Woori Bank Q1 2026 Earnings Call Transcript

Quartr
Provided by Quartr
April 24, 2026

Key Takeaways

  • Neutral Sentiment: Q1 net income was KRW 603.8 billion, flat year over year and below market expectations, reflecting ERP expenses, one-off overseas provisions, and valuation losses tied to sharp FX and interest-rate movements.
  • Positive Sentiment: Bank NIM rose to 1.51%, marking a fifth consecutive quarterly increase, while net operating revenue grew 5.6% year over year and core fee income reached a quarterly record of KRW 576.8 billion.
  • Positive Sentiment: Preliminary CET1 capital improved to a record 13.6%, allowing the group to raise its quarterly dividend 10% year over year to KRW 221 per share and consider additional share buybacks and cancellations in the second half.
  • Negative Sentiment: Q1 credit costs increased 20% year over year to KRW 526.8 billion, although management attributed much of the increase to a KRW 138 billion one-off overseas provision and maintained its 2026 credit-cost target at about 40 basis points.
  • Neutral Sentiment: Woori plans to inject KRW 1 trillion into Woori Investment & Securities and make Tongyang Life wholly owned, aiming to build a mega investment bank and improve insurance efficiencies; however, these initiatives will require near-term investment and the potential insurance merger remains under review.
AI Generated. May Contain Errors.
Earnings Conference Call
Woori Bank Q1 2026
00:00 / 00:00

There are 8 speakers on the call.

Operator

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 Sung-Min, Group CSO, Lee Jung Soo, Group CDO, Ogi Jin, and the Group CRO, Park Jang-Geun. We will begin with the Group CFO, Kwak Sung-Min's presenting on the earnings, followed by a Q&A session. Please also note that we are 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 Sung-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.

Operator

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 quarter uptrend in the bank's NIM, interest income displayed steady growth. At the same time, record high fee income and the inclusion of insurance business growth sizable, not interest income, which led to balanced top line growth. However, due to ERP at the bank beginning of the year and one-off provisioning related to the local subsidiaries of the global division and FX loss and downsize gain from securities following sharp rise in the FX rate and the market interest rate during the quarter, net income somewhat underperforms market expectation.

Operator

But with such factors excluded, 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 rewrote historical records at 13.6%, increasing 71 basis points year to date and 115 basis points from last year. Despite sharp market volatilities caused by external uncertainties on the back of group-wide capital management effects, i.e. asset rebalancing and revaluation of the group's tangible asset, we were able to achieve 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.

Operator

Today, the BOD of Woori Financial Group decided on a quarterly dividend payout of KRW 221 per share, which is 10% increase year-over-year, and as was the case last time, the full amount will be non-taxable. 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 non-bank competitiveness, growth momentum is building following the completion of the setup as a comprehensive financial group. Income from non-bank subsidiaries, including card capital, insurance securities, was up 185% year-on-year, widening the non-bank contribution to 9% of last year to 25%. For Woori Investment & Securities, the decision was made for KRW 1 trillion of capital increase, initiating the phase capitalization plan.

Operator

Tongyang Life will be made fully owned subsidiary, through which we intend to streamline the governance, which will drive efficiencies in business management and solidify insurance competitiveness inside the group. Next, group performance in greater detail. Please refer to page 3 of the material. First, the net operating revenue and the NIM. Q1 2026 net operating revenue came in at KRW 2 trillion 757.7 billion, underpinned by diversified revenue sources and stable earnings capacity. There was 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 of 2.3% year-on-year, reporting KRW 2 trillion 303.2 billion, 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 non-interest income up 26.6%, a sizable increase powering the earnings growth.

Operator

Bank NIM in Q1 was 1.51%, up 2 basis points quarter-on-quarter and 7 basis points year-over-year respectively. While 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 bullish equities market led to concerns over potential NIM decline, but the uptrend continued on rise in market rate, driven by 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 loan totaled around KRW 338 trillion, up 1.2% year to date.

