KB Financial Group Inc

that we look at, so we are looking at that for future guidance. I think for RWA and Q1, you said the FX impact was 4 trillion Korean won, 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 1003, 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 us 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 that asked before, the MPL coverage ratio in Q1, it has come down significantly about Q20%, 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 require additional provisioning for this, or... Is there any expectation or factor that you think that will contribute to the downward pressure on the MPL ratio? Thank you very much. Yes. So please wait a bit while we prepare to answer your question. yes so i think two questions in total regarding rwa and the mpl 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 bits 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 our WA, I think that would be the extent that could answer now. And in terms of the MPL 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. Managing MPL, 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 MPL. with active write-off and sell-off and exit strategy for the existing real estate exposures we have. We will try to actively reduce our MPLs and have that ultimately improve the MPL coverage ratio as well.

Thank you very much for the answer. We will take the next question from HSBC Securities. We have Won Jae-woong. You're on the line, please. Despite a challenging environment, thank you very much for the great results. I have two questions. The first question is operational risk, RWA deregulation. And I know that this is applied to you. And I think in 2024, maybe three years ago, there was an ELS-related operational risk that you had accumulated. at that time when it's deregulated, then in 2027, how much of CT1 improvement would you enjoy? If you can explain that positive impact, it would be greatly appreciated. And second question is for KB Bukufin Bank. And to my I think you had actually turned a profit from last year. There were great improvements. So for this year, including KB Buko Fin, for overseas earnings contribution or increase of their profits, can you share it with us? Thank you very much. Please hold, and we will soon answer your questions. ELS operational risk and RWA loss recognition exemption, you asked about the impact. And at that time, there was about 745 billion won of voluntary compensation that we paid to the customers. So that was actually earmarked as losses. But in the first half of next year, if it is recognized, then there will be 20 BIP positive impact on CT1. Yes, I'm the CFO, and 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 for an exchange rate. So we talked about 15 bps of sensitivity that was mentioned by Doha Kim, and there are the fines that is not actually confirmed yet, the amount. So I think we will have to reconsider how much of the fines or penalties will be derived. And we believe that we have $97 billion that has been recognized for 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 bucofin and global about the contribution to our earnings bucofin had restructuring for many years until now and their i.t 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 is 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 55 percent last year, and this year we believe that it will be hiked up to maybe 6 to 7 percent. And we have a very prudent prediction that it may raise to that level this year. Thank you very much.

Yes, thank you for the answer. We'll now take the next question. It's from Jihan Zhou from JP Morgan. Please ask your question. Well, thank you for the opportunity to ask question. 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 so a slight increase. was the comment that you provided. In 2026, in terms of guidance, the loan growth of 5% and household loan 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 the BIPs level. And considering inflation and the macro environment overall, I think there will be some time lag. And the credit cost, so the 40 BIPs 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? Yes. Please allow some time for us to prepare for the answer. Yes. In terms of loan growth, the bank 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 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 SME loans, we will also follow the productive finance to focus on prime assets. And for SOHOs, 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 MPL and such, we have remained a CCR of around 40. But with the Middle East war and with 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 as vulnerable borrowers with considerable risk for loss, we will have preventive provisioning for MPL. 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 bits 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 upper 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 an increase in GNA. So if there is an increase in the GNA, 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 and 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 going to 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 q1 business results presentation thank you for your attention