
Woori Financial Group Inc. / Earnings Calls / February 9, 2022
Good afternoon. I am Lee Dong Su [ph], Head of IR at Woori Financial Group. Let me first begin by thanking everyone for participating on this earnings conference call today. So on today's call, we have the group CFO, Lee Sung-wook; Group CRO; Jung Seok-Young; Group CFO, Park Jong-il; and Group CEO, Hwang Weon Cheol. As COVID continues, we see fewer opportunities to meet with investors in person. So today, we have prepared a special event before going into the earnings presentation. Woori Financial Group Chairman, Son Tae-Seung is on the call today to extend his greetings and to address our investors. Now please look at the presentation material on the screen. Now I will hand it over to the Chairman, Son Tae-Seung, for his remarks. Please go ahead.
Son Tae-SeungGood afternoon. I am Son Tae-Seung, Chairman of Woori Financial Group. As COVID continues, it is unfortunate that there are less opportunities to directly communicate with the market. So I wanted to use this earnings call as an opportunity to thank our investors and also briefly discuss the main achievements of 2021, and management direction for 2022. Last year, 2021 was an extremely meaningful year at the Woori Financial Group. First, from a financial standpoint, we were able to replace our record each and every quarter which led to net profit growing around 98% Y-o-Y to KRW 2,587.9 billion. This is the highest net profit or net income in our history, and in addition, in all areas across profitability, asset soundness and cost management, we were able to step up our performance, creating a solid foundation for future profit generation. In addition, last September, we received final approval for our IRB approach, which will provide momentum to move to the next stage. In the digital and ESG space, we have laid the groundwork and have been able to outperform market expectations. In recognition of our stronger financial performance and also differentiated growth potential, the group was able to achieve full privatization on December 9 of last year. We thank you for this. During the privatization process, we were able to confirm strong investor interest in Woori Financial Group as well as gain confidence about the expectations for stronger growth going forward and the removal of discount vectors. Today, as we have disclosed, the Woori Financial Group Board has reviewed the 2021 financial performance and also took into consideration the mid- to long-term business plan for the group and confirmed 2021 dividend to be KRW 900 per share, including the KRW 151 interim dividends already paid. The dividend per share is the highest amount in our history, and the dividend payout ratio is also recovered to pre-COVID levels. In order to enhance shareholder value and within the scope that keeps our capital adequacy ratio intact, Woori Financial Group is planning to review a wide variety of shareholder return options once COVID-19 stabilizes. Next, let me discuss the future business direction of the group. Woori Financial group in -- for 2024 has a strategic road map to take the lead as a top global financial group with strong digital capabilities. And under this road map, we have a business strategy for 2022 to become a digitally focused, comprehensive and financial services provider. Aligned with this overall strategy, we do have various initiatives in place. And to talk about them one by one. The first would be to broaden the growth and revenue base. The second would be to drive digital super innovation. The third is to promote core growth businesses. The fourth is strengthening preemptive risk management. The fifth is to enhance our corporate culture, brand and ESG efforts. And the last is to improve group synergies and business efficiency. This year, the Woori Financial Group will further accelerate efforts to expand our nonbank portfolio and solidify our foundation for sustainable growth by building unique digital capabilities and fostering key growth drivers, such as the CIB and global business. Building upon the major achievements in ESG last year, we will adopt environment-friendly management more broadly and also create social value. In addition, we will tightly manage not only the various risks stemming from COVID-19, but also the potential risks that may emerge in a rising interest rate environment. Moreover, using the fresh momentum created from full privatization, we will focus on enhancing the group's competitiveness and corporate value. This year, 2022 is the year of the tiger and I hope it will be a safe and healthy year for all of you who have shown support and interest in Woori Financial Group. Furthermore, I hope this year, I will be able to have many opportunities to see you face-to-face. For the details of our performance, the group CFO, Lee Sung-wook, will walk you through the presentation briefly. Thank you.
