KB Financial Group H1 2023 Earnings Call Transcript

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Provided by Quartr
July 25, 2023

There are 3 speakers on the call.

Operator

Greetings. I am Peter Kuang, the Head of IR at KBFG. We will now begin the 2023 First Half Business Results Presentation. I would like to express my deepest gratitude to everyone for participating today. We have here with us our group CFO and SCVP, Scott Y.

Operator

H. Soul as well as other members from our group management. We will first hear the 2023 first half major final highlights from CFO and SEVP, Scott YH and then engage in a 20 session. I would like to invite our SEVP to deliver our 2023 First Half Earnings Results.

Speaker 1

Good afternoon. I'm Scott, Y. H. Seo, CFO of KB Financial Group. Thank you very much for joining our first half twenty twenty three earnings conference call.

Speaker 1

I will begin with key performance metrics followed by earnings performance in greater detail. Q2 'twenty three group's net profit was 1,499,100,000,000, up 12.2 percent on air to 2,996,700,000,000 as of the first half of the year. Despite difficult operational backdrop with Slowing real economy and rising sentiment for instability surrounding the financial market, Q2 net profit was driven by evenly spread Growth of interest and commissions income and supported by cost control efforts, we outperformed market consensus by around 12%. The group's first half ROE also reported 12.2 percent, and annualized EPS was around 15,201 with around 9% year over year increase displaying a sustained growth trend. But considering the recent interest Trade trend and macro backdrop, we expect NIM to face downward pressure during the second half.

Speaker 1

And as we continue to stick to conservative lending stance in light of internal and external uncertainties, loan growth will inevitably be constrained with 2023 second half interest income growth suppressed. KBFG will pursue growth around high quality asset to We will drive growth of non bank and non interest business, while corporate wide cost control will help fuel steady and solid bottom line growth during the year. Also, in order to bring sustainable growth, KBFG has been steadfast towards inclusive financing, Leading the efforts and making social contribution, pursuing co prosperity with the local communities, and we'll continue to find ways to solve society's issues and expand our role in practicing social responsibility that defines sustainable transformation. In the meanwhile, With prolonged global economic recession, domestic economy is also experiencing a slump and higher interest rate, which has heightened concern over deepening credit risk. As such, KBFG is focused on preemptive risk management from a more conservative perspective.

Speaker 1

As a result, First Half Group's PCL, including Q1 general provisioning, increased significantly versus last year, but we expect this will alleviate the impact from economic shocks going forward and will be a positive factor in removing business uncertainties and reducing profit volatilities driven by credit loss. For your information, group and bank's NPL coverage ratio as of end of June were 2 0 1% and 2 54%, respectively, attesting to industry's highest loss absorption capacity against potential losses. Lastly, KBFG BOD today decided on DPS of KRW 5.10 1 this quarter and will buy back and cancel KRW 300,000,000,000 worth of treasury shares. Following 300,000,000,000 of share buyback and cancellation last February, we've decided on yet another buyback and cancellation, which goes to show our commitment in being faithful to our long term capital plan announced early this year and our will to enhance shareholder value. KBSG will continue to increase shareholder returns through various means while maintaining capital adequacy so that we may live up to meet market expectations.

Speaker 1

From now on, I will walk through business results in more detail. First half 'twenty three group's net interest income was KRW 5,759,000,000,000,000, while Q2 net interest income recorded 1,973,400,000,000, gaining 5.2% on year and 6.7% on quarter. The NIM for the group and the bank in the Q2 of 2023 were 2.1 percentage points and 1.85 percentage points, respectively, Sustaining an uptrend since last quarter. This is primarily due to market rate hike in the second quarter and against the backdrop of Stabilization in core deposit declines, which started since Q3 of last year, followed by a slight uptick and continuing impact from repricing of loans, which drove Q o Q NIM expansion of 6 basis points. Also amid continuing corporate loan growth, mostly Around higher quality assets, we saw recovery in household loan growth during the Q2 supported by real demand, which, though limited, brought rebound in loan growth, contributing to rise in the interest income.

Speaker 1

Next is fee and commission income. 2nd quarter group's fee and commission income was KRW 951 KRW 4,000,000,000 and sustained recovery of domestic stock market as seen from an increase in trading volume, we saw an increase in brokerage fees as well as expansion of IB fees on the back of arranging for large scale acquisitions, which drove Q on Q increase of 4.1%. On a cumulative first half basis, the income was year over year flat and KRW 1,865,400,000,000,000, unhindered in maintaining industry's top Income from the CIB businesses despite higher market volatilities and deepening competition and other difficult operational backdrop, both internal and external.

