Greetings everyone. I am Jerry Kang, General Manager and Head of KB Financial Group's IR department. We will now begin the 2026 Q3 business results presentation. Thank you very much for participating in today's earnings release. We have here with us at today's 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 Q3 business results and then engage in a Q&A session. I will now invite our Group CFO to deliver a presentation on our 2026 Q3 performance.
Greetings everyone. I am KBFG CFO, Sang-Rok Na. Thank you very much for joining our 2026 Q3 business results presentation. Before proceeding with the business results, I will briefly share our cumulative Q3 2026 major performance highlights. Let's go to page one. KBFG is pursuing qualitative improvements in our earning structure by managing actual returns from a risk-adjusted perspective that takes into account the credit loss ratio, moving beyond efforts solely focused on improving the net interest margin. Accordingly, the group's actual interest yield after accounting for credit risk, has remained stable at a level one notch higher than the previous year. In addition, in our fee income business, we are building a foundation for sustainable growth in fee income through flexible resource allocation that takes into account changing capital market conditions and broader market developments, as well as diversification of our revenue sources.
In addition, the group CIR has been maintaining a downward stabilization trend. Along with our scale expansion, we are improving cost efficiencies and increasing our residual profit after costs. Overall, we are building a profit structure capable of fully absorbing volatility amidst extreme changes in the market environment. Please find on the next page that KBFG, despite increasing volatility and an increasingly unpredictable macroeconomic environment, has continued to deliver stable earnings growth supported by complementary earnings generation from our banking and non-banking businesses. KB Financial Group plans to continuously expand our group's fundamentals by diversifying our revenue streams and by reinforcing solid management to secure sustainable future growth engines. Next, before covering our business performance, I would like to walk you through our Q3 cash dividends. Today, our BOD approved a cash dividend of KRW 1,167 per share, totaling KRW 404.9 billion of cash dividends.
Q3 cash dividend per share increased by KRW 237 YoY, a 25.5% YoY increase, reflecting a higher total annual dividend amount compared to the previous year and the impact of share buybacks. Next, I will cover KB Financial Group's business performance. KB Financial Group's Q3 net profit posted KRW 1 , 907.5 billion, and on a Q3 cumulative basis, it posted KRW 5 , 792.1 billion, a 13.1% YoY increase. Q3 cumulative group ROE posted 13.89%, marking a significant improvement of 1.1 percentage point YoY. With factors such as the expansion of the stock market volatilities and the market rate increase, leading to valuation gain volatilities, after the first half in Q3, non-interest income showed a slight weakness, but based on solid loan growth, net interest income increased and rebound in QoQ, and G&A and credit loss reserves are being stably managed and is continuing solid earnings generation capacities.
From now on, I will go into the details of our business performance in each category. 2026 Q3 group net interest income posted KRW 3 , 507 billion, and with the increase of funding costs, despite the weak NIM caused by factors including unbalanced funding market challenges, market supply challenges, it increased by 11.6% QoQ with corporate loan-based solid bank loan growth. As the base effect of interest expenses related to valuation gains on consolidated funds from the previous quarter dissipated, you can see that there was the result. In addition, on a Q3 cumulative basis, it grew 2.9% YoY and posted KRW 9 , 985.3 billion, and is continuing stable growth trend. Next, I will cover bank loans in won growth. Bank loans in won based on September end 2026, posted KRW 391 trillion and grew 3.5% YTD and 1.5% QoQ respectively.
For household loans, stable growth continued based on real demand and increased 1.5% YTD and 0.9% QoQ respectively. Corporate loans centering on large corps and blue-chip SME loans increased 5.5% YTD and 2.0% QoQ respectively. We plan to move forward without compromising our financial soundness and profitability, taking into consideration the rebalancing of loan assets in light of overall household debt levels and portfolio transitions through productive finance.
Moving on to the net interest margin on the bottom right. In Q3, the group's NIM recorded 1.92% and bank NIM 1.72%, each contracting by 2 basis points QoQ. Although the bank's loan asset yield showed some improvement during the quarter, this contraction was due to an increased cost burden stemming from uneven supply and demand dynamics in the funding market, alongside with irregular fund flows. However, from Q4, the base rates hikes from July and August will be gradually reflected in the repricing of our loan assets. Therefore, we expect the improvement in asset yields to further expand. By leveraging the group's greatest strength, our superior sales channels capabilities, we will focus on growing our low-cost deposits. By realigning our asset liability structure to effectively absorb volatility in the funding market, we plan to manage our net interest margin even more stably.
Next, I will move on to non-interest income. For Q3, the group's cumulative non-interest income stood at KRW 4 , 758.8 billion, up 27.3% YoY. Of this, the cumulative net fee income recorded KRW 4 ,0 87.8 billion, an increase of 38.5% YoY. The group's net fee income has exceeded KRW 1 trillion for four consecutive quarters, demonstrating a solid fee income base that has leveled up. However, due to a decrease in stock market trading volume during Q3, the growth of the capital market-related fee income showed slowdown, resulting in a 29.7% decrease in net fee income QoQ. For the other operating income in Q3, impacted by rising market interest rates and heightened stock market volatility, performance was weaker in securities, derivatives, and FX, which resulted in a sizable decline QoQ. Although the non-interest income leveled up this year, quarterly volatility has expanded.
Currently, we are making efforts to smooth out our earnings through replacement trading of securities, taking into account interest rate trends. Furthermore, we plan to secure earnings stability by strengthening our asset management capabilities in the capital markets and expanding the foundation of our flow business. Next, I will cover G&A expenses. For Q3, cumulative G&A expenses stood at KRW 5 , 360.4 billion, up 7.0% YoY. As for the group CIR, driven by continuous cost efficiency effort, it recorded 36.4%, maintaining a downward stabilization trend within our target range. Moving forward, under the principle of selective cost execution, we will continue our efforts to reduce recurring expenses, and we plan to expand investments in further growth areas such as AI. Turning to page eight, let me discuss the group's provision for credit losses. In Q3, the provision for credit losses was KRW 563.3 billion, up slightly by 8.4% QoQ.
This was driven by our conservative provisioning policy, taking into account factors such as the base rate hikes. However, the credit cost for the group for Q3 recorded 43 basis points. On a cumulative basis, it also stood at 40 basis points, indicating that it's still being managed at a stable level. Considering this trend of improving asset quality, we project the group's credit cost for the year to be managed within the mid-40 basis point range. In light of the rising interest rate environment, we will strengthen our asset quality monitoring, targeting segments vulnerable to credit risk. By maintaining a conservative risk management stance, we plan to respond closely and proactively. Next, I will elaborate on the group's capital ratios. Based on the preliminary figures as of end of September 2026, the group's BIS ratio recorded 16.02%, and CET1 ratio recorded 13.80%.
The Korean won to U.S. dollar exchange rate fell by approximately KRW 181 from the end of the previous quarter, creating a more favorable environment compared to the first half of this year. But the upside to the CET1 ratio was somewhat limited, improved by 5 basis points QoQ. This is mainly attributable to the approximately KRW 1.3 trillion in share buybacks and cash dividends, our largest-ever shareholder return, and a decrease in FVOCI valuation gains, adding increased downward pressure. As for the group's first round of shareholder returns of 2027 will be determined based on the year-end CET1 ratio. We plan to minimize earnings volatility and focus on a more sophisticated RWA management to stably manage the CET1. As of end of September 2026, the group's RWA recorded KRW 368 trillion, up 3.1% YTD, showing our annual RWA growth rate is stably managed within our target range.
The following pages contain details on the earnings that we have covered so far, so please refer to them. This concludes the presentation on KB Financial Group's business results for Q3 2026. Thank you very much for your attention.
Thank you very much for the presentation. Now we will move on to the Q&A session. For those who are looking at the internet, you could refer to the icon on the last part of the page, and if you are joining through phone, please press star one on your phone. Now we will pause for questions to come in. We have the first question. The first question is from Korea Investment & Securities. We have Tae -jun Jeong. You're on the line.
Thank you very much for the opportunity. I am from Korea Investment & Securities. Thank you for this opportunity to ask questions. I have two questions. First question is about the margin. There was some basis points actually going down, but I think it was less than others. Can you tell us about your future outlook and about your shareholder return? I think there was the KRW 700 billion of share buyback that was completed. Can you tell us about new shareholder return policies that might happen to your company later on?
