Good afternoon. I am Dong Su, Head of the IR Department at Woori Financial Group. Let me extend my deepest gratitude to everyone who is participating in this earnings call today. On today's conference call, we have the CFO, Mr. [indiscernible] and also the CRO, Mr. Chang Saga; and CTO, Mr. [indiscernible] because of COVID-19, please understand we have tried to keep the attendees to a minimum. Today, we will start with a presentation on our performance, after which we will have a Q&A session. In addition, we have simultaneous interpretant for our overseas investors ongoing. Let us start the first half 2021 presentation on Woori Financial Group.

Good afternoon. I am [indiscernible] CFO and Head of the Financial Division at Woori Financial Group. First, let me thank everyone who is participating on this call for the first half of 2021 for Woori Financial Group. In addition, I would like to take this opportunity to express my gratitude for our shareholders and other market participants for your trust and support in our company. Woori Financial Group, in order to strengthen communication with shareholders and investors in Korea and abroad, will be conducting earnings conference calls from this quarter going forward. With that, let me walk you through the first half 2021 performance for the group. Please refer to Page 3 of the presentation materials, which are available on our website. First, let me go over the net income. The first half 2021 was KRW1.420 trillion. Amid global uncertainties due to a prolonged COVID-19 situation, the group was able to exceed last year's full year performance in only 6 months. The first half performance was up by 114.9% year-over-year due to stronger profit generation capabilities after the holding company transition and stable asset soundness and active cost saving efforts for the group. For the second quarter 2021, the net income was KRW753 billion. On a quarter basis, the first quarter represented the highest performance to date. However, this quarter was a 12.9% Q-o-Q increase, once again a nearly high. Next is net operating revenue. The group's first half net operating revenue was KRW4.044 trillion, up 18.6% year-over-year. Net interest income was KRW3.323 trillion, and noninterest income was KRW721 billion. For interest income, the main subsidiary of the group Woori bank's solid loan and core deposit growth continues to drive momentum and improvements in the profit structure. In addition, on the noninterest income side, increase synergy between subsidiaries after the…

[Operator Instructions]. So the first question will be from Hyundai Motor Securities, Mr. Kim Jin-Sang.

In terms of your capital policy, I would like to ask a few questions. So I do believe that the CFO has touched upon the basic direction. However, in terms of the IRB and the impact of that, you did say that there would be an uplift of around 1 point. However, in terms of introduction, where do you think this could actually be introduced? It might not be introduced, but meaning 100% application, when do you think will actually take place? And in addition to that, in terms of your capital policy that will give you more room to maneuver. So this time around, you did say that you would be paying out interim dividends. Is this something that will be regular? And would it be possible to you actually expand that to provide quarterly dividends? Is there a possibility of that taking place? In addition, in terms of your shareholder return policy for your growth and also shareholder return aspects could you maybe divide about what your policy would be going forward in each area and what your stance would be in those areas?

Yes. This is the CFO, and maybe I can answer your questions. I do believe that you have asked a long range of questions about our capital policy. In terms of IRB application, right now are looking for the authorities approval. Realistically, we are currently looking at a September-ish time line, and that is the expectation. So as of the end of September, we do believe that at that time, our overall capital will be able to increase by around 1 percent point. In terms of the interim dividends, this is something that we did have a limit for around 20%. And that is why this year around, we are able to pay out interim dividends, whether it will be something that we will do on a regular basis or something that we will have to review at the end of the year. So as of now, we will not have anything definitive that we will be able to share with you. In addition, for the end of the year, dividend payout ratio and also what we will be doing going forward. As we have mentioned before, the dividend payout ratio that we are looking to achieve over the longer term would be at around 30%. So this time around, we will be doing an interim dividend. However, one thing that the authorities have proposed is that it would be that a 30% cap should be taken into consideration for the full year. So as a result of that, that will be something that we will take into consideration. And at the end of the year, we will look at a level that is higher than our previous years and within the range that government has recommended. In terms of our M&A opportunities, even if our capital ratio has improved, we believe it will be in the lower 11% range. So versus our peers, we do believe it will be slightly lower. So in the current time for the capital ratio, any M&A opportunities that we would look at would be within the scope of that it would not have a hit on our capital ratio. So I do believe that going forward, if there's more tangible opportunities, we would be able to discuss. But right now, our interest would be in the securities area because we do believe securities brokerage is an area that we would like to beef up. And then in other areas, we would look at opportunities that would not impact our overall capital ratio. So for the capital policy that we have right now 10.5%, which we do believe is a market minimum is something that we want to maintain at a minimum. And over the longer term, we want to be above 11%.

