KB Financial Group Inc

Greetings, everyone. I am Cherry Kang, head of KB FGIR department. We will now begin the 2026 first half business results presentation. Thank you very much for participating in today's earnings release. We have here with us today business results presentation, our group CFO, Sang-Rok Na, as well as executives from our group. Regarding the agenda today, we will first have our group CFO deliver the 2026 first half business results and then have a Q&A session. We will now have our group CFO deliver a presentation on 2026 first half business results. Greetings, everyone. I am KBFG CFO Sang-Rok Na. Thank you very much for taking part in the 2026 first half earnings release. Before we proceed with the business results presentation, I would first like to cover the first half shareholder return approved at today's BOD meeting. Let's go to page one. Despite the operating environment in the first half of the year marked by high SX rate and heightened financial market volatility through strategic capital management efforts, June end group CT1 ratio posted 13.744%, a 10 BP improvement compared to the previous quarter end. According to KV's shareholder return framework, capital that exceeds 13.5% CP1 ratio will be utilized for our second round of shareholder return in 2026. At today's VOD meeting, it was decided to carry out, firstly, $700 billion of share buyback and cancellation. Regarding the remaining surplus capital, we will comprehensively take into account our earnings, PBR, and dividend yield returns at the end of fiscal year 2026 and use this to fund additional shareholder returns. For your reference, if we take into account the $2,820,000,000,000, one of the 2026 first round of shareholder returns which was announced in February, we expect to post $3,700,000,000,000,000 as our 2026 annual total shareholder returns. We will deliver on our commitment to the market to maintain interest-leading level across all shareholder return metrics, and going forward, we plan to consistently maintain our differentiated shareholder return policy based on our stable earnings generation capacity. In addition, at today's VOD meeting, a cash dividend of $1,155 per share for Q2 was approved. Let's go to page two. Through strategic reallocation of capital reflecting the operating environment and growth prospects of each business segment, we are continuously strengthening a virtuous cycle that enhances capital efficiency across the group and at the same time reinvesting in subsidiaries with strong growth potential. As a part of these efforts, in order to absorb the flow of capital market money moving to our recurring earnings base, we decided on two rounds of paid-in capital increase totaling 1,700,000,001. This represents a more efficient and dynamic allocation of capital across the group whereby capital generated by core subsidiaries including the bank is reinvested in the securities business which offers growth potential which is strong. Our security subsidiary plans to utilize the capital secured to proactively respond to changes in the WM market while providing venture capital and supporting productive finance by expanding its promissory note business and fulfilling the requirements ahead of time for IMI IMA Authorization. Going forward, we will further strengthen our group's medium to long-term earnings base across businesses with strong growth potential and high capital efficiency, including the capital market segment. Next, I will cover business results. Q2 net profit posted $1,992.2 billion won, and on the first half cumulative basis, it posted $3,884.6 billion won, A 13.1% increase YOY. This was driven by a significant increase in fee income, which pushed the group's first half total operating income above 10 trillion won for the first time in its history and sustained its stable growth momentum. In particular, our security subsidiary's contribution to the group's net income for the first half increased to approximately a 21% level, leading the growth in earnings from our non-banking business. Meanwhile, supported by this enhanced earnings capacity, the group's ROE for the first half also posted 14.09%, continuing its improvement trend. For your reference first half, Non-operating profit declined significantly while Y. This was mainly attributable to a high base effect from the additional provisioning for ELS-related liabilities in the previous quarter and gains on the disposal of assets held by consolidated funds in the prior year. Let me now walk you through our financial results in greater detail by business segment.