Operator

Next, I will go over other operating income, which includes prop trading income and insurance income. Q2 other operating income recorded KRW 372,500,000,000. And due to decrease of securities and derivative related income as a result of a rebound in market interest Rates such as a rise in government bond yields, it decreased approximately 44% Q o Q. However, on a cumulative basis for the First half of the year, it recorded KRW 1,032,400,000,000, an increase of KRW 1,514,100,000,000 compared to the same period the previous year when large scale losses occurred. This is mainly attributable to the significant improvement in prop trading income through timely response to market conditions And prompt portfolio adjustment and expansion of insurance income.

Operator

S and T division significantly reduced performance volatility compared to the past and achieved stable performance in Q2 following Q1, insurance income also increased by 13.4% Q o Q, contributing to the group's profit growth on the back of expansion of long term insurance sales and the maintenance of a sound loss ratio. Through our business diversification efforts, we have been reducing our dependence on interest income and Increasing the contribution of noninterest income and as a result of the end of June 2023, the noninterest income contribution has expanded to 34% level, The non banking profit contribution has also expanded to the 41% level. However, as briefly mentioned previously, the expansion of interest income is expected to be limited in the second half, and we expect the contribution of insurance income to group profits to be lower than the first half due to first, the possibility of accounting change method regarding actuarial assumptions and second, seasonality in the second half. In response to This, we intend to defend against the decline in operating profit before provisioning and secure a foundation for stable profit growth by additionally expanding Noninterest income such as by increasing commissions in the WM and IB business and improving trading performance.

Operator

Next, I would like to go over SG and A. The group's cumulative G and A expenses in the first half of twenty twenty three posted KRW 3,159,200,000,000. And By continuing digitalization and IT related investments, thanks to group wide cost control efforts, it is being well managed overall with only a 4.1% increase Y o Y. Q2 G and A expenses increased 1.7% QoQ due to seasonal factors such as Tax and dues. Meanwhile, the cumulative group CIR for the first half of twenty twenty three was at a 36.5 percent level, it was a significant improvement of more than 10% points compared to the previous year as continued core profit growth and group wide cost control efforts became visible.

Operator

We are targeting an annual CIR of early 40% range in the mid- to long term, And we plan to further improve the group's cost efficiency through organizational efficiency and group wide cost control efforts based on a diversified profit base. Lastly, it is the group's provision for credit losses. Q2 provision for credit losses posted KRW 651,300,000,000 and quarterly CCR reported 56 basis points. It was a 2.5% decrease Q o Q compared to the large scale general provisioning accumulated in the previous quarter. But even taking this factor into consideration, it is at a level the recurring level of provisioning after last year.

Operator

This is mainly due to the accumulation of additional provisioning worth approximately KRW 170,000,000,000 due to the change Korea Federation of Bank's assumption guidance regarding the bank's estimated loss forecast model. In the first half of the year, provision for credit losses was KRW 1,319,500,000,000 and group credit cost on a cumulative basis for the first half was 59 basis points Compared to total loans, a significant increase compared to the previous year. However, considering the macro environment such as the current level of provisioning and market interest rates, It is highly likely that the group's credit cost will record an earlymid-forty basis point level per annum in 2023. 3, this is mainly due to a short term time mismatch between nominal and real provisioning rather than an increase in the delinquency ratio. With the recent financial company's asset quality indicator deterioration, we understand that there are many concerns about the spread of insolvency risk in the market.

Operator

However, have secured the industry's highest level of loss absorption and capacity through preemptive risk management. And as concerns over asset quality deterioration is continuing, we will further Strive for substantial growth in conservative asset quality management. On the other hand, regarding the issue of provisioning writeback Related to a specific shipbuilder, which has recently become a concern of the market, it was not recognized in the group's earnings in the first of the year, but we plan to make a careful decision in the near future by considering various aspects such as the group's richer performance and financial soundness. On the next page, I will go over the major financial indicators. First, if you look at the bank's loans in 1 growth graph, as of the end of June 2023, the bank's loans increased by 1.1% compared to the end March and increased by 0 point 5% YTD and posted KRW 330,000,000,000,000.