Thank you very much. We will soon answer your questions. Thank you very much
Thank you very much for your good questions. I think the market is very interested in NIM. The reason why NIM actually went down a bit is, in the first half of the year, there was preemptive funding impact, then there was market competition for large corporate loans, and I think there was the loan profitability that went down a bit. Unlike in other patterns, I think the circulation cycle really changed. There was more of the funding for companies rather than for households. From Q4, I think we're going to see some rebounds. We're going to really work hard to do that.
For loan yield, we are seeing some improvement trends from Q3, so it seems that the stabilization of the funding market is going to be very important. We are seeing some patterns that are historical. I think that we are now going to a more normal stance for our core deposits and for our retail deposits. I think we're going to really work hard to focus more on that. Our bank CFO will actually get into more details after my answer. Regarding shareholder return policies that you asked about, for share buyback, it has all been completed. After the first half, as I mentioned, at the end of the year, at the year-end dividend, there will be KRW 180 billion of cash dividend that will be added, so that is still remaining.
Regarding the new shareholder return policy that we might be working on, not really yet. For our shareholder return policy, we do have our formula, our logic, and we will have shareholder return actually based on the results of our formula. In the beginning, I think it took some time for there to be an understanding in the market. But I think because of our simple but powerful logic, we are going to maintain the merit and strength of this simple formula, which is very, we believe, impactful. I think we have been proving ourselves so far, and I hope going forward, we do have some trust from our investors and from our shareholders in the market. After more trust has been accumulated, I think based on our commitment and trust, we will be showing you a more evolved state of shareholder return.
So to give you more color on this, for last year and the year before that, and for this year as well, there has been a lot of volatility. There has been a lot of the FX and other volatility changes. However, there has been tight capital management and RWA management. We had very unwavering shareholder return policies. Based on that, I think our know-how and manage has been more or less established. We believe that at the end of the day, our shareholder return policy, based on our logic and our results, well, if it has been established so far, I think naturally, we will follow on our commitment.
Even if there is a lot of volatility, and I think even if we need more resources for growth, even in that environment, if we do not have critical changes in our capital ratios, then we will do our best to actually honor the commitment. So I think that will be the natural next phase. I believe that the results, they may be a bit higher or lower, but we will consistently do our best to have upward growth. To do that, what will be very important is mid to long-term ROE, so near 13%. Regardless of volatilities, we will need to have stable management of our capital ratio.
Regarding the size and ratio of our shareholder return, even though it had went up substantially, well, there might be a level that market and investors want, and when it actually nears that level, then we will not be too fixated on the results. But based on our commitment and trust, we will have upward trajectory. So we believe that will be the way going forward. What that means is that when we gave guidance in the early part of the year, we actually talked about we will give more guidance on the volume and I think direction of shareholder return so that we can have more communication and trust that will be built. Regarding our shareholder return principles and our priorities and decisions based on having greatest priority on our shareholders, we will actually do that going forward as well.
I am the bank CFO, Gi-won Seo. I have an answer for NIM. In Q3, compared to previous quarter, there was 1.72%, so 2 basis points actually went down. I think that actually we were able to safeguard it well. It is because the market rate went up, so the repricing is being expanded. There was the rate hikes, government rate hikes, in July and August. There was the funding rates that actually was affected. Because of the money move, we had some core deposits that actually were affected. It is true that we were impacted by that. Not only money move, but for retail deposits, well, it actually flowed out a bit, so institutions and corporate time deposits actually are replacing that. We are seeing more funding burden because of that.
Going into more details for Q3, you can see the market rate went up, so the MOR actually was affected. In our case, there was about 10 basis points improvement. However, there was a funding cost improvement effect, which was about 8 basis points. So we had the offsetting, so it seems that there was a 2 basis points improvement. But as you probably know, for our corporate finance or corporate banking, there was the spread that actually narrowed that led to a minus impact. Our core deposits went down, which affected our portfolio. So it also went down because of this. So that is why we were able to actually safeguard it with 2 basis points.
