KB Financial Group Inc. Sponsored ADR Stock

Greetings, everyone. I am Jerry Kang, Head of KBFG IR Department. We will now begin the 2026 First Half Business Results Presentation. Thank you very much for participating in today's earnings release.

We have here with us today business results presentation, our Group CFO, Sang-Rok Na, as well as executives from our group. Regarding the agenda today, we will first have our Group CFO deliver the 2026 first half business results and then have a Q&A session.

We will now have our Group CFO, deliver a presentation on 2026 first half business results.

Greetings, everyone. I am KBFG CFO, Sang-Rok Na. Thank you very much for taking part in the 2026 first half earnings release. Before we proceed with the business results presentation, I would first like to cover the first half shareholder return approved at today's BOD meeting.

Let's go to Page 1. Despite the operating environment in the first half of the year marked by high FX rate and heightened financial market volatility through strategic capital management efforts, June end group CET1 ratio posted 13.74%, a 10 bp improvement compared to the previous quarter end. According to KB's shareholder return framework, capital that exceeds 13.5% CET1 ratio will be utilized for our second round of shareholder return in 2026.

At today's BOD meeting, it was decided to carry out, firstly, KRW 700 billion of share buyback and cancellation. Regarding the remaining surplus capital, we will comprehensively take into account our earnings, PBR and dividend yield trends at the end of fiscal year 2026 and use this to fund additional shareholder returns. For your reference, if we take into account the KRW 2.820 trillion of the 2026 first round of shareholder returns, which was announced in February, we expect to post KRW 3.7 trillion as our 2026 annual total shareholder return. We will deliver on our commitment to the market to maintain industry-leading level across all shareholder return metrics. And going forward, we plan to consistently maintain our differentiated shareholder return policy based on our stable earnings generation capacity.

In addition, at today's BOD meeting, a cash dividend of KRW 1,155 per share for Q2 was approved.

Let's go to Page 2. Through strategic reallocation of capital, reflecting the operating environment and growth prospects of each business segment, we are continuously strengthen a virtuous cycle that enhances capital efficiency across the group and at the same time, reinvesting in subsidiaries with strong growth potential. As a part of these efforts in order to absorb the full capital market money moving into our recurring earnings base, we decided on 2 rounds of paid-in capital increase totaling KRW 1.7 trillion. This represents a more efficient and dynamic allocation of capital across the group, whereby capital generated by core subsidiaries, including the bank is reinvested in the securities business, which offers growth potential, which is strong.

Our security subsidiary plans to utilize the capital secured to proactively respond to changes in the WM market while providing venture capital and supporting productive finance by expanding its promissory note business and fulfilling the requirements ahead of time for IMA authoritization. Going forward, we will further strengthen our group's medium- to long-term earnings base across businesses with strong growth potential and high capital efficiency, including the Capital Markets segment.

Next, I will cover business results. Q2 net profit posted KRW 1,992.2 billion. And on a first half cumulative basis, it posted KRW 3,884.6 billion, a 13.1% increase Y-o-Y. This was driven by a significant increase in fee income, which pushed the group's first half total operating income above KRW 10 trillion for the first time in its history and sustained its stable growth momentum. In particular, our security subsidiaries' contribution to the group's net income for the first half increased to approximately a 21% level, leading the growth in earnings from our nonbanking business. Meanwhile, supported by this enhanced earnings capacity, the group's ROE for the first time -- for the first half also posted 14.09%, continuing its improvement trend.

For your reference, first half nonoperating profit declined significantly Y-o-Y. This was mainly attributable to a high base effect from the additional provisioning for ELS-related liabilities in the previous quarter and gains on the disposal of assets held by consolidated funds in the prior year. Let me now walk you through our financial results in greater detail by business segment.

For the first half of 2026, the group's NII recorded KRW 6.473 trillion, a slight increase Y-o-Y. However, it was a slight decrease Q-o-Q due to a slight drop in NIM from preemptive funding in anticipation of an interest rate hike in the second half of the year.

Next is growth of loans in Korean won. As of the end of June 2026, the bank loans in won amount to KRW 385 trillion, up 2% over the end of 2025 and up 1.6% Q-o-Q. Household loans shifted back to a solid growth trend, reaching KRW 184 trillion, while corporate loans recorded KRW 201 trillion, growing 2.2% Q-o-Q, mostly thanks to the growth of productive financing. In the second half of the year, while not compromising asset quality, we plan to pursue our growth strategy with a focus on qualitative growth such as portfolio shifts through productive financing.

Next, net interest margins on the bottom right. Bank NIM for Q2 recorded 1.74%. Due to intensifying competition in corporate loans, yield on assets remained similar Q-o-Q. The increase in marketable deposits along with preemptive funding in preparation for second half of the year market rate hike pushed up cost of fund, resulting in a NIM drop of 3 basis points Q-o-Q. Meanwhile, group NIM, NIM, recorded 1.94% due to the impact of the lower bank NIM, combined with the decline in credit card financial assets and preemptive funding by KB Capital, group NIM is down 5 basis points Q-o-Q.

However, in the second half of the year with base rate hikes, asset and liability repricing effects and normalization of funding structures gradually incorporated, we expect NIMs to show an improving trend. Accordingly, on an annual basis, aligned with our forecast from the beginning of the year, we expect an improvement Y-o-Y.

Next, noninterest income. Group noninterest income for the first half of the year recorded KRW 3.6292 trillion, demonstrating a significant improvement of 33.3% Y-o-Y. In particular, cumulative net fee income for the first half reached approximately KRW 3 trillion and in Q2 rose 17.8% Q-o-Q to KRW 1.6019 trillion, continuing a double-digit growth trend for 3 consecutive quarters.

This was mainly driven by an expansion in securities brokerage fees under favorable stock market conditions alongside sales of capital market-linked products such as equity funds and ETFs by the bank as well as an increase in personal credit card spending.

As a result, net fee and commission income contributed more than 31% to our top line for the first time, driving the group's solid performance. Meanwhile, as for the first half of the year's other operating income, mainly due to a decline in insurance income caused by rising loss ratios in long-term and auto insurance recorded somewhat sluggish results compared to the same period last year. However, in Q2, loss ratios showed improvement and with the addition of CSM impairment reversals, insurance operating income increased.

While promising industries such as AI and semiconductors led to a significant valuation gains on unlisted stocks at our investment subsidiary, resulting in a performance that rose 29.1% Q-o-Q.

Next, moving on to general and administrative G&A expenses. 1H G&A expenses increased 8.9% Y-o-Y, but backed by solid growth in total operating income, the group CIR posted 36.2%. Excluding Q4, when one-off expenses such as ERP typically occur, the group has stably managed its CIR in the mid- to upper 30% range every quarter since 2023. Going forward, while actively expanding investments for future growth, we will strengthen earnings capacity and also efficiently manage recurring expenses to maintain a downward stabilizing trend in group CIR.

Next, on Page 8 is the group provision for credit losses. Q2 credit loss provisions recorded due to one-off provisioning related to nonperforming corporate loans at the bank, it recorded KRW 519.8 billion, a slight increase Q-o-Q. Excluding these one-off factors, the group's overall asset quality continues to show an improving trend. Particularly, KB Card's asset quality is stabilizing, primarily in personal cards and card loans, easing provision burdens, while the savings bank subsidiary is also seeing real estate PF-related risks gradually resolving.

As a result, Q2 group credit cost recorded 38 bp falling Q-o-Q. And on a cumulative basis for the first half, it came in at 39 bp, significantly improving by 15 bp Y-o-Y.

Lastly, moving on to group capital ratios. As of the end of June, preliminary estimates suggest a group BIS ratio of 15.91% and a CET1 ratio of 13.74%. Risk-weighted assets, RWA recorded approximately KRW 370 trillion, up 1.1% Q-o-Q, but remains well within our projected RWA annual growth target.

To consistently deliver on our shareholder return commitment, we will maintain a balanced pace of asset growth while driving capital efficiency and profitability through RoRWA-oriented asset rebalancing. Detailed breakdowns of our financial results are provided in the following slides for your reference.

This concludes KB Financial Group's first half 2026 earnings presentation. Thank you for your time.

[Operator Instructions]

We have the first question. From Goldman Sachs, we have Park Sinyoung, Head of Center.

I am Park Sinyoung from Goldman. And regarding your total shareholder return for the first half for your cash and for your own shares, can you tell us the distribution also for price to multiple for KB, I think that it has gone beyond 1 multiple. So can you tell us about how you're going to grow your cash dividend? And regarding the reduction in the -- or impairment capital that was discussed at GSM, can you tell us about more details? And I think according to the FX fluctuations, there is some change into the capital ratio. So do you have any plans to revise the capital ratio? Or regarding your target ROE level compared to your competitors, do you have plans to share them with us?

Thank you very much for your questions, and we will soon answer them.

I will answer the questions, and thank you very much, Sinyoung Park, for your great questions. And as you just mentioned, our CET1 ratio of excess capital that exceeds 13.5% before the closing of the fiscal year, we have plans to return all of it to our shareholders. So that is still standing. And we had the share buyback and cancellation of KRW 700 billion, and we have about KRW 180 billion remaining. And we believe that there could be 2 scenarios considering the flexibility. And in the first case, well, the year-end CET1 ratio, capital ratio management is very important. And from last year to this year, when you look at the quarterly capital ratio trends. In Q4, there were seasonal effects. So that is why it was very challenging to uplift the CET1 ratio.

And like always, it's very important to have good capital management, capital ratio management for Q3. And it is true our earnings capacity has strengthened. So there are positive effects, but there are macro variables like the FX rate. We don't really know what will happen. So there is still uncertainty for other factors. So that is why we believe that we need to be more flexible in the timing. And secondly, as you asked, we have reached PBR of 1 multiple.

And in that case, for cash dividends and share buyback and cancellation, we are thinking of maybe adjusting the ratio of the 2, but we're not saying that we are going to shake things up, but it seems that we're going to have the annual earnings size that is going to be more or more materialized, we think the cash dividend will depend on the amount. So I think that we will need to consider these factors. And regarding the method and the timing, I think that we will need to be more flexible.

And secondly, related to shareholder return linked to our capital ratio, I think you asked the question. And I think we are thinking of the best method. And until next year, we already disclosed our plan. However, what we're thinking about is the shareholder return related to our capital ratio, this formula will not be greatly affected. But because we think that if we are in an era where ROE is going to be strengthened, then we will need to think about other methods as well. So that is why we are going to consider many factors so that there seems to be there is room for improvement, but we don't have anything concrete yet that we can share with you.

So I think that will be what I can share with you today. Thank you very much for your questions.

We would like to take the next question. Next question is from [indiscernible] Securities Research.

I have 2 questions. First of all, recently, there was a large fluctuation in margins. And to look at this in more detail, I would like to hear a breakdown of the factors that impacted the margins. And what is your forecast for the 2H margin? And second of all, the return of ELS, could you provide more detail of that reversal of ELS?

I'm the CFO of the bank. First of all, about the NIMs. So in Q2 NIM went down 3 bp to 1.73% and Y-o-Y based on the half year, it went up 2 bp. And in terms of operation and funding, we can look at this in these 2 perspectives. In terms of operation, we are trying to focus on increasing the productive finance, and we are trying to focus more on more stronger loans, and we're also focusing more on conservative loan management. So that led to a reduction in new spreads. And this shows that we are focusing on attaining strong customers and also enhancing our adequacy and focused more on growing in terms of the larger customers. And in terms of funding, our KRW 5.8 trillion increase have helped us enhance or improve in terms of funding cost.

And we did lose a part of our time deposits because of the money move and MMDA and marketable deposits are areas where we have focused on funding preemptively to address that change, and that has led to funding cost increase, and this is going to alleviate as time goes by. In terms of NIM forecast, in terms of operation, compared to other banks, we have a 12-month recurring refreshing loans compared to -- we have a lot of that compared to other banks. And the bank's profitability is going to increase. based on that.