Speaker 1

Corporate loan growth was driven by advanced strategic industries, supported by productive finance, expanding 2% to report KRW 184 trillion. Solid demand from the nation's core industries such as semiconductors, defense, and bio sector drove growth of lending to large corporations by 7.5%. While we saw a marginal dip Q1, 2 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.

Speaker 1

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 will also continue asset rebalancing to navigate 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 cap target. Next, I will go over the group's non-interest income. The group's 2026 Q1 non-interest income jumped by 26.7% year-over-year to KRW 454.6 billion. In Q1, due to sudden effects and market rate increases, there were some downside factors. However, as the group's portfolio was completed last year, profit diversification and non-bank subsidiaries marketing efforts led to a stable level of group-wide businesses.

Speaker 1

In particular, core fee income, which continuously grew every quarter, increased by 13% year-over-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 non-bank subsidiaries strengthen 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 productive 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.

Speaker 1

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 non-bank subsidiary contribution to profit should improve. We will move beyond an interest income-oriented traditional profit structure to gradually increase the non-interest 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. 2026 Q1 SG&A expense of the group stood at KRW 1 trillion 22.8 billion, which is a 9% year-over-year increase. This brings the cost to income ratio to 45%. In this quarter, we incurred ERP related costs 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.

Speaker 1

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 impacts. 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 long-term strategy target of early 40%. I will now move on to credit cost and asset quality. The group's 2026 Q1 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.

Speaker 1

While credit cost rose by 20% year-over-year, it decreased by 10% quarter-over-quarter. Excluding the one-off, the group's credit cost goes down to about KRW 390 billion. The credit cost ratio is being managed stably at below 40 basis points. In case of the bank's corporate loans, high-quality assets take up 84.8%, which is a slight quarter-over-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.

Speaker 1

However, the geopolitical risks 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 2, 3 years, the non-bank subsidiaries have implemented an asset cleaning program. In the future, the group will concentrate on areas of asset quality concern 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 basis points. I will now move on to capital advocacy 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%.

Speaker 1

In order to address the difference between the book value on 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. In result, we recognized a revaluation surplus of KRW 1.8 trillion, lifting the capital ratio by 60 basis points. 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 2026 early and then to stably maintain it at 13.2%, has been effectively delivered in just one quarter, proving our commitment to enhancing corporate value.

Speaker 1

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 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 non-bank 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 11th. Following last year's dividend, this quarterly dividend will also be non-taxable, which is unique to Woori Financial Group in our sector. Individual investors will receive the full amount without any withheld tax. It is even excluded from the comprehensive financial income tax, further significantly enhancing the effective dividend yield.

Speaker 1

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 a 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. Just 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.

Speaker 1

In response to these market trends, Woori Investment & Securities, with the paid-in capital raise, will gradually strengthen key business infrastructure such as capital, talent, and license 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 a 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.

Speaker 1

This will conclude Woori Financial Group's 2026 Q1 earnings call presentation. Thank you.

Operator

Thank you very much. We would now like to begin the Q&A session. For those of you with questions, please press star and number 1 on your phone. If you wish to cancel your questions, please press star and number 2. Give us 1 moment as we wait for the questions to come in. We will take the first question from Hana Investment & Securities, Do Ha Kim. Please go ahead with your question. Thank you for taking my question. I have 2 questions that I would like to ask. First question has to do with turning Tongyang Life as a wholly-owned subsidiary. I would like to understand as to the key purpose behind this move. If you could just provide us with the overall picture, that would be quite helpful.

Speaker 2

Is there any particular reason why you are 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 and the

Speaker 2

If you take a look at the ERP, if you consider for the ERP, I think you still missed the market expectations. We would like to understand as to why are we seeing that mismatch in expectation, especially for the SG&A line item.

Operator

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 Chong-su, President in charge of strategies at the group. Responding to your first question. July of 2025, after we, I guess the merged or acquired the insurance entity, basically 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. Based upon what we have learned, we are undertaking process to improve on our capabilities. In that process, we also considered an option of turning Tongyang Life as a wholly owned subsidiary. That decision will provide us with a flexibility in business management.

