KB Financial beats profit forecast on higher interest rates

KB Financial Group Inc., South Korea’s top financial holding company by assets, on Tuesday reported better-than-expected net profit in the third quarter thanks to higher interest rates, although its key profitability slightly deteriorated.

KB Financial said its net profit rose 0.4% to 1.4 trillion won ($1 billion) in the third quarter from a year earlier, beating analysts’ forecast of 1.3 trillion won. The group logged a total net profit of 4.3 trillion won in the first three quarters, up 7.4% on-year, paving the way to become the country’s first financial holding company with an annual net profit of more than 5 trillion won.

The healthy quarterly profit came as the group’s interest income increased with growing loan assets such as corporate lending. Its net interest income rose 6.6% to 3.1 trillion won in the July-September period from a year earlier.

Compared to the previous quarter, the income advanced 3.3%. Its net interest margin, a key measure of profitability in retail banking activities, dipped by 0.01 percentage point to 2.09% on-quarter, however, as funding costs rose on higher market interest rates.

Its net interest income made up 77.9% of the gross operating income in the third quarter, higher than 69.2% in the previous three months.

BANKING UNIT SHINES

The group’s banking unit KB Kookmin Bank logged a net profit of 996.9 billion won in the third quarter, 21% higher than a year earlier, on rising interest rates. The combined net profit of the country’s top lender advanced 12% to 2.9 trillion won in the first three quarters.

On the other hand, the bank’s asset quality deteriorated with the delinquency ratio and non-performing loan ratio at 0.25% and 0.26%, respectively, up from 0.14% and 0.19% a year earlier.

Non-banking units suffered weaker quarterly profits. KB Securities Co. and KB Insurance Co. reported an 8.4% fall and a 10.7% slide in net profits, respectively, while KB Kookmin Card Co. and KB Life Insurance Co. saw a 25.4% drop and a 7.8% fall.

KB Financial decided to pay dividends of 510 won per share for the third quarter, the same as that of the previous three months.

The group said it has been buying back treasury stocks since August through trust contracts to carry out its plan for a share buyback of 300 billion won and cancellation announced in July. It plans to cancel the treasury shares once the buyback is complete.

Write to Bo-Hyung Kim at kph21c@hankyung.com
 

Jongwoo Cheon edited this article.