Operator

Corporate loans posted KRW 167,000,000,000,000 as End June, an increase 1.8 percent from the end of margin, 2.9 percent YTD and continuing stable quarterly growth. In particular, loans to large corporations Centering on prime assets increased by more than KRW 4,000,000,000,000,000,000, driving corporate loan growth, while SoHo loans and general SME loans also showed a slight net Increased YTD. Meanwhile, as of the end June, household loans posted KRW 163,000,000,000,000, down by 1.8 percent YTD due to high Centering on real demand funds such as housing mortgage loans and jonmucae fund loans. As this is a time when conservative risk management is required due to internal and Under conditions, we plan to focus on qualitative growth centered high quality assets in the second half of the year, focusing on asset quality and profitability management. Let's go to the next page.

Operator

I would like to go over group capital ratio on the top right of the page. As of the end of June 2023, the group's BIS ratio boosted 60.95 percent, and CET1 ratio recorded 13.78%. We are maintaining excellent capital adequacy centering on common equity capital based on stable profit generation while securing a sound capital buffer against macro uncertainties. Please refer to the next pages for details on the performance explained so far. And this concludes KB Financial Group's 2023 First Half Business Performance Presentation.

Operator

Thank you for your attention.

Speaker 1

Thank you very much for the detailed presentation. We will now begin the Q and A. We will take the first question from Waitok Capital. Shane, please go ahead.

Speaker 2

Hello. Thanks for the opportunity. Can you hear me? Yes. Go ahead.

Speaker 2

Yes. I just wanted to understand on the Foreign operations part of KB, how much are you trying to allocate on different markets and what is your growth strategy? Can you provide some numbers So how exactly are you trying to proceed with Mogo Pin example and the other foreign investments? Thank you.

Speaker 1

Thank you very much for the question. With regards to your first part of the question about our global strategy for foreign operation, if you look at our business, [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] We can divide that into DM, developed markets and EM. In the DM, we will focus mostly on the wholesale banking. Usually, it's been the CIB business. And we were able to grow our asset portfolio quite soundly.

Speaker 1

Starting last year and this year, We are, at this point, going through rebalancing of the asset. We're very much focusing on the soundness aspect. For the wholesale business, not The CIB business going forward by setting up a capital markets desk, we will diversify and also provide Different types of services so that we can grow our business scale going forward. In Southeast Asia, in Pacific countries, we are looking we have entered into those companies through M and As countries through M and As or acquisitions. And in Southeast Asian market, recently due to the global economic recession, we believe that we could be more posed to the impact.

Speaker 1

So we were focused more on asset quality rather than aggressively growing those businesses in the market. So for instance, like China and Vietnam and in Myanmar, there are some markets that's experiencing some turbulence, so we will focus more on asset quality rather than extensive growth. But from a long term perspective, retail business and consumer business are Business domains where we believe the growth could be more faster and where we believe we can take better margin, we will gradually And our digital tools into those markets so that we can gradually expand our positioning in those market segments. Regarding Bokoben, we did capital injection previously. And for the in the near future, we do not foresee any other additional investment Our rights offering through internal improvement, we are trying to bring in growth.

Speaker 1

For instance, we will make investment into the IT system so that we can make the business much more upgraded. Thank you. Also, this is Scott, the CFO. If I may also elaborate, Regarding our global strategy, our Senior Managing Director, Cho, has just provided you with the details of the strategy. We say that Bougain, from the time being or short term, it's not that we won't We'll be making investments short term and do so in mid- to long term.

Speaker 1

What we are saying is that last year's capital injection basically was our last to capital increase. I just wanted to clarify that so that there is no misunderstanding. Thank you very much.

Operator

We will take the next question. The next question is from Hyundai Motor Securities, Lee Yong jae. You're on the line. Thank you. I am Lee Yong jae from Hyundai Motor Securities.

Operator

I think you will get more Questions again about the bank later on. So I would like to talk about your nonbank business, especially about KB.

Speaker 1

Now KV Insurance, I would like to understand why did your Kicks ratio increase? Is it due to the available capital increase? I think your Ricardo capital does not seem to have increased significantly. So relating to the movement in the or the fluctuation in the required capital, Could you provide some information there? And also, changes to the actuarial assumptions in 3, I know that if you were to apply the progressive method rather than retroactive approach, Would like to understand as to what your expected figures or numbers are for the insurance business?

Speaker 1

Yes. Just give us one moment. We will respond to that question shortly. Yes. Hello.

