KakaoBank Stock

[Interpreted] Good morning, ladies and gentlemen. Thank you very much for joining us at the KakaoBank's Earnings Conference Call. Following a presentation by KakaoBank management, we will have a Q&A. [Operator Instructions] and with that, we will now begin the First Quarter 2026 Earnings Conference Call for KakaoBank.

[Interpreted] Yes. Hello. This is Dianna Kang from KakaoBank, IR team. I'd like to thank all analysts and investors for joining us today at our earnings conference this quarter. We will proceed with a presentation by management via simultaneous translation, followed by a Q&A session with consecutive translation. [Operator Instructions] and we will now begin KakaoBank's earnings call for the first quarter of 2026.

We are joined by members of management, including our CEO, Daniel Yoon; Vice President, Ruth Kim; Chief Financial Officer, Ted Kwon; Sean Kim, Head of the Banking Group; Paolo Lee and Johnny An, Co-Head of the AI Group; [ Connor ] Shin, Chief Technology Officer; [ Buddy ] Sang, Head of the New Business Group; and [ Elie ] Lee, Chief Risk Officer.

Today's earnings release is based on K-IFRS and has been prepared prior to review by the external auditor for the purpose of providing timely information on the company's operating performance. Accordingly, the contents are subject to change depending on the findings from the auditor's review. I will now hand over to Ted Kwon, our Chief Financial Officer, to present our business highlights and financial results for the first quarter of 2026.

[Interpreted] Good morning. This is Ted Kwon from the KakaoBank. I'm the CFO. Let me take you through our key highlights for the first quarter 2026 on Pages 3 and 4. In the first quarter, we recorded meaningful improvement across major financial metrics, driven by continued expansion in our customer base, which is our core source of competitiveness. Customers totaled 27.27 million, up by 570,000 YTD.

MAU, which is a measure of customer engagement, increased by 320,000 YTD to 20.32 million, an all-time high. Net interest income was KRW 373.4 billion, up 15% Y-o-Y. Fee and commission profit also increased by 47% Y-o-Y as our fee and platform business continued strong growth momentum.

Thanks to robust growth in our fundamentals as well as strong performance from our global business, we posted record high net profit of KRW 187.3 billion in the first quarter of 2026. Allow me to move on to further details on the next slide. Page 4 for our customer base. As of the end of first quarter, we recorded a total of 27.27 million customers, up 570,000 from the start of the year. MAU and WAU also set new records at 20.32 million and 15.02 million, respectively.

Activity indicators also rose together with customer growth, which is an indication of deepening engagement with our users. Looking at penetration by age group, we saw even growth across all age segments. Notably, ages 10 or below, in particular, rose by 4 percentage points Y-o-Y from 27% to 31%. Similarly, the 60-plus group grew from 17% to 21% as we continue to expand our reach across all generations.

Page 5. Among the 570,000 new customers in Q1, roughly 24% were miners who were signed up for the - My Kid Service, which has proven to be a key channel for new acquisitions since launch in September of last year. First quarter traffic improved as measured by MAU and WAU.

Notably, increased customer engagement following the launch of AI assistant services at the end of last year, coupled with strong seasonality of group accounts was a key driver of MAU in the first quarter.

Moving on to operating revenue, Page 6. First quarter operating revenue totaled KRW 819.3 billion, up 4% Y-o-Y. It was primarily driven by interest income, which rose 9.5% Y-o-Y to KRW 659.7 billion, alongside solid gains in fee revenue, which climbed 9.2% Y-o-Y to KRW 58.3 billion. Meanwhile, other operating revenue declined year-on-year from reduced valuation gains from funds amid rising market rates starting in the fourth quarter last year.

On a Q-on-Q basis, however, amid an increase in AUM and enhanced returns from short-term investments, other operating revenue increased from KRW 43.4 billion to KRW 78.8 billion Q-on-Q.

Page 7 for our deposits. Our deposit balance reached KRW 69.4 trillion in the first quarter, rising 15% Y-o-Y and 2% Q-on-Q. Core deposits continued steady growth to KRW 40.1 trillion, while time deposits were also strong at KRW 23.4 trillion, supporting a stable and well-balanced funding structure. The share of low-cost deposits rose by 0.7 percentage points Q-on-Q from 57.8% from 57.1% to 57.8%, resulting in improved funding cost of 1.84%, down 2 basis points Q-on-Q as we maintain competitive funding costs.

Page 8. Group accounts, which are a core deposit product, increased by 9% Y-o-Y to 12.9 million, growing at a faster pace versus total user growth. Our group account balance rose 22% Y-o-Y to KRW 11.6 trillion, and its share of total current deposits increased to 29.1%, up 1.7 percentage points from 27.4% recorded in the previous quarter. This sustained momentum demonstrates the competitive positioning of our KakaoBank Group account offering within the broader market.

The fact that group account balance growth significantly exceeds user growth indicates increasing engagement among existing users, along with a continued rise in the average balance per customer. Driven by strong engagement, we expect group accounts to continue to serve as a solid driver of ongoing deposit growth.

Page 9. First quarter loan balance rose 8% Y-o-Y and 2% Q-on-Q to KRW 47.7 trillion, led by steady growth in both SOHO and Bogeumjari loans. First quarter net interest margin or NIM improved by 6 basis points Q-on-Q from 1.94% to 2.0% on spread widening from high loan yields and lower funding costs.

Meanwhile, in the first quarter, KakaoBank provided KRW 450 billion in mid-low credit loans. And as of the end of the quarter, the share of mid- to low credit loans recorded 32.3% above our target. Since launch, we have supplied a total of KRW 16 trillion of mid-credit loans, doing our best as a digital bank to enhance inclusive finance.

Page 10. Our SOHO loan balance grew to KRW 3.4 trillion, up 51% Y-o-Y. At the same time, the share of guaranteed and secured loans rose to 69% of the total loan portfolio, reflecting strong growth alongside disciplined portfolio management. Bogeumjari loans launched in July of last year reached KRW 1 trillion in cumulative issuance within just 9 months since launch and new loan market share also increased to 6.7%, supported by continued expansion from the convenience and ease of our fully non-face-to-face processes.

For Bogeumjari loans, our business model involves initially recognizing interest income upon loan origination, followed by securitization, after which fee revenue is recognized. As origination volumes grow, this structure enables contribution in both interest and fee revenue stream.

Treasury management on Page 11. As of the first quarter, our AUM increased Q-on-Q to KRW 27.7 trillion, with treasury management profit increasing from KRW 8.1 billion in the fourth quarter to KRW 152 billion. Profits declined slightly Y-o-Y, however, due to valuation losses on funds from rising market interest.

Given heightened market volatility, we will manage our investments with close attention to the loan-to-deposit ratio as well as changing market conditions as we optimize our investment portfolio and conduct ongoing profitability analysis to support overall earnings.