And in Q1, to focus on attaining very strong customers, we were very aggressive with our rates. In the latter half of the year for corporate loan review and approval, we're going to be a little more conservative. And we are also going to enhance our portfolio and focus on smaller customers to enhance our profitability and diversity as well.

Looking at the liquidity, we are going to be very flexible in terms of our funding, WM and core deposits and payroll accounts, those are areas where we are going to highlight. And we are also going to attain more personal time deposits. And ultimately, the annual NIM outlook will be a slight increase as we compared to 2025 as we have announced in the early half of the year or at the beginning of the year.

And in terms of ELS provisioning, there is a decision to be coming in the end of July. So the Financial Supervisory Service and -- financial supervisory commission, they are still pending decision. So that was not built into the report this time. And we are going to build it or incorporate it into the reversal going forward.

We will take the next question. From Hanwha Securities, we have Do Ha Kim on the line.

I have 2 questions. My first question is about shareholder return. You mentioned KRW 700 billion of shareholder buyback and cancellation. And you mentioned that probably you're going -- thinking about increasing the dividend for the fiscal year-end. But looking at the current level, for Q3, there is the remaining shareholder return that you have to give. Well, it seems that maybe you had done that because there's only KRW 700 billion left. So you mentioned that -- if you're going to give out more in the February of next year, I think that will not actually be completely adherent to what you mentioned because if -- so utilizing it for dividend and then maybe it's because you're going to use it from security subsidiary because insurance subsidiary cannot.

So I am sure that you have very strong shareholder return, but it seems that for the funding schedule, it's a bit complicated or mixed up. So regarding the market's expectations for you, I think there might be some confusion. So regarding this tangled web of funding schedule that we're thinking of in the market, if you can explain the situation to us, I think we can actually predict the future funding flow.

And secondly, related to the loans, I think that there is the corporate loan competition that you mentioned that could have been a sobering effect. So can you tell us about any plans for loans for different types of borrowers, it would be very helpful.

Yes, we will hold and soon answer your questions.

Thank you very much, Do Ha Kim, for your insightful questions. Regarding our funding schedule, well, it's not quite tangled, and there's going to be KRW 180 billion that is remaining, but that is not really a wrench in our process. And from next year, there's going to be capital reduction dividends. And regarding those dividends, we do have profits that are sufficient to give out dividends. So we believe that we have no more issues there. And you also asked, I think, a question regarding capital reduction dividend that we're going to probably have from next year. So I hope that you understand that.

And regarding the dividends from our life insurance, well, it was also included. And it's not difficult for our insurance subsidiaries to give out dividends. And it's not that our funding schedule is very complicated. Well, regarding the hybrid bond issuance and others, we have ample room in our funds. So I do not think you need to be very concerned with that. So I think that you can take reassurance that our shareholder return is going to be normal.

We will take the next question from HSBC, Mr. Won Jaewoong.

Thank you for those very strong performance in spite of the unfavorable environment. I'd like to ask about the nonbanking business. So in the securities company, you recently had capital injection. So you're expanding on existing businesses and also trying to begin the IMA business as well. NH Investment Securities and Hankook SG compared to those companies, the KDF is much bigger and the securities company is also much bigger. And while doing IMA, there might be conflicts of interest among the customers. What are your thoughts on that?

And if you're able to begin the IMA business, then how much of a profit will be generated and how much you will grow your balance? I would like to know what are your projections of that. And second of all, leverage trust products are being sold recently. And through bank trust, a lot of sales were made. And for noninterest area, there was a lot of fee income as well. So bank trust leverage, how much does it take up? And what is the balance? And how much is it contributing?

So allow us to prepare to answer that question.

Thank you for the very good question. So one part of your question was about IMA. So if you are able to fulfill the KRW 8 trillion capital requirement, it won't go into full-fledged business right away. It actually will have to be maintained for 2 years. So our goal is not to expand IMA business right away, but actually gradually prepare for that area of business.

Also, about conflict of interest with the bank business, there will be no conflict of interest. But it's actually going to show a lot of synergistic effect across the security and bank subsidiary. And a lot of deals take place concurrently across the securities and bank and senior loan and subordinated loans, sometimes the roles are split between those 2 subsidiaries. So we believe that there is going to be much more synergistic effect rather than conflict of interest with the bank.

And about leveraged ETF sales, our CRO will be answering that question.

So leverage ETF trust product was part of your question. At KB, we don't sell this leveraged ETF product. So this is probably -- this was probably referring to what has taken place at other companies. And for customer asset risk management, we are actually not selling that product as yet. So about household loan and corporate loan growth projections for the latter half of the year, there was a question that was not addressed earlier. So household loan, Q-o-Q, our growth has posted JPY 1.7 trillion and 0.9% and Y-o-Y, 0.5% increase. And because of the taxation on capital gains of owners of multiple homes, multiple homes, we have been focusing on other areas for growth. And of course, there's a ceiling on total home loan. So in terms of profitability, we are going to grow within our plans, and we are also going to focus our growth on policy loans.

For corporate loans, our balance amounts to KRW 200 trillion, a little over KRW 200 trillion, and that would be Q-o-Q, 0.2% growth, KRW 4.3 trillion growth. And because of productive finance policy, we are going to have to continue on this trend in the latter half of the year. And we have been focusing on companies. And as we try to build up our fundamentals, we are showing healthy conversion to SMEs rather than SOHOs. And for household loan, profitability management and adequacy capital quality management, we have to be very selective. So in the past, our household loan growth rate target was 1% to 2%, and our target is going to be maintained at that level.

For corporate loan, we will continue with the productive financing and the transition to SMEs is already taking place. And portfolio is going to be diversified for better growth prospects, and we are going to focus on SMEs and also conglomerates for growth. And corporate loan growth will be around 6% to 7% throughout the year, as we have said in the beginning of the year. Thank you. Now we will take the next question.

From JPMorgan, we have Cho Jihyun.

Regarding shareholder return, I think I'm a little bit confused. So I would like a clarification because I know there is KRW 180 billion that is remaining in the second half. And if it needs to be calculated into shareholder return resources for 2026, well, I think there needs to be share buyback and cancellation or there needs to be some cash dividends that is distributed. However, regarding this KRW 180 billion, can you tell us about how this will be handled? It's because for your share buyback and cancellation plans, you mentioned that it's going to be completed in mid-December.

And when this is executed a bit earlier, then does it mean that share buyback will be possible within this year? So that is my first question.

Second question is G&A, I think, has grown quite a lot. So can you tell us about the reason behind that? It will be very helpful.

And another question is that in Q2, there has been a lot of capital market volatility that is quite severe. So in the second half, can you tell us about your outlook for fee income? So is there going to be a peak out in this quarter and it's going to go down? Or are there other expectations you have for fee income?

And my last question is about Q2 provisioning management. I know that you did well in Q2. And can you tell us about the second half and this year's provisioning outlook or target that you have?

Thank you very much for your questions. We will soon answer them. Please hold.

Thank you very much for your insightful questions. Regarding shareholder return, to answer that question, I think your question holds the answers. So we're going to choose 1 out of the 2 methods and to enact the additional shareholder return. We do have a trust contract, but when we have early execution of share buyback, we can also do it again. So in the past, that was impossible, but now it is not. So it is still open. The possibilities are open. And because we have reached PBR of 1 multiple, as you mentioned, we could have adjustment toward cash dividend. So it could be included into our fiscal year-end dividend.

And regarding the reason why G&A has gone up, it's because there were very good profits in security subsidiary. There was some compensation that was increased for their employees. And because of the stock market boom, there was the stock-related compensation costs or fees that also increased. Also, there was the education tax that was changed and the corporate tax that was also changed as well. So the education tax effect go into the G&A. So that is why we had the increase in G&A. So the impact from education tax, if we exclude that, then on a yearly basis, there was about 3.5% of increase in G&A for this year that we think that could be managed within.

And regarding the capital markets, the fee outlook, that was your question. It seems that in the securities market, there is very huge volatility. So regarding the level of fee income, whether it can be maintained or not, it's very limiting for us to give you an outlook. But regarding the volume of securities transactions, the amount of securities transaction-related amount, well, it is true that it really has gone up compared to the past. So related fee income will probably go up a level compared to the previous year and remain there. And even if there is less coming in than by CIB, there are some big deals that are actually in our plans for the second half.

So the fee income related to productive finance, it can also be a complementary factor. Also, in the first half, there was ECM or DCM securities that was a little bit sluggish. But we think in the second half, we have plans that will be executed. And if that happens, then the fee income related to the securities or capital market, we think that we could have a good supplement. And we are going to ask the CRO of our Holdings Group related to provisioning.

Yes, I would like to answer your question related to provisioning. It's true that in Q2, CCR was 39 bps. So on a Q-o-Q basis, it is improving. Until now, we had conservative provisioning policy. So for our loss of sourcing capacity, we secured that. And related to higher portfolio management based on quality, we had the normalization of provisioning as well. However, at this juncture, we are seeing the aftermath of Middle East situation and high FX rates and interest rate and situation is currently going on. So if we have a sluggish related industries for SMEs or SOHOs or marginal borrowers or vulnerable borrowers, we cannot leave out the possibility that asset quality will deteriorate. So that is why in the second half, we will maintain our conservative provisioning stance.

Accordingly, there could be some fluctuations, but on a basis for this year, we think that it will be in the early to mid-40 bps level.

We don't have any people waiting to ask questions. We will wait for people to line up their questions.

From Samsung Securities, Kim Jaewoo.

I have just one question. ROE has gone up quite significantly. In the ROE, what is the target figure for ROE for the competitor by 2027, they were looking at 10%, but they have adjusted that to 12% to 15%. And KBFG, I would like to know do you have any guidance on how high your ROE will go? And in connection with that, the securities subsidiary performance was quite strong, and this was probably very helpful. However, the market's concern is that the high volatility in the market calls for a better stability or in other words, to maintain the performance or earnings at this higher level. Could KB Securities please respond to this question?

Please bear with us while we prepare to answer.

Thank you so much for that. Very good question. In terms of ROE, this year, our prediction is probably going to -- it's probably going to exceed 11% and we're very much looking forward to this. In mid- to long term, our target for ROE is around 13%. And we're probably going to hit that target higher than we initially expected. And as you asked in your question, the ROE had gone up mostly thanks to the securities subsidiaries strong performance. But because of fluctuations and volatility in the security market, this might go down again.

Then this strength of gains, will that be able to withstand those volatility. As it was stated in your own report, the transactions in the stock market structurally is expanding and growing. And this is probably going to help uphold such gains.

However, KB Securities is also preparing to better weather the volatility. The IB performance and earnings is becoming much more visible and recovering and particularly in SMT, particularly trading, we have been lacking compared to our competitors. And in the first half of the year, we have seen improvement in that area. And we are looking forward to upholding that improvement in the latter half of the year. So the portfolio has to be diversified to be able to maintain the increased gains and performance in the securities.

So in terms of venture capital and we will be able to play a larger role. And we're not -- have high expectations not only in retail, but for large deals and also capital transactions for overseas clients in OCI, the fact that we have to bring in more funds for that, a lot of that is taking place in tandem. So we're trying to expand our customer and client base and diversify our portfolio to better weather volatility and try to maintain that stronger earnings basis and actually pull it further higher.

So I'd like to add on to that. And from KB Securities, the CFO has answered quite sufficiently. However, I'd just like to add on to that. Digital platform advancement, which was meant to your question, that's something we're also pursuing. Our MTS is called M-able, and it is separate from other systems. So an ETF and domestic securities, stock view, those are all provided in one shot view, and we are going to enhance the services in the latter half of the year. And we're going to further advance our MTS and make it much more competitive. But I just wanted to add that point.

It's already 4:43. So I think this will be the last question from [indiscernible] Investment Securities.

And I just have one quick question. As you had answered previously, I understood. And on a group level for ROE exceeding 11% this year. And I think it was said that 13% is your target. Then can you tell us about your -- when you will reach the target ROE? And for the COE level, can you also tell us about the level that you have determined?

Thank you very much for your questions. We will soon answer them.

