Woori Financial Group Inc

KRX:316140

Earnings Call Analysis

Woori Financial Group Reports Strong Q3 2024 Results with Positive Outlook

In Q3 2024, Woori Financial Group achieved a net income of KRW 903.6 billion, up 9.1% year-on-year, driven by strong revenue and effective cost management. The cumulative net operating revenue reached KRW 7,992.7 billion, reflecting a 6.6% increase. However, the bank's net interest margin (NIM) decreased to 1.40%. The CET1 ratio remains stable at 12% with plans to increase it to 12.5% by 2025. The group anticipates a 4% growth in assets and aims to maintain a cost-to-income ratio below 40%. A dividend of KRW 181 per share was declared, highlighting confidence in financial stability.

Woori Financial Group's Solid Performance Despite Challenges

In the third quarter of 2024, Woori Financial Group reported a 9.1% increase in cumulative net income year-over-year, reaching KRW 2,659.1 billion. This performance is impressive, especially as it surpassed last year’s total earnings within just three quarters. The net income for Q3 alone was KRW 903.6 billion—though a slight decrease from the previous quarter, it consistently stayed above KRW 900 billion. Such results have exceeded the market's expectations and demonstrate the group's strong revenue generation capabilities backed by stable cost management, resulting in a return on equity (ROE) of 10.82%.

Revenue and Noninterest Income Growth

The group’s cumulative net operating revenue also witnessed growth, rising 6.6% year-over-year to KRW 7,992.7 billion. For Q3, the revenue remained stable at KRW 2,712.2 billion, similar to the previous quarter. This stability was achieved despite margin pressures attributed to declining market interest rates. Key drivers of this revenue growth included strong asset growth across various segments and a significant increase in noninterest income, primarily from fees and commissions, illustrating effective diversification of revenue streams.

Credit Costs and Asset Quality Management

Currently, the cumulative credit cost is KRW 1,254.6 billion, translating to a credit cost ratio of 0.44%. Although the economic environment posed challenges, notably sluggish domestic demand and high interest rates, the group effectively managed its nonperforming loan (NPL) ratio at 0.55%. In fact, the group's NPL coverage ratio is a robust 152%, indicating a strong buffer against potential losses. This disciplined credit risk management reassures investors about the group’s commitment to maintaining asset quality.

Capital Adequacy and Future Growth Plans

Woori Financial’s Common Equity Tier 1 (CET1) capital ratio is stable at 12% as of September 2024, with aspirations to reach 12.5% by early 2025. The group is focusing on improving its capital structure while ensuring sustainable growth aligned with market demands. The executives highlighted their commitment to proactive asset management and maintaining capital ratios, thereby enhancing shareholder returns through a proposed cash dividend of KRW 181 per share.

Addressing Margin Contraction

The bank’s net interest margin (NIM) decreased to 1.40% for Q3. However, the group plans to engage in active asset-liability management (ALM) to mitigate the effects of falling interest rates. With the Bank of Korea lowering its base rate by 25 basis points, strategies to increase core deposits and adjust asset pricing are in the pipeline to defend the NIM. Despite these challenges, the group projects maintaining similar NIM levels for Q4 2024, with hopes of stabilizing around 1.3% in 2025.

Optimizing Costs and Efficiency

Woori Financial has shown commendable cost control, evidenced by a cost-to-income ratio (CIR) staying below 40% for two consecutive quarters, specifically at 39.6%. The group aims to keep the CIR within early 40% levels next year, with initiatives underway to further streamline operations and optimize resources. This ensures that the group stays focused on efficiency while continuing investments for long-term growth.

Strategic Focus on Noninterest Income

The increase in noninterest income to KRW 1,378.1 billion, marking a 53.2% rise year-over-year, showcases the company’s commitment to diversifying revenue sources. Continued expansions in asset management and enhanced competitiveness in nonbank sectors are in focus. Strategic mergers and partnerships, such as Woori Investment Bank's merger with Foss Securities, illustrate Woori's forward-looking approach to building a robust financial ecosystem.