Pages 12 through 14 outline our fee and platform business. So let's look at Page 12 for our loan platform. In the first quarter, our loan comparison execution volume reached KRW 132.8 billion, up 15% Y-o-Y. This was driven by higher engagement and MAU growth, demonstrating how our loan platform traffic is translating into real loan execution. Going forward, we will continue to expand our product lineup to advance into an integrated financial platform, offering diverse financial options for our users.

Page 13. Our debit card transaction volume reached KRW 6 trillion, up 5% Y-o-Y. When excluding the one-off impact of government consumption vouchers in the second half of last year, underlying usage continued a steady uptrend as we continue to enlarge our user base with diverse debit card offerings for SOHO and group account users.

Our advertising platform revenue increased 23% Y-o-Y, maintaining strong momentum. We have been addressing the diverse needs of advertisers by expanding our range of performance-based products, including CPT and CPA offerings as we shift from simple exposure-based approach to an action-driven model, supporting both qualitative and quantitative growth in ad revenue.

14, on our investment platform, even as fund sales balances in the broader banking sector continued to decline, our balance, however, has grown steadily to KRW 1.7 trillion as of the end of March. This is due to our apps easy user experience and differentiated features such as Idle Money Finder, which lower entry barriers and makes investing more accessible.

Our investment ecosystem centered around our MMF Box as a key gateway continues to expand in a stable manner. Moreover, in April, we launched our investment tab offering, which provides an integrated user journey from portfolio viewing to information discovery to execution as well, alongside a wide range of additional functions such as investment talks, AI search, key market price inquiry, return calculator, et cetera. In the long term, we plan to continue to advance our investment tab to provide an enhanced investment context for our users while shaping a new foundation for platform revenue growth.

Page 15. In the first quarter, SG&A increased by 11% due to -- Y-o-Y due to a rise in IT expenses and D&A, while CIR improved to 30.6%, reflecting one-off nonoperating income from our investment in Superbank in Indonesia. When excluding the one-off effect, our normalized CIR is 35.9%.

And lastly, Page 18 for our Global business. KakaoBank's global business, following our start in Indonesia, we have since continued to expand into other markets, including Thailand and Mongolia. In Q1, our equity investment in Superbank contributed to our financials following the successful IPO and finished setting up a preparatory entity to establish a digital bank in Thailand.

Most recently, we have signed an MOU with MCS Group in Mongolia for a strategic equity investment. In the fourth quarter of this year, our customer base is expected to shift from predominantly domestic users to a much broader inclusion of foreign customers. Ultimately, we are planning a phased expansion of financial services available for the 20 million or so foreign nationals in Korea as we demonstrate the meaning behind our Beyond Korea initiative.

With that, this concludes our business results highlights for the first quarter of 2026. And we will now move on to the Q&A session.

. [Operator Instructions] [Interpreted] Currently, there are no participants with questions.

The first question will be provided by Sinyoung Park from Goldman Sachs.

[Interpreted] This is Sinyoung Park from Goldman Sachs. I would first like to ask about stablecoins. It does seem that it may take some time for it to gain further traction at least here in Korea. But I understand that there is a task force in place within the wider Kakao Group. So could you comment on the R&R? What will be your possible role in terms of issuance, custody, distribution or perhaps the build-out of the infrastructure? And do you, in fact, have an internal consensus within the group? And the second question, it does seem that overall, your cost base has increased so far. So what are your cost execution plans for this year? Will you be required to do additional hiring, for example?

[Interpreted] Let me take the first question.

So while it is hard for me to comment at a very detailed level because we have not seen the legislation here in Korea yet. So we are working together with other parts of the Kakao Group, including Kakao Pay as well to build out a stablecoin ecosystem for a Korean won tech stablecoin that has a lot of real-world utility.

Because within the group, we have various touch points with key parts of the financial market, for example, the payments market, also banking, securities, insurance, et cetera, as we have that kind of underlying infrastructure in place, we are looking to collaborate with partners from in and outside of Korea so that we can make a contribution to the distribution and use of stablecoins, won tech stablecoins.

So as a broad platform driven by bank interest income. We are exploring opportunities across the wide swathe of the ecosystem, not only for issuance, but also custody payment, et cetera. This will provide new revenue streams in terms of custody fees, also service fees as well.

And to cover your second question.

So in the first quarter, SG&A increased by 11% Y-o-Y. This is mostly due to increased D&A from our data center investments, also an increase in AI-related IT expenses as well.

And in terms of our cost outlook for 2026, we believe that investments into AI, [ AA ] and related technology as well as infrastructure is key for KakaoBank to maintain our very high technological competitiveness and advantage. And it is also essential in terms of reinforcing our security and stability of our services as well.

So for full year 2026, we do expect that annual D&A as well as IT expenses may increase by 40% or more year-on-year. However, we will manage other components of SG&A to within single-digit growth so that on balance, overall, we can control SG&A growth within 10%.

Next question please.

[Interpreted] The following question will be presented by Jaewoong Won from HSBC Securities.

[Interpreted] Yes. I have two questions. First is on shareholder return. So you have said that you aim to increase shareholder returns to the 50% cash-based target by 2026. I think up to last year, you have been on track as well, reaching 45% or so. So what would be the next step? If you could share your plans, I would appreciate it, perhaps increasing your payout or even quarterly dividends, for example, some thoughts.

Second, it seems that for the nonbanking business, you did see some valuation losses on bond investments. So I know that you are trying to keep it under control. But what kind of strategy do you have in mind to hedge against that kind of volatility and also further to improve return?

[Interpreted] So the overall direction for our shareholder return policy for KakaoBank is to expand our shareholder return to up to 50% by accounting year 2023.

So per this policy, we have already expanded our shareholder return to 45.6% as of the end of 2025, the year-end dividend.

And as we announced at our value program call, starting from 2027, we will be going by dividend per share or DPS as the main metric in terms of our shareholder return policy.

So that means we will either maintain the DPS level from the prior year or achieve gradual improvement in DPS.

And then regarding your second question on valuation losses on some fund investments.

So right now, 72% of our fund holdings are structured as maturity matching instruments.

So during the holding period, depending on changes to the interest rate, we do recognize unrealized valuation gain or losses. But upon maturity, generally, we are able to achieve the target returns through the principal and interest payments from the underlying bonds.

So the recent valuation loss from rising market rates actually are accounting losses only and because all funds will sequentially mature within the next year, we expect to be able to realize our target returns upon maturity.

And in terms of our investment strategy, we want to focus on driving higher interest income to take advantage of the current high rate environment.

So we will be continuing to purchase high-yielding, high-quality bonds to enhance our held-to-maturity bond returns. We will also increase our exposure to fixed income type funds, but at the same time, try to diversify into additional sources of excess returns, for example, through alpha-seeking type strategies like the [ corporate ] venture funds.

Next question please.

[Interpreted] The following question will be presented by Jun-Sup Jung from NH Investment & Securities.

[Interpreted] Some questions. In the previous earnings call, I think you mentioned potential M&A. You are looking at a capital company as a target. So could you provide a status update? And if you do go ahead with the M&A of the credit finance company, how much contribution do you expect in terms of ROE?

Also second, it seems that you have been expanding your global business with Superbank, also the Thai entity and more recently, the MOU with Mongolia. So the direction seems quite good. But outside of just one-off contributions to revenue, when do you think your overall business will really start to kick in and make contribution -- real contributions to your earnings and to what extent?

[Interpreted] Yes, let me cover the first question.

So we are, in fact, reviewing M&A targets, a capital company with the goal of moving into nonbanking loan markets, including corporate finance, lease, installment financing as well.

So by acquiring a capital provider, it will allow us to advance into new markets. And also, we feel that it could be a good fit to us from the following three perspectives.

First of all, post acquisition, we can help enhance the credit rating of the target to quickly lower the funding cost and improve profitability quickly.

Second, we intend to strengthen synergy and linkage with the wider group, making use of Kakao Score, [ Kakao T ] partnership, loan comparison, et cetera.

And in fact, the capital companies have a higher ROE versus banks. For example, JB Woori Capital's ROE is 16.1%. So when you consider that, potentially, there can be a significant financial contribution.

So we are looking at a wide range of possible targets, and we will follow with the goal of completing the exercise within this year, and we will follow up with the market as things become more firm.

And moving on to the second question.

As we explained as part of our value objectives, we have been gradually expanding our global expansion.

So we are still in the early phase of our overseas advance. And so based on this accumulated experience of success and based on the underlying network, going forward, it will be KakaoBank that takes the lead in pursuing our global business.

So based on this proactive events strategy in the mid- to long term, we will be working to achieve a certain target of revenue from global business as a certain share of total earnings.

Next question please.

[Interpreted] The following question will be presented by Ji-Young Kim from Kyobo Securities.

[Interpreted] Yes. I have three questions for you. First, in terms of your SOHO loans. Compared to what I was expecting, I think it's quite encouraging that you have seen steady, consistent growth. So what is the current status in terms of the delinquency ratio? And could you provide full year guidance on SOHO loans? How much loan growth are you targeting? And how -- what metrics where are you managing the metrics against in terms of asset quality?

Second, regarding G&A expenses, you did mention that you will control SG&A growth to within single digits this year. But what about hiring? I think compared to last year, you did not do significant hiring, but how about the coming year? If so, what areas will require personnel hiring?

Third question is it's quite positive that -- My Kids Service have proven to be a very good driver of MAU. So if you could explain any plans in terms of expansion of these kinds of existing services versus new service launch?

[Interpreted] Yes. Let me take your first question.

In 2026, we intend to manage delinquency and overall asset quality at a stable level by increasing the proportion of real estate-backed secured loans as a percentage of our total loan portfolio.

And we continue to make multifaceted efforts in terms of tight risk management.

So for example, we have been developing and actually using specialized models specific to certain sectors. So for example, rather than just applying simple revenue type data, we also look at the transactional patterns of the business owners, the unique characteristics of the different businesses, also revenue volatility to inform our decision-making.

And we do focus management for certain sectors through very rigorous sector-specific risk management. And so we assigned differentiated limits and approval standards, again, depending on the specifics of the sector.

And we are systematically hedging against the risk of secured loans experiencing distress. This is for SOHO real estate-backed secured loans. We apply differentiated limits, for example, depending on the type of collateral property, the location of collateral, also the use of the loans.

And moving on to the second question.

So last year, we had a headcount increase of slightly more than 140. However, for this year, we intend to be very efficient in terms of the use of personnel.

And so any headcount increase will be focused on essential personnel that are required to enhance our technological competitiveness or otherwise required for a stable, secure operation.

So for this year, we will control the headcount increase to under 100.

Third question.

So for the purpose of new acquisition, also the lock-in effect on existing customers, we are planning to strengthen our lineup of new products and also strengthen our existing services as well.

So we have a foreign currency account that is planned for release within the first half of the year. In the second half, we will be launching additional services targeted at foreign nationals, and we will be adding on debit card functions that can be used for children from the age of 7 as an add-on to our -- My Kids deposit service.

And we will continue with new feature launches throughout this year as well following on the AI group treasurer function in the fourth quarter last year. We have the AI group invitation function in the first quarter, Brand Pocket also this year as well to continue our uptrend in terms of acquisition and growth.

And we will be expanding our lineup with more diverse offerings, including a Stealth account, which can only be viewed in particular geographies only, also other products with linkage to the -- My Hometown Love donation program, for example.

Next question.

[Operator Instructions] [Interpreted] Currently, there are no participants with questions.

As there are no further questions, we will now conclude the earnings call for KakaoBank for the first quarter 2026. We thank all analysts, investors and members of the media. Thank you very much for joining us.

[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]

Good morning, ladies and gentlemen. Thank you, everyone, for joining us at the KakaoBank Conference Earnings Call. We will start with the presentation by KakaoBank, which will then be followed by a Q&A session with today's participants. [Operator Instructions] with that, we will now begin the earnings call for KakaoBank for the fourth quarter 2020.

The months is an Kang from the Taco Bank IR team. I would like to thank all analysts and investors for joining us today at our earnings conference call. We will proceed with a presentation by management via simultaneous translation, followed by a Q&A session through consecutive translation. [Operator Instructions] And with that, we will now begin KakaoBank's earnings call for the fourth quarter of 2025.

Today, we are joined by members of management, including our CEO, Mr. Daniel Young; Vice President, Rotem, Ted Chan, our CFO; Sean Kim, Head of the Banking Group; Vesper go, Head of the AI Group; HalaLi, Chief Business Officer; ConraChin, Chief Technology Officer; Badri Song, Head of the New Business Group; and Eli Lee, our Chief Risk Officer.

Today's earnings release is based on K-IFRS and have been prepared prior to review by an external auditor for the purpose of providing timely information on the company's operating performance. Accordingly, the contents are subject to change depending on findings from the auditor's review.

I will now hand over to Mr. Ted Kwon, our Chief Financial Officer, to present our fourth quarter business highlights and financial results,

This is Ted Kwan from Kakao Bank, the CFO. Let me take you through our key highlights for the fourth quarter 2020 on Page 3 and 4. Our core competitive strengths lie in our customer base and deposit and both showed solid momentum in 2025, increasing by 1.82 million year on end with our deposit up 24% year-on-year. Despite a challenging external environment, loans also grew at approximately 9%, close to our original plan.

In addition, through rigorous risk management, our credit cost ratio declined by 10 basis points year-on-year, maintaining stable levels. As a result of this expansion of our customer base and disciplined internal management, operating profit in 2025 increased by 7% year-on-year, recording KRW 649.4 billion.

Next, on to Page 4. In the fourth quarter, we also achieved positive progress in the global and ESG front. Superbank, which is an equity investment in Indonesia, brand-upcustomers very rapidly in turn to crossed as in December, successfully listed on the IDX Exchange in December, leading or at a very high valuation.

Furthermore, we demonstrated improvements across areas such as personal data and information security financial consumer protection and Board independence, the MSCI ESG assessment earning the highest rating of AAA.

Page 5, our customer base. As of the end of 2025, customers totaled 26.7 million, increasing by 1.82 million YTD. MAU WAU was 20 million and 14.7 million, respectively, both at a record high as we continue to see engagement with customers go from strength to strength.

Page 6. In the fourth quarter, a key driver of customer inflows was my kid services, which was newly launched in September last year, where parents could subscribe on behalf of their children. This was a major contributor to user growth in the fourth quarter. As word got out about the competitiveness of this product, we achieved a penetration rate of 10% in the age 0 Infant segment within just 4 months from launch,

Market service, card account balance has also been rising quickly since launch and is expected to help boost future inflows while also expanding our deposit balance in the long term.

Next, operating revenue on Page 7. Q4 operating revenue was KRW 759 billion, up 2% year-on-year, thanks to interest income growth. On a Q-on-Q basis, despite increase in interest income from loans and platform revenue, rising market interest resulted in a decline -- a slight decline in valuation gains on funds.

Page 8, our deposits. In the fourth quarter, our deposit balance was up 24% from the end of 2024, recording KRW 68.3 trillion. In the fourth quarter, notably, we had the launch of our retirement pension timed deposit product as we saw strong onetime inflow of savings deposits at once. This did push down the share of low-cost deposits, which was down 57 -- or down to 57.1%. Nonetheless, our low-cost core deposit share remains higher than the broad banking sector. Our funding cost was improved by 10 basis points Q-on-Q driven by the repricing effect of savings deposits.

Page 9. The number of group account users, which is a key pillar of deposit growth, reached 12.5 [ billion ], up 10% year-on-year, expanding faster versus our overall customer growth. Our group account balance is also growing at a much steeper pace than the increase in user numbers, clearly demonstrating that our group account users are highly active users with strong product engagement.

On to loans, Page 10. In the fourth quarter, driven by growth in policy bank loans and SOHO business loans, our loan balance increased by 9% year-on-year. The non face-to-face program day loans, which are launched in July 2025, quickly gained traction; while our SOHO loan balance increased by KRW 1.2 trillion from the end of 2024, growing to 6.5% of the total loan book.

Meanwhile, in the fourth quarter, our net interest margin improved to 1.94%, up by 13 basis points Q-on-Q. Meanwhile, our full year NIM was the same at 1.94%. The improvement was driven by a wider net interest spread on lower funding costs and an uplift in our liability to asset ratio from loan growth.

On to Page 11. Starting in December in partnership with ChanbukBank, we launched Together Loan, which is an unsecured joint personal loan product. offered as an innovative financial service. The entire process for loan application to management is completed seamlessly within the KakaoBank app. And through this model, we are able to generate both interest income and fee income, establishing a more diversified and strengthened revenue model.

Meanwhile, we are also steadily building out our SOHO loan portfolio, Initially upon launch, we started out with a single unsecured loan, but then have since broadened our lineup to non-face-to-face guarantee-backed loans in 2023 and property-backed secured loans in 2025. As of the end of 2025, secured- and guaranteed-backed loans combined account for 67% of the portfolio as we see stable expansion of SOHO loans.

On to treasury management, Page 12. In the fourth quarter in terms of our treasury management, the average balance in our AUM decreased as we sold short-term securities to support loan growth. Also, towards the end of December and market rates rose, this led to reduced valuation gains on funds, which were down. And overall treasury management profit were down by 37.2 billion Q-on-Q, recording 143.9 billion.

In 2026, we plan to continue managing our portfolio with due consideration to the loan-to-deposit ratio and market conditions, while contributing to overall profitability through diversification of products and asset management strategies.

On to Page 13 and 14. Despite limited overall growth in the loan comparison service segment, we continue to strengthen our market presence by expanding the number of partners and broadening our product lineup. In Q1, we plan to further widen customer choice within the loan comparison platform with the launch of a refinancing comparison service for small business owners.

As for the investment platform, our MMS box, which surpassed KRW 1.1 trillion in balance within 6 months of launch has become a key anchor serving as a gateway that connects customers to a wider range of investment products. Meanwhile advertising revenue has also been growing meaningfully as the business expands beyond simple placement and impression-based model to a performance-driven offerings.

As you can see, the platform business continues to be strengthened around 3 core pillars: loan comparison services, investments and advertising. Over the mid- to long term, we aim to establish ourselves as a one-stop marketplace of choice for customers for offering a broad range of services and diversified revenue models. Please refer to the individual slides for further details.

on to AI services, Page 15. Throughout 2025, at KakaoBank, we have launched a wide range of customer-facing AI services, including AI search, financial calculator and LLM powered consultation chat bot. AI transfer and an AI Group Treasurer as well.

In December, these AI services were integrated into a unified AI platform, accompanied by a dedicated AI tab on the home screen to enhance further convenience and accessibility. We are actively expanding the application of AI across our services and are continuing to make ongoing efforts to evolve into an AI-native bank proactively delivers value at the moment that our customers needed the most.

On to Pages 16 and 17. In the fourth quarter, SG&A declined 13% year-on-year. The biggest impact coming from labor costs, which decreased by more than 30% year-on-year. Overall, operating profit for the fourth quarter recorded KRW 145.1 billion, up 26% Y-o-Y, with full year recording 36.9%, up by 0.5 percentage points from the end of 2024.

This concludes our presentation on key business highlights and financial performance for the fourth quarter 2025. We will now move on to our Q&A session. Because of the limited time, please limit your questions to 2 per person.

[Operator Instructions]

The first question will be provided by Sinan Park from Goldman Sachs. .

Yes, this is [indiscernible] from Goldman Stack Securities. I will be asking first on the loan growth side. It seems like you quite a pickup in terms of your home mortgage secured loans. Do you believe that this kind of loan growth is sustainable?

And SOHO loans were launched last year in October, these are SOHO secured loans. What has been the market response so far? And at what point do you think you should see some kind of a meaningful pickup in growth? I ask because other companies actually have been expanding their SOHO lineup this year, and some have mentioned a loan growth target of 20% or so for '26. So if you could provide your target in terms of loan growth this year, also the lending mix, I would appreciate it.

Second is on the global side. given constraints to growth in the domestic market, it seems that the 2030 ROE target of 15% that you mentioned as part of your value program does feel a little bit distance and remote. You did mention the successful listing of Superbank. But overall, how much of a financial contribution are you expecting from the global business side? And if you could comment on the capital allocation or deployment, I would also appreciate that as well.

Yes. Thank you for the question. First, in terms of loan growth over 2025, we did see 9% year-on-year loan growth, mostly driven by policy backed loans, including Bogasari loan on the household loan side, also SOHO loans for self-employed business owners. So we see this as a breakthrough for growth despite the overall challenging environment.

In 2026, we do expect regulations to continue to control lending demand, obviously, for the purpose of stabilizing the housing market. And amid that backdrop, we intend to manage strategy similar to 2025, where we will grow our loan book driven by policy, back loans and also mostly SOHO loans., it will be consistent and more or less in line with last year 2025 levels.

Moving on to the second question, so in terms of moving toward our 15% ROE target, well, we intend to move forward in line with our growth plan as we explained as part of our value program. So by maintaining strong traffic and engagement from our customers, we will continue to achieve strong growth in terms of our core deposits as a key underlying driver of growth and also grow our asset side as well. driving growth across our platform through various monetization initiatives.

We're also pursuing inorganic growth opportunities as well. We are in the process of actively pursuing a possible M&A target in the payment and settlement space and also among capital providers. So acquiring a capital lender would be quite positive as it would give us new access to a part of a market where as an Internet bank, we previously were not present.

So although given the rising rate environment that we have come through, the profitability is more muted, considering in the past, how high the ROE was for the capital business. We think that if consummated, it could make a positive impact to our financial.

And then moving on to the third part of your question, so leveraging our experience in mobile banking and also our key underlying technology, we want to advance more into the global markets to further enhance our overall corporate value.

As one good example is a Superbank, which is an investment that we made in Indonesia, it turned around to positive profit just in 1 year from launch, recording 8.55 million users and also net profit of 8.5 billion as of the end of 2025 as it sustains good growth momentum.

And most recently, following the IPO in February -- at February 2, actually terminated our existing shareholder agreement with Superbank, the accounting treatment was also transitioned from equity method gain to FVOCI. And as a result, we recognized 93.3 billion in valuation gain, also 67.6 billion in net profit for the first quarter.

And building on this successful reference case of a successful investment in the global market, we expect continued positive financial impact from these types of overseas initiatives.

The following question will be presented by GohaKim from Hana Investment and Securities. Please go ahead with your question.

Yes. So I would like to first ask about your NIM profile. Could you provide more color in terms of the underlying NIS, the reduced funding cost? Also, given the regulatory environment and the recent money move, could you provide your guidance and expectations for margins this year?

Second question is regarding the reason by -- for the significant drop in your labor cost in the fourth quarter. Was it due to a change in your accounting treatment? Because in terms of your headcount, if anything, I think you had a bigger net increase than prior quarters. So if you could explain.

Yes. So let me take your NIM question first. So in the fourth quarter, our NIM did improve largely on two drivers. First, we saw a widening net interest spread as funding costs declined from repricing of our savings deposits. So that's one. And then our liability to asset ratio increased quarter-on-quarter from loan growth. And so overall, our NIM improved by 13 basis points.

In terms of attribution between the two drivers, the widening NIS was responsible for 6 basis point improvement, the liability-to-asset ratio 7 basis points. So in terms of the NIS breakdown, although the asset yield itself declined by 4 basis points, this was largely offset because our average funding cost decreased by more -- by 10 basis points. 2 million meters million.

And our projection for NIM in 2026, while the outlook for the benchmark policy rate is unclear for 2026, under the assumption that the current benchmark rate is maintained, we do expect 2026 NIM to rise slightly versus 2025.

And then may I comment briefly on the outflow to the equity market? So while we are seeing some trends amid the equity market rally of some movement into the equity market, for KakaoBank, however, our current account balance actually is rising. This includes group accounts. And if you look at the deposit balance as of January, that has also risen relative to the end of December. So we're continuing to see solid inflows.

So we continue to see growth in our demand deposit base. Our group account as a key pillar is continuing stable growth. Also as we diversify into more customer segments, SOHO loans, for example, have seen -- or excuse me, current deposits also have seen solid growth as well. And we are continuing to increase our lineup. This year, we had the my kid service our current account -- or that was last year. And this year, we are also going to introduce new products for foreign -- foreigners also for FX deposits as well. And so this will add to our very stable demand funding base.

And we expect a stable growth in terms of our net funding growth this year as well. As we continue to add on to our funding product lineup, obviously, we had the new retirement pension current account product that was newly on. So as we add on to the lineup, this will also drive continued growth.

And then I think there was another second part to the question. Yes, let me explain the labor cost reduction in the fourth quarter. So SG&A in the fourth quarter declined by 12% Q-on-Q and by 13% Y-o-Y. So this is due to a one-off reversal of around KRW 20 billion. So previous labor expense estimate that were allocated prorata across all of the quarters reflected the real -- the actual number as of the fourth quarter. And so with new estimates produced, this led to, again, a one-off write-back of about 20 billion, So that being the case, this has no bearing on future earnings or P&L.

The following question will be presented by JanOnfrom HSBC Securities [indiscernible] with your question.

Thank you for delivering strong performance despite the difficult environment. I also have some questions on the global business side, which were partially covered by others. But I wanted to ask a little bit more for clarity. So is it -- for the Indonesian bank, so I think there was a number 33.3 billion or so in net profit that will be recognized. So will that be recognized as of the first quarter of next year -- the next fiscal year, I mean, 2026? Also the nonbank revenue, will that also be recognized?

And then the Indonesian bank turned around to positive last year, so starting the first quarter of 2026, will you be consolidating or recognizing equity method gains effective as of first quarter? So if you could just clarify.

And then quite impressive in terms of your fourth quarter performance was the improvement in NIM and reduced funding costs. Could you provide more details in terms of just why the funding cost declined? Because it does seem that your low-cost deposit as a share of deposits actually went down a little bit, while time deposits went up slightly. So is it like higher wighted to legacy deposits, are they rolling off of the book upon maturity, and so that is an outflow, whereas you're seeing new inflow from your retirement pension time deposits? Is that why? Is it basically because of this kind of repricing effect? Could you explain?

Yes. Let me address the first question first. So in terms of our equity interest in Superbank, in the past, we did apply equity method valuation. But recently, upon termination of the existing shareholder agreement, the accounting method was changed from equity method to fair valuation -- or fair value through OCI.

So going forward, as Superbank's share price changes on the exchange post its IPO, that kind of change in share value will not be reflected in our P&L. It will actually go toward our AOCI.

And your second question, so in the fourth quarter, our net interest spread improved by 6 basis points. And as a part of NIS, the funding cost improved by 10 basis points. So as I mentioned in the presentation, the main reason is in the -- the main reason for the reduced funding cost is due to the repricing of savings deposits.

So again, the biggest factor was the repricing of our deposits for both term and free term type of deposit products. So if you look at the deposits that are rolling off upon maturity, they actually carried higher rates, whereas the newly secured deposits offer a lower rate. So this led to widening of the interest spread.

The following question will be presented by Jun-Sup from NH Investment & Securities.

Two questions from me. So during your presentation, you did mention the new my kid service, it was quite impressive to see how you were able to ramp up penetration very quickly. Could I get an idea of the account balance at the moment?

And then it does seem that the share of low-cost deposits has gone down some. Is that somehow connected to the market service? Or if that's not the case, what other reason is behind the slight decline?

