Greetings. I am Peter Kweon, the Head of IR at KBFG. We will now begin the 2023 Q1 business results presentation. I would like to express my deepest gratitude to everyone for participating today. We have here with us our group CFO and SEVP, Scott YH Seo, as well as other members from our group management. We will first hear the 2023 Q1 major financial highlights from CFO and SEVP, Scott YH Seo, and then engage in a Q&A session. I would like to invite our CFO and SEVP to deliver 2020 Q1 earnings results.

Good afternoon. I'm Scott YH Seo, CFO of KB Financial Group. Thank you for joining the company's first quarter 2023 earnings presentation. Before going into the details of Q1 '23 earnings performance, I will first run through key performance metrics for Q1. As you're all aware, starting Q1 of '23 results, our accounts are based on IFRS 19 standards -- IFRS 17 standards, and we have retroactively restated '22 earnings of the group and its insurance subsidiary. First, KBFG's Q1 net profit was KRW 1,497.6 billion, which is up 2.5% year-over-year. Driven by balanced growth from bank and nonbank business, we were able to report earnings which was 6.5% higher than market consensus. Group's Q1 ROE was 12.4% and annualized EPS, earnings per share, was approximately KRW 15,224, increasing by 2% year-over-year and sustaining an uptrend. PPOP, pre-provisioning operating profit in Q1 was KRW 2,793.8 trillion, growing 36% year-over-year. SVB bankruptcy in the U.S. and Credit Suisse merger led to greater financial market uncertainties, despite which we were able to drive solid quarterly results driven by strong customer trust, underpinned by KBFG's robust capital base, and large improvements in contributions from sales and trading -- or market business, which was previously under pressure due to greater financial market volatility in 2022 as well as greater profit contribution from our insurance subsidiaries. As a result, nonbank business share against group's net profit increased to around 41%, while group's earnings profile also improved with contributions from interest income decreasing significantly to 64%. Cost-to-income ratio, which is a measure of cost efficiency, decreased to 35.9% driven by solid profit growth trend and cost efficiency efforts that cut across the entire group. Now during this quarter, there was a significant increase in the group's PCL. This is largely due to conservative provisioning initiated at…

Good afternoon. I am Hyung Jae, from Hyundai Motor Securities. I have questions relating to KB insurance. Would be helpful if you could provide some color on the CSM movement for 2022. And if you could just also share with us what the CSM amortization looks like? And also, the size or the gap between the expected and the actual. Can you share with us what the gap is and what the reasons were? And in Q1, if there is any difference between the expected versus actual, what is the size of that? And also, what is the size of your new business CSM? And this may be a very minor question, but out of your new business for the long-term business line, if you could break down drivers’ or children's insurance for the new business CSM for each of the different types of insurance products, what is the multiple that you're seeing?

Thank you very much, Mr. Lee for all those questions. Just give us one moment to prepare for the answer. Just one moment please.

Yes, hello, I am Oh Byung Joo, Managing Director from KB Financial Group. You asked about your 2022 CSM, for KB Insurance in terms of CSM movement, and also the difference of the size of the expected versus actual. Now regarding this specific question, we will provide you with the details through our IR division. Just to provide an overall high-level picture regarding this question from KB Insurance over the past three years, we have focused on selling high-margin medical products -- health insurance products. And in the recent three years, we were able to further strengthen and expand our market position. And as a result, we've been able to further expand the size of the CSM. And if you look at Q1 numbers, previous year, KB Insurance was about KRW7.9 trillion. And as of Q1 end, it reported a trillion about KRW120 billion so there has been about an increase of KRW250 billion. Now, this is actually an outperformance of the business plan that we have initially set for ourselves. You also asked about regarding the new business for Q1 like drivers and children's insurance. You asked about the CSM conversion ratio and amortization. But as mentioned before, KB Insurance in terms of competition, especially if you get children's insurance product, which Intel's high margin we've been able to successfully sell that into the market through the GA channel. And in Q1 we were able to expand our market share through the GA channel. Looking at drivers like insurance, if you look at CSM conversion is about 18%, for children's insurance, it's above 20%. So that is the figures that I can share with you at this point. Thank you.

We will take the next question Kim Jae-woo from Samsung Securities.

I have some questions and first question is about your provisioning. It says here you had some preemptive provisioning. So, can you tell us about what was one-off and what wasn't? Along with this looking at the credit costs for this year. Can you give us some guidance for this year? Thank you very much. Second question. So, for other operating income, well, it seems that there have been some changes. And can you tell us about the increase and can you tell us about the background? Because I think some will be linked to the rate, and some may be stabilized because of other reasons. So, can you give us some color into the background behind this? Thank you very much.