Earnings Call Transcript 2024-Q3

[Hong Sung Han, executive]

Good day, everyone. I'm Han Hong Sung, Head of Investor Relations at Woori Financial Group. I would like to express my sincere gratitude to all of you for taking the time out of your busy schedule to participate in today's Woori Financial Group's earnings call. Joining us on the call today are Mr. Lee Sung-Wook, the Group CFO; Mr. Oak Il-Jin, the Group CEO; and Mr. Park Jang-Geun, the group's CRO.

Today's call will begin with the presentation on our business performance by the group CFO, Mr. Lee Sung-Wook followed by a Q&A session.

Please note that simultaneous interpretation is available for our international investors. With that, let us begin the presentation on Woori Financial Group's earnings for the third quarter of 2024.

[Sung-Wook Lee, executive]

Good afternoon. I, Lee Sung-Wook, CFO at Woori Financial Group, overseeing the group's financial operations. Let me now walk you through our business performance for the third quarter of 2024.

Please refer to Page 3 of the earnings report on our website. First, let me elaborate on the group's net income. As of third quarter of 2024, financial cumulative net income increased by 9.1% year-on-year, reaching KRW 2659.1 billion, surpassing last year's total annual performance by approximately KRW 150 billion in just 3 quarters.

The group's net income for Q3 stood at KRW 903.6 billion, which represents a slight decrease versus previous quarter. However, it remained above the KRW 900 billion level for 2 consecutive quarters, exceeding market expectations.

Thanks to our strong revenue generation capabilities and stable cost management, the group's ROE came in at 10.82%. Also, the group's cost-to-income ratio remained below 40% for the second consecutive quarter, demonstrating the group's ability to control costs. Meanwhile, the Board of Directors on the 18th approved a cash dividend of KRW 181 per share, which has been publicly disclosed.

Let me now turn to the group's net operating revenue. As of Q3 2024, the group's cumulative net operating revenue grew 6.6% year-on-year to KRW 7,992.7 billion and on a quarterly basis, to KRW 2712.2 billion in line with the previous quarter. The stable top line performance was achieved despite margin contraction due to volume market interest rates supported by robust interest income coming from strong asset growth across all segments as well as significant increase in noninterest income, primarily driven by fees and commissions across all domains. In other words, our ongoing efforts to diversify revenue streams have started to bear fruit.

Let me now move on to credit costs. As of third quarter, the group's cumulative credit cost amounted to KRW 1,254.6 billion with a credit cost ratio of 0.44%. The sluggish domestic demand and the prolonged impact of high interest rates led to a rise in current credit costs with the NPL ratio, an indicator of asset quality standing at 0.55% for the group and 0.21% for the bank. Our NPL coverage ratio, a measure of our loss absorption portion capacity is 152% for the group and 270% for the group, which is among the healthiest in the industry.

Let me now go into capital ratio and capital adequacy. As of the end of September 2024, the group CET1 ratio is expected to be around 12%. Despite the appreciation of the Korean Won in the quarter, Strong asset growth kept the CET1 ratio at a similar level to the previous quarter.

Looking ahead to the fourth quarter and 2025, the group will prioritize, improving its capital ratio, which serves as the foundation for both growth and shareholder return.

Now let's take a more detailed look at the group's business performance by segment. Please refer to Page 4 of the materials.

First, let me address the group's net operating revenue and NIM. For the first 3 quarters of 2024, the group's cumulative net operating revenue was KRW 7,992.7 billion up 6% year-on-year, while quarterly results were in line with the previous quarter at KRW 2,712.2 billion. Meanwhile, the bank's NIM for Q3 was 1.40% and the group's NIM, including the card business, was 1.67%, both declined by 7 basis points versus previous quarter.

