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Good afternoon. This is Park Chulwoo, Head of Investor Relations. Thank you for taking time to join Shinhan Financial Group's earnings presentation for the first quarter of 2026. Joining us today are Group CFO Jang Jonghoon, Group CSO Ko Seokhwan, Chief AI Digital Officer Choi Hyukjae, Group CRO Na Hoon, Shinhan Bank CFO Kang Yonghoon, Shinhan Card CFO Lee Jongbin, Shinhan Securities CFO Lee Jaesong, and Shinhan Life CFO Joo Sung Han. We look forward to your active interest and participation. Today's session will begin with a presentation on the group's first quarter 2026 financial results by our Group CFO, followed by a Q&A session. With that, let me invite Mr. Jang to begin his presentation. Good afternoon. This is Jang Jonghoon, CFO of Shinhan Financial Group. Thank you for joining our earnings presentation for the first quarter of 2026.

On pages two and three of the presentation, I will walk you through our newly announced corporate value-up plan, which was disclosed earlier today. In July 2024, we introduced our value-up plan with three key targets referred to as 10/50/50, and have been executing various initiatives with strong momentum to achieve these goals. As a result, we achieved our 50% shareholder return target ahead of schedule, while also delivering meaningful improvement in PBR, demonstrating both the effectiveness of our strategy and the strength of our execution. In addition, with ongoing tax reforms related to dividend income and continued government efforts to revitalize the capital market, we thought it is now an appropriate time to comprehensively review our existing plan.

Accordingly, under the leadership of our board of directors, we have upgraded our existing value plan, now branded as Shinhan Value Up 3.0 Plus, incorporating the current market environment and our strategic direction. Previously announced value-up plans by financial holding companies largely focused on setting absolute targets at specific points in time to address under-valuation driven by low shareholder returns, or maximizing shareholders' return by opting for full return in case of excess of target. However, we believe it is now time to transition to a new value creation framework that includes not only predictable shareholder return policies, but also a sustainable growth story. Rather than simply returning excess capital or targeting specific numerical threshold, our goal is to establish a sustainable value enhancement framework where shareholder returns and corporate growth are organically aligned, supported by a strong capital base.

Based on this, we have established three new key strategic objectives. First is achieving an ROE of 10%+. We are targeting an ROE that exceeds our cost of equity with a focus on delivering faster improvement. Given our current business portfolio, we expect this to improve at a notably rapid pace. Building on the bank's strong recurring earnings base will strengthen our non-banking competitiveness in a phased manner, focusing capital markets through 2026 and on credit finance business thereafter, and manage our ROE within the 10%-12% range through 2028. In particular, based on Shinhan's proprietary PBR ROC logic tree detailed in our Value-Up materials, we will enhance capital efficiency by simultaneously managing capital ratios, improving profitability across our subsidiaries through a set of granular action plans. Second, a total shareholder return ratio of 50%+.

We have removed our upper cap on shareholder returns rate, while introducing an intuitive formula that takes into account both ROE rate and, based on principles of capital allocation based on our required return rate. Through this approach, we believe investors will be able to more easily anticipate both direction and level of shareholders' return policy alongside the company's growth. However, in periods such as the present, where our ROE remains below COE, we adhere to a principle of gradually increasing shareholder return ratio on a year-over-year basis. We also refined the comprehensive shareholder returns, taking into full account recent tax reforms related to dividend and investor preferences. While maintaining our current equal quarterly dividend policy and a gradual increase in both DPS and total dividend amount, we plan to prioritize the use of tax-exempt dividend resources subject to approval at the March Annual General Meeting this year.

For your reference, our DPS for the next three years will continue to grow by more than 10%, and the allocation between dividend and shareholder buyback will be determined based on a rational framework rather than current returns, and will continue to communicate transparently with the market regarding progress toward our previously announced target of reducing 50 million treasury shares. Third is maintaining a CET1 ratio of 13%+. We'll secure a sufficient capital buffer to account for macroeconomic volatility and maintain stable capital ratio under all conditions. In addition, any excess capital generated through improvement in capital efficiency, including RWA optimization, will be returned to shareholders in principle. Furthermore, under the oversight of the board of directors, we'll annually analyze and review DPS.

Against our target, continue to update our 3-year guidance and actively communicate the results to the market. Let me now turn to our financial results for the first Q of 2026. Turning to page 4 is the business highlights. As of end of first Q 2026, the group CET1 ratio remains stable. We estimate at 13.19%, despite many uncertainties surrounding us. The group board of directors resolved to declare a cash dividend of KRW 741 per share for the first quarter of 2026. For reference, the record date for this cash dividend is April 30th. The shares must be purchased by April 28th to be eligible. Dividend schedule is to be paid by May 29. In addition, out of KRW 700 billion, one share buyback program schedule July 2026, with completion of KRW 4.3 billion, and shares will be retired immediately upon the purchase.

Net income for the first quarter of 2026 amounted to KRW 1,622.6 billion, representing a year-on-year increase of 9%, driven primarily by top line growth centered on non-interest income. Supported by the group's strong financial fundamentals and disciplined capital adequacy management, both ROE and ROTCE improved, reaching 11.9% and 13.4%, up by 0.5 percentage points respectively. Please refer to the key indicators that measure the group's shareholder value. Turning to page 6 on capital. The group CET1 ratio declined by a total of 68 basis points due to RWA growth and also shareholder returns. However, it was managed at a more stable level, reflecting a decline of just 16 basis points relative to the end of last year. Group RWA increased by KRW 7.3 trillion due to asset growth and KRW 3.1 trillion due to foreign exchange movement, but remained well within our planned range.

Going forward, we'll continue to ensure stable capital ratios through efficient internal optimization and strategic resource allocation, while fulfilling our role in providing necessary funding to the real economy. Please refer to page 7 for a breakdown of assets and liabilities. Now, operating profit before expense for the first quarter increased by 11% year-on-year, supported by solid net interest income and significant growth in non-interest income, which I will now explain in greater detail. Group net interest income increased by 5.9% year-on-year, as NIM improved and interest income from securities increased significantly. Bank NIM improved by 2 basis points quarter-on-quarter as loan yields increased in line with rising market interest rates, and funding costs were well managed.

For loans in won, although we saw a decline in household loans due to regulations, overall Korean won loans increased by 1.4% year to date as we strengthen our role in providing productive financing to corporate borrowers. Onto non-interest income. Group non-interest income increased by 26.5% year-over-year, with strong performance in fee income and broad-based improvement across other segments. Fee income performed well across most categories, excluding investment banking fees, which declined due to a high base effect from the prior year. In particular, brokerage fees increased by 215.2% year-over-year, driven by strong equity market activity, leading overall growth. Fees related to fund sales and bancassurance also increased by 54.7% year-over-year, continuing their upward trend in line with government policies to promote capital market development.

Gains on securities declined in bond-related income due to the recent sharp rise in market interest rates, but was offset by valuation gains on other securities. Insurance-related profit also increased by 8.7% year-on-year, and we expect to maintain stable earnings through disciplined management of CSM. Next on to SG&A credit costs. Group SG&A expenses increased by 10.4% year-on-year due to higher education tax, despite ongoing cost efficiency efforts across our subsidiaries, including different business segments. However, with operating profit increasing significantly, the cost income ratio declined slightly to 36.7%, remaining at a stable level. Credit costs for the first quarter increased by 17.5% year-on-year, driven mainly by higher recurring credit costs, including increased write-offs at the bank and some emergence of corporate non-performing exposure.

It is somewhat encouraging that one-off credit costs related to real estate project financing have stabilized as a result of our preemptive and conservative provisioning in prior periods. Amid continued uncertainty driven by high interest rates and elevated FX levels and ongoing geopolitical risk, the credit cost ratio increased by 5 basis points year-on-year to 46 basis points. However, we will continue to manage credit costs rigorously with our full year target range of mid 40 basis points. Onto NPL. The group NPL coverage ratio declined by 12.4 percentage points compared to year-end, despite proactive write-offs and NPL sale policy and conservative provisioning. This was mainly due to an increase in substandard and below exposures, resulting from principal and interest payments related to project financing sites where trust phase construction completion guarantee obligations had expired. These impacts, however, have already been factored in prior year credit costs.

Delinquency ratios for both the bank and the card business, which has been gradually improving, increased slightly in the quarter. However, the bank recorded the lowest level of net new delinquency in the industry. For card, the increase was driven by a reduction in total assets due to lending regulations and remains more than manageable. Given the continued economic slowdown, rising corporate credit risk, and ongoing challenges faced by vulnerable customer segments, we believe it will be important to maintain conservative asset quality management while providing timely and appropriate funding support. Regarding the fund for loss absorption capacity and charge-off activity, we will move on to subsidiary performance. The securities business delivered strong earnings growth of 167.4% year-on-year, driven by increased brokers' commissions from higher trading volume, improved prop trading income among strong capital market dynamics.

The bank recorded 2.6% year-over-year growth in earnings, supported by net interest income, despite declines in security-related gains, higher credit costs, and the impact of increased education tax. The card business saw a decline of 14.9% year-over-year, as improvements in operating revenue and credit costs were offset by one-off expenses related to voluntary retirement programs. For Shinhan Capital, it recorded a significant improvement in earnings, driven by gains on securities, including dividend income supported by favorable market conditions. The life insurance business experienced weaker performance year-over-year due to higher loss ratios, leading to increased insurance various loss, and a decline in insurance finance income from rising market interest rates. As mentioned earlier, beginning with this earnings release, we are providing additional disclosure of quarterly net income, RWA, and return on capital by segment for your reference.

Page 15, we have detailed information on our overseas business performance, which continued to demonstrate differentiated growth. Pages 16 and 17 provide updates on our digital initiatives and ESG. From page 19, you will find detailed financial statements at the subsidiary level, funding and asset liability management as well. This concludes our presentation. Thank you very much. Now we will begin Q&A session. If you have any questions, please use the Raise Hand function on your Zoom. We will accept first question. The first question is from NH Investment & Securities, Mr. Jeong Jun-seop. This is Jeong Jun-seop from NH Investment & Securities. Thank you for the opportunity to ask some questions. Actually, I have two. First, regarding your corporate value enhancement program, thank you very much for your thoughtful program.

Now, productive finance is being promoted by the government, and there were some announcements by the government to ease capital requirements. If those eased requirements are applied, how much of an improvement will there be, say, in terms of your CET1? In terms of the improvement, is it available to fund shareholder returns? For example, to regulatory authorities, the point of easing the requirement would be to direct more towards productive financing to, say, 13.4%, so excess capital beyond 13%. How can you use that excess capital? The second question, you did mention your value-up plans. I think it's on page 16 of your slides. There is an internal limit in terms of internal return. Cost of equity, PBR. I see you said you're going to use the ROE, PBR logic. What is your internal hurdle rate in terms of expected returns?

Your implied returns? Yes. Thank you very much for the questions. Please hold just for a moment as we prepare the answers. Regarding the first question regarding the easing of capital requirements, our Group CRO will take that first, and then the remainder, I think I will be able to follow up on. Yes, I'm the Group CRO. You mentioned productive financing, and rationalization of capital requirements by the authorities. From a market risk perspective, retained earnings and equity contribution, for example, will be included in the scope. We're still in the process of seeking approval from the authorities, so it is pending, and depending on the result, it may have an impact, but 10 basis points or so improvement we think is possible in terms of our CET1. Then operational risk. Exemptions in terms of count RWA.

Things are quite fluid at the moment regarding approval at the board level and the regulatory authority's position. Market and operational RWA combined, I think maybe we can see about 20 basis points or more in upside in our CET1. Let me take the remainder of the questions. Like we have heard, 20 basis point or more, potentially, we can see that kind of improvement. Like you said, well, in terms of our value plan, we actually explained there. We have been seeing some fluctuation quarter on quarter. Net max 36 basis points or so. Yes. That variance actually was quite wide at around 36 basis points. While we say 13%+, in the DBS model, our peers. Maybe from 13.0% to 14.4%, maybe we will not see additional returns within that range.

Toward the end of the year, we'll look at the balance between growth and shareholder return. We will have to make some internal decision-making between the two sides. Perhaps at the end of this year, it will be factored into our growth plan as well as our shareholder return policy as well. Regarding our internal hurdle, so for the first quarter, well, the closing of the accounts was done in February. We mentioned at that conference call that 9.1% is our TGROE, and we want to grow our net income by more than 10%. That was our guidance. In terms of our internal hurdle, this is about the additional incremental returns. CBR is 0.8, and COE and ROE, well, our target ROE is 10%. That said, our internal marginal return, it will be slightly higher than the inverse, which is 12.5%.

That is our internal view anyway. Our company-wide ROE is still below COE slightly, so we are looking at things more cautiously. Until we see more of a normalized phase, we are looking to gradually increase shareholder returns. That is already incorporated in our value plan. Yes, usually, I don't comment about the finance part, but I'm in charge of strategy for the Shinhan Financial Group. Regarding productive finance, I do lead our initiatives. The first question by Mr. Jung, you talked about shareholder return. If we could use that increase in CET1 toward shareholder return. The purpose or the intention behind easing of the regulations was not for the purpose of returning more to shareholders. It was, in principle, meant to be directed more toward productive financing.

In principle, we should be aligned to the purpose behind the easing. It should be more toward growth so that it can be used to fund productive financing. We do believe that is consistent with the intention. Of course, it's not always very clean cut each time. We will look at the overall situation from a more comprehensive view, as was explained by our CFO. I hope that was a sufficient answer. We will move on to the next question, please. From HSBC, Mr. Wang Jung, please go ahead. Regarding shareholder return. Thank you for giving very careful thought and for providing a very refined program. I have two questions about that. First, in the formula, what is the definition of growth? I'd like to know. Because, is it capital growth or RWA growth?

Depending on which it is, it can actually mean a big difference in numbers for TSR. If ROE is 9.5, RWA growth target is between 4%-5%, and capital growth target, I think on average it's about 3%. Actually, the range is quite big. Between the two, what do you mean exactly when you say growth? It will help us in our projections if you give us more color. Now, I'm thinking that perhaps that in the fourth quarter, you might announce a decision about how to use the available amount. For this year, what should we expect? Will we have to use a different formula at mid-year? In terms of timing of actual application of this formula, could you give us more color when exactly it will start to be applied? Okay, thank you very much.

We will ask you to hold as we prepare the answer. Regarding the first question, like you said, we are thinking hard about what you pointed out. If we deep dive a little bit, we came up with this formula because CET1. One assumption was that we maintain the CET1, and then the capital growth in inverse, it comes out to the TSR. That's the formula. Maintaining CET1 means that relative to RWA growth, capital growth actually has to be bigger. Capital growth then can be a main factor. Then temporarily, if RWA, will it be 3% growth or 7% growth? It can depend. We want more stability, and probably we will find the more stable of the two.

Your concern is that the average growth of capital, we're not using that 2% or 3%, but within, there will be a capital adjustment. There are different buffers that will be removed, and we're looking at pure capital growth. Something between 4%-5%, we think that will be the level. That means that our RWA growth, we will obviously try to maintain that growth within that range, 4%-5%. We added plus alpha because if we have more upside available, then we can add on potentially, which is why we have that plus in the formula. In the most typical example, target ROE and our target growth. By growth, we mean capital growth or RWA growth. I use the word or. Capital growth or RWA growth. I think ultimately both will converge within the 4%-5% band.

Within the next few years, TSR will likely be within the 50%-60% range. That is what is incorporated in the plan. Now, in terms of the timing of application, like I said, possibly within the fourth quarter, we will probably share our consensus view with you. At that time, we will look at the growth, pricing, margin profile, CCR, and we'll share. I think this will also come up naturally in that context. Based on our business plan, as we have said, for this year anyway, if we apply this as is, CET1 is 9.1%. ROTCE is lower than COE. That means TSR should be higher than last year. That's one. RWA growth and capital growth, when we did the calculation, as shown in the example, it's about 5.1% or so.

CET1, the plan was to lower the CET1 by about eight basis points. This converts to about a 4% impact in terms of the shareholder return ratio. For this year, 50.2% plus alpha and the max 53%, I think likely it will be somewhere in between that range. That is our internal calculation.

Well, I hope that answered your question. We will now go to the next question. If you have any questions, please use the raise hand function in your Zoom. iM Securities, Seo Yong-jin, please go ahead with your question. Yes. Thank you very much. Now, one question I have is that I think you can become issuer in your securities company. What is your anticipated return rate or profitability objectives, and the issued amount? Please hold while we prepare for your answer. I think Shinhan Securities' CFO can answer your question. I'm Lee Jaesung, CFO of Shinhan Securities. Thank you very much for the question. At the year-end, we got licensed as an issuer. In February, we start the issuance, and currently about KRW 240 billion has been issued.

For this year, I think to make it as a stable vehicle in terms of issue size and volume, we would like to keep in control. I target currently, let's say for year one, about return rate of 100 basis points is our plan. Okay. Hope that answered your question. Now we will accept next question. If you have any question, again, please use the raise hand function in your Zoom.

Analyst Kim Do-ha from Hana Securities, please.

Yes. Please unmute yourself. I'm sorry about that.

In terms of assets on it, NPL coverage ratio is 110% for the holding company. It is quite lower than before. Up to now, delinquencies don't appear to have entered the improvement cycle yet. Regarding your added NPL burden, do you need to do additional provisioning expense? For example, petrochemical companies, there are concerns about the lagging effect from that sector. In terms of your asset quality and the burden in terms of additional provisioning, what is the view? I also have two very simple questions as well. For the next three years, tax-exempt dividends will be a priority you said. You have KRW 9.9 trillion available for distribution, but it won't be used all at once. Are you going to leave some?

For AOCI, our capital appears a bit improved, but because of the rising interest rates, I thought that it would go down because of valuation losses. Maybe it's because of your life’s business. Could you just explain the duration gap?

Okay, thank you for the question. Please hold just one moment as we prepare the answer. Yes. Regarding the first question regarding assets down there

Our group CRO will cover that. Regarding the tax expense distributions, I will explain. Number three, regarding the duration gap, we'll hear from the Shinhan Life side. The group CRO will begin. Yes, thank you for the good question. First, regarding the NPL coverage ratio, the 0.81% is substandard or below for the group. Now, there has been an increase of KRW 40 billion-KRW 60 billion in NPL, and so the NPL coverage ratio did go down about 12.4 percentage points from last year. It's about 113%. If you look at the overall trajectory, credit cost for the group in 2022, prior to that spike in interest rates, we went through a very low rate environment. At that time, credit cost annually was below KRW 1 trillion. With rising interest rates starting in 2023, it started to see KRW 2 trillion.

More recently, with the delayed recovery of the economic slowdown, we are seeing more increase in delinquency for the group overall, substandard or below or delinquency NPL. These indicators, actually, for the most part, are improving. Our goal is NPL coverage ratio of 150% as the bottom line for the bank. Then we will engage in selective write-off and sales, and to maintain asset quality. In terms of our current provisioning against our total loan portfolio, NPL coverage ratio, we want to maintain at above 110%. For tax-exempt dividends, at the time of planning, we said that we will provide a three-year guidance. For the next three years, that's what we mean by priority to tax-exempt dividends. If we have leftover resources, potentially, yes, we can consider other options as well.

After the duration gap answer, if I have anything to add, I will try. Under CFO of Life, as of compared to end of December, interest rates have gone up by more than 40 basis points. As of December, duration gap was 0.2, so slight plus. As of the end of March, it's about 1, is what we expect. The duration gap actually is improving. Just to explain a little bit, I think you're asking about the capital adjustment. OCI valuation loss, yes, there was some loss, but in the past we had M&As and adjustment of consolidated entities. It's a mix, and overall, there is an overall offsetting effect among those factors. Thank you very much. I think there's another question from J.P. Morgan Securities. If it's you, please go ahead. Yes, thank you for the opportunity to ask.

I would like to ask about the tax-exempt dividends. I'm a little bit confused, so let me ask about that. 9 trillion or so have been transferred into retained earnings. And you said that with priority, they will be used for tax-exempt dividends. Do you mean that that full amount will be provided as tax-exempt cash dividends? Or is that also a mix of the separate taxation dividends as well? Separate taxation with the amendment of the tax clause, every year the cash dividend actually will have to be increased by 10% year-on-year to qualify. For tax-exempt dividends, do you assume that cash dividends can increase by more than 10% year-on-year? Is that the plan?

The second question is, I think you said before that this year the capital market will likely be promoted, so you want to grow the securities business, and also you will work on improving the card business as well. What is your target ROE for securities and for your credit card business as well? When you think for the capital market, there has been a lot of activities among retail investors as well, so I can see why securities business might grow. But merchant fees are increasing and household loans are decreasing. So how do you expect to improve profitability for the credit card business? So do you have a certain strategy in mind that you could share with us? Thank you. Yeah. Thank you for the question. Please hold as we prepare to answer.

Yes, regarding the first question, just to clarify, as you said, for this year anyway, as you know, we had the AGM in March to approve the capital reduced dividend. Well, actually, we cannot do the tax exemption dividend yet. Only upon closing can we do that at the end of the year. For this year, first and second, third quarter, we will be subject to separate taxation. Next year, post account closing at the end of the year, we will then move on to tax-exempt dividends. Three years going forward, we will do full tax-exempt dividends. There is a three-year grace period for separate taxation. We gave some thought to what would happen after the grace period was finished, but there were high expectations among investors for tax-exempt dividends.

As much as possible, we wanted to continue to provide that. Because it's tax-exempt, obviously, that means we don't necessarily have to increase cash dividends by 10% or more every year. A 10% threshold is on the size of the dividend, whereas what we are talking about now is EPS, that we want to increase EPS by 10% year-on-year, which is more strongly perceived by the investors. We think net income is likely to grow by more than 10% this year. Naturally, then EPS likely is also to grow by that much as well. On top of that, of course, we will continue to do share buybacks and cancellations. When that is considered, even if we increase EPS by 10% or more, as we do tax-exempt dividends, we're very confident that we can increase EPS by 10% or more.

We're very confident, which is why we include it in our announcement. Regarding the securities business, the brokerage business, you will know, but the brokerage business before, maybe 10 years ago, was always last. Now, as you know, the ROE has improved significantly for the security sector overall. For us, securities usually is about KRW 5.8 trillion in terms of capital base. ROE, I think, is likely going to exceed that this year. Now we are working to make sure that that is sustainable. Regarding credit specialized finance, you said that you're not convinced. When we talk about the credit card performance, we thought that this year it's down by about KRW 20 billion year-on-year. In the first quarter, we already had some impact from the voluntary retirement. We did mention the non-recurring earnings.

If we see those earnings coming through, we're contemplating different options, and there are different stakeholder interests involved, so we are cautious. We did hint that we will look at making the composition between cost and earnings more efficient. As we do that throughout the year, while performance will not dramatically increase, so we think underlying foundation or the fundamentals can gradually improve. Our approach is that we will see gradual improvement of the performance. I hope that was a full answer. From Mirae Asset, we have Mr. Tae Joon Jeong. Please go ahead.

Well, good afternoon. I'm Tae Joon Jeong from Mirae Asset Securities. I do have two questions. First is the rate is actually growing up, and this is resulting in different situations. What's your guidance going forward on that point? Is my first question. My second question is, 34% or above, you said you're going to return it immediately. At year-end, if it's going to exceed that threshold, then for the exit, that may be bought back next year. Is that correct understanding?

So please hold while we prepare for your answer.

Yes.

On your first question, Bank CFO can answer. On the second question, I will answer that.

Good afternoon. I am Jang Jeong Hoon, CFO. First, NIM, if I may share with you, for the first two NIM is 1.6% compared to previous quarter, it increased by 5 bps. It's improvement by 2 bps because of the market situation improvement and favorable conditions formed in the market. Since the latter half of last year, we focused on profit-oriented growth. I think that also helped. What will happen to market rate, to give you some projections. Now, currently, the domestic economy is not really doing well, meaning there are some downward pressure on the rate, but if you consider inflation and expected rate, there's not much room to move upward or downward. That's our anticipation.

Neutrally, we believe that market rate will continue as is, and under that estimation, very profitable, high-quality, asset-oriented productive finance can be expanded, and that could also help increase our liquidity. That resulting in improvement in NIM, and we'll do our best to achieve that. In summary, NIM will maintain the current level, or we will try best even to improve that. In the beginning, about the second question, from 13.0 to 13.4 is the range that we'll be managing. But if it existed, is it going to be given out? Not really. If it goes be-

Beyond that range, if it's excess amount, of course, it needs to return to our shareholders. Except in planning any room for excess growth or as I said before, in marginal internal return rate, we are very cautious, but ours is a bit higher than the market COE. By year-end or beginning of next year, how to utilize that decision will be, in other words, will be made at that time. But as our international peers, they don't automatically return excess because it exceeded 13.5%. If it's like excess, significant increase, then the logic is to give it within few years. Basically, our philosophy is as we keep repeating ourselves, the most important thing is ROE. If the ROE increases, then of course return rate would naturally go up in terms of also size.

Through the growth efficiency, we will also focus on maximizing shareholders return, and we can commit to that. Thank you very much for that answer. Park from Goldman Sachs, please go ahead with your question. Yes, this is Sinyoung Park from Goldman Sachs Securities. Regarding ROE, I had some additional questions for you. Ultimately, as you said, ROE has to grow in order for the shareholder return ratio and the total size of shareholder returns to grow. In the materials, I think you're saying 10%-12% is your target range for ROE over the next three years. Bank versus non-bank. Well, bank will be maintaining status quo, non-bank based on ROC is targeting an improvement by about three to four percentage points, which is actually quite a sizable improvement, I would say.

What would be the main drivers that allow you to improve it by that much? Will it be about improving asset quality? Or what kind of improvement in profitability do you expect or are you planning? As you've seen in the materials, for non-bank, so non-banking has been a strength of our group for many years. I think we're past the rough patch where it was challenged. The non-bank ROC, why do we expect it to improve? Well, of course, there will be some impact on the market. Brokerage, of course, is very active for the groups with security arms. In that case, the ROC, ROE obviously will improve. Well, to what extent will it improve?

I talked about how we expect fast improvement because the securities firms of other peer groups are already at a high level, and so while they can grow the overall size of their net income, they're already at a higher level, whereas we start from a lower end. For securities, ROC, we're not thinking about just 10%, but we think that we will be able to achieve quite a significant jump in terms of absolute ROC. Bank and securities will be the two leading pillars. That said, of course, top line plus profitability, given current conditions, of course, is not very easy. For us, the two big directions are like this. I mentioned how we want a phased and gradual approach. For this year, we will focus on acquiring more customers because ultimately they translate into the bottom line for our business.

Internally, we are preparing for fast customer acquisition. Then in a more direct sense, it's ultimately about cost efficiency. As I said, it's about fundamentally changing the structure to make the cost structure more efficient to strengthen our fundamentals, our funding cost going down and provisioning improving. We can't just blindly expect that to happen because the situation is more challenging. It will not happen just on its own. We have to make the cost structure more efficient. When there are one-offs in terms of the top line, where there is upside, we will direct that to improve our underlying fundamentals. APS, allowing that we can contemplate potentially M&As. If that is not required, we can actually do bold consolidation of our business portfolio as well. We are looking at various options in a broad sense.

I hope that was a sufficient answer for you. Yes. I think we have from White Oak Capital, a question from Mr. Shane Mathews. Please go ahead.

Thank you for the opportunity and congratulations on the results. Just one question. Wanted to confirm the group level NPL coverage, is it targeted at 110% now? If that's the case, when we look at pre-2019 levels, the coverage levels were maybe 20, 30 percentage point at least higher. Why consider operating at a lower coverage level now versus before? What is the change in thinking at this point in time?

Yes. Thank you for the question. Please hold as we prepare the answer.

Yes. This should be answered by the Group CRO, and I will add if required at the end.

Yes, I'm the Group CRO. Regarding credit costs, when I was explaining about that, from a long perspective, I talked about credit cost trends. In 2022, after we saw that spike in interest rates, the real estate market was not good, and credit costs among all financial groups actually was quite elevated and poor. NPL in the write-offs and sale market, there's a lot of supply recently, so pricing actually is not good. Write-offs and sales, it's not very active at the moment either. Real estate market, in order for it to recover, until that time, we need some time to sort out the exposure. Until then, we do believe that the NPL coverage ratio is likely to be a bit lower than in the past.

Depending on how fast the market stabilizes and market interest rate, if we're able to push the write-offs and sales more, that can have the effect of improving our NPL coverage ratio. Let me just add a little bit. For us, 110%, it is lower for us at the group level. The bank, it's about 150%. We expect to continue to maintain 150% for the bank. Why 110%? We have Shinhan Asset Trust. That was the main reason. Through litigation or trust, we incorporated it onto our books. We have already recognized the necessary provisions, though. Until the assets are liquidated and sold off, it will be captured and booked as NPL. The absolute number is quite substantial, which is the main factor why our group NPL coverage is down to 110%. We will have to see how the real estate property market develops going forward.

Even if we have to sell at a certain discount, as we recover NPL, it will take a year or two years maybe, which is why in the short term, our target is set lower at 110%.

Thank you very much. I hope that was a sufficient answer. Time has passed quite a lot, so if you have any additional questions, there seems to be no more questions. With this, we would like to conclude Shinhan Financial Group's earnings call for the Q1 2026. Replay of today's presentation will be available on our website and Shinhan Financial Group IR YouTube channel. If you have any further questions regarding today's results or new Value Up plan, it's all disclosed on our website. Please, you can reference that. Of course, if you have any additional questions, please contact our IR team. With that, we will see you at the next earnings call. Thank you.

Good afternoon. This is Cheol Woo Park, in charge of IR. I thank everyone for joining us at the 2025 third quarter earnings release by Shinhan Financial Group despite your busy schedule. Today, we have here with us Group CFO, Sang Yung Chun; Group CSO, SeogHeon Koh; Group CRO, Dong-kwon Bang; Shinhan Bank CFO, Jeongbin Lee; Shinhan Card CFO, Haechang Park; Shinhan Securities CFO, Jeonghoon Jang; and Shinhan Life CFO, Sunghwan Joo. We will start out with the CFO's presentation on business performance of Q3 2025, followed by a Q&A session with the executives present here with us. Let me now go to CFO Chun to start the presentation.

Good afternoon. Thank you for joining us for the third quarter 2025 earnings release. I will begin from Page 2, business performance highlights. As of the end of September 2025, the group's CET1 ratio was preliminarily estimated at 13.56%, maintaining a stable level. It results from our unending RWA management effort combined with robust profit generation despite the won depreciation and growth in loan assets for future preparedness. Based on this, Board today resolved on cash dividend of KRW 570 per share for the third quarter. Shareholder return in 2025 is expected to be around KRW 2.35 trillion with KRW 1.1 trillion in cash dividend plus KRW 1.25 trillion in share buyback. The shareholder return policy is expected to remain unchanged in the foreseeable future given the stable CET1 ratio and financial soundness. In Q3, the group's net income was KRW 1.4235 trillion despite the decrease in securities-related profits as credit costs were well under control. The cost/income ratio also remained stable. Credit cost ratio stood at 46 bp, up 2 basis points year-on-year, but has generally improved, decreasing Q-o-Q. But whether the asset quality will turn around to decreasing trend, we will have to wait and see due to current combination of factors such as uncertainties in the macro environment and domestic economy. Next is Page 3, capital. As explained earlier, the group's CET1 ratio was kept at 6 bp lower Q-o-Q, thanks to stable net income despite the numerous factors driving up RWA. The group's RWA increased by KRW 8 trillion Q-o-Q, driven by growth in foreign currency-denominated RWA due to won depreciation and loan-driven asset growth. We will keep our utmost focus on maintaining a stable capital adequacy ratio by supplying sufficient funds where and when needed, while improving internal efficiency and strategic resource allocation. Please refer to the slide for details on assets and liabilities on Page 4. Page 5, group's profit and loss. The group's Q3 net income was managed at 8.1% decline Q-o-Q. There was a decline in securities-related profits, reflecting market rate movements, but credit cost was well controlled. ROE and ROTCE, key indicators in corporate value enhancement plan, rose by 0.7 percentage points, respectively Y-o-Y to 11.1% and 12.5%. I will go into more details by item from the next page. Page 6, interest income. Group interest income rose by 2.9% Q-o-Q, thanks to profitability-based asset growth and active margin control. The bank's loan in won increased by 2.7% Q-o-Q. The retail sector grew by 3.1%, primarily driven by policy funds on the back of growing market demand, while the corporate segment grew by 2.3% through proactive funding, also thanks to the active growth strategy from July. Please refer to Page 26 for further details. The bank's NIM rose to 1.56%, up 1 bp Q-o-Q. Although the interest-bearing asset yield fell by 12 bps Q-o-Q, reflecting market rates, including won-denominated loans, it was more than offset by the improvement in funding cost. Next page, noninterest income. The group's noninterest income decreased Q-o-Q, reflecting market conditions. Gains on securities, FX and derivatives declined, while fees remained stable. Credit card fees decreased Q-o-Q due to increased promotional expenses in response to seasonal factors like the Chuseok holidays, but brokerage fees, IB-related fees and product sales fees, including funds, surged Q-o-Q on the back of recent capital market activities. Insurance-related profits decreased by 2.4% Q-o-Q, but profitability remained stable, thanks to scaled up CSM management. Moving on Page 8, group's SG&A expense and credit costs. Group's SG&A increased by 2.2% Q-on-Q due to recognition of voluntary retirement costs at Shinhan Card. However, CIR on a cumulative basis remained stable at 37.3%, maintaining a sound level. Credit cost decreased by 30.1% quarter-on-quarter, reflecting the expiration of corporate credit rating impacts recognized in the previous quarter and the group's continued efforts to manage asset quality. Additional provisions arising from the government-led real estate PF workout plan also decreased significantly Q-on-Q, remaining within our anticipated range. Credit risk among corporate has risen due to delayed economic recovery and challenges persist among vulnerable customer segments. Along with timely funding, more prudent asset quality management will be needed. Turning to Page 9, here are the group's asset quality indicators. Group's NPL coverage ratio declined by 2.9 percentage points quarter-on-quarter as the balance of substandard and below loans in the nonbank sector increased. However, the bank's NPL coverage ratio improved by 12.17 percentage points quarter-on-quarter, supported by the NPL sales and strengthened asset quality management. Delinquency ratio at both the bank and card are also gradually improving. Detailed information on the group's loss absorption capacity NPL sales provided on the following page. Page 11 is profit and loss of our subsidiaries and overseas businesses. Shinhan Bank's earnings declined slightly from the previous quarter, impacted by noninterest income factors, including marketable securities. For details, please refer to Page 21. Shinhan Card posted higher earnings over previous quarter despite the decrease in merchant fee income and recognition of voluntary retirement cost, thanks to reduced credit cost supported by improved asset quality. Shinhan Securities earnings decreased Q-on-Q due to lower product management income. However, the company continues to restore its structural earnings capacity year-on-year through enhanced competitiveness in its core business areas. Shinhan Capital continued to face pressure on funding and credit cost showing a subdued performance. Specialty credit subsidiaries, including card and capital, are steadily improving fundamentals through asset rebalancing and various self-help measures and are expected to gradually recover profitability. Overseas services delivered differentiated results in Q3, particularly in Japan and Vietnam despite ongoing domestic and global uncertainties. Page 12 through 13 summarize our performance in digital initiatives and sustainable management activities. From Page 15 to 18 are the progress of our corporate value-up plan. Overall, the group has achieved solid results in terms of execution, speed and outcomes compared with the plans announced last year and early this year. Please refer to the materials for detailed information. From Page 18 onward, we will find details on the financial status, P&L and funding and investment operations of each subsidiary. Korean financial industry faces challenge, a productive financial transformation to support Korea's economic recovery and sustainable growth. Forward, Shinhan Financial Group will continue its consistent approach of allocating resources to corporate finance while providing timing and efficient funding. We will lead in fulfilling the financial industry's core role in intermediating capital management, managing risk and supporting growth. This concludes our presentation. Thank you very much for your attention.

Thank you very much. And now we will take your questions. [Operator Instructions] And now we will take your questions. The first question will be delivered by Mr. Jung Jun-Sup from NH Securities.

I am Jung Jun-Sup from NH Securities. So I have 2. Now first is about the capital policy. So the government recently is talking about the dividend payout, the separation taxation and then also the similar in other industries as well. So now then in terms of the dividend tax, then I wonder whether related to the dividend tax, have there been any discussions about changes in the group's dividend policy? And then second is about the loan. So the government continues to control the household loans. And I believe that there has been a bit of an excess in the quota that has been given. Then also more recently, now the deposits are also appearing to decline. So it seems as if both the loans and deposits are unlikely to grow much in the future. Then looking ahead to the fourth quarter and beyond, then what would be the outlook for the group's loans and deposits? And also, how does the group intend to respond to these changes?