Next we have form Yuanta Securities. Mr. Tae Joon Jeong.

I'm Tae Joon Jeong from Yuanta Securities. And in the first half, I can see that we are seeing solid performance. And I would like to understand what it would be like in the second half. And I would like to understand the reversal and what kind of effect that would have.

So I believe that connection was not as smooth. So I would like to ask you to repeat the question one more time. Would you like to repeat your question?

So I was able to see that the credit cost ratio was quite satisfactory, and I would like to understand that if we also look into reversal of provisions in the second half, what kind of impact would that have on the CCR?

In the first half, as I have already mentioned, we've seen an increase in KRW750 billion in our net income and KRW68 billion in our overall income. So we believe that in the second quarter, we will be seeing an increase by KRW70 billion compared to the first quarter. So in the second half, in the net interest revenue, we believe that interest income will continue on in current levels. And we believe that we have a lot of assets in the first half. Net operating revenue will continue on. And in the case of noninterest income without a major change in the financial markets, it will continue on with similar trending. And in the third quarter, there are nonordinary events that we are expecting the bank capital increase. And we believe that by the end of September, there will be the quantity losses of approximately KRW70 billion that is expected based on equity method. And in the fourth quarter, we do have early retirements, and there are also expenses executed in the fourth quarter. So there may be some volatility in the expenses outlook. So if we look at the ordinary expenses overall, it will maintain the current trending. However, in the fourth quarter, if you look at profitability, compared to third quarter, there may be some volatility. And Mr. Tae Joon Jeong, I believe that you've asked about credit costs of the first half and also on the second half. Let me -- I would like to reiterate. So we believe that we'll be seeing record high performance. In the case of credit costs until the first [indiscernible] we have 0.17%. And in the second and third quarters, it will be of similar levels because with regard to COVID-19, we have deferred -- there were some deferrals that was a concern of the market. However, when we reviewed our customer loss, you can see that the collateral rates are close to 90% and was accumulated allowance with regard to COVID-19, which is more than KRW200 billion of provisioning. Therefore, there aren't any concerns necessary in this area. And next year with regard to provisioning out of the precautionary accounts, we have KumoTire, which is about KRW100 billion in allowances. And KumoTire recently, they are seeing improvements in their operating income. And as we see better performance there, I believe that next year, there will be some additional reversals of provisioning as possible.

For the next question, it will be from HSBC, Won Jaewoong will be asking a question.

Yes, congratulations on your performance. The 1 question that I would like to ask you is that recently because of the delta variant, there are some increasing uncertainties within the market. So versus our expectations in terms of our dividend payout ratio because of the delta variant, if it spreads further, do you think that, that would be an impact on your policy? That is the question that I would like to ask.

Well, this is the CFO. As the data variant does expand, there has been an overall in long-term yields and there is a lot of concern taking place within the market space. So if this continues to believe that the overall growth rate could be lower than expected and also, there could be a pushback in the overall expectations of a rate hike. So as the -- as a result of that, if a benchmark rate hike at a later time, we do think that the improvements to our overall interest income particularly at a later place. However, as we have mentioned during our presentation in the second half, the focus would be more on our assets on this and also in terms of our capital adequacy. So we do believe that we would be well prepared for any downturn in the overall situation. In addition in terms of our dividend payout ratio, as mentioned before, the financial authorities, while lifting the ban had made a recommendation, which meant that for dividends, of course, they will give us discretion. However, versus 2019, they would like us to use that as a benchmark. So as a result, as mentioned before, I don't want to put words into the authorities mouth. But we do think that we can have a stronger rate than we have had historically. So I don't think that you need to take any -- and have any concerns about that issue.

