Thanks everyone. I am Jerry Kang , Head of KBFG's IR Department. We will now begin 2026 Q1 business results presentation. Thank you very much for participating in today's earnings release. We have here with us our CFO, Sang Rock Na, as well as other executives from the group. Regarding the agenda today, we will first have our Group CFO deliver the 2026 Q1 major business results and then engage in a Q&A session. I would like to invite our Group CFO to deliver a presentation on our 2026 Q1 performance.
Greetings, everyone. I am KB Financial Group CFO, Sang Rock Na. I would like to express my deepest gratitude to everyone for taking part in 2026 Q1 business results presentation. Before I share the details of our business results, I would like to briefly cover our group shareholder return policy and major highlights. Let's go to page one.
KBFG established a market-leading shareholder return model through our industry's first implementation of quarterly dividend and share buyback and Korea's only CET1 ratio linked corporate value enhancement policy. Based on this strong policy direction, today, our BOD, in order to once again demonstrate our firm commitment to enhancing shareholder value, resolved to cancel the entirety of our existing treasury shares. The shares subject to cancellation amount to approximately 14.26 million shares, representing about 3.8% of total issued shares. This constitutes the largest ever single cancellation in the industry in terms of value. Following the recent amendment to the Commercial Code, the cancellation of treasury shares has been mandated with a grace period of one year and six months.
However, despite this grace period, KB Financial Group has decided to proceed with the immediate cancellation of all treasury shares currently held upon the amendment to the law. This reflects the strong commitment of our BOD and management to prioritize shareholders, as well as a firm decision to proactively align with the government's policy direction and the advancement of Korea's capital market. As a result, the group's number of total issued shares have been reduced by 15.2% compared to 10 years ago. You can see that significantly widening the extent of the reduction. As a result, key per-share indicators such as EPS and DPS have also demonstrated growth comparable to that of leading global financial institutions. Next, let's go to page two.
Bank lending products have increased by approximately KRW 9.8 trillion compared to last year, and through strategic efforts to reduce funding costs, we have maintained a solid NIM. Despite concerns over potential fund outflows to capital markets, we are stably securing a stable interest income base. Accordingly, while stably guarding stable core earnings, we have actively leveraged our money market environment towards investment assets to elevate the profitability of our non-interest and non-banking segments to the next level, and this has become a strong driver of our group's overall fundamentals. In particular, the bank's WM income has expanded, meaningfully driven primarily by trust fees, while the securities business has substantially strengthened its profit-generating capacity through increased brokerage income and higher WM fees, thereby further enhancing its contribution to the group's earnings.
In addition, the trust and asset management businesses AUM increased by 55.9% and 18.4% QoQ respectively, thereby further strengthening the non-interest income base that supports improved RORWA efficiecy. With non-banking subsidiaries driving approximately 72% of the group's fee income, KB plans to further solidify our fee income base through efficient capital allocation, leveraging the competitiveness of our non-banking portfolio. Next, I will address shareholder return for Q1. In today's board meeting, we resolved to approve a quarterly cash dividend of KRW 1,143 per share, totaling KRW 405.4 billion, as well as the second round of share buyback and cancellation for the first half of 2026, amounting to KRW 600 billion. Q1 cash dividend per share, reflecting the current share buyback, increased by KRW 231 , a 25.3% increase year-on-year.
The current share buyback and cancellation program follows the completion of the initial purchase of KRW 600 billion out of total KRW 1.2 trillion of buyback and cancellation planned for the first half of 2026, and we plan to proceed with the additional purchases immediately. For reference, the 3.9 billion shares acquired in the first round will be canceled in a single batch on May 15th, together with the 14.26 million treasury shares already held, as previously mentioned. Next, I will walk you through KBFG's financial performance. To begin with, our key highlights of Q1 of 2026 can be summarized as a demonstration of KBFG's strong fundamentals that remains resilient despite unprecedented dual headwinds, including a sharp rise in exchange rates and the war in the Middle East.
The group's 2026 Q1 net income posted KRW 1,892.4 billion. While the bank's interest income base was managed in a stable manner, net fee income from the bank securities and asset management businesses grew significantly, resulting in an 11.5% YoY increase. In addition, the group's Q1 ROE improved by 0.9% percentage points YoY, posting 13.94%, demonstrating solid growth across both profitability and capital efficiency. I will now provide a more detailed breakdown of our financial performance by business segment.
For Q1 of 2026, the KBFG's net interest income recorded KRW 3,334.8 trillion, representing a 2.2% increase YoY. Despite a challenging environment marked by strong capital outflows to the capital markets, this was achieved through effective cost control via an optimized funding mix strategy, including the expansion of core deposits. Such strengthening of the earning structure supported qualitative growth and interest income, alongside an improvement in net interest margin. Next, we will discuss the growth of the bank's Korean won-denominated loans. As of the end of March 2026, the bank's Korean won loans totaled KRW 379 trillion, showing a slight increase of 0.4% compared to year-end. Household loans, due to household debt management regulations and rising market interest rate, recorded a slight decrease of 0.4% compared to year-end.
For corporate loans to large corporations continued to grow while solid growth and high-quality SME loans centered on Productive Finance was added, resulting in an overall increase of 1.2% compared to year-end. Going forward, KBFG for household loans will make portfolio adjustments that take into account overall profitability to enhance profitability and strengthen our earnings fundamentals. In parallel, for corporate loans, in line with Productive Finance, KBFG plans to continue to identify and expand high-quality customers with strong growth potential to maintain a growth framework that ensures sustainable growth and stable earnings base. Next, we will turn to the net interest margin shown in the lower right. For Q1, KBFG and the bank recorded NIM of 1.99% and 1.77% respectively.
The bank's NIM, driven by the expansion of core deposits and the repricing of high-rate term deposits as the rebalancing of the funding portfolio materialized into tangible cost reductions, improved by 2 bps QoQ. In addition, KBFG's NIM, supported by the expansion of the bank's NIM, as well as broad-based improvements in card assets, including credit card receivables and installment financing, improved by 4 bps QoQ. Next, we will discuss non-interest income. For Q1, KBFG's non-interest income recorded KRW 1.6509 trillion, representing a significant increase of 27.8% YoY and marking the highest quarterly non-interest income in the group's history. In particular, for Q1, KBFG's net fee and commission income recorded KRW 1.3593 trillion, increasing by 45.5% YoY, approximately KRW 425.3 billion. This was driven by a significant expansion in fee income from capital market-related subsidiaries, including securities and asset management.
In addition, the bank's wealth management fee income also improved meaningfully, providing further support. Meanwhile, for Q1, other operating profit, amid intensified competition for new contracts across the industry and increased downward pressure on insurance operating profit due to a rise in the loss ratio for the long-term insurance, recorded KRW 291.6 trillion, decreasing 18.5% YoY. Next, we will cover G&A expenses. For Q1, G&A expenses recorded KRW 1.7649 trillion. Despite continued efforts to improve cost efficiency focused on recurring operating expenses due to higher tax and dues following the tax reform at the year-end, it recorded an increase YoY. However, in the case of the group CIR, supported by an all-time high total operating income of approximately KRW 5 trillion and strong top-line growth, combined with ongoing efforts to enhance workforce efficiency and optimize the cost structure, recorded 35.4%.
This once again demonstrates that the group's cost efficiency is being managed in a stable manner. Next is page nine, the group's provision for credit losses. For Q1, credit loss provisions recorded KRW 493.2 billion, representing a significant decrease of 24.8% YoY or KRW 162.4 billion. The decrease was mainly due to the elimination of the base effect from last year's one-off large-scale provisioning at the bank, supported by the proactive efforts to secure loss absorption capacity and the group's conservative risk management efforts. The burden of the provisioning was reduced. In addition, the group's credit cost ratio, despite a slowdown in the asset growth driven by improvements in credit quality, also recorded a significant decline of 14 bps YoY to 40 bps. Lastly, we will discuss the group's capital ratios.
On a preliminary basis, as of end of March 2026, the group's BIS ratio recorded 15.75% and its CET1 ratio recorded 13.63%. The CET1 ratio decreased by approximately 19 bps QoQ. However, despite a sharp rise in the Korean won/USD exchange rate by nearly KRW 80 during the quarter and the downward pressure from large-scale shareholder returns at the beginning of the year presenting a challenging management environment, solid earnings generation capacity and strategic capital management focused on RORWA enables us to keep the ratio at a stable level. As you are well aware of, since shareholder returns in the second half of the year are linked to the CET1 ratio as of the first half, KBFG will continue to maintain disciplined capital management in Q2 to align with market expectations.
Meanwhile, as of end of March 2026, the group's RWA amounted to KRW 366 trillion, increasing by approximately KRW 9 trillion or 2.5% compared to year-end. However, excluding the impact of the increase in exchange rate, the increase was limited to KRW 4 trillion or 1.1% YoY, remaining within the group's target level, showing appropriate growth. The group will continue to implement qualitative growth, efficient capital allocation, and stringent limit management as part of a sophisticated RWA management strategy in order to keep the growth rate at an appropriate level.
The following pages provide detailed supporting materials of the earnings just presented for your reference. This concludes the presentation of KBFG's 2026 Q1 business results. Thank you very much for your attention.
Thank you very much, CFO. We will now entertain questions.
For those who are joining via internet, on the last page of the presentation slide, there is the contact information, and for those who are listening in by phone, there is star one that you can press to ask questions. We will wait until the questions come in. I believe we have the first question from iM Securities. Seol Yong-jin, you're on the line, please.
Thank you for this opportunity. I have a question related to the company's or KBFG's capital policy.
First of all, for bank and non-bank and securities, like securities, capital, and cards, can you tell us about the RWA allocation and RORWA as well? If you can share it with us, it would be greatly appreciated. Secondly, we have the efficiency, making the capital ratio more efficient. I think there is some deregulation trend. I think that probably has been reflected in your second half. Can you tell us about the reflection of those changes?
Thank you very much. We will hold, and then we will soon answer your question.
Thank you very much for the insightful questions. Related to the capital ratio predictions, as you have mentioned, there has been the rationalization of capital regulations. There are some positive aspects stemming from that. However, the FX rate trends and ELS, the fees and other productive finance products are increasing.
I think there are plus factors and minus factors that are mixed in. I believe that regarding the impact of these policies, I believe that it will not happen very short-term, but I think everything will be mixed and offset. This will be all mixed together. From last year, we have been emphasizing that our goal is, in capital ratio management, to have a very stable management and continuous flow. That is our goal going forward. We will do our best with that goal in mind. That is something that I wanted to mention in the beginning. Regarding the RWA allocation, well, I don't think that I can answer that to you in detail right now, but regarding our group's RWA, 70% is for the bank and 15% is for securities.
I think for the rest, 15% or so, we have capital and other subsidiaries that are actually spreading it around. For RORWA and ROE, well, when we try to compare those indicators for securities and asset management and capital, for those related to financial investment rather than group's ROE, group's RORWA, you can see that it is managed at a higher level. Recently, the bank's RORWA or ROE, well, we have the group's ROE also that has been greatly improved. I hope that will answer your question.
Thank you very much.
Thank you for that answer. We'll now pause for the next question. The next question is from Jun-Sup Jung from NH Investment & Securities. Please ask your question.
Yes, hello. This is Jun-Sup Jung from NH Securities. Thank you for the opportunity to ask a question. I have two questions in total. The first one is with regards to the efficiency of capital ratio and the plans to achieve that, and the capacity you have on hand. The CET1 ratio, I think definitely has a lot of pressure and potential for upside. Of course, there will be an impact from your earnings, but also impact from regulations as well. As of Q2 end, the standing of 13.5% CET1 ratio is quite positive, but then there is going to be a shareholder buyback and additional cancellation of shares that would have an impact on that. I would like to ask for your plan and commitment with regards to maintaining that number.
The second question is with regards to the role of the non-bank subsidiaries. The increase in RWA, I would like to know the group-wide strategy that you have. For example, banks, is it to maintain that at current levels? For securities, to increase the portion of RWA, do you have an internal strategy? If so, please provide some more information.
Yes. Please allow some time to ask the questions. Thank you. Prepare the answers.
Yes, I would like to answer the question now. As you asked, with regards to our shareholder return policy, it's 13%.
To have the surplus earnings and use that for the shareholder return policy, the exceeding amount. From two years ago, we have been committed to execute this strategy. This year, this holds steady as well. Compared to other companies, we would say we don't have an internal number target, but we have a logic and a system-wide number, and we provide that as a result of a shareholder return. We will continue to carry out such commitment and efforts. As you asked, in terms of the role of the non-bank subsidiaries, of course, it is quite important when compared to the peer groups. We have the highest contribution from the non-bank subsidiaries at the moment. As of now, we would say we have a complete portfolio, and we are trying to accelerate the growth engine, and we are at that phase now.
In terms of the RWA allocation, what I can say from a group perspective, our RWA and ROE, the ones that are lower than that, we would try to reduce the capital and also recover more. For banks, in line with the expansion of productive finance, we are looking at overall profitability and securing additional customers and securing future growth potential, focusing on SMEs and productive finance. RWA allocation will be allocated more towards that. I think for banks, though, it's not going to be that we're going to reduce and downsize RWA as a whole, but we're looking at the role of our expanded presence in the capital markets and also our expanded contribution for productive finance to set and execute our RWA allocation strategy.
For securities, there was a paid-in capital increase of KRW 700 billion, and as of last year, ROE of securities was higher than the group, and it was improved at that level. Recently, we're expecting that there will be continuous improvement. There was additional capital injected as a result. For growth areas, we will say that RWA will be increased further for such growth areas. Overall, the principle will be, as I mentioned before, it is kind of repetitive, but for areas that are expected to show growth and are showing high profitability, we will allocate more RWA, and that principle will continue to be upheld.
Thank you for your answer. We'll take the next question from Mirae Asset Securities, Joon Tae Jeong. You're on the line, please.
Thank you very much. I'm Joon Tae Jeong from Mirae Asset Securities. I have one question. We do see NIM that is actually on an upward trend and other positive numbers, and for the margin guidance, can you tell us about any new guidance news that you might have? Thank you very much.
Regarding the bank NIM, maybe I can answer the question in Q1 for bank NIM, 1.77%, and compared to the previous quarter, 2 bps increase. The market rate has gone up, and you can see household loans profitability has been on a rebound. For high interest rates, time deposits, we had that funding. Through rebalancing, we had the funding structure that was made more even. When we made a prediction last year, we thought that the BOK rate, it would go down is what our prediction. Recently, looking at the base interest rate, I think increasing it is coming up. Compared to our plans last year, I think that it will probably have a slight increase and end there.
Thank you very much for that answer. We'll now call for the next question. Next question is from Do Ha Kim, Hanwha Investment & Securities. Please ask your question.
Yes, thank you for the opportunity to ask a question. I think the questions are regarding CET1 a lot. I think this is probably the most important number that we look at, so we are looking at that for future guidance. I think for RWA in Q1, you said the FX impact was KRW 4 trillion, 1.1%. If we do a simple calculation, the FX impact was about 15 bps negative to the profitability. This kind of sensitivity, would that be the right number to take into account for the impact? For Q1, the Basel III capital recognition related requirements and the RWA down impact as of that. I think you did also cover that. For Q1, the specific numbers were not released.
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? It would be great to have that in reference for us to look out for the second half. Next question is quite similar to the one asked before. The NPL coverage ratio in Q1, it has come down significantly, about QoQ 20%, and it is above 120% recently. Of course, it's not necessary to be as high as COVID, but compared to the recent levels, it's not at a high level as of now. 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 NPL ratio? Thank you very much.
Yes. Please wait a bit while we prepare to answer your question.
Yes. I think two questions in total regarding RWA and the NPL coverage ratio downward trend. First on the RWA. As you mentioned, the FX impact in terms of the CET1 ratio was about 19 bps in the first half. 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 driven by the FX impact. The RWA-related sensitivity, we're trying a lot to try to reduce that. 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. On top of that, data refinement, portfolio rebalancing, additional RWA leverage options and plans are underway.
As you mentioned, additional rationalization of the capital ratio, there is not a lot of room for buffer we have, but we do have some room. With regards to RWA, I think that would be the extent I could answer now. In terms of the NPL coverage ratio, on a continuous basis, we have maintained quite a cautious stance in terms of provisioning. We have maintained a high CCR as a result. Managing NPL, we have been quite aggressive in rebalancing of it. Moving forward, we will continue to remain conservative in our provisioning stance. What is of more focus now is reducing the NPL with active write-off and sell-off and an exit strategy for the existing real estate exposures we have. We will try to actively reduce our NPLs and have that ultimately improve the NPL coverage ratio as well.
Thank you very much for the answer. We will take the next question from HSBC Global Investment Research. We have Jaewoong Won. 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 with operational risk RWA deregulation, and I know that this is applied to you. I think in 2024, maybe three years ago, there was ELS-related operational risk that you had accumulated. At that time, when it's deregulated, then in 2027, how much of CET1 improvement would you enjoy? If you can explain that positive impact, it would be greatly appreciated. Second question is for KB Kookmin Bank, and to my recollection, I think you had actually turned a profit from last year. There were great improvements. For this year, including KB Bukopin, for overall the earning contribution or increase of their profit, can you share it with us? Thank you very much.