Thank you very much for the questions. And please wait a moment for us to prepare our response.

Thank you very much. So there were 2 questions. Now first, about the capital policy, I will respond to that. And then now with regards to the loan and deposit outlook for the longer term, then that will be responded to by the bank's CFO. Now first, about the capital policy. So you talked about the dividend payout separate taxation and then the non-tax dividend payout. And then first, regarding this, we have had some discussions at the BOD. So through the workshop, we have discussed the shareholder return policy. But given the fact that we have yet to come up with the business plan for next year, we have not made any decisions. But of course, having said that, now with the dividend payment separate taxation then now also to broaden the individual shareholders, now in order to be in alignment with the taxation policy, then we also intend to slightly increase the dividend payout. Having said that, now there's a number of indicators for our shareholder return policies. So for example, shareholder -- the share buyback and cancellation. So even if we do that, then this will not be undermining each of our policies. So we would also look into that. And next is about the tax-exempt dividend payout. And yes, we have also discussed this several times. And yes, we do have some profit available for dividend payout. But then now, looking at the industry trends then, now yes, there is also this kind of a dividend payout that is [indiscernible]. So we would have to wait and see, but we would also be positive about the changes as well. With regards to these overall changes, I do believe that we will be coming to some kind of decisions as the Board has to come up with the business plan for next year. But then overall, I can say that we are positive about both aspects.

Thank you very much. And now this is the CFO of the bank. So the question was about the deposits and loans. So now first, about the loans, then now in the first half, now given the fact that we have grown in the previous year, so we were conservative in terms of our loan growth outlook. So that was for the corporate loan. And then now for also loan, then -- now there was also some increase. And then also, yes, in terms of the banks, then we are a bit over the guidance that was given by the government. But then for the fourth quarter, I do believe that we will be in line with that. And then now for the corporate loan, as I have mentioned earlier, now there was some conservative growth in the first half. But then now in the third quarter, then there was over KRW 1 trillion growth in the corporate loan. And then now for the year, then we were actually planning for about KRW 9 trillion growth. But then now so the actual utilization will be about KRW 7 trillion to KRW 8 trillion. Then also the loan is in won so we were planning for about 5% growth. But then now for the year 2025, we will be growing by about high [indiscernible] so not too different from the plan. Then we're looking ahead to next year for the [indiscernible] loans growth. Now for the household loan, obviously, there are a number of regulations [indiscernible] specific environment for this. So it is not likely for the household loan to grow very [indiscernible] But then yes, there would also be some policy funds to be provided by the government. Then now for the corporate loans, then now compared to this year, so to be in line with the government's policy like the productive finance, I do believe that there will be more growth than this year. But having said that, next year, it is likely to be around 5% to 6% next year. And then about the [indiscernible]. And for this series, there were also some discussions about the deposit. And this is, of course, funding is very important. And also the cost management is also very important. So now then for this year, so we have also focused on the funding control to also defend the NIM. But then also, on the other hand, we also need to ensure funding stability. So yes, we also have a funding management strategy. Now in the fourth quarter, yes, there are -- for the traditionally, now this is the funding maturity period for the bank. So we are also making preparation. And also, the question was some concerns about the expected difficulties for the deposit. And yes, for the individuals and for example, the time deposit, it is being reduced, but then now we also are managing the interest rate quite tightly. So next year, next year perhaps, you can have more appropriate management of the interest rates so that we will be able to have stable funding.

And then also last part of the question, so about funding moving to the capital market and how the group is making the decision for this. Now as the bank's CFO has mentioned, so it seems as if there is a little change in terms of the capital flow in and outside of the bank. But then now, we can see that now for the money flow, so we see that it continues to be stable. But now in terms of the resource allocation, now for the next year and rather than the resource allocation in the bank, we would also allocate more resources to the capital market, and we intend to be flexible depending on the market circumstances.

I hope that answered your question. We will move to the next question. [Operator Instructions] HSBC's Won Jaewoong, you have a question. Please go ahead.

Thank you for good results. Now looking at Page 9, the bank delinquency rate seems to be staying stable. So I was fairly encouraged by that. Now then such trend in fourth Q do you think will continue also for the next year also? That's my first question. The next question is that card delinquency rate in the third Q, it dropped significantly. So the public will [indiscernible] support coupon, may that happen? Or on the card side, do you think there is also signs of stabilization? And the next question is about the credit cost. Now this year, the guideline was about mid 40 bp. I do believe that was your target range. Then in the third Q, you managed quite well, given that in the fourth Q, seasonality makes that we need more provisioning. So I think it could creep up. And does that mean that the credit cost needs to be expected higher than anticipated and fourth Q one-off provision, it's not going to be that high. That's my question.

Well, thank you for your question. While we prepare for the answer, please bear with us.

Yes. Thank you for that question. Now in terms of the asset quality prospects and second was related to credit costs. About credit cost, I will answer first. And about the asset quality on the overall situation, Group CRO, will respond to that. And Banks and Card CFO will talk about banks and cards asset quality related and respectively. Now in terms of guidance on credit costs, if I may give you the conclusion first. As I said, the mid-40 bp in the first half earnings call, I think it's going to hold for the coming period also. Of course, seasonality require more provisioning. But if our simulation shows that within this range, the mid-40 bp range would cover everything. Of course, in the future, on a short-term basis, there could be some unforeseen circumstances, but in the current position, I believe the mid-40 bp range still stands going forward.

And I'm CRO. Let me give you overall response to the asset quality. So bank delinquency rate, yes, you said it was stabilizing. So on a group level, not only bank, but for all of our subsidiaries, including nonbank side. In terms of asset quality, I think we are seeing signs of flattening. But as you know, there's a lot of uncertainties in terms of economic outlook and also there's also other external uncertain factors, including tariff situation. So in terms of now the prices and the current policies again are all uncertain. So the flattening, whether it will go down further, I think it's only to make any judgment. So fourth Q up to the first Q of next year, we just have to wait and see. So we will maintain the current trend up to that time, then I think the result will be positive. That's our anticipation. And as you know, on the banking side, on the banking sector, in Korea, we are one of the relatively best in terms of asset quality. So we will try best to maintain that.

Yes, I'm CFO of the Bank. So if I may add on a response to the CRO. So for Shinhan Bank, when it comes to asset quality, up to a few years ago, among the top 4 banks in Korea, we were actually falling a bit short. So asset quality, of course, is very important, while continuing growth is also important. So we have made various efforts for asset quality, like credit risk system, the management, the portfolio level. And as a result, among the top 4 banks, delinquency and other things are very much staying positively. But as the CRO stated, asset quality or delinquency rate, whether it has become stable, it's too early to say. But flattening, it seems to be continuing, but I think we need to keep our guards up. So within first half of next year up to that period, we have to keep close tab on the asset quality and manage it tightly. Additionally, on the banking side, the credit cost, we are managing on the bank level also. So on the fourth Q, when it comes to credit cards, we will implement more prudent policies. That's my opinion. Thank you very much.

So my -- I'm Card CFO. So the card delinquency ratio, we look at on a monthly basis and keeping close tabs on it. So we also look at the new loans that become delinquent. So it peaked in 0.45%, but it improved to 0.41% in September because of the public relief fund that you talked about that increased small merchant sales, thereby improving the overall finances of the small merchants. But going forward, the government will continue to support small merchants and self-employed. So we have to keep a close watch on that. For example, in the past, for a small merchant, low interest rate lending, they said they will put about KRW 10 trillion toward that. So if the policy continues, in the pandemic era, that also improved the situation. So we think that will be something we will also see here also. Thank you.

Thank you very much. I hope that has answered your questions, and we will take the next question. [Operator Instructions] So there are -- yes. Yes, there is a question. From Hanwha Securities, we have Kim Do Ha.

I'm not sure whether it is a question that would have a specific answer, but I would just like to get your thinking about these topics. So now look at the slides, for the first time in a while, I could see that the interest spread. So it was rising by 3 bp. So from last May to this year, then we see that the interest rate was falling, but then it seems as if considering the circumstances, you were able to really defend the margin. Now then for next year, then if this is the trend, then we need to think about a higher margin next year? And also it seems as if the securities performance is also very good. So then in terms of the resource allocation for next year, then I wonder whether the shareholder return increasing, whether that will be the end all? But then for example, if the margin is going to be better or if the securities profitability is better, then perhaps you can allocate more for growth? So yes, I know that this is a question that defies an easy answer, but then I was just wondering what the group is thinking. So that is all.

Thank you very much for the questions. And yes, please give us a moment to prepare our response.

Thank you very much for the question. And yes, the question that you have raised is actually what we have been thinking for quite some time. So first of all, about the interest spread. Now this is what I would think. So first of all, the policy rate was cut twice this year and then also for the year, then we believe that there is going to be one more cut. And then now we see that, yes, gradually, the interest rate is falling. But then when we look at the market rate, then looking at the usage and also in Korea and then also the FX, so considering other circumstances, then the interest rate taking a clear fall is not really for certain. So that is something that we needed to consider. So yes, the margin perhaps compared to what we have thought last year, the margin did not fall as much as we had expected. Now that is for the short term, but then now for the longer term then both in the U.S. and Korea, then at least 50 bps or even more than 70 bps. So the prevalent view is that it is going to fall by over 70 bps. So then for the longer term, the interest rate is likely to come down. So then looking at the profit and loss for the end of September, then we can see that the interest rate increase was much lower than the overall revenue increase. So right now, we are just defending the interest income, but then over the long term, we believe that the interest income is likely to fall. So we need to be more conservative about this outlook. On the other hand, what we are more positive about is now on one hand, yes, there is the capital market and also the noninterest income, which is doing much better. So for example, brokerage and also the IB, so the noninterest income is actually quite sturdy. So those are also the areas, the businesses where we must have in order to keep growing. So we will continue to encourage that. But then in terms of the resource allocation, as I have mentioned earlier, basically, in terms of the allocation for growth, now compared to this year for next year, then rather than in the bank, the allocation would be heavier for the capital market is the direction for next year. But then again, in terms of the allocation for the growth then, now in terms of the shareholder return policy, so we have already stated the target for the shareholder return. So we will keep to this commitment. But then now the ROE continues to improve, but then also compared to the COE that we have, then it is still lower. So again, we will be flexible about this. But again, overall, the direction is to follow the plan for corporate value enhancement. And then also for the asset growth because the nominal growth is very low. So I mean there is a limit to how much we can pull this up. So in terms of the resource allocation, we will remain with the current framework. But then now in terms of the specific allocation, there could be more -- a bit more allocation to the capital market to be in line with the market circumstances. That is all. Thank you.

Thank you. I hope that has answered your question, and we will take the next question. So next is Kim Jiwon from DAOL.

So CET1 ratio is my -- about -- my question. So it seems the lending side has grown. So as you said, RWA, it's relative though on the household lending, and you said that will be in alignment with government policy. But as being higher on the corporate side, you said that there will be more growth. And for us, RWA overall management strategy, how is going to see that going forward? And is there any factors where you could grow CET1 ratio further -- CET1 ratio further going forward?

Please wait as we prepare an answer to your question.

So RWA and also the future directionality of the -- that. So RWA, we have grown slightly in the Q3. So it looks -- it's higher than the first half. But if you look at the ratio of the growth compared to the previous year, it's still on the lower side. So on the third Q, RWA has grown slightly, but on a yearly basis, compared to the initial expectation of its growth, I think it will be lower than the expected. And going forward, the RWA growth rate, the recurring growth rate would stay on the path of the [ current ] year. And internally, if you take a deep dive for the household lending for the second and third Q because there was high market demand. However, due to regulatory environment now, household lending, I do not think, can grow further. Then on the corporate side, there will be the growth driver for us. But as you know, relatively speaking, corporate side, we have also allocated resources a lot in this area. So the corporate loan in terms of the share will grow, but it will be managed with the overall framework that we have. And in terms of CET1 ratio, compared to last year, this year, the level is a bit higher. So due to various variabilities that is anticipated, we increased it a bit. CET1 ratio, it's not always high being the better. So in terms of capital efficiency, the current mid-13% range is the adequate level. But by Q4 seasonality, there will be less earnings given so it will dip a bit from the current level. But on a yearly basis, we said the base will be 13.1%, but it will be managed in a higher level than that. Anyway, the CET1 ratio be it in the asset growth or it's a key in the shareholder return policy. So we maintain the base, but would also give a lot of buffer so they can be managed on a stable level.

