Shinhan Financial Group Co., Ltd. (SHG) Q2 2026 Earnings Report, Transcript and Summary

Good afternoon, everyone. It's been a while since we last met. I am Cheol Woo Park from the IR team. I hope you're all looking forward to your summer vacation plans. So ahead of the summer vacation season, I'd like to thank you all for joining Shinhan Financial Group's 2026 Second Quarter Earnings Conference. Joining today's earnings conference are Jeong Hoon Jang, Group CFO; Go Suk-Hyun, Group CSO; Hyuck Jae Choi, Head of Group AX Digital; Hoon RA, Group CRO; Kan Yeong Hong, CFO of Shinhan Bank; Jeong-bin Lee, CFO of Shinhan Card; Jaesung Lee, CFO of Shinhan Securities; and Sung-hwan JOO, CFO of Shinhan Life. We would appreciate your active interest and participation throughout today's event. Today's conference will begin with a presentation by our Group CFO on the group's financial results for the second quarter of 2026. Afterwards, it will be followed by a Q&A session with the participants. Now I'd like to invite Group CFO, Jeong Hoon Jang to begin this presentation on the group's financial performance.

Good afternoon, everyone. I am Jeong Hoon Jang, CFO of Shinhan Financial Group. First of all, I'd like to thank everyone for joining our 2026 second quarter earnings presentation. Now let me walk you through our business results for the second quarter of 2026. Please turn to Page 2, highlights of financial performance. As of the end of second quarter of 2026, the group's CET1 ratio was provisionally tallied at 13.43%, maintaining a stable level despite domestic and external uncertainties, including foreign exchange movements. Today, based on our solid capital position, the Board of Directors approved the repurchase of KRW 700 billion worth of treasury shares over the next approximately 3 months as well as a second quarter cash dividend of KRW 741 per share a (sic) [ 740 per share]. As a result, the total amount of share buyback by October 2026 will reach KRW 1.4 trillion, and we plan to announce an additional share buyback amount during the fourth quarter after considering our expected annual earnings and capital adequacy. For your reference, the record date for this dividend is July 30, and we have completed both the share buyback and cancellation of the KRW 700 billion for the first half of this year that we have committed to. If the present level of quarterly cash dividend continue until the year-end, the annual DPS will come to KRW 2,951, up 14.3% Y-o-Y and share buyback simply calculating the amount committed until the end of October drives up the amount to 12.0% higher on a Y-o-Y basis. So going forward, we'll continue to implement a flexible and forward-looking shareholder return policy in line with our industry-leading corporate value enhancement plan. Net income for the second quarter of 2026 amounted to KRW 1,820.1 billion, up 12.2% from the previous quarter. Through our group-wide efforts to enhance profitability, ROE and ROTCE improved by approximately 1 percentage point Y-o-Y to 12.4% and 13.9%, respectively. The next page summarizes various indicators representing Shinhan's shareholder value for your reference in making investment decisions. Next, Page 4, capital. First, CET1 ratio as of the end of the first quarter has been revised upward by 11 basis points from the provisional figure to 13.30%. This revision reflects the approval of certain measures under the capital regulation, rationalization initiative aimed at expanding productive finance, resulting in a reduction of the group's RWA by KRW 3.2 trillion. As of the end of second quarter of 2026, the CET1 ratio improved by a further 13 basis points from the revised level to 13.43%, supported by a solid net income despite the impact of rising exchange rate. Going forward, we'll continue to provide sufficient funding where needed while maintaining a stable capital ratio through internal efficiency improvement and strategic resource allocation. Please refer to Page 5 for details on assets and liabilities. Next, Page 6, the group's earnings. The group's operating profit before expense for the second quarter increased by 8.8% Q-o-Q, driven by solid net interest income and another strong expansion in net interest income. I will now explain each item in more detail, beginning with the following pages. Page 7, interest income. The group's interest income grew by 3.6% Q-o-Q, supported by improvement in the bank's NIM and growth in average loan balances. The bank's NIM increased by 1 basis point from the previous quarter as loan asset yield improved rapidly in line with rising market interest rates. The bank's KRW loans increased by 0.4% Q-o-Q, as we continue to provide balanced financing to both households and corporate sector. Please refer to Page 25 for further details. The next page covers noninterest income. The group's noninterest income increased by 22.0% Q-o-Q, led by fee income continuing the growth trend seen in the first quarter. Fee income increased across all business areas Q-o-Q. Securities custody fees rose 29.5% and wealth management product sales fees increased 60.8%, benefiting from a strong stock market, while investment banking-related fees rebounded from the previous quarter, improving by 151.3%, affecting a successful turnaround. Gains on securities increased by 30.9% from the previous quarter, as gains from other securities more than offset bond-related losses reflecting higher market interest rate. Insurance-related income declined by 44.6% Q-o-Q due to larger expected actual various losses and the impact of changes in actuarial guidelines. Next, Page 9 is on SG&A and credit cost. The group's SG&A increased by 8.1% quarter-on-quarter, driven by seasonal tax and charges and recognition of Shinhan Securities performance fee. However, the cost-to-income ratio remained stable at 33.6% a (sic) [ 36.6% ] , almost unchanged Y-o-Y as operating profit expanded. Group's credit cost increased by 14.7% Q-o-Q