Thank you very much for your insightful questions, although they are quite challenging questions because I think we mentioned our mid- to long-term ROE goal for our group, and it's not very easy for us to answer the goal for each subsidiary. But for the bank for ROE, I think exceeding 11% is probably our target. And for security subsidiaries, 14%. And for insurance, 13% to 14%, we think will be maintained. However, for card, recently, there were challenging operational environment, so the ROE has fallen a bit. But we want to pull it up to a 10% or so level. And related to this, I think you can just refer to it. And regarding COE, well, because we have PBR 1 multiple that we have achieved regarding COE, well, if we say it's 10% level now for ROE, then for COE, we also think that 10% would be appropriate. However, for PBR, if it goes beyond 1 multiple, then it might go below 10% is our prudent guess.

There are no more people to ask questions. This brings us to the end of our earnings release. So those questions that were not asked during this session, please address them to the IR team. This brings us to the end of the 1H 2026 KBFG earnings release. Thank you.

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

Greetings, everyone. I am [ Jerry Kwon ], Head of KBFG's IR Department. We will now begin 2026 Q1 Business Results Presentation. Thank you very much for participating in today's earnings release. We have here with us our CFO, Sang-Rok Na as well as other executives from the group.

Regarding the agenda today, we will first have our Group CFO, deliver the 2026 Q1 major business results and then engage in a Q&A session. I would like to invite our Group CFO to deliver a presentation on our 2026 Q1 performance.

Greetings, everyone. I am KB Financial Group CFO, Sang-Rok Na. I would like to express my deepest gratitude to everyone for taking part in 2026 Q1 business results presentation. Before I share the details of our business results, I would like to briefly cover our group's shareholder return policy and major highlights.

Let's go to Page 1. KBFG established a market-leading shareholder return model through our industry's first implementation of quarterly even dividend, share buyback and Korea's only CET1 ratio linked corporate value enhancement policy. Based on this strong policy direction today, our BOD in order to once again demonstrate our firm commitment to enhancing shareholder value, resolved to cancel the entirety of our existing treasury shares.

The shares subject to cancellation amount to approximately 14.26 million shares, representing about 3.8% of total issued shares. This constitutes the largest ever single cancellation in the industry in terms of value. Following the recent amendment to the commercial code, the cancellation of treasury shares has been mandated with a grace period of 1 year and 6 months. However, despite this grace period, KB Financial Group has decided to proceed with the immediate cancellation of all treasury shares currently held upon the amendment to the law.

This reflects the strong commitment of our BOD and management to prioritize shareholders as well as the firm decision to proactively align with the government's policy direction and the advancement of Korea capital market. As a result, the group's number of total issued shares have been reduced by 15.2% compared to 10 years ago. You can see that significantly widening the extent of the reduction. As a result, key per share indicators such as EPS and DPS have also demonstrated growth comparable to that of leading global financial institutions.

Next, let's go to Page 2. Bank core deposits have increased by approximately KRW 9.8 trillion compared to last year. And through strategic efforts to reduce funding costs, we have maintained a solid NIM. Despite concerns over potential fund outflows to capital markets, we are stably securing a stable interest income base. Accordingly, while stably guarding stable core earnings, we have actively leveraged our money move environment towards investment assets to elevate the profitability of our noninterest and nonbanking segment to the next level, and this has become a strong driver of our group's overall fundamentals.

In particular, the bank's WM income has expanded meaningfully driven primarily by trust fees, while the securities business has substantially strengthened its profit-generating capacity through increased brokerage income and higher WM fees, thereby further enhancing its contribution to the group's earnings.

In addition, securities and asset management business' AUM increased by 55.9% and 18.4% Q-o-Q, respectively, thereby further strengthening the noninterest income base that supports improved RORWA efficiency. With the nonbanking subsidiary driving approximately 72% of the group's fee income, KB plans to further solidify our fee income base through efficient capital allocation, leveraging the competitiveness of our nonbanking portfolio.

Next, I will address shareholder returns for Q1. Today's Board meeting, we resolved to approve, a, quarterly cash dividend of KRW 1,143 per share totaling KRW 405.4 billion as well as the second round of share buybacks and cancellations in the first half of 2026 amounting to KRW 600 billion. Q1 cash dividend per share, reflecting the share buyback increased by KRW 231, a 25.3% increase year-on-year. The current share buyback and cancellation program follows the completion of the initial purchase of KRW 600 billion out of total KRW 1.2 trillion of buyback and cancellation plan for the first half of 2026, and we plan to proceed with additional purchases immediately. For your reference, the -[ 3.9 billion ] shares, share acquired in the first round will be canceled in a single batch on May 15, together with the 14.26 million treasury shares already held as previously mentioned.

Next, I will walk you through KBFG's financial performance. To begin with the key highlights of Q1 of 2026 can be summarized as a demonstration of KBFG's strong fundamentals that remains resilient despite unprecedented dual headwinds, including a sharp rise in exchange rates and the war in the Middle East.

The group's 2026 Q1 net income posted KRW 1,892.4 billion, while the bank's interest income base was managed in a stable manner, net fee income from the bank, securities and asset management businesses grew significantly, resulting in a 11.5% Y-o-Y increase. In addition, the group's Q1 ROE improved by 0.9 percentage points Y-o-Y, posting 13.94%, demonstrating solid growth across both profitability and capital efficiency.

I will now provide a more detailed breakdown of our financial performance by business segment. For Q1 of 2026, the KBFG's net interest income recorded KRW 3.3348 trillion, representing a 2.2% increase Y-o-Y. Despite a challenging environment marked by strong capital outflows to the capital markets, this was achieved through effective cost control via an optimized funding mix strategy, including the expansion of core deposits. Such strengthening of the earnings structure supported qualitative growth in interest income alongside an improvement in net interest margin.

Next, we will discuss the growth of the bank's Korean won denominated loans. As of the end of March 2026, the bank's Korean won loans totaled KRW 379 trillion, showing a slight increase of 0.4% compared to year-end. Household loans due to household debt management regulations and rising market interest rate recorded a slight decrease of 0.4% compared to year-end.

For corporate loans, loans to large corporations continue to grow, while solid growth in high-quality SME loans centered on productive finance was added, resulting in an overall increase of 1.2% compared to year-end. Going forward, KBFG for household loans will make portfolio adjustments that take into account overall profitability to enhance profitability and strengthen our earnings from [indiscernible]. In parallel for corporate loans, in line with productive finance, KBFG plans to continue to identify and expand high-quality customers with strong growth potential to maintain a growth framework that ensures sustainable growth and stable earnings base.

Next, we will turn to the net interest margin shown in the lower right. For Q1, KBFG and the bank recorded NIMs of 1.99% and 1.77%, respectively. The bank's NIM driven by the expansion of core deposits and the repricing of high rate term deposits as the rebalancing of the funding portfolio materialized into tangible cost reductions improved by 2 bps Q-o-Q. In addition, KBFG's NIM supported by the expansion of the bank's NIM as well as broad-based improvements in card assets, including credit card, receivables and installment financing improved by 4 bps Q-o-Q.

Next, we will discuss noninterest income. For Q1, KBFG's noninterest income recorded KRW 1.6509 trillion, representing a significant increase of 27.8% Y-o-Y and marking the highest quarterly noninterest income in the group's history. In particular, for Q1, KBFG's net fee and commission income recorded KRW 1.3593 trillion, increasing by 45.5% Y-o-Y, approximately KRW 425.3 billion. This was driven by a significant expansion in fee income from capital market-related subsidiaries, including securities and asset management.

In addition, the bank's wealth management fee income also improved meaningfully, providing further support. Meanwhile, for Q1, other operating profit amid intensified competition for new contracts across the industry and increased downward pressure on insurance operating profit due to a rise in the loss ratio for the long-term insurance recorded KRW 291.6 billion, decreasing 18.5% Y-o-Y.

Next, we will cover G&A expenses. For Q1, G&A expenses recorded KRW 1.7649 trillion. Despite continued efforts to improve cost efficiency focused on recurring operating expenses due to higher tax induced following the tax reform at the year-end, it recorded an increase Y-o-Y. However, in the case of the group's CIR supported by an all-time high total operating income of approximately KRW 5 trillion and strong top line growth, combined with ongoing efforts to enhance workforce efficiency and optimize the cost structure recorded 35.4%. This once again demonstrates that the group's cost efficiency is being managed in a stable manner.

Next is Page 9, the group's provision for credit losses. For Q1, credit loss provisions recorded KRW 493.2 billion, representing a significant decrease of 24.8% Y-o-Y or KRW 162.4 billion. The decrease was mainly due to the elimination of the base effect from last year's one-off large-scale provisioning at the bank and supported by the proactive efforts to secure loss absorption capacity and the group's conservative risk management efforts, the burden of the provisioning was reduced. In addition, the group's credit cost ratio, despite a slowdown in the asset growth, driven by improvements in credit quality also recorded a significant decline of 14 bps Y-o-Y to 40 bps.

Lastly, we will discuss the group's capital ratios. On a preliminary basis, as of end of March 2026, the group's BIS ratio recorded 15.75% and its CET1 ratio recorded 13.63%. The CET1 ratio decreased by approximately 19 bps Q-o-Q. However, despite a sharp rise in the Korean won USD exchange rate by nearly KRW 80 during the quarter and the downward pressure from large-scale shareholder returns at the beginning of the year, presenting a challenging managing environment, solid earnings generation capacity and strategic capital management focus on RORWA enabled us to keep the ratio at a stable level.

As you are well aware of, since shareholder returns in the second -- half of the year are linked to the CET1 ratio as of the first half, KBFG will continue to maintain disciplined capital management in Q2 to align with market expectations. Meanwhile, as of end of March 2026, the group's RWA amounted to KRW 366 trillion, increasing by approximately KRW 9 trillion or 2.5% compared to year-end. However, excluding the impact of the increase in exchange rate, the increase was limited to KRW 4 trillion or 1.1% Y-o-Y, remaining within the group's target level showing appropriate growth. The group will continue to implement qualitative growth, efficient capital allocation and stringent limit management as part of a sophisticated RWA management strategy in order to keep the growth rate at an appropriate level. The following pages provide detailed supporting materials of the earnings just presented for your reference.

This concludes the presentation of KBFG's 2026 Q1 business results. Thank you very much for your attention.

Thank you very much, CFO. We will now entertain questions.

[Operator Instructions] I believe we have the first question from [indiscernible] Securities, [indiscernible].

I have a question related to the company or KBFG's capital policy. And first of all, core bank and nonbank and securities like securities, capital and cards. Can you tell us about the RWA allocation and RORWA as well? If you can share it with us, it would be greatly appreciated.

Secondly, we have the efficiency making the capital ratio more efficient. So I think there is some deregulation trend. So that -- I think that probably has been reflected in your second half. So can you tell us about the reflection of those changes?

We will hold and then we will soon answer your question.

Thank you very much for the insightful questions. Related to the capital ratio predictions, as you have mentioned, there has been the rationalization of capital regulations. There are some positive aspects stemming from that. However, the FX rate trend and ELS, the fees and other productive finance products are increasing. So I think there are plus factors and minus factors that are mixed in. So I believe that regarding the impact of these policies, I believe that it will not happen very short term, but I think everything will be mixed and offset. So this will be all mixed together.

And from last year, we have been emphasizing that our goal is to -- in capital ratio management to have a very stable management and continuous flow, so that is our goal going forward. So we will do our best with that goal in mind. So that is something that I wanted to mention in the beginning.

And regarding the RWA allocation, well, I don't think that I can answer that to you in detail right now. But regarding our group's RWA, 70% is for the bank and 15% is for securities. And I think for the rest, 15% or so, we have capital and other subsidiaries that are actually spreading it around. And for RORWA and ROE, well, when we try to compare those indicators for securities and asset management and capital, for those related to financial investment rather than group ROE, group's RORWA, you can see that it is managed at a higher level. And recently, the bank's RORWA or ROE, well, we have the group's ROE also that has been greatly improved. So I hope that will answer your question.

The next question is from Jun-Sup Jung from NH Securities.