Unidentified Company RepresentativeYes. Thank you. Next, we will have the group CFO, Lee Sung-wook, go into the full presentation. Thank you.
Lee Sung-wookGood afternoon. I am Lee Sung-wook, the Group CFO at Woori Financial Group. I would like to thank everyone for participating on this call for the 2020 year full year performance of our group. Let me jump into the 2021 performance and walk you through. So please refer to the Page 3 of the presentation material that is available on our website. First, let me start with net income. As the Chairman has just mentioned, Woori Financial Group recorded a net income of KRW 2,587.9 billion in 2021, reaching a record high. Against the backdrop of uncertainties in Korea and abroad, this net income represents an increase of 98% Y-o-Y. It is the result of our stronger profit generation capabilities, stable asset quality and tight cost management. In particular, the contribution of the nonbank business, which was 10% when we first created the holding company, has grown to 17.2% as of 2021 and broadening the profit base of the group. Moreover, the group's fourth quarter 2021 net income was up by 133.5% Y-o-Y at KRW 390 billion. Though one-off factors such as the support for job transitions and additional provisions related to COVID uncertainties, we have been -- have been included. We continue to extend the performance turnaround trend each quarter. Next is the group's net operating revenue. In 2021, the group's net operating revenue was KRW 8,344 billion, an increase of 22.3% to Y-o-Y. Solid asset growth centered on SME loans, along with active margin management efforts for fruit, enabling the group to post KRW 6,986 billion in interest income for 2021. The group's noninterest income also reached KRW 1,350 billion, a significant increase of 65.2% year-over-year, driving the improvement in performance. Such performance was possible due to the efforts aimed at breaking away from the interest income center profit structure and expanding the business portfolio of the nonbanking business. Next, let me elaborate on the group's business performance by division in more detail. Please refer to Page 4 of the material. First, let me go over interest income and NIM or NIM. In 2021, the group's net interest income increased by 16.5% year-over-year to KRW 6.986 trillion. The bank's annual cumulative NIM was 1.37%, up 0.04 percentage points year-over-year the group's NIM, including the credit card business also increased by 0.05 percentage point year-over-year to 1.62%. Meanwhile, the group's fourth quarter net interest income increased by 7.4% Q-on-Q to KRW 1.897 trillion, and a fourth quarter bank NIM improved 0.06 percentage points Q-o-Q to record 1.42%. While loan growth centered on SME loans continues, active efforts to improve the profit structure such as increasing low-cost deposits enabled such performance and considering the domestic and overseas macro environment, margin improvement is expected to continue for the time being. Next, let me move on to asset growth and loan portfolio. Bank loans as of the end of 2021 totaled KRW 288 trillion, up 8.9% and or KRW 24 trillion compared to previous year end. Corporate loans stood at KRW 147 trillion, up 11.5% versus previous year-end. In particular, as demand for SME loans continue throughout the year, SME loans increased by 15.2% versus previous year-end to KRW 110 trillion, leading asset growth. Despite the significant increase in SME loans, the group is preparing for any economic uncertainty by preemptively managing the prime asset ratio and consistently exceeding the firm's management target of 85%, recording 89.4%. Meanwhile, household loans amounted to KRW 139 trillion and increase of 6.4% versus last year and centered on real demand loans such as canceled loans. Next is on the group's noninterest income. In 2021, the group's noninterest income was KRW 1.358 trillion, staging a significant growth of 65.2% year-over-year, leading the turnaround in earnings. Going into the details, we witnessed an even growth in all sectors, including not only the head office business such as foreign exchange derivatives and securities, but also in core fees and commissions. In particular, as a result of M&A efforts, noninterest income in the capital and real estate trust business increased and synergies between group companies are gradually increasing in earnest, resulting in group-wide growth in noninterest income. Let me now move on to expense and capital adequacy. Please refer to Page 5. This is on SG&A expenses. In 2021, the group's SG&A expenses amounted to KRW 4.147 trillion, up 4.8% year-over-year. This is due to the impact from the newly incorporated subsidiary such as the capital and Savings Bank business. And