due to the base effect from our conservative provisioning policy. Credit cost ratio was 42 basis points, improved by 8 bp Y-o-Y. Although credit costs are managed within the range planned at the start of the year, given macro uncertainties such as policy rate hikes, sustained high FX and ongoing geopolitical risks, we will continue to manage them from a conservative standpoint. Turning to Page 10, asset quality indicators. The group's NPL coverage ratio improved by 2 percentage points Q-o-Q, reflecting reductions in nonperforming assets through proactive group-wide asset quality management and conservative provisioning. For the bank, delinquency ratio rose slightly versus Q1, but it was the lowest net new delinquency in the industry. For the card business, it fell by 9 basis points Q-o-Q regarding to year-end levels, supported by volume growth and continued risk management efforts. The sluggish recovery in domestic demand has increased corporate credit risk and vulnerable customer segments remain under stress, which require continued asset quality management into the future. Please refer to the next page for a more detailed information on group's loss absorption capacity and write-off and sale activities. Page 12 is on subsidiary earnings. Shinhan Bank achieved Q-on-Q earnings growth of 12.5%, thanks to top line growth and write-back of fines and lower credit costs. Despite higher SG&A from taxes and public charges. Shinhan Investment Corporation, along with Shinhan Asset Management that showed strong core earnings, delivered earnings growth of 92.5%, benefiting from expanded SAL ETF AUM and proprietary asset returns. For Shinhan card, in a difficult funding environment, it achieved a Q-o-Q growth of 19.5%, following the lapse of the one-off impact of voluntary retirement and decrease in credit cost. For Shinhan Capital, its earnings fell 28.9% Q-o-Q despite the large improvement in credit costs due to the reduced valuation gain on marketable securities recognized in the first quarter. Shinhan Life also achieved Q-on-Q earnings growth of 81.8%, led by the significant improvement in insurance and financial gains despite the wider expected versus actual loss and actuarial assumption adjustments. Banking ROCE remains stable and on the path of improvement. Capital market subsidiaries, ROCE improved materially Y-o-Y, driven mainly by fee income. Specialized finance subsidiaries continued profitability enhancement efforts, including cost efficiency and reducing RWA in low ROCE areas. Page 13, on overseas business earnings, where Shinhan continues to deliver differentiated performance. The group's overseas earnings rose 13% Q-o-Q, supported by growth at major country operations such as Japan and Vietnam. SBJ is seeing expanded interest income amid a brilliant real estate market and higher policy rates and the bank MMC is demonstrating resilient core earnings. Meanwhile, we are also streamlining global operations to enhance profitability, including the withdrawal of securities subsidiary in New York. Pages 14 to 16 cover our digital and sustainability initiatives. While Page 17 onward provides further details on subsidiary financials, earnings, asset operations and funding. This concludes the presentation. Thank you very much for your attention. [Interpreted] And going forward, in the second half, while we have focused on the growth in size for the productive finance in the first half, we're going to focus more on profitability going into the second half, and we will be focusing on high credit assets. So with regards to NIM, let me add 2 things. As has been noted just now, by banks, I think I think there can be some variance by bank because if you look at it on a monthly basis compared to April, as we move toward June, we have seen the NIM rising more. And the reason why there was no inflection point was that because maybe during the quarter, the NIM could have fallen. And as has been noted, because we're seeing a trend -- a long-term trend in increasing NIM, we do believe that going into the second half, aligned with the rise in interest rate, we have a more positive picture for the NIM for the second half. And for your second question, so yes, the guidance that we have provided in the earlier part of the year, if the foreign exchange rate rises and it becomes KRW 1,600, then our RWA will increase by 8%. Would that mean that the interest rate will go to 20%? No, that's not the case because RWA using only that as a factor would involve too many one-off factors to consider. So when we talk about nominal GDP growth rate, the reason why we noted capital or RWA is because stably we do believe that the capital will maintain a stable growth of 4% to 5% because nowadays in the banking sector, the financial holding companies in the banking sector, their earnings does not have that much of a volatility nowadays. So we believe even if the 50% or 60% goes to shareholder returns, if you look at the current capital size, 4% to 5% is going to be the normal. But if you look at the RWA from a more balanced perspective, we're not saying that everything should be excluded as nonordinary. But we're going to leave out some of the influence of the foreign exchange rate when we decide on the shareholder return policy. So if you look at our 2.0 plan, we have noted clearly capital or RWA, and we have set that up as a buffer. And some analysts actually asked back then that when we gave this guideline in the early part of the year, we wanted to say that this is a guideline that will remain unshaken, and that was the communication that we had with the market. If that has to change, if that standard has to change, then we will, of course, communicate that this will be changed. So that was our policy. And so as you have noted, currently, the foreign exchange rate has changed. But as we presented in the Value-up 2.0 plan, in that guideline that we will not be deviating from our set trajectory.

