Chairman Yoon Jong-kyoo of KB Financial Group

KB Financial Group said its first half net profit amounted to 1.8602 trillion won, up 65.5 percent YoY, including 999.01 billion won in Q2 net profit, up 13.8 percent YoY, the financial group said on July 20.

KB Financial Group Inc., a major South Korean banking group, said July 20 that its net profit jumped 70.6 percent in the second quarter from a year earlier helped by equity gains from its affiliates. In the three months ending June 30, the financial holding company's net profit came to 990.1 billion won ($879 million), compared with 580.4 billion won in the same period last year, the group said in a regulatory filing.

In the January-June period, the group's combined net profit stood at 1.86 trillion won, up 65.3 percent from a year earlier.

The banking group attributed the on-year gain to an increased profitability and a decline in general costs and loan-loss provisions. It also said increased equity gains from its non-banking units gave a boost to the group's bottom line.

The group said its interest income gained 20.1 percent year-on-year to 3.66 trillion won in the first six months of this year while its net interest margin, a key measure of profitability, stood at 1.98 percent in the first half of this year, up 13 basis points from a year earlier. Kookmin Bank posted a net profit of 1.2 trillion won in the first half of this year, up 62.7 percent from a year earlier due to increased interest income and reduced loan-loss provisions. As of end-June, the group's total assets stood at 422.2 trillion won, up 23 percent from a year earlier.

The financial group continue to expand its non-banking sector by taking over LIG Non-Life Insurance and Hyundai Securities last year to reduce its reliance on the banking sector profit, which accounted for 80 percent of the group’s total profit.

The financial group will benchmark the successful Bank of America and Merrill Lynch merger model and develop and run the Korean-type Universal Banking operation. The group has always been after the strengthened competitive power of its non-banking sector, taking it as one of its key strategic tasks, and the group also singled out the wealth management and corporate investment banking as a core base sector for creation of synergy.

At the end of last year, the group reorganized its matrix structure taking control over the same job at the holdings company, bank and securities for quicker decision making and synergy creation. 

In the area of wealth management, the group made a number of efforts to make progress in the sector including the expanded operation of the KB Financial Multi Outlets, the creation of the KB Wealth Management Star Advisory Team to help expand the synergy by One Firm and set up of the Real Estate Integrated Consultant Center to provide advisory services on real estate.

Korean banks posted surprisingly good first half earnings on the back of an economic recovery and an uptick in interest rates, industry data showed, stirring up concerns over their bonus plans amid ballooning household debt.

According to the data, the country's four biggest banking groups — Shinhan Financial Group Co., KB Financial Group Inc., Woori Bank and Hana Financial Group Inc. — posted a combined 5.88 trillion won ($5.25 billion) in net profit for the first six months of the year. Shinhan Financial earned a net profit of 1.89 trillion won, marking the largest half-yearly net profit, while KB Financial also logged a record first-half profit of 1.86 trillion won. Net profit of Woori Bank and Hana Financial also pierced the 1 trillion won levels each.

Their record-breaking performances are attributable to a hike in interest rate for household loans, with the country's total home loans reaching nearly 1,400 trillion won. As a result, the banks' net interest margin, a key barometer of profitability, improved considerably.

Kookmin Bank, the key banking unit of KB Financial, saw its net interest market rise 0.06 percentage point on-quarter to 1.72 percent in the second quarter, while the corresponding figure for Shinhan Bank reached 1.56 percent, up 0.03 percentage point from the previous quarter.

However, the companies will be prohibited from paying bonus payments to their executives despite an overflow of net profits.

Under a revised ordinance on local financial groups, which will take effect in September, the companies are not allowed to give out bonuses in a lump sum. They should split the planned payments and give 60 percent in the cited year of gains and the rest in the following three years.