[Asia Exclusive] Huh In, KB Kookmin Bank President, "New Household Loans Must Be Handled Carefully"

Hur In, KB Kookmin Bank President, Conservative Loan Management Inevitable Amid COVID-19 and Base Rate Hikes
Two-Track Strategy for Corporate Loans to Reduce SME Repayment Burden
"Low Risk of Household Sector Despite Possible Rate Hikes in Second Half"

Heo In, President of KB Kookmin Bank. [Photo by Kookmin Bank]

[Asia Economy Reporter Park Sun-mi] "Since 2022, there is a possibility of an increase in household insolvency, especially among low-credit borrowers, multiple debtors, and self-employed individuals."

Following the fourth wave of COVID-19 and the emerging possibility of interest rate hikes within the year, the banking sector is facing a challenging situation. The government and financial authorities are simultaneously urging management of household loans and smooth support for COVID-19 affected groups, placing banks in a position where they must carefully balance profitability maintenance and non-performing loan management.

On the 2nd, KB Kookmin Bank CEO Heo In stated in an interview with Asia Economy that, following the fourth wave of COVID-19 and the possibility of interest rate hikes within the year, cautious loan management is being ordered in the household and corporate loan sectors. New household loans will be operated cautiously considering each borrower's total debt service ratio (DSR) and repayment ability, while corporate loans will adopt a two-track strategy to prepare various countermeasures to reduce the repayment burden of small and medium-sized enterprises (SMEs) affected by COVID-19.

Considering the current low interest rate levels, Heo said that even if there is an interest rate hike in the second half of this year, the risk in the household sector is unlikely to increase sharply. However, if interest rates rise multiple times within a short period as in 2010, there is a possibility of increased household insolvency centered on low-credit borrowers, multiple debtors, and self-employed individuals after next year, so household loans must be operated cautiously.

He said, "We plan to conduct more sophisticated efforts to detect abnormal signs in existing loans in preparation for interest rate hikes," and "New loans will be operated cautiously considering each borrower's DSR and repayment ability." However, with improving domestic and international economic indicators and a recovery in exports this year, expectations for economic recovery are rising, so the corporate sector will provide loan support according to the recovery speed of each field.

Heo added, "When evaluating the credit of SMEs affected by COVID-19, we fully reflect their recovery potential and support minimizing interest rate hikes even if credit ratings decline." He also said, "When applying for maturity extensions and repayment deferrals, we guide customers to select suitable repayment periods (within three years) to reduce their repayment burden. If continuous repayment burdens are expected after the deferral period ends, we check the possibility of normalization and implementation of self-rescue plans to prevent the spread of non-performing loans through internal workout systems and induce a smooth landing."

Heo is also actively responding to the emerging MyData era, which has become a new source of revenue for financial institutions. KB Kookmin Bank is focusing on creating an easy and convenient customer-centered platform, anticipating fierce competition for leadership in the MyData era in the second half of the year. He believes that becoming a platform company chosen by customers in the competition for MyData leadership is very important. Heo said, "The MyData business will bring significant changes to the banking business system," and "Not only financial companies but also big tech and fintech companies from various industries will be selected as MyData operators and compete to secure leadership in the data business. The core competitiveness will be collecting and analyzing customer data to provide optimal products and services in a timely manner."

He added, "Above all, we plan to make it easy and convenient for customers to access by leveraging KB Financial Group's capabilities," and "We will greatly enhance scalability through strategic alliances with non-financial industries and secure security through strengthened MyData information protection systems in technical, managerial, and physical aspects to create a platform that customers can use with confidence."

Regarding the intensifying competition with big tech (large information and communication companies), Heo believes there is a chance of success if banks fully leverage their inherent strengths. He emphasized, "We must utilize the intangible asset of 'trust' that banks have, meaning that customers can trust and entrust all their financial assets and information." He continued, "Based on brand trust related to finance, KB Kookmin Bank's long-standing expertise in financial products and know-how in providing comprehensive financial services at the group level will enable differentiated customer experiences that big tech companies cannot provide." Of course, he also stated that mutual cooperation with big tech will be actively pursued whenever it is to provide better services to customers.

He also shared his thoughts on future profit generation. Despite the shrinking position of traditional banks, KB Kookmin Bank achieved a net profit of 1.4226 trillion won in the first half of the year, a 14.1% increase compared to the same period last year. While maintaining double-digit net profit growth in the bank sector, which accounts for more than half of the financial group's total profit, Heo continues to contemplate ways to generate additional profits.

Heo explained, "We will focus on maintaining competitiveness in the core business of deposit and loan business and dramatically increase profit-generating capabilities in core growth businesses such as global, corporate investment banking (CIB), capital markets, wealth management (WM), and platform business to enhance actual profit contribution." Regarding the global strategy, he said, "As in the successful acquisition of Indonesia's Bank Bukopin, we will focus on building retail networks in Asia, where growth potential is high, and promote business centered on CIB and capital markets in advanced financial markets."

KB Kookmin Bank's capabilities are also shining in ESG (environment, social, governance) management, which has emerged as a key topic this year. Since KB Financial Group was elected as the representative bank for the Asia-Pacific region on the Net Zero Banking Alliance (NZBA) steering committee, KB Kookmin Bank plans to focus on ESG management, especially carbon neutrality, this year. Heo said, "Through the 'KB Green Wave Pil (必)' environmental campaign involving customers and employees, the saved costs will be donated to society, creating a virtuous cycle through continuous annual donations," and "In the second half of the year, we will promote carbon neutrality based on KB Financial Group's mid- to long-term carbon neutrality strategy, 'KB Net Zero S.T.A.R,' and strive to make KB's ESG activities a model for other companies."

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