KB Financial Group Inc

We will now begin the 2024 Q3 business results presentation, and thank you very much for participating in today's earnings release. We have here with us Group CFO and SEVP Jaegwan Kim, as well as executives from our group. Regarding today's agenda, first there will be a video of our Group CEO and Chairman, Jonghee Yang, explaining our company's value-of-plan which was disclosed today, and then our Group CFO will cover 2024 Q3 major earnings results. After that, we will have a Q&A session. We will now watch a video covering KB Financial Group's sustainable value-of-plan. Greetings. I am Jonghee Yang, Chairman and CEO of KB Financial Group. I will briefly cover KBFG's Sustainable Value of Plan to our shareholders and investors in and out of Korea who support and love KB. KB has the significant responsibility of both utilizing the capital that our shareholders have invested to maximize profitability to continuously achieve high profits, and at the same time maintain asset quality as a financial company which plays a pivotal role in supporting the nation's economy. During the past 10 years, KB, by strengthening fundamentals through painstaking efforts, diversified our portfolio. In addition, we firmly established our position as a leading financial group representing Korea in terms of earnings, shareholder return, and ESG. As a result, our capital profitability and asset quality has grown to the point where it stands shoulder to shoulder with leading global companies, and our value per share also has considerably improved. In addition, through continuous shareholder return efforts, 2023 total shareholder return ratio grew to 37.7%. However, shareholder return is still being pointed out as the biggest reason KB's corporate value is being undervalued, and we have the task of increasing the level of our shareholder return for our company's value to be properly assessed. While preparing for this value-up disclosure, what we believed was the most important shareholder return philosophy was first, sustainability, and second, predictability. What we most painstakingly thought long and hard about was how to catch three rabbits, which were to continuously improve companies' profitability, and also enhance shareholder value and in addition maintain our corporate asset quality. Going forward, KB will link shareholder returns to CT1 ratio and return surplus capital excluding some management buffer to our shareholders. For example, if 2024 year-end CT1 ratio posted 13.5%, Then, 50 BP of capital, which exceeded 13%, will be a source for next year's dividends and first-half share buyback and cancellation. On the other hand, with the profits that are accumulated throughout the year, we will maintain CT1 ratio of mid-13% and utilize the amount, which exceeds 13.5% in the second half, for additional share buyback and cancellation. The higher KB CET1 ratio is, the more shareholder returns our shareholders can expect for the next year. In addition, you can predict the amount of shareholder return with the CET1 ratio as well. Like global leading companies such as JP Morgan, CT1 ratio linked shareholder returns will give more amount back to shareholders the higher the CT1 ratio is without limitations on total shareholder return ratio. To this end, KB Financial Group will strengthen our fundamentals, keeping in step with a new value of paradigm which pursues qualitative growth that goes beyond quantitative growth. We are organizing our business management system so that we can continue RORWA-focused growth efforts so that we can strengthen our fundamental earnings generation capabilities. from right away we will begin from our business plans for 2025 set asset growth goals that will be fit our value of paradigm and redesign key performance indicators that is to say that all of our group members will move according to to the program. Based on these changes, KB's shareholder returns will lead the industry going forward and our total shareholder return ratio will also maintain the industry's highest position. KB, even before implementing our value-up program, was genuinely committed to shareholder value enhancement, including being the first in the industry to implement share buyback and cancellation and adopting quarterly even dividends on a total annual amount basis. We included in this disclosure, which was presented today, the results of our deep thoughts about how to satisfy our shareholders and interested parties. Due to time constraints, I cannot explain all details, but we promise you that we will continuously improve our corporate governance structure, internal control, ESG, and communication with shareholders. In KB's sustainable journey to catch the three rabbits of profitability, asset quality and shareholder return, all members of KB, including myself, will strive forward with one heart and one mind. Thank you for listening.