Regarding margin compression, the recent decline in market interest rates was reflected in asset repricing, but in terms of funding, increased demand for time deposits ahead of anticipated base rate cuts and increased funding needs due to the overall rise in lending within the banking sector led to sustained cost pressures, which has narrowed the loan-to-deposit interest rate spread.

In October, the Bank of Korea's Monetary Policy Board, citing weak domestic demand and slowing inflation lowered the base rate by 25 basis points for the first time in 3 years. As for concerns about future margin contraction following the interest rate pivot, we believe the impact has already been largely reflected in lower market interest rates.

In periods of falling interest rates, the group will focus on increasing core deposits, engage in proactive ALM management and reduced funding costs at our nonbank subsidiaries to actively prepare for any downward pressure on N I M or NIM. Meanwhile, the group's cumulative interest income for the third quarter amounted to KRW 6,614.6 billion, maintaining the same level as the previous year despite narrowing margins as asset growth offset such impact.

Next, I will give an overview on asset growth and loans. Total loans of the bank stood at KRW 340 trillion as of September 2024, which is a 5% increase from end of June. Corporate loans increased by 4.3% from June to KRW 191 trillion, thanks to balanced growth of large corporates and SME loans.

For households, demand for mortgages, including policy mortgages grew considerably recording a 6.2% growth in Q3 to reach KRW 145 trillion. In Q3, property transaction volume increased, driven by the greater Seoul area. And with the DSR Phase 2 set to come in, in September, temporary demand for mortgages was strong. However, household loan growth peaked in August and has significantly slowed down in September, implying downward stabilization in Q4.

While the financial markets, including interest rates and FX rates are overall stabilizing, the U.S. presidential elections, geopolitical risk in the Middle East and possibility of economic slowdown are causing uncertainty at both home and abroad. Against this backdrop, the bank and the group will consider asset elements and capital adequacy as top priority to ensure quality asset growth.

Next is deposits. As of September 2024, total Korean won deposits stood at KRW 327 trillion, which is a 5.5% increase from June. However, the growth of core deposits was weak given high demand for time deposits as the Bank of Korea was expected to cut rates.

Keeping the rate cut cycle in mind in order to defend margin and secure stable funding base, close cooperation within the group will continue to increase core deposits. Meanwhile, as of September 2024, the bank's LTD was 98.8% and is maintaining a stable buffer above regulatory requirements.

Next, I will go over noninterest income and cost. Please refer to Page 5. I will go over the group's noninterest income. The group's noninterest income up to Q3 was KRW 1378.1 billion, which is a 53.2% Y-o-Y increase driving top line growth. Favorable market conditions generated significant profit growth from marketable securities and fee income was above KRW 500 billion for 3 consecutive quarters, evidencing that there has been level up across all bank and nonbank subsidiaries.

Once downward rate movement becomes more evident, the business environment of financial investment and IB businesses will improve and demand for asset management services is expected to grow. Against this backdrop, we will continue to expand sales efforts to boost noninterest income. Meanwhile, Woori Financial Group is concentrating efforts to strengthen the competitiveness of its nonbank businesses. In August, we merged Woori Investment Bank and Foss Securities to relaunch Woori Investment Securities. The group also signed an SPA with Tongyang and ABL Insurance to lay the foundation to enter the insurance industry. The group is making multifaceted efforts to diversify sources of noninterest income and maximize synergy.

Next is SG&A. Cumulative SG&A up to Q3 2024 was KRW 3,158.1 billion. which is a 3.4% Y-o-Y increase. However, SG&A in Q3 alone was KRW 1,057.1 billion, which is a slight decrease of 1.1% during the previous quarter. Group-wide efforts to minimize current expense and to optimize channel and workforce to boost cost efficiency, have enabled the CIR to stay below 40% for 2 consecutive quarters.

In Q3, the group CIR was 39.6%. While maintaining investment for the future, such as in boosting brand value and digital and IT systems, we will work to reduce unnecessary current expense as part of group-wide efforts to continuously reduce cost.