Second question is in the same context, but could you introduce some new plan services or offerings that are in the pipeline 2026? You did mention the M&A, but in terms of services, I'd like to know more.

Yes, let me answer the first question. Yes. So for my kid service, this is the type of service that can be used by both the children and the parents alike. We have seen a very rapid ramp in terms of the number of users since launch. 100,000 in month 1, 300,000 by month 3, 500,000 by month 4. And so we are really expanding our market presence very quickly. In terms of the balance, we have surpassed the KRW 50 billion mark.

So market services include not only installment deposits but also current or time deposits. And between the two, the mix, we're seeing more inflows into the time deposit side rather than installment savings. So the ramp-up in market services, I don't think, is associated with the declining share of the low-cost deposit.

And let me explain more about the reduced share. So in the presentation where you see mention of our funding costs, this is actually based on EOP or end-of-period basis. But in terms of funding costs, this is based on average balance figures. So that explains the discrepancy.

In particular, for the retirement pension type deposit product, which was launched -- or there was a concentration of that inflow towards the end of the year, which in part led to the decreased share of low-cost deposits. However, this did not impact the average balance. And ultimately, our funding costs overall improved. And the new retirement pension type deposit product is quite favorable for us as it is not subject to contribution in the deposit insurance scheme. And so relative to other funding means this is more conducive towards future reduction in funding costs.

The following question will be presented by Simon Park from Goldman Sachs.

I would just like to add some follow-up questions. I think in your previous communications, you talked about double-digit growth or CAGR of 20% for your fee and platform revenue for this year and next year. Overall, the current year 2025 was relatively sluggish. So what are you looking at or expecting for 2026? If you have any anything in the plan, I'd like to hear more about that.

And some other banks have mentioned their BAS initiative. So do you have any initiatives which are gaining visibility internally? And if so, how would it be differentiated versus other players?

Yes. Let me take your first question. So for 2025, our fee and platform revenue, earnings actually increased by 3% Y-o-Y. This was despite a decline in the debit card earnings from lowering of the merchant fee rate. This was driven by very high Y-o-Y growth from advertising revenue and also from our loan comparison service as well, which grew by 54% and 37%, respectively.

In 2026, we intend to continue to grow our advertising business. We are targeting above 30% growth, and we'll continue to be expanding our loan comparison service as well. And we are looking to launch new products as well, including a new payment and settlement product, also new joint loan products as well. And we will be strengthening our investment-related services through our investment tab, including fund investment. So overall, our annual fee and platform income or our target growth would be 20% plus Y-o-Y,

And moving on to your second question, so BaaS-related products are currently being discussed within the financial sector. However, they are associated with high funding costs and also, it's not clear, the growth trajectory is not clear from financial institution, the genuine client base. So rather than BaaS-driven deposits, a more important priority for us would be AI-based deposit products, including our signature products like the group accounts.

And so we will be expanding these types of -- well, we will be expanding additional services that leverage these types of signature products going forward, and this will be one of our main priorities.

So for BaaS, rather than using it as a driver for deposit growth, and of course, we being 24% deposit growth, as per the latest number; we want to apply more BaaS more toward the investment context. For example, the joint loans that were begun in December loan comparison services that will be scaled to include secured loans as well and mostly around loans or investment.

The following question will be presented by HeijnPark from Daishin Securities.

Yes. I also have two questions. I think from some point onward, your overall asset soundness indicators that you have been tracking quite stably. What is the outlook of KakaoBank in terms of credit quality in terms of delinquency or credit costs? Most of the other banks, I think, have a largely positive views. I'd like to know what KakaoBank is thinking.

And CET1, although still high, has appeared to have gone down a little bit. So could you explain why?

Yes, let me take your first question. So first, in terms of CR, we expect that in 2026 it will largely be similar to 2025 levels at 0.55% or slightly better. So the reason for this view is that policy-backed loans, like sunshine loans, for self-employed business owners that will be increasing. Also, there may be additional provisioning required, given prevailing uncertainties, both in and outside of Korea.

However, these challenging factors will largely be offset as we increase the share of secured or guaranteed backed loans, including SOHO secured loans or Oguntade loans. And on balance, this will help improve our credit cost,

Moving on to the second question, so in the fourth quarter, our BIS ratio stands at 23.15%, down 0.7 percentage points Q-on-Q. The main reason behind this decline is the reduction in our equity upon determination of end-of-period dividend of 461. So again, as we resolved upon 461 in the ending dividend end of your final -- end of year dividend, our shareholder equity would be reduced by 219.2 billion, leading to a 75 basis point reduction in our BIS ratio.

With that, we will now conclude the fourth quarter 2025 earnings call for KakaoBank. I'd like to thank all of our analysts, investors and media for taking your time to join us today. Thank you very much.

[Interpreted] Good morning. I would like to welcome you to KakaoBank's Bank's earnings conference call. [Operator Instructions] Now then we will begin Third Quarter 2025 Earnings Conference Call for KakaoBank.

[Interpreted] Good morning. This is Dianna Kang from KakaoBank's IR team. I'd like to thank all our analysts and investors who are joining us today at our earnings call. We will proceed with the presentation by management via simultaneous translation first. followed by a Q&A with consecutive translation. [Operator Instructions] And with that, we will now begin KakaoBank's earnings call for the third quarter 2025.

Today, we are joined by members of management, including our CEO, Daniel Yoon, Vice President, [indiscernible]; Tae Kwon, our CFO; Shawn Kim, Head of the Banking Group; [ Vesper Ko ], Head of the AI Group; Paolo Lee, Chief Business Officer; [indiscernible], Chief Technology Officer; [ Buddy Song ], Head of the New Business Group; and [ Elie Lee ], our Chief Risk Officer.

The financial results contained in today's call are preliminary unaudited results based on K-IFRS and therefore, may be subject to change upon final review by an independent auditor.

[Interpreted] Yes. Good morning. My name is Kwon Tae-Hoon, Tae, Kwon, the CFO from KakaoBank. Let me take you through our key highlights for the third quarter of 2025 on Page 3.

Based on a framework view of improving performance based on core competitive drivers, we continue to see G&A growth in the third quarter. As of the end of the third quarter, number of customers recorded 26.24 million, up by 1.36 million from the end of 2024.

Our deposit balance increased to KRW 65.7 trillion, up 21% year-on-year with the increase allocated efficiently across loans and treasury management. Meanwhile, platform revenue rose by 7% year-on-year, recording KRW 23.3 billion.

Moving along to further details on third quarter results. Page 4. This is our customer base. As of the third quarter, our customer base totaled 26.24 million, with continuous inflow from new services, including mobile ID, market services and government subsidy search. In the third quarter, MAU was 19.97 million. WAU 14.64 million as continued -- as we saw continued solid traffic inflows.

Moving on to operating revenue, Page 5. Third quarter operating revenue was KRW 764.7 billion. On a year-on-year basis, driven by growth in platform revenue and treasury management, operating revenue increased by 2%. On a Q-on-Q basis, however, operating revenue declined slightly as market interest rate, a movement led to a decline in interest income from loans as well as income from treasury management.