when excluding this impact, the increase was limited to approximately 2.7% year-on-year. Thanks to the Woori Financial Group's efforts to manage the cost to income ratio, the group's General and admin costs only increased by 1.8% Y-o-Y. And in particular, general and admin costs of our core subsidiary, Woori Bank, recorded a slight decrease year-over-year. The group's cost-to-income ratio when excluding the fourth quarter early retirement costs stands at 47.5%, stably being managed well within the group's annual target of 50% as stated at the beginning of the year. Let me now move on to credit costs. In 2021, the group's credit cost stood at KRW 537 billion, a 31.5% decrease year-over-year. Credit cost ratio improved, recording 0.17% and down 0.11 percentage points year-over-year. In order to preemptively prepare for COVID-related uncertainties, the group has additionally accumulated approximately KRW 80 billion in provisions for COVID-related loans during the fourth quarter. Even if COVID-related additional provisioning costs are reflected, the group's fourth quarter credit cost stands at KRW 225 billion, still well managed at a stable level. Due to the termination of COVID-related loan repayment deferrals, I understand that there are some concerns in the market regarding asset quality management. As of the end of 2021, the outstanding balance of our COVID-related deferred principal loan is KRW 1.4 trillion, and the balance of deferred interest loans is KRW 171 billion. Including fourth quarter's additional provisioning, we have already accumulated a total of KRW 301 billion in COVID-related provisions and with the collateral ratio of forbearance loans exceeding 85%, the group has sufficient capacity to respond to insolvent assets. In 2022, we plan to continue to drive asset growth centers on prime assets and put further focus on asset quality management in preparation for a full-fledged interest rate hike. Next, allow me to elaborate on capital adequacy and dividend policy. As of the end of 2021, the group's expected common stock ratio or our CET1 ratio is 11.3%, which is an increase by 1.3 percentage points compared to last year end. Despite the large increase in SME loans, strong profit growth and active risk-weighted asset management enabled such results. Furthermore, at the end of September, we received final approval from the financial authority regarding additional application of the internal ratings-based approach. The final approval of the internal ratings-based approach resulted in an increase of 1.3 percentage points in common stock ratio. The group has already informed several times about its mid- to long-term dividend policy. Taking into account the stability of the macro environment against COVID-19 and within the scope of maintaining the company's capital adequacy, we plan to continuously raise the dividend payout ratio to 30% in the mid- to long run. Before concluding the earnings presentation, let me inform you on our key financial initiatives for 2022. First, we plan to continue to set a new record high in our performance in 2022 as well. We will continue to promote asset growth centered on prime assets and improve margins and further strengthen our competitiveness in noninterest income to exceed our 2021 performance. Second, we plan to continue pursuing intensive cost efficiency measures from the previous year. In 2022, through efficient operation of our channels and personnel, we plan to minimize the increase in general and admin costs. However, we will be aggressively expanding the allocation into the group's future growth budget, including the digital business aimed at strengthening the group's future competitiveness. In 2022, we plan to stably manage the group's cost-to-income ratio at 50% or less. Third, we plan to focus on preemptive risk management. In 2022, rising market interest rates and the termination of COVID-related support are expected to add to the sustained uncertainty in the external environment. Through our upgraded risk management capabilities, we will concentrate on managing credit costs and asset quality. In my earnings presentation last year, I elaborated on the 3 key financial initiatives for 2021, which were first realizing a profit turnaround through strengthen sales capabilities; second, actively managing cost to income ratio; and third, improving the capital ratio. Thanks to the significant support from our customers and the hard work of all of our employees, we were able to outperform all of our original goals. Going forward as well, Woori Financial Group will strive to deliver on its core initiatives and promise to the market. This concludes the presentation of Woori Financial Group's annual business performance. Thank you.
End of Q&A: