KB Financial Group's CEO Candidate Committee Meeting D-1... Spotlight on Chairman Yoon Jong-kyu's M&A Achievements (Comprehensive)

Indonesia Bukopin Bank Acquisition Enhances Overseas Division
Secures 67% Stake to Become Largest Shareholder
Acquires Prudential Life, Adding 13th Subsidiary
Synergy with KB Life... Strengthening Non-Banking Sector

[Asia Economy Reporter Park Sun-mi] As the Chairman Candidate Recommendation Committee (Chairman Nomination Committee) prepares to select four candidates for the KB Financial Group chairman position, the mergers and acquisitions (M&A) projects led by Chairman Yoon Jong-kyu are being finalized one after another.

The stock price of Bukopin Bank, a mid-sized Indonesian bank, surged immediately after KB Kookmin Bank completed its acquisition on the 26th, reflecting market expectations for the 'new owner.' Additionally, Prudential Life Insurance, considered a valuable asset in the life insurance industry, received final approval from the Financial Services Commission on the same day, confirming its incorporation as the 13th subsidiary. Chairman Yoon, who is praised for successfully strengthening the previously weak overseas and non-bank sectors through active M&A, is increasingly seen as a strong candidate for a third term.

KB Kookmin Bank Completes Acquisition of 67% Stake in Indonesia's Bukopin Bank
Mid-sized bank with 412 local branches and 835 ATMs
Investment of approximately 400 billion KRW

◆ Yoon Jong-kyu's New Southern Policy Big Picture... Establishing a Foothold in Indonesia = KB Kookmin Bank announced on the 27th that it has finalized the acquisition of a 67% stake in Bukopin Bank. The investment began in July 2018 with a 22% stake, followed by an additional 11.9% acquired through a rights offering last month, and a further 33.1% obtained this month via a third-party allotment, completing a total 67% stake acquisition. The total investment to secure the majority shareholder position in Bukopin Bank was approximately 400 billion KRW.

Bukopin Bank, established in 1970, is a mid-sized bank with 412 branches and 835 ATMs across Indonesia. It has traditionally secured a retail-focused customer base through pension loans, cooperative member loans, and small and medium-sized enterprise (SME) loans. The government also holds a partial stake, providing a stable market position.

The local market responded enthusiastically to KB Kookmin Bank's acquisition of Bukopin Bank. Following the announcement of the successful acquisition of a 67% stake, Bukopin Bank's stock price surged over 15% intraday on the Jakarta Stock Exchange. The stock closed at 290 rupiah per share (approximately 23.5 KRW), up 10%, marking the highest closing price since August 19 of last year. This was driven by expectations that the change in majority ownership would resolve liquidity issues. Due to the economic difficulties caused by the COVID-19 pandemic this year, Bukopin Bank's stock price had fallen below 100 rupiah, and liquidity problems led to a bank run crisis in June.

The ongoing legal dispute between the previous majority shareholder and Indonesian banking authorities over KB Kookmin Bank's acquisition of Bukopin Bank remains a challenge. The former largest shareholder, Bosowa Group, which lost its majority stake to the foreign bank, filed a lawsuit against the Indonesian Financial Services Authority (OJK) at the Central Jakarta District Court on the 24th regarding the M&A.

OJK reportedly created negotiation conditions favorable to KB Kookmin Bank to secure liquidity amid difficulties faced by banks due to COVID-19. According to existing laws, foreign banks acquiring more than 40% of a local bank's shares must also take on a failing bank, but exceptions were made recognizing the crisis. As a result, KB Kookmin Bank became the first foreign bank to secure management rights of a local bank without having to take on a failing bank.

However, KB Kookmin Bank maintains that even if the lawsuit proceeds, there is no issue in exercising management rights over Bukopin Bank since Bosowa Group did not directly sue KB Kookmin Bank and the acquisition process has already been completed.

KB Kookmin Bank is currently dispatching 15 key personnel to Bukopin Bank to improve its profitability. The plan is to eliminate non-performing loans held by Bukopin Bank and reduce unnecessary expenses, using Bukopin Bank as a foothold for KB Kookmin Bank's expansion into Indonesia.

Prudential Life Insurance Acquisition to be Completed This Month
Incorporated as the 13th Subsidiary
Expected Synergy with KB Life Insurance

◆ Synergy with KB Life Insurance... Strengthening Non-Bank Sector = KB Financial Group will also complete the acquisition of Prudential Life Insurance, ranked sixth in the industry and known as a valuable life insurer, within this month. The acquisition of Prudential Life Insurance enables KB Financial to achieve a more balanced portfolio encompassing both banking and non-banking sectors, regarded as one of Chairman Yoon's management achievements.

After signing a stock purchase agreement with Prudential Life Insurance in April, KB Financial announced on the 27th that following the Financial Services Commission's approval for subsidiary incorporation, it will complete the acquisition payment by the 31st and incorporate Prudential Life Insurance as its 13th subsidiary.

KB Financial's acquisition of Prudential Life Insurance is considered a major M&A deal. Following the acquisitions of KB Capital (formerly Woori Financial) in 2014, KB Insurance (formerly LIG Insurance) in 2015, and KB Securities (formerly Hyundai Securities) in 2016, this acquisition addresses the long-standing challenge of strengthening competitiveness in the insurance sector. Upon completion, the combined premium income ranking with existing subsidiary KB Life Insurance is expected to enter the top 10.

KB Financial plans to prioritize stabilizing Prudential Life Insurance's business and enhancing its value after incorporation, operating it as an independent legal entity to maximize the strengths of both companies. KB Life Insurance has a solid bancassurance and general agency (GA) channel, while Prudential Life Insurance specializes in a sales organization centered on life planners (LP) and GA channels.

The market views this acquisition as KB Financial catching three rabbits at once. It has improved corporate value through efficient capital utilization based on sound capital adequacy via M&A, strengthened its business portfolio, expanded its profit-generating base, and enhanced stability. Additionally, the acquisition is expected to significantly boost the group's influence in the life insurance market, which was limited with KB Life Insurance alone.

As KB Financial proceeds with selecting Chairman Yoon's successor, the completion of M&A projects supports his potential reappointment. The smooth integration of the new organization after acquiring Prudential Life Insurance is crucial for generating overall group synergy. Chairman Yoon envisions utilizing Prudential Life Insurance's LP organization as KB Financial's 'Mobile Wealth Manager' to offer various premium services in asset management. There is high anticipation that customized wealth management (WM) services will be provided at the group level to Prudential Life Insurance's 650,000 high-income customers.