Speaker 1

I am Oh Byung Ju, Managing Director. I am in charge of the insurance business. Regarding The changes in the guideline for the actuarial assumptions and the accounting treatment thereof. Now the FSS has a progressive method and method and Kicks fair value method, basically, they use on IFRS 17 liability. It's a conditional retroactive approach.

Speaker 1

So there are 2 things that is currently being considered. And we're currently making some analysis, and we're communicating with SSS on the details. KB ensures in order for us to improve comparability. And this year, since it is the 1st year where we apply IFRS 17, we want to provide more clarity to the financial statement. So at this point, we are reviewing applying the conditional retroactive approach.

Speaker 1

In terms of the level of impact this will have on our financials, the CSM, capital and on P and L, we do expect there may be Slight dip, but we do not think that it's going to be as big as what the market is concerned about. We believe that under our business So we can amply make up for any such movement. For the progressive method, as I've mentioned at The beginning, basically, we are currently reviewing applying the conditional retroactive approach. And within the year, together with the FSS, we We will continuously communicate with FSS all the details of the guidelines. And once we come to some sort of a conclusion, we will be able to come back to you.

Speaker 1

From KB Insurance's perspective, and as I've clearly communicated this since last year, is that IFRS 17 and under new KIC's regime, KEB Insurance is very much focused on improving reliability of our financial statement and also sustainability. Our number one priority is to make sure that we limit as much as possible the volatilities in these numbers. So in terms of the specific impact this will have on each of the line items, we will be able to come back to you and communicate with you the details either end of this week and in the near future.

Operator

We will take the next question from Hana Securities. Kimi Do you're on the line? Thank you for the opportunity. I would like to ask a question about provisioning. Actually, we heard from the CFO that for this quarter, there was additional provisioning that I think you mentioned.

Operator

So can you actually go over that once again?

Speaker 1

And even if you exclude all

Operator

of this, can you All of this, can you tell us about the recurring level of CCR? And I believe that if it was what you had mentioned, I think it was a 50% increase compared to the same period last year. So I think per annum, it was about 30 bps level. And if you are thinking about additional provisioning on top of that, so can we think of it as higher than the recurring I'm curious about your perspective. And DSME the former DSME related provisioning and the main creditor bank situation in the second half of the year.

Operator

Well, do you believe reversal might not take place? You mentioned that you will Actually, go over the situation and reach a conclusion later on. So can you tell us about the current situation? Thank you very much. I am the group CFO, and I would like to answer your question.

Operator

And if there are additional comments, I would like to ask our CRO, Choi, to answer them. And Sorry for my pronunciation. In Q2 regarding provisioning, so for the future Forecast model, the assumption guidance was changed. So there was additional KRW 170,000,000,000 of additional provisioning. And You also mentioned that until now for investors or shareholders, when we gave guidance for credit costs for 2024 Per annum, 35 bps to 40 bps is what we had mentioned.

Operator

But when I mentioned this in my presentation previously. I mentioned that 2023 credit costs will be higher than this. So it will be in the mid to earlytomid40 bps range. And I also mentioned that probably it's because of the time gap, a short term mismatch. So to elaborate a little more on that, in Q1, we had 300,000,000,000 or higher general Provisioning and general provisioning refers to your level relevant to a specific credit event.

Operator

It is just General provisioning. So we had accumulated that, but regarding the accumulation of real provisioning, there will be a time gap. It is inevitable. So General provisioning can cut down on the future credit cost as a result, but when we give quarterly earnings reports, there is bound to be a match. And because of that mismatch effect for this year, overall, for our calculated credit cost, We believe that it could be a little bit higher than we had mentioned to the market, and this does not attest that it's a deterioration of our asset quality.

Operator

So I would like to make that clear. It was because of that time gap.

Speaker 1

Next question from JPMorgan, Cheon Cho. Please go ahead with your question. Yes. Thank you for taking my question. I would like to ask 2 questions.

Speaker 1

First one relating to your overseas Property Investment. Many of the banks, bank group and brokerage firms, I understand that they Made their overseas investment, their prop investment. So would like to understand as to what your exposure is geographically and sector wise? And also, do you have an exposure that you have classified as precautionary for your overseas Property exposure and how you're going to manage that risk. And also, it's been mark to mark.

Speaker 1

And is it being mark to mark? And are you provisioning against it? And also, There is also some fund that's been sold. And recently, we've seen banks Take on the liability for selling such funds. So we'd like to understand whether this has any impact on your numbers.