Speaker 3

We believe that this was an essential step for us to drive more synergies. From that perspective, from mid to longer term perspective, we believe that by turning Tongyang Life as wholly owned subsidiaries, we could actually retain their earnings capacity 100% within the group. Moving on to your second question on SG&A results. If you look at Q1 2026, the CI ratio is 45%, which is about 1.4% increase on a year-over-year basis. If you look at SG&A on a year-over-year basis, there was an increase of KRW 117 billion. If you were to exclude insurance and education tax, that is an increase of 5.8%. As one-off factors, as we have mentioned before, there is KRW 183 billion coming from the ERP impact that is coming from the bank.

Speaker 1

Last year, there was an ERP-related expense of KRW 169 billion last year, so there is about KRW 12 billion increase. I am sure this will be the case for our peers as well. There is about KRW 17 billion impact from increase in the education tax. As you would 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 investment, which amounted to KRW 17 billion increase and uplift or the increase in the SG&A related to our brokerage business. In July of 2025, as we included the securities business on a year-over-year basis comparison at the insurance level, there is about KRW 25 billion increase in SG&A. Due to these elements, the SG&A and cost ratio on a year-over-year basis, there was 1.5% increase, reaching at 45%.

Speaker 1

But in terms of insurance and education tax, if we were to carve out those impacts, it is still at about 5.8%. So we do see, the management does understand that our CI ratio is comparatively higher compared to our peers. That is why we are putting in a lot of effort, both from short-term perspective and to mid to longer term perspective. We are really focusing on cutting down on unnecessary spending and also making our branch network as well as our headcount more efficient. So as of today, basically, we are putting an effort to consolidate our branches to 37, which is a number as of July of 2025. From a longer-term perspective, through AI and digital investment, we will be making the right investment to make our investments and make our expenditures more efficient. Thank you.

Operator

The next question is from Yuanta Securities, from Analyst Woo Do-hyung. Please go ahead. Well, good afternoon. Thank you for the opportunity to ask questions today. I have two questions. First question is about annual NIM guideline. If you can go over that, it will be appreciated. You have the CCR guideline that is around early 40 bps. Does this include the first Q one-offs? 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?

Operator

Thank you for the questions. Please just give us a second to prepare the answers.

Speaker 1

Good afternoon. I am Kwak Sung-Min, CFO, and I will go over the NIM. It is 1.51, and it is about 2 bps Q-o-Q and Y-o-Y 7 bps increase. For five executive quarters, NIM has been showing uptrend. Major drivers include the market rate has been going up, so that is the biggest factor. If you look at the, we have been increasing efficiency of the funding, and increase in the core deposits. Also, I have been repeating myself, but we have been working on asset rebalancing. So profit generation from our asset base has been showing better trends as well. So we believe that this trend will continue in the second half. The 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.

Speaker 1

There can be some government regulations that are introduced from July onwards. As we all know, the money move is very visible in the market. We are preparing to respond to that market trend. Overall, it is a downside factor to the NIM. We will do our most to prepare for any market trends that can undermine the NIM. The Bank of Korea is expected to maintain the current Bank of Korea rates in the second half. If we assume that, the 1.46 annual NIM of last full year, I think, can be maintained. We will try to show improvement, something higher than 1.46 or around that level, I think, will be appropriate expectation for this year. You asked about the CCR credit cost. In Q1, it was around 53 bps for the group. It is slightly relatively high.

Speaker 1

I did go through the factors. One of the bank's overseas subsidiary booked a one-off provision, so KRW 91 billion increase year-over-year. That's around KRW 527 billion. As also mentioned, it's about 10% decrease quarter-over-quarter, KRW 57 billion. The Indonesian subsidiary, KRW 130 billion, was the one-off that I've mentioned. So it's around 39%, and so it becomes a 40 bps credit cost ratio. If you look at the NPL and delinquency ratios, it shows slight upward trend, but our coverage ratio is sufficient. As of year-end 2025, we are above the average of the peers. Even for the Q1 2026, I think we have higher number than our peers. The Middle Eastern conflict causing oil price and possibility of it being prolonged can impact some of the borrowers and the sectors.