This is Jun-Sup Jung from NH Securities. I have 2 questions in total. The first one is with regards to the efficiency of capital ratio and the plans to achieve that and the capacity you have on hand. So the CET1 ratio, I think definitely has a lot of pressure and potential for upside. Of course, there will be an impact from your earnings, but also impact from regulations as well. So as of Q2 end, the increase -- standing of 13.5% CET1 ratio is quite positive, but then there is going to be a shareholder buyback and additional cancellation of shares that would have an impact on that. So I would like to ask for your plan and commitment to -- with regards to maintaining that number.

And the second question is with regards to the role of the nonbank subsidiaries. The increase in RWA, I would like to know the group-wide strategy that you have. So for example, [indiscernible], is it to maintain that at current levels and for securities to increase the portion of RWA. Do you have an internal strategy? If so, please provide some more information.

Yes, please allow some time to ask the questions and prepare the answers.

Yes, I would like to answer the question now. As you asked, with regards to our shareholder return policy, it's 13% and to have the surplus earnings and use that for the shareholder return policy, the exceeding amount. And from 2 years ago, we have been committed to execute this strategy. And this year, this holds steady as well. Compared to other companies, we would say we don't have an internal number target, but we have a logic and a system-wide number, and we provide that as a result of our shareholder return, and we will continue to carry out such commitment and efforts.

And as you asked, in terms of the role of the nonbank subsidiaries, of course, it is quite important and compared to the peer groups, we have the highest contribution from the nonbank subsidiaries at the moment. And as of now, we would say we have a complete portfolio, and we are trying to accelerate the growth engine, and we are at that phase now. In terms of the RWA allocation, what I can say from a group perspective, RORWA and ROE, the ones that are lower than that, we would try to reduce the capital and also recover more. And for banks in line with the expansion of productive finance, we are looking at overall profitability and securing additional customers and securing future growth potential, focusing on SMEs and productive finance. So RWA allocation will be allocated more towards that.

I think for banks, though, it's not going to be that we're going to reduce and downsize RWA as a whole, but we're looking at the role of our expanded presence in the capital markets and also our expanded contribution for productive finance to set and execute our RWA allocation strategy. For securities, there was a paid-in capital increase of KRW 700 billion. And as of last year, ROE of securities was higher than the group, and it was improved at that level. And recently, we're expecting that there will be continuous improvement. There was additional capital injected as a result. So for growth areas, we will say that RWA will be increased further for such growth areas. So overall, the principle will be, as I mentioned before, it is kind of repetitive. But for areas that are expected to show growth and are showing high profitability, we will allocate more RWA, and that principle will continue to be upheld.

We will take the next question from Mirae Asset Securities, Jeong Tae Joon.

I'm Jeong Tae Joon from Mirae Asset Securities. I have one question. So you see NIM that is actually on an upward trend and other positive numbers. And for the margin guidance, can you talk about any new guidance news that you might have?

Regarding the bank NIM, maybe I can answer the question. In Q1 for bank NIM, 1.77%. And compared to the previous quarter, 2 bps increase. So the market rate has gone up, and you can see household loan profitability has been on a rebound. So for high interest rate, time deposits, we had that funding, but through rebalancing, we had the funding structure that was made more even. And when we made a prediction last year, we thought that the [indiscernible] rate, it would go down is -- was our prediction. But recently looking at the base interest rate, I think increasing it is coming up. So compared to our plans last year, I think that it will probably have a slight increase and end there.

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

Yes. Thank you f or the opportunity to ask a question. So I think the questions are regarding CET1 a lot. I think this is probably the most important number that we look at. So we are looking at that for future guidance.

I think for RWA in Q1, you said the FX impact was KRW 4 trillion, 1.1%. So if we do a simple calculation, the FX impact was about 15 bps negative to the profitability. So this kind of sensitivity, would that be the right number to take into account for the impact? And for Q1, the Basel III capital recognition related requirements and the RWA down impact as of that, I think you did also cover that. But for Q1, the specific numbers were not released. So the RWA Q2, the external factors, of course, not the FX impact, but what would be the external factors for investors to look out for? And it would be great to have that in reference for us to look out for the second half.

And next question is quite similar to the one asked before, the NPL coverage ratio in Q1, it has come down significantly about Q-o-Q 20%. And it is above 120% recently. Of course, it's not necessary to be as high as COVID. But compared to the recent levels, it's not at a high level as of now. So are we going to record additional provisioning for this? Or is there any expectation or a factor that you think that will contribute to the downward pressure on the NPL ratio?

So please wait a bit, while we prepare to answer your question.

So I think 2 questions in total regarding RWA, and the NPL coverage ratio downward trend. So first on the RWA. So as you mentioned, the FX impact in terms of the CET1 ratio was about 19 bps in the first half. So in Q2, Q3 and Q4, there has been a lot of downsizing to the potential for growth throughout the year. However, despite that, the downward impact is -- majority is driven by the FX impact. So the RWA related sensitivity, we're trying a lot to try to reduce that. So for example, the over-the-counter derivatives, managing the duration and a lot of the maturity and duration related efforts are being taken to reduce the sensitivity.

And on top of that, data refinement, portfolio rebalancing, additional RWA leverage options and plans are underway. As you mentioned, so additional rationalization of the capital ratio, there is not a lot of room of buffer we have, but we do have some room. So with regards to RWA, I think that would be the extent I could answer now.

And in terms of the NPL coverage ratio, on a continuous basis, we have maintained quite a cautious stance in terms of provisioning and we have maintained a high CCR as a result. And managing NPL, we have been quite aggressive in rebalancing of it. Moving forward, we will continue to remain conservative in our provisioning stance. But what is of more focus now is reducing the NPL with active write-off and sell-off and an exit strategy for the existing real estate exposures we have. We will try to actively reduce our NPLs and have that ultimately improve the NPL coverage ratio as well.

We will take the next question. From HSBC Securities, we have Won Jaewoong.

Despite a challenging environment, thank you very much for the great results. I have 2 questions. The first question is operational risk RWA deregulation. And I know that this was -- is applied to you. And I think in 2024, maybe 2 years ago, there was ELS-related operational risk that you had accumulated. So at that time, when it's deregulated, then in 2027, how much of CET1 improvement would you enjoy? If you can explain that positive impact, it will be greatly appreciated.

And second question is for KB Kookmin Bank and to my recollection, I think you had actually turned the profit from last year. There were great improvements. So for this year, including KB Kookmin Bank for overseas earnings contribution or increase of their profit. Can you share it with us?

Please hold and we will soon answer your questions.

Regarding ELS, operational risks and RWA loss recognition exemption. You asked about the impact. And at that time, there was about KRW 745 billion voluntary compensation that we paid to the customers. So that is actually earmarked as losses. But in the first half of next year, if it is recognized, then there will be 20 bps positive impact on CET1.

Yes, I'm the CFO. Regarding the question regarding RWA. Maybe I can add a little more to my answer. So we're doing a lot of the work to reduce the sensitivity to foreign exchange rate. So we talked about 15 bps of sensitivity that was mentioned by Do Ha Kim, and there are the fines that it's not actually confirmed yet, the amount. So I think we will have to reconsider how much of the finder penalties will be derived. And we believe that we have KRW 97 billion that has been recognized, we're provisioning for that amount.

And related to the optimization or rationalization of capital regulations, well, regarding, I think, the details of that, it hasn't been finalized. So we are talking with the regulators regarding this. So we cannot really pinpoint a clear-cut answer to that. So I hope for your kind understanding and for the past ELS-related operational risk, well, as our CRO just mentioned, from next year, I believe that it will be gradually reflected.

In the case of Bukopin and Global about the contribution to our earnings, Bukopin had restructuring for many years until now. And their IT system was upgraded. So now we have set a strong foundation so that the operational base has been laid very firm. And regarding the acquisition of CASA deposits, we are doing our best to reduce funding costs and there's the Korea desk. So we are doing wholesale retail that actually is being done. And we cannot really say that it will improve in a significant percentage, but you can see that the profit contribution of the Global was about 5% last year. And this year, we believe that it will be hike up to maybe 6% to 7% and we have a very prudent prediction that it may raise to that level this year.

Next, it's from Jihyun Cho from JPMorgan. .

Well, thank you for the opportunity to ask questions. So I think definitely, the fee income was increased considerably. And at the early start of the year, I think NIM, you said the guidance was quite conservative, and thus saw a slight increase, was the comment that you provided. In 2026, in terms of guidance, the loan growth of 5% and household loan 2.2% to 3% as I recall. I think if we look at Q1, and if you look at the overall market environment, the loan growth target of 5%, is this sustainable?

And the SG&A it did increase by 10%. I think early start of the year, the guidance was 4%. So is this at a manageable level? And in Q1, most importantly, the credit cost was around 40% at bps level. And considering inflation and the macro environment overall, I do think there will be some time lag and the credit cost, so the 40 bps early in that range, is this going to be attainable. So could you provide guidance on the credit cost? Does it need to be upwardly revised?

Please allow some time for us to prepare for the answer.

Yes. In terms of loan growth, the bank's CFO will provide an answer for you. And the CCR guidance and projections, our CRO, will provide an answer. So after that, I will also follow up with some additional answers.

So in terms of loan asset growth, so as of end of March, Korean won loan balance was an increase of 0.4% compared to year-end. And in terms of household loan compared to year-end, it was a decrease of 0.4% and corporate loans was an increase of 2.2%. So as you well know, in terms of household loans, there is the total cap, and it's linked to such policies and directions, which does present us with some restrictions. However, within the cap, we are trying to leverage how we can increase our loan book, and there are the policy loans, the [indiscernible] loans that is provided to the young population and the elderly population. So we are trying to increase that portion.

So the household loan is targeted to increase by 1% to 2%. In terms of corporate loans, so under the productive finance direction, so we're expecting a growth of 6% to 7%, and that is our target. So of course, there's going to be intensified competition to attract corporate loans. So in line with the productive finance, we will be preemptive in our efforts to try to convert to our growth momentum and diversify our portfolio to secure future growth areas.

And for SMEs, loans, we will also follow the productive finance to focus on prime assets. And for SOHO, we will be quite selective to have an adequate level of growth there as well. So in total, we would say for household loan, growth target is 1% to 2%, corporate loans is about 6% to 7%. So for the bank as a whole, the credit growth is on average expected to be around 4% in our target for the year.

And with regards to credit loss provisions. So as you mentioned in Q1, we have had the conservative stance in terms of provisioning and the qualitative improvement in our portfolio and this materialized. And despite the declining numbers in our NPL and such, we have remained a CCR of around 40%. But with the Middle East war and with that the high pressure on the FX rate and such, this could pose additional impact on our asset quality. So in the future, we will continue to -- and we do think it's necessary to maintain a conservative provisioning stance.

Despite that, for the ones that we view with as vulnerable borrowers with a considerable risk for loss, we will have preventive provisioning for NPL. And for the existing real estate projects, if possible, we will have a sufficient loss absorption capacity for restructuring and also sell off to reduce our distress and potential exposure. And if so, the 40 bps, mid -- early to mid level of that is thought to be attainable as of now. So we currently hold that to be the same as now.

And in terms of SG&A, you asked about the upward pressure on that part and I think as you know, for education tax and corporate tax, the tax rate was increased and the G&A was increased as a result. And in addition to that, securities and banks, we did have very solid performance and definitely from securities, very strong earnings. So the actual adjustments made to the bonus and such, we did have to reflect that accordingly, and that resulted in increase in G&A.

So if there is an increase in the G&A, of course, this is attributable to the top line growth that we have. So we would say we are trying to manage it within the overall group level and continue our efforts for cost optimization. And if that does not undermine our cost efficiency target in plans, we do believe that it is at a manageable sustainable level. So considering the tax increase rate impact and also the strong earnings leading to additional set aside of bonus and such related payments, we do believe that the range of the SG&A increase is continued going to be -- continue to be at a manageable level.

Thank you very much for your answer. There are no questions in the queue for now. So we will wait to see if other questions come in.

