Woori Financial Group Inc. (WF) Q4 2023 Earnings Report, Transcript and Summary

[Interpreted] Good afternoon. I am Han Hong Sung, Head of IR at Woori Financial Group. Let me first begin by thanking everyone for taking time to participate on this earnings call for Woori Financial Group. On today's call, we have Group CFO Lee Sung-Wook, Group CRO Park Jang-Geun, and Group CDO Oak Il-Jin participating. For today's call, the CFO Lee Sung-Wook will present the earnings performance and are Financial Group's capital management plan, after which the CRO Park Jang-Geun will walk you through an overview of the group's risk management efforts. And at the end, we will have a Q&A session. In addition, please note that today's call is being interpreted simultaneously for our overseas investors. Now let us start the presentation on Woori Financial Group 2023 business performance.

[Interpreted] Good afternoon. I am Lee Sung-Wook, CFO of Woori Financial Group. Let me dive into the 2023 performance of our group. Based on the presentation, which is available on our website, please turn to Page 3. First, let me discuss the group's 2023 profit and losses. In 2023, Woori Financial Group's net income was KRW 2,515.7 billion, representing a 19.9% decrease year-over-year. The decline in net income was due to mainly one-off factors such as preemptive provisions by changing the credit cost calculation components, strengthening the loss absorption capabilities of vulnerable areas within the nonbank subsidiaries and expenses related to corporate and finance programs. Following the steep rise in interest rates, the higher for longer environment has led to increasing concerns by the market on the quality of high-risk assets, such as real estate project finance and loans to vulnerable borrowers. We have been focusing on our efforts in the fourth quarter to ensure we preemptively address these market concerns. On the bank side, we adjusted the assumptions that go into our credit costs, such as the LGD and PD values to reflect the future economic outlook. In addition, in the nonbank side, we conducted a comprehensive examination on vulnerable areas to actively set aside provisions. And during the fourth quarter, these activities led to approximately KRW 525 billion in additional one-off credit. In addition to actively participate in extending cooperative finance, we approximately $170 billion in other operating expenses were recognized in the fourth quarter. When excluding these one-off factors, the group continues to maintain solid profit-generating capabilities. Based on our enhanced loss absorption capabilities in 2024, we will strengthen our fundamental competitiveness and intergroup synergies to further solidify our performance improvements. Next, let me move on to the expenses, including our SG&A and credit cost. The group's 2023 group SG&A was KRW 4,443.9 billion, though inflationary pressure continued, it decreased 1.9% year-over-year. The cost-income ratio was 43.5%, which is a 0.9% point decrease versus the previous year, and it has been being maintained at a stable level. On the group credit cost, including for the fourth quarter, $802.2 billion. For the full year of 2020, the group provisioned KRW 1880.7 billion, which is around 2x higher year-over-year, which we believe represents sufficient loss absorption capabilities. When excluding the one-off factors that we mentioned before, related to preemptive risk management, the normalized credit cost ratio is 0.32%. As a result of actively dealing with future uncertainties, the group NPL ratio is 0.35%, and the NPL coverage ratio, which is an indicator of loss absorption capabilities, is 229%, the highest level to date. Next, let me move on to discuss our capital ratios and dividends. As of the end of 2023, the group's CET1 ratio is expected to be 11.9%. This is a result of prudent management on risk-weighted assets and is a 0.3% increase versus the end of the previous year. In addition, during the group BoD meeting today, in consideration of the financial performance and the group's mid- to long-term plans, the Board decided on a year-end dividend of KRW 640 per share for 2023. When including quarterly dividends of 361, it becomes KRW 1,000 per share. In addition, to modernize the dividend policy, the reference date for the 2023 year dividend has been determined to be February 29. When excluding the 100 billion share buyback and cancellation conducted during the year, Woori Financial Group total shareholder return rate is 33.7%, which is a significant increase versus the previous year. After the earnings presentation, I will provide you with additional information on our new capital management policy and mid- to long-term shareholder return policy. Next, let me delve into the performance of each area in more detail. Please refer to Page 4 of the presentation. First is interest income and net interest margin, or NIM. The group's 2023 net interest income totaled KRW 8,742.5 billion, similar to the prior year. And in the fourth quarter, the net interest income was $2,142.6 billion, a 2% decrease Q-o-Q. Woori Bank's 2023 NIM was 1.56%, and the group NIM, including the credit card business was 1.82%. The NIM of the bank and the