Speaker 1

And the second question that I would like to ask has to do with the policies, your buyback policies. Today, you've announced, To our surprise that you are going to buy back shares, is that for the purpose of cancellation? And I understand that the period under which you have to purchase is by July of next year. So do we or can we continue to see that There's going to be a treasury share buyback up until the end of this year? Or what since it's quite large in size, You whether you will purchase this by next year?

Speaker 1

Leo, I am Choi Cho Soo. I am in charge of CRO. I think the first question probably relates to the commercial real estate exposure. I wasn't able to clearly understand will hear your question. So let me just first give it a try.

Speaker 1

So in terms of our commercial exposure, we have about 5 point yen 9,000,000,000 of commercial property exposure. And if you look at the type of investments because they are commercial real estate, usually, the geographies are U. S. And Europe. And if you look at the type of sectors, it's we have office buildings.

Speaker 1

We also have multifamily. We also have retail property. We also have logistical centers as well. So overall, out of our total investment, more than twothree has been made by the bank. So bank Basically, they've been quite conservative.

Speaker 1

So 98% have senior loans, senior secured exposure. So I can tell you that it is a quite stable exposure. We recently seen many press articles about commercial real estate exposure. And because we are living in a high rated backdrop and people are working from home and so there is Higher vacancy rate, and we do understand that there is potential for more delinquencies going forward. And that is why we took a Stocktaking of our entire commercial property exposure.

Speaker 1

So right now, although it is not loss making, but For any at risk locations, we have defined the list of those so called at risk or problematic Exposures, and we're very closely controlling and managing that. And some of our KB subsidiaries have also made some equity investment or sub debt investment. Although that exposure is not very high, we have actually written that as loss, written that as loss, and we also have provisioned for There's exposures. Going forward, for the so usually, the secured senior exposures is our focus because that takes up the majority. We do not think that the probability of loss is going to be that high.

Speaker 1

And we want to be proactive and preemptive in managing these exposures. So and to do that, what Our underwriting division and our business units are very aggressively managing these loans and exposure. So we think that its impact on our financial numbers will be very much limited. Also, This is the CFO. For alternative investment, regarding our fund investment, I think the question was whether we expect there to be loss from those fund investment, if I understood [SPEAKER

Operator

UNIDENTIFIED COMPANY REPRESENTATIVE:] Correctly. Our KB

Speaker 1

Asset Management, if you look at the funds that we've originated and we've sold or the ones that we sold as a distributor, I think there will be 2 Keesis. So for KB Asset Management, the fund that we've created and we've sold, we haven't yet seen any nonperforming As said at this point, we've reviewed everything and we haven't been able to identify any significant risk. From a third party distribution perspective, for us Selling the fund on behalf of other asset managers, we do not, at this point, believe that there is any risk. As our CRO has just mentioned, Even for the fund distribution, just like our prob investment principal investment, we have the same criteria upon which we review and assess and screen. So in terms of the fund distribution, we do not believe that Compared to our overseas AI exposure, the risk is not high.

Speaker 1

2nd question had to do with the treasury share buyback of 300,000,000,000 yen. Once the EUR 300,000,000,000 is completely bought, it will be completely canceled. It will be retired in its entirety. In terms of the period, for the purchase period, in the past, we used direct purchasing, direct buyback. But from this time on, it will be a share buyback through a trust approach.

Speaker 1

So after you do a direct Buyback, then you have to complete the purchase within 3 months after you announce. But if you're making use of a trust vehicle, Basically, the treasury share buyback will take place over a longer duration. So according to that, What we've announced today does not mean that we are not going to, In any way, assume that we're not going to do any buyback up until end of this year or end of next year. So relating the retirement of the shares, I think at 4 p. M, we've made a disclosure.

Operator

We have Won Jung from HSBC Securities. You're on the line. Please go ahead. Thank you for the opportunity. I have two questions.

Operator

The first question is about your NIM because it has, I believe, increased higher than expected. So can you actually break down the NIM for us? 2nd question is about second half NIM forecast. If you can go over it, it would be greatly appreciated. 2nd question is about the preemptive additional provisioning, I believe, that has taking place?

Operator

And in the second half of the year, do you believe that there might be additional provisioning as well? Or do you believe that since there was A sizable amount of preemptive provisioning. Do you believe that additional provisioning possibility will be quite limited? Thank you very much. I am the bank CFO, Kim Jae hwan.