Thank you very much for the response, and we will take the next question. [Operator Instructions] So there are currently no questions requested. So it seems as if there are no further questions. And then with that, we will conclude the 2025 third quarter earnings release conference call by Shinhan Financial Group. You can find today's presentation at our web page as well as the Shinhan Financial Group IR YouTube channel. If you have any further questions, then please contact the IR team. And we will see you again in February next year for earnings release for the year of 2025. Thank you very much. [Statements in English on this transcript were spoken by an interpreter present on the live call.]

Good afternoon. I am Park Cheol-woo, head of IR. I would like to thank everyone for attending the 2025 Q2 Shinhan Financial Group's earnings presentation. In today's earnings presentation, we have with us the Group's CFO, Cheon Sang-young; Group CSO, Go Suk-Hyun; Group CRO, Bang Dong-kwon; Shinhan Bank's CFO, Lee Jeong-Bin; Shinhan Card CFO, Park Hae-chang; Shinhan Investment Securities CFO, Jang Jeong-hoon; and from Shinhan Life CFO, [Gyu Song-han] is with us. Today's earnings release will proceed as follows. We will hear a presentation on the Q2 business results by our CFO, which will be followed by a Q&A session. Now I invite our Group CFO, Cheon Sang-young, for a presentation on the quarter's business results. Sang-young Cheon Good afternoon. Thank you for participating in the 2025 Q2 earnings presentation. Let me begin on Page 2 with the highlights of our business performance. As of the end of June 2025, the Group's CET1 ratio was provisionally estimated at 13.59%, an improvement of 32 bps compared to previous quarter. This was driven by solid group's earnings, the impact of a weaker exchange rate and continued efforts to manage RWA efficiently. Today, the Board of Directors resolved to pay a cash dividend of KRW571 per share for Q2 and a result share buyback amounting to KRW800 billion. Of the total share repurchase amount, KRW600 billion will be executed in H2 of this year and the remaining KRW200 billion will be carried out in January 2026. Through this, we'll continue our year-round share buyback program as we have done this year. Including the KRW650 billion already acquired in H1 and the KRW600 billion scheduled for H2, the total share back for 2025 will amount to approximately KRW1.250 trillion. In Q2 2025, the Group recorded a net income of KRW1,549.1 billion, growing 4.1% QoQ despite an increase in credit cost, thanks to improvements in noninterest income. While the cost-to-income ratio remained stable, the credit cost ratio showed a slight increase due to delayed economic recovery. Next on Page 3, moving on to capital. As mentioned earlier, the Group CET1 ratio improved by 32 bps QoQ despite the increased size of share buyback program, supported by a favorable exchange rate and a stable net profit. The Group RWA declined by KRW4 trillion QoQ as foreign currency loan-denominated risk-weighted assets decreased due to FX depreciation and the Group's portfolio was adjusted to prioritize profitability alongside appropriate growth in Korean won-denominated loans. Going forward, we will do our utmost to supply funds where necessary while maintaining capital stability through internal efficiencies and strategic resource allocation. Page 4, assets and liabilities. Please refer to the slide for more details. Next, moving on to Page 5, our profit and loss. In Q2 2025, the Group's net income increased by 4.1% QoQ despite rising credit costs, driven by strong growth in noninterest income under a diversified portfolio. As a result, ROE and ROTCE, the key indicators of our value enhancement strategy, each rose by 0.7%. This means that we are recording 11.4% and 12.9%, respectively. We will explain the details of each item on the following pages. Next, Page 6, net interest income. Despite falling market interest rates, net interest income remained flat QoQ, supported by appropriate growth focused on return on capital. The Bank's Korean won loan book grew at a similar level to the previous quarter as we pursued portfolio optimization through asset rebalancing while responding to market demand, especially in retail lending. For more details, please refer to Page 27. The Bank's NIM declined by 16 bps QoQ as yield on interest-earning assets, including Korean won loans reflected the falling market rate. However, thanks to adequate asset growth and effective execution of LLM strategies, NIM was maintained at the previous quarter's level. Next page is on noninterest income. The Group noninterest income grew 34.7% QoQ with improvement across all segments. In particular, securities and FX derivative-related gains, which benefited significantly from favorable market conditions led the overall growth in noninterest income. Let's take a closer look at commission and fees. Credit card fee income was improved from savings and marketing costs but still sluggish on a YoY basis. Meanwhile, brokerage commissions were boosted by active stock market trading, up significantly YoY as brokerage trading volume increased. Investment banking commissions continued growth momentum centered around our banking business, driven by a continued pipeline of solid IP deals. Amid favorable market conditions, we recorded growth in our trust fee income from funds and bancassurance, up both YoY and QoQ. While insurance-related income showed a decline YoY, this was due to the high base effect from last year when SPP or short-term payment policy sales were promoted. Otherwise, we're seeing stable earnings. Next, Page 8 on SG&A and credit costs. Group SG&A is under stable management with nothing notable from last year. We recorded a cost-to-income ratio of 36.6% in H1. The rise in credit cost versus Q1 was mostly due to the delay in economic recovery as well as our conservative management in terms of our loan book, where we recognized more recurring credit costs in the current period. In the process of implementation of the government-led resolution of real estate bank loans, while we have seen some additional provisioning mostly from nonbanking, it is within our expected and manageable range. Amid the delayed economic recovery, we expect corporates to see rising credit risk while vulnerable customers will be increasingly challenged. For credit cost, the size may be slightly above our initial expectations while timing of recovery is slightly later than expected. Please refer to Pages 9 to 10 for further details on our group asset quality metrics and loss-absorbing capacity. Next on to Page 11, net income by subsidiary and our overseas business performance. Shinhan Bank, despite the increase in credit costs while interest income held up at Q1 levels, while noninterest income was up significantly, thanks to improved fee income from IB and marketable securities, maintaining solid performance. Shinhan Investment Securities has been working to recover from last year's poor performance, improving the competitiveness of its core offerings such as security trust and prop trading to improve underlying business fundamentals. Personal card and capital both remained sluggish amid continued funding and credit cost pressures. But through self-help measures such as asset rebalancing, we expect improved fundamentals and a gradual recovery in earnings. Our Group's overseas business continues to return solid performance despite ongoing internal and external uncertainties. Pages 12 through 13 outline our digital and sustainability-related initiatives. And Page 14 is on our group-wide inclusive co-prosperity finance initiatives. We have been offering refinancing for borrowers from Shinhan Savings Bank with lending from Shinhan Bank to enhance the credit of our customers. We've been helping customers discover their forgotten dormant accounts while lowering to a single-digit lending rate on all Shinhan Bank household loans, charging 10% or more to help support economic self-reliance and sustainable consumption. We also have institutionalized support to help improve the financing conditions of our customers. Going forward, we are committed to the core role of finance to provide productive intermediation of financing. We will continue to pursue diverse programs for co-prosperity, to grow together with our customers as we do our best to become a sustainable financial group. Pages 15 through 18 are more on our corporate value program in terms of implementation progress and performance. Relative to the plans announced last year and this year, I can say that we have achieved good implementation results so far. Please refer to the materials for further details. From Page 19 and onward, we provide detailed breakdown of group subsidiaries, including financial highlights, P&L, asset management and funding so please refer to the pages. In terms of our H1 performance and shareholder return policies, we intend to hold a separate session for individual retail investors, so we look forward to your engagement and support and your interest. Thank you very much.

Yes. Thank you very much, and we will now open the discussions to the floor for Q&A. We do excuse ourselves and seek your kind understanding regarding the technical difficulties.

The first question comes from Jung Joon-seop from NH Securities. Joon-seop Jung I'm Jung Joon-seop from NH Securities. I have 2 questions actually. The first question has to do with the fact in the beginning of the year, one of your competitors had actually carried out distribution from reduced capital. And yesterday, another peer announced that they are considering distribution from reduced capital. I think a similar question has been asked in the past, but there were recent changes in the capital market. Recently, with regards to this issue, has there been a change in your views or position regarding this matter? Second question has to do with the outlook for H2, especially this year's H2, the economic outlook and also the credit cost ratio, what is the outlook in H2?

Thank you very much for that question. While we're preparing for the answer, please hold for a few seconds. Sang-young Cheon Thank you very much for that question. With regards to the distribution from reduced capital, our views and second question was about the economic outlook and also credit cost outlook for H2 of the year. The first question about the distribution from reduced capital reserves and the second question about the credit cycle outlook. Our CRO will take that question and the credit cost-related question, I'll take that question. With regards to distribution from reduced capital, at this point in time, as of yet, there is no actually a positive consideration review that has been undertaken. At the beginning of the year, when one of our peers had reviewed it, we did actually review it. There was a lot of factors to consider, but the regulatory body, I think they are looking into the tax-related issues. When this conclusion comes out from the regulatory body, I think at that point in time, we can do another review. But at this point, we have new plans of engaging in distribution from reduced capital. In the case of our peers, the reason why they have conducted distribution from reduced capital, I think it was partially done to enhance shareholder return, or maybe they were forced to do it because they lack earnings to distribute. But in our case, as of the end of last year, we had enough, actually grew KRW4.6 trillion, so we're not in a position to really review this matter. So were there any changes regarding tax issues or others. But as of now, we have no plans to consider this matter.

Yes, this is the CRO. Regarding our economic outlook for H2 of the year and in terms of the overall asset soundness conditions. As you know, in H1 of the year, across the financial sector, the real economy, domestic political and economic conditions, well, various factors weighed on the prospects for a quick economic turnaround. At Shinhan Bank, of course, it could be in part due to a base effect. But in terms of the number of new delinquencies or the delinquency amount has been in decline. Based on our vintage analysis within the last 2 years of new loans, the delinquency amount in the last 2 years from the last 2 years' worth of origination has been in decline as well. As you know, recently, the supplementary budget will be implemented, and there's the livelihood support voucher program and the bad bank initiative. These government policies are intended to promote consumption while providing support for small merchants. Starting from last year, regarding the real estate PF loan, we have been working together with the government for normalization of the PF loans. As a result of these efforts and also there will be an added effect from rate cuts expected in H2 of the year. So on balance, we think that in H2, cautiously, we may see a peak-out of our asset quality metrics. However, that said, given the tariff issue, this is a challenging time. There are tighter regulations against household loans so we still believe that there are many sources of uncertainty that remains. So we intend to stay on guard and be vigilant in our management. In terms of credit cost, in H1, just to recap what happened, as we explained earlier, overall, there is a delayed recovery in terms of overall asset soundness. In H1, we were more conservative in terms of credit assessment, and so that had the result of increasing credit costs. We did additional provisioning against real estate loans as well, which is why compared to our initial expectations, our actual credit costs were above our expectations. Sang-young Cheon The CRO talked about the outlook for the credit side in H2. Whenever we do this earnings presentation, the quarter outlook for asset quality and we are giving guidance for credit cost as well. However, this is a difficult year. We have the full year presentation and the Q1 earnings presentation. Whenever we do that, the numbers are actually increasing. So in Q1, actually, the number that we had provided was about 40 bps, early 40 bps, but we do believe that the number can go over mid-40 bps range. Internally, our target is for mid-40 bps level. But the credit cost has been dealt with by the CRO. But as asset quality deteriorates on a recurring level, credit cost actually does increase in proportion. But from a conservative point of view, provisioning, if we can move more proactively in this regard. If we do have some room in terms of capital ratio or in our ability to absorb the losses, and we do want to actually absorb the losses in a more conservative manner. That is reflected in our credit cost as well. All in all, for credit cost for H2, we do believe our assessment is for the mid- to late 40 bps range.

Mr. Seol Yong-jin from SK Securities, please go ahead. Yong-jin Seol I will also ask about 2 things. Recently, separate taxations for dividend income, for example, this has been drawing greater interest recently. If there's legislation and if it does materialize in terms of shareholder return, will there be any changes to your Value-up program? If you could share your overall directionality and some thoughts. Then second, recently, there's a lot of talk about stablecoins. Is there anything in the works within the Shinhan Group regarding stablecoins?

