Good afternoon. I'm [ Lee Jong-Soo ], head of IR at Woori Financial Group. I would like to express my sincere gratitude to you all for joining Woori Financial Group's earnings call despite your busy schedules today. On today's conference call, we have with us our Chairman, Tae-Seung Son; President, Chun Sang-Wook, responsible for the group's IR; Group's CFO, Lee Sung-Wook; Group's CRO, Jung Seok-Young; and Group CTO, Ouk Il-Jin and also our personnel in charge of ESG. At today's earnings call, Chairman, Son Tae-Seung will deliver his IR message, which will be followed by a presentation of the group's financial performance and Q&A. In addition, we would like to inform you that the simultaneous interpretation is being provided for our overseas investors. Let us now begin with the IR message by Chairman, Son Tae-Seung, and the earnings presentation of the first half of 2022.

Good afternoon. I am Son Tae-Seung, Chairman of Woori Financial Group. Following the annual earnings presentation in February, I am here to deliver my greetings at the first half of the year earnings call. Before going into the earnings presentation, I would like to express my deepest gratitude to everyone for joining Woori Financial Group's first half of 2022 earnings call. Let me now elaborate on the business performance for the first half and the management direction for the second half of 2022. Woori Financial Group's net income for the first half of 2022 increased to 24% year-on-year to KRW 1,761.4 billion. This is the highest half year performance of the group. And quarterly performance also rose 9.9% from the previous quarter's record high performance to KRW 922 billion. Despite the uncertain financial environment, both home and abroad, robust operations in the head office, including the IB business, continued, which further upgraded the profit-generating capabilities of the group. While the profits of the group's core subsidiary, Woori Bank, continued to rise, nonbank subsidiaries also continued to sustain substantial growth in their core businesses. As a result, the nonbank's earnings contribution ratio, which stood at 10% at the beginning of the establishment of the holding company, rose to 18.5% as of the first half of 2022. In particular, synergies between subsidiaries and the group's noninterest income began to emerge in earnest, which led to demonstrating unwavering stable profit generation capabilities despite economic fluctuations. Thanks to Woori Financial's risk-focused business culture for the past several years, credit cost remain at the lowest level in the industry. Nevertheless, the group set aside approximately KRW 130 billion in additional provisions in the second quarter to preemptively prepare for future uncertainties. Today, the Woori Financial Group's Board of Directors confirmed and announced an interim dividend…

Good afternoon. I am President, Chun Sang-Wook, in-charge of Woori Financial Group's IR. I would like to express my deepest gratitude to everyone joining Woori Financial Group's first half of 2022 earnings call. Let me now begin the presentation on Woori Financial Group's first half of 2022 business performance. Please refer to Page 3 of the business performance material available on our website. Let me first start off with the group's net income. Woori Financial Group's net income for the first half of 2022 is KRW 1,761.4 billion. Despite growing uncertainties, both home and abroad, the group's performance grew 24% year-over-year, recording the highest performance for the first half of any given year. Such performance is the result of improved revenue generation capabilities of our subsidiaries and active group-wide cost management efforts. Meanwhile, the group's net income for the second quarter of 2022 was KRW 922 billion, a record high on a quarterly basis. Despite the provisioning in preparation for economic uncertainties, net income further improved 9.9% from the previous quarter's record high performance. Next is net operating revenue. In the first half of 2022, group net operating revenue recorded KRW 4.886 trillion, rising 20.8% on year. Net interest income and noninterest income posted KRW 4.103 trillion and KRW 783 billion, respectively. Group interest income displayed a sustained growth in the first half, backed by modest asset growth and profit structure improvements of key affiliates. Noninterest income also saw a level-off on income generation, thanks to the synergies created amongst the affiliates and expanded revenue in the IB business based on strengthened CIB business. Top line continued to improve, and group's second quarter net operating revenue, in particular, posted a record high quarterly result of KRW 2.515 trillion. Thanks to portfolio diversification efforts, so far, group nonbanking revenue accounted for…

Yes. Thank you very much. We will now begin the Q&A session. For your information, I would like to mention that the executives of the Woori Financial Group joining us today will be answering the questions. [Operator Instructions] The first question is from Change Jeong Tae Joon from Yuanta Securities.

