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

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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.

Story Continues

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.

This article first appeared on GuruFocus.

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