So for the next question, this will be from Hana Investment Securities. It will be [indiscernible]

I would like to ask you a question about your NIM. So if you look at the first and second question from bank, I do think that there is some differences in the NIM growth that we see. So in the case of our case in the second half, what would be your forecast? And for next year, what would be your view for the overall situation? And more specifically, right now, I think that the funding cost has actually been lower than expected, which had helped the overall NIM situation. But if you look at the recent times, I think that we see a stronger increase in the funding costs. So if funding cost does increase and the overall lending cost does increase, I do think that there could be a NIM expansion. If that does take place and what would you get your expectations in terms of the timing? And when do you think we can see an improvement?

This is the CFO. In the case of the NIM, I think that in the first quarter was 1.3% and versus 1.37 in the second quarter, we actually had a 2 basis point increase in improvement. So if we look get into more detail, I think that for the low-cost deposit that improved 1 basis point, and then in terms of the [indiscernible] there was improvement of 1 basis point there also. If we look at the market rate, there was also a decrease of around 1 basis points, which led to the overall 2 basis points improvement in total. So if we look at the NIM improvement in itself based upon the current market rate, if some rates remain steady, we do think that the NIM will be at the current level. And to improvement, what we're currently focusing on is to increase our core deposits and also improving our overall lending, because on the household loan side, there's a lot of regulations. We do want to assets and grow our assets in other areas. So as a result of that versus the current situation, we do think that there will be an increasing improvement. However, as we had mentioned during our presentation before, if the rate and the CD rate, which is to do benchmark it hasn't been rising and has been maintaining a very flat level, so from there, we have around 30% of our products which are linked to that, which is larger than our peers. So if the benchmark grade were to rise, then we do believe that there will be an uplift that we would be able to enjoy in a very short period of time. So if we look at the timing of that, it probably will be the fourth quarter in which we will enjoy that uplift because we do expect that the benchmark rate may be raised in October or thereafter. And for this trend, once the benchmark rises, we do think that, that will continue to have an impact for around 6 months or to a year.

Moving on from Morgan Stanley, Mr. [indiscernible]

I was referring -- I would like to refer to the last slide. And you can see that we -- see, digital banks going into as well as mortgage loans and also online WM businesses. In the case of Woori Financial Group, out of the credit loans, I know that your is 67%. So in this different competitive landscape, I would like to understand the strategy of Woori Financial Group and what kind of responses or actions do you have in place or planned.

So with regard to that, we have CTO, Mr. [indiscernible] in charge of the digital business to provide the answers.

I am [indiscernible] in charge of the digital business of Woori Financial Group, the CTO. Thank you very much for your question. On the very last slide, if you look at the indicators on the digital business or digital innovation, you can see that the overall performance is continuing to improve. Many to think about -- look into the cases of and fintech as well as Internet-only banks. And many do have a curiosity as to how the existing banks will respond to this different landscape. And with regard to our strategy, we are in terms of how we look on how we observe the market and with regard to how we would like to respond, let me elaborate on that. As you're very well aware, recently, the financial authority has been looking into financial innovation, has been pursuing financial innovation. So not only Internet-only banks, but the fintech and DTECH banks are now entering the market. Particularly some to say that we're now seeing an unlevel playing field. And if you -- and they also see that we cannot see these cases apart. It's quite unprecedented in terms of the financial regulation, especially in terms of open banking, in the second half, we have the loans platform that this is a major change in the landscape, and we are seeing an active participation of these fintech companies. So in terms of the stretch that we foresee that in the area of finance, we may be seeing a division of, let's say, manufacturing and sales. So in order to respond to the separation, we are looking into the policies of the financial authority, and we want to be very aggressive and active in responding to these financial regulations or policies in the future. And not only that, we have digital…

We will take the next question which will be coming from Korea Investment & Trust.

My name is Doosan from Korea Investment & Trust. I would like to ask some questions about asset quality. So if you look at the bank on the precautionary side, there was some increase in that around KRW250 billion on a Q-o-Q basis. So what was the reason for that? And was it in terms of the credit cost or in terms of your provisioning, what type of impact did that have?