[Interpreted] Thank you very much. I hope that has answered your question. We will take the next question from JPMorgan.

[Interpreted] I have 3. First, I see that the financial performance was much stronger than expected for the first and the second quarters with the very strong fee earnings. But then because the capital market is very much volatile, so what is the expectation of the fee income in the second half? And also because the earnings are really spiking up, then now for this year and also for the next 3 years, what is the company's expectation of the ROE. So I would like to ask for the guidance. And then the second question is -- how about the share buyback, the company is increasing the size and also the ROE continues to climb up. So the stock price, it appears as if it is likely to now recover. So then going into the third quarter and the fourth quarter, so it was mentioned that in the second latter half, there's also going to be additional share buyback. Now then for the year-end dividend, then not just the equal dividend, but then let's say, if the earnings are better than expected, then the cash dividend as well, of course, considering like TSR and others. So I wonder whether the company is also willing to be flexible about the year-end dividend payout as well. And the last question is about in this quarter. I wonder whether there have been any one-off costs because the improvement was not as high as expected. So I wonder whether there were any other one-off expenses.

[Interpreted] Thank you very much for the questions and hold for a minute as we prepare the responses.

[Interpreted] First of all, now about the fee, and I would say that it is the securities, Shinhan Securities now that is seeing the biggest impact. So we will first hear from the Shinhan Securities CFO, and then I will come up with additional follow-up.

[Interpreted] Good afternoon. This is Lee Jaesung, the CFO of Shinhan Investment Securities. Now yes, the equity trading volume has continued to grow in Korea, but then at the end of June. So Hynix and also Samsung Electronics, we see that there have been some corrections. So then compared to the first quarter, the equity trading volume has gone down. Now having said that, then in the second half of the year in terms of the brokerage fee growth is not going to be as high as in the first half, but we are expecting that it will be maintained at the second quarter level. And also for the brokerage fee, then there have also been some financial products fees. So we are also really focusing on selling the financial products and then also the EDS (sic) [ ELS ] sales have also gone up considerably. So again, in the second half, we do expect the performance to continue, perhaps a bit less than the first half.

