What KB Financial Group (KB) Said on Its Q3 Earnings Call

Key Points

• Strong earnings and shareholder returns: KB Financial reported third-quarter net profit of KRW 1.91 trillion, while nine-month profit rose 13.1% year over year to KRW 5.79 trillion. The board approved a KRW 1,167-per-share dividend, up 25.5% from a year earlier.
• Loan growth offset margin pressure: Korean-won loans increased 3.5% year to date, led by corporate lending, but group net interest margin declined to 1.92% because of higher funding costs. Management plans to emphasize low-cost deposits and expects loan repricing benefits from rate increases to emerge gradually.
• Capital remains solid amid cautious outlook: KB’s CET1 ratio rose to 13.80% despite buybacks and dividends, while credit costs are expected to remain in the mid-40-basis-point range. The group is also managing potential insurance-regulation impacts and preparing to establish an Indonesian holding company by August 2027.

KB Financial Group NYSE: KB reported third-quarter net profit of KRW 1.91 trillion and cumulative net profit of KRW 5.79 trillion for the first nine months of 2026, up 13.1% from a year earlier, as loan growth and banking and non-banking earnings supported results.

Group CFO Sang-Rok Na said cumulative return on equity reached 13.89%, improving 1.1 percentage points year over year. He said the group is seeking to improve its earnings structure through risk-adjusted return management, fee-income diversification and cost efficiency measures.

The board approved a third-quarter cash dividend of KRW 1,167 per share, totaling KRW 404.9 billion. The per-share dividend was KRW 237 higher than a year earlier, or a 25.5% increase, reflecting a higher annual dividend amount and the effect of share repurchases, according to Na.

Interest Income Rises Despite Margin Pressure

Third-quarter net interest income totaled KRW 3.51 trillion, up 11.6% from the prior quarter. Cumulative net interest income was KRW 9.99 trillion, a 2.9% increase from the prior-year period.

Bank loans denominated in Korean won stood at KRW 391 trillion at the end of September, up 3.5% year to date and 1.5% from the prior quarter. Household loans rose 1.5% year to date and 0.9% sequentially, while corporate loans increased 5.5% year to date and 2.0% from the prior quarter, led by lending to large companies and blue-chip small and medium-sized enterprises.

Group net interest margin declined 2 basis points from the prior quarter to 1.92%, while bank NIM also fell 2 basis points to 1.72%. Na attributed the decline to higher funding costs amid uneven funding-market supply and demand and irregular fund flows.

KB Kookmin Bank CFO Gi-won Seo said the bank experienced pressure from reduced core deposits and replacement funding through institutional and corporate time deposits. He added that loan asset yields began improving in the third quarter and that the July and August base-rate increases are expected to be reflected more gradually in loan repricing beginning in the fourth quarter.

Seo said the bank plans to emphasize low-cost core and retail deposits and manage its asset-liability structure to address funding-market volatility.

Fee Income Remains Elevated but Declines Sequentially

Cumulative non-interest income reached KRW 4.76 trillion, up 27.3% year over year. Cumulative net fee income was KRW 4.09 trillion, an increase of 38.5% from a year earlier.

However, third-quarter net fee income declined 29.7% from the prior quarter as lower stock-market trading volume slowed capital-market-related fee income growth. Other operating income also weakened sequentially, reflecting higher market interest rates and greater equity-market volatility that affected securities, derivatives and foreign-exchange operations.

Na said the company is using securities replacement trading in response to interest-rate trends and aims to improve earnings stability through stronger capital-markets asset management and expansion of its flow business.

During the question-and-answer session, Na said quarterly fee income has exceeded KRW 1 trillion for four consecutive quarters and described that level as reflecting the group’s underlying fee-income base. He said it was difficult to provide precise guidance for next year because of market volatility, but the group intends to build its presence in trading, corporate and investment banking, retirement pensions and related businesses.

Costs, Credit Quality and Capital

Cumulative general and administrative expenses rose 7.0% year over year to KRW 5.36 trillion. The group’s cost-to-income ratio was 36.4%, which Na said remained within its target range and continued a downward stabilization trend. He said KB Financial plans to reduce recurring expenses while increasing investment in growth areas including artificial intelligence.

Third-quarter provisions for credit losses were KRW 563.3 billion, up 8.4% from the prior quarter. The group’s quarterly credit-cost ratio was 43 basis points, while the nine-month ratio was 40 basis points. KB Financial expects full-year credit costs to remain in the mid-40-basis-point range and said it will maintain conservative risk management in response to higher interest rates.

At the end of September, the group’s preliminary BIS capital ratio was 16.02% and its common equity tier 1 ratio was 13.80%, up 5 basis points from the prior quarter. The improvement was limited by approximately KRW 1.3 trillion in share buybacks and cash dividends, as well as lower fair-value-through-other-comprehensive-income valuation gains, Na said.

Risk-weighted assets totaled KRW 368 trillion, up 3.1% year to date. Na said the group plans to focus on managing earnings volatility and risk-weighted assets while determining its first shareholder-return round for 2027 based on its year-end CET1 ratio.

Insurance and Indonesia Operations

Company representatives said potential changes to deposit insurance could negatively affect insurance capital metrics, though details have not been finalized and discussions with regulators are ongoing. KB Insurance estimated that the effect could reduce its contractual service margin by about KRW 500 billion and lower its K-ICS ratio by 5 percentage points, subject to the final outcome.

The company also said changes to managed-benefit coverage for certain therapies could produce an estimated net positive effect of roughly KRW 2 billion after considering offsetting use of other uncovered treatments. It estimated that policy changes related to auto insurance could provide a KRW 90 billion to KRW 100 billion positive effect for its non-life insurance business.

Separately, KB Kookmin Bank Chief of Global Business Group Jong-min Lee said the group is required to establish an Indonesian holding company and make a contribution by August 2027. The holding company is expected to include six subsidiaries. Lee said the move is not expected to materially change profit and loss, although the timing of the transition could affect corporate taxes, and the group plans to pursue operating synergies among its Indonesian subsidiaries.

About KB Financial Group (NYSE:KB)

KB Financial Group Inc is a South Korean financial holding company headquartered in Seoul. Established in 2008, the group operates through a broad network of financial subsidiaries led by KB Kookmin Bank, one of South Korea's major commercial banks. Its American depositary shares trade on the New York Stock Exchange under the symbol “KB.”

KB Financial Group provides a wide range of financial products and services, including retail and commercial banking, corporate finance, credit cards, securities brokerage and investment banking, insurance, asset management, consumer finance, and savings banking.

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