group fell 3 basis points and 2 basis points, respectively, versus 2022. Amid a high interest rate environment, the portion of low-cost core deposits increased significantly -- decreased significantly, resulting in a continued increase in funding cost, which was one of the main drivers behind the weaker margins. This year, we will be entering a rate-cutting cycle. And thus, we expect the backdrop will be challenging from a profitability perspective. However, low-cost core deposits have recently recovered and the interest on time deposits is declining. We will continue to focus our efforts on improving our funding cost and defend our margins. Next, let me talk about asset growth and the loan book. The total loans of the bank as of the end of 2023 totaled KRW 311 trillion, which is a 5.1% increase year-over-year. On the corporate loan side, the large corporate loan demand was very strong, with high-quality SME loan growth, also very solid, leading to corporate loans posting KRW 170 trillion, up by 8% Y-o-Y. On the other hand, retail loans was KRW 136 trillion, an increase of 1.9% Y-o-Y as growth was driven by real demand mortgage loans due to the effects of the government's household debt management policy. This year, the group will diligently execute its role as a liquidity supplier in light of the economic situation. But as uncertainties at home and abroad are still looming large, we are planning to focus our portfolio growth on high-quality assets with a consideration of our risk weights to achieve profitable growth. Next, let me talk about the group noninterest income. The group's 2023 noninterest income was KRW 1,094.8 billion, a decrease of 4.7% Y-o-Y. This includes the support we will extend to cooperative finance. And when excluding -- in excluding this amount, noninterest income grew 10% Y-o-Y. In addition, core fee income each quarter is recording a mid- KRW 400 billion level, representing a solid growth trend. As intergroup synergies are realized in full, the fee income contribution of nonbank subsidiaries, such as credit card trust and capital business, has grown a lot versus the early days of the holding companies. In 2024, the group is planning to actively pursue HQ sales in the areas of FX and derivatives and marketable securities and asset management will be focusing on wealth management. The bank will become a leader in the asset management market by creating an upgraded product lineup and portfolio, enhancing sales capabilities by increasing the channel specialized in asset management and utilizing its existing robust product risk management system. Next, let me move on to expenses and capital adequacy. Please look at Page 5. This is the SG&A. The group's SG&A in 2023 was KRW 4,443.9 billion. And although inflationary pressure continued, the SG&A was down by 1.9% year-over-year. In addition, the cost-to-income ratio recorded 43.5%, a decrease of 0.9% points year-over-year, maintaining a 3-year continuous and consecutive decline. Due to consistent efforts to rationalize personnel, labor cost decreased 6.3% Y-o-Y. And in addition, even though new subsidiaries like Woori Venture Partners was added, general and admit cost only grew slightly versus the previous year. As the top line growth will be challenging, we believe it is important to focus on cost management in the current conditions. The group has kept recurring expenses outside of future core businesses flat and while also continuing to rationalize channels and personnel, such company-wide cost-saving efforts will be strengthened further going forward. Next is credit cost. In 2023, the group's credit cost was KRW 1,880.7 billion for the full year and KRW 802.2 billion for the fourth quarter. In the first half of the year, Woori Financial Group executed preemptive provisioning of KRW 263 billion, reflecting adjustments to the future economic outlook. And in the fourth quarter, the banking business in consideration of changes in credit cost calculation components such as real estate LGD values set aside KRW 229 billion in preventative provisions and to enhance loss absorption capacity in vulnerable sectors, the nonbanking side added provisions of approximately KRW 200 billion. And when adding the provisioning of KRW 96 billion related to [ TMC ] which recently filed for a debt workout, the total of additional credit costs recognized stands at approximately KRW 525 billion, putting the group at a stronger position to respond to future economic conditions. As a result, the group's and the bank's NPL coverage ratios are at record high levels of 229% and 318%, respectively, and the NPL ratio is stably managed at 0.35% and 0.18%. Meanwhile, the group's credit cost ratio is 0.53%. But excluding the one-off factors mentioned -- aforementioned, the current credit cost ratio is at 0.32% level. Considering the risk of default in real estate PF loans and the rising delinquency rate in the nonbanking side, concerns about the soundness of the market are likely to persist for some time. However, Woori Financial Group has proactively reexamined the group's risk factors and strengthened its loss-absorbing capacity at an early stage, thereby securing sufficient capacity for future risk management. Going