Release Date: April 25, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Woori Financial Group Inc (NYSE:WF) reported a net income of KRW615.6 billion for Q1 2025, demonstrating solid revenue-generating capabilities despite market volatility.
• The group's net operating revenue increased by 2.4% year-over-year and 6.6% quarter-over-quarter, reaching KRW2,609.5 billion.
• Efforts to optimize the portfolio and diversify revenue sources have resulted in stable growth in non-interest income, driven by core fee income.
• The group's preliminary CET1 ratio improved to 12.42%, a 30 basis point increase from the end of the previous year, showing progress towards achieving a 12.5% CET1 ratio.
• Woori Financial Group Inc (NYSE:WF) announced a quarterly dividend of KRW200 per share, an 11% increase year-over-year, and is executing a share buyback and cancellation program totaling KRW150 billion.

Negative Points

• Net income came in below market expectations due to conservative provisioning and non-regular items such as costs related to the ERP and investments for future growth.
• Credit costs increased by 18.8% year-over-year to KRW435.5 billion, driven by challenging internal and external business environments.
• The group's SG&A expenses rose by 26.6% year-over-year, with a cost-to-income ratio of 43.6%, influenced by one-off factors including early retirement program costs.
• The bank's loan portfolio showed a slight 1% decrease versus the end of the year, with retail loans remaining flat due to government household debt management policies.
• Concerns over economic recession and market volatility persist, with potential impacts from prolonged high exchange rates and US reciprocal tariff policies.

Q & A Highlights

• Warning! GuruFocus has detected 4 Warning Sign with WF.

Q: Can you elaborate on the factors that led to the net income being below market expectations? A: Lee Sung-Wook, CFO: The net income for the first quarter of 2025 was KRW615.6 billion. This was impacted by conservative provisioning due to concerns about future economic downturns and non-regular items such as costs related to the ERP conducted at the beginning of the year. Despite these, the group's fundamentals remain solid with an ROE of 9.5%.

Q: How did the group's net operating revenue perform in the first quarter? A: Lee Sung-Wook, CFO: The net operating revenue increased by 2.4% year-over-year and 6.6% quarter-over-quarter to KRW2,609.5 billion. This growth was driven by solid interest income and efforts to strengthen non-interest businesses and diversify revenue sources across all affiliates.

Q: What measures are being taken to manage credit costs amid the challenging business environment? A: Lee Sung-Wook, CFO: Credit costs were KRW435.5 billion, with a year-over-year increase of 18.8%. We are closely monitoring the market and taking pre-emptive measures such as actively managing high-risk and potential distressed assets. The credit cost ratio was 0.46%, but excluding one-off provisions, it is 0.39%.

Q: Could you provide an update on the group's capital ratios and dividend policy? A: Lee Sung-Wook, CFO: As of March end, the CET1 ratio is 12.42%, a 30 basis points increase from last year. The Board decided on a Q1 dividend of KRW200 per share, an 11% increase year-over-year. We are committed to achieving a 12.5% CET1 ratio within the year.

Q: What are the group's strategies for dealing with macroeconomic uncertainties and market volatility? A: Lee Sung-Wook, CFO: We have formed a group-wide task force to respond swiftly to market conditions. Our strategies include asset rebalancing, focusing on high-quality assets, and providing customized support to companies affected by tariffs. We aim to maintain a solid financial structure and enhance business diversification.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.