[Interpreted] Yes. And also about the fee income in the second half. Now -- so yes, along with the securities, the asset management, we are also seeing a good performance. So Y-o-Y, we see that there have been over 100% growth. So for example, the BBG is the -- as the fee goes up, then the ROE is also improving. And we have been reiterating since the beginning of the year, but then by '27, the target ROE is 10%. But then we also want to accelerate the process. So we did mention that it is an accelerated process of ROE improvement. So we are still cautious, but then -- now of course, internally, we are hoping that there will be more visible outcome within 2026. And that is why in the Value-up 2.0, similar to the overseas cases, the ROE management range is going to be set at between 10% to 12%. Now the management range of 10% to 12%, the reason why we said it like this is because, of course, ROE keep going up, that would be good. But then there is bound to be volatility in the returns. But despite that, we do intend to maintain the ROE at minimum 10% and then shift towards 12%. And along the way, then there could be some volatility, but that is why we have offered the 10% to 12% management range. And then second, so about the additional shareholder return, as of October 27, based on the expected performance, we will be making the decisions about the shareholder return. And for this year, now there is also I believe some issues about the time lag. Now what I mean by this is now for the additional shareholder return decision that is to be made in October, but then the closing would be done at the end of December. So then in terms of the year-end dividend, then we also need to do some adjustment. In other words, instead of -- so of course, in terms of the equal dividend payment, that is to be maintained. And if there has to be some additional dividend payout, then there could be some more dividend added. But yes, so we will be open to such variability. And then about the one-off cost, so as was mentioned during the presentation, so there was the writeback of the ELS penalty by about KRW 83.7 billion. So that is the one-off cost. And then also, we have talked quite a lot about the credit cost, but we don't believe that, that is one-off. So from the beginning of this year, the group CEO has also mentioned that we will have solid BIS and then also we would have conservative financial policy. And for the real estate PF and the business feasibility study, so we have been really building up our process of very conservatively analyzing them. And now as a result, we are actually seeing a reversal of about KRW 30 billion from the business feasibility analysis. So again, as we maintain our conservative approach, this is some of the volatility or the variability that we are seeing.

[Interpreted] I hope that provided a sufficient answer to your question. We'll receive the next question. The next question comes from White Oak Capital.

I wanted to get an overview from you on whether the tailwind the Korean economy is experiencing can be an opportunity for you. We saw, for example, a $26 billion bonus package approved for Samsung's employees. Now does this throw up any opportunity for you to grow, let's say, as that money comes into the economy mortgage book or as it is reinvested, can this be a loan growth opportunity for you? Or can this be maybe a wealth management opportunity for you? How are you thinking about the tailwind that is the economy as a business opportunity for the next 1, 2 years?

[Interpreted] So while we are preparing for the answer, please hold for a few seconds.

[Interpreted] So the government as well as the financial institutions, this is something that we are looking forward to, yes. In the past, these individual retail funds and the gains from the equity investment, they have mostly flowed into the real estate sector. There were some concerns about that happening this time around as well. However, the vendor companies and if this money flows into the consumer economy area, then although we are seeing growth in the export sector for the economy, we do hope that this money can lead to an uptick in the consumption of the domestic economy. But we talk about the K-shaped phenomenon, and we still have a lot of concerns about this polarization, income disparity issues. And so this flows down to the middle class to the working class. We will have to wait and see whether this will have an effect in the segment. And in the case of the wealth management business, we do have a positive outlook for this. And including other peer securities companies, including ours, yes, for the wealth management segment, we are seeing greater, yes, income flowing in for our financial products segment.

[Interpreted] Thank you very much. I do hope that, that has answered your question. And now I see that there are no further questions. We will pause briefly to see if there are any additional questions. Yes, there is another question. Shane Mathews. Yes, Mr. Shane Mathews. Please go ahead with the question.

Two questions from my end. One, given, let's say, the news flows of acquisitions, et cetera, how would that really return to your shareholder return policy program? How should we think about what impact can that be because certain assets might need more capital than just initial. So can you guide us on how you think about shareholder return plan in conjunction with the M&A opportunities you see? And second, just on costs, do you have any long-term cost income ratio plans? Any benefits you're seeing from AI? Can you talk more about long-term cost outlook going forward?

Thank you very much. So, please give us a moment to prepare for the question.

[Interpreted] Now first of all, about the shareholder return and the M&A, the possible connection. I believe that we can put it this way. So let's say, from 13.0% to 14%, so that is the management's range. And then going beyond that, then we could be considering, for example, additional growth or anything else. So now then if we could get some, let's say, additional strength from the CET1, then maybe we can also utilize that for the M&A. So then perhaps not big deals, but that is why we are also considering some M&A. In other words, for the short term, so whether it is going to affect the shareholder return for that particular year, that is not going to be the case. That I can tell you with certainty. But then now if there is M&A, then let's say, the output is, for example, ROI or ROE or EPS perspective, then let's say, the current required return on the capital is then we are also considering the COE for the dividend. And so it's like this, for example, the current -- the PBR is 0.8 multiple and let's say the COE is 10%, then the required return would be like 15.2%, then given that, then the M&A deal, then for the longer term or for the short term, then it would have to meet the required return. So that is going to be the one consideration or one direction for the M&A initiative. So once again, let me reiterate that there is not going to be any short-term impact from the M&A deal. And then second, about the SG&A. So our continuous guidance has been that in terms of the expenses, then it's about 4% to 5% GDP growth or the inflation. So we also say that it is going to be in line with that. But then now in this case, now the top line gains and losses growing and then also the performance pay and then also the government's change in the regulations. So for example, education tax or the securities transaction tax. So we see that there have also been increase Y-o-Y. So they are also reflected into our SG&A. So then looking at the CAGR, then yes, there has been some considerable increase. And they are expenses that are related to the top line. So the CIR is not going to worsen very quickly. But then what we are thinking now is that let's say, low 40% or like around 40% CIR is this the proper level. So compared to the overseas peers, and I believe that it is still too low. But then we are not saying that we are going to dramatically increase this. So for the CIR, then let's say, for the 3-year projection, we believe that there will be little changes, meaning that it will be managed within the guidance.

