105560.KS

• Shareholder Return

  • A second round 2026 shareholder return of KRW 700 billion in share buyback and cancellation was approved, utilizing capital above the 13.5% CET1 threshold per KBFG's framework.
  • Including the February 2026 first round return of KRW 2.820 trillion, total 2026 annual shareholder return is projected at KRW 3.7 trillion, maintaining an industry-leading level. A Q2 cash dividend of KRW 1,155 per share was approved.
  • Remaining surplus capital will be assessed at year-end 2026 to fund additional returns, with flexibility on allocation between buybacks and dividends.

• Capital Allocation Strategy

  • A KRW 1.7 trillion paid-in capital increase (two rounds) was approved for KB Securities, reinvesting capital generated by core subsidiaries into the high-growth Capital Markets segment.
  • KB Securities will use the new capital to expand wealth management (WM), venture capital, productive finance and promissory note businesses, and meet pre-requirements for IMA authorization.
  • Management will continue to pursue RoRWA-oriented asset rebalancing to improve capital efficiency and profitability while maintaining balanced asset growth.

• Operational Priorities

  • Banking: Focus on qualitative, profitable growth via portfolio shifts to productive financing, with selective household loan growth and a shift of corporate loans toward SMEs. Maintain stable cost management to hold CIR in a downward stabilizing trend.
  • Securities: Diversify earnings to reduce sensitivity to equity market volatility, expand IB and trading businesses, advance the M-able digital trading platform, and gradually prepare for future IMA business.
  • Credit quality: Maintain conservative provisioning while real estate PF-related risks gradually resolve and KB Card asset quality stabilizes.

• NIM: Full-year 2026 NIM is projected to improve Y-o-Y, unchanged from the beginning-of-year forecast, as base rate hikes, asset/liability repricing, and funding structure normalization lift margins in the second half.
• Loan Growth: Full-year household loan growth target is maintained at 1% to 2%; corporate loan growth target is maintained at 6% to 7%, aligned with the start-of-year outlook.
• ROE: Group full-year 2026 ROE is projected to exceed 11%, with a medium-term group ROE target of 13%. Subsidiary targets are 11%+ for the core bank, 14% for KB Securities, 13% to 14% for insurance, and ~10% for KB Card.
• Cost of Equity (COE): Management estimates current COE is ~10%, and expects COE to fall below 10% if PBR sustainably exceeds 1x.
• 2026 full-year credit cost is projected to be in the early-to-mid 40 bp range.
• Fee income: Capital market and securities fee income is expected to hold at a higher level than 2025, supported by planned CIB and ECM/DCM deal flow in the second half that will offset any volatility in transaction volumes.
• G&A: Excluding the one-off education tax impact, full-year 2026 G&A growth is expected to be managed within ~3.5%.

1. Core Banking Segment:

• Net Interest Income (NII): KRW 6.473 trillion for the first half, a slight year-over-year (Y-o-Y) increase, but a slight quarter-over-quarter (Q-o-Q) decrease due to a 3 basis point (bp) drop in bank net interest margin (NIM).
• Bank NIM: 1.74% in Q2, down 3 bp Q-o-Q due to higher funding costs from preemptive funding for projected second half rate hikes and intense corporate loan competition.
• Group NIM: 1.94% in Q2, down 5 bp Q-o-Q.
• Total Loans (KRW): KRW 385 trillion as of end-June 2026, up 2% from end-2025 and up 1.6% Q-o-Q. Household loans reached KRW 184 trillion; corporate loans reached KRW 201 trillion, up 2.2% Q-o-Q driven by growth in productive financing.

1. Non-Banking Segments:

• Noninterest Income: KRW 3.6292 trillion for the first half, up 33.3% Y-o-Y. Cumulative net fee income reached ~KRW 3 trillion, contributing over 31% of total revenue for the first time. Q2 net fee income rose 17.8% Q-o-Q, driven by higher securities brokerage fees, capital market product sales, and increased credit card spending.
• KB Securities: Contributed 21% of group net income for the first half, leading non-banking earnings growth.
• Insurance: First half operating income was sluggish year-over-year due to higher loss ratios, but Q2 performance improved with lower loss ratios and CSM impairment reversals. Investment subsidiaries posted 29.1% Q-o-Q operating income growth driven by valuation gains on unlisted AI and semiconductor stocks.

