Woori Financial Group's Q3 2025: Contradictions Emerge on Insurance Acquisition Strategy, Credit Cost Outlook, and Capital Ratio Impact

Date of Call: October 29, 2025

Financials Results

• Revenue: KRW 8,173.4 billion YTD net operating revenue; Q3 net operating revenue KRW 2,773.3 billion (up 2.3% YOY; Q3 similar to prior quarter)

Guidance:

• CET1: preliminary 12.92% (up ~80 bps YoY) with goal to exceed 12.5% by end-2025 and reach 13% ahead of schedule in 2026.
• NIM: Woori Bank Q3 NIM 1.48% (↑3 bps Q-o-Q; +8 bps YoY); management expects to maintain ~1.5% for the year.
• Future Co-Growth: supply KRW 80 trillion over 5 years (RWA impact ~50% of that amount) while offsetting via asset rebalancing and capital measures.
• Credit costs: one-off provisioning largely resolved; expect stabilization in Q4.
• Shareholder returns: quarterly cash dividend KRW 200/share; buybacks/cancellations and TSR decisions tied to CET1 and volatility.

Business Commentary:

* Net Income Growth and Strategic Acquisitions: - Woori Financial Group's year-to-date net income as of the third quarter end rose by 5.1% to KRW 2,796.4 billion, with net income for the third quarter alone reaching KRW 1,244.4 billion. - This growth was driven by balanced growth between interest and noninterest income and contributions from a recent insurance acquisition.

• Capital Ratio Improvement:
• The group's preliminary CET ratio improved significantly by approximately 80 basis points versus the end of last year, reaching 12.92%.

• The improvement was largely due to concerted efforts in managing risk-weighted assets and selective asset growth, despite the impact of a stronger exchange rate.

• Noninterest Income Increase:

• The group's cumulative noninterest income amounted to KRW 1,441.5 billion, up 4.6% year-on-year, with a quarterly increase of 5.3% to KRW 555.2 billion.

• The increase was supported by robust fee income across all business lines, including insurance subsidiaries' performance post-acquisition.

• Risk Management and Provisioning:

• The group recognized KRW 200 billion in preemptive provisions, with third quarter credit costs totaling KRW 574.3 billion, an increase of 13.1% from the previous quarter.
• This was due to one-off adjustments and provisions related to completion-guarantee trusts, nonperforming loans, and litigation settlements.

Sentiment Analysis:

Overall Tone: Positive

• Management highlighted YTD net income up 5.1% to KRW 2,796.4bn, Q3 net income KRW 1,244.4bn (strong QoQ increase), record quarterly core fee income, improved NIM for third consecutive quarter and preliminary CET1 12.92% (up ~80 bps YoY) while completing the insurance acquisition with limited CET1 impact.

Q&A:

• Question from Jun-Sup Jung (NH Investment & Securities Co., Ltd., Research Division): Post-insurance acquisition next steps (merger/100% subsidiary) and any future M&A plans?
  Response: No decision yet on merging or making Tongyang Life a 100% subsidiary; focus is on diagnosing and strengthening newly added securities and insurance businesses and prioritizing organic competitiveness over near-term M&A while targeting CET1 13% in 2026.

• Question from Doosan Baek (Korea Investment & Securities Co., Ltd., Research Division): Outlook for credit cost after heavy preemptive provisioning and details on the Future Co-Growth Project's funding and capital impact?
  Response: Excluding one-offs credit cost ratio is ~0.42% and completion-guarantee provisioning is largely resolved so credit costs should stabilize in Q4; Future Co-Growth will deploy KRW80tn over 5 years (RWA impact ~50%), managed via asset rebalancing and CET1 improvement toward 13%.

• Question from Do Ha Kim (Hanwha Investment & Securities Co., Ltd., Research Division): Will bargain purchase gains (~KRW580bn) be used for shareholder returns this year and what cybersecurity investments are planned?
  Response: Use of bargain purchase gains for TSR/dividends will be decided after assessing CET1 and market volatility—no firm commitment yet; cybersecurity: group-wide reviews underway and IT/security investment share will be increased.

• Question from Jaewoong Won (HSBC Global Investment Research): Timing of early retirement (Q4 vs Q1) and expected profit contribution from the insurance acquisition next year?
  Response: Insurance profit contribution expected to be modest initially—management expects a persistent positive contribution in the range of roughly KRW30–40bn annually going forward.

• Question from Tae Joon Jeong (Mirae Asset Securities Co., Ltd., Research Division): How much did the insurance arm contribute this quarter and what is the expected ongoing contribution?
  Response: Combined insurance subsidiaries contributed roughly KRW70–80bn in revenue and about KRW50bn in net income in Q3, with an expected long-term annual net contribution of approximately KRW30–40bn (subject to volatility).

