Woori Financial Group Inc. (NYSE:WF) Q1 2023 Earnings Call Transcript
Woori Financial Group Inc. (NYSE:WF) Q1 2023 Earnings Call Transcript February 6, 2024
Woori Financial Group Inc. isn't one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Han Hong Sung: 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’s CFO, Lee Sung-Wook; Group CRO, Park Jang-Geun; and Group CDO, Ouk Il-Jin, participating. For today’s call, the CFO, Lee Sung-Wook, will present the earnings performance and Woori 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 of Woori Financial Group 2023 business performance.
Lee Sung-Wook: 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 KRW2,516.7 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 non-bank 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 cost, such as the LGD and PD values to reflect the future economic outlook. In addition, in the non-bank side, we conducted a comprehensive examination on vulnerable areas to actively set aside provisions, and during the fourth quarter, these activities led to approximately KRW525 billion in additional one-off credit. In addition to actively participate in extending cooperative finance, we approximately KRW170 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 KRW4,443.9 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, KRW802.2 billion, for the full year of 2023, the Group provisioned KRW1,880.7 billion, which is around two times 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 MPL ratio is 0.35%, and the MPL 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 KRW641 per share for 2023.
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