Greetings. I am Peter Kwon, the Head of IR at KBFG. We will now begin the 2023 Full Year Business Results Presentation. I would like to express my deep gratitude to everyone for participating today. We have here with us our Group CFO and SEVP Jae Kwan Kim, as well as other members from our group management. We will first hear the 2023 major financial highlights from CFO and SEVP, Jae Kwan Kim and then engage in a joint Q&A session. I would like to invite our CFO and SEVP to deliver our 2023 earnings results.

Good afternoon. I am Jae Kwan Kim, the CFO of KB Financial Group. Thank you for taking part in our 2023 earnings presentation. Before going into the details of the business results, let me briefly walk you through the key financial highlight for the year of 2023 of KB Financial Group. KB Financial Group's net profit attributable to controlling interest for 2023 posted KRW 4,631.9 billion. It is up 11.5% Y-o-Y, driven by noninterest income-led solid earnings improvements and stable cost control despite macro headwinds, thus demonstrating the healthy fundamentals and ability for profit growth. Balanced and strong earnings fundamentals was achieved across all of the top line segments of the group, which resulted in record high gross operating profit for 2023, posting KRW 16 trillion, up 17.8% Y-o-Y. As a result of efforts to enhance cost efficiency within the group, G&A expenses increased only 0.1% Y-o-Y and the group CIR in 2023 was at record low levels, coming in at 41% approximately. However, provisions for credit losses posted KRW 3,146.4 billion last year, up significantly Y-o-Y due to continuing high interest rates, both at home and abroad. Credit risk, especially in the real estate market, has expanded substantially. After Taeyoung E&C filed for a debt restructuring program in December, concerns are running high of deteriorating asset quality in the real estate PF market. To be preemptively prepared during the first half of last year through changes in our expected loss modeling, we have set aside KRW 490 billion in provisions. In addition, in the fourth quarter, reflecting a conservative outlook for the future, we have set aside an additional KRW 51 billion approximately and preemptively set aside approximately KRW 754 billion one-off additional provisions for priority watch list sectors, including real estate PF and overseas commercial real estate to…

Thank you very much for the presentation. We'll now proceed to a Q&A session. Those of you viewing the presentation through the Internet, please contact us through the contact number that is on the last page of the PPT deck. So we'll now wait for the questions.

[ First question is] Park Hye-jin from Daishin Securities.

My name is Park Hye-jin from Daishin Securities. So with regards to credit cost, I have some questions. So rather the expectations in Q4, the credit cost was quite high. With regards to real estate PF, I do understand that there has been preemptive provisions. Can you break down the provisions between the banking subsidiaries and the nonbank subsidiaries, and the total exposure in the bridge loan and delinquency? What is the size of the delinquency at the year-end? And also, loan loss provisions this year as well. Despite the preemptive provisioning, with regards to the real estate PF, do you have any plans of additional provisioning this year as well? So these are my questions.

So in the fourth quarter, we have had set aside large provisions. So bank subsidiaries and nonbanking subsidiaries, well in the case of the bank subsidiaries, the PF is about 95% of senior debt. But if you look at the loan provisioning between bank and the nonbank subsidiaries, the bank accounts for 60% and -- bank and the nonbank subsidiaries, it's 50 to 50. So the bank's portion is quite large, but the nonbanking subsidiaries, there has been a large additional provision set aside for those segments as well. And KRW 13.5 trillion is the total exposure around so. And from that, half of that is accounted for by the bank and the rest, securities and insurance companies are responsible for those other provisions. And with regards to delinquency ratio, well, in the case of the real estate PF, the NPL ratio is about 1%, 0.8% -- less than 1%, 0.8%. Despite this low level, we have set aside very conservative provisioning and the asset quality rating has been done in a very conservative manner. And also the PF asset evaluation has also been done very conservatively. That is the reason why we have set aside large provisions. And the question as to whether we're going to have additional provisioning this year. So the conservative provisioning, from the point of view of the present, if we assume the worst case, well, collaterals in the worst case, how far the price of the collateral can fall, that is the basis of our scenario. So from the present point of view, we do believe that sufficient provisioning has already been set aside. And so we don't foresee any additional provisioning for this year as of the present. So starting from this year, unless there is any exceptional events in the real estate market, we do believe that we will be able to manage developments going forward.

We will take the next question from HSBC. We have Won Jaewoong on the line.

Thank you very much for very superior earnings despite the difficult circumstances and thank you very much for your shareholder return results. So I would like to ask you about the standard that you have in mind because the KRW 320 billion of share cancellation and you mentioned the PCA and the payout ratio. So I think that it is over 38% or so. So is that all total -- TSR? Or can you give us a little more color on whether we should see that this will change? So total shareholder return ratio that you have in mind, can you give us guidance for that?

Thank you very much. I am CFO of the group Jae Kwan Kim. As you had elaborated, I think there will be some changes according to which calendar you are using on a calendar basis for the share buyback and cancellation for this year. When we retrospectively look back to the previous year, it's 38.6%, as you mentioned. And for share buyback and calculation this year, we see it for 2024 and we had KRW 572 billion for last year. So it's 37.5% or so.

We will receive the next question. Jeong Tae Joon from Yuanta Securities.

My name is Jeong Tae Joon. This recent issue with regards to the ELS. So the company -- what is your view on this? And what are your future responses that you are formulating to cope with the situation?

So while we are preparing the answer, please wait for a few seconds. Thank you. So this year, the bank is pretty much focused on the ELS responses and also rebuilding the trust of the customers. The FSS audit is still underway. And so there hasn't been anything decided in terms of compensation for the damages.

We will take the next question from Samsung Securities, Kim Jaewoo.