• Question from Hye-jin Park (Daishin Securities Co. Ltd., Research Division): What adjustments to the PPA might occur over the next year and what's the NIM/securities outlook?
  Response: PPA adjustments over the next year are expected to be limited with no material fluctuations; NIM is expected to remain broadly stable around 1.4%–1.5% despite potential policy rate cuts, and securities contributions should rise next year after initial 2025 investments.

Contradiction Point 1

Insurance Acquisition Strategy

It involves the strategic direction of the insurance arm acquisition, which affects corporate structure and potential future profitability.

What are the plans for the insurance acquisition and future M&A opportunities? - Jun-Sup Jung (NH Investment & Securities Co., Ltd., Research Division)

2025Q3: We completed the deal on July 1. We are reviewing options to make Tongyang Life a 100% subsidiary or merge it. A decision is expected later. Regarding M&A, our business portfolio is now complete with the addition of securities and insurance. - Sung-Wook Lee(CFO)

Has the company made any decisions to merge or delist the listed entity following the insurance arm acquisition? - Jun-Sup Jung (NH Securities)

2025Q2: The business assessment is ongoing, focusing on capital management and competitive improvement. The impact on the capital ratio will be disclosed in Q3. No decision yet on merging or delisting. The merger or 100%-owned subsidiaries could be future options. - Sung-Wook Lee(CFO)

Contradiction Point 2

Credit Cost Outlook

It involves the outlook for credit costs, which are crucial for financial planning and investor expectations.

What is the outlook for credit cost improvements and the impact of the Future Co-Growth Project? - Doosan Baek (Korea Investment & Securities Co., Ltd., Research Division)

2025Q3: Credit costs increased due to provisions but will stabilize in Q4. Completion-guarantee projects are resolved, and there are no significant provisions expected. - Jang-Geun Park(CRO)

What is the 2025 credit cost ratio (CCR) guidance? - Hye-jin Park (Daishin Securities Co. Ltd., Research Division)

2025Q2: The CCR is expected to remain stable at a low to mid-40% range. Asset rebalancing and risk asset management will enhance the credit cost ratio in the second half. - Jang-Geun Park(CRO)

Contradiction Point 3

Capital Ratio Target and Insurance Acquisition Impact

It involves the impact of insurance acquisition on the capital ratio, which is crucial for financial stability and capital management.

What is the outlook for credit cost improvement and the impact of the Future Co-Growth Project? - Doosan Baek (Korea Investment & Securities Co., Ltd., Research Division)

2025Q3: We expect minimal impact on capital ratio based on current investment limits. - Hong Sung Han(Head of IR)

What are the early retirement plans and insurance acquisitions' impact on profitability? - Jaewoong Won (HSBC Global Investment Research)

2025Q3: For the insurance acquisitions, they will contribute to net income but will prioritize capital stability. - Park Jang-Geun(CRO)

Contradiction Point 4

Credit Cost Improvement Outlook

It affects the financial performance and risk management strategy, which are critical for investor confidence and regulatory compliance.

What is the outlook for credit cost improvement and the Future Co-Growth Project's impact? - Doosan Baek (Korea Investment & Securities Co., Ltd., Research Division)

2025Q1: We're aware of rate cuts and stronger regulations, and we're managing insurance capital adequacy prudently. - Hong Sung Han(Head of IR)

Why is your credit cost ratio higher than peers? What steps are you taking to reduce it? How do you manage RWA sensitivity to FX rates? - Kim Do Ha (Hanwha Investment & Securities)

2025Q1: We expect minimal impact on capital ratio based on current investment limits. - Hong Sung Han(Head of IR)

Contradiction Point 5

Insurance Acquisition and M&A Strategy

It involves changes in strategic plans regarding insurance acquisitions and future M&A opportunities, which are crucial for the company's growth and market positioning.

What are the plans for the insurance acquisition and future M&A opportunities? - Jun-Sup Jung (NH Investment & Securities Co., Ltd., Research Division)

2025Q3: Credit costs increased due to provisions but will stabilize in Q4. Completion-guarantee projects are resolved, and there are no significant provisions expected. - Jang-Geun Park(CRO)

How do you plan to manage the CET1 ratio given current FX rates? - Jeong Tae-joon (Yuanta Securities)

2025Q1: Excluding one-off costs, our credit cost ratio is stable at 39 bps. One-off factors include additional provisions for corporate rehabilitation and guarantee projects. - Park Jang-Geun(CRO)