Speaker 1

There are concerns in the market that we are aware of. We will make preemptive risk management efforts. The global business of the bank, I think, have largely been cleaned up and provisioned against. 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. The total size should be around 20% lower than last year. We'll make those efforts in Q2, 3 and 4. Today, the board of directors of the group decided to inject KRW 1 trillion capital into the securities company. As of 2025, our securities company ranked 16. After the injection, it will be around 11th in terms of capital base.

Speaker 1

Like I've mentioned earlier, this year, we are trying to become a mega IB in the mid long term, so it requires capital injections. Productive finance has become important issue these days. The venture capital supplied by Woori Investment Securities can increase in the future. Based on the capital injection, the top line of the securities company this year can also, I think, 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. 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 long term, ROE can be at around 10%. We are actively supporting the securities company.

Speaker 1

Additional capital injections may occur 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 are hoping that Woori Investment & Securities will be able to have an expanded infrastructure, including talent, capital, and so on, so that it can jump to become a mega IB this year. That is one of the key goals of the Woori Financial Group. If that happens, the IB business and the S&T business can be expanded, and in the near future, it will turn to profit. IT is still being developed, so the retail business can take longer to start generating profit. But we will be working to expand the retail base along the way. I think the core profit drivers will be IB, S&T, and retail starting from early next year.

Operator

We are going to implement a balanced profit structure for the securities company in the near future. Thank you. We will now take the next question. Ms. Hye-jin Park from Daishin Securities, please go ahead.

Speaker 4

Thank you. I would like to ask a question regarding the capital injection on your securities business and also the share exchange for the insurance company. We would like to understand what impact it would have on your CET1 ratio. The capital injection for the security business, you say that, if I heard you correctly, that it would not impact your CET1 ratio. Is my understanding correct? The second question is there was this comprehensive share swap for Tongyang Life. I understand that this is being done for the benefit of integrating Tongyang Life and ABL Life Insurance. 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 result? The second aspect is the securities business. You would want to receive a license as a CFIB, the comprehensive finance investment business.

Speaker 4

When do you foresee you would be receiving that license as CFIB?

Operator

Thank you for the question. Just give us one moment. It is regarding the impact of capital injection into Woori Investment & Securities and its impact on CET1 ratio. I remember talking about this before. The holding company, when they inject capital to its subsidiary, the capital increase itself is not going to have any impact on the CET1 ratio. Having said that, if you look at the purpose of such capital injection, it is to further strengthen and cultivate the business of the brokerage arm. So in terms of RWA allocation, there is going to be more allocation that will be done towards the securities business.

Speaker 1

For the risk-weighted assets, the RWA, if we take on a stance where we are more actively allocating this to our securities business, then before the time that the increase in the profit is going to offset this, for that window of time, it may have a downward impact on the CET1 ratio. However, we did run internal scenario, and we expect that within 3 to 4 years' time, the P&L increase, the extent of that, is going to be ample enough to offset that impact on RWA. So ultimately, due to the increase in the P&L, we expect that there would be a certain level or a small contribution that would be made to the CET1 ratio. So that would be the financial planning that we will come up with. In terms of when we expect to gain that approval as a CFIB.

Speaker 1

In 2024, August, that is when we launched the securities business. Previously, the Woori Merchant Bank, the license was for 10 years, so up till July of 2034. So the Merchant Bank was able to engage in the issuance of the notes by July of 2034. So the issuance of such notes is a key business that is being done by the Merchant Bank. Based upon the assumption that we have the permit to run the issuance of the notes business up until July of 2034, basically, if we were to inject KRW 1 trillion of capital increase, then later on, the securities companies would be able to drive earnings. If need be at a latter date, there is need for additional capital injection.