forward, the group based on such risk management capabilities, will continue to focus on managing high-risk assets, such as real estate PF and vulnerable borrower loans. Let me now elaborate on capital adequacy indicators. As of the end of 2023, the group's common stock ratio is expected to be 11.9%, an increase of 0.3 percentage points from the previous year-end, while additional provisions to expand loss absorption capacity and the cooperative finance programs resulted in decline in profitability, the aforementioned result was possible due to our strengthened efforts to enhance capital adequacy, including active risk-weighted asset management. As the supervisory authorities measures to strengthen capital regulations such as the imposition of stress buffer capital are scheduled to be implemented in the future, the group plans to manage its capital ratio at a level above the CET1 ratio of 12%, and we will further strive to improve our capital adequacy through solid financial performance and thorough risk management. Following the update on the financial performance, I would like to take this opportunity to present the group's new capital management policy and shareholder return policy. Please refer to Page 6. For your reference, this material was prepared based on what was discussed at the Board of Directors meeting. At last year's earnings call, the group announced that based on a CET1 ratio of 12%, the total return to shareholders, including dividends and share buyback, would be implemented within 30%. In addition, the group noted that when the common stock ratio reached 12%, it will review its mid- to long-term shareholder return policy with a view to expanding shareholder return. Last year, Woori Financial Group for the first time since its establishment as a holding company paid quarterly dividends of KRW 180 per share in the second and third quarters and also engage in the buyback and cancellation of treasury shares worth KRW 100 billion. The group also signed a stock transfers framework agreement with KDIC and result related overhang risks. Considering the closing dividend of $641 per share announced today, the group's dividend payout ratio for 2023 is 29.7%, and the total shareholder return is 33.7%. Furthermore, in order to improve the dividend process, the group for its 2023 year-end dividend has set the dividend reference date to February 29, after the dividend amount has been determined, thereby enhancing the predictability of dividends. This year in light of strengthened capital regulations and expanded loss absorption capacity, we reset the common stock ratio target to 13%. We will maintain the shareholder return method of combining dividends and treasury stock buyback and cancellation, but we'll implement more active shareholder return for each common stock ratio tier and such approach feeds into our reestablished shareholder return policy that focuses on gradually increasing dividend per share and total shareholder return. Considering our current capital ratio when the group's CET1 ratio is within 13%, we will gradually increase the TSR, or total shareholder return, to 35%. And when the CET1 is above 13%, we will pursue a total shareholder return of 35%, more and more. However, the mid- to long-term TSR target is set at 50%. In particular, for the group's capital management, we plan to actively manage risk-weighted assets by enhancing our portfolio with a focus on low-risk, high-return quality prime assets and selective asset growth based on RoRWA. The recently discussed corporate value program aimed at resolving the undervaluation of the stock market is also expected to greatly contribute to this trend of expanding shareholder return and provide momentum for valuation recovery of value stocks that are undervalued in the market. This year, Woori Financial Group, based on its upgraded profit generating capability and stabilized asset settlements, plans to initiate a full-scale earnings turnaround, also, so that the profits generated in this way can be more fiscally returned to shareholders. We will endeavor to implement various shareholder value enhancement measures. By achieving our management plan targets, we will restore our 2024 dividend per share to the level at or above 2022 levels and continue to further increase in the future. The plan to purchase the 1.2% stake in the company held by KDIC is also currently under discussion to be implemented as soon as possible. And given the current stock price level, this is KRW 130 billion, an increase of more than 30% year-on-year, and share buyback and the total amount is to be canceled after the purchase. We will announce the decision as soon as it is finalized. In 2023, the group reviewed its vulnerabilities and focused its efforts to proactively secure the ability to respond to future economic conditions. These proactive measures resulted in a decline in net income, but this is only temporary. This year, based on our recovered performance, we will continue to improve shareholder value, as described earlier and fulfill our social responsibility as a financial institution. Thank you. Next, the group's CRO, Mr. Park Jang-Geun, will elaborate on the status of the group's risk management.

