KB Financial Group, Inc. Q3 FY2024 earnings call

• CEO Jong Hee Yang introduced KBFG's sustainable value - up plan, emphasizing sustainability and predictability in shareholder return, linking shareholder returns to CET1 ratio, and the importance of strengthening fundamentals and reorganizing business management system. - CFO Jae Kwan Kim covered Q3 earnings results, BOD's resolution on Q3 shareholder return, including approved quarterly cash dividend and additional share buyback and cancellation. Also, mentioned CET1 ratio expected to be 25 basis points increased Q - over - Q to 13.85% as of end of September, group's performance highlights like cumulative net profit, credit cost improvement, loan growth in won, and NIM situation.

Group's Q3 2024 cumulative net profit was KRW 4.3953 trillion, up 0.4% year - over - year. Q3 net profit was KRW 1.614 trillion, down Q - over - Q. Net interest income in Q3 was KRW 3.165 trillion, down 1.3% Q - over - Q. Q3 net fees and commission income was KRW 942.7 billion, up 2.5% Q - over - Q. Other operating profit in Q3 was KRW 398.7 billion, up 23.4% Q - over - Q. Q3 G&A expense was KRW 1.6508 trillion, up 3.6% Q - over - Q. Third quarter PCL was KRW 498.1 billion, down 9.9% Q - over - Q. Nonoperating profit in Q3 declined by KRW 140 billion Q - over - Q. Cumulative group ROE in Q3 '24 was 11.26%, above the target ROE of 10%. Bank's total loan in won as of September end '24 was KRW 362 trillion, up 2.9% versus June and 5.9% year - to - date. Group and bank's NIM in Q3 was 1.95% and 1.71%, down 13 basis points respectively Q - over - Q.

• Link shareholder returns to CET1 ratio and return surplus capital excluding some management buffer to shareholders. For example, if 2024 year - end CET1 ratio is 13.5%, 50 bp of capital exceeding 13% will be for next year's dividends and first half share buyback and cancellation. - Will begin 2025 business plans fit for value - up paradigm and redesign key performance indicators. - Expect Q4 bank NIM to be at a steady level on the back of recovery in margin, and focus on quality - driven growth with adequate margin under right balance between growth and profit.

• FX rate movement may have an impact on RWA. For example, KRW 10 fluctuation in FX can have a 1 bp effect on RWA. - Real estate project financing market restructuring is ongoing, and there may be potential impact on asset quality and provisioning.

Q: What is your RWA target compared to other developed markets like U.S. and Japan, and what is your ultimate target for shareholder return?

A: RWA growth target is around the nominal GDP growth rate, previously average growth rate over past decade was 6.1% and going forward will push it down to around 5%. Do not set a separate TSR target, but will continue to maintain positioning as company with best TSR and expect meaningful increase in total size of shareholder return back to shareholders in next year.

Q: Do you have targets for RoRWA? And about the balance of cash dividend amount compared to share buybacks and cancellation?

A: From next year's RoRWA, will have targets although cannot make public at this time. Regarding cash dividends and share buyback and cancellation, until PBR is 1.0, will expand share buyback and cancellation amount, and will look at dividend yield ratio and market conditions to expand dividend amount, with speed of DPS uplift accelerated due to continuous increase in share buyback and cancellation.

Q: When is the baseline of the 13.5% CET1 ratio for second half share buyback?

A: In our disclosure in the second half, it's based upon the CET1 ratio as of the second quarter. If there are any special circumstances, could base it off of third quarter number, but target is to base the CET1 ratio as of the second quarter of the year.

Q: What are the incentives for management and employees regarding the value - up program?

A: The proportion of RoRWA will be more reflected on the compensation plan for executives, and will not just remain at executives or offices, but sales will also play a great role, with KPIs reflecting this going forward to align everyone in the company with the value - up program.

Q: What is the competitive edge of the value - up program? And what about NIM outlook?

A: Characterized by sustainability and predictability, linked to CET1 ratio. In terms of NIM, in Q4 will be controlled at a steady level, next year quarterly NIM is expected to be quite similar to this year, and will focus on profitability and capital efficiency going forward based on low - cost deposit.

Q: What about asset quality and credit cost projection?

A: Have been very conservative and preemptive in setting aside provision, currently CCR is capped at around 40 basis point and expect to maintain CCR ratio at around that level next year, with real estate project financing market restructuring ongoing but no significant concern about asset quality completely eliminated yet.

Q: What is the impact of external changes like FX on RWA?

A: Related to FX, KRW 10 fluctuation in FX can have a 1 bp effect on RWA, and is working toward capital - light growth to have more efficient use of capital