Next is credit cost. The group's cumulative credit cost up to Q3 was KRW 1,254.6 billion, which is a 6.3% Y-o-Y increase. Credit cost in Q3 alone was KRW 479.1 billion, which is a 17.1% Q-o-Q increase. Slowdown of the real economy and the restructuring of the real estate PF market resulted in higher delinquency rates of the nonbank sector pushing up credit cost. However, the delinquency of the bank was stably managed.

The NPL ratio was 0.21% and the coverage ratio was 270%, showing robust asset quality. Woori Financial growth is strengthening monitoring of market environment and actively selling and writing off past debt to prudently manage the group's risk factors. As central banks around the world cut rates, concerns on market settlements are decreasing. However, the group will continue conservative and preemptive risk management to strengthen loss absorption capacity.

Now I will go over capital adequacy and the shareholder return policy. Please refer to Page 6. As of September 2024, the CET1 ratio of the group is expected to be 12%, which is similar to the previous quarter. Given the declining FX rates in Q3, the CET1 ratio is being managed at stable levels. And the capital ratio was mainly the result of loan growth, which was in line with market demand.

The Board of Woori Financial Group recognizes the importance of diligent capital management to boost corporate value. To achieve CET1 ratio of 12.5% early in 2025, the group will actively manage asset growth in Q4 while prioritizing improvement of the CET1 ratio in the 2025 finance plan, which is currently being developed.

Also, the Board has considered the group's quarterly dividend policy and market expectation to declare a cash dividend of KRW 181 per share. Meanwhile, during the earnings call held on July 25, we were the first in the banking industry to announce the Corporate Value-up Plan.

The diverse value-up measures announced at the time are currently being implemented via various methods at respective speeds. We will continuously communicate with the market to review, assess and update its progress.

For the CET1 ratio, we will consider the volatility of financial markets, regulatory changes and the progress of the M&A activities comprehensively to actively control growth and diligently manage RWA to make utmost effort to reach a CET1 ratio of 12.5% in 2025 early.

Since announcing the value of plan, the group has been receiving heightened interest from overseas investors. The ownership of foreigners has risen significantly, and the group has been included in the Korea Value-up Index.

Our value-up efforts are being recognized by various means and to meet heightened market expectations, the group is committed to its core business as a financial group while working to enhance shareholder value to grow together with our shareholders. This will conclude the earnings results for 2024 Q3 of Woori Financial Group. Thank you.

[Operator]

We'd now like to engage in the Q&A session. [Operator Instructions]. The first question is from [ DS ] Investment Securities, Mr. [indiscernible].

[Unknown Analyst]

I am from [ DS Investment Securities]. I am [indiscernible]. I do have a question with regard to CET1 ratio. So for this quarter, the CET1 versus previous quarter was flat. So I would like to understand some of the reasons behind that. And then additionally, in the previous earnings call, you have mentioned that the guidance is 12.2% for year-end for CET1. But with the appreciation of the one, I would like to understand whether this is still feasible. And with regard to the CET1 sensitivity to ForEx and also with regard to the RWA-related plan going forward, can you also share with that with us.

[Operator]

Thank you very much for the question. Please bear with us for just a moment as we prepare to answer your question.

[Unknown Executive]

Yes. I believe that this is an area of key interest. So with regard to the CET1 ratio, let me give you some more specific information. So from 12% from year-end of June and now September, it's similar to your end of June right now at 12%, and the reason has to do with ForEx. We've been seeing the appreciation. And with that, there will be improvement in the capital ratio and based on our company standards, it will be 3 bps per KRW 10.

And in the presentation, as was mentioned, if you look at the market demand and future growth and future profitability within third quarter, we have increased our assets which has led to increased weighted assets, and that's why we were -- we are now maintaining the levels of June end.

In the fourth quarter, the group will be focusing on its priorities on asset management to improve capital ratio. There are various ways that we're looking into so that we can achieve the 12.2% target.

