have suffered large losses, but our size in the market remains relatively small. I did mention the P&L for the securities business: in retail our income was KRW 11 billion and KRW 15 billion, totaling KRW 26.6 billion of net revenue, an increase of about KRW 10 billion Y-o-Y. Of course, compared to others, we don't yet have as extensive a retail sales network. But we are opening complex branches in Gangnam, Yeouido and Gwangju, and a fourth complex branch will follow. We will continue to open these complex branches and outlets. With the network expansion, we'll grow our customer base and assets under management. There is a clear need for this, and through this network we will increase sales, retail base, customer count and AUM. Regarding licenses for derivatives, we have not obtained that license yet and will be pursuing it in 2027. We will actively pursue pending licenses and, through collaboration in retail, seek synergies. Once these elements are in place — S&T and other businesses — we will be able to achieve more synergy. Retail expansion will continue, and in IT and retail platforms we will create a complete environment to enhance retail profitability. As for the KRW 1 trillion capital increase in May, the principle for the holding company is to support ROE improvement. Last quarter's call noted that the capital injection was intended to support growth in securities and to designate the securities subsidiary as a stronger CIB player. We will focus resources to improve the ROE of the securities business. The group will lend support and there will be a concentrated effort to nurture the securities business, which is our priority. We will improve profitability and continue capital injections phase by phase. We will consider additional licenses and decide on amount and timing accordingly. The KRW 1 trillion capital increase was allocated across IB, S&T and retail accordingly. In retail, the limit for credit sharing has increased to KRW 800 billion, and capital has been allocated. For IB, internal capital has been allocated. IB is receiving the most immediate benefit from the capital increase. As you know, retail has limits and IB profitability improvement is the highest priority; we have earned KRW 45 billion in operating revenue in securities, an increase of KRW 38 billion, so IB is enjoying the biggest and quickest benefit from the capital injection.
Next, Seol Yong Jin from IM Securities.
I have a question regarding credit. I understand there is around KRW 250 billion classified as substandard, and I think some large corporate-related issues have arisen. I'd like to understand how this was actually reflected in the books. Also, for the second half and next year, what is your target credit cost ratio (CCR)?
Yes. Thank you very much. Let me respond. Regarding the increase in NPLs in the group, the provisioning and the credit cost ratio: with respect to Tongyang Group exposure and workout situations, a total of six companies have applied for workout. There was KRW 130 billion of exposure, which led to an increase in NPLs. This is similar across other banks. Our group's exposure to the Tongyang Group is mostly in the form of real estate guarantees, and for the bank it is primarily first-lien collateral. As indicated in the IR materials in the second quarter, we provisioned a total of KRW 44 billion related to these exposures. Regarding the increase in NPLs, Tongyang Group exposure was the major reason for the rise. Regarding write-backs, please refer to the IR materials: in the second quarter there were no additional write-backs on provisioning; rather, we added to provisioning for Tongyang Group. In this quarter there was no reversal of provisioning; instead, provisions were increased. Regarding the credit cost ratio: as briefly mentioned in the presentation, Q-o-Q credit costs decreased by KRW 88 billion to a total of KRW 439 billion, and the recurring credit cost ratio was 48 bps, a reduction of 5 bps Q-o-Q. If we exclude one-off items Q-o-Q, the recurring ratio was 39 bps, which is 1 bps lower Q-o-Q. Looking ahead, we are mindful of economic uncertainties and the potential impact of policy rate hikes on vulnerable borrowers. We will manage risks stringently and proactively. Our productive finance focus is on high-quality corporate lending, and we will prioritize asset quality while growing loans. By maintaining these trends we expect to reach our full-year target of reducing credit cost by 15% and bringing the credit cost ratio to the low 40 bps range. Maintaining this as a top priority, we will remain proactive to achieve this target.
The next question is from Park Hye-jin, Daishin Securities.
I have two questions. First, about margins. Looking at loan growth, it's focused on corporate and especially large corporates. Market rates are rising and NIM looks stable, but I want to know the reason behind that. Since productive finance and inclusive finance seem to be the areas where you are most active, are there no concerns about profitability? What do you see as the prospect? Second, what preparations do you have for digital assets?