Yes. Please wait just momentarily as we prepare answer. Sang-young Cheon Yes, thank you for your questions. I think there were 2. First about the shareholder return mix and then second about stablecoin. I will take the first question and pass on the second question to our CSO. Recently, in terms of separate taxation for dividend income, there is a lot of talk going on, and certainly, we are monitoring very closely. However, it's similar for this as well. Like we said, some are saying 35%. There's a lot of speculation, but as to how it will ultimately be decided, we will have to wait and see our legislation. Once it is entered into law, of course, we'll have to think hard about our shareholder return mix. When we first announced our Value-up program, every year and every quarter, we said we will monitor progress and have discussions at the BOD level, so likewise, this will, of course, be subject to those discussions as well. At our BOD meeting earlier this morning, there were discussions about this as well. However, we still do not know how it will be legislated so we were not able to review the details. But a key characteristic of our value program is the pace of shareholder return and also our share buyback. We have a target in terms of how many shares outstanding we will be buying back and canceling. So buyback and cancellation being the mainstay of our program, I think that remains unchanged. What's fortunate is that in terms of the pace of the buyback and cancellation, has been quite fast, so we may not have to wait until 2027 to achieve our target of 50 million shares. At an appropriate time, the mix is between dividends and share buyback and cancellations. Well, it gives us room to be more flexible in terms of adjusting the mix. And so our PBR, if it goes above 0.8x and we have adequate valuation, then rather than through buyback and cancellation, we could shift toward more dividends to boost cash flow for post-retirement investors, for example. So we will be flexible in reviewing our options and then also communicating our results with the market as well. Regarding stablecoin, I think according to the press, well, I can only provide a very high-level generic answer. So 14 banks are studying. There's a consultative consortium in place deliberating about stablecoins and we are a member of that consortium as well. But again, there has not been legislation yet as to who the insurers will be, where you can use the stablecoin, how the supervisory and oversight system will be. There are many unknowns. But in the longer term, we will not just stand by not doing anything as stablecoin materializes. But we will look and study hard how to use this as an opportunity instead of as something that can be a source of concern.

We will take the next question. HSBC Securities, Won Jae-woong, the floor is yours.

A difficult and challenging environment, thank you for the solid results. And also thank you very much for paying a lot of attention to shareholder returns. I have 2 questions. If you look at Page 16, when you say shareholder return, depending on the PBR interval, you said that in the case of greater PBR [Inaudible] that it seems that there is management about share buyback. If the number is greater than 1 PBR, then there will be no share buyback, is that how we should understand it? And then there is no comment on the 1.8 1 multiple. That interval will the cash dividend move up faster? That's my first question. Secondly, the loan growth, I think, was weaker than expectations in H1. In H2, I think the loan environment was quite challenging. But even in that environment, are you going to maintain the current pace in H2 or going to increase the pace? And also, what's your outlook for NIM as well, so outlook for the loan as well as NIM?

Thank you very much for the question. While we are preparing for the answer, please hold. Company Representative So PBR, by the interval of PBR, the shareholder return mix and also outlook for loan. So the first question, I'll take the first question. And the CFO of the Bank will take the second question. With regards to your first question, I also actually talked about this during our announcement of the corporate Value-up program. Our principle when it comes to the corporate value-up is we look at the COE and ROE, so COE and ROE is lifted and a balanced approach will be taken. If you look at the current levels, in order to normalize the PBR, then the shareholder return rate has to be accelerated. In order for this to have an impact, we do believe that a share buyback is actually more effective than cash dividend. So if we say the PBR is 1, then up until PBR of 0.8, then our principle would be to do share buyback. And then if it goes beyond that, we will actually change the mix. So if it goes over 1 PBR, then will we not engage in share buybacks? No, that's not, actually. If you look at the overseas cases, up until 1 or 2 PBR, then our share buyback is actually effective. There are evidence of that. And our ROE and also the rate of recovery at the PBR level, all of these factors will be looked at, will be a very flexible approach. And also this mix of dividends and share buyback, we will look at our performance as well as other factors. We'll discuss this matter with the market as well and decide. Jeong-bin Lee I'm Lee Jeong-Bin, the Bank's CFO. With regards to the asset growth and NIM outlook, that was the question, let me answer those questions. In H1, as we have mentioned, our asset growth slowed down a bit as you have mentioned. In the case of household lending, there was a total quantity regulated guidance from the regulator, and so in H1, household loans have grown by KRW2.5 trillion. And so in H2 as well, we will be taking into consideration the policy-related environment and manage growth at an appropriate level. So the corporate loan in H1, well, in 2024, we have actually increased significantly the corporate loan volume. And so in H1, we are focusing on profitability as well as margin management. And also in terms of asset quality, we have taken a rather conservative approach in our asset growth management. In the case of the corporate loan segment, the growth has been somewhat weak. However, in H2, based on the portfolio management that was conducted in H1, we do believe that the growth momentum for the corporate side has been secured. So in H2, unlike H1, we will be more proactive in the corporate loan market and move forward asset growth. And also, in the case of corporate loan segment, while we are growing the segment, I think you may have concerns about the margins. Well, in H1, when we manage the NIM, there was interest rate-related loans but also funding cost management was very important. So in H2, the liquidity and other factors will be considered. So cost management for the funding will be done and also margins will be closely monitored in order to grow the asset. That is all.

I hope that was a sufficient answer for you. Now from Mirae Asset, Mr. Jeong Tae-joon, please go ahead. Jeong-hoon Jang Yes, this is Jeong Tae-joon from Mirae. I also have 2 questions. So the capital ratio seems up, so what is your adequate level in terms of an appropriate capital ratio? And other than [Inaudible], other plans? Regarding shareholder return, I think it's almost at 50% or so. Do you have plans to do above 50% shareholder returns, which some of your competitors have been doing? Sang-young Cheon Okay, so there were 2 questions. First about the adequate capital ratio, I think. Compared to Q1, our capital ratio was actually quite improved, I think on the market. Regarding our capital position, there were some perceptions that we are a little bit tight internally. Of course, there was a matter of externalities, including FX rates, but there were many efficiency gain measures and rebalancing that helped us boost our capital ratio. So I think you're asking about where we intend to use the capital other than loans. We do not intend to use it for big projects like M&A. But like our bank CFO has mentioned, at an adequate level, it can go toward loan growth and also toward investments as well. There will have to be an effective allocation. As you know, the Korean economy overall is experiencing many challenges like low growth, sluggish consumption as well, so it's a combination of different factors. So our financing intermediation, mediation to more productive parts of the economy, we will be very faithful to that role. In terms of the methodology of exactly how, we will be quite thoughtful as we execute. We do have a sufficient capital buffer, but given the regulatory environment and the macro condition, it could be subject to change. We said our CET1 ratio would be above 13.1% so at a minimum, we believe we should manage it at around that level or higher. Given the US tariff issues, there are lots of externalities in terms of the macro so we do want to be more on the conservative side. Regarding the level of shareholder returns, I think July last year, we committed to a 50% shareholder return ratio. And I think the reaction from the market found it to be quite revolutionary, quite fresh because 2 years ago, it was 30%. Last year, it went up to 40%. And I think now for the other financial institutions, I think some are talking about above 50%. We are expecting significant increase on our side as well. But in terms of what level is most appropriate, I think I have to maintain a similar tone as before as to the actual level of shareholder return. 50% by 2027 is our directionality, but we are, of course, open to different options. But this will depend on PBR, ROE and the internal management strategy. These factors will all have to be taken into comprehensive consideration. We have already announced our shareholder returns for H2 of the year. So if there are any changes beyond those plans, we will try to communicate those new developments with the market.

Thank you for that answer. We move to the next question from Daishin Securities, Park Hye-jin. Hye-jin Park I have 2 questions. With regards to credit costs, can you elaborate and give us more detail about this period? The Bank and the card, I think your write-off have increased. And also the NPL ratio is not falling. Look at Page 10, rather than the Bank and the card or [Inaudible] through Q3 last year, I think you said the card segment, rate or the funding cost. So is that outlook still valid? And also with regards to increase in credit cost, would you take into consideration increase in NPL assets in the card segment, asset quality of the card side? Can you explain more about that? The second question is you said in H2, the share buyback will be around KRW800 billion. What will happen in 2025? Is KRW600 billion and then KRW200 billion will be done in the earlier half of next year, is that correct?

Thank you very much for the question. Please hold while we are preparing the answer. Sang-young Cheon You have asked 2 questions. So with regards to credit cost, you asked the question and also share buyback schedule. With regards to the second question, let me take the first. And the credit cost question, I'll give you a brief overview. And because your question pertains to the card business, with regards to asset quality and also other matters, our Card CFO will be taking that question. With regards to share buyback, our BOD had resolved KRW800 billion this time around. And what they had clearly, we saw was that KRW600 billion will be bought back by the end of this year, and KRW200 billion will be bought back early next year. This was the same last year because our share buyback program is growing. In order to spread that out over the year, we're taking this approach. Consistently, on a fiscal year basis, we are differentiating it. This year, KRW600 billion, up until that amount is what we are doing for this year and the remaining KRW200 billion will be done next year. So that will be next year's shareholder return portion. With regards to asset quality and credit cost so we are doing some write-offs as well and disposal. The NPL loans are actually growing faster than our initial expectations, that is true. But in the write-off and disposal, we do have some concerns and issues. Because we are seeing growing NPLs, the price for write-offs and disposal is actually coming down very quickly steeply compared to last year. And in order to manage asset quality, how much of loss are we going to take? So that is actually an issue of concern internally for us. Managing asset quality ratio is very important, so we need to maintain that at an appropriate level, but there are that concerns. Regarding the card business, I think our Card CFO can provide you with more sufficient answer. Hae-chang Park This is the Card CFO. As we have explained already about the delinquency during our last presentation, new delinquency is actually the focus now. So 2 months overdue, that's a key indicator. After the impeachment last year, the number has grown steeply. Internally, we are taking a lot of actions so that by February, the delinquency roll rate actually peaked at 0.45%. And then in July, it's about 4.1% that we're expecting so it's improving. However, recently, in order to stabilize the housing prices, loan provision is being limited. That impact will be felt in the next couple of months and we need to closely monitor the market. In the current situation, we have ticked down and we are coming down. That is the trend that we are observing. You talked about NPL, the delinquent loans are becoming NPLs, and we are managing that through write-offs. And in the case of NPL ratio and also the delinquency we get, in order to ensure that those are not growing, we are actually increasing the write-off so the rates will be managed at the previous level.

There are no questions pending so we do have another question from Hanwha Investment & Securities, Do-ha Kim. Do-Ha Kim I just have 1 final question regarding real estate trust. I do understand there was a legal litigation. There was some write-off in the press about it. I think regarding your provisioning against that kind of litigation, I understand there is some set aside. So additional provisioning, how much do you expect to have to set aside further against this kind of real estate trust type exposure?

Please hold on as we prepare the answer. Sang-young Cheon So in terms of real estate trust, I think within the industry, if you look at real estate trust companies based on their financials, a lot of them are still loss-making and the sector remains still challenged. For us, you remember last year, we actually saw a significant loss, which was reflected into our closed accounts. So we wanted to be preemptive in terms of absorbing against that loss. So there is a significant buffer against that kind of loss. Regarding the litigation, we actually set aside about KRW25 billion in provisioning against that kind of loss. But still for Shinhan real estate trust, although profits actually have gone down compared to historical levels, we have seen uptrend in Q2. Now it depends on the real estate market, so if we suppose that the downtrend continues and the expected recovery amount, of course, will become smaller, so there may be additional loss in that case. But at a high level, for the most part, we have set aside our required provisioning so it's already done. As of June, we have about KRW380 billion in loans to the trust account and KRW340 billion in provisioning against that exposure so it's almost full coverage. So rather than a large sum loss, we potentially can have a little bit of loss depending on the real estate business cycle. But in the larger scheme of things, we have a good provisioning already.

We will move on, [Kim Ji-won] from Securities. Participant I have questions about the securities. Recently, Shinhan Securities brokerage market share is going up and IB-related activities is also growing as well. In terms of contribution to the noninterest income, what area of the business is securities business focusing on or trying to diversify? And also I think you have asked for a new issuer license. What kind of business are you pursuing based on that?

