Summary

• The average shareholder return ratio of the 7 banks for FY2023 is 33.7%, which is an increase of 4.2%p this year following last year's 5.2%p increase, and Align Partners’ requirements such as the emphasis on per share metrics in the IR materials are reflected… Overall, Align Partners welcomes such changes by the banks
• However, the growth rate of risk-weighted assets averaged 6.1%, exceeding Korea's nominal economic growth rate (about 4%), and it needs to be improved from a more efficient capital allocation perspective
• We will continue to demand banks’ management of risk-weighted asset growth (within 3~4% per annum) to achieve the target CET1 ratio of 13.0~13.5% earlier and to return capital exceeding the target CET1 ratio to shareholders

Align Partners' Evaluation and Proposal upon Each Bank's Announcement

KB Financial Group

• In 2023, in consideration of internal and external uncertainties (ELS, real estate PF, etc.), a significant portion (0.6%p) of the capital exceeding the target CET1 ratio of 13.0% was reserved in-house, but in the future, if there are no special circumstances, KBFG has once again stated that it will actively use the capital exceeding the CET1 ratio of 13.0% as a source of shareholder return, so KBFG’s compliance will be closely monitored.
• The total asset growth rate (3.9%) was well managed at the level of nominal GDP growth as previously announced, but the risk-weighted asset growth rate (6.3%) needs to be managed more strictly

Shinhan Financial Group

• As the target CET1 ratio of 13.0% has been exceeded as of year-end in 2023, capital exceeding 13% should be used for shareholder return in principle in accordance with the announced policy in 2024, so compliance with the policy will be closely monitored.
• The total asset growth rate (4.1%) was well managed at the nominal economic growth rate as previously announced, but the risk-weighted asset growth rate (8.2%) needs to be managed more strictly. After 2024, SHFG must continue to manage asset growth at the level of nominal economic growth.

Hana Financial Group

• Not only in 2024, but also in the future, HFG needs to manage the loan growth rate within the nominal GDP growth rate (about 4~5%) until the current undervaluation is resolved.

Woori Financial Group

• WFG has the lowest CET1 ratio (11.9%) among the four major commercial banks in Korea. Therefore, strict management of risk-weighted asset growth (e.g. less than 3% per annum) is required until the target CET1 ratio (13%) is achieved.

JB Financial Group

• In the current undervaluation situation, JBFG’s mid-term risk-weighted asset growth target of 7~8% per annum is not efficient, so until the target CET1 ratio (13%) is achieved, stricter management of RWA growth rate is required as in other banks (e.g. less than 4% per annum). In fact, in FY23, JBFG’s risk-weighted asset growth was well managed at 3.8% per annum.

BNK Financial Group

• The CET1 ratio (11.7%) is too low compared to the target ratio (13.5%). As mentioned in the financial results announcement, BNKFG shall strictly manage the risk-weighted asset growth rate in the future and achieve the goal of improving the CET1 ratio by at least 30bp per year.

DGB Financial Group

• The CET1 ratio (11.2%) is too low compared to the target (13.0%). As mentioned in the financial results announcement, the CET1 ratio shall be improved as quickly as possible by managing the risk-weighted assets growth rate through reallocation of risk-weighted assets between bank and non-bank operations.