Yes, I'll address those two questions. Regarding NIM: as mentioned in the presentation, NIM rose 7 bps Y-o-Y and remained steady at 1.51% Q-o-Q. The reasons for the stability include our ALM measures: market rate effects were about 3 bps and expansion of core deposits added about 2 bps. Although market rates rose, we minimized funding cost pressure by sourcing longer-term deposits in April and May in anticipation of policy rate increases. Those longer-term deposits help delay the impact of rising funding costs. We reduced shorter-term deposits by KRW 15 trillion, which also helps in the longer run. Compared to June last year, our variable-rate exposure increased, and we have a significant portion of loans linked to CD rates and floating rates, particularly in corporate and household loans. When market rates rise, CD-linked and floating rate loans will help raise interest income and NIM. So, while NIM was flat between Q1 and Q2 at 1.51%, our portfolio positioning—higher proportion of CD-linked loans and longer-term deposit funding—provides a platform for NIM to improve in Q3, Q4 and into early next year. Regarding productive finance and inclusive finance: expanding productive finance does not mean simply adding low-margin assets. We are rebalancing existing assets into higher-value advanced strategic industries. Productive finance also often comes with policy institution guarantees that can lower loss and capital burden. This is not just expanding low-interest assets; we are redeploying and rebalancing assets toward areas where we have strong corporate lending expertise. Productive finance can produce synergies with other businesses and secure profitability across underwriting and financing structures. Inclusive finance may incur short-term costs but can contribute to credit cost reduction over the longer term. We will balance profitability and social roles carefully and pursue inclusive finance at an optimal level.
Yes, I'm Oak Il-Jin, CTO. Regarding alternative exchange and digital assets: I understand this refers to digital asset exchanges. The financial authorities have a policy of 'one exchange, one bank', and we are reviewing regulations closely. We are maintaining active communication with major exchanges and exploring strategic, multifaceted collaborations. We are reviewing business models and monitoring the situation closely, aiming to decide the optimal time to enter. Regarding stablecoins, we expect legislation in the second half of the year or early next year. We are considering forming a consortium and, prior to legislation, intend to work via working groups on stablecoin initiatives. For payments and settlement, we are securing the necessary technology across issuance, retail wallet development and payments. We have completed a real-time settlement test for a won-denominated stablecoin and are conducting many POCs across different scenarios. We will remain nimble and prepare to enter when regulations and strategy align.
To address concerns on productive and inclusive finance profitability: there may be interest rate competition among competitors, which is a valid concern. However, our approach to productive finance is not to expand low-interest assets indiscriminately. We are rebalancing existing assets into advanced industries. We consider credit cost, capital and interest margins in our underwriting. Many productive finance transactions include guarantees from policy institutions, lowering loss and capital burden. Productive finance is typically corporate lending, an area where we have strong expertise. Through underwriting, acquisition financing and group synergies, we can secure profitability. In the long term, measures such as credit cost reduction, non-interest income expansion and portfolio rebalancing will support earnings. Inclusive finance may raise short-term costs but should contribute to lower credit costs over time. We will pursue both productively and prudently.
The next question is from Kim Do Ha, Hanwha Investment & Securities.
I'd like to ask about total shareholder return (TSR). With CET1 exceeding 13%, I know you now have a platform to meet your TSR target. I understand 50% TSR might not be met this year and would be a gradual trajectory. Can you clarify the timeline and trajectory to reach that 50% target? Clarifying that communication would help lift misunderstanding.
