Good morning, ladies and gentlemen. Thank you very much for joining us at the KakaoBank earnings conference call. Following a presentation by KakaoBank management, we will have a Q&A with our participants. For those with questions, please Star and number one on your phone. We will now begin the first quarter 2026 earnings conference call for KakaoBank. Yes, hello, this is Anna Kang from KakaoBank's IR team. I'd like to thank all analysts and investors for joining us today at our earnings conference this quarter. We will proceed with a presentation by management via simultaneous translation, followed by a Q&A session with consecutive translation. Those with questions, please press Star and number one. We will now begin KakaoBank's earnings call for the first quarter of 2026.
We are joined by members of management, including our CEO Daniel Yun, Vice President Ruth Kim, CFO Tae-hoon Kwon, Kim Seok, Head of the Banking Group, Paolo Lee and Johnny An, Co-Head of the AI Group, Shin Jae-hong, CTO, Song Ho-geun, Head of the New Business Group, and Lee Ji-woon, CRO. Today's earnings release is based on K-IFRS and has been prepared prior to review by the external auditor for the purpose of providing timely information on the company's operating performance. Accordingly, the contents are subject to change depending on the findings from the auditor's review. I will now hand over to Tae-hoon Kwon, our CFO, to present our business highlights and financial results for the first quarter of 2026. Good morning.
This is Tae-hoon Kwon from the KakaoBank. I'm the CFO. Let me take you through our key highlights for the first quarter 2026 on Pages 3 and 4. In the first quarter, we recorded meaningful improvement across major financial metrics driven by continued expansion in our customer base, which is our core source of competitiveness. Customers total 27.27 billion, up by 570,000 YTD. MAU, which is a measure of customer engagement, increased by 320,000 YTD to 20.32 million, an all-time high. Net interest income was KRW 373.4 billion, up 15% YoY. Fee and commission profit also increased by 47% YoY as our fee and platform business continued strong growth momentum.
Thanks to robust growth in our fundamentals as well as strong performance from our global business, we posted record high net profit of KRW 187.3 billion in the first quarter of 2026. Allow me to move on to further details on the next slide. Page four for our customer base. As of the end of first quarter, we recorded a total of 27.27 million customers, up 570K from the start of the year. MAU and WAU also set new records at 20.32 million and 15.02 million respectively. Activity indicators also rose together with customer growth, which is an indication of deepening engagement with our users. Looking at penetration by age group, we saw even growth across all age segments.
Notably, ages 10 or below in particular rose by 4% points YoY from 27% to 31%. Similarly, the 60-plus group grew from 17% to 21% as we continue to expand our reach across all generations. Page five. Among the 570,000 new customers in Q1, roughly 24% were minors who were signed up for the KakaoBank mini service, which has proven to be a key channel for new acquisitions since launch in September of last year. First quarter traffic improved as measured by MAU and WAU. Notably, increased customer engagement following the launch of AI assistant services at the end of last year, coupled with strong seasonality of group accounts, was a key driver of MAU in the first quarter. Moving on to operating revenue, Page six.
First quarter operating revenue totaled KRW 819.3 billion, up 4% YoY. It was primarily driven by interest income, which rose 9.5% YoY to KRW 659.7 billion, alongside solid gains in fee revenue, which climbed 9.2% YoY to KRW 58.3 billion. Meanwhile, other operating revenue declined year-on-year from reduced valuation gains from funds amid rising market rates starting the 4th quarter last year. On a Q-on-Q basis, however, amid an increase in AUM and enhanced returns from short-term investments, other operating revenue increased from KRW 43.4 billion to KRW 78.8 billion Q on Q. Page seven for our deposits. Our deposit balance reached KRW 69.4 trillion in the 1st quarter, rising 15% YoY and 2% Q on Q.
Current deposits continued steady growth to KRW 40.1 trillion, while time deposits were also strong at KRW 23.4 trillion, supporting a stable and well-balanced funding structure. The share of low-cost deposits rose by 0.7 percentage points Q on Q from 57.8%, or from 57.1% to 57.8%, resulting in improved funding costs of 1.84%, down two basis points Q on Q as we maintain competitive funding costs. Page eight. Group accounts, which are a core deposit product, increased by 9% YOY to KRW 12.9 billion, growing at a faster pace versus total user growth.
Our group account balance rose 22% YoY to KRW 11.6 trillion, and its share of total current deposits increased to 29.1%, up 1.7 percentage points from 27.4% recorded in the previous quarter. This sustained momentum demonstrates the competitive positioning of our KakaoBank group account offering within the broader market. The fact that group account balance growth significantly exceeds user growth indicates increasing engagement among existing users, along with a continued rise in the average balance per customer. Driven by strong engagement, we expect group accounts to continue to serve as a solid driver of ongoing deposit growth. Page nine. First quarter loan balance rose 8% YoY and 2% Q-on-Q to KRW 47.7 trillion, led by steady growth in both SOHO and Bogeumjari loans.