Good afternoon. I am Kim Jae Kwon, CFO of KB Financial Group. Thank you very much for joining our third quarter 2024 earnings presentation. Before going to Q3 earnings, I will first run through the resolution made by the BOD today regarding the third quarter shareholder return. We're on page four. Based on industry's top capital strength and earnings capacity, KBFG is committed to shareholder return policy with a view towards driving shareholder and corporate value enhancement. To pay out equal amount dividend every quarter, we've done share buyback and cancellation, driving quarterly DPS uptrend. As you can see from the value of plan disclosed today, we will continue to enhance shareholder value underpinned by RO-RWA-centric business management and through CET1-linked shareholder return policy. CET1 ratio, which is common equity tier one, it's used for determining shareholder return and is expected to be 25 basis point, increased Q over Q to 13.85% as of end of September. In Q, possibly due to FX rate movement, share buyback and seasonality weighing down on profit, CET1 ratio may slightly dip, but we plan to keep it robust at above 13.5% during the year. And today, the BOD approved quarterly cash dividend of 795.1 per share and additional share buyback and cancellation of 100 billion won. DPS, therefore, is 795.1, marginally up Q over Q, following the impact from 400 billion won of share buyback, which was announced during the first half of the year. And with 100 billion won of additional buyback and cancellation, our plan is to buyback and retire a total of 820 billion won this year, which represents industry's biggest buyback and cancellation, yet again a testament to the strong will of the BOD and the management, placing foremost priority upon shareholder and corporate value enhancement. Two keywords that characterize KB Financial Group's value of plan are sustainability and predictability of shareholder return. Guided by such sustainability and predictability, we will endeavor to sustain shareholder return at industry's top-notch level in alignment with the new value of program. Now, moving on to KBFG's earnings result for Q3 2024. I will begin with Group's performance highlights and key business metrics on cumulative basis, ending Q3 2024. The Group's Q3 2024 cumulative net profit was 4,395.3 billion won, up 0.4% year over year. This is thanks to good performance across non-bank subsidiaries, including securities, insurance and credit card businesses, despite continuing headwinds from rate cuts and sluggish economy. On the other hand, net profit in Q3 reported $1,614,000,000 down on a Q over Q basis. This is mainly due to the base effect of sizable provisioning last quarter for ELS compensation. And save for this impact, on a normalized basis, net profit was flat Q over Q. Next, Group's cumulative credit cost in Q3 recorded an improvement of 11 basis points year-over-year, coming in at 0.41%. Despite ensuing macro uncertainties, we have ample amount of buffer following pre-emptive provisioning, and we expect to be able to maintain a robust control over credit cost going forward as well. As mentioned, as of September end 2024, Group CET1 ratio reported 13.85%, maintaining industry's top level of capital buffer on the back of solid profit generation and strategic capital management. This, in turn, has been the basis of 100 billion won of additional share buyback and cancellation, enabling KBFG to continue on with differentiated shareholder return policy supported by capital strength. With that said, I will now move on to a detailed breakdown of the company's third quarter results. Group's net interest income in Q3 was 3 trillion 165 billion won, down 1.3% Q over Q on the back of interest rate cuts, which drove down yield from loan assets. Q3 net fees and commission income was 942.7 billion on the back of increases in the bank's bank assurance and securities investment banking fee, driving 2.5% Q over Q increase. Next is other operating profit. In Q3, other operating profit reported 398.7 billion won of 23.4% Q over Q, driven by fall in market rate and FX rate, which drove significant expansion in returns from securities and derivatives. Next is on G&A expense. While Q3 G&A expense came in at 1 trillion 650.8 billion, which is an increase of 3.6% Q over Q, Group CIR in Q3 on a cumulative basis reported 36.5%, keeping to below 40% level thanks to a solid top-line growth and sustained effort behind cost efficiency gains. Next is on Group's PCL. Third quarter PCL was 498.1 billion won, down 9.9% Q over Q, mainly due to lessened burden for provisionings at non-bank subsidiaries including KB Card, Savings Bank and Real Estate Trust. Lastly, non-operating profit in Q3 recorded a decline of 140 billion won Q over Q on the back of base effect of last quarter's sizable provisioning for ELS compensation cost. On the next page, I will explain key financial indicators. First, profitability indicators. Q3 24 cumulative group ROE was 11.26%, coming in and above the target ROE of 10%. In the face of upcoming rate cut cycle, we will also continue to place effort behind diversifying the revenue source and improving cost efficiency. Looking at now the growth of loans in won, banks' total loan in won as of September end 24 was 362 trillion won, up 2.9% versus June and 5.9% year-to-date. Household loan was 176 trillion won on rise in demand following recent increases in the transaction volume, which drove 2.7% increase or 4.6 trillion won versus end of June. Corporate loan reported 186 trillion won as loans to large corporates continued following the second quarter trend, on top of which SME loans also uptrended, driving 3.2% rise compared to end of June. Next is on NIM. Group and banks NIM in Q3 was 1.95% and 1.71% down 13 basis point respectively Q over Q. Now this is because market rate has priced in expectations of base rate cut and as repricing of deposit lags loan repricing, we saw spread contraction and lower yield on loan assets. However, downward pressures on NIM, including steep rise in mortgage lending and base rate cuts being priced in, have been mostly captured during Q3. And we therefore expect as repricing of deposit follows the lending rate, there will be offsetting of NIM erosion. Also, loan growth has slowed since September as government had stringent control on household lending and we expect to maintain Q4 bank NIM at a steady level on the back of recovery in margin. Rather than focusing on growing the loan book, we plan to focus on quality-driven growth with adequate margin under a right balance between growth and profit so as to broaden sustainable basis for interest income generation.

Let's go to the next page. I will cover the group's cost-income ratio, or CIR. As you can see on the graph on the top left-hand side, 2024 Q3 cumulative group CIR posted 36.5%, and through solid earnings growth and group-wide cost control efforts, it is maintaining a stable level. Next is credit cost ratio. Credit cost. Q3 cumulative group credit cost posted a 41 BP level and with the real estate PF market stabilization, some reversal took place and thus group's CCR is being stably managed. Last is group's capital adequacy. Despite the risk-weighted asset growth effect with the loan growth in the quarter, On the back of Group's proactive capital management efforts and sound net interest growth, we have secured the highest level of capital adequacy in the industry. In September, base BIS ratio and CT1 ratio is expected to pose 16.75% and 13.85% respectively. As I covered in the shareholder return slide, We will continue to work to improve capital efficiency to improve shareholder return visibility by managing the CET ratio to more than 13.5% throughout the year. KB Financial Group is striving and making diverse efforts to strengthen communication with and provide investment information access to not only institutional investors but also to individual investors. As a beginning, we will newly put up a value-up bulletin board on our website to provide diverse investment-related information including for our value-up program. From the next earnings release, we plan to provide time to receive questions beforehand from individual investors and to answer them. Please refer to the next pages for details related to the business presentation that I have covered so far. With this, I will conclude KB Financial Group's 2024 Q3 Business Results presentation. Thank you for listening.