KB Financial Group Reports Q1 Net Profit of 729.5 Billion KRW, Down 13.7% Year-on-Year Due to COVID-19 Impact

[Asia Economy Reporter Kangwook Cho] KB Financial Group announced on the 23rd that its net profit for the first quarter of this year was 729.5 billion KRW, a decrease of 13.7% (116.2 billion KRW) compared to the same period last year.

KB Financial Group announced these first-quarter business results through internet and mobile live broadcasts on the same day, explaining that "despite steady growth in interest income and net fee income, the temporary significant occurrence of other operating losses was due to the expansion of financial market volatility triggered by COVID-19."

Compared to the previous quarter, the fourth quarter of last year, net profit increased sharply by 36.4% (194.8 billion KRW) thanks to a significant decrease in seasonal costs such as voluntary retirement expenses and an increase in interest income and fee income.

First-quarter net interest income increased by 4.3% (97.1 billion KRW) year-on-year, supported by steady asset growth in banking and card sectors despite a reduction in net interest margin (NIM) due to interest rate cuts and the handling of the Anshim Conversion Loan. Net fee income surged by 21.7% (119.5 billion KRW) year-on-year, driven by an increase in securities custody fees and improved performance in the IB division, which expanded securities business income fees, as well as increased credit card fee income due to efforts to enhance cost efficiency in the card division.

On the other hand, other operating losses recorded a loss of 277.3 billion KRW due to the sharp expansion of financial market volatility such as stock indices, exchange rates, and interest rates. This was analyzed as resulting from valuation losses in securities operations such as foreign currency bonds and principal-protected trusts due to increased financial market volatility caused by COVID-19, as well as CVA losses (approximately 34 billion KRW) and ELS self-hedging operation losses in derivatives and foreign exchange-related sectors.

As of the first quarter, the group's and bank's NIM were 1.84% and 1.56%, respectively. The bank's NIM in the first quarter fell by 5 basis points compared to the previous quarter due to a reduction in asset yields caused by the base interest rate cut and the handling of the Anshim Conversion Loan, despite stable increases in low-cost deposits and reduced funding costs. The group's NIM also fell by 4 basis points compared to the previous quarter, reflecting the decline in the bank's NIM and the growth effect of card assets such as installment finance.

As of the end of March, the group's total assets recorded 544.9 trillion KRW, an increase of 5.1% (26.4 trillion KRW) compared to the end of the previous year, and the group's assets under management (AUM) stood at 266.4 trillion KRW. The group's BIS capital adequacy ratio and common equity tier 1 ratio were 14.02% and 12.96%, respectively. These slightly decreased compared to the end of the previous year due to the increase in risk-weighted assets caused by loan growth centered on corporate loans and the expansion of financial market volatility such as exchange rates.

A KB Financial Group official evaluated, "Although the first quarter recorded somewhat sluggish results due to expanded losses related to securities and derivatives/foreign exchange, the bank's KRW loans increased by 4.2% compared to the end of the previous year, centered on large and small and medium-sized enterprise loans, maintaining steady growth. All affiliates are maximizing their business capabilities to steadily expand net fee income while managing asset soundness stably, so the group's recurring profit capacity remains solid."

KB Kookmin Bank's net profit for the first quarter was 586.3 billion KRW, slightly increasing year-on-year despite the expansion of other operating losses, due to steady growth in interest income and fee income.

KB Securities recorded a net loss of 21.4 billion KRW. A KB Financial Group official said, "Due to the global linked stock index's sharp fluctuations during the first quarter, temporary ELS self-hedging operation losses occurred, along with valuation losses related to Lime Asset Management TRS transactions (approximately 40 billion KRW) and one-time provisions (approximately 19 billion KRW), resulting in disappointing performance." He added, "We plan to minimize operational losses caused by market volatility and maintain profitability through flexible product issuance by reestablishing hedging strategies for derivatives operations including ELS, and reorganizing the issuance and operation processes of derivatives to manage profit and loss volatility."

KB Insurance's net profit for the first quarter improved to 77.2 billion KRW compared to the previous quarter, and KB Kookmin Card's net profit for the first quarter was 82.1 billion KRW, increasing by 5.3% (4.1 billion KRW) year-on-year due to growth in financial assets such as card loans and installment finance and efforts to enhance cost efficiency.

At the earnings announcement meeting on the same day, KB Financial Group's Chief Financial Officer said, "We believe that black swan events like the COVID-19 crisis can occur at any time in the future, and KB Financial Group aims to build a solid resilience and structure capable of overcoming any crisis." He emphasized, "Although the current financial industry management environment is more challenging than ever before, we will take this as an opportunity to strengthen our foundation and strive to leap forward as a true leading financial group."

KB Financial Group announced plans to focus on strengthening the competitiveness of its core growth engines, the IB and WM divisions, as part of its profitability management strategy to proactively respond to changes in the financial environment such as low growth and low interest rates. It will also expand the group's revenue base by strengthening global business to secure mid- to long-term growth momentum.

This content was produced with the assistance of AI translation services.