[Interpreted] I hope it provided a sufficient answer to your question. I think -- yes, actually, we do have one more question. From Hana Securities, [ Kim do Ha ]

[Interpreted] I'm sorry, I did want to ask one further question. So on a median basis, we look at the earnings, it does not appear really conspicuously. However, if you look at the noninterest income, there are securities-related gains and losses and also the insurance-related financial gains, there's plus or minus about KRW 2 trillion they are in the reverse direction. So plus or minus, how was it recognized? Can you actually explain this for the plus and minus KRW 2 trillion? One. Can I ask another question? I'm sorry, with regards to the easing of the operating risk, I don't -- was it reflected in the second quarter?

[Interpreted] So yes, please hold for a few seconds while we answer -- prepare an answer for this question.

[Interpreted] All right. So I believe that it is right that I respond to this. So as you have mentioned, yes, because it is on a consolidated basis, then, of course, for the individual subsidiary and the Life Insurance CFO can respond to this. So now we have several, for example, the securities and also the life products, yes, there are some variation. Now for example, looking at the variable products, of course, for the securities gains and losses, then despite the interest rate hike, so the minus in the debt still the prices go up. So we are seeing some losses. So that is what we see. But then now when we apply that to insurance and that is the variable product. So because of the rise in the stock prices, then there are some plus on the securities and also from the insurance, then there is some minus. And then second is now in terms of the change in the guidelines, so that is also reflected into the financial products' gains and losses. And then second, about the operating RWA, that has not been reflected yet. And for that, so like this time, the -- so it's like the structural position, so as we have reflected aggressively in the second quarter. So we are still considering whether we are going to apply this to the second quarter or into the third quarter. But again, let me repeat that it has not been reflected yet.

[Interpreted] All right. Thank you very much. I hope that has answered your question. And yes, we have, I believe, run through the given time. So if there are no further questions, we could conclude this call. So there being no further questions, that concludes Shinhan Financial Group's Second Quarter 2026 Earnings Call. A replay of today's presentation is available on our website and on the Shinhan Financial Group IR YouTube channel. If you have any follow-up questions regarding the financial performance, then please contact our IR team at any time. We look forward to seeing you again after the heat of summer gives way to pleasant autumn. Thank you very much. Thank you very much. We will now open the floor to questions. Yes. The first question will come from IM Securities [indiscernible], the floor is yours.

I have 2 questions. So first question is related to the share buyback. I think the cycle has been reduced 2 or 3 months. So going forward, can we expect that the share buyback will take place on a quarterly basis? And the second question has to do with the non-life insurance acquisition that has reported in the media, so including capital increase, what kind of plans do you have going forward about this matter.

So why -- can you hold for a few seconds while we prepare to answer to your question.