[Interpreted] Good afternoon. I am the CRO of Woori Financial Group. I am Park Jang-Geun. Let me present the Risk Management section in Woori Financial Group's 2023 annual business performance. Please refer to Page 7. First is delinquency rate trend. In the case of Woori Bank, it was 0.26%, which was an increase of 0.0 (sic) [ 0.04 ] point percentage point year-on-year, and Woori Card was 1.22%, which was up 0.02 percentage points year-on-year. And we're seeing high interest rates and marketing instability is continuing on. And therefore, delinquency rate did increase slightly. However, if you refer to the increase, it is at the lowest level in each relative industry. And let me now move on to the proactive risk management. As you can see here in this graph, in 2023, the annual credit cost was KRW 1,881 billion. Of this amount, KRW 1,009 billion was of ordinary accruals and KRW 872 billion was for a preemptive provisioning. And this preemptive credit cost amounts to KRW 525 billion in the fourth quarter. In the case of the KRW 525 billion, it is in response to regular estimates reflecting future economic outlook and adjustments to the loan loss factors, including risk management components of LGD. And therefore, this is KRW 229 billion that was set aside for reserves and in addition to that, KRW 96 billion related to the debt workout company and KRW 200 billion to strengthen loss absorption capacity in vulnerable sectors such as real estate PF, taxes on NPL coverage ratio and the loan loss provision ratio to total loans. Woori Financial Group, as was mentioned, has been very much focused on preemptive provisioning, and we have been strengthening our loss absorption capacity. And the NPL coverage ratio as of the end of fourth quarter 2023 is 229.2%. And not only in terms of the provisioning, but if you refer to the provision ratio to total ratio, it has been continuously increasing, indicating that the group has been very much proactive in preparing for any insolvency across all loans. On the right, you can refer to the status of the real estate PF loans. The total amount of the group's real estate PF loans and the PF bridge loans totaled KRW 3.4 trillion. Of this, we have agency guaranteed loans, which is $1.3 trillion, including the HUG or HUG guarantee. And you can see that excluding that, it's $2 trillion in terms of the outstanding balance. Including the bridge loans and the overall real estate PF, we have a total of 200 sites. And what we have been doing was in a comprehensive site evaluation to understand the risk, as well as in the cases of insolvency, and we've been reviewing the vitality of the sites. And we have developed and managed the response plan such as adding additional reserves in case of losses. Next, moving on to the CRE in the U.S. With regard to CRE in the U.S., it's KRW 2.9 trillion and syndicated is $1.1 trillion loan, and the general loans is KRW 1.8 trillion. In the case of the general loans, unlike the syndicated loans, it showed that it consists of small amount of loans and the risk that is, of course, diverse. And in the case of the CRE loans, you can see that mostly our senior loans, so the LTV ratio is averaged 40%. And in terms of loan preservation or recovering credit, it's quite satisfactory. And last but not least, in 2024, I would like to focus -- to mention our direction in 2024, the unstable financial market and the high interest rate situation is to persist. And in response, we'll be very much focused on asset soundness, as well as capital adequacy when it comes to our risk management. Through growth center on new quality growth companies and prime companies, we will improve our quality of the portfolio and also with regard to high-risk assets, including CRE assets and also in terms of vulnerabilities and some of the subsidiaries portfolio, we will be focusing on inducing a soft landing. And by establishing a regular response system for each risk factor, such as interest rates and exchange rates, we will strengthen the group's [indiscernible] response capabilities and also including ICT risk and digital risk and other operational risks, and also understanding the country-specific risks we want to put in place a differentiated global risk management system. Thank you very much.