In Q4, it is actually not easy to give you an easy outlook, but for bank debentures or bonds and others, we are going to have some reflections on what has been happening so far. For asset yields, we believe that there will be a positive impact. For corporate loans as well, there are three-month and six-month that actually were less competitive compared to our peers. But I think in Q2 and Q3, we had more of a percentage for that. So I think there will be more of a repricing effect with the rate hike, and there will be new COFIX and others that will be increased for household loans. We believe that will also be something that will affect us in regards to the changes in the market rates.
For funding, I think it is similar to others as well in the market, our peers, other banks. So we are seeing a lot of maturities that are focused on Q4. I think it is like that for all others as well. Last year and the year before last year, we tried our best to flatten the maturity timing, so we will need to wait and see. But I think we will smoothly be able to provide funding that we need. We believe that efficiently managing our funding burden will be a very important task for us to achieve. Regarding the money move, I think the funding structure has been really changing. I think as our CFO just commented, I think it is going a bit to the past, but I don't think it is a very stark reality yet.
Regarding the volatility of this funding, I do believe that we are very competitive in our core deposits. So we are going to engage in funding based on that and reverse money move measures or others. We do have a very strong retail base. So based on that, we are really going to focus on our core deposits, and based on the rate outlook, we are going to have our asset liability portfolio that will be well-balanced. Thank you very much.
Thank you very much for that answer. I will take the next question. The next question would be from Jaewoong Won from HSBC Securities.
Thank you very much for the opportunity to ask question. I have two questions as well. The first is regarding asset quality, and the second is regarding asset quality. There has been some changes, and the overall situation has improved quite differently. The credit cost ratio has also differed quite differently. Moving on from next year, there is going to be a tougher environment. The credit cost ratio for next year, what are your expectations in terms of the level? I would like to get your answer on that. The overall deposit insurance trend has been talked about. Is it actually the case? The insurance company impact is quite another issue that I would like to talk about.
We will soon answer your question. Please hold.
Let me answer your question regarding credit costs. You actually talked about next quarter's guidance. There is a possibility that there could be a deterioration of our asset quality, and we are approaching it in a very conservative manner. For this year, our target, we're not going to deviate far from that, but we are reviewing the current situation. I would like to say just as of now, we are going to take a conservative approach.
Next, moving on to the question about the deposit insurance. From the bank side, there hasn't been much of a change or certain movements. However, for insurance, the details have not been finalized, but there might be some impact. We will have our insurance VP answer that question.
Yes. With regards to the increase regarding the deposit insurance, there has been a very large portion of increase from the insurance side. CSM, the K-ICS ratio, will be impacted in a negative way. However, as was pointed out during the state audit meetings, the point has been raised that the raising a portion is too much. We are currently in consultation with the regulatory agencies, and we are expecting that the overall increase size will be declined. In terms of the impact, from the business sector itself, even if we are able to absorb it, for KB Insurance, CSM is going to be expected to decline by around KRW 500 billion, and the K-ICS ratio also by 5%. We are going to monitor the situation very closely.
Thank you for the answer. We will take the next question from iM Securities, Yong-jin Seol, you are on the line.
Thank you very much for the opportunity. I have a question about insurance. I actually have two questions. First is for non-life insurance from July, I think there has been the managed benefit coverage. Can you tell us more about that for Q3, what kind of improvements there have been? From September, there will be the eight-week rule that will be adopted. That has been adopted, I guess. Can you tell us about what impact you think this will have? The second question is about life insurance, and from 2019, there was the seven-year whole life insurance. I think the period has ended, and you probably have the lapse ratio results, and I think the numbers might not be very positive.
Can you give us some color about the results? Are you going to make some adjustments going forward? Thank you very much.
We will soon answer the questions.
Yes, for the manual therapy, I think question that you asked. We have the shockwave therapy and the manual therapy that has actually had the guidance from July, and I think there was about KRW 7 billion-KRW 8 billion of losses that will be actually offset. However, even before it actually was implemented, there are some balloon effects. There are some different therapies that are not covered, that may not lead to pain. We are seeing KRW 5 billion-KRW 7 billion of an increase because of these therapies. We believe that maybe there will be just about a KRW 2 billion positive effect.
