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01/10 15:43
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call shows mixed signals. Positive elements include increased dividends, share buybacks, and strong noninterest income growth. However, net income missed expectations, and SG&A expenses rose significantly. The Q&A revealed uncertainties in strategic decisions and unclear management responses, particularly concerning the insurance arm and CET1 ratio target. These factors suggest a neutral market reaction, as positive shareholder returns and growth in noninterest income may offset concerns about missed earnings and rising expenses.
Net Income KRW 1,551.3 billion for the first half of 2025, representing a year-over-year decrease of 11.6%. The decrease was due to one-off expenses related to the early retirement program and preemptive provisions for a completion guarantee of Trust company. Excluding these factors, net income was similar to last year.
Second Quarter Net Income KRW 934.6 billion, which is KRW 300 billion higher than the first quarter. However, it did not meet market expectations.
CET1 Ratio 12.76% as of June 2025, showing an increase of approximately 60 basis points from the end of last year. The improvement was driven by favorable external conditions such as a weaker exchange rate, asset rebalancing, and proactive risk-weighted asset management.
Net Operating Revenue KRW 5,400.1 billion for the first half of 2025, up by 2.3% year-over-year. This growth was achieved despite a challenging business environment, supported by sound interest income and improved noninterest income.
NIM (Net Interest Margin) 1.45% for the bank and 1.71% for the group (including the credit card business) in the second quarter, representing an increase of 1 basis point quarter-over-quarter. The improvement was due to active funding cost management and asset rebalancing.
Bank Loans KRW 329 trillion as of June 2025, remaining at a similar level to the end of March. Corporate loans totaled KRW 179 trillion, while retail loans increased by approximately KRW 3.7 trillion from the end of March, reaching KRW 148 trillion.
Noninterest Income KRW 886.3 billion for the first half of 2025, maintaining a similar level year-over-year. On a quarterly basis, it rose sharply by approximately 47% from the previous quarter, reaching KRW 527.3 billion. Growth was driven by core fee income in the Wealth Management segment and gains related to securities and FX valuation.
SG&A Expense KRW 2,479.1 billion for the first half of 2025, representing an 18% increase year-over-year. The increase was due to one-off factors such as early retirement costs, investments in the securities business, wage settlements, and expanded investments in digital and IT capabilities.
Credit Costs KRW 944.5 billion for the first half of 2025. In the second quarter, credit costs were KRW 509 billion, up 16.9% from the previous quarter. The increase reflects preemptive provisions for completion guarantee projects and additional provisions for certain borrowers.
Securities arm expansion: Acquired final approval for the investment trading business and launched the MTS platform.
Insurance business acquisition: Completed acquisition of Tongyang Life and ABL Life, integrating them as affiliates and reevaluating their assets and liabilities.
Nonbank portfolio expansion: Focused on expanding the nonbank portfolio, including insurance and securities businesses, to diversify revenue streams.
Wealth Management growth: Core fee income from Wealth Management showed notable growth, contributing to stable top-line performance.
Capital ratio improvement: Achieved a CET1 ratio of 12.76%, exceeding the 12.5% target for the first time in the group's history.
Cost efficiency measures: Invested in digital and IT capabilities while pursuing cost efficiency through workforce and channel optimization.
Integrated financial services strategy: Aiming to become a comprehensive financial services group by balancing growth between banking and nonbanking businesses and maximizing synergies across affiliates.
Net Income Decline: Net income for the first half of 2025 decreased by 11.6% year-over-year, attributed to one-off expenses and preemptive provisions, indicating challenges in maintaining profitability.
Economic Slowdown: Conservative loan loss management and increased SG&A costs were necessary to address the economic slowdown, reflecting ongoing economic uncertainties.
Insurance Business Concerns: Market concerns about capital adequacy and the outlook for the insurance business amid a challenging rate cycle environment.