[Interpreted] Yes. Thank you for the presentation. And now we will start the Q&A session. [Operator Instructions] The first question will be from NH Securities, Jung, Jun-Sup.

[Interpreted] My name is Jung Jun-Sup, and in a challenging environment in terms of the dividends, we thank you for the efforts that you have made. And for 2024, I would like to ask you about your total shareholder return policy. So during the presentation, one thing that you mentioned was that for the KDIC stake is something that you wanted to purchase and fully cancel. And if that is the situation, does this include, in your 2024 TSR? I think that you did. But in addition to that, for 2024, would you have any additional plans to reach -- to any share buybacks. Of course, your CET1 ratio would need to meet your target level, but including the efforts that you're making right now in terms of your dividends, maybe the share buybacks and other measures that you would take, what would be the breakdown behind that? And the reason why I'm asking that is because if you look at the other financial holding companies, it seems to be that rather than paying cash dividends, they are more focused on share buybacks. So I'd like to know what your group's position is on this situation.

[Interpreted] If you could wait -- if you could give us some time, we will prepare and then answer your question.

[Interpreted] Yes, this is the CFO, Lee Sung-Wook. And as we have just mentioned during the presentation, in the case of the KDIC stake, once we purchased that, we did say that we would fully cancel that amount. And that, in total, would be included into our TSR. And in addition to that of course, we will first acquire the KDIC stake, but for any additional share buyback efforts, right now, the overall CET1 ratio is less than 12% as of right now. So we would look at where our level is to consider whether we will make any additional plans. And for 2025 in terms of the dividends and also in terms of the breakdown for 2024, between share buybacks and other dividend payouts right now in terms of our overall dividend payout ratio, it's around 29%. And if you look at 2022, the DPS that we had in the year is something that we are targeting to achieve once again in 2024. And then in addition to that, any share buybacks and cancellation and also, would be something that we would do in addition to that. Thank you.

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

[Interpreted] Thank you very much for the presentation. I would like to understand, we have in the noninterest, there's about $170 billion that was recognized with regard to the cooperative schemes. So I would like to understand this total amount. What would that be? And how is that to be reflected in the books. And with regard to the margin trend, I would like to understand, what's the quality of -- what is the quarterly forecast that you have for the margin trend?

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

[Interpreted] Yes. With regard to the cooperative finance scheme, as was indicated in the case of noninterest, we do have $69.4 billion as operating costs, and we have a raining slightly more than $100 billion or $100 million. And we believe that within 2024, it won't be reflected in us, but in terms of support for the self-employed, some of the -- some of that would be depreciated. And therefore, in 2024, some of the items that were reflected just some of that, a portion of that would be reflected in the books in 2024. And with regard to the margin or NIM, so a drop by 8 percentage points at 1.47% is NIM right now. And with the increasing assets and the rates tied to that, and there are some specific aspects to the Woori banks, which have to do with increase in GAAP amount coming from the secondary loans. And in addition to that, we had the impact coming from the drop in the low deposit rates and time deposits. And we believe that all of these factors have come into play. And with regard to Woori Bank, it has a social responsibility. So it has a specific second guarantee loans that's for the small borrowers. And we believe that there is a gap with regard to the interest rate, which has led to a drop in NIM rates. In the first half of 2024, NIM, considering the financing of time deposits stabilized. And if we do see the stabilization of core deposits. We believe that compared to fourth quarter '23, it's going to improve by a small margin. And for your information, in January of 2024, NIM is 1.50%, which is 0.03 percentage points increase quarter-on-quarter. And we are going to continue to increase the proportion of core deposits and also financing of time deposits and also with regard to increased corporate loans with higher interest rates, we're going to find a way to defend the drop in NIM. Thank you.

[Interpreted] We will move on to the next question from Yuanta Securities, Jeong Tae Joon.

[Interpreted] Yes. This is Jeong Tae Joon from Yuanta Securities. There are 2 questions that I would like to ask you. The first question is with regards to your dividends. There would be quarterly dividends and year-end dividends. What would be the portion of that for this year and the ongoing situation? And the second is that right now, if you look at -- there are some news reports about the possibility of you acquiring a small-scale securities company. So if you have any plans that you can share with us, that would be appreciated.

[Interpreted] If you give us some time to actually prepare, then we will prepare an answer for you.