For non-covered therapies, we are going to do our best so that it will not lead to balloon effects. We are going to do, I think, collective measures so that this will not balloon into more costs. I think from the 10th of September, there has been the policy that you have asked about, and it is for the, I think, maybe end of November or December that we are going to see more numbers related to that. Regarding the effect from the contraction or the reduction of settlement amounts, I think there will be some positive effects, and it will help us improve the losses from our car accident insurance. We are estimating by our non-life about KRW 90 billion-KRW 100 billion of positive effect from the policy change regarding car accidents. Next.
So seven-year whole life insurance, I guess we can say that was an insurance product. KB Life, we had these whole life insurance-related lapse ratios or cancellation ratios that were already exposed. So in Q3, for our monthly revenue, it was about KRW 500 million, so it is about 10% of our total revenues. Also, for KB Life, we have products like this that actually give back more. So we have been seeing the different observational rates and have been making adjustments. We had made some adjustment in 2025 in the first half as well. So for these types of enhancement rates of refund type of products.
So I think we are going to try to lessen the gap, and even if we have the assumptions for lapse rates that change, we believe the CSM balance will be about 8%, so difference, so it will be about KRW 3.5 trillion level.
Thank you very much for the question. There are no current participants with questions, so we will take a moment for questions to come in. Yes, next question is from Jihyun Cho from JPMorgan Securities. Please ask your question.
Hello. Thank you for the opportunity to ask the question. I have two questions. First, there seems to be a decline in commission income in Q3. Were there any one-off factors to be accounted for in Q4 for fee income? What is your guidance that you will be able to provide? The corporate income tax for this quarter seems to be quite low. So I think there has some impact from KBI, the establishment of the holding company. After the establishment of the non-operating holding company, what are your prospects in the future?
So allow us to take a few moments to prepare our answers.
Yes, thank you very much for the question. If we look at the one-off factors, the non-operating holding, there was about a KRW 200 billion of refund that we were able to account for because of the deferred tax assets. Of course, I think if we do have such recovery, we have the principle that we would account for that with different types of investments. But in order to defend our NIM, there has been some exchanges in our position on our bond holdings and also for our provisions that we are setting aside because of the rate hike cycle with the increased credit risk, we do believe that we need to remain vigilant. So we are setting aside additional provisions as well. So there was a one-off profit, but it was somewhat offset because we are trying to lay the foundation for future fundamentals.
And in terms of next year's fee income, I think there's a lot of volatility, so it's difficult to give an accurate guidance now. But if you look at the very big upside that we had, and before that in Q3, Q4 of last year, on a quarterly basis, our fee income always exceeded KRW 1 trillion. Our basic fundamentals on a quarterly basis is thought to be around KRW 1 trillion. For securities, because of the decline in trading volume and the fee income decline coming from that, we have a lot of trading-related capabilities and CIB as well. The flow business from trading, retirement, pensions, the retirement pension products that we have, the strong capabilities that we have, we plan to establish a firmer foothold so that we are building a better presence.
A slowdown in the fee income is inevitable, and there are bound to be some adjustments, but we will not only look at that, but on the bottom line, in order to protect the net income, we will currently look at the rate hike cycle to look at how that would have an impact on the insurance income side, and also, cost efficiency efforts will be continued. The conservative provisioning stance will continue, and we will also take into account the different type of savings that we have altogether comprehensively. On the net income side, I think we will be on a continuous path of upward trajectory. The Indonesia KBI holding company, we will answer that question from KB Bank. Mr. Jong-min Lee?
For the holding company in Indonesia, we are going to be required to make a contribution and establish it until August 2027. There will be six subsidiaries, and there will be an Indonesia holding company established with the subsidiaries of our group. There's not going to be a significant change in the P&L. However, in terms of the timing of the transition, there might be some adjustment of the corporate tax, so there might be some additional impact to be expected. On the P&L, after the establishment of the holding company, we are going to manage the synergy among the different subsidiaries to generate a plus.
Thank you very much for the answer. We do not have any questions in the queue, so please hold until we receive more questions. It is currently 35 after the hour, so we will wait just a little more, and if we do not have any further questions, we will conclude today's business presentation. If you have further questions or comments, please contact our IR department and we will faithfully answer them. We do not have any questions in the queue, and with this, we will conclude our 2026 Q3 business results presentation. Thank you very much for your participation.