Speaker 1

We basically, by next year, would have to satisfy the KRW 3 trillion level in order for us to go through the process of receiving a license as CFIB. So our plan is to achieve the KRW 3 trillion of capital for this business, and we will file for the permit or license, and up until 2034, we will eventually be getting that approval as a CFIB. So that is the timeline under which we are currently working under. We will look at whether there is any additional need for a capital injection or capital increase along the way. I am Lee Jung Soo. Just adding on to the CFO's answer to your question, and just to clarify, your question had to do with the integration of our insurance business, consolidation of the insurance business. The comprehensive share exchange, on the assumption that it is successful

Speaker 3

Once Tongyang Life becomes a fully owned subsidiary of the group, as part of our efforts to strengthen our competitiveness, we are at this point reviewing the possibility of merging the two entities. Through that merger, having two life insurance arm under one group will be the configuration. By achieving that, we want to eliminate the inefficiencies so that we can achieve economy of scale for the insurance business and reduce operational costs, and also enhance the quality of capital management. We believe that those are the positive impact that will come through. However, this has to be decided by the BOD of each of the entities.

Speaker 3

At this point, I have to say that we do not have a definitive direction forward because we still have to go through the deliberation of the BOD, and there are relevant laws and regulations that we have to work under. Once the final decision is made, we will come back to you and inform you with more details. This is Kwak Sung-Min, the CFO. Just to elaborate a little more on the comprehensive share swap and what impact it will have on our CET1 ratio. With respect to that question, our CSO has provided you with the answer. If I were to just add, the group CET1 ratio, we have put in a lot of thought into ways in which it will minimize the impact on CET1 ratio.

Speaker 1

We've decided to select the comprehensive share exchange and share swap because it will have minimal impact on CET. The way you calculate solvency ratio for the insurance is quite different compared to other financial businesses. Within CET1 ratio of 10% and whatever is in excess, there is some accounting treatment issue where you would have to deduct it from the capital. We have put in a lot of thought in how we're going to do this because of the BIS calculation aspect. By making that additional acquisition of Tongyang Life's equities, there is a bit of a deduction, but through new issuance of shares, we believe that we will be able to offset it by KRW 300 billion. The CET1 ratio impact, I can tell you, is almost minimal. Once it becomes wholly owned, there is no impact.

Speaker 1

Going forward, there may be need for asset revaluation, which is KRW 1.8 trillion on an after-tax basis, there is an asset impact. Within the year, most likely August or September, once the entity turns wholly owned, we would have to do the calculation once again. But at that point in time, there is also possibility that it could actually lift the CET1 ratio.

Operator

The next question is from NH Investment & Securities, from Jung Jin Suk. Please go ahead. Good afternoon. I am from NH Securities, and thank you for the opportunity today. I have two questions. Another question about the CET1 ratio. You just talked about the capital injection of the securities firm and the insurance company as well, the share swap. You said that CET1 impact would be minimal. In Q1, you did the asset reappraisal that lifted the CET1 ratio. Government is really pushing on the productive finance, and I think that would have already had impact on bank and group, and I think that can continue to have impact. Assuming that, what would the impact on the CET1 ratio? I think capital ratio has improved significantly. How would that impact your shareholder return policy then?

Speaker 5

Would the current policy be continuously effective, or would you amend the current one to reflect the higher capital ratios? Second question is about K Bank. I think you still have about 9%, and according to the press, there is possibility of you disposing the equities that you have in K Bank. What are your plans for that? It would be greatly appreciated if you can share that with us today. Thank you for the questions. Just please give us a moment to prepare the answer.

Speaker 6

Good afternoon. I am Park Jang-Geun, CRO. You talked about the government's new or amended regulations on capital. I think market risk is minimum for us, so we are thinking about whether we are going to apply for that. For the operational risk, DLF and DLS, I think, is a big part of that. So it's about loss recognition rationalization, and there is an application process in the FSS. But internally, CET1 ratio, I think around 17 bps positive impact. Before that, in Q1

Speaker 1

In terms of the RWA reduction of the non-listed companies, that was included in Q1. As time passes, within 3 years, there can be some additions, so it will be reflected accordingly. Thank you. As for the shareholder return policy, I am CFO, Kwak Sung-Min. In principle, we will continue our Value-Up Program, so DPS annual 10%, and for next 5 years, non-taxable dividends. We will be increasing treasury stock to around 10% in a speedy manner, and briefly mentioned during the presentation, CET1 ratio of 13%. If that's higher than that, we will be reviewing cancellation of treasury stock in the second half. So those commitments will be carried on in 2026, and I think we'll be able to adhere to those commitments in 2026.