[Interpreted] Yes. Maybe I can address your question. In 2023, if you look at the first quarter, second quarter, we did $181 per quarter. And then, at the end of the year, we actually did KRW 640 per share. And going forward, in terms of how we are going to pay out our dividends is the question that you asked for 2024 in terms of the total amount, based upon our basis plan, if we achieve that, then we want to achieve a DPS that would be on the par with 2022. And in terms of the quarterly, in the second quarter and third quarter, we did $181 as mentioned before, and then this is something that we want to continue and maybe also provide in the first quarter. So continuing quarterly dividends is what the policy would be. And in terms of the size, it would be 50% of what our per share dividends would be over the mid- to longer term. And in addition to that, we will also look at market expectations and the previous year's dividend level to deal with and make a deal determination on the dividend level. In addition, with regards to the M&A opportunity that you just talked about, I do believe that there's a lot of press reports recently about this topic. And in terms of the M&A principles that we have, I think that it's the same that we have -- what we have told you previously, which would be that, in order to have sound management and also maximize our shareholder value within an appropriate capital ratio level, we would look at the possibilities to increase our REO and also maximize synergies within our intergroup. So we are looking at and opening various opportunities. So in the current market situation, we're looking at all the possible assets that are on the market. And right now, one of the securities companies that is mentioned would be one of such of the assets. So for this company, it is an online fund dedicated company. And if we were to acquire this company, the impact on the capital ratio would be almost negligent. However, as of now, we have not made any determination. Thank you.

[Interpreted] The next question is from HSBC Securities, Won Jaewoong.

I believe that the questions I did have were already asked, but I have some 2 additional questions. So first, as to do with the online funds and the securities firms, and I do know that you are looking into acquiring such securities firm. But as far as I know, Woori Finance, when looking into nonbank subsidiaries, you're trying to look at a moderate scale type of company. It's never been trying to focus on small-scale acquisitions. So that was my understanding, but I would like to know whether there is a change in the plan. And the second question that I have is with regard to the online business, like other companies, we have a new one for the super apps that you have in place. So with regard to this app, is there a different differentiating factor or advantage that it has versus other apps? It could be on acquiring new customers. So is it for -- does it have some entertainment aspects? Is that the focus? Or is it about focusing on wealth management or asset management for the customers of offering a number of options. So your strategy, please?

[Interpreted] Please bear with us for just a moment.

[Interpreted] Yes, with regard to M&A, as was already mentioned, with regard to our overall M&A principle, there is no significant change. And with regard to the securities firm, it's an online fund sales company. And with regard to the planned acquisition, there's nothing that has been finalized or decided as of yet, so please refer to this piece of information.

[Interpreted] I'm Oak Il-Jin, CDO. And with regard to the super app in November, that's the target date that we have to open that app. And with regard to the direction, it's about customer-centered service is offered in a seamless fashion, and it's about the bank as being the basis. But of course, for all of the service from our subsidiaries, we want to provide this as a universal banking type of format or platform so that they can utilize all these services across the board. And recently, the buzz word is gen AI. So a gen AI-based banking and MyData -- in other words, utilizing this data to provide personalized services is something that we want to do based on cutting-edge technology to make it as convenient as possible for our customers to make it as successful as possible.

[Interpreted] The next question will be by KB Securities, Kang Seung-Gun.

[Interpreted] I would like to ask a question about the TSR. So right now, if our CET1 ratio doesn't reach 13%, you're talking about 35% TSR, which would be similar to this year. But if we look at how much it can actually increase would be around 1% point only. So I think that what is very important is that at the Woori Financial Group level, when are we going to be able to achieve the 13% CET1, I guess, in this point. So right now, you did talk about that you will maintain growth in the corporate loan book. So as a result of that, in terms of our CET1 ratio growth, I do think that the path may be different from other financial holding companies. So for 2024, 2025 and over the mid- to long term, in terms of your corporate loan growth rate, what is the expectations there? And taking that into consideration, when do you actually believe your CET1 ratio will pierce 13% mark?

[Interpreted] If you could please wait while we address your question, that would be appreciated.

[Interpreted] Yes. Let me address your question. And I think that if you look at 2023, it was 11.9% in terms of CET1. This is preliminary and in actuality, I think it will be maybe 11.9% upper end of that percentage. So as a result of that, our overall target is to be at 12% range, very stable. And if we look at the overall exchange rate per dollar, it's at around 1,300. And going forward, if the rate were to be cut or if the FX were to be more stable, then I do believe that, that would have a large impact on our group's overall financial performance. So around KRW 10 difference in the exchange rate has a 3 to 4 basis point difference in terms of the situation. So as a result of that, if it goes down to 1,300, then that would be that there could be an improvement of around 60 to 80 basis points. So in such a situation, we did talk about the overall targets that we want. But based upon the market conditions or the risk-weighted assets that we have, this is something that we will do in collaboration also to achieve our target. So at the end of the day, I can't say exactly in what year, we will reach our 13%, but we do think that it will probably be 3, 4 years down the road. So from 11.5%, this is something -- or for the 12.5%. This is something that we want to achieve as early as possible.

