Chairman Yoon Jong-kyoo of KB Financial Group. (Photo: KB Financial Group)
As KB Financial Group suffered an increase losses from securities, derivatives and foreign exchange in the aftermath of the new coronavirus crisis in the first quarter, its net profit fell compared to the previous year.
Nonetheless, the bank loan growth of over 4 percent has buttressed its net profit.
KB Financial Group announced on April 23 that it posted 729.5 billion won in net profit in the first quarter.
The figure was a decrease of 13.7 percent from the same period in 2019. Compared to the previous quarter, net profit swelled by 36.4 percent due to a significant decrease in seasonal expenses such as cost for voluntary retirements.
Peculiar factors in KB Financial Group's first-quarter earnings (before tax) include 40 billion won loss related to securities including, 34 billion won in bank credit valuation adjustments (CVAs) and 19 billion won in provisions for accrued receivables from stock brokerage.
In the first quarter of 2020, KB Financial Group's ROE hit 7.64 percent due to a slump in the operating profit amid increasing volatility in the financial market. Excluding abnormal factors, its current ROE stood at 8.66 percent. The group’s ROA arrived at 0.56 percent in the first quarter.
In the first quarter of 2020, the KB Financial Group's net interest income amounted to 2,349.2 billion won, an increase of 97.1 billion won (4.3 percent) compared to the same period of 2019. Despite a fall in net interest margin (NIM) following an interest rate cut and the handling of secured convertible loans, its banking and credit card affiliates enjoyed steady asset growth.
In the first quarter of 2020, KB Financial Group and its bank’s NIMs recorded 1.84 percent and 1.56 percent, respectively, and fell by 4bp and 5bp, respectively, from the previous quarter.
In the case of the bank, despite a stable increase in low-cost deposits and a reduction in procurement costs, asset yields shrank due to a cut in the benchmark interest rate and the handling of secured convertible loans.
The group’s NIM was also affected by the growth effects of card assets such as installment financing due to a drop in the bank NIM.
Its net commission income in the first quarter of 2020 stood at 670.1 billion won, an increase of 119.5 billion won (21.7 percent) from the same period of 2019. Stock trade commission rose thanks to an increase in stock trade volume and an improvement in IB earnings and credit card commissions grew, having a positive impact on the net commission income.
In the first quarter of 2020, the group's other operating losses amounted to 277.3 billion won. As the volatility of the financial market expanded due to the spread of the novel coronavirus, valuation losses occurred in securities management sectors such as foreign currency bonds and fixed-return trust products.
Insurance-related profit in the first quarter touched 78.1 billion won, showing good results compared to the previous quarter, mainly thanks to an improvement in the overall loss ratio, in particular, that of auto insurance and better investment management performances.
The group's general operating expenses in the first quarter of 2020 amounted to 1,459 billion won. They sank 19.6 percent and 3.6 percent, respectively, compared to the previous quarter which had seasonal factors such as voluntary retirement costs and the accumulation of internal welfare funds and the same period of the previous year.
KB Financial Group’s CIR in the first quarter was 53.2 percent. Its ordinary CIR, excluding specific factors such as voluntary retirement cost, has remained closer to 50 percent over the past four years.
In the first quarter, credit loss provisions amounted to 243.7 billion won and credit cost 0.25 percent.
With respect to asset quality, as of the end of March, its NPL ratio hit 0.50 percent and its NPL coverage ratio 141.4 percent.
BIS capital adequacy ratio and common equity capital ratio were 14.02 percent and 12.96 percent, respectively, meaning the company has maintained a capital buffer at the highest level in the Korean financial industry.