So about this, on a Q-o-Q basis for the increase and the questions that you have just asked, maybe I could just take a first shot about your question, and then maybe the CFO could add on some comments as necessary. So if we look at the normal and those that have moved into cautionary bucket, there are not a lot of assets that have done that. However, there have actually been the worth of standard or below and then have moved into the precautionary. So there was an improvement. And then like for shipbuilding, there were also some very large clients that have fit into that. So as a result of that, on a Q-o-Q basis, there has been an increase, however, in terms of the asset quality trends. From a macro perspective, there's not a lot of change that has taken place. Maybe if I could add some comments for the precautionary loans, the reason why there was an increase as Mr. Lee has just mentioned, there's not a sudden change, but it's more that if we look at the asset classification, if there's 1 -- anything that has been more than 1 month past due, we have moved some of that. And in addition to that, on the provisioning side, there's not a lot of difference. So maybe around KRW100 billion to KRW200 billion, there has been some small changes there, but nothing significantly has deteriorated driving the overall increase.

From Kiwoom Securities, so we have Mr. Seo Young-Soo on the line.

I'm Seo Young-Soo from Kiwoom Securities. So since you did mention about the digital in business, I would like to ask a question. From October, the FSC will be launching a loans platform. And I know that many platforms will be linking that -- linking their business to that, and this will enable the clients to compare the loan products. And so this is a restructuring loan platform. So I believe that if that is the case, this may lead to a rate-related competition. And not only that, we were seeing an upswing in the margins. However, I believe that it may lead to a down pool. And if you do engage in these restructuring loan platforms, I think that the only thing remaining would be a competition for the rates on the rates. And that would mean that maybe the pain will just be a production outlet. In other words, it would be in the form, which would be a laggard in this digital innovation era. So in other words, would be at a disadvantage. So I would like to understand there may be some concerns here. So for Woori Financial Group, I would like to understand how you are going to respond. So for instance, when will you be launching a product? And with regard to fees and commissions, how are you going to respond? And you said that you will be very active and aggressive in the digital business. So then I would like to understand to what extent will you be aggressive? And how will you be defending the market? I think it's a sensitive issue, but also an important issue. So would you like to elaborate on this topic, please?

As you have mentioned, for the credit loans in October for the banking sector and the card -- credit card agencies probably in December, and then we'll be moving on to secured loans as far as I know. So as you've mentioned, there will be some fierce competition that would be leading to a cut in loan rates. But if you look at the government, they currently are engaging in the household loan volume restriction. So this means that you cannot get loans from many financial institutions once you meet the cap, meaning that it will go to increase pricing rates. And all in all, supply is quite limited. If you look at this, but demand is to continue on. So that's why we do have a certain guarantee of profitability. And when we do see account transfer policy in place, when we do see that did not impact us greatly. So the household or loan regulations by the government would lead to a greater demand than supply. So realistically speaking, we believe that this policy will not have a significant impact on business. But we have prime clients as well as active accounts, and we believe that this will be a good opportunity to attract more of these prime accounts. So of course, there is the loan cap policy in place, and that may be a concern, but we will be customizing our marketing efforts to make sure that we can seize the opportunity. And to add, with regard to the restructuring loan platform of how this will be operated or how would be run? The final conclusion has not been made yet, but who will be running this platform and what will be the time, the operating hours of this platform and other details may impact the market,…

So due to time, we would like to wrap up the Q&A session. And maybe we could just have some last comments from the CFO. And with that, we would like to wrap up the earnings conference call for Woori Financial Group.

Despite concerns regarding the resurgence of COVID-19, we are continuing with our performance in Q2 as we did in Q1 of surpassing 2019's pre-COVID earnings. As aforementioned, this is not a performance dependent on some one-off effects or factors, but rather the result of the group's efforts to improve profitability, soundness and cost management. We expect this performance upswing to be sustainable. And in addition, we will make every effort to return the profits to our shareholders in various ways. We will do our best to generate results that exceed the expectations of investors in all aspects. So the all the executives and employees will do our best. Thank you very much for your attention.