KB Financial, Q1 Net Profit Down 30% YoY "Impact of Hong Kong ELS Compensation"

Net Income of 1.0491 Trillion Won Recorded
ELS Customer Compensation Costs of 862 Billion Won
Resolution to Introduce 'Quarterly Equal Dividend Based on Total Dividend Amount'

KB Financial Group, Yeouido, Seoul. Photo by Jinhyung Kang aymsdream@

KB Financial Group announced on the 25th that its net profit for the first quarter was 1.0491 trillion KRW, a 30.5% decrease compared to the previous year.

KB Financial explained that the significant increase in non-operating losses was due to recognizing approximately 862 billion KRW in provisions for customer compensation related to Hong Kong H Index (Hang Seng China Enterprises Index·HSCEI) based equity-linked securities (ELS).

A KB Financial representative added, "Excluding one-time costs such as the large-scale ELS loss compensation incurred this quarter, net profit stands at around 1.5929 trillion KRW, maintaining a solid profit base."

Net interest income for the first quarter recorded 3.1515 trillion KRW, up 11.6% year-on-year. The net interest margin (NIM) for the first quarter was 2.11%, and the bank NIM was 1.87%, rising 3 basis points (1bp=0.01%) and 4 basis points respectively from the previous quarter.

Net fee income for the first quarter was 990.1 billion KRW, an 8.3% increase from the previous year. The strong performance was driven by expanded securities commission income and increased credit card fee income.

The credit cost ratio (CCR) dropped significantly to 0.38%. This was due to a base effect from proactive provisioning for bad debts such as real estate project financing (PF) in the previous year. The non-performing loan (NPL) ratio was 0.63%, and the NPL coverage ratio was 158.7%, indicating strong loss absorption capacity, according to the company.

The BIS capital adequacy ratio and common equity tier 1 ratio were 16.54% and 13.40%, respectively. KB Financial stated that although these ratios slightly declined compared to the previous quarter due to recognizing ELS customer compensation costs, they secured capital adequacy at the highest level in the financial sector.

As of the first quarter, KB Financial Group's total assets amounted to 732.2 trillion KRW, and including assets under management (AUM), the group's total assets reached 1,242.8 trillion KRW.

Looking at the operating results of major affiliates, KB Kookmin Bank's net profit for the first quarter was 389.5 billion KRW, a 58.2% decrease year-on-year due to expanded non-operating losses related to ELS loss compensation. As of the end of March, the delinquency rate was 0.25%, and the NPL ratio was 0.33%, rising 0.03 percentage points and 0.02 percentage points respectively compared to the end of the previous year.

KB Insurance's net profit for the first quarter was 292.2 billion KRW, a 15.1% increase year-on-year. KB Kookmin Card's net profit for the first quarter was 139.1 billion KRW, growing 69.6% compared to the previous year.

Meanwhile, KB Financial's board of directors resolved to introduce the industry's first new shareholder return policy of equal quarterly dividends based on total dividend amount and set the first quarter dividend per share at 784 KRW.