Please hold while we are preparing the answer. Jeong-hoon Jang I'm the CFO from Securities. Thank you very much for those questions. With regards to the brokerage IB fees going forward, the income that we anticipate for the past 4 to 5 years, WM and IB [Inaudible] and we had the private equity issue and then alternative investments in overseas market, we had incurred some losses. And so retail WM and IB has been rather sluggish. That is true. As we have said, the asset management, WM and IB segment, yes, we are trying to enhance profitability in these segments. In the case of overseas stock, MS, even if those are included, it's over 5% in terms of MS and the brokerage income continues to grow in this segment. In the IB, in H1 compared to last year, there has been an increase of about KRW20 billion underwriting fees. So our fundamentals are actually improving. That is our internal assessment. However, for potential loss factors, potential default factors, we are actually closely monitoring these issues, and we will be preemptively removing any of these uncertainty factors. And also the issuer license acquisition, I think this is a cautious issue. Five players have applied for this license, I do believe. With regards to this matter, we're taking a cautious approach. We have engaged in a thorough review of this and a more aggressive or proactive existing issuers, rather than those kind of aggressive approach, align with the government policies. And then also conservative growth and also in order to align with our group's portfolio about these kind of assets, so the profitability and the growth of the segment, we want to pursue all this in a balanced manner. And that's how we have constructed our portfolio. And so we have done a simulation of various scenarios and so we are preparing the business to ensure stable growth.

Mr. Kim Jae-woo from Samsung Securities, please go ahead.

I just have some brief questions. First of all, you mentioned credit cost, you talked about mid- to high 40 basis points for the full year. If I do the math, for Q2, I think you are around 60 basis points. So 50 basis is just on a cumulative basis. For Q2, it's 60 basis points. So typically, in Q4, it does tend to go up. Are you expecting that in H2, the credit cost is likely to go down to achieve that full year goal? And then there was a lot of fee income from derivatives and other marketable securities. So since it has gone up already, is there room for further upside? Was it more of a one-off or what are your expectations for H2? Regarding your collaboration with Jeju Bank, could you provide some progress update? And if this goes well, is there a possibility of expanding it further?

Yes, let us prepare to answer just one moment. Sang-young Cheon First, regarding our credit cost outlook, I think you asked about some of our underlying ground for our outlook. If you look at just Q2 at 50 basis points, if these trends continue, of course, mid- to high 40 basis points will not be achievable. So for us, we are looking at recurring trends in Q3. Are there any big factors in Q3? So we have run simulations and we are expecting a slight decrease in credit costs going forward than Q2. Then marketable securities and derivatives. In the rate cut cycle, although our interest income goes down, this provides a boost to our overall earnings. This is correlated with macro factors, so the stock market, how active it is and the cost index and the capital markets, the market interest trends, these will be factors. So I cannot say it will go way above current levels to see explosive growth, but market interest trends and also the cost activity that we have seen starting in Q2 makes us believe that this kind of trend is likely to go up. And there wasn't any one-off factor driving up derivatives. It's not so much valuation gains, but there's a lot of volatility in the FX rates, for example, that can lead to gain and loss. And so that said, we see remaining potential there as well. And then regarding the collaboration, yes, so we are working hard on the collaboration with Jeju [Inaudible] And we have experts from our side at Shinhan as well. So together, we have a team of 40 people from all parties making the overall preparation starting in April this year. Like we said, the target is end of Q1 to provide meaningful products available to SMEs or small business owners. So we are working in line with the schedule. In terms of expansion, I think that's a matter for later after we do a successful launch of the initiative first. So that is it.

Thank you very much for that answer. Today, a number of financial groups have presentation. The time is up. I'd like to conclude today's earnings presentation. We have a bit of housekeeping announcement for our retail investors. Our CFO did mention that on August 28, we intend to have an individual IR session for retail investors through our Shinhan Financial Group YouTube channel, same as last year. So from today up to August 4, you can apply to join on our website. During that IR session, we will entertain your questions. So please upload your questions on the Group website in advance of the IR session. Any questions that were not covered today, please go ahead and let us know by uploading them on to our home page. More information will be provided through our website and the site as well so we look forward to your interest. And with that, we will conclude our earnings call for Q2. Thank you. [END]

Good afternoon. This is Cheol Woo Park, Head of IR at Shinhan Financial Group. Thank you very much for joining the 2025 Q1 earnings presentation of Shinhan Financial Group. Today, we have our Group CFO, Sang Yung Chun; Group CSO, SeogHeon Koh; Group CRO, Dong-kwon Bang; Shinhan Bank CFO, Jeongbin Lee; Shinhan Card CFO, Haechang Park; Shinhan Investment Securities CFO, Jeonghoon Jang; and Shinhan Life CFO, Sunghwan Joo also attending. We will start with an update on the progress of the Value-up plan that we had announced in July and give you some details of what we have in plan this year before taking you through our Q1 business results. After the presentation, we will open the floor and receive your questions. From now our Group CFO, Sang Yung Chun, will take you through the presentation.

Good afternoon. Thank you for joining the Shinhan Financial Group 2025 Q1 earnings presentation. Before looking at our Q1 results, I would like to start from Page 2 and explain the 2025 Value-up plan, which was publicly disclosed today. The 2025 Value-up plan is based on the results of '24 implementation assessment led by the BOD as well as diagnosis of the appropriateness of existing targets and newly established near-term targets and execution plans for 2025. Looking back on 2024 performance, group ROE fell Y-o-Y due to decrease in nonbank affiliate earnings, but the CET1 ratio remained above 13% every quarter despite greater market volatility. That said, considering CET1 sensitivity to macro volatility and uncertainty, current management levels were found somewhat tight. In shareholder return, active share buyback last year reduced number of outstanding shares to less than 500 million shares as of end of last year, boosting our shareholder return ratio to 40.2%. Based on such performance review, we decided to maintain the original targets covering until 2027, while establishing the following plans for 2025, which will be the first year of proper implementation of our Value-up plan. First, we plan to improve ROE by more than 50 bp Y-o-Y through a stable bank earnings and structural improvement of non-bank businesses. Second, we plan to unlock additional capacity -- capital capacity through efficient asset management. We aim to maintain CET1 ratio at 13.1% or above, which is 10 bp higher than the existing target level and giving us greater flexibility. Third, given the current PBR levels, which are heavily undervalued, buyback and cancellation will be the focus for a faster paid shareholder return program to increase shareholder return ratio to 42% or above in 2025. To achieve this Value-up plan in 2025, with better execution, we will operate key action initiatives, including structural improvement of non-bank businesses, efficient asset management and stronger links between evaluation and compensation. For details, please refer to the publicly disclosed materials. Pages 3 through 5 shows the Value-up plan progress as of end of Q1 this year, and we plan to keep you updated each quarter using the same format. Now to turn to Page 6 for our Q1 business results, starting from the business highlights. 2025, Q1 tentative group CET1 is 13.27%, which is 21 bp improvement YTD. Despite the effects of Basel III group-wide RWA reduction efforts and solid earnings growth from the banking business contributed to the healthy CET1, and based on this, the BOD today resolved on Q1 cash dividend of KRW 570, which is a 31% increase Q-o-Q. Regarding share buyback out of the KRW 650 billion plan for the first half buyback of KRW 285.7 billion has been completed as of end of March. And among this KRW 150 billion announced last year is scheduled for cancellation late April and the rest is scheduled for cancellation by end of June. Q1 group net income was KRW 1,488.3 billion, which is a 12.6% Y-o-Y increase, thanks to absence of nonoperating one-offs and solid growth of interest income. Page 7 looks at capital. Despite a larger buyback program than previous year through CET1 improved 21 bp YTD based on well-managed RWA and stable net income. Despite the RWA increasing effect of KRW 5.4 trillion YTD due to regulation, including Basel III, appropriate Korean won loan growth combined with group level RWA control efforts, including portfolio rebalancing, limited RWA increased to KRW 3.1 trillion YTD. We will continue to focus on maintaining stable capital ratio through internal efficiency and strategic management while sufficiently supplying necessary funds to the right places. Page 8 looks at assets and liabilities. And we move on to Page 9, which looks at group P&L. Group net income increased 12.6% Y-o-Y, thanks to absence of nonoperating one-offs and growth of interest income, is on the ROE and ROTCE key metrics of the Value-up plan increased by 1 percentage point Y-o-Y, respectively, to 11.4% and 12.9% each and I will break down the details starting from the next page. On to Page 10 for our interest income. Despite falling market interest rates, our group interest income increased by 1.4% year-on-year, driven by the average balance effect from growth in our income-producing assets. Bank loans in won increased by 0.4% versus end of last year, mostly driven by blue chip SME loans. Please refer to Page 27 for details. For bank NIM although the yield on interest-bearing assets, including loan in won dropped 12 basis points Q-on-Q. Nonetheless, we saw alleviated funding pressure amid adequate asset growth under our broad profitability management stance and seasonal deposit inflows, on balance improving NIM by 3 basis points Q-on-Q. Group NIM was also improved by 5 basis points Q-on-Q, thanks to the increase in bank NIM. Next on to noninterest income. Group noninterest income decreased 6.3% Y-o-Y from a decline in commission and insurance-related income. Credit card fee income were impacted by an increase in proactive customer acquisition marketing spend, while brokerage commissions were also down Y-o-Y as brokerage trading volume decreased amid market uncertainties. However, we continue to achieve growth in interest fee income from fund and bancassurance sales centered around our bank business. Also despite the challenging environment, quite encouragingly investment banking commissions recorded growth on both a Y-o-Y and Q-on-Q basis. In Q4, amid rising external internal uncertainties, income from marketable securities, FX and derivatives was very poor, but has since recovered back to more recurring levels, reflecting lower market rates. Other insurance-related income showed a decline Y-o-Y. This was due to the high base effect from last year where insurance sales were quite brisk. Otherwise, it's being managed at a stable level. Next, moving on to SG&A and credit costs. Group SG&A is stable with nothing notable versus last year. Cost-to-income ratio was up 1.4 percentage points Y-o-Y, recording 37.3%. For credit costs, even though additional provisioning for real estate PF loans fell, there was an increase in recurring provisioning, reflecting the economic cycle, resulting in a 15.4% increase Y-o-Y. As a result, group nominal credit cost recorded 41 basis points, up 3 basis points Y-o-Y, while recurring CCR was 38 basis points, up 8 basis points Y-o-Y. As we move forward, while credit costs related to real estate PF is expected to stabilize gradually, corporates will likely face greater credit risk from delayed economic recovery and vulnerable customers may become increasingly challenged. So overall credit cost in terms of size may be slightly greater than our initial expectations, while recovery may take longer. However, we have already built up sufficient loss-absorbing capacity and will enforce even closer monitoring and control for soundness and keep credit costs well under control within the limit of our established business plans. Please refer to Pages 13 and 14 for details on group asset quality and loss absorbing capacity. Moving on to our group and overseas business earnings, Page 15, for bank, thanks to solid interest income and balanced portfolio. We saw improved fee and marketable security income driving overall performance for the broad group. For Shinhan Card and Capital, as profitability was impacted due to regulatory change and still high interest rate environment, both continued sluggish performance with pressure on both the funding and credit cost side. For investment securities, despite increased market uncertainty, we saw gradual recovery in recurring earning power, driven by top line performance in IB fee income and marketable securities. Insurance continues to deliver consistent performance given last year, thanks to stable KICS ratio. For Asset Trust business, which recorded a loss last year from large loan loss provisioning, with completion guarantee, real estate trust exposure has turned to profit. Overseas business, we're seeing solid performance trends from Vietnam, Japan this year as well. From Pages 16 to 18, we outlined the performance on digital and sustainability initiatives. Page 16 provides details on the main digital indicators that we have shared every quarter. Page 17 provides details on the Jeju Bank ERP banking initiative, which you may be interested in. Page 18 outlines our efforts in terms of greenhouse gas emissions reductions, also more on our inclusive and win-win financial initiative as well. From Page 19, we list the detailed financials and performance of the respective affiliates. So please refer to the slides. Recently, the Korean economy faces structural issues as well as many internal and external challenges, which represent a complexity of challenging issues, including poor domestic and export demand, attraction on corporate investment in tranche loan growth. Our core role as a financial group as a financial intermediary that supports the real economy, working in coordination with the passing authorities. We want to go beyond just the passive intermediary, and we're looking to be more proactive across many fronts, to provide preemptive liquidity to competitive corporates and allocate capital to productive sectors of the economy to support recovery of the real economy and help resolve the issues confronting Korea. Also as a value leader and as a major player in the capital markets, we will faithfully implement our corporate value commitments to the market, building on the customer trust and solid underlying fundamentals. Thank you very much for your attention.

Thank you very much for the presentation. Now we will receive your questions. English Questions will be consecutively interpreted into Korean. So please wait for a moment for that translation. Now we will receive the first question. Mr. Jaewoong Won from HSBC.

