KB Financial Group(KB) - 2023 Q4 - Annual Report

Financial Position and Capital Adequacy - As of December 31, 2023, the company held debt securities with a total carrying amount of ₩59,597 billion in its trading and investment securities portfolio[109]. - The company's common equity Tier I capital adequacy ratio was 13.59%, exceeding the minimum requirement of 8.0% as of December 31, 2023[115]. - Approximately 95.7% of the company's deposits had maturities of one year or less or were payable on demand as of December 31, 2023[114]. - The company had ₩113 billion of special reserves in respect of trust accounts for which it provided guarantees of principal as of December 31, 2023[111]. - The company is subject to an additional capital requirement of 1.0% for being designated as a domestic systemically important bank for 2024[118]. - The company’s capital adequacy ratios may deteriorate if its financial condition worsens or if it cannot deploy funding into low-risk assets[115]. Risk Management and Operational Challenges - The company may face challenges in realizing the full book value of debt securities due to the underdeveloped secondary market for corporate bonds in Korea[109]. - The company’s risk management strategies may not be effective in mitigating operational risks, especially in difficult market conditions[102]. - The company may be required to cover shortfalls in guaranteed trust accounts from its general banking operations, which could adversely impact its results[110]. - The company has made substantial investments in cybersecurity measures, but there is no guarantee that these measures will be fully effective against evolving cyber threats[112]. - Financial problems in restructuring large companies (chaebols) could adversely affect the financial condition of the company and its customers[141]. - The company may face adverse effects from labor unrest and economic difficulties in Korea, which could impact operations and loan repayments[139]. Economic and Market Conditions - The Bank of Korea raised its policy rate to 3.50% from April 2022 to January 2023, impacting loan demand and repayment ability of borrowers[119]. - Non-performing loans to overseas borrowers increased from ₩1,342 billion as of December 31, 2022, to ₩1,568 billion as of December 31, 2023, reflecting rising global interest rates[120]. - A sustained increase in interest rates may lead to a decline in the value of the debt securities portfolio, affecting profitability and requiring re-balancing of asset portfolios[119]. - The value of debt securities and general account assets of insurance subsidiaries may decline, resulting in lower unrealized gains and affecting solvency ratios[122]. - The Korean economy faces risks from rising inflation, increasing household debt, and potential deterioration in the financial condition of borrowers[138]. Regulatory Environment and Compliance - The Financial Consumer Protection Act, enacted in March 2020, imposes stricter distribution guidelines and increased liability for customer losses[124]. - The company may incur significant compliance costs due to strengthened consumer protection laws, impacting operational flexibility[125]. - The company is subject to regulatory scrutiny and potential burdensome measures if deemed financially unsound by the Financial Services Commission[129]. Government Influence and Market Dynamics - The Korean government has implemented measures from April 2020 to September 2023 to encourage financial support for small- and medium-sized enterprises affected by the COVID-19 pandemic[128]. - Escalating tensions with North Korea could adversely affect the company's business and market value of its securities[130]. - The Korean National Pension Service held approximately 8.30% of the total issued common stock as of December 31, 2023, which may impact market dynamics if sold[142]. - The KRX KOSPI Market, where the company's common stock is listed, has experienced substantial fluctuations, with the KOSPI at 2,628.6 on April 25, 2024, highlighting market volatility[153]. - The Korean government may impose restrictions on converting and remitting dividends in U.S. dollars during emergency circumstances, affecting cash flows[155]. - Ownership of common stock is restricted under Korean law, with a limit of 10.0% for single stockholders, which could impact investment strategies[144]. - The company has no current plans for public offerings of common stock or ADSs, but future sales could dilute existing investments[140]. - Fluctuations in the exchange rate between the U.S. dollar and the Won will affect dividend payments and the value of proceeds from sales of common stock[150]. - The potential for government influence on the private sector could lead to sudden movements in the market prices of securities, impacting the company's stock[154].