November 24, 2024

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KB Financial Group reported record third-quarter profits driven by increased interest revenues from expanded loans while announcing a plan to enhance shareholder returns linked to its financial stability.

The group posted a net profit of 1.61 trillion won ($1.17 billion), a 17.5 percent on-year increase, marking its best performance for the third quarter to date. Cumulatively, the year-to-date net profit reached 4.4 trillion won, up 0.4 percent from the previous year.

However, compared to the previous quarter, net profit slipped by 6.8 percent, with the net interest margin -- a key profitability indicator -- dropping 13 basis points. KB attributed the decline to decreased interest income from falling market rates and one-time expenses related to provisions for losses stemming from equity-linked securities.

Despite the worsened profitability, interest income totaled 3.17 trillion won, up 1.3 percent on-year, driven by expanded loan balances. As of September, total outstanding loans reached 362 trillion won, up 2.9 percent from June and 5.9 percent from the end of 2023. This year, household loans grew by 5.8 percent, while corporate loans surged by 6.0 percent.

Non-interest income in the third quarter totaled 1.34 trillion won, a 60 percent increase on-year and up 7.9 percent from the prior quarter.

KB Bank, the group's main subsidiary, posted a third-quarter net profit of 1.11 trillion won, an 11.5 percent increase, but cumulative net profit dropped 8.3 percent on-year to 2.62 trillion won due to one-time expenses spent earlier in the year.

KB Financial Group also announced a detailed plan to enhance corporate value and shareholder returns.

According to the plan, approved at the board meeting Thursday, the group will return excess capital exceeding a Common Equity Tier 1 ratio of 13 percent to its shareholders starting next year.

The CET1 ratio, a crucial measure of financial stability, reached an industry-leading 13.59 percent in the second quarter and rose to 13.85 percent by the end of September. Excess capital above 13 percent by the end of 2024 will fund the first round of shareholder returns in 2025, while capital exceeding 13.5 percent during 2025 will support share buybacks and retirements in the second half of the year.

The firm further highlighted a shift in its shareholder return policy toward "per-share value growth," targeting an annual earnings-per-share growth rate of around 10 percent and annual buybacks and cancellations of treasury shares exceeding 10 million shares.

To enhance corporate value, KB Financial Group has also set targets of maintaining a return on equity of over 10 percent and a CET1 capital ratio of around mid-13 percent.

Thursday's corporate value enhancement plan follows KB's failure to enter the Korea Value-up Index, unlike industry rivals Shinhan Financial Group and Woori Financial Group, which made disclosures ahead of the index launch.

The Value-up Index is a stock index comprising Korean companies making effective efforts to enhance their corporate values. The index was launched in September as part of the government-led Value-up Program, an initiative established earlier this year to promote the growth of companies listed on the domestic stock market.

Banking groups have benefited from the Value-up program, with share prices reaching new highs this year. KB Financial Group's stock closed at 94,300 won Wednesday, up 76 percent from its starting price of 53,600 won on Jan. 2.

"This value-up disclosure was prepared on the basis that an actual shareholders value improvement can be realized by connecting essential measures for corporate value enhancement to shareholder returns," an official said, adding, "We hope this framework can become a standard for the local financial industry."

By Choi Ji-won (jwc@heraldcorp.com)