[Interpreted] And this question is Lee Changhwan from Align Partners.

[Interpreted] Good day. I do have a similar question that was just posed. So in the case of last year, with regard to your shareholder return policy that was announced, I believe that asset growth was at 4% linked to the nominal growth rate -- nominal GDP growth rate. But in the presentation today, you can see that improving RWA asset portfolio, it's about focusing on the soundness, but there wasn't any specific indicator or number. So would that imply that you can grow 4% to 5% going forward? Or does it mean that it will be managed at 4% to 5% levels and there will be no change in that. And the purpose behind this question is, as was mentioned CET1 13%, only when we reach that, can we go to a TSR of 50%. But when would it be 13%? That would be the critical point. So in the case of risk-weighted assets, it means that it has to be a very tightly managed. So I want to understand, is there any change in policy.

[Interpreted] Please bear with us for just a moment.

[Interpreted] Yes, let me address that question. And some areas -- some of my response may be redundant, but realistically speaking, with regard to asset growth, last year, it was 5%. And going forward, we believe that it will be more or less within that same range of 5%. And if you look at the risk-weighted assets and the corporate loans, it doesn't mean that it will increase automatically out of the corporate loans. If we increase the prime assets, it means that there may be some loss on NIM. However, risk-weighted would drop in the case of SMEs. If it's based on -- it's non-secured. In that case, the risk weighted, of course, would go down. Therefore, if we refer to past performance, typically, the CET1 was 20, 30 bps, was on improving. And so that means that we are very much tightly managing our risk-weighted assets. But in 2024, as was mentioned, but we will be very much active in asset management, so that we can achieve 12% plus going forward.

[Interpreted] The next question will be from Korea Investment Securities, Baek Doosan.

[Interpreted] Yes. This is Baek Doosan from KIS, and I would like to ask you about your asset quality. So this year, if we look at your nonbank side, in terms of the additional provisions that you set aside, if we look at that in light of the loans that you have on the nonbank side, it does seem to be that the provisionals were large. So with regards to the $200 billion that you provisioned on the non-bank side, could you talk about the details of that? And then if we were to look at the bank versus the nonbank side and look at the total picture for 2024, how -- what level of provisions do you think or what do you believe the credit cost would be for this year? If you could give any guidance, that would be appreciated.

[Interpreted] While we prepare, if you could wait a bit, that would be appreciated.

[Interpreted] Yes. This is Park Jang-Geun and maybe I can address your question. With regards to the nonbank loss absorption capabilities and the additional provision of $200 billion, if we look at the details of that, as mentioned before, on the real estate PF side, we did a full examination. And we looked at the viability of the projects and also what the loss would be. We did a stress test and an overall assessment. So for the areas in which we believe were insufficient, we actually put aside additional provisions -- which is a significant portion. And then on the nonbank side, we also looked at the RC value. So we looked at the data assumptions and then there were some adjustments made in the risk levels. And in addition to that, for the write-offs, we did believe that there would be a lot. So for those that we expected to be written off, we also did some pre-provisioning for those areas. In addition, if we look at the loan loss for this year, in 2023 on the bank side and nonbank side together, and in addition to that [ offer TAM ], we did fully provision against TAM in itself. So any provisions that would be one-off in nature would not be very large. So we do believe that the provisioning would be on a normal basis. And if we look at the normal size of provisions, of course, on the self-employed, the overall delinquency and insolvency is increasing. So as a result of that, we do think that there will be additional provisions that we will set aside accordingly.

[Interpreted] There are no more questions remaining. We would like to conclude the Q&A session. If you do have any additional questions, please call our IR department, and we'll make sure to have your questions answered. And with this, we would like to conclude the 2024 earnings call for Woori Financial Group. Thank you very much for your attention. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]