[Click eStock] "KB Financial Group Expected to Surpass 50% Total Shareholder Return Rate"

Announcement of 850 Billion Won Share Buyback
...Exceeding Market Expectations

KB Financial Group performed better than expected in the second quarter, continuing its steady progress. This was due to a one-off gain from the KDB Life Tower. With a large-scale share buyback planned for the second half of the year, the total shareholder return rate for this year, including dividends, is expected to exceed 50%.

On July 25, Yuanta Securities raised its target price for KB Financial Group by 19.5% to 141,000 won, citing these factors. The 'Buy' investment rating was also maintained.

In the second quarter of this year, KB Financial Group's net profit attributable to controlling shareholders was 1.7384 trillion won, about 6.0% higher than the market consensus. This was because non-interest income improved due to a decline in interest rates and exchange rates, and a gain of 267 billion won from the sale of KDB Life Tower was reflected in non-operating profit and loss.

Second-quarter net interest income decreased by 4.8% compared to the previous quarter. This was because 159 billion won related to non-controlling interests from the sale of KDB Life Tower was recognized as interest expenses. Won-denominated loans increased by 1.4% compared to the previous quarter, and net interest margin (NIM) fell by 3 basis points (bp; 1bp=0.01%). Excluding the one-off interest expense, net interest income was at a similar level to the first quarter.

Non-interest income increased by 17.0% year-on-year, due to the decline in exchange rates and the rise in stock indices. The credit cost ratio (CCR) rose to 0.55%, higher than expected.

The announcement of a share buyback worth 850 billion won in the second half of the year is seen as a positive factor. As of the second quarter, the common equity tier 1 (CET-1) ratio stood at 13.74%, and in line with the existing shareholder return policy, KB Financial Group will buy back shares equivalent to the 0.24 percentage points exceeding the 13.5% threshold. However, due to insufficient distributable profit, 660 billion won will be bought back within this year. After receiving dividends from subsidiaries as interim dividends, the remaining 190 billion won will be bought back and cancelled next year.

Woo Dohyung, a researcher at Yuanta Securities, explained, "The total shareholder return amount for this year, including dividends, is expected to be 3.01 trillion won (with 1.67 trillion won from share buybacks), and the total shareholder return rate is projected at 50.9%. The strong performance and the announcement of a larger-than-expected share buyback led to the upward revision of the target price."