KB Financial Group(US:KB)2024-07-24 09:45Financial Data and Key Metrics - CET1 ratio increased by 17 basis points QoQ to 13.59%, the highest in the domestic market [1] - Q2 other operating profit posted KRW323.1 billion, a 19.5% QoQ increase, driven by improved financial market conditions and securities investment performance [2] - First half cumulative other operating profit was KRW593.5 billion, lower YoY due to interest rate and FX rate effects on securities, FX, and derivatives [2] - Q2 non-operating profit grew significantly QoQ due to the reversal of large-scale ELS provisioning in Q1 [3] - First half group net fee and commissions income increased 2.4% YoY to KRW1,909.8 billion, driven by higher stock transaction amounts and brokerage income [11] - Q2 group net fee income was KRW919.7 billion, slightly down QoQ due to a decline in IB fees from real estate PF market contraction [11] - Q2 provision for credit losses increased QoQ to KRW552.6 billion, mainly due to additional provisioning for real estate trust and conservative provisioning stance [12] - First half cumulative provision for credit losses decreased significantly YoY to KRW981 billion, reflecting preemptive large-scale provisioning in the previous year [12] - Q2 net interest income increased 9% YoY and 1.7% QoQ to KRW3,206.2 billion, driven by loan average balance growth and interest income expansion [23] - First half group net interest income was KRW6,357.7 billion [23] - Q2 group and bank NIM declined by 3 basis points QoQ to 2.08% and 1.84%, respectively, due to spread contraction and market interest rate decline [25] - First half group ROE was 10.78%, with recurring ROE (excluding one-offs) at 12.26% [24] - Q2 credit cost ratio was 43 basis points, slightly increased QoQ but remains stable [26] - First half group CIR was 36.4%, showing downward stabilization due to cost efficiency efforts [14] - First half G&A expenses increased 2% YoY to KRW3,222.1 billion, with Q2 G&A decreasing 2.1% QoQ [34] Business Line Performance - Insurance income increased KRW185.7 billion YoY in the first half, driven by non-life insurance IBNR reserve reversal and improved loss ratios [2] - Bank loans in won grew 2.3% QoQ and 2.9% YTD to KRW352 trillion, with loan demand recovering in Q2 [13] - Household loans increased 3.0% YTD to KRW172 trillion, driven by home transaction increases [74] - Corporate loans increased 2.7% YTD, supported by large corporate loans and moderate SME loan growth [74] Market Performance - Banking sector prices showed strength due to high expectations for the value-up program [10] - Real estate PF market contraction impacted IB fees and provisioning [11][12] Company Strategy and Industry Competition - The company is committed to a progressive dividend policy and enhancing shareholder returns through share buybacks and cancellations [1][9][21] - The company plans to maintain a CET1 ratio at 13.5% and improve capital adequacy to enhance shareholder return visibility [80] - The company is focusing on cost efficiency and labor cost reduction to stabilize CIR [22] - The company is preparing for value-up disclosures, focusing on capital ratio, ROE improvement, and shareholder value enhancement [44] Management Commentary on Operating Environment and Future Outlook - Macro uncertainties continue, but the company has ample capacity to respond with conservative provisioning and rigorous risk management [10] - The company expects to maintain stable credit costs and asset quality despite economic slowdown concerns [10][12] - The company plans to focus on qualitative growth in asset quality and profitability in the second half [74] - The company is cautious about the real estate PF market, with conservative provisioning and a focus on senior loans [43][77] Other Important Information - The company announced a quarterly cash payout of KRW791 per share and a KRW400 billion share buyback and cancellation, totaling KRW720 billion for shareholder returns [21] - The company has about 14 million treasury shares, with no plans to release them into the market [66] Q&A Session Summary Questions and Answers - Question: Will there be changes in the value-up disclosure? Answer: The company is implementing measures under the value-up program, including quarterly dividends and share buybacks, but has not yet made the disclosure [17] - Question: Will shareholder return calculations shift to a calendar basis? Answer: The company will integrate shareholder return calculations on a calendar basis going forward [30][82] - Question: What is the outlook for NIM and defensive strategies against interest rate declines? Answer: The company expects NIM to remain flat YoY and will focus on core deposit growth and funding cost management [31][63][65] - Question: What is the status of asset quality and provisioning for real estate PF? Answer: The company has accumulated sizable provisioning and maintains a conservative stance, with senior loans accounting for over 95% of property loans [42][43][77] - Question: What is the expected credit cost for the year? Answer: The recurring credit cost is around 40 basis points, with conservative provisioning in place [68] - Question: Will there be additional shareholder returns beyond the KRW720 billion announced? Answer: The company plans to gradually increase shareholder returns and will decide on additional measures based on the situation [81] - Question: What is the appropriate level of coverage ratio for NPLs? Answer: The company considers 130%-140% as an appropriate coverage ratio, depending on the macro environment [58][79]