And to give you some more specifics, in terms of corporate loans, it's about pricing and pricing adjustments that would help us defend any drop in rates. And then in terms of household loans, it's about responding and reacting to the national policy. And in September, there were risk assets that slightly ticked up. And this, we will make sure to make -- to bring this down as quickly as possible.

And there are also other ways and measures that we are looking into and the group will prioritize all efforts so that we can achieve the targets at fourth for CET1. And also, I think there could be some more questions.

So if I may continue on to respond. In the case of CET1 as mentioned, whether we can achieve 12.5% by year-end of 2025, as was already mentioned in 2025, 12.5%. In order to achieve that from fourth quarter of this year until the end of 2025, we will continue on to prioritize improvements in capital ratio.

So this was already discussed at the BOD meeting, and there will be specific plans put together. And as was mentioned, recently, the ForEx rates went up. The exchange rates went up. So it makes it very difficult, but we will put in our best efforts to make it happen. And until 2025 about improving ROE and in terms of differentiating in [ RWA ], what we want to do is enable 4% for nominal economic rates, less than 4% is what we will be doing to -- in terms of managing our asset growth. And this has all discussed with the BOD.

So there could be some slightly tweaks on the measures going forward, but I do want to mention that the guidance would be around 4% by year-end. So that's what was discussed. And if we do see a growth of 4%, what this implies, is that if we look at the overall structure, the ROE, if it's 10%, it means that will be a growth of 7% to 8%, which will help us maintain the capital ratio as of last year. So then with 4% growth.

And if we also make sure to find ways to manage the ROA, we believe that there will be an upward, an uptick of 40 to 50 bps. But once again, by next year-end, achieving 12.5% as quickly as possible would be our key focus.

Thank you for the question, and we'll move on to the next question.

[Operator]

Next, we have Mr. Jung Jun-Sup from NH Investment Securities. Please go ahead.

[Jun-Sup Jung, analyst]

I have 2 questions. First, you just mentioned that in Q3, the NIM declined significantly. What is your outlook for Q4? And second question is about the quarterly dividends. So the dividend went up in Q4 compared to Q1, Q3. So for 2025, I am wondering if you're going to equally distribute the dividends across quarters like other financial groups.

[Operator]

Thank you for those questions. Please give us a minute to prepare the answer.

[Unknown Executive]

Yes, the NIM of Q2 was around 1.40, that's 7 bps decline from previous quarter. This is because of the Korean won spread reduction and preemptive asset growth, which means that we paid higher interest rate for the time deposits. So this resulted in about 7 bps decline.

Well, from Q4 onwards, we will be actively managing the assets and also the capital. So we're going to be managing capital and NIM together simultaneously. So according to our projections, in Q4, thanks to those active management measures, it should be at least around Q3. And next year, structurally, if there's 25 bps cut, NIM goes down by around 3 bps throughout the year.

So in 2025, if the rates go down by 75 bps, theoretically, it will be 9 bps downward. But I think we can manage this within 4 to 5 bps decline. So 1.3% especially recently, the treasury rate went down to around 2%. And the low-cost deposit, we plan to increase, and we plan to reprice our assets to defend the NIM. As we just mentioned, next year, asset growth, the RWA growth should be within 4% next year, that should also contribute to defending the NIM.

So overall, in 2025, NIM should be around high 1.3% and then regarding your second question, the equal distribution of dividends across quarters. I understand that some financial groups equally pay the dividends across the quarters. So for us, when we announced the dividends this year, we said it will be around 50%, and we said we were going to equally distribute around March, June and September, and we're going to consider all of the different elements before declaring the dividends for each respective quarter.

So the real dividends increased this year. And like we announced today, according to the current dividend policy, we made the dividend decisions. But regarding your question in 2025, we will be discussing that topic with Board of Directors, and I think we will be able to communicate that to the shareholders and investors in February 2025.

[Operator]

The next question is from Hanwha Investment & Securities, Kim Do Ha.