Operator

Thank you very much for your question. I would like to answer your question about NIM. There was loan repricing effect. So because of that, in Q1, there was a NIM peak out that we had expected. However, in Q2, There was 3 year treasury bond and 37 bps increased.

Operator

So there was the market interest rate increase, which led to NIM increase as well. And as was mentioned by our group CFO, for core deposit decrease until now, it was by a great amount. But in Q2, it has become stabilized. So Q2 peaked out Q1 pickup, we thought we believe, has been delayed. However, in the second half of the year, NIM, we believe will go down, but we believe that it will not be steeper decline than expected.

Operator

So in the second half of the year, loan repricing effect, we believe, will continue until Q3. However, there are the LCR Regulations, and it is becoming normalized, and there is a large amount of the loans that will reach maturity. So regarding the LDR, we are seeing that The gap is actually narrowing, so we believe that the NIM will actually go down slightly in Q3. Regarding provisioning, I would like to go over that as well. Hanwha Securities' Kim Do asked A question previously, but I believe my answer was not sufficient.

Operator

So maybe I can add to my answer. In the first half of this year, there is the CCR of our provisioning, which is 59 basis points. But in my presentation, in 2023, Annual credit cost for the year, I mentioned that we expect it to be early to mid-forty range. So taking all of these numbers into consideration, I think it sufficiently answers your question about the second half. And Hanover Ocean or former DSME question, we did not have the reversal of provisioning in the first TAF.

Operator

And in the near future, we will make a decision about reversal. And regarding the timing of whether when To reflect it on our earnings, we will make a decision later on, but it will be made in the near future, and we will let you know.

Speaker 1

Thank you for the answer. We will wait a minute to see if there are more questions. For those of you who did not have a chance to ask any question, please feel free to contact us The IR team, I think that we've entertained sufficient number of questions, but still just give us one moment. Yes. I see that there There is another question.

Speaker 1

I am Chong Joon seo from NH Investment Securities. I just have one question I wanted to ask. Despite this very difficult Macro backdrop. You've decided to do share buyback and also your CET1 ratio is Quite favorable. And beginning of the year, you said that what is in excess of CET1, 13%, you're going to pay that back to the shareholder.

Speaker 1

So Having said that, don't you think that you'll be able to increase your total shareholder return above 33%? And you said that there could be additional announcement on share buyback and cancellation end of the year. Do you have plan to further increase Your share buyback or cancellation, basically, what would be the criteria upon which that you will announce so that you would return back more to the shareholders. Yes. This is the group CEO.

Speaker 1

Regarding your question, I fully understand where you're coming from. The answer that I can provide you is basically based upon what we have already disclosed. And I can tell you that we are committed To that disclosure, anything that is in excess of 13% of CET1, as a matter of principle, we will return that back to our Shareholders, and I can tell you that we are committed and fully complying with that. And we are Very much committed to progressive payout ratio. As we close the first half of the year, if you look at quarterly dividend payout and the share buyback decision, these actions are in well good alignment with our previous And we are committed to keeping to our word so that our investors and shareholders basically, In light of what we have announced at the beginning of the year, can expect us to keep with that promise.

Operator

It seems that there are no other questions in the queue. We will wait to see if there are further questions in the queue. It seems that all the questions have been made. So with this, we will conclude our earnings Presentation. Thank you

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Key Takeaways

  • H1 2023 net profit of KRW 2,996.7 bn, up 12.2% YoY and Q2 profit of KRW 1,499.1 bn (+12% QoQ), outpacing consensus by ~12%, with ROE at 12.2% and EPS up ~9% to KRW 15,201.
  • NIM rose to 2.10% in Q2 (1.85% at the bank), driven by loan repricing and deposit stabilization, but is forecast to decline in H2 as loan growth remains conservative amid macro uncertainty.
  • Non-interest income now accounts for 34% of group revenues and non-bank profits for 41%, and management plans to bolster fee income in wealth/IB and improve trading to mitigate limited H2 interest income growth.
  • Preemptive provisioning reached KRW 1,319.5 bn in H1 (59 bps credit cost), including KRW 170 bn in Q2 for model assumption changes, raising NPL coverage to 201% (254% at the bank) and targeting mid-40 bps annualized credit cost.
  • A DPS of KRW 5,101 and a KRW 300 bn share buyback/cancellation were approved, aligning with the policy to return excess capital above a 13% CET1 (currently 13.78%) while preserving strong buffers.
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Earnings Conference Call
KB Financial Group H1 2023
00:00 / 00:00