[Click eStock] KB Financial Group, Interest Income and Asset Soundness Exceed Expectations

[Asia Economy Reporter Lee Seon-ae] Yuanta Securities announced on the 22nd that it maintains a buy rating and a target price of 72,000 KRW for KB Financial Group, citing better-than-expected interest income and demonstration of asset soundness.

Jeong Tae-jun, a researcher at Yuanta Securities, explained, "The consolidated profit for the third quarter was 1.2979 trillion KRW, exceeding our estimate of 1.2179 trillion KRW and the consensus of 1.2080 trillion KRW. Contrary to concerns, both NIM and loan growth rate showed a steady upward trend, resulting in better-than-expected interest income. Additionally, asset soundness further improved compared to the previous quarter due to the reversal of provisions." He added, "Key special factors include approximately 18 billion KRW in bank corporate tax reversals, about 17 billion KRW in large loan loss provision reversals, and around 14 billion KRW in other operating income related to the early acquisition of remaining shares in overseas subsidiaries."

First, interest income increased by 16.0% year-on-year and 3.5% quarter-on-quarter, surpassing estimates by 2.8%. This was due to the disappearance of the deposit interest repricing effect, concerns over household debt management notwithstanding, with group NIM improving by 1bp quarter-on-quarter, bank NIM improving by 2bps quarter-on-quarter, and Korean won loans increasing by 3.4% quarter-on-quarter. The household loan growth rate in the first half was only 1.4% compared to the end of the previous year, and corporate loans continued high growth, which is believed to have enabled the high loan growth rate.

Non-interest income increased by 3.3% year-on-year but decreased by 1.4% quarter-on-quarter, falling short of estimates. Fee income grew by 15.5% year-on-year and 5.3% quarter-on-quarter, but other operating income significantly decreased due to increased foreign exchange losses and increased reserve contributions for Prudential Life Insurance.

Regarding selling and administrative expenses, they increased by 4.0% year-on-year and decreased by 0.3% quarter-on-quarter, aligning with estimates. The expense ratio for the third quarter was 46.8%, improving by 3.9 percentage points year-on-year and 1.2 percentage points quarter-on-quarter.

Provision expenses decreased by 7.1% year-on-year and 10.9% quarter-on-quarter, showing better performance than estimates. The loan loss cost ratio was 20bps, down 2bps year-on-year and 5bps quarter-on-quarter. Excluding the impact of provision reversals, the recurring loan loss cost ratio was also 22bps, indicating continued record asset soundness.

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