For the first half of 2026, the Group's NII recorded $6.4783 trillion, when a slight increase while Y. However, it was a slight decrease in QOQ due to a slight drop in NIM from pre-ended funding in anticipation of an interest rate hike in the second half of the year. Next is growth of loans in Korean Won. As of the end of June 2026, the bank loans in Won amount to 385 trillion Won, up 2% over the end of 2025 and up 1.6% QOQ. Household loans shifted back to a solid growth trend, reaching 184 trillion won, while corporate loans recorded 201 trillion won, growing 2.2% QOQ, mostly thanks to the growth of productive financing. In the second half of the year, while not compromising asset quality, we plan to pursue our growth strategy with a focus on qualitative growth, such as portfolio shifts through productive financing. Next, net interest margins on the bottom right. Bank NIM for Q2 recorded 1.74%. Due to intensifying competition in corporate loans, yield on assets remained similar, QOQ. The increase in marketable deposits along with preemptive funding in preparation for a second half-of-a-year market rate hike pushed the cost of funds, resulting in a NIM drop of three basis points, QOQ. Meanwhile, Group NIM recorded 1.94% due to the impact of the lower bank NIM combined with the decline in credit card financial assets and preemptive funding by KB Capital. Group NIM is down 5 basis points QOQ. However, in the second half of the year with base rate hikes, asset and liability repricing effects, and normalization of funding structures gradually incorporated, we expect NIMS to show an improvement trend. Accordingly, on an annual basis aligned with our forecast from the beginning of the year, we expect an improvement YOY. Next, non-interest income. Group non-interest income for the first half of the year recorded 3.6292 trillion won, demonstrating a significant improvement of 33.3% YOY. In particular, cumulative net fee income for the first half reached approximately 3 trillion won. and in Q2, rose 17.8% QOQ to 1.6019 trillion won, continuing a double-digit growth trend for three consecutive quarters. This was mainly driven by an expansion in securities brokerage fees under favorable stock market conditions, alongside sales of capital market-linked products such as equity funds and ETFs by the bank, As well as an increase in personal credit card spending. As a result, net fee and commission income contributed more than 31% to our top line for the first time, driving the group's solid performance. Meanwhile, as for the first half of the year's other operating income, mainly due to a decline in insurance income caused by rising loss ratios in long-term and auto insurance, recorded somewhat sluggish results compared to the same period last year. However, in Q2, loss ratios showed improvement, and with the addition of CSM impairment reversals, insurance operating income increased. While promising industries such as AI and semiconductors led to a significant valuation gains on unlisted stocks that are investment subsidiary, resulting in a performance that rose 29.1% QOQ. Next, moving on to general and administrative G&A expenses. 1HG&A expenses increased 8.9% YOY but backed by solid growth in total operating income, the group CIR posted 36.2%. Excluding Q4, when one-off expenses such as ERP typically occur, the group has stably managed its CIR in the mid to upper 30% range every quarter since 2023. Going forward, while actively expanding investments for future growth, we will strengthen earnings capacity and also efficiently manage recurring expenses to maintain a downward stabilizing trend in Group CIR. Next on page 8 is a group provision for credit losses. Due to credit loss provisions recorded due to one-off provisioning related to non-performing corporate loans at the bank, It recorded 519.8 billion won, a slight increased QOQ. Excluding these one-off factors, the group's overall asset quality continues to show an improving trend. Particularly, KADCard's asset quality is stabilizing, primarily in personal cards and card loans, easing provision burdens, while the savings-based subsidiary is also seeing real estate PF-related risks gradually resolving. As a result, Q2 group credit cost recorded 38 BP following QOQ, and on a cumulative basis for the first half, it came in at 39 BP, significantly improving by 15 BP YY. Lastly, moving on to group capital ratios. As of the end of June, preliminary estimates suggest a group DIS ratio of 15.91% and a CET1 ratio of 13.74%. Risk-weighted assets, RWA, recorded approximately 370 trillion won, up 1.1% QOQ, but remains well within our projected RWA annual growth target. To consistently deliver on our shareholder return commitment, we will maintain a balanced pace of asset growth while driving capital efficiency and profitability through war-oriented asset rebalancing. Detailed breakdowns of our financial results are provided in the following slides for your reference. This concludes KB Financial Group's first half 2026 earnings presentation. Thank you for your time. Thank you for the presentation. Now we will have the question and answers. Those of you joining on the internet, please use the phone number on the last presentation slide. Those listening on their phones, please press the star key and number one to ask a question. We will wait for questions.

We have the first question from Goldman Sachs. We have Park Shin Young, head of center. Please ask your question. Thank you very much. I am Park Shin Young from Goldman. And regarding your total shareholder return for the first half, for your cash and for your own shares, can you tell us the distribution also? For price to the multiple for KB, I think that it has gone beyond one multiple. So can you tell us about how you're going to grow your cash dividend? And regarding the... Reduction or impairment capital that was discussed at GSM. Can you tell us about more details? And I think according to the FX fluctuations, there is some change into the capital ratio. So do you have any plans to revise the capital ratio? Or regarding your target ROE level compared to your competitors, do you have plans to share them with us? Thank you very much. Thank you very much for your questions, and we will soon answer them. I will answer the questions, and thank you very much, Shin Young Park, for your great questions. And as you just mentioned, our CP1 ratio of excess capital that exceeds 13.5%, Before the closing of the fiscal year, we have plans to return all of it to our shareholders, so that is still standing. And we had the share buyback and cancellation of 700 billion won, and we have about 180 billion won remaining. And we believe that there could be Two or other scenarios considering the flexibility. In the first case, the year and CT1 ratio, capital ratio management is very important. And from last year to this year, when you look at the quarterly capital ratio trends, in Q4 there were seasonal effects. So that is why it was very challenging to uplift the CT1 ratio. And like always, it's very important to have good capital management, capital ratio management for 2-3. And it is true our earnings capacity has strengthened, so there are positive effects. But there are macro variables like the FX rate. We don't really know what will happen, so there is still uncertainty for other factors. So that is why we believe that we need to be more flexible in the timing. And secondly, as you asked, We have reached PBR of one multiple, and in that case, for cash dividends and your buyback and cancellation, we are thinking of maybe adjusting the ratio of the two, but we're not saying that we are going to shake things up, but it seems that we're going to have the annual earnings size that is going to be more or more materialized. We think the cash dividend will deteriorate Depend on the amount. So I think that we will need to consider these factors. And regarding the method and the timing, I think that we will need to be more flexible. And secondly, related to shareholder return linked to our capital ratio, I think you asked the question. And I think we are thinking of the best method. And until next year, we already disclosed our plan. However, what we're thinking about is The shareholder return related to our capital ratio, this formula will not be greatly affected, but because we think that if we are in an era where ROE is going to be strengthened, then we will need to think about other methods as well. So that is why we are going to consider many factors so that there seems to be there is room for improvement, but We don't have anything concrete yet that we can share with you, so I think that will be what I can share with you today. Thank you very much for your questions.