First quarter net interest margin, or NIM, improved by 6 basis points QoQ from 1.94% to 2.0% on spread widening from high loan yields and lower funding costs. Meanwhile, in the first quarter, KakaoBank provided KRW 450 billion in mid, low credit loans. As of the end of the quarter, the share of mid to low credit loans recorded 32.3% above our target. Since launch, we have supplied a total of KRW 16 trillion of mid credit loans, doing our best as a digital bank to enhance inclusive finance. Page 10. Our SOHO loan balance grew to KRW 3.4 trillion won, up 51% YoY. At the same time, the share of guaranteed and secured loans rose to 69% of the total loan portfolio, reflecting strong growth alongside disciplined portfolio management.
Bogeumjari loans, launched in July of last year, reached KRW 1 trillion in cumulative issuance within just 9 months since launch, and new loan market share also increased to 6.7%, supported by continued expansion from the convenience and ease of our fully non-face-to-face processes. For Bogeumjari loans, our business model involves initially recognizing interest income upon loan origination, followed by securitization, after which fee revenue is recognized. As origination volumes grow, this structure enables contribution in both interest and fee revenue streams. Treasury management on Page 11. As of the first quarter, our AUM increased Q-on-Q to KRW 27.7 trillion, with treasury management profits increasing from KRW 8.1 billion in the fourth quarter to KRW 152 billion. Profits declined slightly YoY, however, due to valuation losses on funds from rising market interest.
Given heightened market volatility, we will manage our investments with close attention to the loan-to-deposit ratio, as well as changing market conditions as we optimize our investment portfolio and conduct ongoing profitability analysis to support overall earnings. Pages 12 through 14 outline our fee and platform business. Let's look at Page 12 for our loan platform first. In the first quarter, our loan comparison execution volume reached KRW 132.8 billion, up 15% YoY. This was driven by higher engagement and MAU growth, demonstrating how our loan platform traffic is translating into real loan execution. Going forward, we will continue to expand our product lineup to advance into an integrated financial platform, offering diverse financial options for our users. Page 13. Our debit card transaction volume reached KRW 6 trillion, up 5% YoY.
When excluding the one-off impact of government consumption vouchers in the second half of last year, underlying usage continued a steady uptrend as we continue to enlarge our user base with diverse debit card offerings for SOHO and group account users. Our advertising platform revenue increased 23% YoY, maintaining strong momentum. We have been addressing the diverse needs of advertisers by expanding our range of performance-based products, including CPT and CPA offerings, as we shift from simple exposure-based approach to an action-driven model, supporting both qualitative and quantitative growth in ad revenue. On our investment platform, even as fund sales balances in the broader banking sector continue to decline, our balance, however, has grown steadily to 1.7 trillion KRW as of the end of March.
This is due to our easy user experience and differentiated features such as idle money finder, which lower entry barriers and makes investing more accessible. Our investment ecosystem, centered around our MMF box as a key gateway, continues to expand in a stable manner. In April, we launched our investment tab offering, which provides an integrated user journey from portfolio viewing to information discovery to execution as well, alongside a wide range of additional functions such as Investment Talk, AI Search, key market price inquiry, return calculator, etc. In the long term, we plan to continue to advance our investment tab to provide an enhanced investment context for our users while shaping a new foundation for platform revenue growth. Page 15.
In the first quarter, SG&A increased by 11% due to YoY, due to a rise in IT expenses and D&A, while CIR improved to 30.6%, reflecting one-off non-operating income from our investment in Superbank in Indonesia. When excluding the one-off effect, our normalized CIR is 35.9%. Lastly, Page 18 for our global business. For KakaoBank's global business, following our start in Indonesia, we have since continued to expand into other markets, including Thailand and Mongolia. In Q1, our equity investment in Superbank contributed to our financials following the successful IPO and have finished setting up a preparatory entity to establish a digital bank in Thailand. Most recently, we have signed an MOU with MCS Group in Mongolia for a strategic equity investment.
In the 4th quarter of this year, our customer base is expected to shift from predominantly domestic users to a much broader inclusion of foreign customers. Ultimately, we are planning a phased expansion of financial services available for the 20 million or so foreign nationals in Korea as we demonstrate the meaning behind our Beyond Korea initiative. With that, this concludes our business results highlights for the 1st quarter of 2026. Yes, we will now move on to the Q&A session. Because of the limited time, we will ask that you limit yourselves to two questions per person.