Speaker 1

The quarterly dividend in Q1 is around 50% of last year, and equally paid dividends throughout the year, that is around 10% increase, KRW 221 per share. I think we will be paying the equal dividends, KRW 221 per share for Q1, 2, 3, and 4. This year, we mentioned that KRW 200 billion treasury stock purchase and cancellation by June is the deadline that we had. We already bought around KRW 100 billion, and we plan to purchase KRW 100 billion additional shares and cancel the full KRW 200 billion by June. Then second half, we will be reviewing additional treasury stock purchase and cancellation. After the Q2 results are released, I think we will be having such discussions in the board, and hopefully, we will be able to communicate some positive news to the market. 2025 total shareholder return, I think, would be lower than 2026.

Speaker 1

The 2026 total shareholder return would be much higher than the previous year. In the near future, I think we will be able to have similar levels as peers in the market. We already mentioned the insurance company and how we are turning that into a fully owned subsidiary, and the capital injection of the securities company. Those two elements do not have a significant impact on our CET1 ratio. It should not become a hurdle in terms of keeping the promises that we made to the market regarding shareholder return. You mentioned K Bank. As you know, 5th of March, it listed successfully on KOSDAQ, and the price was KRW 8,300. We are the second largest shareholder. After the IPO, 9.2% was locked up. Other than the locked-up shares, we disposed, that is around 2% of the shares.

Speaker 1

That is around KRW 19 billion of funds coming in in Q1. In March, we still have 9.2%. We are still 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 would strategically hold or whether we would dispose some of the shares has not been determined yet. If we decide to dispose some of the shares, depending on the market price, after the locked-up period, the RWA would be reduced, and that will be a positive factor to our capital ratios. As of today, we hold 9.2% of K Bank, and after the locked-up period, we will be having discussions on how to handle the K Bank equity ownership that we have. We will be thinking about the most efficient way to use this within the bank and the group.

Speaker 1

If we decide to dispose, then the RWA will be reduced, and will have positive impact to our capital ratios. Thank you.

Operator

Next question, please, from HSBC, Kwon Jae Um. Please go ahead with your question. Yes, thank you very much. I have two questions regarding your subsidiaries. With regards to that comprehensive share swap, I think you mentioned that there could be some costs that may be incurred. I am thinking that that has to do with the appraisal right, exercise of appraisal right. I would like to understand as to if that expense is incurred, when would you be recognizing that, and what would be the extent of that expense? Also, you have made capital injection into your securities business. In my view, looking at brokerage and unsecured loans will be some of the business areas that you must want to expand into.

Speaker 7

If that is the case from RORWA basis compared to the bank, the RORWA may be higher and that may be able to improve on your CET1 ratio. I would like to understand where would be your key focus on your investment securities and to what extent is RORWA going to improve? Thank you.

Operator

Thank you for your question. Just give us one moment.

Speaker 3

This is CSO, Lee Jong-su. Mr. Kwon, your question related to our wholly-owned subsidiary initiative and also asked about potential exercise of appraisal rights, et cetera. Just to check whether I understood your question correctly, and based on my understanding of the question that you asked, depending on the size of the appraisal right, in terms of the liquidity, we believe that there may be certain level of expense that may be incurred that is aligned with the size of the appraisal right. There would be, for instance, if you were to compare with our previous cases and the size in which there was an appraisal right that was exercised, based upon our previous experience, there will not be any liquidity-related constraint or any crunches that you may be concerned of, in light of our past experiences.