It seems that about 40 minutes has passed since we started our earnings presentation. If you have any further questions, please contact our IR department, and we'll be happy to provide you with answers. Because we have no questions in the queue, we will conclude 2021 (sic) [ 2026 ] Q1 business results presentation. Thank you for your attention. .

Greetings, everyone. I am Jerry Kang, Head of KBFG IR team. We will now begin the 2025 full year business results presentation. Thank you very much for participating in today's earnings release. We have here with us executives from the group, including CFO, Sang Rok Na; and first, our Group CFO, will cover 2025 full year business results. After that, we will have a Q&A session.

I will now invite our group CFO to walk us through 2025 full year business results.

Greetings, everyone. I am KBFG CFO, Sang-Rok Na. Thank you very much for joining our 2025 full year business results presentation. Before proceeding with the business results, I'll briefly share some of our key performance highlights. 2025 was a year of unprecedented volatility in the financial market. As volatility in the exchange rate and market interest rates widened, the influence of external factors intensified, economic recovery was somewhat delayed and a challenging operating environment continued with asset quality pressures.

On the other hand, as government policies materialize and discount factors where the domestic market became resolved partially, the capital market is gaining unprecedented momentum toward the KOSPI 5,000 era. In a situation where diverse variables and new trends are intertwined, KBFG with our stable portfolio and consistent risk management policies is absorbing external uncertainties and we are working hard to expand nonbanking earnings contribution and to shift to a business structure focused on the capital market. Added to these strategic efforts as a result of the fading away of sizable one-off effects, including 2024 ELS customer compensation cost, 2025 net profit posted KRW 5.8 trillion, a 15.1% increase Y-o-Y and proved our robust profit-generating capacity.

On the other hand, today, the BOD resolved to approve a year-end cash dividend of KRW 1,605 per share, amounting to a total of KRW 575.5 billion. Accordingly, the 2025 total cash dividend amount stands at KRW 1,580 billion, an increase of approximately 32% compared to the previous year. The 2025 dividend per share, including previously paid quarterly dividends recorded a total of KRW 4,367, marking a significant increase of approximately 37.6% Y-o-Y. The total year-end cash dividend amount includes an additional KRW 240.5 billion on top of the existing 2025 quarterly uniform dividend amount. This reflects our efforts not only to meet the corporate eligibility criteria for separate taxation on dividend income, but also our efforts to reevaluate our shareholder return mix in line with the normalization of our PBR, which has recently surpassed 0.8 multiple while striving to achieve an industry-leading dividend payout ratio.

According to our shareholder return framework linked to our CET1 ratio, 2025 total shareholder return ratio posted 52.4%, a 12.6 percentage point increase Y-o-Y and also achieved an industry-leading level in both shareholder return ratio and scale. In addition, we efficiently managed accumulated capital and maintained the industry's highest level of capital adequacy level in 2025 and anticipated CET1 ratio is expected to be 13.79% and demonstrated significantly enhanced capital management capabilities. Taking into account the downward impact of approximately 6 bp arising from the KRW 240.5 billion of additional cash dividend amount, the effective 2025 end CET1 ratio can be considered to have remained at a high level of approximately 13.85%. A portion of this additional cash dividend amount utilize KRW 190 billion of deferred shareholder return for 2025.

Next, I will cover details of our 2026 first phase of shareholder returns. The funding for total shareholder returns in the first half of the year amounts to a total of KRW 2,820 billion in capital, corresponding to 79 bp above last year end CET1 ratio of 13%. It has already reached more than 92% of the total annual shareholder return of the previous year and has been expanded on a proactive basis. Of this amount, KRW 1,620 billion will be returned as total cash dividends for 2026, while the remaining KRW 1,200 billion will be returned through first half share buyback and cancellations.

Accordingly, the BOD today resolved to conduct KRW 600 billion of share buyback and cancellation which is the first round of share buyback and will commence immediately after this earnings release. The remaining KRW 600 billion is scheduled to be repurchased during the second quarter following an additional BOD resolution upon the completion of the first round. Also separate from this, regarding the tax-exempt dividends that have garnered significant market interest, we're actively reviewing the procedures for implementation, including the submission of agenda items to the GSM and plan to proceed accordingly. This year, under the government's economic stimulus policy stance, including productive finance, the role of financial institutions in enhancing the dynamism of the real economy is expected to expand.

Based on our group's diversified portfolio by proactively allocating resources to high value-added areas such as AI semiconductors and innovative SMEs, fundamentally transforming the group's business model and to secure future growth engines, we will continue to expand our customer base and business scope and seek to preemptively seize new opportunities amid a rapidly changing financial environment. Centering on subsidiaries with competitiveness in corporate banking and capital market business, we will identify and preempt additional growth areas and thereby build the foundation for future growth engines and at the same time, evolve into a reliable partner that directly contributes to the real economy of the nation. Through these management strategies of transformation and expansion, we plan to further enhance shareholder and corporate value by solidifying our profitability and earnings base while improving capital efficiency.

Next, I will cover KBFG business results. First, our key words of 2025 group business results are as follows: First, the full normalization of bank earnings, which has been somewhat subdued due to 2024 one-off factors. Second, a business portfolio well prepared for the money move trend toward capital markets as demonstrated by a significant improvement in noninterest income. Third, enhancing cost efficiency through group-wide cost management efforts and optimal resource allocation. Fourth, while maintaining the broad framework of KBFG's proprietary shareholder return formula, this can be summarized as a flexible response aimed at maximizing shareholder and investor value, including a proactive expansion of the scale of shareholder returns and the achievement of a total shareholder return ratio at the highest level in the industry.

As aforementioned, our group's 2025 annual net profit posted KRW 5,843 billion. And despite unfavorable conditions such as increased volatility in exchange rates and interest rates, earnings of core subsidiaries, including bank and securities expanded. In particular, the group's earnings power expanded as noninterest income grew significantly driven by capital market-related gains. In addition, 2025 ROE posted 10.86%, a 1.1 percentage point increase Y-o-Y, and the basic EPS earnings per share was KRW 15,437, representing an approximate 20% increase Y-o-Y. On the other hand, for Q4 net profit with the reflection of sizable one-off items, including Group's ERP costs and provisioning for penalties, including ELS as well as seasonal contraction in insurance performance, it declined significantly Q-o-Q.

Now I will cover business results in more detail. In 2025, the group's net interest income amounted to KRW 13,073.1 billion, increasing slightly by 1.9% Y-o-Y. This is attributed to improved profitability despite concerns over margin pressure from the base rate cut cycle that continues through the first half, driven by growth in the average balance of the bank's loan assets and reduced funding costs through the policy to expand our core deposits.

Next, I will discuss the growth of the bank's Korean won loans. As of the year-end 2025, the bank's Korean won loan balance stood at KRW 377 trillion, representing growth of 3.8% versus year-end of last year and 0.5% versus end of September. Within this, household loans increased by 3.7% versus year-end of last year and by 0.8% Q-o-Q as we pursued growth at an appropriate level under the government's household debt management stance. While corporate loans grew by 3.9% versus year-end of last year and by 0.4% Q-o-Q, supported by the steady expansion of loans to high-quality SMEs and increased lending to large corporates.

Considering government regulations and the slowdown in housing transaction volumes, household lending is expected to show limited growth this year as well. Accordingly, taking into account factors such as our loan portfolio mix centered on productive finance, we'll continue to pursue household lending policies focused on improving profitability, and we plan to strengthen the corporate finance bank based growth framework by shifting our growth axis toward corporate lending.

Next, let me move to the net interest margin shown at the bottom right. In 2025, the annual NIM of the group and the bank recorded 1.97% and 1.74%, respectively, representing a slight decline from the prior year. In the fourth quarter, the bank's NIM was 1.75%, up by 1 bps Q-o-Q as we flexibly adjusted the pace of the household loan growth despite pressure on the loan-to-deposit spread from the higher deposit rates and reduced funding costs through the establishment of an optimal funding mix, resulting in a slight improvement in NIM versus the previous quarter. And this year as well, based on our strong channel competitiveness, we plan to rigorously manage NIM by increasing low-cost deposits and through more sophisticated ALM management.

Next, I'll discuss noninterest income. In 2025, the group's noninterest income amounted to KRW 4,872.1 billion, expanding sharply by 16% Y-o-Y. In 2025, the group's net fee income was KRW 4,098.3 billion, increasing by 6.5% or approximately KRW 248.7 billion compared to previous year. This was driven by a significant increase in brokerage commissions at the securities business due to the expansion of equity market trading value despite a decline in card fees amid the economic slowdown and also by meaningful improvements in the bank's fee income such as bancassurance and fund sales as well as trust-related income.

In addition, capital market affiliates other than securities such as asset management and investment also posted fee income growth of 28.9% and 73.2%, respectively, compared to previous year, further supporting the expansion of the group's fee income. Meanwhile, fourth quarter net fee income is KRW 1,145.9 billion with securities leading to improvement through a substantial expansion in brokerage fees and IB fees and as fee-generating capabilities across affiliates improved overall, including trust income at the bank and asset management. Given the nonbank subsidiaries are driving approximately 70% of the group's fee income, KB will further strengthen the competitiveness of its capital market center nonbank portfolio in line with the government's policy direction to activate the capital markets, thereby further solidifying the fee income base.

Meanwhile, other operating income in 2025 recorded KRW 773.8 billion despite the base effect from the reversal of non-life insurance IBNR reserves in 2024. It increased by approximately 120% Y-o-Y as a result of the efficient management of the securities portfolio, including expanded performance from the management of equity securities. However, in the fourth quarter, other operating income was somewhat weak quarter-on-quarter due to a decline in the bank income and securities amid rising bond yields, a decline in the securities business derivatives income as well. In 2025, the SG&A expenses totaled KRW 7,051 billion and due to ongoing cost efficiency efforts combined with cumulative effects of the ERP program implemented over the past several years, they increased by only 1.6% Y-o-Y.

In addition, the group's CIR recorded 39.3% in 2025, reaching an all-time low supported by solid top line growth, ongoing improvements to our workforce structure and cost control efforts. And for the first time in the group's history, coming in below 40% on an annual basis, thereby demonstrating clearly improved cost efficiency versus the past. Meanwhile, fourth quarter SG&A expenses amounted to KRW 2,043.3 billion, increasing sharply Q-o-Q as seasonal factors were reflected, including approximately KRW 248.0 billion in group-wide ERP costs and higher advertising and promotion expenses. Going forward, KB Financial Group will expand investments in essential areas such as future growth fields, including AI and strengthening information security while continuing efforts to reduce recurring expenses in parallel to efforts to further enhance the efficiency of our cost structure.

Next is Page 8, the group's provision for credit loss. In 2025, the credit loss provision amounted to KRW 2,318.7 billion, increasing by 15.6% or KRW 318.7 billion compared to previous year, and the group's credit cost recorded 48 bps in 2025. This was despite improvements in asset quality indicators and reduced provisioning burdens resulting from portfolio enhancement efforts and was due to the maintenance of a conservative provisioning stance across all subsidiaries to prepare for potential economic volatility, including delayed rate cuts. As such, we built additional provisions at an appropriate level from the beginning of the year. Based on the loss absorbing capacity, we have proactively secured and our conservative risk management stance. We expect to manage credit costs stably this year at a level in the low to mid-40 bps range.

Next, I will discuss the group's capital ratios. On a preliminary basis, as of the year-end 2025, the group's BIS ratio recorded 16.16% and the CET1 ratio recorded 13.79%, maintaining industry-leading capital adequacy despite the downward impact from the increased year-end dividend. Meanwhile, in the fourth quarter of 2025, the group's risk-weighted assets stood at KRW 358 trillion, remaining at levels similar to the prior quarter and increasing by only 3.3% versus year-end of the prior year, thereby growing at an appropriate level within our target range. This year as well, while various factors such as interest rate and FX volatility may affect the RWA as demonstrated by our 2025 RWA growth rate, we'll continue sophisticate thorough group level RWA management strategy, including rigorous limit monitoring and portfolio adjustments in order to manage the growth rate at an appropriate level for the RWA.

From the next page onward, you'll find detailed data on the results explained thus far. So please refer to those materials at your leisure.