I'm Jeong Tae Joon from Yuanta Securities. I have a question with regard to credit costs. So in September, I know that the deferral is to discontinue. And I would like to understand, as we've seen in the second quarter, and for the past 3 years, would there be any additional provisioning? And with the increased rate hike, when we do see that the situation will normalize, I would like to understand the 19 bps of the credit cost ratio, would it -- is it to increase? So please give us some prospects.

Please bear with us for just a moment as we prepare to answer your question.

I am Jung Seok-Young, CRO of the group. Let me now answer your question. For the first half, as was mentioned by President, Chun Sang-Wook, in order to increase our loss absorption capabilities, we have satisfied additional KRW 130 billion in provisioning. In the second half, as you've mentioned, the foreign exchange rates and the rate hikes will lead to exacerbating the economic situation. However, if we refer to our asset portfolio, we believe that we do not have to engage in any additional provisioning. And also in terms of the COVID-19 loans, we've actually already provisioned about KRW 300 billion for that. And currently, we believe that delinquency rates or deposit rates of corporations is something that we have to take into account and engage in any additional provisioning, if necessary. But right now, there are no specified plans or prospects that are set forth.

Next, we'd like to take another question. It's from BNK Securities. Mr. Kim In, you have the floor.

My name is Kim from BNK Securities. Can you hear me well?

My apologies. I think that you should speak up a little more.

Yes, I will try. My name is Kim from BNK Securities. Can you hear me?

Yes, we can. If we can't hear you or miss anything, we will let you know. Please continue. Mr. Kim In?

Yes. Can you hear me?

Yes, you have the floor. You can ask your questions now.

Yes, I do have three questions, but I think that altogether can be summed as one. Now if you take household loans, in the second quarter, you recorded minus growth. Given the real estate market, I don't think that retail lending is going to grow any further. And I believe that in the second quarter -- or in the first quarter, it was quite high, but I think that because of economic downturn prospects, there can be a lot of limiting factors. So I'd like to hear your comment on that. And given the additional interest rate hike, I think that it's going to affect our economy. If you look at market interest rate, however, in Korea, there were some factors that could affect the interest rate. And I think that we have a lot of news reports that could affect margins. And in the second half, I think that margin can be negatively affected. So what's your take on that? Now altogether, I'd like to ask you about interest rates. I think that interest rates are pretty high at the moment. It's growing really fast. Now given the growth and also sluggish margin in the second half, I believe that there has to be some moderation going forward. So how do you plan for that in the second half?

Thank you very much for your questions. And if I may, I'd like to summarize all of your questions again. Now in the first half, if you look at our loans, and your question had to do with our second half lending prospects. And your second question had to do with our margin. There can be some additional benchmark interest rate hike in the second half. But if you look at current market movement in the second half, the interest income prospect was your question. So as we prepare for your answer, please bear with us.

Thank you very much. I am Lee Sung-Wook, VP for Financials. Now first, I would like to talk about our asset growth. As Mr. Kim In, you rightly mentioned, retail lending decreased and also corporate lending, while increased, especially SME lending in the first half increased significantly. So overall, in the case of our group, our focus was on nonbanking loans, rather nonbanking business. So overall, I think that we plan for an annual growth of 8%. Now if you look at altogether, I think that it would be around 5% growth. So in the second half, what is our growth outlook, that was your question. As you mentioned, Mr. Kim, I think that retail lending, because of the inception of the new government and also new housing policies, I think that growth in retail lending is going to be quite limited in the second half. And when it comes to SME lending, I think that the growth trend in the first half is going to continue on in the second half. However, credit card and capital and banking growth was quite sharp in the first half. But asset quality and also risk management is very important. And therefore, also in terms of capital adequacy, in the second half we are going to maintain the growth rate at a more appropriate level. So overall, again, the initial target of the group was 8%, but we are going to make sure to limit that within that 8% limit, so that we can enhance capital adequacy in the second half. And you also asked a question about N-I-M or NIM. I think that short to long-term interest rates were brought up. I think that you are especially referring to long-term rates. I think that long-term rates growth was about 50 bp for…

Next, we have Kim Do Ha from Hanwha Investment & Securities.