Please hold, and we will soon answer your questions.
Regarding ELS operational risks and RWA loss recognition exemption, you asked about the impact, and at that time, there was about KRW 745 billion of voluntary compensation that we paid to the customers. That is actually earmarked as losses. In the first half of next year, if it is recognized, then there will be 20 bps positive impact on CET1.
Yes, I'm the CFO. Regarding the question regarding RWA, maybe I can add a little more to my answer. We're doing a lot of the work to reduce the sensitivity to foreign exchange rate. We talked about 15 bps of sensitivity that was mentioned by Do Ha Kim, and there are the fines that is not actually confirmed yet the amount.
I think we will have to consider how much of the fine or penalties will be devised. We believe that we have KRW 97 billion that has been recognized for provisioning for that amount. Related to the optimization or rationalization of capital regulations, regarding, I think, the details of that, it hasn't been finalized. We are talking with the regulators regarding this. We cannot really pinpoint a clear-cut answer to that. I hope for your kind understanding and for the past ELS-related operational risk, as our COO just mentioned, from next year, I believe that it will be gradually reflected. In the case of Bukopin and globally about the contribution to our earnings, Bukopin had restructuring for many years until now, and their IT system was upgraded.
Now we have set a strong foundation so that.
The operational base has been laid very firm. Regarding the acquisition of Kasabi, because we are doing our best to reduce funding costs, and there's a Korean debt, we are doing wholesale, retail, that actually is being done, and we cannot really say that it will improve in a significant percentage. You can see that the profit contribution of the global was about 65% last year. This year we believe that it will be hyped up to maybe 6%-7%. We have a very prudent prediction that it may rise 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 Jihyun Cho from JPMorgan. Please ask your question.
Oh, thank you for the opportunity to ask question. I think definitely the fee income was increased considerably. At the early start of the year, I think, Min, you said the guidance was quite conservative and there's still a slight increase, was the comment that you provided. In 2026, in terms of guidance, the loan growth of 5% and household loans 2.2%-3%, as I recall. I think if you look at Q1, and if you look at the overall market environment, the loan growth target of 5%, is this sustainable? The SG&A, it did increase by 10%. I think early start of the year, the guidance was 4%. Is this at a manageable level?
In Q1, most importantly, the credit cost was around 40% at this level, and considering inflation and the macro environment overall, I do think there will be some time lag. The credit cost, so the 40 bps early in that range, is this going to be attainable? 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 CSO will provide an answer for you, and the CCR guidance and projections, our CRMO will provide an answer. After that, I will also follow up with some additional answers.
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.
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%. 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 Didimdol Loan that is provided to the young population and the elderly population. We are trying to increase that portion. The household loan is targeted to increase by 1%-2%. In terms of corporate loans, so under the productive finance direction, so we're expecting a growth of 6%-7%, and that is our target. Of course, there is going to be intensified competition to attract corporate loans.
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. For SMEs loans, we will also follow the productive finance to focus on prime assets. For SOHOs, we will be quite selective to have an adequate level of growth there as well. In total, we'd say for household loans, growth target is 1%-2%. Corporate loans is about 6%-7%. For the bank as a whole, the credit growth is on average expected to be around 4% in our target for the year.
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.
Despite the declining numbers in our NPL and such, we have remained a CCR of around 0.40%. 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. 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 provisionings for NPL. 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. If so, the 40 bps early to mid-level of that is thought to be attainable as of now. We currently hold that to be the same as now.
In terms of SG&A, you asked about the upward pressure on that part, and I think as you know for education tax and corporate tax, the tax rate was increased and the G&A was increased as a result. In addition to that, securities and banks, we did have very solid performance and definitely from securities, a very strong earnings. The actual adjustments made to the bonus and such, we did have to reflect that accordingly and that resulted in increase in G&A. If there is an increase in the G&A, of course, this is attributable to the top line growth that we have. We would say we are trying to manage it within the overall group level and continue our efforts for cost optimization.
If that does not undermine our cost efficiency target and plans, we do believe that it is at a manageable, sustainable level. 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 be continued 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 have 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 2026 Q1 business results presentation. Thank you for your attention.