Rising Credit Costs: Credit costs increased by 16.9% in Q2 2025 due to preemptive provisions and additional provisions for vulnerable borrowers, highlighting risks in asset quality.
Delinquency and NPL Ratios: Delinquency and NPL ratios are rising, particularly in vulnerable industries, due to ongoing domestic and global uncertainties.
SG&A Expense Increase: SG&A expenses rose by 18% year-over-year, driven by early retirement costs, investments in digital and IT, and other one-off factors, pressuring cost efficiency.
Interest Rate Environment: Falling interest rates are expected to continue, creating downward pressure on NIM and impacting profitability.
Regulatory and Capital Requirements: Potential changes in regulatory capital requirements and volatility in interest and exchange rates could impact the group's capital adequacy and financial stability.
Capital Adequacy: The group plans to outperform the year-end target of achieving a CET1 ratio of 12.5% and accelerate efforts to achieve the market expectation of 13%.
Insurance Business Outlook: The group plans to focus on sound capital adequacy management by maintaining a K-ICS ratio that comfortably exceeds the regulatory guideline and on profitable management focusing on financial stability.
Securities Business Expansion: The group will strengthen competitiveness by launching the MTS platform and utilizing the merchant bank license and bank corporate customer network for marketing activities.
Loan Portfolio Management: The group will focus on managing the volume of household loans in line with government policy and strengthen financial support for future growth industries to ensure productive market fund flow.
Noninterest Income Growth: The group aims to uncover new business opportunities to expand noninterest income, leveraging favorable market conditions such as falling interest rates and exchange rates.
Cost Efficiency: The group will actively pursue cost efficiency through workforce and channel optimization, process enhancement using IT, and reduction of unnecessary recurring expenses.
Credit Cost Stabilization: Credit costs are expected to gradually stabilize from the third quarter onwards, supported by proactive risk management and the government's economic stimulus measures.
Shareholder Returns: The group aims to enhance shareholder returns based on a strengthened CET1 ratio, with a quarterly dividend of KRW 200 per share approved by the Board of Directors.
Dividend Policy: In line with our dividend policy to distribute 50% of the previous year's annual dividend evenly on a quarterly basis, the Board of Directors today approved a quarterly dividend of KRW 200 per share. As previously announced, the record date will be August 10.
The earnings call shows stable financial performance with solid interest income and improved noninterest income. The company is focused on strengthening competitiveness and managing capital efficiently. While there are some uncertainties, such as unclear management responses and increased credit costs, the overall sentiment is positive due to strategic growth plans, strong capital ratios, and shareholder return initiatives. The market is likely to react positively, especially with the optimistic guidance and focus on cost efficiency and revenue stability.
The earnings call shows mixed signals. Positive elements include increased dividends, share buybacks, and strong noninterest income growth. However, net income missed expectations, and SG&A expenses rose significantly. The Q&A revealed uncertainties in strategic decisions and unclear management responses, particularly concerning the insurance arm and CET1 ratio target. These factors suggest a neutral market reaction, as positive shareholder returns and growth in noninterest income may offset concerns about missed earnings and rising expenses.
The earnings call highlights several negative factors: increased credit costs, SG&A expenses, and asset quality concerns due to economic uncertainties. Despite some positive aspects like increased dividends and share buybacks, the overall sentiment remains negative due to regulatory challenges, high exchange rates, and unclear management responses in the Q&A section. The lack of strong guidance and the impact of U.S. tariffs further contribute to a negative outlook. The stock price is likely to decline by 2% to 8% over the next two weeks.
The earnings call highlights strong financial performance, with net income and non-interest income showing significant growth. The shareholder return plan, including dividend approval, is a positive indicator. Despite some uncertainties in market conditions and supply chain challenges, the group maintains a stable CET1 ratio and targets further improvements. The Q&A section reveals confidence in achieving financial targets, though some responses lacked clarity. Overall, the positive financial metrics and shareholder return announcements outweigh concerns, suggesting a positive stock price movement in the short term.
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