Now Q&A session will begin. Please press Star one, that is Star and one, if you have any questions. Questions will be taken according to the order you have pressed the number Star one. For cancellation, please press Star two, that is Star and two on your phone. In order to allow as many Q&A chances as possible within the restricted time, we would appreciate only two questions per each participant. Currently, there are no participants with questions. Please press Star one, Star and one to give your question. The first question will be provided by Shinyoung Park from Goldman Sachs. Please go ahead with your question.
Yes, thank you. This is Shinyoung Park from Goldman Sachs. I would first like to ask about stablecoins. It does seem that it may take some time for it to gain further traction, at least here in Korea, but I understand that there is a task force in place within the wider Kakao Group. Could you comment on the R&R? What will be your possible role in terms of issuance, custody, distribution, or perhaps the build-out of the infrastructure? Do you in fact, have an internal consensus within the group? The second question, it does seem that overall your cost base has increased so far. What are your cost execution plans for this year? Will you be required to do additional hiring, for example?
Yes, let me take the first question. While it is hard for me to comment it at a very detailed level because we have not seen the legislation here in Korea yet. We are working together with other parts of the Kakao Group, including Kakao Pay as well, to build out a stablecoin ecosystem for a Korean won peg stablecoin that has a lot of real-world utility. Because within the group, we have various touchpoints with key parts of the financial market, for example, the payment market, also banking, securities, insurance, et cetera. As we have that kind of underlying infrastructure in place, we are looking to collaborate with partners from in and outside of Korea so that we can make a contribution to the distribution and use of stablecoin, won peg stablecoins.
As a broad platform, driven by bank interest income, we are exploring opportunities across the wide swath of the ecosystem, not only for issuance, but also custody, payment, et cetera. This will provide new revenue streams in terms of custody fees, also service fees, as well. To cover your second question. In the first quarter, SG&A increased by 11% YoY. This is mostly due to increased D&A from our data center investments, also an increase in AI related IT expenses as well. In terms of our cost outlook for 2026, we believe that investments into AI, AA and related technology as well as infrastructure is key for KakaoBank to maintain our very high technological competitiveness and advantage.
It is also essential in terms of reinforcing our security and stability of our services as well. For full year 2026, we do expect that annual D&A as well as IT expenses may increase by 40% or more year on year. However, we will manage other components of SG&A to within single-digit growth, so that on balance, overall, we can control SG&A growth within 10%. Next question, please.
The following question will be presented by Jung Won Kim from HSBC Securities. Please go ahead with your question.
Yes. I have two questions. Thank you for the opportunity. First is on shareholder return. You have said that you aim to increase shareholder returns to the 50% cash-based target by 2026. I think up to last year you have been on track as well, reaching 45% or so. What would be the next step? If you could share your plans, I would appreciate it. Perhaps increasing your payout or even quarterly dividends, for example. Some thoughts? Second, it seems that for the non-banking business, you did see some valuation losses on bond investments. I know that you are trying to keep it under control, but what kind of strategy do you have in mind to hedge against that kind of volatility and also further to improve return?
The overall direction for our shareholder return policy for KakaoBank is to expand our shareholder return to up to 50% by accounting year 2026. Per this policy, we have already expanded our shareholder return to 45.6% as of the end of 2025, the year-end dividend. As we announced at our value program call, starting from 2027, we will be going by dividend per share or DPS as the main metric in terms of our shareholder return policy. That means we will either maintain the DPS level from the prior year or achieve gradual improvement in DPS. Regarding your second question on valuation losses on some fund investments.
Right now, 72% of our fund holdings are structured as maturity match matching instruments. During the holding period, depending on changes to the interest rates, we do recognize unrealized valuation gain or losses. Upon maturity, generally we are able to achieve the target returns through the principal and interest payments from the underlying bond. The recent valuation loss from rising market rates actually are accounting losses only. Because all funds will sequentially mature within the next year, we expect to be able to realize our target returns upon maturity. In terms of our investment strategy, we want to focus on driving higher interest income to take advantage of the current high rate environment. We will be continuing to purchase high yielding, high quality bonds to enhance our held-to-maturity bond returns.
We will also increase our exposure to fixed income type funds, but at the same time, try to diversify into additional sources of excess returns, for example, through alpha-seeking type strategies like the Kosdaq Venture Fund. Next question, please.
The following question will be presented by Jeon Seok-Yong from NH Investment & Securities. Please go ahead with your question.