Yes. Thank you for that question. Regarding TSR: our dividend policy this year has been equal per quarter, KRW 220 for Q1 and KRW 220 for Q2. Last year we indicated that cash dividends would be increased to greater than 10% of EPS and we intend to meet that commitment again this year. Share buybacks: earlier this year we executed KRW 200 billion and in the second half we approved an additional KRW 150 billion, bringing total buybacks to KRW 350 billion. The context behind the share buybacks is our corporate value-up plan and the intent to increase share cancellation to more than 10% as quickly as possible. With the KRW 350 billion total, we believe we will exceed 10% cumulative cancellation. Regarding TSR: last year our TSR was 36.6% including a non-taxable dividend, and if accounting for the non-taxable nature it was close to 40%. As to whether we will reach 50% TSR this year, achieving a 50% face value will depend on fourth-quarter results, CET1 trajectory and overall market conditions. External factors such as exchange rates, global conflicts and market volatility could affect CET1 and dividend decisions. Based on current visibility — including our non-taxable dividends and buybacks — we believe the effective TSR for investors may be at or above 50%. However, this is a cautious expectation and not a guarantee. We expect to provide better visibility when we present third-quarter results in October and will communicate more clearly then.
From HSBC, Won Jaewoong.
Two questions. First, about NIM: you mentioned preparing preemptively for higher rates in the second half. Historically, Woori Bank had higher sensitivity to NIM. When policy rates increase in the second half, what is your expectation for NIM? Second, about SG&A: ERP was recognized in Q1 this year. Going forward, should we understand that seasonal ERP will continue to be recognized in Q1 rather than Q4?
Thank you. Regarding NIM sensitivity: based on our internal simulations, a 25 bps increase in market rates is estimated to increase interest income by roughly KRW 160 billion, translating to about a 4 bps rise in NIM. Previously at an IR event we discussed about KRW 140 billion and a 3 bps increase for 25 bps of higher rates, but given Woori Bank's higher proportion of CD-linked loans, the sensitivity can be slightly higher. CD-linked loans increase interest income when market rates rise, so our net interest income and NIM are expected to rise modestly with higher market rates. Regarding ERP timing and SG&A: ERP exercises in recent years have occurred in January, including 2025 and this year. Future timing may depend on variables such as changes to government policy on retirement age, strategic store closures and headcount optimization. If future ERP rounds occur in the near term, it is likely they will take place in Q1 based on current practice. For longer-term workforce restructuring tied to our mid- to long-term plan, timing may be more flexible and will be determined by branch and headcount plans. We will share clearer guidance when the mid- to long-term plan is finalized.
We have one last person in the queue. Kim Jiwon from DAOL Securities.
I have two questions. First, regarding productive finance which increases corporate lending: you will need to manage RWA. Given CET1 has been raised to around 13% since last quarter, what RWA target does the group have, if any, to defend CET1 at 13%? Second, Tongyang Life will be a wholly owned subsidiary according to your disclosure. What role do you expect the life insurer to play: bancassurance, wealth management, or as an IB-related LP or other role?
Thank you for the questions. On productive finance and RWA: expanding productive finance is primarily asset rebalancing rather than simply adding loans of a particular category. We are redeploying existing loans into advanced strategic industries such as semiconductors, AI and defense/aerospace; many of these are existing corporate customers. Productive finance does not necessarily require adding risky RWA in the loan portfolio. Investment-type exposures, venture capital and securities supply can affect RWA, and that impact is managed within the securities and IB businesses. We have allocated RWA carefully across banking, securities and investment banking. Additionally, the government is reviewing rationalization of risk weighting, and some adjustments have already been reflected in policies. These changes will mitigate RWA impact. In the short term, we will maintain CET1 around the mid-13% range, and with active use of productive finance and potential future regulatory adjustments, we expect no material issues maintaining CET1 in the mid-to-high 13% range over the mid-to-long term.
Yes, I'm Byung-Gyu Kim in the business development department. Regarding the role of the insurance arm, whether bancassurance or IB support: at the group level, bancassurance and contributing to IB capabilities can both be sources of synergy. However, the top priority is to enhance the profitability of the life insurance core business so it contributes meaningfully to group net income. Since integration into the group last July, we've performed internal reviews and due diligence and identified tasks which we are actively addressing. Key focus areas include K-ICS and ensuring sound capital adequacy, establishing appropriate channel strategies and exclusive channels where needed. Based on these improvements, starting next year we will enhance sales and profitability of the life insurance business and that is our roadmap for Tongyang Life's role in the group.
I believe that there are no more questions. And with that, we would like to conclude the Q&A session. Thank you very much for joining us at this earnings call. Thank you very much for your participation.