So you have asked 2 questions with regards to the treasury stock policy. Let me take that question first. So we did actually give a lot of thought to this. So normally on a 6-month basis, we have carried out our share buyback policy. But as you are well aware, this year the interest rate and the foreign exchange rate and the stock prices as well, it has been quite volatile, and the changes in the earnings for this year is predicting this 6 months before was not quite easy. And in order to refine the ratios up until the month of October, we would like to see the direction in which the earnings take till October. And so that's the reason why we have shortened the cycle to 3 months. And as you have noted, so at present, it's going to be KRW 700 billion and at the end of October, when there's an earnings presentation, we'll be taking into consideration various factors in order to determine the share buyback value. But that does not mean that we're going to do it every 3 months, that's fixed. No, that's not the case. So next year, perhaps if in the first half, if we are able to stably predict the earnings then It can go back to 6 months cycle. But until that happens, I think we're going to refine the cycle to a shorter interval. And secondly, with regards to your question about the possible acquisition of a non-life insurance company, there's been a lot of media reports about this, so let me be very brief about this matter. So last June, we have announced that nothing has been finalized that this kind of disclosure has been announced. And with regards to the M&A options, not only we look at nonlife insurance, but we are looking into various options to see which will be really helpful and contribute to our bottom line. And we are reviewing several options, but nothing has been finalized at this point. And secondly, M&A process always has a counterparty, right? And so our company's position only or the other interest parties position has to be considered fully as well. And so a very balanced compromise need to be sought. And so that can lead to a prolonged process. But I think so, thirdly what I would like to notice that from the point of our company's position, as we have announced at the month of April, we have announced a Corporate Enhancement Plan 2.0, and we will continue to pursue M&As in accordance with that plan, a stable CET1 ratio has to be managed and cared. And within that range, if the EPS or the ROE improvement is significant then we will pursue those M&A options. So if Shinhan Group engages in an M&A, then I think you can actually look forward to greater performance, because of that M&A. And finally, if there are any detailed or concrete progress made on this front, then we will be sure to communicate this information to the investors with the market as well. We will be very prompt in ensuring that this information is delivered to the market. Thank you.

Thank you very much. I hope that has answered your question. We will take the next question from HSBC, Mr. Won Jaewoong.

Thank you very much, and thank you very much for the good performance. And also about the share buyback yes, I see that there was an announcement of a sizable amount. So thank you very much for that. So the questions are about the shares and also about the nonbank subsidiaries. So first about the nonbanks subsidiaries, now KB Securities. So they have secured KRW 1 trillion of capital, so increasing their capital to about KRW 8 trillion and are about to get the certification from IME. So then, for example, the short-term note issuance business and so forth. So I believe that now it would also be necessary to expand the business into such areas. So then, let's say, for the company, then perhaps getting the securities business and also increasing it to KRW 8 trillion to get the IME certification. Does the company have any such plan? And also for the capital injection, so does the company believe that the -- if that is the case, then the capital injection, can this be in -- could be placed in the back corner? And then the next question is now regarding the share buyback, now there was also the announcement of the shareholder return formula. And I'm just wondering about how this was created. And also if the share buyback is to be announced again in October, then again, out of this formula. So how should we apply this to come up with some prediction for the October share buyback? So could you give us some criteria?

Well, thank you very much for the very detailed questions. So please also give us a moment to prepare the answers.

No. Thank you. So I believe that I should take this question because it is also about capital injections. So allow me. Now first, about the Shinhan Securities and also the resource allocation. That was part of the question and then also about the connection to the nonlife insurer and whether it is going to be the senior or junior. And this is how I see it. Now for Shinhan Securities and also, for example, Korea Securities and KB, so I would say that their cases are a bit different by which I mean -- now in our case, for example, the short-term note issuance. So we just got the approval only last year. So then, in terms of the leverage line, I believe that we still have some room left there. But then now for the peer groups now in terms of the room in the limit and also the additional needs for the IME business. I believe that, that is the reason why they are moving in that path. Now in our case, what we need is not the RWA limit, but then it's more about the risk limit. So for example, as part of our capital within the 100%, then, for example, the credit line or the brokerage. So where we fall short in terms of the limit, then we are also trying to increase the limit by acquiring some hyper securities as well. And if there is some outcome from this, then yes, I do believe that resource allocation is going to be possible. But as was mentioned earlier, at this time, now in terms of the limit on the short-term note issuance and also for the business as well, we do have some room left. So compared to the other peers, then I believe that immediate capital injection is not warranted. And then you also asked about the connection with the non-life insurer. And I believe that it can be undertaken in parallel, and that is because I do know for insurance. Now there is the capital deduction right away. So there would be an impact on the CET1 right away. But then let's say, if there is capital injection into securities, then it does not mean that there is going to be an immediate increase in the RWA or anything. It means that when there is business performance, this will lead to RWA increase leading to decrease in the CET1, and also if you can get the required return, then the CET1 can be maintained. So now as I mentioned earlier, so we will not be placed in the, let's say, the subordinary level because of this. So if our ROE is high enough, then with this confidence, I believe that we will be able to do the capital injection and the capital allocation as needed. And then the second question. So that was about the shareholder return formula. So when we announced this at the early part of this year, what we said as a way of hint was that now for the October. So let's say, it was going to be the COE level. And last year, it was about 9.11%. So we said that the target ROE was going to be 10%. And second is, now about the denominator, in other words, the growth rate. So of course, the nominal growth rate continues to change, but then we are looking at about 4% to 5%, which is the ordinary level. So that should be denominator. So in terms of the capital, then I believe that, that is going to to be maintained. And then now coming to the RWA, then excluding the exchange rate influence, then the growth in the RWA is falling below 2%. So I believe that the 4% to 5% range is going to maintain. And also we did give some hints for the value up 2.5 -- 2.0, but then now in terms of our logic then, the maximum level is going to be probably 53%, that means that we would also have to make the decision within that. And then also in terms of the denominator and the numerator, then we would also have to link them with this size, and also we need to do some political consideration as well, and that is why this was -- this is to be done in October. And so, so far, the KRW 1.4 trillion of shareholder return and then also considering the quarterly equal dividends and then also in terms of the reversal of the P&L. And -- so considering all this, then we are cautiously optimistic that there could be some additional shareholder return. And that is why we are also mentioning such a shareholder return in October as well.