[Do Ha Kim, analyst]

I am Kim Do Ha from Hanwha Investment & Securities. So with regard to the investment in securities that was recently launched, it's true that we had the fund supermarket, the application, that's probably one business that we have heard. But I would like to understand the schedule for any other services. And I don't know that you're also looking into an integrated on app. So in terms of the application development schedule, what's that like for -- with the investment in securities.

[Unknown Executive]

Thank you very much for the question. Yes, I'm Oak II-Jin, in charge of the digital business. In the case of MTS by year-end, we will be launching the service. So that's the plan right now. And then until first quarter of next year, an integrated super app, something that's pursued by the bank, an integrated banking would have these services. And then we would be integrating the IT systems where it would be an integrated MTS and that would be by the second half of next year.

[Operator]

Yes. We'll move on to the next question. The question is from SK Investment Securities. Mr. Seol.

[Yong Jin Seol, analyst]

Thank you for the opportunity today. I have questions regarding credit costs. I don't see any large-scale PF credit costs these days, but I think ordinary credit cost is an upward trend. So towards year-end and early next year, what would be the amount of credit cost that you are projecting?

[Jang-Geun Park, executive]

My name is Park Jang-Geun, and I'm the CRO. Excluding one-offs, looking at the ordinary credit cost, it's 42 bps on before interest rate cuts, because of the high interest rate environment and higher delinquency rates, resulting from that, the restructuring of the real estate PF market, credit cost this year should remain at current levels, I think it will be similar. Next year, if the PF restructuring is completed and rates start to go down, I think it will show a gradual improvement. So I think it can go down to below 40 bps.

[Operator]

Next from Korea Investment Securities, Mr. Baek Doosan. Please proceed with your question.

[Doosan Baek, analyst]

Yes, I'm from Korea Investment Securities, Baek Doosan. I do have a question with regard to your core deposits. So I believe that this is an area of your focus. However, we have to take into consideration the challenging market conditions. And I believe that in terms of the improvement, it seems a bit delayed or subdued.

But as mentioned, in terms of the time deposit related policy rate cuts. With that, we believe that going forward, there will be some faster improvements. So, in the future, with regard to core deposits, the average balance or the imbalance, the target that you have, what would that be? Or if you do have any targets, please let us know. And then also with regard to core deposits in order to achieve that target, is there may be specific deposits that you'll be targeting going forward? Anything that was discussed amongst the management.

[Operator]

Thank you very much for that question. Please bear with us for just a moment.

[Unknown Executive]

Yes, next year or this year, it would be the same, but increasing core deposits, it helps us actually deal with the downside of NIM. So for us in the second half, at the bank segment, increasing core deposits, let's say, to maybe about -- about 30 measures are in place basically. We have a bank-wide type of measure when it comes to term, corporate household, many ways to increase the client segments. So there are more than 30 means or measures to do that.

And also in the nonbank segment. Well, it's true that there are many areas that benefit from the bank segment. But of course, we have clients in the nonbank segment. And we believe that really having them buying these core deposits is also something that we want to do as a group.

So from July or the second half of this year, we've been seeing some positive impact from those measures. And in the future, we believe that it will increase, and it will get better, especially because we launched these measures in the second half of this year, next time or next year, we do believe that we will be seeing some faster pace improvements.

And could be well many measures, more many conditions, but with the rate cuts. If we look at our core deposits, it's around KRW 92 trillion as of September. So next year, the prospects or targets has not been set forth, but my personal take is that it would be a target of 3 digits or KRW 100 trillion. And for that to be possible, there will be many measures that we will be devising. So thank you.

[Operator]

We'll move on to the next question. From Park Hye-jin of Daishin Securities.

[Hye-jin Park, analyst]

You mentioned RWA growth within 4%. That was your target, but you have a launch of the investment securities. I don't think the insurance company will be a big issue, but asset growth will definitely be priority for the investment securities arm. So is it possible to keep asset growth within 4%? And the card margin is improving. The nonbank subsidiaries' funding cost, I think, is going down. What would be the reason for that?