Thank you very much for your good earnings results and shareholder return results. So regarding the CET1 ratio, I think it is improving and compared to your peers, I think it is very superior. And to what extent do you think total shareholder return can take place? So for Hana, so if it goes beyond 13%, they say that they will have up to 50% of returns to shareholders that goes -- that exceeds that. So do you have any special guidance that you can remark upon related to that? And you also have the quarterly dividends? And can you give us some guidance on quarterly dividends for this year as well?

I am Jae Kwan Kim, the CFO of the group. Regarding shareholder return, I would like to emphasize 3 factors. First, we have the highest level of earnings power or generating power in the financial industries. So there was a preemptive provisioning for social contribution last year. But excluding that, 2023 recurring net profit stands at KRW 3.5 trillion level and total operating profit posted about KRW 16 trillion, a 17.8% growth, a record high level. Our superior earnings power capacity will become a great source for shareholder return. Secondly, according to the mid- to long-term capital management plan we announced in February, we will faithfully implement our shareholder return policies. Through detailed and sophisticated capital management plans, we will secure the highest level of capital adequacy in the industry. And for capital in excess that goes beyond 13% of CET1 ratio, we plan to actively utilize this for shareholder return if there are no special circumstances related to financial market volatility and our company's management goals. So based on such principles, the recent decision on shareholder return was made in full consideration of the [ HSCEI ] linked to ELS related uncertainties going forward. Barring any exceptional events, we intend to carry out our existing long-term capital management plan faithfully. KP Financial Group has over the years played a leading role in terms of shareholder returns, and we intend to implement an even stronger shareholder return policy going forward. Finally, I understand that there is a lot of market interest nowadays in enhancing the enterprise value of low PBR stocks. And when I decide a detailed plan for a value program, it comes out, we will be sure to put forward proactive responses to ensure that enterprise value is enhanced. Regarding the quarterly dividends that you asked about, we plan to do so this year as well, and we will discuss in detail with the BOD for details regarding our quarterly dividends this year.

Next question is from Kim Do Ha from Hanwha Securities.

It's quite overlapping with the previous question. In the earlier part of the year -- so the treasury stock, how are you intending to calculate the shareholder buyback? Is it linked to the previous year's performance or this year's performance? So I think based on your answer, we can be able to anticipate what the guidance will be going forward for this year's dividend. So thank you very much for your answer in advance.

So I am Kim Jae Kwan, the CFO of the group. Well, this question, I think this is the same question as the first question. So let me say that the answer is quite the same as the first question.

We will take the next question from SK Securities Seol Yong Jin.

It might be a very narrow question, but you can see the K-ICS ratio. Well, it seems that it has gone up for the insurance. So can you elaborate more about the reasons behind that?

Well, the K-ICS ratio changes each quarter and currently, well, we have been -- actually been affected by interest rates. So for the changes in the quarter, it is because of the interest rates. So that will be a large reason behind that.

So next question Mr. Cho Jihyun from JPMorgan.

I have 2 questions. In 2024, NIM and also with regards to your credit cost growth, if you have any guidance, can you share that also with your assumptions? And secondly, the U.S. real estate exposure, I think a lot of investors have questions about that with regards to overseas real estate at the group level. And if you can provide a breakdown by subsidiaries. Can you provide us with a rough assumption of the exposure? And going forward, what kind of -- what level of risk do you foresee? And with regards to K-ICS, I do believe that you have sufficient provision regarding K-ICS. But with regards to overseas real estate, do you have provisions for overseas real estate also included in that amount?

So while we are preparing the answer, please wait for a few seconds. Thank you. So the U.S. commercial real estate, let me get that question first. We have about KRW 5 trillion of exposure, and a large part of that is held by the bank and the amount held by the other subsidiaries is not that large. In the case of the bank, it has a large exposure. But it had conservatively invested. So senior debt is -- takes up a large portion. In the case of United States and Europe, we have commercial real estate there and office and multifamily and quasi residential real estate is the bulk of our holdings and 0.2% default rate NPL ratio. And you talked about provisioning. But in Q4 I said that we have conservative provision against real estate. And for the overseas commercial real estate as well, we have even more conservative provisioning for such real estate and for funds as well. It is a [ P&L ] asset. And so we have taken impaired losses in end of 2023. So the overall portfolio is mostly senior debt, and so there is a significant impact and we have sufficient provisioning given these factors. So the overseas commercial real estate for KB Financial Group, we don't see much impact going forward because of these reasons.

Also the other questions regarding NIM.

In the case of NIM, we have a very high share of low-cost deposit. And in a high interest rate regime, this leads us to maintain a high NIM level in 2023 and in 2024 earlier as well, we have maturing high interest rate time deposits. This can serve as a factor. And also KB, the share of the fixed interest rate deposit is quite high. And also starting from last year, the asset duration is being expanded. So even if the interest rate goes down in the second half, we will be able to engage in flexible funding portfolio management. And so in 2024, we will manage the NIM, so that it will be slightly lower than last year. With regard to loan growth, our growth is focused mostly on corporate loan, and it's going to be maintained at the nominal GDP growth level.

It seems that there are no other questions in the queue now, so we shall hold.

It seems that we have received about 7 questions in a short amount of time and covered different areas. If you did not get a chance to ask questions, please contact our IR team, and we would be more than happy to answer them. And it seems that there are no questions in the queue now. Since we do not seem to be having any more questions for now in the queue, we shall wait a little longer and if there are no other questions coming in, we will conclude our earnings presentation. Well, we will conclude our Q&A session, and we will conclude our business presentation for full year 2023. Thank you very much. [Statements in English on this transcript were spoken by an interpreter present on the live call.]