Net Interest Income Reaches KRW 3.6 Trillion... Fee Income at KRW 934 Billion
Bank Profit Surges 163% in One Year Due to ELS Provision Base Effect
Non-Banking Businesses Now Account for 42% of Group Profit
KB Financial Group's net profit for the first quarter of this year increased by 63% compared to the same period last year, surpassing market expectations. The significant improvement was mainly due to the disappearance of the base effect from the previous year, when the group had set aside provisions to cover losses from Hong Kong H-Index equity-linked securities (ELS) in the first quarter. The group also performed well despite declining market interest rates, with a slight increase in net interest income.
On April 24, KB Financial Group announced in a regulatory filing that its consolidated net profit attributable to controlling interests for the first quarter of this year was KRW 1.6973 trillion, a 62.9% increase from KRW 1.042 trillion a year earlier. This figure exceeded the market consensus estimate of KRW 1.578 trillion.
Na Sangrok, Chief Financial Officer of KB Financial Group, explained, "The base effect from provisions for ELS loss compensation at the bank in the first quarter of last year has disappeared, and profits from non-banking affiliates have generally expanded, driven by a well-balanced group portfolio, which contributed to the group's overall performance."
Net interest income reached KRW 3.2622 trillion, up 0.6% from the previous quarter. Na added, "Although interest income declined due to falling market interest rates, efforts to reduce funding costs, such as expanding core deposit inflows, enabled net interest income to remain at a similar level to the previous quarter." The group's net interest margin (NIM) for the first quarter was 2.01%, up 0.03 percentage points from the previous quarter. Net fee and commission income was KRW 934 billion, a 5.7% decrease from the same period last year.
By affiliate, KB Kookmin Bank's net profit for the first quarter was KRW 1.0264 trillion, up 163.5% year-on-year. This was due to the removal of ELS loss compensation risk, which had been reflected as provisions in the first quarter of last year. Securities-related earnings also recovered, increasing by KRW 636.9 billion compared to the same period last year. Net interest income was KRW 2.5967 trillion, up 0.89% from the previous quarter. NIM rose by 0.04 percentage points to 1.76% over the same period.
KB Securities posted a net profit of KRW 179.9 billion, down 9.1% year-on-year. A KB Financial Group official explained, "Net profit decreased as profit and loss from securities valuation shrank due to a decline in stock indices, and securities brokerage commissions fell as domestic stock trading volume decreased." KB Insurance's net profit was KRW 313.5 billion, up 8.2% over the same period, while KB Life Insurance's net profit was KRW 87 billion, down 7.7%. KB Kookmin Card's net profit for the first quarter was KRW 84.5 billion, a 39.3% decrease. This was due to a reduction in commission income following adjustments to merchant commission rates, and an increase in credit loss provisions. The share of non-banking businesses in the group's total profit rose to 42%.
As of the end of the first quarter, KB Financial Group's Common Equity Tier 1 (CET1) ratio stood at 13.67%, and its BIS capital adequacy ratio was 16.57%. The group’s cost-to-income ratio (CIR), a measure of cost efficiency, hit a record low of 35.3%, showing a clear trend of downward stabilization.
Prior to the earnings release, KB Financial Group held a board meeting and resolved to pay a cash dividend of KRW 912 per share and to repurchase and cancel KRW 300 billion worth of treasury shares.
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