Moving on to deposits, Page 6. In Q3, our deposit balance totaled KRW 65.7 trillion, up KRW 2 trillion Q-on-Q from even growth across all product categories. The portion of low-cost deposits increased slightly quarter-on-quarter to 59%, which remains above the banking sector average.

In order to boost our deposit base, which is a core source of our competitiveness, we are ensuring stable operations for signature products such as group accounts. As we continue to launch new offerings as well, My Kids Service, which was launched in September while we continue to add 2 lineup, which now includes a card account and installment savings account for one stop management of children's financial assets as we build and expand and integrated into an asset management platform.

Please refer to Page 7 for details. Page 8 for loans. Impacted by external factors like regulation, growth in household loans was minimal, where SOHO loans grew by more than 9% Q-on-Q with our third quarter loan balance to KRW 45.2 trillion. Given the structural nature of our deposits comprising a high share of low-cost deposits, during a period of falling interest rates like now, there is limited room for further reduction in our funding costs. Consequently, Q3 NIM was down Q-on-Q, recording 1.81%, although, of course, still significantly above the average of other major commercial banks.

Page 9. In October, looking to expand our coverage on to -- or into SOHO secured loans, which account for 80% of the SOHO loan market, we launched property-backed secured loans. The entire process from loan application to document submission and post-loan management after the loan is executed is all done inside the KakaoBank app using a chat-based interface as we seek to deliver overwhelming convenience expand our market share within SOHO Lending.

Page 10, treasury management. As of the end of the third quarter, driven by a rise in deposit inflows, our treasury management AUM increased to KRW 25.7 trillion as market interest rates rose at the end of the quarter, valuation gains on funds and other instruments decreased, but this was offset by an increase in interest income from bonds and on balance, treasury management profit grew by KRW 100 million versus Q2.

Meanwhile, in the third quarter, we invested in a real estate fund for the acquisition of Pangyo Tech One tower. As we continue to diversify our portfolio across alternative assets as we seek to expand treasury management profit on a continuous basis.

Pages 11 and 13 are about our main platform business highlights. For loan comparison service, while the loan execution amount decreased slightly from the impact of household loan regulations in June, we are seeing continued demand for loans and have been working to expand our partnerships and product lineup.

For our ad platform, we introduced new services such as the Joy of Earning money, incorporating elements of fun together with benefits, expand traffic and grow the influence of our ad platform. And the number of advertisers, of course, seeking [indiscernible] is on the rise.

On to our investment platform, the MMF Box product, which was released late Q2 continued successful performance. In the third quarter, we captured nearly 70% of the MMF market, net incremental at KakaoBank, as we believe it accurately address customer needs.

Please refer to the respective pages for further detail. Page 14. Third quarter SG&A rose by 17% year-on-year from rising labor costs and advertising and marketing spend for newly launched service promotion. Due to the temporary increase in cost, cumulative CRR was 36.9%, up slightly from 2024. Please refer to the slides for further details on other performance items, and I will move on directly to Page 17.

KakaoBank we have been featuring customer services incorporating AI since the second quarter. Following on AI search and our AI financial calculator, which reached 1.3 million cumulative customers to date, in the fourth quarter, we plan to introduce AI transfer services, which allows users to carry out remittances and transfers, which are core to mobile banking using a natural conversational language without any complicated steps. We'll also be launching AI Group Treasurer which is a group account embedded with AI as we broadly expand AI application across our services.

With that, this concludes the key business highlights and financial performance for the third quarter of 2025. Thank you. We will now move on to Q&A. [Operator Instructions]

[Interpreted] [Operator Instructions]

The first question will be provided by Sinyoung Park from Goldman Sachs.

[Interpreted] Yes. I have two questions. First, regarding your loan growth, it does seem that growth has been quite slow. It may be due to government policies and whatnot. But do you think that you may need to revise down your initial guidance that you showed at the start of the year, which was around low 10% lending growth? Or is it ahead of the SOHO secured loan product launch? Was it intentional to moderate the pace to leave a bit of a buffer for the fourth quarter?

Second question is on stablecoin regarding licensing. Cautiously, I may say that the legal risk concerning the Kakao Group overall has not been completely alleviated just yet, do you think that this could potentially serve or present some kind of constraint on your stablecoin initiative?

[Interpreted] Yes. So impacted from regulations that were announced in June on the 27th, it is true that any net increase in household loans were actually quite minimal throughout the month of July to August. However, starting in September, we saw a robust net increase for the policy backed program Bogeumjari loan.

And in the fourth quarter, the Bogeumjari loans will start to be executed at full scale and will contribute significantly to driving loan balance growth.

Also, we launched the SOHO secured loan product in July. And overall, the SOHO loans should also be a significant driver of lending growth, and we expect a significant improvement in loan growth relative to the second or the third quarter.

So while it does seem that we might be slightly off of the initial annual guidance of 10%, again, in the fourth quarter, we expect that the SOHO loans also the Bogeumjari loans will be a contributor to significant growth, and we again expect much higher loan growth in the fourth quarter over Q2 and Q3.

And then moving on to the one-backed stablecoin. So because we do not have legislation passed and in place yet, it is hard to comment at any detail.

And regarding the ruling by the lower court, I do agree that because the prosecution has since appealed the ruling, the majority shareholder eligibility issue has not been completely resolved.

However, For the wider Kakao Group, we have a joint task force that is operational, and we are preparing proactively ahead of the won stablecoin. So 3 parties, Kakao Corp., KakaoBank Corp., Kakao Pay are very much involved and working hard to prepare.

And so we will be seeking to drive group-wide synergy. And for KakaoBank regarding licensing, although again, the law has not been legislated yet. And it is hard to say. But at this point, we do not anticipate any difficulty in acquiring the necessary license.

And actually, the stablecoin consortium, where we can actually join the consortium with no problem irregardless of court ruling.

And because of the court decision, the appellate court's decision will be finalized next year, we think that, that will have the effect of clearing out a lot of the uncertainty.

[Interpreted] [Operator Instructions]

The following question will be presented by Seung-Gun Kang from KB Securities.

[Interpreted] This is Kang Seung-Gun from KB Securities. I would like to also look at the loan growth in the third quarter. So although lending growth was not very strong, nonetheless, your RWA actually has increased significantly on a Q-on-Q basis around by 8.2%. So what is the big reason for that jump?

And relative to the amount of deposit growth that you have seen, I think under noninterest other revenue, particularly for the security or marketable security side, your revenue actually was a little bit sluggish in comparison in the third quarter. So any reason in particular? And what is your outlook going forward?

[Interpreted] Yes, in the third quarter, our RWA increased by KRW 2.226 trillion. So actually, this is mostly due to our investment in the Tech One building, the REIT fund and also the effect of a temporary rise in accrual from the low income recovery support program.

