Chairman Yoon Jong-kyoo of KB Financial Group. (Photo: KB Financial Group)

KB Financial Group announced on July 21 that it posted a net profit of 1,711.3 billion won in the first half of 2020. The figure is down 6.8 percent from 1,836.8 billion won in the first half of last year.

This is because KB Financial Group set aside loan-loss reserves in advance in consideration of a prolonged economic downturn despite an increase in interest and net commission income.

Its net profit in the second quarter arrived at 981.8 billion won, up 34.6 percent from 729.5 billion won in the previous quarter.

This is due to the stabilization of the financial market, which restored other operating profits and improved commission income and insurance gains of non-bank affiliates, such as securities and credit card affiliates.

“Our net profit decreased compared to the same period of last year due to the impact of preemptive loan-loss reserves based on a future economic outlook for the second quarter,” a KB Financial official said. “Except for major one-off factors, KB Financial Group maintained steady and stable profit generation despite a difficult business environment sparked off by an economic slowdown and an interest rate decline.”

Its net interest income in the first half stood at 4,683.2 billion won, up 2.9 percent (134 billion won) from a year earlier.

Although its net interest margin (NIM) shrank this year due to a cut in the benchmark interest rate and the handling of safe convertible loans, its overall interest profit increased as bank and credit card loans swelled.

In the second quarter, the NIMs of KB Financial Group and KB Kookmin Bank arrived at 1.74 percent and 1.50 percent, respectively.

In the second quarter, the bank's NIM fell by 6bp from the previous quarter due to the impact of a key rate cut and reduced return on assets due to the burden of managing foreign currency liquidity.

The group’s NIM fell by 10bp from the previous quarter due to a decrease in the NIM of the credit card affiliate caused by a drop in sales of medium-interest rate products such as credit card loans and cash advances and a decrease in the NIM of the banking affiliate.

KB Financial Group’s net commission income in the first half of this year amounted to 1,381.3 billion won, up 21.6 percent (245.6 billion won) from the first half of 2019. This is because the non-banking sector's performance was strong with commissions rising 59.5 percent in the securities industry and an increase in credit card commission profits.

The group’s credit loss allowance for the first half of 2020 rose 21.5 percent from the previous quarter due to the group’s additional loan-loss reserves of about 206 billion won based on a future economic outlook.

The group’s credit cost ratio inched up to 0.29 percent in the second quarter and 0.27 percent in the first half due to the accumulation of additional loan-loss reserves.

KB Financial Group's total assets stood at 569.6 trillion won as of the end of June, up 9.9 percent (51.1 trillion won) from the end of 2019. The group’s total assets including assets under management reached 873.5 trillion won.

In the meantime, KB Financial Group resolved to actively participate in a “Korean version of the New Deal” through the continuous promotion and expansion of innovative finance in a meeting of KB New Deal and Innovation Finance Council consisting of Yoon Jong-kyu, chairman of KB Financial Group and the top management of its major affiliates including KB Kookmin Bank president Huh In on July 23.

KB Financial Group is holding the 2020 Innovative Finance Campaign focusing on 16 key agenda items at a rapid pace. Its average progress rate hit 66.5 percent as of the end of June.

This is because the group made a lot of efforts to coexist with companies such as expanding loans (5.8 trillion won) for companies suffering from the spread of the COVID-19 pandemic.

At the meeting, the participants decided to expand KB Innovation Finance Council into KB New Deal and Innovation Finance Council, and had a discussion about additional ways to effectively support the Korean New Deal Project while checking loan support for and investment in innovative companies and discussing major plans for the future.