With that, we conclude the presentation of KB Financial Group's 2025 business results. Thank you very much for your attention.

Thank you very much for the presentation. We will now proceed to the Q&A session. [Operator Instructions].

We will take the first question. From HSBC, we have Jaewoong Won.

Thank you very much for such good results in this challenging environment and also for your concern about the shareholder returns. So looking at your results, it's like I feel I received your New Year present. So I have 2 questions. First is that in the fourth quarter, the year-end cash dividend was actually larger than what we expected. So the cash dividend payout ratio should have been at least 25%, but I think you gave much more than that for a high dividend company. So is there any special reason for that?

And my second question is the size was really larger than I expected, and that was really surprising. So 2 rounds of KRW 600 billion, I think that's been paid down. So looking at your disclosure, it seems that you're doing it in 2 rounds. What is the reason you're doing it in 2 rounds instead of 1 consolidated round?

So while we are preparing the answer, please hold for a few seconds.

So thank you very much for your congratulations as well as for your questions. You asked for the reason why there was a significant expansion of the year-end dividends, as you have said, one of the first reasons was that at the end of the first half of 2025, when we announced the second round of shareholder return amount, it was a total of KRW 850 billion at the time. The size of the shareholder return was actually larger than what we had expected initially. And so we lagged earnings for distribution. And so unavoidably, about KRW 100 billion was deferred to early 2026. That was announced previously through our disclosures. And so we have used that KRW 190 billion. And afterwards, we have continuously gave a lot of thought into how to use that KRW 100 billion, whether to do a cash dividend or whether to do share buyback. And so starting from last half, various policies from the government came out related to revitalizing the capital market, and there was introduction of the separation tax on dividend income.

And so we have been looking at various options in about the right dividend yield. And so also, given the quickly improving PBR improvement trends, we thought that there should be some changes to the mix of the means that we use for shareholder returns. And thirdly, recently, the performance of our share prices have been really strong. And so in consideration of this rise in the share prices, we believe that there was a need for adjustment of the dividend yield. And that is the reason why these 3 reasons were the reason why we have decided on this decision. And so added to the KRW 900 billion, KRW 50 billion has been added in the addition. So KRW 575.5 billion has been decided as year-end cash dividend.

So the total in 2025 for cash dividend was KRW 1,580 billion. So compared to last year, it's up by 32%. On annual DPS, it's KRW 436.7 billion. So compared to last year, there is about 3% increase. And this dividend payout ratio is 27%. So we have qualified as a high dividend paying company. But what's also important is that starting from last year, as we have said, we needed to establish ourselves as the people's most preferred dividend share. And in accordance with the corporate value program that we have announced, we will maintain that basic framework and the formula for shareholder returns. But we'll continue to look into different means and options in order to further enhance the shareholder value as well as the investors' value.

So we'll maintain a flexible stance going forward, and we'll continue to ensure that our shareholders and investors benefit from the enhanced corporate value.

I would like to answer your question about why 2 rounds. Well, regarding our first half share buyback was KRW 520 billion. And compared to that, it is true that we have the amount of share buyback that was much bigger. So we took that into consideration, and we took into consideration the timing or duration. It's because when we need to think about the funding for share buyback, we bought -- we believe that direct acquisition was better than a trust acquisition method. And when we have the direct acquisition, we need to buy the shares within 3 months.

So that is why we believe that 2 rounds would be better. And an advantage to this is that within the year, we will continue with a share buyback. So there is that advantage. So that is why we decided to have 2 separate rounds of share buyback. So we have the KRW 600 billion of share buyback that was determined through today's BOD that will be done immediately. And we will have the rest of KRW 600 billion of share buyback that will be done additionally in Q2 after the BOD resolution. Thank you very much.

We'll now receive the next question from Goldman Sachs Securities, Park Sinyoung, Center Director.

I'm Park Sinyoung from Goldman Sachs Securities. I have a question about the ROE target. So in your Value-up program, it says more than 10%. But previously, other peers have actually referred to their ROE target of 12%. And also in our case, already the nonbanking sector portfolio has become diversified. And this year's ROE is already reaching 11%. So going forward, what is your stance on a sustainable level of ROE? In addition, with your overseas business, the improvement in profitability, do you think this can actually help in terms of the ROE aspect? And what are the trends?

So please hold for a few seconds while we prepare the answer. Thank you.

So let me answer your question. Our mid- to long-term ROE target, we do believe that we have to upwardly adjust the target. In the case of last year, a lot of the discount factors for our share prices have been diffused and addressed. And so the valuation is going up. And so we need to also raise the value fundamentals at this point. So we are targeting ROE for more than 11% in the mid- to long term. And we do believe that the expansion of the leverage cannot be more than 10% as it has been done in the past. And so we do believe we have this task of raising the ROE target. But as we have noted, increased fee income, the increase in the noninterest income is very important for this. And also -- so we do believe that for the improvement of ROE, the improvement of the noninterest income is very important. And also recently, the profit generation by the nonbanking affiliates have actually coupled with the money move been very helpful.

As you have mentioned, of course, in the case of the overseas business, any improvement in profitability will be very helpful as well. our KBI or [indiscernible] Bank, these overseas entities improvement in profit is actually becoming more visible, and this is very helpful.

It seems that we do not have any questions in the queue, so we will wait. We will take the next question. From Mirae Asset Securities, we have Tae Joon Jeong.

I am Jeong Tae Joon from Mirae Asset Securities. Thank you very much for the good performance. Regarding shareholder return, I think it is quite positive. And I think you gave us a range of 40% to 50%, and it seems 60%. So maybe it will surpass that after a couple of years. So I just wanted to check that scope.

We will answer that question as soon as possible. Please hold.

I will answer that question. Regarding our corporate value enhancement program in the beginning, when we made our announcement compared to our peer groups, we were different because actually, we did not give a shareholder return ratio at a certain percentage. I think what we committed ourselves to was when we have an excess of a CET1 ratio that we had promised that we will use all of that as resources for shareholder return. So as was mentioned in that commitment, it is very open for shareholder return. So we have a very flexible and open shareholder return policy. Thank you.

We have no further questions coming in. We'll wait for further questions. We'll receive the next question from Goldman Sachs Securities, Park Sinyoung.

I have one further follow-up question. With regards to your dividend policy, the separate taxation and also the capital reduction dividend, what kind of details can you share about these 2 topics?

Please hold while we prepare the answers.

So for these 2 issues, as I've already said, in order to establish ourselves as the most preferred dividend paying share stock, these are very important issues. And we have qualified for the separate taxation for the dividend income. And so starting from this year, the dividend that is being paid out, will be applied with this policy. And in the case of the capital reduction dividend, we have already made the preparations and we're nearing the completion of this preparation stage. But because it has not been fully finalized as of yet in the near future, we do believe that we'll be able to deliver good news in this regard. And so any changes in the mix of the dividend and the shareholder return policies, we will be making decisions that are beneficial for our shareholders and investors. Thank you.

Thank you very much. We have Cho Jihyun from JPMorgan.

I have a question about guidance for 2026 for different indicators, if possible, because regarding asset quality, I think you gave us a provisioning goal. And can you tell us about what is the NIM interest rate, credit cost, last year's impact that will lead to this year's loan growth. So can you tell us about productive finance effect and SG&A pressure, I think it will be heightened. So can you tell us about any factors for SG&A boost? Can you tell us about the quarterly performance trend? And regarding the financing needed for shareholder return, what is the trajectory of CET1 do you expect for different quarters?

Please hold and we will soon answer your questions.

Let me cover the bank NIM. For 2026, well, for 2025, our CFO already mentioned that. So for 2026, household loan is expected to be restricted, and we will need to shift quickly to corporate finance. So we need to expand productive finance. So companies will have portfolio diversification, new growth, high profits and having a sustainable future platform. So in this situation, we will have corporate loan centered growth, but we will refrain from excessive price competition. So for asset profitability, we are going to actually safeguard some of that. And for 2026, for low-cost deposit expansion or having rebalancing of high interest rate loans, we will do our best to have the best portfolio so that we can have strategic financing cost expansion so that funding cost expansion, so we can manage the NIM.

So I think we had KRW 10 trillion of net deposit -- core deposit that grew, and we will have similar growth this year as well. And we cannot really give you an accurate target, but for the NIM, low to mid-single-digit level of NIM, I think we expect a gradual decline of NIM for 2026. And for our asset growth, well, for the household loans, we think there will be some limitations. There will be some government policies regarding debt management. So that is why on a yearly basis, I think for the bank loan growth, it will be around 5% more or less. And for household loans, we think it will be around 2% to 3%.

And for corporate loans, it seems that like last year, about 6% to 7% level is what we are anticipating. In the case of corporate loans, well, we think that there will be more competition intensification for that. So I think that we are thinking of special ways to quickly move to more profitable areas. So we are going to have those as our growth access and have portfolio diversification and have SME productive finance expansion and have a focus on blue asset -- and so -- and SOHO as well. So I think that is the asset growth that we are planning.

I would like to add to the SG&A. And for this year, we have the education tax that will be increased. So there is a little bit of a more burden. So compared to 2025, we think it's inevitable that we will have SG&A growth. But we think it will be plus/minus 4% or 4% growth more or less. And I think on a recurring level, excluding the education tax increase, it will be around 2% that we will manage plus/minus. And then for CET1 ratio regarding the annual trajectory that we expect for 2025 from Q3 to end of the year, it actually went up. for last year at year-end, when we were managing the capital adequacy ratio, we believe that it should be at an appropriate level. It's because for this year, there will be active participation in productive finance.

So we need asset growth based on that, and there is equity investment that will also go up as well. So taking all of these factors into consideration for the year-end CET1 ratio, we think it will be best for us to have it as high as possible for us to have asset growth and to have profitability. So we believe that there will be many variables such as FX and interest rate at the end of last year, but we were able to have a CET1 ratio that was hiked up with our efforts. And we think for this year, it will be a little bit different because there will be some similar movement, maybe a slight decline. And we think that it will not really move much. But with Q3, we believe that it will actually go up on an upward trajectory.

We don't have anybody waiting in the queue for questions. So we'll wait for a little while for further questions. So we'll receive the next question. The next question is from Daishin Securities, Park Hye-jin.

I'm Park Hye-jin from Daishin Securities. I also have 2 questions. First, this time around, ELS and LTV related, what was the amount of provisioning provision that you have set aside? And secondly, you said you're reviewing the taxation for dividend income. If you look at in 2026, the total increase rate of the cash dividend, it's about 25%. So the dividend payout ratio should be 25%. And so the increase rate should be about 10%, but I think you're meeting that requirement. So in 2026, do you also plan on another surprise dividend payout in the fourth quarter as well?

While we are preparing the answer, please hold for a little while.

So with regards to the LTV, the provisioning is KRW 69.7 billion. In the case of the ELS penalty, it's KRW 263.3 billion that has been reflected already. Let me add to it a little bit. With regards to the provisioning that has been set aside, we are receiving the views of the external legal counsel as well as the experts. And as has been reported by the media reports, our exposure to the penalty is the largest. However, given our earnings fundamentals and also the stance of the regulatory authorities, we are able to manage this issue without damaging our capacity. So there might be some adjustment of the amount itself. What I'd like to, however, note is that this penalty issue is something that will be completely diffused within the year 2026. And so when that issue disappears, there will be a significant rebound. That is for sure.

And also with regard to separate taxation and the dividend income, so you also talked about the increased rate of the dividend payout ratio for 2026. So we have 27% dividend payout ratio, and that's based on the 2025 levels. We are actually, however, step-by-step making upward adjustments. And as we have already noted, we're going to maintain a flexible stance when it comes to the shareholder returns. And so the year-end 2026 dividend may also go up as well. There is a possibility of that. And so we also have considered the capital reduction dividends. All of this has been considered together to reach this conclusion.

We will hold in case we have more questions coming in. We have had a 40-minute earnings call till now, and we will hold. And if we do not have any additional questions, we will conclude today's business results presentation. If you have any further questions, please do not hesitate and contact our IR team, and we'll be more than happy to answer any questions you may have. It seems we do not have any further questions in the queue.

