JB Financial : IR Letter_2023.08.23

IR Letter (Aug 2023)

JB Financial Group

Dear JB Financial Group Shareholders,

In this IR letter, I am pleased to provide you with an overview of the Q&A sessions and feedback that transpired during the Non-Deal Roadshow(NDR) conducted subsequent to the release of our 2Q23 earnings report.

Broadly speaking, we emphasized three pitching points during the NDR.

• Fundamentals

Our 1H23 net income of KRW 326 billion, tops the market consensus thus increasing the possibility of achieving our full-year earnings guidance of KRW 620 billion. This is all attributable to the fact that we successfully fortified our net income by ramping up our non- interest income amid the difficult circumstances with falling NIM and rising credit costs.

In the second half of this year, we expect the key profitability indicators such as NIM, loan growth rate, and credit cost ratio to improve further compared to 1H23. NIM pressure from funding repricing will be completed as the new time deposit rate for June gets lower than the average interest rate of the existing time deposit. Furthermore, as the time deposits that we funded with higher rates 4Q22 will come to mature, our NIM will likely rise 2H23F. As for the growth of won-denominated loans, we are planning a mild loan growth centered around credit guaranteed loans and loans with superior credit rating. Regarding asset quality, new delinquency rate peaked in the first quarter and now is on the decline in the second quarter. Compared to the first half, asset quality is expected to improve further owing to loan volume growth. Accordingly, normalized credit cost ratio is likely to fall in the second half compared to 1H23. We will keep delivering on our promises as we have consistently met market expectations about earnings guidance over the past four years.

• Investment in Finda

Our equity investment in Finda has been implemented as part of our important strategies toward business diversification and new business initiative (Digital Banking). On the

IR Letter (Aug 2023)

JB Financial Group

conventional banking business, JBFG's strategy has been to rebalance our business asset portfolio with a greater focus on the products of higher risk-adjusted return. Another pivotal axis of our Group's strategies for the future involves collaboration with fintech firms with the aim of expanding our customer base and creating new business opportunities. As the case of the cooperation between Kwangju Bank and Toss Bank (currently underway), Jeonbuk Bank is planning to generate synergy through mutual collaboration with Finda in various fields: such as 1) joint product development, 2) customers attraction outside of our regions via the installation of digital branches on Finda's platform, 3) risk management, 4) development of sophisticated credit rating models using alternative credit data.

The strategy of cooperating with fintech/platform companies is JBFG's distinctive strategy differentiated from other Korean financial groups that are trying to compete fintech by developing super apps. This is considered as the best way to counter threats, such as the aging of the population in the Honam region, ever-evolving mobile technology, new regulations, to the traditional business models of Korean regional banks. Further collaborating with fintech /platform companies across the country is becoming an increasingly important strategy.

• Shareholder Return Policy

Now that JBFG's CET1 ratio achieved the 12% level and, our current share price is undervalued, the board of directors decided on a share buyback worth KRW 30 billion to enhance shareholder value. Share buyback will not be a one-time event. We will continuously consider repurchasing our own shares. For shareholder return policy, we will mix cash dividends and share buyback. The criterion for such adjustment will be dividend yield. If dividend yield is high, we will increase share buyback and if dividend yield is low, we will increase cash dividends. In addition, the board of directors adopted a resolution that KRW 120 per share be paid as a semi-annual dividend and we are planning to pay out quarterly dividends from next year on. Whether to distribute dividends on a quarterly basis will be specifically discussed at a board meeting and we will take a phased approach with the final aim of paying out quarterly dividends of an equal amount.

IR Letter (Aug 2023)

JB Financial Group

Let me summarize the feedback we gained during the 2Q23 NDR. We received positive feedback regarding the net income that topped our guidance amid the difficult environments and stock buyback. On the contrary, investors voiced some concern over the deteriorating asset quality indicators though the pace of deterioration has slowed down and there were questions about the outlook for asset quality and the possibility of the regulatory pressures on demanding extra provisioning. Asset quality and shareholder return policy, which investors are most interested in, are the matters that we regard as top priorities along with profitability. Therefore, we will continue to do our utmost to enhance corporate value and shareholder return policy based on our solid fundamentals.

Please contact us if you have any further questions or need more data.

Thank you.

IR Department, JB Financial Group

IR Letter (Aug 2023)

JB Financial Group

Key Q&A at 2Q23 NDR

[Asset Quality/Loan Loss Provision]

Q. Would you share your forecasts for asset quality and loan loss provision for the second half of this year? How much additional provision do you think the regulators will demand?

A. Asset quality became worse in the 1st quarter but the pace of deterioration slowed down a lot in the 2nd quarter. Loan loss provisions are rising in every product segment compared to the previous year and we think interest rate hikes implemented last year are now finding their way into the real economy this year. We will stick to our conservative stance on provisioning. Credit cost ratio in the second half of this year is expected to decline slightly as we do not expect an immediate improvement in asset quality for the time being. JBFG has set apart loan loss provisions of KRW 130 billion over the past three years based on the Covid-19 and the conservative economic outlook. Thus, the impact, even if the regulator calls for an additional provisioning, would be limited. Besides, there will be additional provisioning through LGD adjustment reflecting the forecasts for the future economy towards the end of this year or next year.

Q. How much is the total outstanding balance of real estate PF loans? Are there any problematic project sites?

A. JBFG's total outstanding real estate PF loans stand at KRW 5.8 trillion and as of now we do not have any problematic project sites. Both of our affiliated banks have PF loans and senior PF loans and 79% of them are backed by a letter of guarantee. So, our exposure to property development finances in real terms is limited. As for JBFG Woori Capital, real estate PF exposure accounts for 11% of its total assets, lower than the sector average. The outstanding balance of bridge loans, a concern for the market, is KRW 150 billion, which is small in amount and their average LTV is mid-70%. 70% is lower than the 20-year average sale price appraisal ratio (which is 80%) of the land lots which are collateral for bridge loans so the losses should be limited even if the bridge loans in a worst-case scenario do not turn into PF loans.

IR Letter (Aug 2023)

JB Financial Group

Q. What is the asset quality status of the unsecured retail loans which became quite worse in the previous quarter?

A. As for asset quality, JBFG's top priority continues to be unsecured retail loans. The most problematic vintage (i.e., the time a loan was granted) is the unsecured loans granted non- face-to-face last year. We have been strengthening risk management by tightening underwriting standards and the loan approval process. The loans we granted from November last year up to June this year look sound enough. We maintain an appropriate level of profitability for our loan products despite their delinquency rate by applying sufficient risk pricing. We have established loan loss provision in the amount equivalent to 60~70% of the expected maximum loss, which is KRW 100 billion. Therefore, we have potential losses pretty much under control.