I do have one question. So I can see that the banks contribute greatly, but we can see that you have many nonbank subsidiaries under the belt. So we have capital or we can see that depending on the subsidiary, if we look at the current status, what kind of prospects do you have for these individual subsidiaries?

Yes. Thank you. If I may recap your question. You've mentioned about the nonbank subsidiaries, especially Capital, Investment Bank, and Woori Card, you've asked for the prospects for these individual subsidiaries. So please bear with us for just a moment as we prepare to respond to your question.

I'm Lee Sung-Wook, group CFO. First, on the Card, Capital, and Investment Bank's prospects. So the Card, Financial Capital, and Investment Bank, they are in the nonbanking sector, as you know. And as you are very well aware, if we do see an economic slowdown, there could be an issue with asset quality or soundness more so than the banking sector. Therefore, in terms of asset quality and soundness, we will be focusing on that and zooming into that in the second half for these subsidiaries. So first, Woori Financial Capital. You can see that for the first half, about KRW 125 billion was the profits that were generated, and this is an increase by KRW 42 billion year-on-year. But if you look at Financial Capital, Woori Financial Capital recently, you can see that funding rates have increased. And because of that, you can see that the internal margin right now may be a bit dampened from what we have seen up until now. So overall, if you look at the external growth, that was the focus for the first half, a KRW 2 trillion increase year-over-year. So in other words, a 20% growth of external asset size was something that we have witnessed. So you can see that it may be able to cover any exacerbation in margins with this increased asset portfolio. But of course, at the end of the day, it's about how we manage credit cards. And I believe that Woori Financial Capital, whether it can actually see increased profitability will depend on the management of credit cards. So for Financial Capital, in the second half, we will be focusing on managing credit cards. And in the case of Woori Investment Bank, a KRW 45 billion. So that was comparable to last year's levels, but Investment…

It's around 3:30, and we have three more questions remaining. So we will take all three questions and then wrap up the Q&A session. So from Goldman Sachs, we have Park Sinyoung ready to give the question.

I'm from Goldman Sachs. My name is Park Sinyoung. I do have two questions. First of all, I believe that you have about KRW 100 billion of nonoperating profits. And I believe that there were none one-off items. So please elaborate what those were? And in the first half, I believe that the performance was quite good. And the interim dividend was set at the same level as last year. So is this going to be the same signal for the annual dividend? So tell us more about how you came up with that interim dividend amount? And also, at the group level, I understand that you've been working on strengthening nonbanking portfolio and you are seeking M&A opportunities. So is that because of the asset allocation plans? So if you can, I would like to hear more about your asset allocation plans going forward.

Thank you very much for the questions. So Park Sinyoung asked about nonoperating profit. And also about interim dividend, what were the bases to the interim dividend amount, and also asset allocation plans for the second half was also part of her question. Please bear with us as we prepare the answer.

Yes. I am Sung-Wook again. I'd like to answer that question. When it comes to nonoperating profit, there are some volatilities. There were some profits and losses. In the first half, we have [indiscernible] as part of our asset. And because of the sell-off, I think that nonoperating income increased. And with regard to that interim dividend at KRW 151 per share, last year, we've also paid out KRW 151. And also this year, the same amount was paid out. In the second half, there are a lot of uncertainties. So we've decided to stick with the last year's number. So we took into consideration various factors, including capital adequacy in determining the number. So interim dividend is KRW 151. And so the annual dividend is going to be in line with our overall dividend payout ratio. Market expectations and also internal and external market factors will be taken into consideration, so that we can maintain stable payout ratio. For details, I believe that the decisions are going to be made by the BOD, but anyways, mid- to long-term dividend policy is going to stay the same. We plan to increase it up to 30%. So with regard to our interim -- rather dividend policy, nothing much has changed. Thank you very much.