Speaker 3

Regarding capital injection, where the capital would be utilized, would it be for unsecured loans or other businesses? What is the possibility of a potential increase in RORWA? This investment in securities has just launched. In terms of the size of the asset and the capital, it is relatively smaller. Up until last year, RORWA, compared to the group's average, it was slightly lower. As we were coming up with this capitalization plan, the capital that would be injected into the securities business and how that is going to be allocated is what is being currently simulated for IB and S&T and retail. How it would be allocated across these businesses is what is being currently studied at this point. As I have mentioned before, on the brokerage side, we still have more work to do on setting the IT system.

Speaker 3

It will be quite difficult for us to give brokerage the priority. In terms of extending the credit and also guaranteed or asset-backed loans, stock-backed loans, because we have the license to engage in such business. For credit loans, if you look at the capital that is allocated to that business, we believe that more than 50%, we will be able to gain more room through the capital injection. That is based upon the plan of the investment securities. We recently see that there is a credit loan or the stock-backed loans where we see a significant demand uptrend these days. If we were to allocate the capital to that business, we think that that will have a positive impact on RORWA, of course. The capital increase for Woori Investment Securities, it will not end here. It would take place in phases.

Speaker 3

There is phase 1, phase 2, and onwards. We are in the process of coming up with a business strategy for this business. We think that within this year, we will be able to see RORWA on par with bank. After that point in time, the securities business, brokerage business, works under the assumption that its RORWA has to be higher than the banking business. That is the premise upon which our business plan sits on. We believe there will be a meaningful increase in RORWA to meet the level of the bank. After that point in time, we will come up with the business allocation, especially allocating more capital on the retail business. That is incorporated in the business planning of our investment securities business, so that RORWA contribution from the securities business is going to expand as we go forward.

Operator

I think this will be the last question. It will be from DAOL Investment & Securities, from Kim Ji-hyun. Please go ahead. Good afternoon. Thank you for the opportunity today. I have a short question. It is about group RORWA. With the capital injection to Woori Investment Securities, I would like to know the impact it has on the RORWA. You say you will have a phase in capital injection plan, but for the entire group, from the RORWA, what is the allocation among the group subsidiaries? My second question is about the insurance. You have Tongyang and ABL Life Insurance. The merger of the two, I think is related to the non-interest income of the group. If they are merged, are you thinking of injecting additional capital to improve their K-ICS ratio?

Speaker 3

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, and I will first try to give you an overall answer to your questions, and I think there will be some comments added by my colleagues here. I think the factor of all your question, I can refer back to one of our answers that I made earlier today about the boosting of efficiency, improving capital and K-ICS ratio, and I think there is an assumption that this is the main reason for the merger, if the merger happens. What kind of objectives, and if necessary, additional capital boosting measures would be required. I think that is the essence of your question.

Speaker 3

In the short term, if I repeat my answer that I gave earlier, one of the main purposes of the review that we are conducting on the merger is about efficiency. It is really to your question, stable and effective K-ICS ratio. Primarily, in terms of additional capital supplements, we do not have any confirmed measures in the group. If the merger can help maintain stable K-ICS ratio and help them with their sales and marketing activities, I think that will be one of our key priorities. Regarding the RWA allocation, and especially regarding the securities company, according to when we were developing the financial plan for 2026, the RWA allocation to the securities company was higher than the bank and other subsidiaries. Even in early 2026, the growth of RWA was highest in the securities company.

Speaker 1

In terms of growth rates, it will be around more than 60% compared to 2025. Around 20% or more has been concentrated in the securities company. RWA growth of the securities company, I think, will be stronger than previous years. Of course, all of those numbers were assuming the capital injection. Capital injection has been on our plan. Early on in 2026, the RWA growth rate of the securities company should be around 64%, and I think that will be sufficient for the securities company to leverage its RWA to deliver significant growth of profits and net income. Even after that, the non-bank subsidiaries and the bank's RWA, I think will be short.

Operator

To summarize, I think the securities company will continue to show higher RWA growth compared to the banks and other subsidiaries, so that it can play a critical role as our main capital markets player, and I think that will be continued to be supported by the group. 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 will conclude the Q&A session and the 2026 Q1 earnings call of Woori Financial Group. Thank you for your participation today.

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