Release Date: July 23, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- KB Financial Group Inc (KB, Financial) reported a CET1 ratio of 13.59%, the highest in the domestic market.
- The company has implemented a progressive dividend policy, with quarterly cash payouts and share buybacks to enhance shareholder returns.
- First half 2024 Group net profit was KRW2,781.5 billion, with a strong second quarter net profit of KRW1,732.4 billion.
- Group net interest income for the first half of 2024 was KRW6,357.7 billion, showing a 9% year-over-year increase.
- The Group's cost income ratio (CIR) was maintained at 36.4%, indicating strong cost efficiency.
Negative Points
- First half net profit declined by 7.5% year-over-year due to sizable ELS compensation costs in Q1.
- Group's G&A expenses increased by 2% year-over-year, reaching KRW3,222.1 billion.
- Provision for credit losses in Q2 increased to KRW552.6 billion, reflecting conservative provisioning for potential economic slowdowns.
- Net interest margin (NIM) for the Group and bank declined by 3 basis points quarter-over-quarter.
- Q2 Group net fee income decreased slightly quarter-over-quarter due to a decline in IB fees following real estate PF market contraction.
Q & A Highlights
Q: Can you provide more details on the shareholder return plan and the rationale behind the recent decisions?
A: (Jae Kwan Kim, CFO and SEVP) Despite a challenging operational environment, KBFG has maintained a leading shareholder return policy. The CET1 ratio increased by 17 basis points to 13.59%, the highest in the domestic market. The BoD decided on a quarterly cash payout of KRW791 per share and a buyback and cancellation amounting to KRW400 billion. This demonstrates our commitment to enhancing total shareholder return and shareholder value.
Q: What were the key drivers behind the 7.5% decline in net profit year over year?
A: (Jae Kwan Kim, CFO and SEVP) The decline was primarily due to sizable ELS compensation costs in Q1. However, the second quarter saw evenly spread growth from both bank and non-bank businesses, particularly securities and insurance, resulting in a net profit of KRW1,732.4 billion.
Q: How did the Group's G&A expenses and cost-income ratio perform in the first half of 2024?
A: (Jae Kwan Kim, CFO and SEVP) G&A expenses were KRW3,222.1 billion, up 2% year over year. The cost-income ratio was 36.4%, supported by solid earnings growth and corporate-wide cost efficiency efforts. We expect this trend to continue downward due to ongoing cost rationalization and a decline in labor costs.
Q: Can you elaborate on the Group's credit cost and asset quality management?
A: (Jae Kwan Kim, CFO and SEVP) The first half cumulative credit cost was 40 basis points, kept at a steady level. Despite macro uncertainties, we have ample capacity to respond with preemptive conservative provisioning and rigorous risk management. We believe the Group's credit cost will remain under steady control.
Q: What were the main contributors to the increase in net interest income and net fee and commissions income?
A: (Jae Kwan Kim, CFO and SEVP) Net interest income for the first half was KRW6,357.7 billion, driven by loan balance growth and interest income contributions from non-bank subsidiaries. Net fee and commissions income increased by 2.4% year over year to KRW1,909.8 billion, mainly due to higher stock transaction amounts and expanding brokerage income.
Q: How did the Group's non-operating profit perform in Q2 2024?
A: (Jae Kwan Kim, CFO and SEVP) Q2 non-operating profit posted KRW323.1 billion, a 19.5% increase quarter over quarter, due to improvements in the financial market environment and expansion of securities investments. However, on a first-half cumulative basis, it was lower than the previous year due to contractions in securities, FX, and derivatives performance.
Q: What are the expectations for the Group's loan growth and net interest margin in the second half of 2024?
A: (Jae Kwan Kim, CFO and SEVP) We expect loan growth to recover gradually, focusing on qualitative growth in asset quality and profitability. The net interest margin for Q2 was 2.08% for the Group and 1.84% for the bank, both declining by 3 basis points quarter over quarter. However, on a year-over-year basis, both increased by 3 basis points.
Q: How is the Group managing its capital adequacy and what are the future plans?
A: (Jae Kwan Kim, CFO and SEVP) Despite FX increases, the Group's BIS ratio and CET1 ratio are expected to post 16.63% and 13.59%, respectively, the highest in the financial industry. We will manage the CET1 ratio at around 13.5% and continue efforts to improve capital adequacy to enhance shareholder return visibility.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