So for the Tech One investment, the RWA was 20%. And had the effect of increasing RWA by KRW 960 billion. The accruals, we applied 100% risk weighting and the effect was about KRW 482.5 billion. For the accruals, however, because this was a temporary accrual, we expect it to recover in the next quarter.

And in the third quarter, our operating revenue decreased by KRW 13.3 billion. So the main reason was amid falling market interest rates, we saw a fall overall in our lending-related investment assets also with an increase in interest rates at the end of September that led to a decrease in our valuation gain.

And then the main reason for the sluggishness in the noninterest revenue, mostly, again, was due to the rapid rise in KTB interest rates in September where we saw the KTB yield actually go up by 14 basis points very abruptly. So this again led to a decrease in valuation gains on our trading assets as well as other investment assets.

Overall, we continue Q-on-Q improvements in terms of our investment yield overall from treasury management as the size of our fixed income bond holdings increased and reflecting our bond portfolio rebalancing.

And we actually expect the Monetary Policy Committee to cut the benchmark interest rate in November, and we think that this kind of overall stance will continue throughout the first half of 2026. That being said, we are intending to increase the size of our bond holdings further. And rather than KTB, we will increase our exposure to the higher yielding, high credit, credit type investment as well, and we'll be shifting our duration strategy to be more flexible in terms of managing our assets.

[Interpreted] [Operator Instructions] The following question will be presented by Jihyun Cho from JPMorgan Securities.

[Interpreted] First, I would like to ask about the drivers behind the rise in labor costs. Actually, as you increase different products, especially SOHO loans, I do expect that you may need more labor, headcount, and also as you increase your application of AI as well. So what are your plans in terms of SG&A and labor expense in particular for this year and next year, if you could share?

And second question, I know it has not been too long since you launched your SOHO secured loan products. But still, what is your growth target for this type of product for this year and next year? And while it doesn't seem likely that household loans overall will see growth or substantial growth this year, what about if your SOHO loans do not grow as quickly as you anticipate? Or if the household low regulations are not unwound, do you have any intention of perhaps using the resources to further increase your payout so overall, what are your payout plans for this year and next year?

[Interpreted] Yes. Let me answer your first question. So in the third quarter, our SG&A increased by KRW 8 billion Q-on-Q due to a rise in labor costs and also advertising marketing spend.

So as we launched various new service offerings, there was an increase in the advertising or marketing for those promotions. And as we increased our hiring for new business areas, including AI, this also led to an increase in labor expense.

And as of the third quarter, on a cumulative basis, CIR was 36.9%, and we do expect that full year CIR is likely to increase slightly from last year levels as we expand hiring which will lead to higher labor costs and also due to a rise in IT-related expenses from increasing cloud usage.

Over in 2026, we will continue to work on improving our CIR further through more rigorous cost or efficient cost management.

And then on to secured loans for as a whole. So with the launch of our SOHO secure products earlier this year in October, we are now fully expecting that this category of the whole loans will start to grow in full scale starting next year, which is why we expect that loan growth for 2026 will be higher than what we saw in 2025.

In terms of the actual numbers, I think I can communicate with you later on because we are still in the process of setting up our business plan. But once it is finalized, we will share.

And then on to shareholder returns. So as we shared at our value-up plan announcement, our plan is to gradually increase our total shareholder return to up to 50% by 2026.

So while we will have to consider our capital ratio and ROE to come up with the final size or scale, we do expect somewhere in the mid-40% range for 2025.

[Interpreted] [Operator Instructions] The following question will be presented by Min Wook Na from DB Securities.

[Interpreted] Yes. I will also ask two questions. I think overall for your platform business, you are seeing some slowdown in growth, largely impacted by loan-related regulation, also the cut in the merchant fee level as well. As we can expect more regulations to come in going forward, what are your plans to mitigate the circumstances including new service or new product launch, if you could elaborate? Also second question is on AI, could you share more of your AI-related plan?

[Interpreted] Yes. Let me address your first question. Yes. So for the third quarter 2025, it is true that we did see a 2% or negative 2% decline Y-o-Y in our fee and platform revenue.

So in terms of our platform, core offerings include our loan comparison and advertising business, which, respectively, grew by 27% and 50% Y-o-Y. However, the check card, the debit card, although the transaction volume increase due to the cut in the merchant fee, overall, we saw a significant Y-o-Y decline in fee revenue.

So overall, we believe that our underlying business fundamentals remain very solid. It's just the impact of external factors, including the cut in merchant rates that led to a decline in our fee income.

So overall, for 2026, we expect all 3 core platform offerings to grow, including our loan comparison, advertising and investment platforms. And with new service add-ons, including farm banking, Bogeumjari and other mobile services, we expect double-digit growth.

Then on to your second question. So we have been applying AI for the products and services that are most frequently used and enjoyed by our bank users, and we are really anchoring ourselves as an AI-native bank.

Throughout the first half of this year, we introduced the AI machine text verification service as well as our AI search and AI financial calculator as well.

In the second half, followed with AI transfer and will follow with the AI group treasury Signature Service as well, which embeds and applies optimized AI models to provide for a much significant user upgrades -- user experience upgrade.

And so relative to any other financial institution in Korea, we believe that we will grow into the #1 institution in terms of AI application and use cases.

[Interpreted] Currently, there are no participants with questions. [Operator Instructions] The following question will be presented by Sinyoung Park from Goldman Sachs.

[Interpreted] Yes, I would like to ask another question. I think one of your charts showed rising penetration across different age groups. So how did you achieve this? Was there a certain strategy or maybe a certain product that serves as the driver? Or is it still primarily the effect of your group accounts?

[Interpreted] So as we mentioned in the presentation, there were many new offerings launched in the third quarter, including the mobile ID, market services and also searching for government support and subsidies, whatnot. These all have the effect of driving up traffic, especially the My Kids Service as it involves not only the parents, but their children as well. So this was a significant driver in the inflow.

And we also introduced many various investment products, RP, funds or MMF. And so this has the effect of driving a lot of traffic from older-aged users who tend to have more personal assets.

[Interpreted] The following question will be presented by Ji-Young Kim from Kyobo Securities.

[Interpreted] I would just like to check on a number. So what is your expectation for the credit cost ratio in the fourth quarter and also your outlook for 2026?

[Interpreted] Yes, let me talk about credit cost. So from the effect of the real estate regulations announced on June 27, we saw a decrease in net increase in mid-credit loan. As a consequence, our loan loss provisioning also went down by KRW 2 billion quarter-on-quarter.

While in the fourth quarter, there might be adjustments the asset value, which may actually lead to some increase in provisioning, overall, we think that credit cost will be somewhere in the mid-0.5% range, which has improved from last year's level.

And for 2026, we largely believe that it will be similar to this year's level, although there are lots of uncertainties, including the business cycle or interest rate outstanding, this is our expectation.

[Interpreted] With that, we will now conclude the conference call for the third quarter 2025 for KakaoBank. We'd like to thank all of our analysts, investors and the press for your valuable time today.

[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]