With this, we will conclude our 2025 full year business results presentation. Thank you for your attention.

Greetings, everyone. I am Peter Kwon, Head of KB Financial Group IR Division. We will now begin the 2025 Q3 business results presentation. Thank you very much for participating in today's earnings release.

We have here with us executives from the group, including our Group CFO, Sang-Rok Na. We will have our CFO cover 2025 Q3 major business results, and then we will have a Q&A session. I will now invite our group CFO to walk us through 2025 Q3 business results.

Good afternoon. I'm Na, Sang-Rok, CFO of KB Financial Group. Thank you for joining the third quarter 2025 earnings presentation by KBFG.

Before running through the third quarter performance, let me first talk about our approach to profitability against changing business environment. Amid continuing slow growth trend, we face wide-ranging factors, including interest rate and FX volatility, government housing market stabilization measures and policies to revitalize the capital market. Navigating this environment and underpinned by robust fundamentals, KBFG mitigated the impact of external uncertainties as it continuously ensures stable earnings capacity.

On strong growth of core deposit base, we defended the group's NIM resilience offsetting external volatilities, while through nonbank subsidiaries portfolio, we are building a well-balanced earnings structure in this new wave of change. We are also maintaining appropriate RWA growth, absorbing the impact arising from multiple variables, which we believe forms a steady foundation for the group's overall profitability.

Under the government's target of KOSPI reaching 5,000, Korean economy is at an inflection point where the pivot of the economy is moving from real estate to capital market. In line with such change, KBFG will leverage this opportunity and turn the tide of change to one that can strengthen our profit-making capacity in order to broaden the basis of group's future growth. Upon the bank and KB Securities WM channel, we will expand brokerage, credit and sale of investment products to broaden the basis of earnings while supporting financial asset growth of the Korean people.

Leveraging our accumulated expertise and influence in the capital markets, we aim to lead the market tide characterized by expansion of productive finance and venture capital and capture emerging and new business opportunities. And I believe our experience in investing into venture and innovative companies and the success cases we were able to draw from them will provide greater boost for our market leadership as we make investments into growth sectors. Thus, supported by well-prepared leadership, KBFG will proactively respond to change, driving quality improvement in earnings structure.

Before moving on to financial performance, first on Q3 cash dividend. Today, Board of Directors approved KRW 931 DPS with total cash dividend amounting to KRW 335.7 billion. Q3 cash dividend per share increased KRW 135 Q-on-Q, excuse me, year-over-year on the back of increase in total dividend sum beginning of the year and the impact of share buyback.

Next, moving on to financial performance of KBFG. Group's net profit for the quarter reported KRW 1.686 trillion, while on a cumulative basis as of Q3 increased 16.6% year-on-year, reaching KRW 5,121.7 billion. Cumulative group ROE in Q3 was 12.78%, an improvement by a large margin versus last year. This was driven by solid core earnings and with the absence of ELS reserving impact and gains from sales of holdings in our consolidated funds in Q2, there was sizable recovery on the nonoperating accounts.

On top of this, rigorous cost control efforts were compounded, driving and attesting to group's solid fundamentals. Meanwhile, nonbank business accounts for 37% of cumulative Q3 net profit as we maintained diversified earnings portfolio.

Next, I will move on to detailed breakdown of earnings results. Group's third quarter cumulative net interest income was KRW 9,704.9 billion, flat year-over-year. In Q3 '25, group's net interest income was KRW 3,336.2 billion, but removing the base effect of costs related to liquidation of fund being recognized as interest expense, NII was flat Q-on-Q.

Next, I will elaborate on bank loans in Won growth. As of end September 2025, bank loans in Won stood at KRW 375 trillion, a 3.3% growth compared to last year and a 0.9% growth Q-o-Q. Household loans recorded KRW 182 trillion, a 0.7% growth Q-o-Q and corporate loans centering on large corps and robust SME loans grew 1.0% Q-o-Q. Taking into consideration the government stance of strengthening household debt management and housing market stabilization measures, we expect household loans to show limited growth for the time being.

However, we plan to rebalance household loan portfolio from a profitability perspective and pursue a loan growth strategy focusing on robust SMEs to secure our interest income basis. Next is NIM on the bottom right of the page. Q3 bank NIM stood at 1.74% on the back of funding cost management efforts and group NIM posted 1.96%, maintaining a similar level to the previous quarter. In particular, despite the contract in loan yields this quarter, the bank's NIM remained stable at around KRW 7.9 trillion growth in core deposits alleviated funding pressure, enabling a steady defense of our margin.

Next, I will cover noninterest income. Q3 cumulative group noninterest income posted KRW 3,739 billion, a 1.1% decrease Y-o-Y. Q3 cumulative other operating income posted KRW 786.6 billion, a 15.4% decrease Y-o-Y, and it was primarily attributable to the base effect from the reversal of KRW 123 billion in KB Insurance, IBNR reserves in the previous year.

On the other hand, Q3 cumulative net fee income posted KRW 2,952.4 billion, a 3.5% growth Y-o-Y. Along with the increase in stock market trading volume, brokerage commission income grew significantly, while strong bancassurance sales and the expansion of trust-related earnings also contributed to improved performance.

In particular, in case of our subsidiaries, KB Securities showed 16.5% net fee income growth and KB Asset Management showed 23.3% of net fee income growth, respectively, and drove group's fee income expansion. We believe that this increase in fee income from the capital market, in line with the ongoing momentum of capital market revitalization, has ample potential for further expansion going forward. Since around 70% of the group fee income is generated by nonbanking subsidiaries centering on the capital market, we plan to strengthen nonbanking competitiveness to further expand our fee income basis.

Next, I will cover general G&A. Q3 cumulative general G&A posted KRW 5,007.7 billion. And on the back of continuous cost efficiency efforts, it stopped at a 2.8% increase Y-o-Y. Q3 cumulative group CIR recorded 37.2% and is being stably managed within our target range.

We have been exerting efforts to save recurring expenses and at the same time, maintaining an appropriate level of investment in essential areas, including IT, disaster prevention and strengthening information security. We are strategically expanding investment in growth areas, including AI. And going forward, we will heighten our cost structure efficiency through selective cost implementation.

Next is Page 8, group provision for credit losses. Q3 provision for credit losses posted KRW 364.5 billion, a 44.4% decrease Q-o-Q. Q3 group credit cost went down 25 bps Q-o-Q, posting 30 bps and on a cumulative basis, recorded 46 bps and transitioned to a lower stabilization trend. To give more color about the main reason why this quarter's provisioning decreased around KRW 290.6 billion Q-o-Q, it was on the back of the conservative additional provisioning stance we had until now as well as slightly alleviated burden on provisioning accumulation through the portfolio improvement efforts, which took place from the second half of last year as well as the bank retail credit assessment model advancement.

In addition, there was a partial provisioning reversal due to NPL recovery in Q3. So overall provisioning size decreased significantly. We believe that our efforts to strengthen risk management until now have been gradually showing results. And considering this trend of improved soundness, we believe that this year's group -- this year, group's credit cost will be managed around the mid-40 bp range.

I will now cover group's capital ratio. At the end of September 2025, estimated group BIS ratio posted 16.28% and CET1 ratio recorded 13.83%, respectively, securing one of the highest levels of capital adequacy in the industry. 2025 September end group risk-weighted asset posted KRW 358 trillion and increased 3.5% compared to the end of the previous year. In Q3, the KRW 48 depreciation of the Korean Won against the U.S. dollar acted as a driver of RWA growth, but through RWA monitoring and portfolio adjustment, the FX effect was absorbed, and we adequately manage RWA growth at an appropriate level.

From the next page, please refer to the detailed materials regarding the performance results I have just covered. With this, I will conclude KBFG's Q3 business results presentation. Thank you for your attention.

Thank you for the presentation. We will now begin the Q&A.

[Operator Instructions] We will take the first question, Do Ha Kim from Hanwha Securities.

I have one question on margin, and you talked about the reversal. So first, on margin, it seems like the decline has now stopped. And there's been an offset in Q4 or for next year. Do you have, maybe not, a specific number in terms of the guidance? Do you see that the decline in margin has now stopped? And are you looking forward to a turnaround? And you talked about the reversal from the recovery of the NPL. What is the amount?

Give us one moment as we prepare for the answer to the question that you've submitted.

Yes. Good afternoon. I am Lee, Jong-Min. I'm the CFO of KB Bank. First, we'll talk about the NIM outlook. If you look at Q3 NIM, it was 1.78%, so it's 1 basis point increase. And basically, the rate down-cycle has somewhat slowed. And also our core deposit on an average balance basis, there was an increase of KRW 4.3 trillion. So through our efforts in reducing the funding cost, we were able to defend the margin from the stagnant loan growth.

Now under the government policy in terms of having a very rigorous control over household debt, we believe that for the time being, the loan growth is going to be limited. We will continue to focus on expanding our core deposit and also reducing the funding costs. That would make the key pillars behind the NIM. We are going to focus on company's institutional sales and expand on the low-cost deposit so that we can drive further savings in terms of funding cost.

On an annual basis, in the second half or in Q4, we expect the NIM -- of course, it will be impacted by the movement of the market policy rate. There are multiple views regarding how the market rate is going to go going forward. However, looking at the overall direction forward, we think that in the second half, there's going to be a quite gradual decline at low single digit. That is what we are forecasting. And in order to defend its impact on margin, we're going to really make that up and offset the impact through strengthening our deposit base.

Regarding the reversal of the provision, and you asked me about the size, it's around KRW 70 billion. Basically, overseas acquisition, we were able to recover certain bad debt there. And for domestic regarding the knowledge complex centers and the loans that were extended, there was a recovery, and that was reflected on the reversal.

We will take the next question from ANZ, [indiscernible].

Two questions from my side, please. One is, given that the policy rates in the U.S. are falling now faster than those by BOK, what is the plan for the financial group or for KB Bank -- for Kookmin Bank to issue additional Tier 1 securities in foreign currency in U.S. dollars? That's number one. And second question is, what is your guidance for NPL coverage for the foreseeable future? Do we expect it to decline further? Or you will keep it at the current levels or approximately around those?

Can you repeat the first question on the Tier 1 capital? Did you say issuance of USD-denominated Tier 1?

Yes. So is the bank -- is the group or the bank planning to issue U.S. dollar-denominated additional Tier 1 securities given that the cost of foreign currency debt is now falling faster than the Korean won policy rate?

Yes, give us one moment.

Regarding the first question, now the FX rate is very elevated at this point. And compared to the fall in the U.S. Fed rate, if you look at Korea, we have a household loan-related issue and also there are real estate packages. So we do expect that the interest rate decline is not going to be faster than the U.S. So in consideration of that, so at this point, the U.S. dollar-denominated bond or any issuance of a hybrid bond issuance denominated in U.S. dollars, we're not yet considering to do that.

You also asked about the coverage ratio. Right now, we are at about 130% coverage. Now over the past 2 years, we've really cleaned up our bad assets. And also there were some factors that drove reversal. So from -- it is correct that it went down from 200% level to 130% level. Now over the past 2 years, we've maintained this trajectory. So as we complete the NPL cleanup and we've seen improvement in the portfolio, we think that the inflow of new NPLs is going to be limited. Now having said that, our reserving discipline is going to stay intact. So the coverage ratio compared to where we are right now may slightly go up.

We do not have any questions in the queue as of now, so we will wait. We will take the next question from BNK Investment Securities, Kim In, Director Kim In.

Congratulations, and thank you for the good performance.

Can you speak up a little bit?

I think for KB for Q3, your earnings are good, but this could be a little bit sensitive. But as you probably know, we are hearing some talk about fines, administrative fines. So if you can comment on this, can you tell us about your thoughts, what is currently on your mind regarding these fines?

We will soon answer the question, please.

I am the CFO of the group. So to briefly elaborate, currently, regarding the size of the fine or the timing, it is very hard for us to comment because of its impact or the amount or the calculating standard, it is not finalized. So it is difficult for us to answer it in detail. And for the basic fine or the deductions, I believe that the authorities have shown us some clear guidance. And looking at the current situation, we are actively giving them our responses.