[Operator]

Thank you for the questions. Please give us a moment as we prepare the answers.

[Sung-Wook Lee, executive]

Good afternoon. I am Lee Sung-Wook. You just mentioned the securities firm. So reinvestment securities, I think you are referring to RWA of reinvestment securities, which is around KRW 5 trillion at the moment. And so I understand where you're coming from. Bank has RWA of above KRW 200 trillion.

So investment securities -- of course, we need to double the asset growth of the securities firm. It's very small at the moment. So even if it records high asset growth, it does not have a strong impact to the overall group because the RWA size of the bank is so big.

So we will be trying to control the RW Asset growth of the bank and some of the other nonbank subsidiaries. So the target will be to manage the overall group's RWA growth and that should be within 4%. And you talked about the credit card margin improvements. Recently, the credit card loans has increased, and that has been written in the press recently. And those credit card loans tend to have higher interest rates than some of the other assets and products. Revenue is also increasing trend. All of those factors combined, the Q3 profit increase has been more evident compared to the first half.

[Operator]

Thank you. Yes, we have Won Jaewoong from HSBC Securities.

[Jaewoong Won, analyst]

Yes. Despite challenging time, thank you very much for that good performance. I have 2 questions. The first question has to do with the CRR ratio, which has been quite interesting. So it's been dropping. So is there a specific CRR ratio that you're looking into? Any targets, please share? And the second question. With regard to acquisition of insurance firms, I think that there could be some upside with regard to increase in net income. But according to what was covered by the press, I believe that the K-ICS ratio of ABL has dropped to about 140%. And also due to the liabilities discount ratio, we believe that the K-ICS ratio will drop further. So then with regard to that, would there be a possibility or concerns of a capital addition that would be necessary?

[Operator]

Yes. Thank you very much for the question. Let us prepare the response. Just a moment please.

[Unknown Executive]

Yes. Let me respond to that question. In the run up to third quarter, it was 39.6% CIR. So then in the fourth quarter, it showed that our expenses have been focused there. So it would be around 42%, 43% in terms of the CIR. And then next year, the target, as of current, there are, of course, IT investment, this will be ongoing, but in terms of improving the brand.

And I'm sure that was covered by the press, where -- we are engaging and integrating the branches, finding a way to rationalize personnel management. So this will continue on. So we believe that there were about 23 less branches by the end of September. So in terms of the CIR ratio, we will continue on to work on that.

So next year, according to plan, it would be early 40% or would be '25. And then in '26 and onwards, it will be less than 40% from 2026 and onwards. So that would be the long-term plan. So next year, the target would probably be around 40% levels.

And we will have to discuss this with the BOD, the Board of Directors, but that would be basically the guidance. And then with regard to the acquisition of insurance firm and also the K-ICS and the capital ratio. As was mentioned, the rate cuts are anticipated. Therefore, K-ICS would be something that we would have to manage and then there is CISM and additional margin related requirements is something that we would like to look into.

But then if you think about the capital ratio of the group, that would be the focus and that would be how we will be dealing with capital management. And in June, ever since the policy, the ABL, for ABL it's 145%. But in September, there was about 1 trillion from Tongyang from the insurance and then KRW 200 billion from ABL. In the case of Tongyang, it would be 180% and for ABL as of June end, we don't have the numbers for September, it will be 165% due to the subordinated loans.

So in the future, we will have to look into measures that would not impact the group. And if so, we would be increasing the capital as necessary. So there will be various measures that we would be taking into account so that any impact on the group would be minimized.

I don't believe we have any questions pending. And I think we touched a lot of different topics today. So I would like to conclude the Q&A session here. If you have any further questions, please contact us, and we will try to get back to you as quickly as possible.

This will conclude the Q&A session, and this will also conclude the 2024 Q3 earnings call. Thank you for your attendance today.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]