1. Group-wide Performance:

• General & Administrative (G&A) Expenses: Up 8.9% Y-o-Y, but cost-to-income ratio (CIR) was 36.2%, stable in the mid-upper 30% range excluding one-off items.
• Credit Loss Provisions: Q2 provisions were KRW 519.8 billion (up slightly Q-o-Q) due to one-off nonperforming corporate loan provisions. Excluding one-offs, asset quality is improving. First half cumulative credit cost was 39 bp, down 15 bp Y-o-Y.
• Capital Ratios: End-June group CET1 ratio was 13.74% (up 10 bp Q-o-Q), BIS ratio was 15.91%, risk-weighted assets (RWA) were ~KRW 370 trillion (up 1.1% Q-o-Q, within annual growth targets).
• Net Profit: Q2 net profit was KRW 1,992.2 billion; first half cumulative net profit was KRW 3,884.6 billion, up 13.1% Y-o-Y. First half ROE was 14.09%, continuing an improving trend.

• Macroeconomic and market risks: Heightened financial market volatility, high FX rate fluctuations, and persistent high interest rates create uncertainty for capital ratio management and asset quality.
• Interest rate and funding risk: Intense corporate loan competition and preemptive funding for projected rate hikes temporarily increased funding costs and compressed NIM in Q2.
• Asset quality risk: Sluggish economic conditions could lead to deterioration in asset quality for SMEs, SOHOs, and vulnerable/marginal borrowers, even after conservative provisioning.
• Securities earnings risk: High equity market volatility could lead to swings in KB Securities earnings, though management is diversifying its portfolio to mitigate this risk.
• Regulatory risk: A pending decision from the Financial Supervisory Service on ELS-related provision reversals has not yet been incorporated into current financial results.

Q: With CET1 capital above the 13.5% return threshold and PBR now exceeding 1x, how will you adjust cash dividend levels, will you change your capital-linked shareholder return framework, and do you plan to update your ROE target? / A: Management reaffirmed the existing policy of returning all CET1 capital exceeding 13.5% to shareholders annually. While PBR exceeding 1x may lead to a slight shift in allocation toward cash dividends, the overall capital-linked return framework will not see major changes. Management is reviewing potential adjustments to ROE targets but has no concrete changes to announce yet. KRW 180 billion in remaining excess capital will be allocated to additional shareholder return in 2026, with flexibility between accelerated share buybacks and inclusion in the year-end cash dividend.

Q: What drove the Q2 NIM decline, what is your second half NIM outlook, and when will ELS provision reversals be reflected? / A: Q2 NIM declined 3 bp due to spread compression from competitive corporate loan pricing for high-quality clients, and higher funding costs from preemptive shifts to marketable deposits ahead of projected second half rate hikes. The full-year NIM is still expected to see a slight Y-o-Y increase as projected at the start of the year, supported by regular loan repricing and more flexible liquidity management in the second half. A final regulatory decision on ELS provision reversals is pending at the end of July, so reversals have not been included in the current results and will be reflected once finalized.

Q: Following the KRW 1.7 trillion capital injection for KB Securities' IMA business, will you face conflicts of interest with the core bank, how much growth do you expect from IMA, and what is the contribution of leveraged trust products to fee income? / A: KB Securities will not immediately launch full-scale IMA business after meeting the KRW 8 trillion capital requirement, and will instead gradually prepare for the business over the required 2-year regulatory holding period. The company expects synergies with the core bank (with split roles on deals that combine bank lending and securities capital) rather than conflicts of interest. KBFG does not currently sell leveraged ETF trust products, so this product category contributes no fee income at present.

Q: Why did G&A increase sharply in the first half, what is your second half fee income outlook, and what is your full-year provisioning target? / A: G&A increased primarily due to higher variable compensation at KB Securities following strong performance, and a one-time increase from changes to education and corporate tax rules; excluding the one-off tax impact, full-year G&A growth will be held to ~3.5%. Fee income is expected to maintain a higher level than 2025, even with equity market volatility, supported by planned large CIB deals and a projected pickup in ECM/DCM activity in the second half. Management will maintain a conservative provisioning stance in the second half amid macro uncertainty, and expects full-year 2026 credit cost to land in the early-to-mid 40 bp range.