So I think that we're in the process of coming up with a reasonable resolution. I'm sure that we will have some impact, but we are doing our best to minimize the impact, and we're working very hard. So we will work hard so that it will not actually have an impact on the shareholder return policy that we have committed ourselves to. And our bank CFO, I think, will also give a few comments, but maybe we can just conclude the answer at this time. Thank you.

We will actually wait just a little more.

We do not have any questions in the queue as of now. And we will take the next question from HSBC Securities. We have Won Jaewoong.

Despite the challenging environment, thank you very much for your great earnings. I have one question and for core deposit growth, I think that is quite notable. And regarding your core deposits, I think all other banks have this increase. So I think NIM has gone up. But I think that the competition is getting fiercer. Do you think this trend will continue for the time being? Or do you think that because there was the great elevation because of some maybe one-offs, so I'm curious about what was the main reason for this?

And another question is, on Page 14 of the presentation, I think when we have a booming stock market for savings products, or I think a lot of the money moves to demand deposits. So do you think this is a trend? Or do you think it's because core deposits are coming in from the outside, so this is actually growing? So if you can explain about this phenomenon, it will be greatly appreciated.

We will soon answer the question, please.

Yes, I will answer your question. For the bank, for the core deposit increase, regarding the reasons, I think on the whole, the interest rate fell. So that was a big impact because when the market rate falls, we tend to have more core deposits. So they are elevated. So I think that is the basic direction. I believe that recently, we had some of -- more customers that actually are using us to deposit their salaries. And on the whole, I think we have this increase in our customers that is leading to more core deposits.

And I think we -- there are some changes so that we can receive more of these deposits from institutions and others and companies. So I think through these changes, we're seeing more companies and institutions that are providing more core deposits to us, and we are making many efforts. And I think in the stock market, we can see that with unsecured loans, it is inching up a bit and coming in as demand deposits and then going to the stock market. So I think we have this money move and it's going back and forth.

So I think regarding whether that had a big impact, we will need to wait and see. But I think for individuals, we had more customers, customer numbers increased, which was the biggest impact. And I think for corporations, it's because we had some changes to make this easier for them to give us their accounts.

Next Cho, Jihyun from JPMorgan.

I have two questions. First one has to do with the productive finance. What are your plans regarding productive finance? And also for RWA and CET 1, what's the impact that you're projecting? Also for the loan growth up to Q3, compared to your peers, we see that your loan growth is weaker and KB usually has a strength in the household lending space. So going forward, in terms of the loan growth, there is expectation that it may be difficult for you to achieve the target that you've said. So we'd like to gain some insight on Q4 and for next year, what is your loan growth projection, especially in relation to all the inclusive finance related effort?

So there was a big write-back in Q3. And because that size is quite big. So in the second half, you seem to allude to the fact that the overall size of the reserve is going to be more downsized. What can we expect in Q4? Are you looking towards a write-back of the reserves? And your NPL dipped slightly. Is this -- do you think it peaked out? Are we now in a secular trend in terms of the NPL decline? So I would like to gain your thoughts on this.

Give us one moment.

Thank you for the good questions for productive finance and its impact on RWA. Let me briefly respond to that. Now since there hasn't been any official announcement, we have all the preparation that we've set aside. And once that announcement is made, we will share with the market as to what the extent or the size of this support is. And so in light of the government's official guidance, we will be determining the size of the product to finance package. But of course, the amount is important, but what's more important than the mere amount is that our asset structure has to be transformed in a way that actually improves on the RWA and that whole process and having that in parallel is what's most important.

What that means is that our asset structure now is overly tipped towards properties and financial assets. And if that is redirected to SMEs and manufacturing sector, where we increased the RWAs that basically is our basic approach. So when it comes to not just the productive finance package and also its impact on our assets, there are certain areas that we do need to lower our exposure on. So in consideration of all of those factors that we are planning our RWA direction. So we think that next year, we will be amply -- we will be able to amply meet that RWA growth rate of around 5%.

I say that because from the government's side, they're trying to revitalize the capital market, and they've made adjustments to the risk weights, lower than for the securities for the RWA securities. Now -- so we believe that we are in good alignment with the government's policy approach as well. So for next year, there is an impact of this productive finance. And so in controlling the RWA, it's become much more complicated for us to manage against RWA last year. And this year, as we monitor the RWA, we were able to build up on our know-how and experience. So we are very certain and confident that we will be able to continue to do so as we move into next year.

In terms of the loan growth, I'm going to turn it over to CFO of the bank to respond to that question.

So in terms of the loan growth, just to add, now our bank on a quarterly basis, we try to ensure stable growth, so Q1, 2 and 3, we are growing at about the same rate. So under that approach for the loan growth, especially for household, it will be 3%, 6% to 7% for corporate loans. That's the growth rate that we are working under, so which will bring us about 5% of an annual growth. And we believe that we will be able to achieve that same level next year as well.

Well, I would also like to add one more thing. So in terms of the growth of the loans and the assets, if I could elaborate, yes, there is the loan growth aspect. But if you look at this pivot changing to the capital market, now there is also a potential growth from the securities. So if you look at our asset mix, the loan growth is about 4.5%. That's the expected projected growth. For the securities, we expect it's going to show about 9% securities investment. So for next year, in terms of the mix of our assets, yes, loan growth is important, but there's also securities investment domain that we will also focus on to really drive growth.

Just one more thing because you did ask about the asset quality projection. As you have mentioned up to the first half of the year, we went through some difficult patch. But starting end of last year, we've taken on a quite aggressive approach in improving and enhancing our portfolio. Thanks to these efforts, we have seen the outcome of that starting the second quarter, and we believe that, that improvement continued on into the third quarter. So in terms of the delinquency rate, in terms of NPL ratio, although a bit cautious, I believe that we are now in a period where we are now starting to see a recovery.

And especially for the stimulus packages of the government and also support packages for those people and the vulnerable part of the society, we believe that there will be some gradual improvement. In terms of credit cost, we started off at an elevated level in the first half of the year, but we were very conservative in reserving -- we were very conservatively reserving and now we are seeing a reversal of such loan reserves. And we believe that this type of a trend can continue on until the end of Q4. So CCR we will be able to achieve the target that we set originally.

Now having said that, when it comes to asset quality and the level and the extent of that improvement is going to be contingent on how the domestic market recovers and what the situation is for the real estate market. Those are also factors that will impact that going forward. For borrowers who are vulnerable, we will make sure that we keep a close monitoring of those segments so that we can have a rigorous control.

We do not have any questions in the queue as of now, so we will hold.

I think we had a very good Q&A session. And we have actually from Samsung Securities, Kim Jaewoo, who will ask the next question.

I have two questions. The first question is related to asset quality that was mentioned and regarding credit card delinquency rates. I think we are seeing a notable decline. So if asset quality is improved, and I think for vulnerable borrowers, you said you have a prudent attitude. But do you think internally -- do you think that we have had meaningful improvement? Or do you think that you will need to wait and see, and this is just what happened in Q3?

And I think regarding your forecast for Q4, then for next year for provisions, so what is the level that you're expecting? Because looking at the credit cost for this first half of this year, well, there was an elevated effect in March. So I think if it shows that the economy has deteriorated, do you think that for next year, how do you think it will change? And my second question is the capital adequacy ratio, and I think it has improved significantly. And I think that excess of 13% in RWA, you mentioned that.

So based on that, so when we have simple calculations, I believe that we could see actually more than expected. So maybe I'm speaking a little bit earlier than is concerned. But I think for this year, we are expecting about excess of 50%. Then what do you think is the window that we should open to? And do you think that will be quite difficult? Or if it follows the formula then for next year, as you had mentioned, do you think that you can have differentiated TSR that can lead the industry? So can you tell us what we can expect?

We will soon answer your question. Thank you.

Regarding credit card delinquency, I would like to answer that question. As you had mentioned, for a credit card, from late last year, we have been very aggressive and active in entry management and having good write-offs and sell-offs. So due to this, we have had portfolio improvement. And I think we're seeing the effects of our efforts materialize. So I think regarding the positive results, it is not just a one-off effect. I think this will actually continue until next year, the positive results. Of course, for the receivable, the voluntary adjustment and others, we will do so. But I believe that we will be able to manage it at the current level.

You also asked a question about asset quality and the level of CCR for next year. And as was mentioned previously, I think until now, we will maintain the stance for management that we have had until now, and I think early 40% range could be the goal that we are going to pursue.

Regarding Q4, capital adequacy rate and expectations for next year's shareholder return, well, regarding the amount of TSR or shareholder return, well, I also have very rosy expectations, and I'm keeping an eye on the situation. And regarding the capital adequacy ratio, well, I think that we have had a very high FX rate and it's being maintained. So we need to have ample buffer for that. So we have been managing our RWA. In Q4, there are seasonal factors. So it normally falls. And I think this pattern will also be repeated in Q4 of this year as well. So we need to take that into consideration.

And regarding TSR, whether it will go up or down, well, you probably know we can't really comment on what we think will happen. But regarding the excess capital that goes beyond our committed number, well, we do have a protocol and this protocol will be maintained next year as well. But what we can comment on for sure is that regarding the timing or the size of TSR, regarding what we showed this year, we will be very flexible like we had been this year. And this means that in Q2 of this year, there was the expected shareholder return that we had actually implemented earlier than scheduled.

So we will maybe pursue a similar stance next year, but we have the first half and second half of the year policy that we will actually commit to and we promise the highest level of TSR in the industry. So we will do our best to meet our commitments so that we can satisfy the expectation that you're looking for. Thank you.

So we have Cho Jihyun from JPMorgan also wanting to ask a question.

Yes, just one more question on shareholder return policy. In the General Meeting of Shareholders, you would make resolution on the dividend payments through the use of the capital reduction. So regarding the separate taxation on dividend, now basically, for high dividend paying, criteria is 40%, cash dividend rate or 25% cash dividend, and then looking at past 3 years -- comparing to the last 3 years' average, for instance. So there are different criteria. Now -- and there's a lot of controversy that it should only be a cash basis of 40%. Now so if -- 25% plus 5%, if basically that theme is what's decided at, then only the company that's doing cash dividend of 30% or 40% that are subject to that separation of taxation.

So then can we increase the cash dividend rate up to that ceiling to provide the benefit as much as possible to the shareholders? Now there could be multiple scenarios. How are you going to manage the mix between the dividend and the share buyback and cancellation?

Give us one moment.

Well, thank you very much for the question, a very good question. Now in the first half of the year, we've mentioned during our earnings call that basically in expanding the retail investor base, and to have the positioning and status as a household name in terms of the capital market investment that basically is our tenet, and we stand by that, and we are considering and looking at reviewing various different elements. So I think that's to the extent that I can share with you at this point because the policies or the law itself has not yet been determined or confirmed.

We will engage in active discussion with the outside market as well. In terms of the requirement for that separate taxation for the dividend income because the rules and guidelines have not yet been confirmed, it's quite difficult for me to give you a definitive answer at this point. But when we announced our plan, when PBR is from -- to move from 0.8 to 1, we are going to have a higher level of share buyback and cancellation up until a point we reach a certain PBR ratio.

For cash payout ratio, and if the requirement is 30% or set at 40%, so a much higher level, then cash dividend payout ratio, it's difficult for us to really just increase that quite steeply, although the requirement yet has not been determined, we will once again look at the mix between the cash dividend and also the share buyback. Basically, we would based on the discipline that we are using. However, if the taxation requirement is set at a level that we can amply meet, then we will also proactively consider the way to benefit the retail investors as much as possible.

Thank you very much for the answer. We don't have any questions in the queue as of now. And I believe that we have had a good amount of discussion for about 45 minutes since we had the beginning of our earnings release. If you have any questions, please feel free to contact our IR department.

And we will wait just a little bit more if you have any other questions. Well, I think questions are over, and we will conclude our business results presentation and Q&A session. Thank you very much.

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