So I hope that provides a sufficient answer to your question. We will receive the next question. The next question will come from Hana Securities.

I have 2 questions. First of all, the margin. So you are the very first financial group to do an earnings presentation, but we don't have data on other banks, it seems that margins have gone up by 1 bps, the banking business. But if you look at the market rate and the timing of this log, the rise in the margin does not seem to live up to expectations. It seems that the loan to the large companies have increased, and there's a lot of M&A influence. So there can be a lot of speculations, but what do you think internally are the factors behind this result. And up until this month that was a result. And going forward for the third quarter and fourth quarter, what is your estimation or prediction for the margins? And another question has to do with the formula. You have presented this formula last quarter you have provided guidance for this year, it can be in the early 50% range. However, just now you said that excluding the foreign exchange rate, the RWA growth was around 2%. So on the surface on a YTD basis, the RWA has increased 4% for the past 6 months ago. When we look forward to the shareholder return, do we have to look at the RWA growth, excluding the non -- the abnormal factors and foreign exchange rate, but that means that we'll have less visibility. So I cannot really assess the tone of your comments to really exclude these issues when predicting this matter going forward.

So thank you very much for that question. We'll be taking some few seconds to prepare the answer.

So with regards to the first question about the margin, the cause for the current results and what we predict going forward. So that question will be taken up by our CFO, and the second question will be taken up by myself.

Thank you very much for your question. I'm the bank's CFO, Jeong Hoon Jang. So with regards to your question, as of the second quarter, the NIM is 1.61%. And so it's up 5 bps Y-o-Y. And on a Q-o-Q basis, it is up 1 bp as you have noted in the first half, the rise of the market rate should have been reflected, but why is it only 1 bp that it is less than market expectations. I think that was a concern that you have presented to us. But if you look at the market, yes, it has risen to some extent in the first half of the year. But in terms of the funding perspective, because of the strong stock market, there has been a decline in the retail deposits. And overall, the corporate deposits, especially large company deposits have increased significantly. This has had an impact. And starting from the earlier part of the year, we have been very aggressive in pursuing productive finance. And so although it appears so realistically on Q-o-Q basis, it's 1.60. But compared to the 2 quarters previously, there's been a rise of 2 bps. And so if you look at it from a time series manner, so -- the first quarter has been 1.55, 1.56 and 1.58. So continuously, it's moving up. It is continuously increasing. So I think you need to look at the longer trend. And if we forecast the second half. In the month of July, the Monetary Commission has actually decided to increase the benchmark rate by 25 bps. And also, we do believe that -- so there is expectation of additional interest rate hikes. And although the NIM appears to have risen only by 1 bps in the second quarter, compared to the first quarter. We do believe that it will be actually making a greater improvement in the second half. And internally, we believe that there will be another interest rate hike, at least once going into the second half. And if that happens, there can be an additional 4 to 3 bps improvement of the NIM. And also, we have increased the retail deposit, the time deposit rates, and we do believe that this will bring in a greater inflow of deposits. And also from the corporate sector as well, we do expect a greater inflow for the deposit segment. And this will lead to an improvement in the funding structure.