Total Shareholder Return Rate 33%... Cash Dividend Payout Ratio 26%
[Asia Economy Reporter Yu Je-hoon] KB Financial Group posted a record high net profit of KRW 4.4133 trillion last year.
KB Financial Group announced on the 7th that its net profit for last year was KRW 4.4133 trillion, a 0.1% (approximately KRW 3 billion) increase compared to the previous year. This profit level is the highest ever recorded. Despite a deteriorating business environment due to a stock market slump and increased volatility in financial markets, the company explained that it maintained solid profitability through loan growth, an expansion of net interest margin (NIM), resulting in increased net interest income, and thorough cost management.
The group's return on equity (ROE) was 9.86%, slightly down from 10.22% the previous year, but the recurring ROE excluding voluntary retirement costs was 11.46%. KB Financial added, "This reflects steady growth in core earnings and efforts to improve cost efficiency despite financial market uncertainties."
Fourth-quarter net profit was KRW 385.4 billion, showing a sharp decline from the previous quarter's KRW 1.2713 trillion. This was due to voluntary retirement costs and proactive loan loss provisions reflecting a conservative economic outlook. Nevertheless, recurring net profit remained solid at about KRW 1.2 trillion.
Meanwhile, KB Financial's total shareholder return ratio for 2022 was 33%, up 7 percentage points from the previous year. Regarding the board's dividend decision, KB Financial stated, "The cash dividend payout ratio is planned at 26%, providing stable dividends to shareholders. Following last year, quarterly dividends have been regularized to enhance dividend visibility. Additionally, approximately KRW 300 billion worth of treasury stock was repurchased and canceled to improve the total shareholder return ratio."
Regarding growing expectations for shareholder returns, KB Financial said, "To respond to potential future economic volatility, we have established a mid- to long-term capital management plan to maintain the group's capital ratio at a stable level, expand shareholder value, and pursue a higher level of shareholder return policy. Based on the group's strong capital base and abundant liquidity, we derived the optimal capital structure and formulated management measures, considering various factors such as appropriate common equity tier 1 ratio, asset growth rate, and shareholder return policy."
Interest Income Up 19% to KRW 11 Trillion... Fee Income Declines
Looking at business performance by segment, net interest income rose 18.9% year-on-year to KRW 11.3814 trillion. This was driven by loan growth and NIM improvement, with bank interest income increasing by KRW 1.5625 trillion and additional contributions from non-bank affiliates such as card and capital companies.
The annual NIM for the group and the bank were 1.96% and 1.73%, respectively, expanding by 13 basis points (bp) and 15 bp compared to the previous year (1 bp = 0.01%). The NIM improvement trend continued in the fourth quarter, with the group and bank NIM at 1.99% and 1.77%, respectively. Bank NIM expansion was limited due to increased funding costs from a decrease in core deposits and an increase in time deposits, but repricing effects on loan assets led to a 1 bp improvement compared to the previous quarter.
Net fee income remained at KRW 3.3216 trillion, down 8.4%. This was due to a sharp decline in securities custody fees amid domestic and international stock market downturns, and overall contraction in bank trust and fund sales performance caused by rising interest rates and falling stock indices. However, IB fee income increased about 18% year-on-year despite this environment. KB Financial explained, "This is the result of company-wide efforts to strengthen business competitiveness and secure a solid market position."
Banks and Non-life Insurance Rise, Securities Lag
By affiliate, KB Kookmin Bank's net profit last year increased 15.6% year-on-year to KRW 2.996 trillion. Capital market-related performance was weak due to rising interest rates and stock market downturns, but loan growth and NIM improvement drove earnings growth despite conservative loan loss provisions.
As of the end of last year, KB Kookmin Bank's KRW loans increased 3.1% year-on-year to KRW 329 trillion. Household loans decreased 2.4% due to sharp loan rate hikes, while corporate loans grew 9.4%. The delinquency rate rose by 0.04 percentage points to 0.16%, the non-performing loan (NPL) ratio remained stable at 0.20%, and the NPL coverage ratio was 259.4%, indicating sufficient loss absorption capacity.
KB Insurance also posted a net profit of KRW 557.7 billion, up 84.8% year-on-year. Although a one-time gain from real estate sales (approximately KRW 157 billion after tax) had a significant impact, recurring net profit also increased about 21.9% excluding this.
On the other hand, the securities sector, which had been a non-bank profit driver, showed a decline due to the stock market slump. KB Securities' net profit last year dropped 65.3% to KRW 206.3 billion. In particular, KB Securities posted a net loss of KRW 97.4 billion in the fourth quarter. This was due to a decrease in custody fees compared to the previous quarter, securities valuation losses, and one-time costs including voluntary retirement expenses totaling about KRW 83 billion after tax.
KB Card, which had raised expectations due to increased consumption, recorded KRW 378.6 billion, down 9.6%. Despite increased card usage from recovering consumer sentiment, merchant fee cuts and rising funding costs overlapped. KB Kookmin Card's delinquency rate at year-end rose 0.1 percentage points to 0.92%, and the NPL ratio remained at 0.96%, maintaining the previous year's level. The NPL coverage ratio also remained stable at 335.6%.
A KB Financial official said, "Last year, despite a difficult business environment with ongoing economic and financial market uncertainties, interest income increased significantly due to loan growth and improved net interest margin from rising market interest rates. As a result of strengthening competitiveness in the group's core business units and diversifying the non-bank portfolio, the group's fee income exceeded KRW 3 trillion for two consecutive years, enhancing the group's profit-generating capacity compared to the past."
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