The following is a summary of a written interview with Chmn. Euh Yoon-dae in which he outlines the group’ s plans and strategies for both domestic and overseas operations °™Ed.

One of the biggest management objectives for KB Financial Group has been risk management, especially in the area of household loans, which has been expanding fast due to the slowdown in economic growth and uncertainty in economic trends, KB Financial officials said.

The group’s first-half profit amounted to 600 billion won, considered excellent compared to previous quarters, as it was accomplished in difficult economic conditions due to stymied growth and increases in defaults in household loans.

The group will strive to post a higher profit in the second half than those before the financial crisis by boosting productivity and through tighter risk management.

The group must seek new sources of profit including offering a financial product linking real estate and financing, securing domination of the Smart financial market, strengthening retirement financial services, and special booths for working couples, all in the new channel financial market that needs to be developed.

In the development of real estate related financial products, a number of financial affiliates of the group will play a role such as KB Bank, KB Asset Management, and KB Real Estate Trust, among others. The project will employ the group’ s vast information and database on real estate to develop financial products tailor-made for customers’  needs, support customers’  decision-making through consultations, including the provision of loans, and provide real estate management services through its vast network.

In order to provide for deeper penetration of the Smart financial market, KB Bank opened its first smart branch to handle customers using smartphones to take care of their banking activities. Customers can use the smartphones at the branch to deposit or withdraw their funds and get financial consultations including financial information.

The group is in the process of setting up a KB Retirement Research Center to study how best it can serve retired citizens by finding out the changes in various areas of society including business, demographics, and employment, as the number of retired people and senior citizens ready for retirement rapidly rises.

The group has also been studying various matters related to opening special branches to deal exclusively with those in their 30s and 40s with special working hours suitable for them along with tailor-made financial products.The group has been focused on strengthening the corporate financing sector through KB Kookmin Bank, including the opening of the large corporate financing group, divided into the new idea and industrial teams, as it sees the need for a big overhaul of the domestic banks’  large business financial model beyond just financing to include an integrated corporate financial service role in order to take over from such foreign banks as Citi and HSBC. The group also developed a joint marketing system for its affiliates and is launching the CIB Marketing Committee to oversee the system.

The group has also set up the KB Hidden Star 500 Program to select SMEs with great growth potential to give them financial support. So far 181 have been selected, with the remaining 319 to be selected by 2013.

KB Financial has set up its mid to long-term growth strategy under the theme of “Stable Growth through Tight Management with Maximum Profit” with the management strategy for this year being “Maximum management effect through boosted productivity.”

The strategy means that internal management will be tightened and productivity and effectiveness boosted to cope with uncertainties and other environmental changes along with a steady push for reform at the group-level with each affiliate doing its best to promote changes realistically and in greater detail.

By sector, the banks will juggle their portfolios to a satisfactory level centered on financially-healthy corporate customers in order to maximize their profits with balanced growth both in the corporate and household loan sectors.

The financial group should be able to secure a sound position in the retail finance sector and expand the selection of financial services tailor-made for its corporate customers, such as foreign exchange, so that it will continue to maintain the expanded market bases for corporate customers in both the domestic and overseas markets.

The non-banking sectors, including credit card, securities, and life insurance, should continue to maintain their strengths within their sectors by expanding their market shares through their own strength and, if needed, through M&As in the future.

When I took over as the chairman and CEO of KB Financial Group, it was going through tough times due to the global financial crisis and an ineffective organization and manpower, causing a drop in profits and productivity and increases in defaults °™  in fact, an overall management crisis.

In order to cope with the situation, I set up a task force to devise a number of measures to resolve the situation including boosting profit and the management effect by reorganizing the structure of the group. Reform took place slowly, but with all of the group’ s affiliates and its employees working together, the group firmly secured the reform direction and changes began to occur visibly.

The group’ s organizational changes are part of the reform efforts, which include the spinoff of KB Kookmin Card in March 2011 and the merger of KB Investment and Securities and KB Futures in November 2011, along with the honorary retirement of 3,244 personnel.

Under the reform moves, the group has been able to diversify and strengthen its profit sources as well as strengthen its personnel structure, cutting down and improving the ineffective management.

But the most significant change has been the independence of the group from government and Financial Service Commission meddling in the management of the group.

The group has also been able to secure transparency for its management and accounting and build up its infrastructure, removing all kinds of mistakes in accounting and preventing irregularities, reborn as an enterprise model for transparent management practices.

The group’ s strategy to expand its overseas operations has been focused on building advance bases in China and Southeast Asia and expanding its operations gradually through both organic and inorganic growth while deepening the localization of operations.

The group will, at the same time, maximize the expansion of the local operation’ s network in countries in which it operates through growth and maximization of synergy.

The group will hire and train personnel who speak the languages of the countries it operates in and will know their cultures in order to effectively man its special overseas network. The group will eventually expand its overseas operations to Asian countries other than China such as India, Indonesia, and Vietnam, in various forms including representative offices, branches, local subsidiaries, joint ventures, stake holding, and M&As, depending on the regulations and business environments of those countries.

The group will also eye advanced countries where its financial products and services can make inroads.