Yes. Thank you for the opportunity to ask some questions. In a previous earnings call, I think you mentioned potential M&A. You were looking at a capital company as a target. Could you provide a status update? If you do go ahead with the M&A of the credit finance company, how much contribution do you expect in terms of ROE? Also second, it seems that you have been expanding your global business with Superbank, also the Thai entity, and more recently, the MOU with Mongolia. The direction seems quite good. Outside of just one-off contributions to revenue, when do you think your overall business will really start to kick in and make contributions, real contributions to your earnings, and to what extent?
Yes, let me cover the first question. We are in fact reviewing M&A targets, like a capital company with the goal of moving into non-banking loan markets, including corporate finance, lease, installment financing, as well. By acquiring a capital provider, it will allow us to advance into new markets. We feel that it could be a good fit to us from the following three perspectives. First of all, post-acquisition, we can help enhance the credit rating of the target to quickly lower the funding cost and improve profitability quickly. Second, we intend to strengthen synergy and linkage with the wider group, making use of Kakao Score, Kakao T partnership, loan comparison, et cetera. In fact, the capital companies have a higher ROE versus banks. For example, JB Woori Capital's ROE is 16.1%.
When you consider that, potentially there can be significant financial contribution. We are looking at a wide range of possible targets, and we will follow with the goal of completing the exercise within this year, and we will follow up with the market as things become more firm. Moving on to the second question. As we explained, as part of our value of objectives, we have been gradually expanding our global expansion. We are still in the early phase of our overseas advance, based on this accumulated experience of success and based on the underlying network going forward, it will be KakaoBank that takes the lead in pursuing our global business.
Based on this proactive advance strategy in the mid to long term, we will be working to achieve a certain target of revenue from global business as a certain share of total earnings. Next question, please.
The following question will be presented by Ji-young Kim from Kyobo Securities. Please go ahead with your question.
Yes. I have three questions for you. First, in terms of your SOHO loans. Compared to what I was expecting, I think it's quite encouraging that you have seen steady, consistent growth. What is the current status in terms of the delinquency ratio? Could you provide full year guidance on SOHO loans? How much loan growth are you targeting? How what metrics are you managing the metrics against in terms of asset quality?
Second, regarding G&A expenses, you did mention that you will control SG&A growth to within single digits this year. What about hiring? I think, compared to last year, you did not do significant hiring, how about the coming year? If so, what areas will require personnel hiring? Third question is, it's quite positive that MyKid services have proven to be a very good driver of MAU. If you could explain any plans in terms of expansion of these kinds of existing services versus new service launch. Yes, let me take your first question.
In 2026, we intend to manage delinquency and overall asset quality at a stable level by increasing the proportion of real estate-backed secured loans as a percentage of our total loan portfolio. We continue to make multifaceted efforts in terms of tight risk management. For example, we have been developing and actually using specialized models specific to certain sectors. For example, rather than just applying simple revenue type data, we also look at the transactional patterns of the business owners, the unique characteristics of the different businesses, also revenue volatility to inform our decision-making. We do focused management for certain sectors through very rigorous sector-specific risk management. We assigned differentiated limits and approval standards, again, depending on the specifics of the sector.
We are systematically hedging against the risk of secured loans experiencing distress. This is for SOHO real estate-backed secured loans. We apply differentiated limits, for example, depending on the type of collateral property, the location of collateral, also the use of the loans. Moving on to the second question. Last year, we had a headcount increase of slightly more than 140. However, for this year, we intend to be very efficient in terms of the use of personnel. Any headcount increase will be focused on essential personnel that are required to enhance our technological competitiveness or otherwise required for stable, secure operation. For this year, we will control the headcount increase to under 100. Third question.
For the purpose of new acquisition, also the lock-in effect on existing customers, we are planning to strengthen our lineup of new products and also strengthen our existing services as well. We have a foreign currency account that is planned for release within the first half of the year. In the second half, we will be launching additional services targeted at foreign nationals, and we will be adding on debit card functions that can be used for children from the age of 7 as an add-on to our MyKid deposit service. We will continue with new feature launches throughout this year as well, following on the AI Group Treasurer function in the fourth quarter last year.
We have the AI group invitation function in the first quarter, Brand Pocket, also this year as well, to continue our uptrend in terms of acquisition and growth. We will be expanding our lineup with more diverse offerings, including a stealth account, which can only be viewed in particular geographies only. Also other products with linkage to the Hometown Love Donation program, for example.
Next question. Currently, there are no participants with questions. Please press Star one, Star and one to give your question. If there are no further questions, we will now conclude the earnings call for KakaoBank for the first quarter of 2026. We thank all analysts, investors, and members of the media. Thank you very much for joining us.