Can you hear me?

Yes, we can hear you well.

Well, despite the difficult situation, you've delivered good performance. And also, you've shown a lot of effort for shareholder value. I have 2 questions. First is group NIM. Your full year guidance was that NIM may drop by about 7bps to 8 bps. But looking at Q1, actually, in Q1, your group NIM went up by 5 bps. So what about the full year outlook? Do you see the need to change your full year NIM outlook or can you give us your expectations of how NIM would move throughout the year? My second question is about asset quality. We do see signs of asset quality deterioration, not only at Shinhan, but across all banks. Your NPL coverage ratio has dropped from 143 to 129, a large drop. The current NPL coverage ratio, do you think there is additional downside room there? Or do you think that current levels you'll be able to keep? I would appreciate your thoughts on that.

Thank you very much for those 2 questions. Please give us a moment to prepare our answer.

Well, thank you very much for that question. Regarding the NIM outlook, and the second question was about asset quality, I think for NIM, it's best for our bank CFO to mention that. And regarding the asset quality, I myself and our group CRO will take the question.

This is Jeongbin Lee, the CFO of Shinhan Bank. You've asked about our NIM. First of all, I'll answer based on bank NIM, which increased by 3 bps Q-o-Q. Group NIM increased by 5 bps Q-o-Q. And the reason why it went up is that on the lending side, market rates did come down, so loan profitability is declining. That said, we also have the growth lever that we can use. So by maintaining loan growth at appropriate level, we are able to somewhat defend or offset the decrease in loan yields. And then in Q1, the funding side, the funding cost decreased because there were some core deposits that increased and overall finding scale was decreased. This decreased our funding cost and that resulted in the increase of our NIM in Q1. Now for the outlook on NIM going forward from Q2 going forward, in Q1, we were able to manage our NIM, but market rates do continue to decline, BOK rate is likely to go down further this year. And so we are expecting that the declining market rates will impact our NIM, and we are expecting our NIM to come down. That said, we still have the asset side, the loan profitability levers that we can use to defend. And also, we can try to collect more of the deposit-based low-cost funding to maintain our funding cost to defend our NIM as much as possible.

So that was the bank CFO that answered the first question on NIM outlook. And as he mentioned, we are entering a rate declining cycle this year, and we still expect our NIM to decrease throughout the year. our NIM did improve in Q1, and that is a bit of a seasonality. Usually, Q1 has better margins in terms of NIM seasonally. But looking at where the BOK rate is expected to go, our views have not changed. But about credit cost, as we mentioned in the presentation, we're expecting the credit cost to go up a little bit. But NIM maybe the decline will be flatter than what we had originally expected, but that's very cautiously. Your second question is about the NPL coverage ratio. Our current coverage ratio number is probably the lowest in the past year or two. This coverage ratio is explained two ways. One is not only Shinhan, but the overall market is in the lower part of the credit cycle, recovery is being pushed back and so substandard and below is increasing faster than planned, and that seems to be happening throughout the market. And as you can see on Page 14 of our presentation, when we do provisioning at the end of each year, we do sales. But recently, the NPL sales conditions are not favorable. That's why in end of March, Shinhan Bank sold less NPL than usual, strategically, that was a strategic choice. And that is the reason that decreased the coverage ratio. What we have been emphasizing, at Shinhan Financial Group level, we always prepare preemptively the loss absorption capacity, and we think that as the coverage ratio at the end of Q1 is most likely our bottom, and so that in Q2 and Q3, our coverage ratio is expected to improve.

This is the group CRO. If I may add on the answer. The coverage ratio -- when we calculate the coverage ratio, usually, what we do is we -- had we done similar level of NPL sales, our actually, coverage ratio would have been 180%. And so we think that we'll be able to come -- bring it up to 190% at Q3 and 200% NPL coverage ratio by end of this year. That is our management target, and we will follow that plan.

We'll take the next question. Mr. Jung Jun-Sup from NH Investment & Securities.

Thank you for the opportunity to ask 2 questions. First, I think it was addressed before. But in terms of your 42% target -- 42% or more shareholder return target, well, it is in line with your previous targets, the guidance. But given the share prices and the level of shareholder return by other companies, it does appear to be a little bit on the low side, and your capital ratio actually is improving by more than expected. So in terms of managing the pace, as you work towards your 2027 targets, do you have any intention to speed things up a little bit? And then there were some discussions about different forms of reduced dividends. Could you elaborate more?

Please bear with us as we prepare the answer.

In terms of the total shareholder return level and also the pace, 42% was our target. But actually, it was -- it's a minimal line. We're talking about 42% or more. As we mentioned during the presentation, regarding our corporate value program, we are approaching with speed, but the market valuation is quite low in terms of reduction in shares outstanding, whatnot. We are moving a little bit faster than planned. So as we mentioned, regarding our value program, we do want to speed up our shareholder return program. We will look at overall earnings this year and the market conditions as well. And so a share buyback and cancellation, we are actually open and committed to speeding things up more than our initial plan. But as we move out through the second and third quarter, we will have to see the overall earnings circumstances, and the final decision will be made by the Board, but the PBR actually is quite undervalued at the moment. And so we think that as far as shareholder buybacks are concerned, I think it would make sense to move faster than planned. So when we make our earnings call in the third quarter, we will elaborate more about any changes to our plans in terms of shareholder buyback or shareholder returns in the second half. In terms of capital reduction dividends, the government actually is collecting some views from the industry about tax benefits. So early this year, other companies did announce capital reduction dividends. And so we did give it a light review, and we did have the resources to affect that if we felt it was correct. But we felt that other than retail investors, we have a lot of foreign investors, of course, corporate investors as well. So the benefits actually could vary depending on the investor. So that was one point of consideration and among others. So first, you take the lead, we prefer just to observe the market developments and approach it slowly. So that was the conclusion of our initial review. So anyway, at present, as far as capital reduction dividends are considered, we do not have any plans at the moment. But we will see what the tax authorities decide later on, also developments by other companies as well, and we will make our decision on balance. And in terms of how we want to return more value to our shareholders, we intend, of course, to be flexible, and we will be open to various measures.

I hope that has answered your questions. We will take the next question from Hanwha Investment Securities, Do Ha Kim.

I have a question about the value update. I just want to check if I understood correctly, the CET1 ratio this year is 13.1% or above. That seems to be sign of your confidence. But even in April, the authorities have demanded increase of corporate loans. And the pressure could grow stronger as we move throughout the year. I think overall, we are seeing SME loans delinquencies coming up and credit card delinquencies are coming up faster than we had expected. So if you consider the external environment, considering export companies having difficulty, and looking where we are in the cycle, which may be prolonged, you have raised your hurdle on the capital targets. I'm a bit concerned about that. So is this more of a commitment? Or do you need to satisfy 13.1% or more CET1 to deliver on all the other business metrics that you have this year? Second part of the question is, if you have to give up more business loans than you had planned, would that increase your RWA versus plan? And how are you going to manage your CET1 if that happens?

Thank you very much for those questions, and please give us a moment to prepare the answer.

Well, thank you very much for that question. You've asked whether this is a sign of our confidence, the CET1 target this year of being 13.1% or above. Well, actually, we have always delivered our CET1 above 13%. And as you can see in Q1 CET1 numbers, our asset growth continues, and this is combined with internal efficiency efforts, such as data cleansing to deliver 13.1%. We have increased the target by 10 bps, and that is explained by various issues. Last year, there was a lot of macro volatility, including exchange rate. And we wanted to actually keep an additional buffer, and that's why it's 13.1%. And this is comfortably deliverable. We have simulated this internally, and we are quite comfortable that we will be able to deliver at least 13.1% of CET1 this year. And then your question was, what would happened if business loans have to be increased and delinquencies? We are carefully watching the business cycle in Korea. But even at current trends, we will be able to comfortably deliver our business plan this year. And relatively speaking, Shinhan Financial Group, when it comes to asset quality, is a bit superior to others. And this year, asset soundness management is the top priority as we manage our business. So we will be particularly more tight in our management. Now in terms of funding and asset growth, we are going to be delivering the CET1, while supplying the funds in the right places.

So we'll move on to Seol Yong Jin from SK Securities.

I would like to ask more about the Jeju Bank regarding your collaboration with Douzone Bizon. You were seeking a license as an Internet-only bank, but then it seems that you have shifted your corporate strategy product more about that. In the mid- to long term, what is the size? Do you have a target in terms of how much you want to grow your business? And then the overall directionality, it's positioned within the wider group, et cetera, if you could explain.

Thank you for your question. Please bear with us as we prepare the answer. For Jeju Bank's ERP banking initiative, the Group CSO will address your question.

Yes, this is Koh, Seogheon, the group CSO. I think I've been attending the IR session more than 10x now, and I think I am checking the microphone. It's been quite a while. Regarding the background, in banking, of course, it's a red ocean domain with very intense competition. So in terms of remaining scope white space, well, of course, we have to look at the adequacy of financials, also, it's a matter of trust. So for nonaudited SMEs or SOHOs, there's always some concern about the credit standing. How can we assess the credit standing of these types of potential customers to provide support. That's always very key. So that will be very key in terms of receiving licensing for an Internet bank. So yes, we did look at it as a potential. In terms of why we changed our direction, in order to become Internet-only bank, there are many different stakeholders involved. There are about 4 consortiums that apply for license and each actually have more than 10 stakeholders involved in each of the consortiums. With Douzone Bizon, we have set a clear direction in terms of what we want to achieve. If there are too many stakeholders, we will watch out whether it can be achieved. And then in terms of the capital size of the personnel, many resources or sizable resources are required, and there's a long period until we're ready to really launch products. So it will take a long time to become an Internet-only bank. Now Jeju Bank as a regional bank was based with various constraints. So we wanted to find some way to foster more competitiveness of Jeju Bank. So everything came together, and we ultimately decided to change our tact and direction. Of course, in the mid- to long term, embedded banking is the model that we have announced. So short-term corporate loans or SME loans, SOHO loans will be focused. And so once that performance is validated, then employees, corporate employees, for example, may be included in the scope as we expand business. So this is actually sort of a test bed for the group. In the short term, as you may know, we're thinking KRW 1.5 trillion to KRW 2 trillion. So we hope that things go well, somewhere around that level. But there are lots of things that we have to think hard about throughout the process. So whether our commitment and the desired direction can be achieved or not. We have to work very hard in order to really deliver on our commitments to our shareholders. So I look forward to a lot of interest, and also a lot of support from everyone regarding this initiative.

We'll move on. Ms. Park Hye-jin from Daishin Securities.

Thank you very much for this opportunity. I have a question to Shinhan card. As we saw in the presentation, delinquencies are worsening and you said that the Shinhan Bank sold less NPL than usual because of unfavorable conditions. I don't think that is the case for credit card assets. Can you give us overall your expectations guidance for the credit card business this year?

Thank you very much for that great question. And please give us a moment to prepare our answers.

Well, regarding that, the Shinhan Card CFO will answer.

Yes, this is Hae Chang Park, the CFO of Shinhan Card. The self-employed businesses are the key reason for the higher delinquencies and they are now recovering. Interest rate did start to decline from 3Q last year, helped improve business situation, but then there was impeachment. The impeachment is somewhat wrapped up now. And we are expecting overall environment to improve even for the self-employed small businesses. So we think that delinquencies will start to improve. Also from April, we have our direct recall free organization in our call centers to once again reduce our delinquencies. And with that in place, we are expecting delinquencies to improve from Q3. And then the Shinhan Card business performance outlook, it's mainly in the credit cost and the funding cost, which is the burden, and we are at the peak of the funding cost. And as market rates go down, our average funding cost will also go down, and that will be favorable to our P&L bottom line. And then as we approach the end of the year, we expect to recover to usual profitability levels.

Well, thank you very much for that answer. Currently, we have no other questions in the queue. We do know that there are other financial groups doing their earnings calls today. Perhaps that is the reason why we don't have more questions lined up. And I think this is a good place for us to end this earnings presentation. Actually, we have Do Ha Kim online.

Actually, I was applauding. That was the Applause icon, not the Raise Hand icon since I heard you were wrapping up.

Thank you very much then. With that, we will conclude our first earnings call for the first quarter of 2025 for Shinhan Financial Group. Please refer to our website and our YouTube channel for a video of today's earnings call. Thank you very much.