We will soon answer your question. Please hold. I would like to answer your question. First, it is about provisioning. As we aforementioned, for general provision, which is unspecified provisioning, in Q1, it was about KRW320 billion. So, it was provisioned through the Bank. The reason behind this was that in Q1, we had the credit cost that actually surged, and second is the guidance for credit cost. We believe that, the market interest rate, well, there is NPL and credit cost, which is deeply linked, and this is the main reason for that. And the Group's business, Research Institute says that, for Q2 and Q3 for interest rate, it will have ups and downs. And from 2024, it will continuously drop. So, based on those projections, looking at the NPL ratio and credit cost ratio, if we make assumptions, it seems that until now through our IR sessions, we have been saying that, the Group credit cost from the mid-30s to 40-s is what said. But in 2023, we believe that this will keep in line with our guidance. We don't believe that, the credit cost will fluctuate greatly. And for credit cost, for our guidance, I believe what I can -- this is what I can say and for other operating income, you test about whether it is stable or not. And I couldn't really catch your question perfectly, because I couldn't hear the sound clearly, but for other operating income, we have a prop trading and insurance income. So those two are the parts. And for the insurance part of our income, in Q1, we had not only one-off in Q1, but we believe that in Q2, Q3, and Q4, we will have a stable contribution by the insurance for the Group's earnings. Secondly, for securities, we believe that going forward, for securities for FX and for derivative, the earnings and income from that in Q2 will greatly -- has greatly increased, and I believe as you had asked, we will need to see the interrogate situation to see whether this will hold. But in 2022 for the Group, we have all the prop trading-related groups that were completely revamped during the year. And as a result, we have the best and the stable traders that have been rooted. So, we believe that, there will be some trading income changes according to the changes in the market that we believe, compared to our competitors, it will be a Stabler and less volatile. Thank you very much.

Thank you very much for the answer. We waiting for additional question to come in from Hanwha Securities, Do-ha Kim. Please go ahead. Miss Do-ha Kim. Please go ahead.

Yes. I would also like to ask one question. Regarding previous earnings, I think you have given us more details relating to the application of the IFRS 9. And I think there has been significant fluctuation on the securities-related income under other income. Even if you provide us with the details later on, if you look at Q1, looking at FVPL, can you give us a carve-out of that FVPL because under nonlife, it is just included in others line item. But I would like to understand because it's quite difficult for us to carve out just the impact from FVPL. So, if you could tell us what that is, I think it would be helpful for us to further understand. And also, from the banks, you talked about KRW320 billion of additional provisioning, if you could share more details as to what the assumptions were? And also, are these all regarding the current COVID-related counter cyclical buffer or if you could provide a little more breakdown as to this additional general provisioning? That would also be helpful.

Thank you. Just give us one moment. [indiscernible] Kim. Regarding KB insurance and the devaluation of assets. And then regarding the application of IFRS 9 as you have correctly mentioned that KB insurance we have internally applied IFRS nine since 2018, and last year IFRS 17. And if you look at P&L, like I thought was 19 has already been embedded last year because of the interest rate movement and also the impact from the stock market. The FVPL, value PCL [ph], there has been a valuation loss that was booked that is the fact. However, in Q1 with the interest rate movement and the rate cuts as well as improvement of the stock market last year. In FVPL, there has been some plus impact. So, if you just look at KB insurance, out of the FVPL asset, there was about plus KRW41 billion of valuation gains that we were able to book. Regarding the general provisioning, if you look at Q1 PCL of the group, it was a KRW668.2 billion and out of that KRW320 billion had to do with that countercyclical COVID related provisioning. Let me revisit this once again. This is irrespective of project financing this is it purely for general provisioning purposes. And then the remaining KRW300 billion is to respond to increase in NPL et cetera. So that is the running basis provisioning amounting to KRW300 billion.

It seems that we don't have any questions in the queue yet. So, we will wait for questions to come in. You can also contact our IR team any time after our earnings release to ask questions. Cho Jihyun from JP Morgan.

Thank you, very much for the opportunity. You answered a question about provisioning. So, I would just like to add to the question for PF journal provisioning. You mentioned that PF hasn't been reflected in the journal provisioning and others have been included. And I think for card and capital, you have seen appeal increase, especially for PF and bridge loans. I think you mentioned that. And recently the PF loan exposure or other loan exposure, if you can remark on that. And can you tell us about, how you think it will change and be managed in the latter half of this year. If you can provide some color to that it would be greatly appreciated.

Regarding the PF exposure, it's about KRW11 trillion. And our CFO commented that it's not for specific provisioning in the PF for the different areas, but regarding delinquencies or any problematic businesses, well, we are just provisioning it according to our general standards and PF loans are a great issue in the market nowadays. So, it is four different businesses in our group that we are responding to this risk preemptively and we are responding to it individually and also because of the market situation. So, we have had soft landings with the agreements and others. So, we will need to wait and see. And we also expect many businesses to normalize and we are responding to each case individually. And if looking at the market, we are seeing some slow speed then we will also be looking toward for additional provisioning if required. Thank you very much for your question. It seems that we are waiting for questions to come into the queue, we will wait.

While preparing for today's earnings presentation, we felt that you would be interested in our insurance as well as our provision-related positions. So, I think there were an ample number of questions that came in regarding those topics. We will still wait just one more moment for any additional questions I see that there are no further questions in the queue. So, this brings us to the end of the Q&A. Thank you very much.