KB Financial Group(US:KB)2024-10-26 07:50Financial Data and Key Metrics - Q3 2024 cumulative net profit was KRW 4.3953 trillion, up 0.4% year-over-year, driven by strong performance in nonbank subsidiaries such as securities, insurance, and credit card businesses [12] - Q3 net profit was KRW 1.614 trillion, down Q-over-Q due to base effects from sizable provisioning last quarter for ELS compensation [12] - Cumulative credit cost improved by 11 basis points year-over-year to 0.41% in Q3 [13] - CET1 ratio increased by 25 basis points Q-over-Q to 13.85% as of September 2024 [10] - Net interest income in Q3 was KRW 3.165 trillion, down 1.3% Q-over-Q due to interest rate cuts [14] - Net fees and commission income in Q3 was KRW 942.7 billion, up 2.5% Q-over-Q, driven by bancassurance and securities investment banking fees [14] - Other operating profit in Q3 was KRW 398.7 billion, up 23.4% Q-over-Q, driven by market and FX rate movements [15] - G&A expense in Q3 was KRW 1.6508 trillion, up 3.6% Q-over-Q, while cumulative CIR was 36.5% [15] - PCL in Q3 was KRW 498.1 billion, down 9.9% Q-over-Q, due to reduced provisioning at nonbank subsidiaries [15] - Nonoperating profit in Q3 declined by KRW 140 billion Q-over-Q due to base effects from ELS compensation provisioning [16] - Cumulative group ROE in Q3 2024 was 11.26%, above the target of 10% [16] - Bank's total loan in won as of September 2024 was KRW 362 trillion, up 2.9% versus June and 5.9% year-to-date [16] - Group and bank's NIM in Q3 was 1.95% and 1.71%, respectively, down 13 basis points Q-over-Q [17] Business Line Performance - Nonbank subsidiaries, including securities, insurance, and credit card businesses, performed well despite rate cuts and a sluggish economy [12] - Household loans increased by 2.7% or KRW 4.6 trillion versus June, driven by rising transaction volumes [16] - Corporate loans increased by 3.2% compared to June, with SME loans trending upward [17] Market Performance - The real estate PF market stabilization led to some provisioning reversals, contributing to stable credit cost management [18] - The CET1 ratio of 13.85% as of September 2024 reflects the industry's top level of capital buffer [13] Strategic Direction and Industry Competition - The company is focusing on sustainable and predictable shareholder returns, linking them to CET1 ratio [5][6] - KB Financial Group aims to maintain industry-leading shareholder returns, with a total shareholder return ratio of 37.7% in 2023 [4] - The company is reorganizing its business management system to focus on RWA-centric growth and fundamental earnings generation [6] - KB plans to maintain a CET1 ratio above 13.5% throughout the year, using excess capital for share buybacks and dividends [10][11] Management Commentary on Operating Environment and Future Outlook - Management emphasized the importance of sustainability and predictability in shareholder returns [4][5] - The company expects to maintain robust credit cost control despite macroeconomic uncertainties [13] - Management anticipates steady NIM levels in Q4 2024, with loan growth slowing due to government controls on household lending [17] - The company plans to focus on quality-driven growth rather than loan book expansion, aiming for sustainable interest income generation [18] Other Important Information - The company approved a quarterly cash dividend of KRW 795 per share and an additional share buyback and cancellation of KRW 100 billion [11] - KB Financial Group plans to enhance communication with investors by providing a value-up bulletin board on its website and allowing individual investors to submit questions before earnings releases [19] Q&A Session Summary Question: RWA growth target and shareholder return [21] - The company targets RWA growth at around 5%, aligning with nominal GDP growth, and does not set a specific TSR target but focuses on increasing the absolute amount of shareholder returns [23][24] Question: RoRWA targets and balance between dividends and share buybacks [25] - The company will set RoRWA targets for 2025 and link them to executive compensation, with a focus on expanding share buybacks until PBR reaches 1.0 [26][27] Question: Timing of share buybacks based on CET1 ratio [29] - Share buybacks in the second half are based on the CET1 ratio as of the second quarter, with potential adjustments based on special circumstances [29] Question: Compensation plan alignment with value-up program [32] - The company is aligning KPIs with the value-up program, emphasizing RoRWA and expanding incentives to sales teams [32][33] Question: Competitive edge and NIM outlook [35] - The company's value-up program is characterized by sustainability and predictability, with CET1-linked shareholder returns [36] - NIM is expected to remain steady in Q4 2024, with similar quarterly NIM levels anticipated for next year [39][41] Question: Sensitivity of RWA to external factors [43] - FX rate fluctuations have a minor impact on RWA, with a 1 basis point effect for every KRW 10 change [44] Question: Credit cost projections and real estate PF market [47] - The company expects credit cost to remain around 40 basis points, with reversals from preemptive provisioning in real estate PF [47][48]