Thank you very much for that response. Next, we would like to invite a question from our investors from Align Partners, Lee Changhwan.

I am Lee Changhwan from Align Partners Thank you very much for that excellent performance. Recently, you can see that there were some adjustments or correction in stock prices. But we've been actually seeing good performance and maybe that actually brings up the attractiveness of the stocks. But I do know that as a shareholder return policy, Woori Financial is only focusing on a dividend payout. But you can see that for other cases, when the -- if stock prices actually turn attractive, there are cases like a treasury buyback, which actually can be quite productive. So I would like to understand, recently, especially, you can see that with the change ahead of the financial regulatory body, there have been some changes to the policies and direction. So when we do see the stock price being quite attractive, you may be thinking of utilizing treasury buybacks. So I would like to understand, do you have any plans of such, or maybe in the future? And under what condition would you be thinking of this option?

Yes. Thank you very much, Mr. Lee Changhwan for your question. So it has to do with our shareholder return policy other than our dividends. So for instance, treasury buyback or write-back of the treasury stock. So as we prepare to answer your question, please hold.

Yes, I am Group CFO, Lee Sung-Wook. So with regard to our shareholder return policy, as you've mentioned, there are many ways, including dividend, buying back the treasuries, and writing off. So there would be many ways to actually engage in shareholder return. But we do have 1.3% of shares of KTIC. So in order to solve this, we have been putting in many measures. And I do know that -- I do want to mention that we're trying to make sure that there are no issues that -- at least no issues in the market. And with regard to treasury buyback, based on the commercial code, within the dividend payout range, we can actually buy back the treasury. But you can see that our threshold is about KRW 5 trillion plus. But if you look at our common stock, CET2 ratio, it's quite low versus the industry. So it's important to make sure that we allocate our assets in an efficient manner. You can see that engaging in nonbank M&As and acquisitions are something that we are looking into. And if we do that, that will have an impact on the capital ratio. Therefore, in the short run, rather than focusing on treasury buyback, we want to focus on enhancing our corporate value in the mid- to long run, in other words, focus on M&A. And in the future in terms of the treasury buyback, we would be reviewing that when the conditions arise. But as you have already mentioned, M&As and asset investments is something that we want to focus on. And after that, we will be also actively looking into the treasury buyback option.

Now because of time constraints, I would like to take one last question.

The last question is from Samsung Securities. We have Mr. [ Kim Jae-Woo ] ready for the question.

I have a question about your digital policies going forward. In recent years, I believe that digital transition was a buzzword. And if you look at your competition, nonbanking services or nonfinancial services have been combined in order to provide more broad services for the customers. Now looking at your advertisements, I understand that you are responding quite actively when it comes to these policies. However, from an outsider's point of view, I think that expansion is something that is needed, like other companies adding ONE to bank. Now you need more nonfinancial, nonbanking affiliates. So I would like to understand what your future plan is and what your future direction is going forward?

Thank you very much, Mr. Kim, for your question. So the question had to do with the future direction of Woori Financial Group's digital policies and concrete action plans to realize those digital goals. As we prepare to answer your question, please bear with us.

My name is Ouk Il-Jin. I'm responsible for Digital Services at Woori Financial Group. With regard to digital, non-face-to-face, platform-based resources and priorities are something that we are looking into. So platform-based, user-based expansion is something that we're working on. For example, using M&As as an indicator, we're trying to measure our performances. And you talked about expansion. Now as a financial group, we have a bank and also credit card. So we are going to further grow those apps. And until next year, we are going to also work on introducing an integrated group-wide platform. So that from a customer's point of view, we can provide a comprehensive financial solution and also combine the living services -- lifestyle services to our customers. So we want to have an integrated platform, and we do have a mid-to-long-term plan for this year and also next year.

Thank you very much for the response. This concludes the Q&A session, and this brings us to the end of the 2022 First Half Woori Financial Group's Earnings Call. I would like to thank you all for your attention. [Statements in English on this transcript were spoken by an interpreter present on the live call.]