Exhibit 99.2
KB Financial Group Inc.
Separate Interim Financial Statements
September 30, 2018 and 2017
KB Financial Group Inc.
Index
September 30, 2018 and 2017
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Report on Review of Interim Financial Statements
(English Translation of a Report Originally Issued in Korean)
To the Shareholders and Board of Directors of
KB Financial Group Inc.
Reviewed Financial Statements
We have reviewed the accompanying separate interim financial statements of KB Financial Group Inc. (the “Company”). These financial statements consist of the separate interim statement of financial position of the Company as of September 30, 2018, and the related separate interim statements of comprehensive income for the three-month and nine-month periods ended September 30, 2018 and 2017, and separate interim statements of changes in equity and cash flows for the nine-month periods ended September 30, 2018 and 2017, and a summary of significant accounting policies and other explanatory notes, expressed in Korean won.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these separate interim financial statements in accordance with International Financial Reporting Standards as adopted by the Republic of Korea (“Korean IFRS”) 1034,Interim Financial Reporting, and for such internal control as management determines is necessary to enable the preparation of separate interim financial statements that are free from material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to issue a report on these separate interim financial statements based on our review.
We conducted our review in accordance with quarterly or semi-annual review standards established by the Securities and Futures Commission of the Republic of Korea. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Korean Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our reviews, nothing has come to our attention that causes us to believe the accompanying separate interim financial statements are not presented fairly, in all material respects, in accordance with Korean IFRS 1034, Interim Financial Reporting.
Other Matters
We have audited the separate statement of financial position of the Company as of December 31, 2017, and the related separate statements of comprehensive income, changes in equity and cash flows for the year then ended, in accordance with Korean Standards on Auditing. We expressed an unqualified opinion on those financial statements, not presented herein, in our audit report dated March 12, 2018. The separate statement of financial position as of December 31, 2017, presented herein for comparative purposes, is consistent, in all material respects, with the above audited statement of financial position as of December 31, 2017.
Review standards and their application in practice vary among countries. The procedures and practices used in the Republic of Korea to review such financial statements may differ from those generally accepted and applied in other countries.
/S/ Samil PricewaterhouseCoopers
Seoul, Korea
November 14, 2018
This report is effective as of November 14, 2018, the review report date. Certain subsequent events or circumstances, which may occur between the review report date and the time of reading this report, could have a material impact on the accompanying separate interim financial statements and notes thereto. Accordingly, the readers of the review report should understand that there is a possibility that the above review report may have to be revised to reflect the impact of such subsequent events or circumstances, if any.
2
KB Financial Group Inc.
Separate Interim Statements of Financial Position
September 30, 2018 (Unaudited) and December 31, 2017
| (In millions of Korean won) | Notes | September 30, 20181 | December 31, 2017 | |||||||||
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Assets | ||||||||||||
Cash and due from financial institutions | 4,5,6,28 | |||||||||||
Financial assets at fair value through profit or loss (under Korean IFRS 1039) | 4,5,7 | — | 284,485 | |||||||||
Financial assets at fair value through profit or loss | 4,5,7 | 288,157 | — | |||||||||
Loans at amortized cost | 4,5,8 | 50,000 | 10,000 | |||||||||
Investments in subsidiaries | 9 | 24,062,116 | 24,062,116 | |||||||||
Property and equipment | 10 | 685 | 697 | |||||||||
Intangible assets | 11 | 8,652 | 8,864 | |||||||||
Net defined benefit assets | 16 | — | 201 | |||||||||
Deferred income tax assets | 12 | 7,869 | 10,282 | |||||||||
Other assets | 4,5,13 | 751,036 | 480,789 | |||||||||
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Total assets | ||||||||||||
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Debts | 4,5,14 | |||||||||||
Debentures | 4,5,15 | 5,462,828 | 5,162,600 | |||||||||
Net defined benefit liabilities | 16 | 1,378 | — | |||||||||
Current income tax liabilities | 613,994 | 308,854 | ||||||||||
Other liabilities | 4,5,17 | 150,050 | 204,835 | |||||||||
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Total liabilities | 6,228,250 | 5,976,289 | ||||||||||
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Equity | ||||||||||||
Share capital | 18 | 2,090,558 | 2,090,558 | |||||||||
Capital surplus | 18 | 14,742,814 | 14,742,814 | |||||||||
Accumulated other comprehensive income | 18 | (5,342 | ) | (5,233 | ) | |||||||
Retained earnings | 18 | 3,259,694 | 3,054,379 | |||||||||
Treasury shares | 18 | (936,194 | ) | (755,973 | ) | |||||||
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Total equity | 19,151,530 | 19,126,545 | ||||||||||
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Total liabilities and equity | ||||||||||||
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| 1 | The separate statement of financial position as at September 30, 2018 is prepared in accordance with Korean IFRS 1109; however, the comparative separate statement of financial position as at December 31, 2017 was not retrospectively restated to apply Korean IFRS 1109. |
The accompanying notes are an integral part of these separate interim financial statements.
3
KB Financial Group Inc.
Separate Interim Statements of Comprehensive Income
Three-Month and Nine-month Periods Ended September 30, 2018 and 2017 (Unaudited)
| (In millions of Korean won, except per share amounts) | Notes | 20181 | 2017 | |||||||||||||||||
| (Unaudited) | (Unaudited) | |||||||||||||||||||
| Three months | Nine months | Three months | Nine months | |||||||||||||||||
Interest income | ||||||||||||||||||||
Interest expense | (30,948) | (91,309) | (27,273) | (72,877) | ||||||||||||||||
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Net interest expense | 20 | (29,312 | ) | (86,331 | ) | (26,670 | ) | (69,664 | ) | |||||||||||
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Fee and commission income | 218 | 487 | 240 | 576 | ||||||||||||||||
Fee and commission expense | (824 | ) | (4,724 | ) | (1,275 | ) | (6,612 | ) | ||||||||||||
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Net fee and commission expense | 21 | (606 | ) | (4,237 | ) | (1,035 | ) | (6,036 | ) | |||||||||||
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Net gains (losses) on financial assets at fair value through profit or loss (under Korean IFRS 1039) | 22 | — | — | (1,108 | ) | 3,777 | ||||||||||||||
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Net gains on financial assets at fair value | ||||||||||||||||||||
through profit or loss | 22 | 5,133 | 13,865 | — | — | |||||||||||||||
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Net other operating income | 23 | — | 1,089,556 | — | 709,544 | |||||||||||||||
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General and administrative expenses | 24 | (12,747 | ) | (37,975 | ) | (11,856 | ) | (38,467 | ) | |||||||||||
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Operating profit (loss) before provision for credit losses | (37,532 | ) | 974,878 | (40,669 | ) | 599,154 | ||||||||||||||
Provision for credit losses | — | — | — | — | ||||||||||||||||
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Operating profit (loss) | (37,532 | ) | 974,878 | (40,669 | ) | 599,154 | ||||||||||||||
Netnon-operating income (expense) | 25 | (280 | ) | (381 | ) | 134 | 94 | |||||||||||||
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Profit (loss) before income tax | (37,812 | ) | 974,497 | (40,535 | ) | 599,248 | ||||||||||||||
Income tax benefit (expense) | 26 | (106 | ) | (2,454 | ) | 1,404 | 1,937 | |||||||||||||
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Profit (loss) for the period | (37,918 | ) | 972,043 | (39,131 | ) | 601,185 | ||||||||||||||
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Items that will not be reclassified to profit or loss: | ||||||||||||||||||||
Remeasurements of net defined benefit liabilities | (36 | ) | (109 | ) | (28 | ) | (84 | ) | ||||||||||||
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Other comprehensive loss for the period, net of tax | (36 | ) | (109 | ) | (28 | ) | (84 | ) | ||||||||||||
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Total comprehensive income (loss) for the period | ||||||||||||||||||||
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Earnings (loss) per share | ||||||||||||||||||||
Basic earnings (loss) per share | 27 | 1,510 | ||||||||||||||||||
Diluted earnings (loss) per share | 27 | (95 | ) | 2,437 | (97 | ) | 1,502 | |||||||||||||
| 1 | The separate statement of comprehensive income for the three-month and nine-month period ended September 30, 2018 is prepared in accordance with Korean IFRS 1109; however, the comparative separate statement of comprehensive income for the three-month and nine-month period ended September 30, 2017 was not retrospectively restated to apply Korean IFRS 1109. |
The accompanying notes are an integral part of these separate interim financial statements.
4
KB Financial Group Inc.
Separate Interim Statements of Changes in Equity
Nine-Month Periods Ended September 30, 2018 and 2017 (Unaudited)
| (In millions of Korean won) | Share Capital | Capital Surplus | Accumulated Other Comprehensive Income | Retained Earnings | Treasury Shares | Total Equity | ||||||||||||||||||
Balance at January 1, 2017 | ||||||||||||||||||||||||
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Comprehensive income | ||||||||||||||||||||||||
Profit for the period | — | — | — | 601,185 | — | 601,185 | ||||||||||||||||||
Remeasurements of net defined benefit liabilities | — | — | (84 | ) | — | — | (84 | ) | ||||||||||||||||
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Total comprehensive income | — | — | (84 | ) | 601,185 | — | 601,101 | |||||||||||||||||
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Transactions with shareholders | ||||||||||||||||||||||||
Dividends | — | — | — | (497,969 | ) | — | (497,969 | ) | ||||||||||||||||
Acquisition of treasury shares | — | — | — | — | (82,212 | ) | (82,212 | ) | ||||||||||||||||
Disposal of treasury shares | — | 86,646 | — | — | 165,101 | 251,747 | ||||||||||||||||||
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Total transactions with shareholders | — | 86,646 | — | (497,969 | ) | 82,889 | (328,434 | ) | ||||||||||||||||
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Balance at September 30, 2017 (Unaudited) | ||||||||||||||||||||||||
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Balance at January 1, 2018 | 3,054,379 | |||||||||||||||||||||||
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Comprehensive income | ||||||||||||||||||||||||
Profit for the period | — | — | — | 972,043 | — | 972,043 | ||||||||||||||||||
Remeasurements of net defined benefit liabilities | — | — | (109 | ) | — | — | (109 | ) | ||||||||||||||||
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Total comprehensive income | — | — | (109 | ) | 972,043 | — | 971,934 | |||||||||||||||||
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Transactions with shareholders | ||||||||||||||||||||||||
Dividends | — | — | — | (766,728 | ) | — | (766,728 | ) | ||||||||||||||||
Acquisition of treasury shares | — | — | — | — | (180,221 | ) | (180,221 | ) | ||||||||||||||||
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Total transactions with shareholders | — | — | — | (766,728 | ) | (180,221 | ) | (946,949 | ) | |||||||||||||||
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Balance at September 30, 2018 (Unaudited)1 | 3,259,694 | |||||||||||||||||||||||
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| 1 | The separate statement of changes in equity for the nine-month period ended September 30, 2018 is prepared in accordance with Korean IFRS 1109; however, the comparative separate statement of changes in equity for the nine-month period ended September 30, 2017 was not retrospectively restated to apply Korean IFRS 1109. |
The accompanying notes are an integral part of these separate interim financial statements.
5
KB Financial Group Inc.
Separate Interim Statements of Cash Flows
Nine-Month Periods Ended September 30, 2018 and 2017 (Unaudited)
| (In millions of Korean won) | Note | 20181 | 2017 | |||||||||
| (Unaudited) | (Unaudited) | |||||||||||
Cash flows from operating activities | ||||||||||||
Profit for the period | ||||||||||||
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Adjustment fornon-cash items | ||||||||||||
Depreciation and amortization | 540 | 479 | ||||||||||
Share-based payments | 977 | 4,952 | ||||||||||
Net interest expense | 2,919 | 6,677 | ||||||||||
Net gains on valuation on financial assets at fair value through profit or loss (under Korean IFRS 1039) | — | 5,706 | ||||||||||
Net gains on valuation on financial assets at fair value through profit or loss | (3,672 | ) | — | |||||||||
Net other expenses | 1,645 | 1,554 | ||||||||||
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| 2,409 | 19,368 | |||||||||||
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Changes in operating assets and liabilities | ||||||||||||
Deferred income tax assets | 2,413 | (1,937 | ) | |||||||||
Other assets | (538 | ) | (934 | ) | ||||||||
Other liabilities | (4,629 | ) | (7,039 | ) | ||||||||
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| (2,754 | ) | (9,910 | ) | |||||||||
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Net cash inflow from operating activities | 971,698 | 610,643 | ||||||||||
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Cash flows from investing activities | ||||||||||||
Acquisition of subsidiaries | — | (1,364,034 | ) | |||||||||
Acquisition of financial assets at fair value through profit or loss | — | (50,000 | ) | |||||||||
Decrease (increase) in loans at amortized cost | (40,000 | ) | 19,415 | |||||||||
Acquisition of property and equipment | (276 | ) | (81 | ) | ||||||||
Acquisition of intangible assets | (52 | ) | (334 | ) | ||||||||
Disposal of intangible assets | 34 | — | ||||||||||
Net increase in guarantee deposits paid | (365 | ) | — | |||||||||
Other investing activities | (121 | ) | — | |||||||||
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Net cash inflow(outflow) from investing activities | (40,780 | ) | (1,395,034 | ) | ||||||||
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Cash flows from financing activities | ||||||||||||
Increase in debts | — | 1,124,675 | ||||||||||
Decrease in debts | (298,485 | ) | (1,275,032 | ) | ||||||||
Increase in debentures | 778,104 | 1,836,114 | ||||||||||
Decrease in debentures | (478,921 | ) | (149,669 | ) | ||||||||
Dividends paid to shareholders | (766,728 | ) | (497,969 | ) | ||||||||
Acquisition of treasury shares | (199,023 | ) | (82,110 | ) | ||||||||
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Net cash inflow (outflow) from financing activities | (965,053 | ) | 956,009 | |||||||||
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Net increase (decrease) in cash and cash equivalents |
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Cash and cash equivalents at the beginning of the period | 28 | 245,397 | 115,062 | |||||||||
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Cash and cash equivalents at the end of the period | 28 | |||||||||||
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| 1 | The separate statement of cash flows for the nine-month period ended September 30, 2018 is prepared in accordance with Korean IFRS 1109; however, the comparative separate statement of cash flows for the nine-month period ended September 30, 2017 was not retrospectively restated to apply Korean IFRS 1109. |
The accompanying notes are an integral part of these separate interim financial statements.
6
KB Financial Group Inc.
Notes to Separate Interim Financial Statements
September 30, 2018 and 2017(Unaudited), and December 31, 2017
1. The Company
KB Financial Group Inc. (the “Company”), in accordance with Financial Holding Companies Act, was established on September 29, 2008, through stock transfers with the former shareholders of Kookmin Bank, KB Investment & Securities Co., Ltd., KB Asset Management Co., Ltd., KB Real Estate Trust Co., Ltd., KB Investment Co., Ltd., KB Futures Co., Ltd., KB Credit Information Co., Ltd., and KB Data Systems Co., Ltd. in order to provide management services and financing to associated companies. The headquarters are located at 26,Gukjegeumyung-ro-8-gil,Yeongdeungpo-gu, Seoul. The Company’s share capital as of September 30, 2018, isW 2,090,558 million. In 2011, Kookmin Bank spun off its credit card business segment and established a new separate credit card company, KB Kookmin Card Co., Ltd., and KB Investment & Securities Co., Ltd. merged with KB Futures Co., Ltd. The Company established KB Savings Bank Co., Ltd. in January 2012, acquired Yehansoul Savings Bank Co., Ltd. in September 2013, and KB Savings Bank Co., Ltd. merged with Yehansoul Savings Bank Co., Ltd. in January 2014. In March 2014, the Company acquired Woori Financial Co., Ltd. and changed the name to KB Capital Co., Ltd. Meanwhile, the Company included LIG Insurance Co., Ltd. as an associate and changed the name to KB Insurance Co., Ltd. in June 2015. Also, the Company included Hyundai Securities Co., Ltd. as an associate in June 2016 and included as a subsidiary on October 2016 by comprehensive exchange of shares. Hyundai Securities Co., Ltd. merged with KB Investment&Securities Co., Ltd. in December 2016 and changed the name to KB Securities Co., Ltd. in January 2017. KB Insurance Co., Ltd. became one of the subsidiaries through a tender offer in May 2017.
The Company has been listed on the Korea Exchange (“KRX”) since October 10, 2008, and on the New York Stock Exchange (“NYSE”) for its American Depositary Shares (“ADS”) since September 29, 2008. Number of shares authorized on its Articles of Incorporation is 1,000 million.
2. Basis of Preparation
2.1 Application of Korean IFRS
The Company maintains its accounting records in Korean won and prepares statutory financial statements in the Korean language (“Hangeul”) in accordance with International Financial Reporting Standards as adopted by the Republic of Korea (“Korean IFRS”). The accompanying separate financial statements have been condensed, restructured and translated into English from the Korean language financial statements.
Certain information attached to the Korean language financial statements, but not required for a fair presentation of the Company’s financial position, financial performance or cash flows, is not presented in the accompanying separate financial statements.
The separate financial statements of the Company have been prepared in accordance with Korean IFRS. These are the standards, subsequent amendments and related interpretations issued by the International Accounting Standards Board (“IASB”) that have been adopted by the Republic of Korea.
The preparation of separate financial statements requires the use of certain critical accounting estimates. Management also needs to exercise judgment in applying the Company’s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the separate financial statements are disclosed in Note 2.4.
7
KB Financial Group Inc.
Notes to Separate Interim Financial Statements
September 30, 2018 and 2017(Unaudited), and December 31, 2017
The separate financial statements were prepared in accordance with Korean IFRS 1027,Separate Financial Statements.
The Company’s interim separate financial statements as of and for the nine-month period ended September 30, 2018, have been prepared in accordance with Korean IFRS 1034,Interim Financial Reporting. These interim separate financial statements have been prepared in accordance with the Korean IFRS which is effective or early adopted as of September 30, 2018.
The Company has applied the following standards and amendments for the first time for their annual reporting period commencing January 1, 2018. The adoption of these amendments did not have any impact on the current period or any prior period and is not likely to affect future periods.
| • | Amendments to Korean IFRS 1028Investments in Associates and Joint Ventures |
Amendments to Korean IFRS 1028 clarifies that a venture capital organization or a mutual fund, and similar entities may elect, at initial recognition, to measure investments in an associate or joint venture at fair value through profit or loss separately for each associate or joint venture.
- Amendments to Korean IFRS 1040Investment Property
An entity shall transfer a property to, or from, investment property when, and only when, there is evidence of the change in use; Paragraph 57 at the Korean IFRS shows the examples of evidence of a change in use. The Korean IFRS, also, clarifies that investments property under construction is included within the scope of this amendment.
| • | Amendments to Korean IFRS 1102Share-based Payment |
Amendments to Korean IFRS 1102 clarifies accounting for a modification to the terms and conditions of a share-based payment that changes the classification of the transaction from cash-settled to equity-settled. And also, clarifies that the measurement approach should treat the terms and conditions of a cash-settled award in the same way as for an equity-settled award.
- Enactment of Korean IFRS 2122Foreign Currency Transactions and Advance Consideration
According to the enacted interpretation, the date of the transaction, for the purpose of determining the exchange rate to use on initial recognition of the related asset, expense or income (or part of it) is the date on which an entity initially recognizes thenon-monetary asset ornon-monetary liability arising from the prepayment or receipt of advance consideration. In case there are multiple payments or receipts in advance, the entity should determine a date of the transaction for each payment or receipt of advance consideration.
| • | Enactment of Korean IFRS 1109Financial Instruments |
The Company has adopted Korean IFRS 1109Financial Instruments with a date of initial application of January 1, 2018. As permitted by the transition requirements of Korean IFRS 1109, comparative periods have not been restated. The adoption does not have a significant impact on the financial statements.
| • | Enactment of Korean IFRS 1115 Revenue from Contracts with Customers |
8
KB Financial Group Inc.
Notes to Separate Interim Financial Statements
September 30, 2018 and 2017(Unaudited), and December 31, 2017
The Company has adopted Korean IFRS 1115Revenue from Contracts with Customers. As permitted by the transition requirements of Korean IFRS 1115, comparative periods have not been restated. The adoption does not have a significant impact on the financial statements.
Certain new accounting standards and interpretations that have been published but are not mandatory for annual reporting period commencing January 1, 2018 and have not been early adopted by the Company are set out below.
| • | Korean IFRS 1116 Leases |
Korean IFRS 1116 Leases issued on May 22, 2017 is effective for annual periods beginning on or after January 1, 2019, with early adoption permitted. This standard will replace Korean IFRS 1017Leases, Korean IFRS 2104Determining whether an Arrangement contains a Lease, Korean IFRS 2015Operating Leases-Incentives, and Korean IFRS 2027Evaluating the Substance of Transactions Involving the Legal Form of a Lease.
At inception of a contract, the entity shall assess whether the contract is, or contains, a lease. Also, at the date of initial application, the entity shall assess whether the contract is, or contains, a lease in accordance with the standard. However, the entity will not need to reassess all contracts with applying the practical expedient because the entity elected to apply the practical expedient only to contracts entered before the date of initial application.
For a contract that is, or contains, a lease, the entity shall account for each lease component within the contract as a lease separately fromnon-lease components of the contract. A lessee is required to recognize aright-of-use asset representing its right to use the underlying leased asset and a lease liability representing its obligation to make lease payments. The lessee may elect not to apply the requirements to short-term lease (a lease term of 12 months or less at the commencement date) and low value assets (e.g. underlying assets below $ 5,000). In addition, as a practical expedient, the lessee may elect, by class of underlying asset, not to separatenon-lease components from lease components, and instead account for each lease component and any associatednon-lease components as a single lease component.
The classification criteria between a financial lease and an operating lease for a lessor under Korean IFRS 1116 are similar to Korean IFRS 1017.
The Company is currently in process of analyzing the potential impact on its financial statements resulting from the application of Korean IFRS 1116.
2.2 Measurement Basis
The separate financial statements have been prepared under the historical cost convention unless otherwise specified.
9
KB Financial Group Inc.
Notes to Separate Interim Financial Statements
September 30, 2018 and 2017(Unaudited), and December 31, 2017
2.3 Functional and Presentation Currency
Items included in the separate financial statements of the Company are measured using the currency of the primary economic environment in which the Company operates (“the functional currency”). The separate financial statements are presented in Korean won, which is the Company’s functional and presentation currency.
2.4 Critical Accounting Estimates
The preparation of separate financial statements requires the application of accounting policies, certain critical accounting estimates and assumptions that may have a significant impact on the assets (liabilities) and incomes (expenses). Management’s estimates of outcomes may differ from actual outcomes if management’s estimates and assumptions based on management’s best judgment at the reporting date are different from the actual environment.
Estimates and assumptions are continually evaluated and any change in an accounting estimate is recognized prospectively by including it in profit or loss in the period of the change, if the change affects that period only. Alternatively, if the change in accounting estimate affects both the period of change and future periods, that change is recognized in the profit or loss of all those periods.
The significant accounting estimates and assumptions are consistently applied to all periods presented, except for the assumptions for income tax expense.
3. Significant Accounting Policies
The significant accounting policies and calculation methods applied in the preparation of these separate financial statements have been consistently applied to all periods presented, except for the impact of changes due to enactment of new standards, amendments and interpretations disclosed in Note 2.1 and the following paragraph.
3.1 Recognition and Measurement of Financial Instruments
3.1.1 Initial recognition
The Company recognizes a financial asset or a financial liability in its statement of financial position when the Company becomes a party to the contractual provisions of the instrument. A regular way purchase or sale of financial assets (a purchase or sale of a financial asset under a contract whose terms require delivery of the financial instruments within the time frame established generally by market regulation or practice) is recognized and derecognized using trade date accounting.
The Company classifies financial assets as financial assets at fair value through profit or loss, financial assets at fair value through other comprehensive income, or financial assets at amortized cost. The Company classifies financial liabilities as financial liabilities at fair value through profit or loss, or other financial liabilities. The classification depends on the nature and holding purpose of the financial instrument at initial recognition in the separate financial statements.
At initial recognition, a financial asset or financial liability is measured at its fair value plus or minus, in the case of a financial asset or financial liability not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition or issue of the financial asset or financial liability.
10
KB Financial Group Inc.
Notes to Separate Interim Financial Statements
September 30, 2018 and 2017(Unaudited), and December 31, 2017
The fair value is defined as the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s length transaction. The fair value of a financial instrument on initial recognition is normally the transaction price (that is, the fair value of the consideration given or received) in an arm’s length transaction.
3.1.2 Subsequent measurement
After initial recognition, financial instruments are measured at amortized cost or fair value based on classification at initial recognition.
Amortized cost
The amortized cost of a financial asset or financial liability is the amount at which the financial asset or financial liability is measured on initial recognition:
| • | minus the principal repayments |
| • | plus or minus the cumulative amortization using the effective interest method of any difference between that initial amount and the maturity amount |
| • | or any reduction (directly or through the use of an allowance account) due to impairment or uncollectibility |
Fair value
Fair values, which the Company primarily uses for the measurement of financial instruments, are the published price quotations based on market prices or dealer price quotations of financial instruments traded in an active market where available. These are the best evidence of fair value. A financial instrument is regarded as quoted in an active market if quoted prices are readily and regularly available from an exchange, dealer, broker, an entity in the same industry, pricing service or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm’s length basis.
If the market for a financial instrument is not active, fair value is determined either by using a valuation technique or independent third-party valuation service. Valuation techniques include using recent arm’s length market transactions between knowledgeable, willing parties, if available, referencing to the current fair value of another instrument that is substantially the same, discounted cash flow analysis and option pricing models.
The Company uses valuation models that are commonly used by market participants and customized for the Company to determine fair values of commonover-the-counter (OTC) derivatives such as options, interest rate swaps and currency swaps which are based on the inputs observable in markets. For more complex instruments, the Company uses internally developed models, which are usually based on valuation methods and techniques generally used within the industry, or a value measured by an independent external valuation institution as the fair values if all or some of the inputs to the valuation models are not market observable and therefore it is necessary to estimate fair value based on certain assumptions.
11
KB Financial Group Inc.
Notes to Separate Interim Financial Statements
September 30, 2018 and 2017(Unaudited), and December 31, 2017
The Company classifies and discloses fair value of financial instruments into the following three-level hierarchy:
| Level 1: | quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date | |
| Level 2: | inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. | |
| Level 3: | unobservable inputs for the asset or liability. | |
The level in the fair value hierarchy within which the fair value measurement is categorized in its entirety shall be determined on the basis of the lowest level input that is significant to the fair value measurement in its entirety. For this purpose, the significance of an input is assessed against the fair value measurement in its entirety.
If a fair value measurement uses observable inputs that require significant adjustment based on unobservable inputs, that measurement is a Level 3 measurement.
If the valuation technique does not reflect all factors which market participants would consider in setting a price, the fair value is adjusted to reflect those factors. Those factors include counterparty credit risk,bid-ask spread, liquidity risk and others.
The chosen valuation technique makes maximum use of market inputs and relies as little as possible on entity-specific inputs. It incorporates all factors that market participants would consider in setting a price and is consistent with economic methodologies applied for pricing financial instruments. Periodically, the Company calibrates the valuation technique and tests its validity using prices of observable current market transactions of the same instrument or based on other relevant observable market data.
3.1.3 Derecognition
Derecognition is the removal of a previously recognized financial asset or financial liability from the statement of financial position. The Company derecognizes a financial asset or a financial liability when, and only when:
Derecognition of financial assets
Financial assets are derecognized when the contractual rights to the cash flows from the financial assets expire or the financial assets have been transferred and substantially all the risks and rewards of ownership of the financial assets are also transferred, or all the risks and rewards of ownership of the financial assets are neither substantially transferred nor retained and the Company has not retained control. If the Company neither transfers nor disposes of substantially all the risks and rewards of ownership of the financial assets, the Company continues to recognize the financial asset to the extent of its continuing involvement in the financial asset.
If the Company transfers the contractual rights to receive the cash flows of the financial asset, but retains substantially all the risks and rewards of ownership of the financial asset, the Company continues to recognize the transferred asset in its entirety and recognize a financial liability for the consideration received.
12
KB Financial Group Inc.
Notes to Separate Interim Financial Statements
September 30, 2018 and 2017(Unaudited), and December 31, 2017
The Company writes off financial assets in its entirety or to a portion thereof when the principal and interest on the principal amount outstanding are determined to be no longer recoverable. In general, the Company considerswrite-off if significant financial difficulties of the debtor, or delinquency in interest or principal payments is indicated. Thewrite-off decision is made in accordance with internal regulations and may require approval from external institution, if necessary. After thewrite-off, the Company can collect thewritten-off loans continuously according to the internal policy. Recovered amounts of financial assets previouslywritten-off are recognized at profit or loss.
Derecognition of financial liabilities
Financial liabilities are derecognized from the statement of financial position when the obligation specified in the contract is discharged, cancelled or expires.
3.1.4 Offsetting
Financial assets and liabilities are offset and the net amount reported in the separate statements of financial position where there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis or realize the assets and settle the liability simultaneously. The legally enforceable right must not be contingent on future events and must be enforceable in the normal course of business and in the event of default, insolvency or bankruptcy of the Company or the counterparty.
3.2 Cash and Due from Financial Institutions
Cash and due from financial institutions include cash on hand, foreign currency, and short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, and due from financial institutions. Cash and due from financial institutions are measured at amortized cost.
3.3Non-derivative Financial Assets
3.3.1 Financial assets at fair value through profit or loss
Financial assets classified as held for trading, financial assets designated by the Company as at fair value through profit or loss upon initial recognition, and financial assets that are required to be mandatorily measured at fair value through profit or loss are classified as financial assets at fair value through profit or loss.
The Company may designate certain financial assets upon initial recognition as at fair value through profit or loss when the designation eliminates or significantly reduces a measurement or recognition inconsistency (sometimes referred to as ‘an accounting mismatch’) that would otherwise arise from measuring assets or liabilities or recognizing the gains and losses on them on different bases.
After initial recognition, a financial asset at fair value through profit or loss is measured at fair value and gains or losses arising from a change in the fair value are recognized in profit or loss. Interest income and dividend income from financial assets at fair value through profit or loss are also recognized in the statement of comprehensive income.
13
KB Financial Group Inc.
Notes to Separate Interim Financial Statements
September 30, 2018 and 2017(Unaudited), and December 31, 2017
3.3.2 Financial assets at fair value through other comprehensive income
The Company classifies below financial assets as financial assets at fair value through other comprehensive income;
| • | debt instruments with a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets, and consistent with representing solely payments of principal and interest on the principal amount outstanding or; |
| • | equity instruments, not held for trading with the objective of generating a profit from short-term fluctuations in price or dealer’s margin, designated as financial assets at fair value through other comprehensive income |
After initial recognition, a financial asset at fair value through other comprehensive income is measured at fair value. Gain and loss from changes in fair value, other than dividend income and interest income amortized using effective interest method and exchange differences arising on monetary items which are recognized directly in income as interest income or expense, are recognized as other comprehensive income in equity.
At disposal of financial assets at fair value through other comprehensive income, cumulative gain or loss is recognized as profit or loss for the reporting period. However, cumulative gain or loss of equity instrument designated as fair value through other comprehensive income are not recycled to profit or loss at disposal.
Financial assets at fair value through other comprehensive income denominated in foreign currencies are translated at the closing rate. Exchange differences resulting from changes in amortized cost are recognized in profit or loss, and other changes are recognized as equity.
3.3.3 Financial assets measured at amortized cost
A financial asset, which are held within the business model whose objective is to hold assets in order to collect contractual cash flows and consistent with representing solely payments of principal and interest on the principal amount outstanding, are classified as a financial asset at amortized cost.
Financial assets at amortized cost are subsequently measured at amortized cost using the effective interest method after initial recognition and interest income is recognized using the effective interest method.
3.4 Expected Credit Loss of Financial Assets (Debt Instruments)
The Company measures expected credit loss and recognizes loss allowance at the end of the reporting period for financial assets measured at amortized cost and fair value through other comprehensive income with the exception of financial asset measured at fair value through profit or loss.
Expected credit losses are a probability-weighted estimate of credit losses (i.e. the present value of all cash shortfalls) over the expected life of the financial instrument. The Company measures expected credit losses by reflecting reasonable and supportable information that is reasonably available at the reporting date without undue cost or effort, including information about past events, current conditions and forecasts of future economic conditions.
14
KB Financial Group Inc.
Notes to Separate Interim Financial Statements
September 30, 2018 and 2017(Unaudited), and December 31, 2017
The Company uses the following three measurement techniques in accordance with Korean IFRS:
| • | General approach: for financial assets andoff-balance-sheet unused credit line that are not applied below two approaches |
| • | Simplified approach: for receivables, contract assets and lease receivables |
| • | Credit-impaired approach: for purchased or originated credit-impaired financial assets |
Different measurement approaches are applied depending on significant increase in credit risk. 12 month expected credit losses is recognized when credit risk has not significantly increased since initial recognition. A loss allowance at an amount equal to lifetime expected credit losses is recognized when credit risk has significantly increased since initial recognition. Lifetime is presumed to be a period to the contractual maturity date of a financial asset (the expected life of the financial asset.
One or more of the following items is deemed significant increase in credit risk. When the contractual cash flows of a financial asset are renegotiated or otherwise modified, the Company determines whether the credit risk has increased significantly since initial recognition using the following information.
| • | more than 30 days past due; |
| • | decline in credit rating at period end by more than certain notches as compared to that at initial recognition; |
| • | debt restructuring (except for impaired financial assets); and |
| • | credit delinquency information on Korea Federation of Banks, and etc. |
Under simplified approach, the Company shall always measure the loss allowance at an amount equal to lifetime expected credit losses. Under credit-impaired approach, the Company shall only recognize the cumulative changes in lifetime expected credit losses since initial recognition as a loss allowance for purchased or originated credit-impaired financial assets. In assessing credit impairment, the Company uses definition of default as in the new Basel Accord which rules calculation of Capital Adequacy Ratio.
The Company generally deems one or more of the following items credit-impaired:
| • | no less than 90 days past due; |
| • | legal proceedings related to collection; |
| • | a borrower that has received a warning from the Korea Federation of banks; |
| • | corporate borrowers that are rated C or D; |
| • | debt restructuring. |
15
KB Financial Group Inc.
Notes to Separate Interim Financial Statements
September 30, 2018 and 2017(Unaudited), and December 31, 2017
3.4.1 Forward-looking information
The Company uses forward-looking information, when it determines whether the credit risk has increased significantly since initial recognition and measures expected credit losses.
The Company assumes the risk component has a certain correlation with the business cycle, and calculates the expected credit loss by reflecting the forward-looking information with macroeconomic variables on the measurement inputs.
Forward looking information used in calculation of expected credit loss is derived by KB Financial Group Research Institute after comprehensive consideration of a variety of factors including scenario in management planning, third party forecast, and others.
3.4.2 Measuring expected credit losses on financial assets at amortized cost
The amount of the loss on financial assets at amortized cost is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the financial asset’s original effective interest rate.
The Company estimates expected future cash flows for financial assets that are individually significant (individual assessment of impairment).
For financial assets that are not individually significant, the Company collectively estimates expected credit loss by grouping loans with homogeneous credit risk profile (collective assessment of impairment).
Individual assessment of impairment
Individual assessment of impairment losses are calculated using management’s best estimate on present value of expected future cashflows. The Company uses all the available information including operating cash flow of the borrower and net realizable value of any collateral held.
Collective assessment of impairment
Collective assessment of loss allowance involves historical loss experience along with incorporation of forward-looking information. Such process incorporates factors such as type of collateral, product and borrowers, credit rating, size of portfolio and recovery period and applies probability of default on a group of assets and loss given default by type of recovery method. Also, the expected credit loss model involves certain assumption to determine input based on loss experience and forward-looking information. These models and assumptions are periodically reviewed to reduce gap between loss estimate and actual loss experience.
Lifetime expected credit loss as at the end of the reporting period is calculated by product of carrying amount net of expected repayment, Probability of Default (PD) for each period and Loss Given Default (LGD) adjusted by change in carrying amount.
16
KB Financial Group Inc.
Notes to Separate Interim Financial Statements
September 30, 2018 and 2017(Unaudited), and December 31, 2017
3.4.3 Measuring expected credit losses on financial assets at fair value through other comprehensive income
Measuring method of expected credit losses on financial assets at fair value through other comprehensive income is equal to the method of financial assets at amortized cost, except for changes in loss allowances that are recognized as other comprehensive income. Amounts recognized in other comprehensive income for sale or repayment of financial assets at fair value through other comprehensive income are reclassified to profit or loss.
3.5 Revenue Recognition
The Company recognizes revenues in accordance with the following revenue recognition standard:
| • | Step 1: Identify the contract with a customer. |
| • | Step 2: Identify the performance obligations in the contract. |
| • | Step 3: Determine the transaction price. |
| • | Step 4: Allocate the transaction price to the performance obligations in the contract. |
| • | Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation. |
3.5.1 Interest income and expense
Interest income of financial assets at amortized cost and financial assets at fair value through other comprehensive income, and expense are recognized in statements of comprehensive income using the effective interest method. The effective interest method is a method of calculating the amortized cost of a financial asset or a financial liability (or groups of financial assets or financial liabilities) and of allocating the interest income or interest expense over the relevant period.
The effective interest rate is the rate that exactly discounts estimated future cash receipts or payments through the expected life of the financial instrument or, where appropriate, a shorter period, to the net carrying amount of the financial asset or financial liability. When calculating the effective interest rate, the Company estimates cash flows considering all contractual terms of the financial instrument but does not consider future credit losses. The calculation includes all fees and points paid (main components of effective interest rates only) or received between parties to the contract that are an integral part of the effective interest rate, transaction costs, and all other premiums or discounts. In those rare cases when it is not possible to estimate reliably the cash flows or the expected life of a financial instrument (or group of financial instruments), the Company uses the contractual cash flows over the full contractual term of the financial instrument (or group of financial instruments).
Interest on impaired financial assets is recognized using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss.
Interest earned arising from debt investments at fair value through profit or loss is also classified as interest income in statements of comprehensive income.
17
KB Financial Group Inc.
Notes to Separate Interim Financial Statements
September 30, 2018 and 2017(Unaudited), and December 31, 2017
3.5.2 Fee and commission income
The Company recognizes financial service fees in accordance with the accounting standard of the financial instrument related to the fees earned.
Fees that are an integral part of the effective interest of a financial instrument
Such fees are generally treated as adjustments of effective interest. Such fees may include compensation for activities such as evaluating the borrower’s financial condition, evaluating and recording guarantees, collateral and other security arrangements, negotiating the terms of the instrument, preparing and processing documents and closing the transaction and origination fees received on issuing financial liabilities measured at amortized cost. However, fees relating to the creation or acquisition of a financial instrument at fair value through profit or loss are recognized as revenue immediately.
Fees earned as services are provided
Such fees are recognized as revenue as the services are provided. Fees which can be earned through the certain periods, including account servicing fees, investment management fees, and etc, are recognized when the related services are provided.
Fees that are earned on the execution of a significant act
Such fees are recognized as revenue when the significant act has been completed.
3.5.3 Net gains/losses on financial instruments at fair value through profit or loss
Net gains/losses on financial instruments at fair value through profit or loss include profit or loss (changes in fair value, dividends, and gain/loss from foreign currency translation) from following financial instruments:
| • | Gain or loss from financial instruments at fair value through profit or loss |
| • | Gain or loss from derivatives for trading, including derivatives for hedging that does not meet the condition of hedge accounting |
3.5.4 Dividend income
Dividend income is recognized in profit or loss when the right to receive payment is established. Dividend income is recognized as relevant items on statements of profit or loss and other comprehensive income in accordance with the classification of equity instruments.
3.6 Income Tax Expense for the Interim Period
Income tax expense for the interim period is measured by expected average annual income tax rate applicable on expected total annual income.
18
KB Financial Group Inc.
Notes to Separate Interim Financial Statements
September 30, 2018 and 2017(Unaudited), and December 31, 2017
4. Financial Risk Management
4.1 Summary
4.1.1 Overview of financial risk management policy
The financial risks that the Company is exposed to are credit risk, market risk, liquidity risk and others.
The note regarding financial risk management provides information about the risks that the Company is exposed to, including the objectives, policies, assessment and management process of risks. Additional quantitative information is disclosed throughout the separate financial statements.
The Company’s risk management system focuses on increasing transparency, developing the risk management environment, and the preemptive response to risk due to rapid changes in the financial environment to support the Company’s long-term strategy and business decisions efficiently. Credit risk, market risk and liquidity risk have been recognized as the Company’s key risks. These risks are measured and managed in Internal Capital or VaR (Value at Risk) using a statistical method.
4.1.2 Risk management organization
Risk Management Committee
The Risk Management Committee establishes risk management strategies in accordance with the directives of the Board of Directors and determines the Company’s target risk appetite. The committee approves significant risk matters and reviews the level of risks that the Company is exposed to and the appropriateness of the Company’s risk management operations as an ultimate decision-making authority.
Risk Management Council
The Risk Management Council is a consultative group which reviews and makes decisions on matters delegated by the Risk Management Committee, and discusses the detailed issues relating to the Company’s risk management.
Risk Management Division
The Risk Management Division is responsible for conducting detailed policies, procedures and working processes relating to the Company’s risk management.
4.2 Credit Risk
4.2.1 Overview of credit risk
Credit risk is the risk of possible losses in an asset portfolio in the event of counterparty’s default, breach of contract and deterioration in the credit quality of the counterparty. For risk management reporting purposes, the individual borrower’s default risk is considered.
19
KB Financial Group Inc.
Notes to Separate Interim Financial Statements
September 30, 2018 and 2017(Unaudited), and December 31, 2017
4.2.2 Credit risk management
The Company measures expected losses on assets that are subject to credit risk management and uses it as a management indicator.
4.2.3 Maximum exposure to credit risk
The Company’s maximum exposures of financial instruments to credit risk without consideration of collateral values as of September 30, 2018 and December 31, 2017, are as follows:
| (In millions of Korean won) | September 30, 2018 | |||
Due from financial institutions | ||||
Loans at amortized cost | 50,000 | |||
Other financial assets | 21,193 | |||
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| (In millions of Korean won) | December 31, 2017 | |||
Due from financial institutions | ||||
Loans | 10,000 | |||
Other financial assets | 16,207 | |||
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4.2.4 Credit risk of loans
The Company maintains an allowance for loan losses associated with credit risk on loans to manage its credit risk.
The Company assesses expected credit loss on financial asset at amortized cost and financial asset at fair value through other comprehensive income other than financial asset at fair value through profit or loss and recognizes loss allowance. Expected credit losses are a probability-weighted estimate of possible credit losses within certain range by reflecting reasonable and supportable information that is reasonably available at the reporting date without undue cost or effort, including information about past events, current conditions and forecasts of future economic conditions. For financial assets at amortized cost, the Company measures the expected credit losses and presents it in the financial statements netting the allowance from the related loans; for financial assets measured at fair value through other comprehensive income, the Company presents it in the statements using other comprehensive income.
Loans as of September 30, 2018 are classified as follows:
(In millions of Korean won)
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| The financial instruments applying 12-month expected credit losses | The financial instruments applying lifetime expected credit losses | Financial instruments applying credit loss model | Financial instruments not applying expected credit losses | Total | ||||||||||||||||||||
| Non-impaired | Impaired | |||||||||||||||||||||||
Financial assets at amortized cost |
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20
KB Financial Group Inc.
Notes to Separate Interim Financial Statements
September 30, 2018 and 2017(Unaudited), and December 31, 2017
Credit quality of loan is graded according to the probability of default:
Range of PD (%) (Probability of Default) | ||
Grade 1 | 0.0 ~ 1.0 | |
Grade 2 | 1.0 ~ 5.0 | |
Grade 3 | 5.0 ~ 15.0 | |
Grade 4 | 15.0 ~ 30.0 | |
Grade 5 | 30.0 ~ |
Loans as of December 31, 2017 are classified as follows:
| (In millions of Korean won) | December 31, 2017 | |||||||
Corporate loans | Percentage (%) | |||||||
Loans | ||||||||
Neither past due nor impaired | 100.00 | |||||||
Past due but not impaired | — | — | ||||||
Impaired | — | — | ||||||
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Credit quality of loans that are neither past due nor impaired are as follows:
| Corporate Loans | ||||
| (In millions of Korean won) | December 31, 2017 | |||
Grade 1 | ||||
Grade 2 | — | |||
Grade 3 | — | |||
Grade 4 | — | |||
Grade 5 | — | |||
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Credit quality of loan is graded according to the probability of default:
Range of PD (%) (Probability of Default) | ||
Grade 1 | 0.0 ~ 1.0 | |
Grade 2 | 1.0 ~ 5.0 | |
Grade 3 | 5.0 ~ 15.0 | |
Grade 4 | 15.0 ~ 30.0 | |
Grade 5 | 30.0 ~ |
21
KB Financial Group Inc.
Notes to Separate Interim Financial Statements
September 30, 2018 and 2017(Unaudited), and December 31, 2017
4.2.5 Credit risk of due from financial institutions
Due from Financial Institutions as of September 30, 2018 are classified as follows:
| (In millions of Korean won) | September 30, 2018 | |||||||||||||||||||||||
| The financial instruments applying 12-month expected credit losses | The financial instruments applying lifetime expected credit losses | Financial instruments applying credit loss model | Financial instruments not applying expected credit losses | Total | ||||||||||||||||||||
| Non-impaired | Impaired | |||||||||||||||||||||||
Due from financial institutions at amortized cost |
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Grade 4 | — | — | — | — | — | — | ||||||||||||||||||
Grade 5 | — | — | — | — | — | — | ||||||||||||||||||
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4.2.6 Credit risk concentration analysis
Details of the Company’s loans by country as of September 30, 2018 and December 31, 2017, are as follows:
| (In millions of Korean won) | September 30, 2018 | |||||||||||||||
| Corporate loans | % | Allowances | Carrying amount | |||||||||||||
Korea | 100.00 | |||||||||||||||
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| (In millions of Korean won) | December 31, 2017 | |||||||||||||||
| Corporate loans | % | Allowances | Carrying amount | |||||||||||||
Korea | 100.00 | |||||||||||||||
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Details of the Company’s corporate loans by industry as of September 30, 2018 and December 31, 2017, are as follows:
| (In millions of Korean won) | September 30, 2018 | |||||||||||||||
| Loans | % | Allowances | Carrying amount | |||||||||||||
Financial institutions | 100.00 | |||||||||||||||
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| (In millions of Korean won) | December 31, 2017 | |||||||||||||||
| Loans | % | Allowances | Carrying amount | |||||||||||||
Financial institutions | 100.00 | |||||||||||||||
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22
KB Financial Group Inc.
Notes to Separate Interim Financial Statements
September 30, 2018 and 2017(Unaudited), and December 31, 2017
Details of the Company’s due from financial institutions by industry as of September 30, 2018 is as follows:
| (In millions of Korean won) | September 30, 2018 | |||||||||||||||
| Amount | % | Allowances | Carrying amount | |||||||||||||
Financial institutions | 100.00 | |||||||||||||||
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Details of the Company’s due from financial institutions by country as of September 30, 2018 is as follows:
| (In millions of Korean won) | September 30, 2018 | |||||||||||||||
| Amount | % | Allowances | Carrying amount | |||||||||||||
Korea | 100.00 | |||||||||||||||
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4.3 Liquidity Risk
4.3.1 Overview of liquidity risk
Liquidity risk is a risk that the Company becomes insolvent due to uncertain liquidity caused by unexpected cash outflows, or a risk of borrowing high interest debts or disposal of liquid and other assets at a substantial discount. The Company manages its liquidity risk through analysis of the contractual maturity of interest-bearing assets and liabilities. The Company discloses them by maturity group; such as, on demand, up to one month, between over one month and three months, between over three months and 12 months, between over one year and five years, and over five years.
Cash flows disclosed for the maturity analysis are undiscounted contractual principal and interest to be received (paid) and; thus, are not identical to the amount in the financial statements that are based on the present value of expected cash flows in some cases. The amount of interest to be received or paid on floating rate assets and liabilities is measured on the assumption that the current interest rate would be the same through the maturity.
4.3.2. Liquidity risk management
The liquidity risk is managed by liquidity management principles and related guidelines which are applied to the risk management policies and procedures that address all the possible risks that arise from the overall business of the Company.
23
KB Financial Group Inc.
Notes to Separate Interim Financial Statements
September 30, 2018 and 2017(Unaudited), and December 31, 2017
4.3.3. Analysis of remaining contractual maturity of financial assets and liabilities
The remaining contractual maturity of financial assets and liabilities as of September 30, 2018 and December 31, 2017, are as follows:
| (In millions of Korean won) | September 30, 2018 | |||||||||||||||||||||||||||
| On demand | Up to 1 month | 1-3 months | 3-12 months | 1-5 years | Over 5 years | Total | ||||||||||||||||||||||
Financial assets | ||||||||||||||||||||||||||||
Cash and due from financial institutions1 | ||||||||||||||||||||||||||||
Financial assets at fair value through profit or loss2 | — | — | — | — | — | 288,157 | 288,157 | |||||||||||||||||||||
Loans at amortized cost | — | — | — | 51,075 | — | — | 51,075 | |||||||||||||||||||||
Other financial assets | — | 5,141 | — | 15,064 | — | — | 20,205 | |||||||||||||||||||||
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Financial liabilities | ||||||||||||||||||||||||||||
Debentures | ||||||||||||||||||||||||||||
Other financial liabilities | — | 5,303 | 1,952 | 3,092 | — | — | 10,347 | |||||||||||||||||||||
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| (In millions of Korean won) | December 31, 2017 | |||||||||||||||||||||||||||
| On demand | Up to 1 month | 1-3 months | 3-12 months | 1-5 years | Over 5 years | Total | ||||||||||||||||||||||
Financial assets | ||||||||||||||||||||||||||||
Cash and due from financial institutions1 | ||||||||||||||||||||||||||||
Financial assets designated at fair value through profit or loss2 | — | — | — | — | — | 284,485 | 284,485 | |||||||||||||||||||||
Loans | — | — | — | 10,096 | — | — | 10,096 | |||||||||||||||||||||
Other financial assets | — | 795 | — | 14,699 | — | — | 15,494 | |||||||||||||||||||||
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Debts | ||||||||||||||||||||||||||||
Debentures | — | 2,726 | 24,121 | 767,259 | 3,592,586 | 1,192,247 | 5,578,939 | |||||||||||||||||||||
Other financial liabilities | — | 19,942 | — | — | — | — | 19,942 | |||||||||||||||||||||
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| 1 | The amount of |
| 2 | Financial assets at fair value through profit or loss and financial assets designated at fair value through profit or loss are hybrid capital instruments and are included in the ‘Over 5 years’ category according to their remaining contractual maturity because the assets’ point of sale is uncertain. |
24
KB Financial Group Inc.
Notes to Separate Interim Financial Statements
September 30, 2018 and 2017(Unaudited), and December 31, 2017
4.4 Market Risk
4.4.1 Concept
Market risk is the risk of possible losses which arise from changes in market factors; such as, interest rate, stock price, foreign exchange rate and other market factors that affect the fair value of future cash flows of financial instruments. The most significant risk of the Company is interest rate risk.
4.4.2 Interest rate risk
Definition of interest rate risk
Interest rate risk is the risk that the fair value of items in the statement of financial position and cash flaws relating to interest income and interest cost incurred from investing and financing activities change due to interest rate fluctuation.
Observation method and management indicator on interest rate risk
The main objective of interest rate risk management is to protect asset values against interest rate fluctuations. The Company manages the risk through measurement and management of Value at Risk for the interest rate.
25
KB Financial Group Inc.
Notes to Separate Interim Financial Statements
September 30, 2018 and 2017(Unaudited), and December 31, 2017
5. Financial Assets and Financial Liabilities
5.1 Classification and Fair value of Financial Instruments
The carrying amounts and fair value of financial assets and liabilities by category as of September 30, 2018 and December 31, 2017, are as follows:
(In millions of Korean won) | September 30, 2018 | |||||||
| Carrying amount | Fair value | |||||||
Financial assets | ||||||||
Financial assets at fair value through profit or loss | ||||||||
Financial assets at amortized cost | ||||||||
Due from financial institutions | 211,265 | 211,265 | ||||||
Loans | 50,000 | 50,000 | ||||||
Other financial assets | 21,193 | 21,193 | ||||||
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Financial liabilities | ||||||||
Financial liabilities at amortized cost | ||||||||
Debentures | ||||||||
Other financial liabilities | 22,285 | 22,285 | ||||||
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| (In millions of Korean won) | December 31, 2017 | |||||||
| Carrying amount | Fair value | |||||||
Financial assets | ||||||||
Financial assets designated at fair value through profit or loss | ||||||||
Loans and receivables | ||||||||
Due from financial institutions | 245,400 | 245,400 | ||||||
Loans | 10,000 | 10,000 | ||||||
Other financial assets | 16,207 | 16,207 | ||||||
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Financial liabilities at amortized cost | ||||||||
Debts | ||||||||
Debentures | 5,162,600 | 5,094,561 | ||||||
Other financial liabilities | 29,963 | 29,963 | ||||||
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Fair value is the amount for which an asset could be exchanged, or a liability could be settled, between knowledgeable, willing parties in an arm’s length transaction. For each class of financial assets and financial liabilities, the Company discloses the fair value of that class of assets and liabilities in a way that permits it to be compared with its carrying amount at the end of each reporting period. The best evidence of fair value of financial instruments is quoted price in an active market.
Methods of determining fair value of financial instruments are as follows:
26
KB Financial Group Inc.
Notes to Separate Interim Financial Statements
September 30, 2018 and 2017(Unaudited), and December 31, 2017
Cash and due from financial institutions | The carrying amounts of cash and demand due from financial institutions and payment due from financial institutions are a reasonable approximation of fair values. These financial instruments do not have a fixed maturity and are receivable on demand. Fair value of ordinary due from financial institutions is measured using DCF model. | |
| Investment securities | The fair value of financial instruments that are quoted in active markets is determined using the quoted prices. Fair value is determined through the use of external professional valuation institution where quoted prices are not available. The institutions use one or more of the following valuation techniques including DCF Model, Free Cash Flow to Equity Model, Imputed Market Value Model, Dividend Discount Model, Risk Adjusted Discount Rate Method, and Net Asset Value Method. | |
| Derivatives | For exchange traded derivatives, quoted price in an active market is used to determine fair value and for OTC derivatives, fair value is determined using valuation techniques. The Company uses internally developed valuation models that are widely used by market participants to determine fair values of plain vanilla OTC derivatives including options, interest rate swaps, and currency swaps, based on observable market parameters. However, some complex financial instruments are valued using appropriate models developed from generally accepted market valuation models including the Finite Difference Method and the Monte Carlo Simulation or valuation results from independent external professional valuation institution. | |
| Loans at amortized cost | DCF model is used to determine the fair value of loans. Fair value is determined by discounting the expected cash flows, which are contractual cash flows adjusted by the expected prepayment rate, at appropriate discount rate. | |
| Debts | Carrying amount of overdraft in foreign currency is regarded as representative of fair value because they do not have a fixed maturity and are payable on demand. Fair value of other debts is determined using a DCF model discounting contractual future cash flows at an appropriate discount rate. | |
| Debentures | Fair value is determined by using the valuations of external professional valuation institution, which are calculated using market inputs. | |
| Other financial assets and liabilities | The carrying amounts are reasonable approximation of fair values. These financial instruments are temporary accounts used for other various transactions and their maturities are relatively short or not defined. | |
Fair value hierarchy
The Company believes that valuation methods used for measuring the fair values of financial instruments are reasonable and that the fair values recognized in the statements of financial position are appropriate. However, the fair values of the financial instruments recognized in the statements of financial position may be different if other valuation methods or assumptions are used. Additionally, as there is a variety of valuation techniques and assumptions used in measuring fair value, it may be difficult to reasonably compare the fair value with that of other financial institutions.
27
KB Financial Group Inc.
Notes to Separate Interim Financial Statements
September 30, 2018 and 2017(Unaudited), and December 31, 2017
The Company classifies and discloses fair value of the financial instruments into the three-level hierarchy as follows:
Level 1: The fair values are based on quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date.
Level 2: The fair values are based on inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.
Level 3: The fair values are based on unobservable inputs for the asset or liability.
The level in the fair value hierarchy within which the fair value measurement is categorized in its entirety shall be determined on the basis of the lowest level input that is significant to the fair value measurement in its entirety. For this purpose, the significance of an input is assessed against the fair value measurement in its entirety. If a fair value measurement uses observable inputs that require significant adjustment based on unobservable inputs, that measurement is a Level 3 measurement.
Fair value hierarchy of financial assets and liabilities measured at fair value in the statements of financial position
The fair value hierarchy of financial assets measured at fair value in the statement of financial position as of September 30, 2018 and December 31, 2017, is as follows:
| (In millions of Korean won) | September 30, 2018 | |||||||||||||||
| Fair value hierarchy | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Financial assets | ||||||||||||||||
Financial assets at fair value through profit or loss | ||||||||||||||||
Derivative-linked securities | ||||||||||||||||
| (In millions of Korean won) | December 31, 2017 | |||||||||||||||
| Fair value hierarchy | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Financial assets | ||||||||||||||||
Financial assets designated at fair value through profit or loss | ||||||||||||||||
Derivative-linked securities | ||||||||||||||||
28
KB Financial Group Inc.
Notes to Separate Interim Financial Statements
September 30, 2018 and 2017(Unaudited), and December 31, 2017
Fair value hierarchy of financial assets and liabilities whose fair values are disclosed
The fair value hierarchy of financial assets and liabilities whose fair values are disclosed as of September 30, 2018 and December 31, 2017, is as follows:
| (In millions of Korean won) | September 30, 2018 | |||||||||||||||
| Fair value hierarchy | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Financial assets | ||||||||||||||||
Cash and due from financial institutions1 | ||||||||||||||||
Loans at amortized cost2 | — | — | 50,000 | 50,000 | ||||||||||||
Other financial assets3 | — | — | 21,193 | 21,193 | ||||||||||||
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Debentures | ||||||||||||||||
Other financial liabilities3 | — | — | 22,285 | 22,285 | ||||||||||||
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| (In millions of Korean won) | December 31, 2017 | |||||||||||||||
| Fair value hierarchy | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Financial assets | ||||||||||||||||
Cash and due from financial institutions1 | ||||||||||||||||
Loans2 | — | — | 10,000 | 10,000 | ||||||||||||
Other financial assets3 | — | — | 16,207 | 16,207 | ||||||||||||
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Debts4 | ||||||||||||||||
Debentures | — | 5,094,561 | — | 5,094,561 | ||||||||||||
Other financial liabilities3 | — | — | 29,963 | 29,963 | ||||||||||||
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| 1 | Because due from financial institutions classified as level 2 are deposits on demand, carrying amounts are reasonable approximations of fair values. And due from financial institutions classified as level 3 are due from financial institutions with residual maturity of less than 3 months, carrying amounts are reasonable approximations of fair values. |
| 2 | Because loans at amortized cost and loans classified as level 3 are loans with residual maturity of less than one year, carrying amounts are reasonable approximations of fair values. |
| 3 | For other financial assets and other financial liabilities classified as level 3, carrying amounts are reasonable approximations of fair values. |
| 4 | For debts classified as level 2, carrying amounts are reasonable approximations of fair values. |
29
KB Financial Group Inc.
Notes to Separate Interim Financial Statements
September 30, 2018 and 2017(Unaudited), and December 31, 2017
Valuation techniques and inputs used in the fair value measurement
For financial assets and liabilities whose carrying amount is a reasonable approximation of fair value, we do not disclose valuation techniques and inputs.
Valuation techniques and inputs of financial assets and liabilities whose fair values are disclosed and classified as Level 2 as of September 30, 2018 and December 31, 2017, are as follows:
| (In millions of Korean won) | Fair value | Valuation Techniques | Inputs | |||||||||||||
| September 30, 2018 | December 31, 2017 | |||||||||||||||
Financial liabilities | ||||||||||||||||
Debentures | DCF model | Discount rate | ||||||||||||||
5.2 Level 3 of the Fair Value Hierarchy Disclosure
5.2.1 Valuation policy and process for fair value measurement categorized as Level 3
The Company uses external, independent and qualified professional valuer’s valuation to determine the fair value of the Company’s assets at the end of every reporting period.
5.2.2 Changes in fair value (Level 3) measured using valuation technique based on assumption that is unobservable in the market
Details of changes in Level 3 of the fair value hierarchy for the nine-month periods ended September 30, 2018 and 2017, are as follows:
| (In millions of Korean won) | 2018 | |||
| Financial assets at fair value through profit or loss | ||||
Beginning balance | ||||
Total gains or losses | ||||
- Profit or loss for the period | 3,672 | |||
- Other comprehensive income | — | |||
Purchases | — | |||
Sales | — | |||
Issues | — | |||
Settlements | — | |||
Transfers into Level 3 | — | |||
Transfers out of Level 3 | — | |||
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| (In millions of Korean won) | 2017 | |||
| Financial assets designated at fair value through profit or loss | ||||
Beginning balance | ||||
Total gains or losses | ||||
- Profit or loss for the period | (5,706 | ) | ||
- Other comprehensive income | — | |||
Purchases | 50,000 | |||
Sales | — | |||
Issues | — | |||
Settlements | — | |||
Transfers into Level 3 | — | |||
Transfers out of Level 3 | — | |||
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30
KB Financial Group Inc.
Notes to Separate Interim Financial Statements
September 30, 2018 and 2017(Unaudited), and December 31, 2017
In relation to changes in Level 3 of the fair value hierarchy, total gains or losses recognized in profit or loss for the period, and profit or loss from financial instruments held at the end of the reporting period in the statement of comprehensive income for the nine-month periods ended September 30, 2018 and 2017, are as follows:
| (In millions of Korean won) | 2018 | |||||||||||
Gains (losses) from financial investments at | Other operating income | Net interest income | ||||||||||
Total gains or losses included in profit or loss for the period | ||||||||||||
Total gains or losses for the period included in profit or loss for financial instruments held at the end of the reporting period | ||||||||||||
| (In millions of Korean won) | 2017 | |||||||||||
Gains (losses) from financial investments at fair value through profit or loss | Other operating income | Net interest income | ||||||||||
Total gains or losses included in profit or loss for the period | ||||||||||||
Total gains or losses for the period included in profit or loss for financial instruments held at the end of the reporting period | ||||||||||||
31
KB Financial Group Inc.
Notes to Separate Interim Financial Statements
September 30, 2018 and 2017(Unaudited), and December 31, 2017
5.2.3 Sensitivity analysis of changes in unobservable inputs
Information about fair value measurements using unobservable inputs as of September 30, 2018 and December 31, 2017, are as follows:
| (In millions of Korean won) | September 30, 2018 | |||||||||||
| Fair value | Valuation technique | Unobservable inputs | Range of unobservable inputs (%) | Relationship of unobservable inputs to fair value | ||||||||
Financial assets | ||||||||||||
Financial assets at fair value through profit or loss | ||||||||||||
Derivative-linked securities | Hull and White Model, | Discount rate | 2.32~5.03 | The lower the discount rate, the higher the fair value | ||||||||
| Monte Carlo Simulation | Volatility of interest rate | 0.48 | The higher the volatility, the higher the fair value fluctuation | |||||||||
| (In millions of Korean won) | December 31, 2017 | |||||||||||||
| Fair value | Valuation technique | Unobservable inputs | Range of unobservable inputs (%) | Relationship of unobservable inputs to fair value | ||||||||||
Financial assets | ||||||||||||||
Financial assets designated at fair value through profit or loss | ||||||||||||||
Derivative-linked securities | Hull and White Model, | Discount rate | 2.44 ~ 5.10 | The lower the discount rate, the higher the fair value | ||||||||||
| Monte Carlo Simulation, DCF Model | Volatility of interest rate | 0.50 | The higher the volatility, the higher the fair value fluctuation | |||||||||||
Sensitivity analysis of changes in unobservable inputs
Sensitivity analysis of financial instruments is performed to measure favorable and unfavorable changes in the fair value of financial instruments which are affected by the unobservable parameters, using a statistical technique. When the fair value is affected by more than two input parameters, the amounts represent the most favorable or most unfavorable outcome. There are derivative-linked securities whose fair value changes are recognized in profit or loss.
32
KB Financial Group Inc.
Notes to Separate Interim Financial Statements
September 30, 2018 and 2017(Unaudited), and December 31, 2017
The results of the sensitivity analysis from changes in inputs are as follows:
| (In millions of Korean won) | September 30, 2018 | |||||||||||||||
| Recognition in profit or loss | Other comprehensive income | |||||||||||||||
| Favorable changes | Unfavorable changes | Favorable changes | Unfavorable changes | |||||||||||||
Financial assets | ||||||||||||||||
Financial assets at fair value through profit or loss | ||||||||||||||||
Derivative-linked securities1 | ||||||||||||||||
| (In millions of Korean won) | December 31, 2017 | |||||||||||||||
| Recognition in profit or loss | Other comprehensive income | |||||||||||||||
| Favorable changes | Unfavorable changes | Favorable changes | Unfavorable changes | |||||||||||||
Financial assets | ||||||||||||||||
Financial assets designated at fair value through profit or loss | ||||||||||||||||
Derivative-linked securities1 | ||||||||||||||||
| 1 | For equity securities,the changes in fair value are calculated by shifting principal unobservable input parameters; such as, discount rate, the correlation of rates of long-term interest rate and short-term interest rate, or the volatility of the interest rate is shifted by ± 1%. |
6. Due from Financial Institution
Details of due from financial institution as of September 30, 2018 and December 31, 2017, are as follows:
| (In millions of Korean won) | Financial Institution | Interest rate (%) (As of September 30, 2018) | September 30, 2018 | December 31, 2017 | ||||||||||||||||
Due from financial institution in Korean won | | Due from banks | | | Kookmin Bank | | 0.00 ~ 1.65 | |||||||||||||
| | Standard Chartered Bank | | 1.30 | 623 | 60,694 | |||||||||||||||
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| | BNK Busan Bank | | — | — | 138,644 | |||||||||||||||
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33
KB Financial Group Inc.
Notes to Separate Interim Financial Statements
September 30, 2018 and 2017(Unaudited), and December 31, 2017
Details of a maturity analysis of due from financial institution, excluding restricted cash, as of September 30, 2018 and December 31, 2017, are as follows:
| (In millions of Korean won) | September 30, 2018 | |||||||||||||||||||||||
Up to 3 months | 3~6 months | 6~12 months | 1~3 years | Over 3 years | Total | |||||||||||||||||||
Due from financial institution in Korean won | ||||||||||||||||||||||||
| (In millions of Korean won) | December 31, 2017 | |||||||||||||||||||||||
Up to 3 months | 3~6 months | 6~12 months | 1~3 years | Over 3 years | Total | |||||||||||||||||||
Due from financial institution in Korean won | ||||||||||||||||||||||||
Restricted cash from financial institution as of September 30, 2018 and December 31, 2017, are as follows:
| (In millions of Korean won) | Financial Institution | September 30, 2018 | December 31, 2017 | Reason for restriction | ||||||||||||
Due from financial institution in Korean won | | Kookmin Bank |
| | Pledged as collateral for the overdraft establishment | | ||||||||||
7. Financial assets at fair value through profit or loss and financial assets at fair value through profit or loss (under Korean IFRS 1039)
Details of financial assets at fair value through profit or loss and financial assets at fair value through profit or loss (under Korean IFRS 1039) as of September 30, 2018 and December 31, 2017, are as follows:
| (In millions of Korean won) | September 30, 2018 | December 31, 2017 | ||||||
Financial Assets at Fair Value through Profit or Loss and Financial Assets at Fair Value through Profit or Loss (under Korean IFRS 1039) |
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Derivative-linked securities | ||||||||
8. Loans at Amortized Cost
Details of loans at amortized cost as of September 30, 2018 and December 31, 2017, are as follows:
| (In millions of Korean won) | September 30, 2018 | December 31, 2017 | ||||||
Loans at amortized cost | ||||||||
Less: Allowances for loan losses | — | — | ||||||
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34
KB Financial Group Inc.
Notes to Separate Interim Financial Statements
September 30, 2018 and 2017(Unaudited), and December 31, 2017
9. Investments in Subsidiaries
Details of subsidiaries as of September 30, 2018, are as follows:
| Name of subsidiary | Industry | Location | ||
Kookmin Bank | Banking and domestic, foreign exchange transaction | Korea | ||
KB Securities Co., Ltd. | Financial investment | Korea | ||
KB Insurance Co., Ltd | Insurance | Korea | ||
KB Kookmin Card Co., Ltd. | Credit card | Korea | ||
KB Life Insurance Co., Ltd. | Life insurance | Korea | ||
KB Asset Management Co., Ltd. | Investment advisory and collective investment | Korea | ||
KB Capital Co., Ltd. | Financial leasing | Korea | ||
KB Savings Bank Co., Ltd. | Savings banking | Korea | ||
KB Real Estate Trust Co., Ltd. | Real estate trust management | Korea | ||
KB Investment Co., Ltd. | Capital investment | Korea | ||
KB Credit Information Co., Ltd. | Collection of receivables and credit investigation | Korea | ||
KB Data System Co., Ltd. | System software, development and supply | Korea |
Investments in subsidiaries as of September 30, 2018 and December 31, 2017, are as follows:
| (In millions of Korean won, except for shares and ownership %) | Number of Issued Shares | Ownership(%) | Carrying amount | |||||||||||||
| Name of subsidiary | As of September 30, 2018 | September 30, 2018 | December 31, 2017 | |||||||||||||
Kookmin Bank | 404,379,116 | 100.00 | ||||||||||||||
KB Securities Co., Ltd. | 298,620,424 | 100.00 | 3,342,391 | 3,342,391 | ||||||||||||
KB Insurance Co., Ltd. | 66,500,000 | 100.00 | 2,375,430 | 2,375,430 | ||||||||||||
KB Kookmin Card Co., Ltd. | 92,000,000 | 100.00 | 1,953,175 | 1,953,175 | ||||||||||||
KB Life Insurance Co., Ltd. | 91,200,000 | 100.00 | 485,314 | 485,314 | ||||||||||||
KB Asset Management Co., Ltd. | 7,667,550 | 100.00 | 96,312 | 96,312 | ||||||||||||
KB Capital Co., Ltd. | 21,492,128 | 100.00 | 573,811 | 573,811 | ||||||||||||
KB Savings Bank Co., Ltd. | 8,001,912 | 100.00 | 157,544 | 157,544 | ||||||||||||
KB Real Estate Trust Co., Ltd. | 16,000,000 | 100.00 | 121,553 | 121,553 | ||||||||||||
KB Investment Co., Ltd. | 8,951,797 | 100.00 | 104,910 | 104,910 | ||||||||||||
KB Credit Information Co., Ltd. | 1,252,400 | 100.00 | 23,621 | 23,621 | ||||||||||||
KB Data System Co., Ltd. | 800,000 | 100.00 | 6,334 | 6,334 | ||||||||||||
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Changes in accumulated impairment losses on investments in subsidiaries for the nine-month periods ended September 30, 2018 and 2017, are as follows:
| (In millions of Korean won) | 2018 | |||||||||||||||
| Beginning | Impairment | Others | Ending | |||||||||||||
Accumulated impairment losses on investments in subsidiaries | ||||||||||||||||
35
KB Financial Group Inc.
Notes to Separate Interim Financial Statements
September 30, 2018 and 2017(Unaudited), and December 31, 2017
| (In millions of Korean won) | 2017 | |||||||||||||||
| Beginning | Impairment | Others | Ending | |||||||||||||
Accumulated impairment losses on investments in subsidiaries | ||||||||||||||||
10. Property and Equipment
Details of property and equipment as of September 30, 2018 and December 31, 2017, are as follows:
| (In millions of Korean won) | September 30, 2018 | |||||||||||||||
| Acquisition cost | Accumulated depreciation | Accumulated impairment losses | Carrying amount | |||||||||||||
Leasehold improvements | ||||||||||||||||
Equipment and others | 3,837 | (3,277 | ) | 560 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
|
|
|
|
|
|
|
| |||||||||
| (In millions of Korean won) | December 31, 2017 | |||||||||||||||
| Acquisition cost | Accumulated depreciation | Accumulated impairment losses | Carrying amount | |||||||||||||
Leasehold improvements | ||||||||||||||||
Equipment and others | 3,675 | (3,054 | ) | — | 621 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
|
|
|
|
|
|
|
| |||||||||
11. Intangible Assets
Details of intangible assets as of September 30, 2018 and December 31, 2017, are as follows:
| (In millions of Korean won) | September 30, 2018 | |||||||||||||||
Acquisition cost | Accumulated amortization | Accumulated impairment losses | Carrying amount | |||||||||||||
Software | ||||||||||||||||
Membership rights | 9,623 | — | (1,864 | ) | 7,759 | |||||||||||
Other intangible assets | 4,187 | (3,672 | ) | — | 515 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
|
|
|
|
|
|
|
| |||||||||
36
KB Financial Group Inc.
Notes to Separate Interim Financial Statements
September 30, 2018 and 2017(Unaudited), and December 31, 2017
| (In millions of Korean won) | December 31, 2017 | |||||||||||||||
Acquisition cost | Accumulated amortization | Accumulated impairment losses | Carrying amount | |||||||||||||
Software | ||||||||||||||||
Membership rights | 9,657 | — | (1,864 | ) | 7,793 | |||||||||||
Other intangible assets | 4,116 | (3,537 | ) | — | 579 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
|
|
|
|
|
|
|
| |||||||||
12. Deferred Income Tax Assets and Liabilities
Details of deferred income tax assets and liabilities as of September 30, 2018 and December 31, 2017, are as follows:
| (In millions of Korean won) | September 30, 2018 | |||||||||||
| Assets | Liabilities | Net amounts | ||||||||||
Share-based payments | ||||||||||||
Membership rights | 513 | — | 513 | |||||||||
Defined benefit obligation | 1,718 | — | 1,718 | |||||||||
Plan assets | — | (1,402 | ) | (1,402 | ) | |||||||
Short-term employee benefits | 533 | — | 533 | |||||||||
Gains (loss) on valuation of hybrid capital instruments | 3,257 | — | 3,257 | |||||||||
Others | 247 | (197 | ) | 50 | ||||||||
|
|
|
|
|
| |||||||
| 9,468 | (1,599 | ) | 7,869 | |||||||||
|
|
|
|
|
| |||||||
Offsetting of deferred tax assets and liabilities | (1,599 | ) | 1,599 | — | ||||||||
|
|
|
|
|
| |||||||
|
|
|
|
|
| |||||||
| (In millions of Korean won) | December 31, 2017 | |||||||||||
| Assets | Liabilities | Net amounts | ||||||||||
Share-based payments | ||||||||||||
Membership rights | 513 | — | 513 | |||||||||
Defined benefit obligation | 1,597 | — | 1,597 | |||||||||
Plan assets | — | (948 | ) | (948 | ) | |||||||
Short-term employee benefits | 571 | — | 571 | |||||||||
Gains (loss) on valuation of hybrid capital instruments | 4,267 | — | 4,267 | |||||||||
Others | 124 | — | 124 | |||||||||
|
|
|
|
|
| |||||||
| 11,230 | (948 | ) | 10,282 | |||||||||
|
|
|
|
|
| |||||||
Offsetting of deferred tax assets and liabilities | (948 | ) | 948 | — | ||||||||
|
|
|
|
|
| |||||||
|
|
|
|
|
| |||||||
13. Other Assets
Details of other assets as of September 30, 2018 and December 31, 2017, are as follows:
37
KB Financial Group Inc.
Notes to Separate Interim Financial Statements
September 30, 2018 and 2017(Unaudited), and December 31, 2017
| (In millions of Korean won) | September 30, 2018 | December 31, 2017 | ||||||
Other financial assets | ||||||||
Receivables | ||||||||
Accrued income | 1,824 | 1,635 | ||||||
Guarantee deposits | 14,783 | 14,517 | ||||||
|
|
|
| |||||
| 21,193 | 16,207 | |||||||
|
|
|
| |||||
Othernon-financial assets | ||||||||
Receivables | 728,569 | 463,012 | ||||||
Prepaid expenses | 1,133 | 1,532 | ||||||
Advanced payments | 141 | 38 | ||||||
|
|
|
| |||||
| 729,843 | 464,582 | |||||||
|
|
|
| |||||
|
|
|
| |||||
14. Debts
Debts as of September 30, 2018 and December 31, 2017, consist of:
| (In millions of Korean won) | September 30, 2018 | December 31, 2017 | ||||||
Borrowings | ||||||||
Details of borrowings as of September 30, 2018 and December 31, 2017, are as follows:
| (In millions of Korean won) | Lender | Annual interest rates (%) As of September 30, 2018 | September 30, 2018 | December 31, 2017 | ||||||||||||||||
Borrowings in Korean won | Other borrowings | SK Securities Co., Ltd. | — | |||||||||||||||||
| KB Securities Co., Ltd | — | — | 150,000 | |||||||||||||||||
|
|
|
| |||||||||||||||||
|
|
|
| |||||||||||||||||
The maturities of debts as of December 31, 2017, are as follows:
| (In millions of Korean won) | December 31, 2017 | |||||||||||||||||||||||
Up to 3 months | 3~6 months | 6~12 months | 1~3 years | Over 3 years | Total | |||||||||||||||||||
Borrowings in Korean won | ||||||||||||||||||||||||
15. Debentures
Details of debentures as of September 30, 2018 and December 31, 2017, are as follows:
38
KB Financial Group Inc.
Notes to Separate Interim Financial Statements
September 30, 2018 and 2017(Unaudited), and December 31, 2017
| (In millions of Korean won) | ||||||||||||||||||||
| Issued date | Expiration date | Annual interest rates (%) As of September 30, 2018 | September 30, 2018 | December 31, 2017 | ||||||||||||||||
Unguaranteed debenturesNo. 3-2 | Aug. 13, 2013 | Aug. 13, 2018 | 3.46 | |||||||||||||||||
Unguaranteed debenturesNo. 3-3 | Aug. 13, 2013 | Aug. 13, 2020 | 3.65 | 70,000 | 70,000 | |||||||||||||||
Unguaranteed debenturesNo. 5-1 | Mar. 19, 2014 | Mar. 19, 2019 | 3.31 | 80,000 | 80,000 | |||||||||||||||
Unguaranteed debenturesNo. 5-2 | Mar. 19, 2014 | Mar. 19, 2021 | 3.50 | 50,000 | 50,000 | |||||||||||||||
Unguaranteed debentures No. 6 | Feb. 26, 2015 | Feb. 26, 2022 | 2.38 | 30,000 | 30,000 | |||||||||||||||
Unguaranteed debentures No. 7 | June 23, 2015 | June 23, 2018 | 1.98 | — | 150,000 | |||||||||||||||
Unguaranteed debentures No. 8 | June 23, 2015 | June 23, 2020 | 2.34 | 100,000 | 100,000 | |||||||||||||||
Unguaranteed debentures No. 9 | June 23, 2015 | June 23, 2022 | 2.52 | 150,000 | 150,000 | |||||||||||||||
Unguaranteed debentures No. 10 | Sept. 17, 2015 | Sept. 17, 2020 | 2.16 | 20,000 | 20,000 | |||||||||||||||
Unguaranteed debentures No. 11 | Sept. 23, 2015 | Sept. 23, 2020 | 2.06 | 30,000 | 30,000 | |||||||||||||||
Unguaranteed debenturesNo. 12-1 | Nov. 27, 2015 | Nov. 27, 2018 | 2.07 | 80,000 | 80,000 | |||||||||||||||
Unguaranteed debenturesNo. 12-2 | Nov. 27, 2015 | Nov. 27, 2020 | 2.26 | 110,000 | 110,000 | |||||||||||||||
Unguaranteed debenturesNo. 12-3 | Nov. 27, 2015 | Nov. 27, 2022 | 2.38 | 50,000 | 50,000 | |||||||||||||||
Unguaranteed debentures No. 13 | Dec. 04, 2015 | Dec. 04, 2018 | 2.09 | 130,000 | 130,000 | |||||||||||||||
Unguaranteed debenturesNo. 14-1 | Dec. 09, 2015 | Dec. 09, 2020 | 2.27 | 140,000 | 140,000 | |||||||||||||||
Unguaranteed debenturesNo. 14-2 | Dec. 09, 2015 | Dec. 09, 2022 | 2.38 | 30,000 | 30,000 | |||||||||||||||
Unguaranteed debenturesNo. 15-1 | May 12, 2016 | May 12, 2019 | 1.61 | 180,000 | 180,000 | |||||||||||||||
Unguaranteed debenturesNo. 15-2 | May 12, 2016 | May 12, 2021 | 1.72 | 220,000 | 220,000 | |||||||||||||||
Unguaranteed debenturesNo. 15-3 | May 12, 2016 | May 12, 2026 | 2.01 | 200,000 | 200,000 | |||||||||||||||
Unguaranteed debenturesNo. 16-1 | May 27, 2016 | May 27, 2019 | 1.67 | 240,000 | 240,000 | |||||||||||||||
Unguaranteed debenturesNo. 16-2 | May 27, 2016 | May 27, 2021 | 1.78 | 60,000 | 60,000 | |||||||||||||||
Unguaranteed debenturesNo. 16-3 | May 27, 2016 | May 27, 2023 | 1.91 | 150,000 | 150,000 | |||||||||||||||
Unguaranteed debentures No. 17 | June 27, 2016 | June 27, 2021 | 1.51 | 50,000 | 50,000 | |||||||||||||||
Unguaranteed debenturesNo. 18-1 | July 25, 2016 | July 25, 2019 | 1.38 | 170,000 | 170,000 | |||||||||||||||
Unguaranteed debenturesNo. 18-2 | July 25, 2016 | July 25, 2021 | 1.45 | 110,000 | 110,000 | |||||||||||||||
Unguaranteed debenturesNo. 18-3 | July 25, 2016 | July 25, 2026 | 1.69 | 80,000 | 80,000 | |||||||||||||||
Unguaranteed debenturesNo. 19-1 | Aug. 25, 2016 | Aug. 24, 2018 | 1.35 | — | 200,000 | |||||||||||||||
Unguaranteed debenturesNo. 19-2 | Aug. 25, 2016 | Aug. 25, 2021 | 1.46 | 100,000 | 100,000 | |||||||||||||||
Unguaranteed debenturesNo. 19-3 | Aug. 25, 2016 | Aug. 25, 2026 | 1.69 | 120,000 | 120,000 | |||||||||||||||
Unguaranteed debenturesNo. 20-1 | Nov. 28, 2016 | Nov. 28, 2019 | 2.13 | 50,000 | 50,000 | |||||||||||||||
Unguaranteed debenturesNo. 20-2 | Nov. 28, 2016 | Nov. 28, 2021 | 2.28 | 50,000 | 50,000 | |||||||||||||||
Unguaranteed debentures No. 21 | Jan. 25, 2017 | Jan. 23, 2020 | 1.82 | 100,000 | 100,000 | |||||||||||||||
Unguaranteed debenturesNo. 22-1 | Feb. 28, 2017 | Feb. 28, 2020 | 1.89 | 120,000 | 120,000 | |||||||||||||||
Unguaranteed debenturesNo. 22-2 | Feb. 28, 2017 | Feb. 28, 2022 | 2.11 | 110,000 | 110,000 | |||||||||||||||
Unguaranteed debentures No. 23 | Mar. 23, 2017 | Mar. 23, 2020 | 1.95 | 80,000 | 80,000 | |||||||||||||||
Unguaranteed debentures No. 24 | Apr. 06, 2017 | Apr. 06, 2020 | 1.97 | 70,000 | 70,000 | |||||||||||||||
Unguaranteed debenturesNo. 25-1 | May 24, 2017 | May 24, 2019 | 1.79 | 150,000 | 150,000 | |||||||||||||||
Unguaranteed debenturesNo. 25-2 | May 24, 2017 | May 24, 2020 | 1.97 | 100,000 | 100,000 | |||||||||||||||
Unguaranteed debenturesNo. 25-3 | May 24, 2017 | May 24, 2022 | 2.23 | 270,000 | 270,000 | |||||||||||||||
Unguaranteed debenturesNo. 25-4 | May 24, 2017 | May 24, 2027 | 2.62 | 80,000 | 80,000 | |||||||||||||||
Unguaranteed debenturesNo. 26-1 | June 27, 2017 | June 27, 2022 | 2.18 | 50,000 | 50,000 | |||||||||||||||
Unguaranteed debenturesNo. 26-2 | June 27, 2017 | June 27, 2024 | 2.34 | 200,000 | 200,000 | |||||||||||||||
Unguaranteed debentures No. 27 | July 19, 2017 | July 19, 2024 | 2.41 | 100,000 | 100,000 | |||||||||||||||
Unguaranteed debenturesNo. 28-1 | Aug. 30, 2017 | Aug. 30, 2022 | 2.30 | 60,000 | 60,000 | |||||||||||||||
Unguaranteed debenturesNo. 28-2 | Aug. 30, 2017 | Aug. 30, 2024 | 2.43 | 30,000 | 30,000 | |||||||||||||||
Unguaranteed debenturesNo. 28-3 | Aug. 30, 2017 | Aug. 30, 2027 | 2.60 | 60,000 | 60,000 | |||||||||||||||
Unguaranteed debenturesNo. 29-1 | Sept. 19, 2017 | Sept. 19, 2022 | 2.29 | 150,000 | 150,000 | |||||||||||||||
Unguaranteed debenturesNo. 29-2 | Sept. 19, 2017 | Sept. 19, 2024 | 2.44 | 110,000 | 110,000 | |||||||||||||||
Unguaranteed debentures No. 30 | Jan. 25, 2018 | Jan. 25, 2021 | 2.45 | 80,000 | — | |||||||||||||||
Unguaranteed debenturesNo. 31-1 | Feb. 28, 2018 | Feb. 26, 2021 | 2.57 | 150,000 | — | |||||||||||||||
Unguaranteed debenturesNo. 31-2 | Feb. 28, 2018 | Feb. 28, 2023 | 2.81 | 50,000 | — | |||||||||||||||
Unguaranteed debenturesNo. 31-3 | Feb. 28, 2018 | Feb. 28, 2028 | 3.02 | 60,000 | — | |||||||||||||||
Unguaranteed debenturesNo. 32-1 | Apr. 06, 2018 | Apr. 06, 2021 | 2.50 | 60,000 | — | |||||||||||||||
Unguaranteed debenturesNo. 32-2 | Apr. 06, 2018 | Apr. 06, 2023 | 2.71 | 80,000 | — | |||||||||||||||
Unguaranteed debenturesNo. 32-3 | Apr. 06, 2018 | Apr. 06, 2028 | 2.86 | 20,000 | — | |||||||||||||||
Unguaranteed debenturesNo. 33-1 | June 12, 2018 | June 12, 2023 | 2.81 | 100,000 | — | |||||||||||||||
Unguaranteed debenturesNo. 33-2 | June 12, 2018 | June 12, 2028 | 2.92 | 30,000 | — | |||||||||||||||
Unguaranteed debenturesNo. 34-1 | July 25, 2018 | July 23, 2021 | 2.41 | 40,000 | — | |||||||||||||||
Unguaranteed debenturesNo. 34-2 | July 25, 2018 | July 25, 2023 | 2.65 | 70,000 | — | |||||||||||||||
Unguaranteed debenturesNo. 34-3 | July 25, 2018 | July 25, 2025 | 2.71 | 20,000 | — | |||||||||||||||
Unguaranteed debenturesNo. 34-4 | July 25, 2018 | July 25, 2028 | 2.76 | 20,000 | — | |||||||||||||||
|
|
|
| |||||||||||||||||
| 5,470,000 | 5,170,000 | |||||||||||||||||||
| Less: Bond Discounts | (7,172 | ) | (7,400 | ) | ||||||||||||||||
|
|
|
| |||||||||||||||||
|
|
|
| |||||||||||||||||
39
KB Financial Group Inc.
Notes to Separate Interim Financial Statements
September 30, 2018 and 2017(Unaudited), and December 31, 2017
The maturities of debentures as of September 30, 2018 and December 31, 2017, are as follows:
| (In millions of Korean won) | September 30, 2018 | |||||||||||||||||||||||
Up to 3 months | 3~6 months | 6~12 months | 1~3 years | Over 3 years | Total | |||||||||||||||||||
Debentures in Korean won | ||||||||||||||||||||||||
| (In millions of Korean won) | December 31, 2017 | |||||||||||||||||||||||
Up to 3 months | 3~6 months | 6~12 months | 1~3 years | Over 3 years | Total | |||||||||||||||||||
Debentures in Korean won | ||||||||||||||||||||||||
Changes in debentures based on face value for the nine-month periods ended September 30, 2018 and 2017, are as follows:
| (In millions of Korean won) | 2018 | |||||||||||||||
| Beginning | Issue | Repayment | Ending | |||||||||||||
Debentures in Korean won | ||||||||||||||||
| (In millions of Korean won) | 2017 | |||||||||||||||
| Beginning | Issue | Repayment | Ending | |||||||||||||
Debentures in Korean won | ||||||||||||||||
16. Net Defined Benefit Liabilities
Defined benefit plan
The Company operates defined benefit plans which have the following characteristics:
| • | The Company has the obligation to pay the agreed benefits to all its current and former employees. |
| • | Actuarial risk (that benefits will cost more than expected) and investment risk fall, in substance, on the Company. |
The net defined benefit liability recognized in the statements of financial position is calculated in accordance with actuarial valuation methods using market data; such as, interest rates, future salary increase rate and mortality rate based on historical data. Actuarial assumptions may differ from actual results, due to changes in the market, economic trends and mortality trends.
Changes in the defined benefit obligation for the nine-month periods ended September 30, 2018 and 2017, are as follows:
40
KB Financial Group Inc.
Notes to Separate Interim Financial Statements
September 30, 2018 and 2017(Unaudited), and December 31, 2017
| (In millions of Korean won) | ||||||||||||
| 2018 | ||||||||||||
| Present value of defined benefit obligation | Fair value of plan assets | Net defined benefit liabilities | ||||||||||
Beginning | ||||||||||||
Current service cost | 1,472 | — | 1,472 | |||||||||
Interest cost (income) | 359 | (363 | ) | (4 | ) | |||||||
Remeasurements: | ||||||||||||
Return on plan assets (excluding amounts included in interest income) | — | 150 | 150 | |||||||||
Payments from plans (benefit payments) | (1,393 | ) | 1,393 | — | ||||||||
Payments from the Company | (39 | ) | — | (39 | ) | |||||||
Transfer in | 2,844 | (2,844 | ) | — | ||||||||
Transfer out | (2,376 | ) | 2,376 | — | ||||||||
|
|
|
|
|
| |||||||
Ending | ||||||||||||
|
|
|
|
|
| |||||||
| (In millions of Korean won) | ||||||||||||
| 2017 | ||||||||||||
| Present value of defined benefit obligation | Fair value of plan assets | Net defined benefit liabilities | ||||||||||
Beginning | ||||||||||||
Current service cost | 1,466 | — | 1,466 | |||||||||
Interest cost (income) | 292 | (296 | ) | (4 | ) | |||||||
Remeasurements: | ||||||||||||
Return on plan assets (excluding amounts included in interest income) | — | 111 | 111 | |||||||||
Payments from plans (benefit payments) | (2,130 | ) | 2,130 | — | ||||||||
Payments from the Company | (63 | ) | — | (63 | ) | |||||||
Transfer in | 2,801 | (2,801 | ) | — | ||||||||
Transfer out | (1,525 | ) | 1,525 | — | ||||||||
|
|
|
|
|
| |||||||
Ending | ||||||||||||
|
|
|
|
|
| |||||||
41
KB Financial Group Inc.
Notes to Separate Interim Financial Statements
September 30, 2018 and 2017(Unaudited), and December 31, 2017
Details of the net defined benefit liabilities (assets) as of September 30, 2018 and December 31, 2017, are as follows:
| (In millions of Korean won) | September 30, 2018 | December 31, 2017 | ||||||
Present value of defined benefit obligation | ||||||||
Fair value of plan assets | (16,083 | ) | (16,795 | ) | ||||
|
|
|
| |||||
Net defined benefit liabilities (assets) | ||||||||
|
|
|
| |||||
Details of post-employment benefits recognized in profit or loss as employee compensation and benefits for the nine-month periods ended September 30, 2018 and 2017, are as follows:
| (In millions of Korean won) | 2018 | 2017 | ||||||
Current service cost | ||||||||
Net interest expenses of net defined benefit liabilities | (4 | ) | (4 | ) | ||||
|
|
|
| |||||
Post-employment benefits | ||||||||
|
|
|
| |||||
17. Other Liabilities
Details of other liabilities as of September 30, 2018 and December 31, 2017, are as follows:
| (In millions of Korean won) | September 30, 2018 | December 31, 2017 | ||||||
Other financial liabilities | ||||||||
Payables | ||||||||
Accrued expenses | 17,546 | 10,521 | ||||||
|
|
|
| |||||
| 22,285 | 29,963 | |||||||
|
|
|
| |||||
Othernon-financial liabilities | ||||||||
Payables | 9,392 | 36,899 | ||||||
Accrued expenses | 117,952 | 137,243 | ||||||
Withholding taxes | 421 | 730 | ||||||
|
|
|
| |||||
| 127,765 | 174,872 | |||||||
|
|
|
| |||||
|
|
|
| |||||
18. Equity
18.1 Share Capital
Details of share capital and number of issued shares as of September 30, 2018 and December 31, 2017, are as follows:
| September 30, 2018 | December 31, 2017 | |||||||
| Type of share | Ordinary share | Ordinary share | ||||||
Number of authorized shares | 1,000,000,000 | 1,000,000,000 | ||||||
Par value per share | ||||||||
Number of issued shares | 418,111,537 | 418,111,537 | ||||||
Share capital1 | ||||||||
| 1 | In millions of Korean won. |
42
KB Financial Group Inc.
Notes to Separate Interim Financial Statements
September 30, 2018 and 2017(Unaudited), and December 31, 2017
Changes in shares outstanding for the nine-month periods ended September 30, 2018 and 2017, are as follows:
| (In number of shares) | 2018 | 2017 | ||||||
Beginning | 399,037,583 | 398,357,724 | ||||||
Increase | — | 4,438,230 | ||||||
Decrease | (2,803,909 | ) | (1,792,500 | ) | ||||
|
|
|
| |||||
Ending | 396,233,674 | 401,003,454 | ||||||
|
|
|
| |||||
18.2 Capital Surplus
Details of capital surplus as of September 30, 2018 and December 31, 2017, are as follows:
| (In millions of Korean won) | September 30, 2018 | December 31, 2017 | ||||||
Share premium | ||||||||
Other capital surplus | 1,465,893 | 1,465,893 | ||||||
Gain on sales of treasury share | 86,646 | 86,646 | ||||||
|
|
|
| |||||
|
|
|
| |||||
18.3 Accumulated Other Comprehensive Income (Loss)
Details of accumulated other comprehensive income (loss) as of September 30, 2018 and December 31, 2017, are as follows:
| (In millions of Korean won) | September 30, 2018 | December 31, 2017 | ||||||
Remeasurements of net defined benefit liabilities | ||||||||
Changes in accumulated other comprehensive income (loss) for the nine-month periods ended September 30, 2018 and 2017, are as follows:
| (In millions of Korean won) | 2018 | |||||||||||||||
| Beginning | Changes | Tax effect | Ending | |||||||||||||
Remeasurements of net defined benefit liabilities | ||||||||||||||||
| (In millions of Korean won) | 2017 | |||||||||||||||
| Beginning | Changes | Tax effect | Ending | |||||||||||||
Remeasurements of net defined benefit liabilities | ||||||||||||||||
18.4 Retained Earnings
Details of retained earnings as of September 30, 2018 and December 31, 2017, are as follows:
| (In millions of Korean won) | September 30, 2018 | December 31, 2017 | ||||||
Legal reserves | ||||||||
Voluntary reserves | 982,000 | 982,000 | ||||||
Regulatory reserve for credit losses | 2,374 | 2,498 | ||||||
Retained earnings before appropriation | 1,885,104 | 1,735,008 | ||||||
|
|
|
| |||||
|
|
|
| |||||
43
KB Financial Group Inc.
Notes to Separate Interim Financial Statements
September 30, 2018 and 2017(Unaudited), and December 31, 2017
With respect to the allocation of net profit earned in a fiscal term, the Company must set aside in its legal reserve an amount equal to at least 10% of its net income after tax as reported in the separate statement of comprehensive income each time it pays dividends on its net profits earned until its legal reserve reaches at least the aggregate amount of its share capital in accordance with Article 53 of the Financial Holding Company Act. The reserve is not available for the payment of cash dividends, but may be transferred to share capital, or used to reduce accumulated deficit.
Regulatory reserve for credit losses
Measurement and disclosure of regulatory reserve for credit losses are required in accordance with Articles 26 through 28 of the Supervisory Regulations on Financial Holding Companies.
Details of the regulatory reserve for credit losses as of September 30, 2018 and December 31, 2017, are as follows:
| (In millions of Korean won) | September 30, 2018 | December 31, 2017 | ||||||
Beginning | ||||||||
Estimated amounts subject to provision (reversal) | 1,552 | (124 | ) | |||||
|
|
|
| |||||
Ending | ||||||||
|
|
|
| |||||
The adjustments to the regulatory reserve for credit losses for the three-month and the nine-month periods ended September 30, 2018 and 2017, are as follows:
| (In millions of Korean won, except per share amounts) | 2018 | |||||||
| Three months | Nine months | |||||||
Provision of regulatory reserve for credit losses | ||||||||
Adjusted profit after provision of regulatory reserve for credit losses1 | (38,816 | ) | 970,491 | |||||
Adjusted basic earnings per share after provision of regulatory reserve for credit losses1 | (98 | ) | 2,447 | |||||
Adjusted diluted earnings per share after provision of regulatory reserve for credit losses1 | (97 | ) | 2,433 | |||||
| (In millions of Korean won, except per share amounts) | 2017 | |||||||
| Three months | Nine months | |||||||
Provision of regulatory reserve for credit losses | ||||||||
Adjusted profit after provision of regulatory reserve for credit losses1 | (40,044 | ) | 602,028 | |||||
Adjusted basic earnings per share after provision of regulatory reserve for credit losses1 | (100 | ) | 1,512 | |||||
Adjusted diluted earnings per share after provision of regulatory reserve for credit losses1 | (99 | ) | 1,504 | |||||
| 1 | Adjusted profit after provision of regulatory reserve for credit losses is not in accordance with Korean IFRS and calculated on the assumption that provision of regulatory reserve for credit losses before income tax is adjusted to the profit for the period. |
44
KB Financial Group Inc.
Notes to Separate Interim Financial Statements
September 30, 2018 and 2017(Unaudited), and December 31, 2017
18.5 Treasury Shares
Changes in treasury shares outstanding for the nine-month periods ended September 30, 2018 and 2017, are as follows:
| (In millions of Korean won and in number of shares) | 2018 | |||||||||||||||
| Beginning | Acquisition | Disposal | Ending | |||||||||||||
Number of treasury shares1 | 19,073,954 | 2,803,909 | — | 21,877,863 | ||||||||||||
Carrying amount1 | ||||||||||||||||
| 1 | In order to increase shareholder value, the Company entered into another treasury stock trust agreement of |
| (In millions of Korean won and in number of shares) | 2017 | |||||||||||||||
| Beginning | Acquisition | Disposal | Ending | |||||||||||||
Number of treasury shares1 | 19,753,813 | 1,792,500 | 4,438,230 | 17,108,083 | ||||||||||||
Carrying amount1 | ||||||||||||||||
| 1 | The trust agreement with Samsung Securities Co., Ltd. is terminated as the agreement was expired during the nine-month period ended September 30, 2017. |
19. Dividends
The dividends to the shareholders of the Company in respect of the year ended December 31, 2017, ofW1,920 per share, amounting to total dividends ofW766,728 million, were paid in April 2018. The dividends paid to the shareholders of the Company in 2017 wereW497,969 million (W1,250 per share).
20. Net Interest Expense
Interest income (expense) and net interest expense for the three-month and the nine-month periods ended September 30, 2018 and 2017, are as follows:
| (In millions of Korean won) | 2018 | 2017 | ||||||||||||||
| Three months | Nine months | Three months | Nine months | |||||||||||||
Interest income | ||||||||||||||||
Due from financial institutions | ||||||||||||||||
Loans at amortized cost | 243 | 348 | 44 | 94 | ||||||||||||
Other | 60 | 177 | 64 | 190 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| 1,636 | 4,978 | 603 | 3,213 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
Interest expense | ||||||||||||||||
Debts | — | 973 | 1,813 | 7,364 | ||||||||||||
Debentures | 30,948 | 90,336 | 25,460 | 65,513 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| 30,948 | 91,309 | 27,273 | 72,877 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net interest expense | ||||||||||||||||
|
|
|
|
|
|
|
| |||||||||
45
KB Financial Group Inc.
Notes to Separate Interim Financial Statements
September 30, 2018 and 2017(Unaudited), and December 31, 2017
21. Net Fee and Commission Expense
Fee and commission income (expense) and net fee and commission expense for the three-month and the nine-month periods ended September 30, 2018 and 2017, are as follows:
| (In millions of Korean won) | 2018 | 2017 | ||||||||||||||
| Three months | Nine months | Three months | Nine months | |||||||||||||
Fee and commission income | ||||||||||||||||
Fees in Korean won | ||||||||||||||||
Fee and commission expense | ||||||||||||||||
Fees paid in Korean won | 769 | 4,597 | 1,195 | 6,450 | ||||||||||||
Fees paid in foreign currency | 55 | 127 | 80 | 162 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| 824 | 4,724 | 1,275 | 6,612 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net fee and commission expense | ||||||||||||||||
|
|
|
|
|
|
|
| |||||||||
22. Net Gains on Financial Assets at Fair Value through Profit or Loss and Net Gains on Financial Assets at Fair Value through Profit or Loss (under Korean IFRS 1039)
Net gains on financial assets at fair value through profit or loss and net gains on financial assets at fair value through profit or loss (under Korean IFRS 1039)consist of gains or losses related to financial instrument that includes dividend income and gains or losses arising from changes in the fair values, sales and redemptions. Details for the three-month and nine-month periods ended September 30, 2018 and 2017, are as follows:
| (In millions of Korean won) | 2018 | 2017 | ||||||||||||||
| Three months | Nine months | Three months | Nine months | |||||||||||||
Gains related to financial instruments at fair value through profit or loss (under Korean IFRS 1039) | ||||||||||||||||
Financial assets at fair value through profit or loss (under Korean IFRS 1039) | ||||||||||||||||
Gains related to financial instruments at fair value through profit or loss | ||||||||||||||||
Financial assets at fair value through profit or loss | 5,133 | 13,865 | — | — | ||||||||||||
Losses related to financial instruments at fair value through profit or loss (under Korean IFRS 1039) | ||||||||||||||||
Financial assets at fair value through profit or loss (under Korean IFRS 1039) | — | — | 4,517 | 5,706 | ||||||||||||
Losses related to financial instruments at fair value through profit or loss | ||||||||||||||||
Financial assets at fair value through profit or loss | — | — | — | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net gains (losses) on financial instruments at fair value through profit or loss | ||||||||||||||||
|
|
|
|
|
|
|
| |||||||||
46
KB Financial Group Inc.
Notes to Separate Interim Financial Statements
September 30, 2018 and 2017(Unaudited), and December 31, 2017
23. Net Other Operating Income
Other operating income or other operating expense for the three-month and the nine-month periods ended September 30, 2018 and 2017, are as follows:
| (In millions of Korean won) | 2018 | 2017 | ||||||||||||||
| Three months | Nine months | Three months | Nine months | |||||||||||||
Other operating income | ||||||||||||||||
Dividend income from subsidiaries | ||||||||||||||||
Dividend income from associate | — | — | — | 15,884 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| — | 1,089,556 | — | 709,544 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net other operating income | ||||||||||||||||
|
|
|
|
|
|
|
| |||||||||
24. General and Administrative Expenses
Details of general and administrative expenses for the three-month and nine-month periods ended September 30, 2018 and 2017, are as follows:
| (In millions of Korean won) | 2018 | 2017 | ||||||||||||||
| Three months | Nine months | Three months | Nine months | |||||||||||||
Employee benefits | ||||||||||||||||
Salaries and other short-term employee benefits—Salaries | ||||||||||||||||
Salaries and other short-term employee benefits—Others | 1,131 | 3,071 | 935 | 2,841 | ||||||||||||
Post-employment benefits—defined benefit plans | 489 | 1,468 | 487 | 1,462 | ||||||||||||
Post-employment benefits—defined contribution plans | — | — | — | 1 | ||||||||||||
Share-based payments | 1,122 | 977 | 1,009 | 4,952 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| 7,859 | 22,396 | 7,870 | 25,670 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
Depreciation and amortization | 193 | 540 | 132 | 479 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Other general and administrative expenses | ||||||||||||||||
Travel | 186 | 479 | 139 | 500 | ||||||||||||
Communications | 76 | 396 | 80 | 379 | ||||||||||||
Tax and dues | 38 | 269 | 43 | 206 | ||||||||||||
Publication | 54 | 184 | 45 | 162 | ||||||||||||
Rental expense | 356 | 1,078 | 415 | 1,153 | ||||||||||||
Vehicle | 40 | 102 | 39 | 103 | ||||||||||||
Service fees | 2,127 | 7,067 | 1,554 | 4,841 | ||||||||||||
Advertising | 30 | 496 | 52 | 440 | ||||||||||||
Training | 247 | 568 | 179 | 558 | ||||||||||||
Others | 1,541 | 4,400 | 1,308 | 3,976 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| 4,695 | 15,039 | 3,854 | 12,318 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
|
|
|
|
|
|
|
| |||||||||
47
KB Financial Group Inc.
Notes to Separate Interim Financial Statements
September 30, 2018 and 2017(Unaudited), and December 31, 2017
Share-based Payments
The Company entered into share-based payment plan for executives and employees of the Company and its subsidiaries.
Details of stock grants linked to long-term performance as of September 30, 2018, are as follows:
| (In number of shares) | Grant date | Number of granted shares1 | Vesting conditions | |||||||
KB Financial Group Inc. |
| |||||||||
Series 17 | Jan. 01, 2017 | 16,579 | Services fulfillment, Achievement of targets on the basis of market andnon-market performance2,5 | |||||||
Series 18 | July. 17, 2017 | 7,444 | Services fulfillment, Achievement of targets on the basis of market andnon-market performance2,5 | |||||||
Series 19 | Nov. 21, 2017 | 46,890 | Services fulfillment, Achievement of targets on the basis of market andnon-market performance2,6 | |||||||
Series 20 | Jan. 01, 2018 | 35,330 | Services fulfillment, Achievement of targets on the basis of market andnon-market performance2,8 | |||||||
Deferred grant | 2012 | 5,415 | Satisfied in 2012 | |||||||
Deferred grant | 2013 | 588 | Satisfied in 2013 | |||||||
Deferred grant | 2015 | 15,154 | Satisfied in 2015 | |||||||
Deferred grant | 2016 | 14,538 | Satisfied in 2016 | |||||||
Deferred grant | 2017 | 85,491 | Satisfied in 2017 | |||||||
|
| |||||||||
Kookmin Bank | 227,429 | |||||||||
|
| |||||||||
Series 69 | Jan. 01, 2017 | 168,360 | Services fulfillment:2years3 | |||||||
Series 71 | Aug. 26, 2017 | 4,372 | Services fulfillment:2years3 | |||||||
Series 72 | Aug. 28, 2017 | 5,601 | Services fulfillment:2years3 | |||||||
Series 73 | Nov. 21, 2017 | 27,786 | Services fulfillment:2years4 | |||||||
Series 74 | Jan. 01, 2018 | 190,536 | Services fulfillment:2years3 | |||||||
Deferred grant | 2015 | 33,050 | Satisfied in 2015 | |||||||
Deferred grant | 2016 | 110,967 | Satisfied in 2016 | |||||||
Deferred grant | 2017 | 150,212 | Satisfied in 2017 | |||||||
|
| |||||||||
| 690,884 | ||||||||||
|
| |||||||||
48
KB Financial Group Inc.
Notes to Separate Interim Financial Statements
September 30, 2018 and 2017(Unaudited), and December 31, 2017
Other subsidiaries | ||||||||||
Stock granted in 2010 | — | 366 | Services fulfillment, Achievement of targets on the basis of market andnon-market performance 7, 9 | |||||||
Stock granted in 2011 | — | 601 | ||||||||
Stock granted in 2012 | — | 2,048 | ||||||||
Stock granted in 2013 | — | 3,097 | ||||||||
Stock granted in 2014 | — | 4,628 | ||||||||
Stock granted in 2015 | — | 66,655 | ||||||||
Stock granted in 2016 | — | 121,998 | ||||||||
Stock granted in 2017 | — | 233,273 | ||||||||
Stock granted in 2018 | — | 107,945 | ||||||||
|
| |||||||||
| 540,611 | ||||||||||
|
| |||||||||
| 1,458,924 | ||||||||||
|
|
| 1 | Granted shares represent the total number of shares initially granted to directors and employees that have residual shares at the end of reporting period (Deferred grants are residual shares at the end of the reporting period). |
| 2 | Executives and employees were given the option of deferring payment of the granted shares (after the date of retirement), payment ratio, and payment period. Accordingly, a certain percentage of the granted amount is deferred for up to five years after the date of retirement when the deferred grant has been confirmed. |
| 3 | 30%, 40% and 30% of the number of granted shares to be compensated are determined upon the accomplishment of the relative TSR, Performance Results, Evaluation of the Bank president’s performance, respectively. 30% of the number of certain granted shares to be compensated is determined upon the accomplishment of relative TSR, while 70% is determined upon the accomplishment of Performance Results. |
| 4 | 30% and 70% of the number of granted shares to be compensated are determined upon the accomplishment of relative TSR and Evaluation of the Bank president’s performance, respectively. |
| 5 | 40%, 30% and 30% of the number of granted shares to be compensated are determined upon the accomplishment of Performance Results, financial results of the Company and relative TSR , respectively. 50% of the number of certain granted shares to be compensated is determined upon the accomplishment of Performance Results, while 50% is determined upon the accomplishment of relative TSR. |
| 6 | 35%, 35%, 20%, 5% and 5% of the number of granted shares to be compensated are determined upon the accomplishment of relative TSR, EPS, Asset Quality, HCROI and nonbanking segment profit, respectively. |
| 7 | 50%, 30% and 20% of the number of granted shares to be compensated are determined upon the accomplishment of Performance Results, subsidiaries’ performance and relative TSR, respectively. 80% of the number of certain granted shares to be compensated is determined upon the accomplishment of subsidiaries’ performance, while 20% is determined upon the accomplishment of relative TSR. 80% of the number of certain granted shares to be compensated is determined upon the accomplishment of Performance Results, while 20% is determined upon the accomplishment of relative TSR. 60%, 30% and 10% of the number of certain granted shares to be compensated are determined upon accomplishment of Performance Results, subsidiaries’ performance and relative TSR, respectively. 90% of the number of certain granted shares to be compensated is determined upon the accomplishment of subsidiaries’ performance, while 10% is determined upon the accomplishment of relative TSR. 90% of the number of certain granted shares to be compensated is determined upon the accomplishment of Performance Results, while 10% is determined upon the accomplishment of relative TSR. |
49
KB Financial Group Inc.
Notes to Separate Interim Financial Statements
September 30, 2018 and 2017(Unaudited), and December 31, 2017
| 8 | 40%, 30% and 30% of the number of granted shares to be compensated are determined upon the accomplishment of Performance Results, financial results of the Company and relative TSR , respectively. 70% of the number of certain granted shares to be compensated is determined upon the accomplishment of Performance Results, while 30% is determined upon the accomplishment of relative TSR. |
| 9 | 30%, 30% and 40% of the number of granted shares to be compensated are determined upon the accomplishment of Performance Results, subsidiaries’ performance and relative TSR, respectively. 60% of the number of certain granted shares to be compensated is determined upon the accomplishment of subsidiaries’ performance, while 40% is determined upon the accomplishment of relative TSR. 40%, 30% and 30% of the number of certain granted shares to be compensated are determined upon accomplishment of Performance Results, subsidiaries’ performance and relative TSR, respectively. 50% of the number of certain granted shares to be compensated is determined upon the accomplishment of subsidiaries’ performance, while 50% is determined upon the accomplishment of relative TSR. 70% of the number of certain granted shares to be compensated is determined upon the accomplishment of subsidiaries’ performance, while 30% is determined upon the accomplishment of relative TSR. |
The stock grant award program is an incentive plan that sets, on grant date, the maximum amount of shares that can be awarded. Actual stock granted at the end of the vesting period is determined in accordance with achievement ofpre-specified targets over the vesting period.
Details of stock grants linked to short-term performances as of September 30, 2018, are as follows:
| Grant date | Estimated number of vested shares1 | Vesting Conditions | ||||||
KB Financial Group Inc. | ||||||||
Stock granted in 2010 | Jan. 01, 2010 | 322 | Satisfied | |||||
Stock granted in 2011 | Jan. 01, 2011 | 1,728 | Satisfied | |||||
Stock granted in 2012 | Jan. 01, 2012 | 2,642 | Satisfied | |||||
Stock granted in 2013 | Jan. 01, 2013 | 448 | Satisfied | |||||
Stock granted in 2015 | Jan. 01, 2015 | 13,516 | Satisfied | |||||
Stock granted in 2016 | Jan. 01, 2016 | 16,526 | Satisfied | |||||
Stock granted in 2017 | Jan. 01, 2017 | 16,855 | Satisfied | |||||
Stock granted in 2018 | Jan. 01, 2018 | 11,458 | Proportional to service period | |||||
Kookmin Bank | ||||||||
Stock granted in 2015 | Jan. 01, 2015 | 56,379 | Satisfied | |||||
Stock granted in 2016 | Jan. 01, 2016 | 83,424 | Satisfied | |||||
Stock granted in 2017 | Jan. 01, 2017 | 80,331 | Satisfied | |||||
Stock granted in 2018 | Jan. 01, 2018 | 69,820 | Proportional to service period | |||||
Other subsidiaries | ||||||||
Stock granted in 2015 | — | 68,444 | Satisfied | |||||
Stock granted in 2016 | — | 154,997 | Satisfied | |||||
Stock granted in 2017 | — | 335,810 | Satisfied | |||||
Stock granted in 2018 | — | 172,303 | Proportional to service period | |||||
| 1 | Executives and employees were given the option of deferring payment of the granted shares (after the date of retirement), payment ratio, and payment period. Accordingly, a certain percentage of the granted amount is deferred for up to five years after the date of retirement when the deferred grant has been confirmed. |
50
KB Financial Group Inc.
Notes to Separate Interim Financial Statements
September 30, 2018 and 2017(Unaudited), and December 31, 2017
Share-based payment arrangement for subsidiaries was transferred to the Company in 2010, and the related compensation cost paid to the executives and employees of subsidiaries is reimbursed by these companies. The accrued expenses representing share-based payments as of September 30, 2018 and December 31, 2017, areW115,181 million andW133,496 million, respectively, and the receivables to be reimbursed by the subsidiaries for the compensation costs areW103,543 million andW118,375 million, respectively. The compensation costs from share-based payments that amounts toW977 million andW4,952 million were recognized as an expense for the nine-month periods ended September 30, 2018 and 2017, respectively.
25.Non-operating Income (Expense)
Details ofnon-operating income and expenses for the three-month and nine-month periods ended September 30, 2018 and 2017, are as follows:
| (In millions of Korean won) | 2018 | 2017 | ||||||||||||||
| Three months | Nine months | Three months | Nine months | |||||||||||||
Non-operating income | ||||||||||||||||
Reversal of impairment losses on intangible assets | ||||||||||||||||
Others | 323 | 753 | 2 | 605 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| 323 | 753 | 102 | 705 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
Non-operating expenses | ||||||||||||||||
Impairment losses on intangible assets | — | — | (67 | ) | 2 | |||||||||||
Donation | 603 | 1,133 | 35 | 603 | ||||||||||||
Others | — | 1 | — | 6 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| 603 | 1,134 | (32 | ) | 611 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Non-operating benefit (expenses) | ||||||||||||||||
|
|
|
|
|
|
|
| |||||||||
26. Income Tax Expense
Details of income tax benefit for the nine-month periods ended September 30, 2018 and 2017, are as follows:
| (In millions of Korean won) | 2018 | 2017 | ||||||
Tax payable | ||||||||
Current tax expense | ||||||||
Change in deferred tax assets and liabilities | ||||||||
Origination and reversal of temporary differences | (2,413 | ) | 1,964 | |||||
Tax expense recognized directly in equity | ||||||||
Remeasurements of net defined benefit liabilities | (41 | ) | (27 | ) | ||||
|
|
|
| |||||
Income tax benefit (expense) | ||||||||
|
|
|
| |||||
51
KB Financial Group Inc.
Notes to Separate Interim Financial Statements
September 30, 2018 and 2017(Unaudited), and December 31, 2017
27. Earnings (loss) per Share
Calculations of basic earnings (loss) per share on the profit (loss) attributable to ordinary shares are as follows:
Weighted average number of ordinary shares outstanding:
| (In number of shares) | 2018 | |||||||
| Three months | Nine months | |||||||
Beginning (A) | 418,111,537 | 418,111,537 | ||||||
Acquisition of treasury shares (B) | 21,877,863 | 21,487,116 | ||||||
|
|
|
| |||||
Weighted average number of ordinary shares outstanding (A - B) | 396,233,674 | 396,624,421 | ||||||
|
|
|
| |||||
| (In number of shares) | 2017 | |||||||
| Three months | Nine months | |||||||
Beginning (A) | 418,111,537 | 418,111,537 | ||||||
Acquisition of treasury shares (B) | 17,397,533 | 20,008,876 | ||||||
|
|
|
| |||||
Weighted average number of ordinary shares outstanding (A - B) | 400,714,004 | 398,102,661 | ||||||
|
|
|
| |||||
Basic earnings (loss) per share
| (In Korean won and in number of shares) | 2018 | |||||||
| Three months | Nine months | |||||||
Profit (loss) attributable to ordinary shares1 (C) | ||||||||
Weighted average number of ordinary shares outstanding (D) | 396,233,674 | 396,624,421 | ||||||
Basic earnings (loss) per share (E = C / D) | ||||||||
| (In Korean won and in number of shares) | 2017 | |||||||
| Three months | Nine months | |||||||
Profit (loss) attributable to ordinary shares1 (C) | ||||||||
Weighted average number of ordinary shares outstanding (D) | 400,714,004 | 398,102,661 | ||||||
Basic earnings (loss) per share (E = C / D) | ||||||||
| 1 | Profit (loss) attributable to ordinary shares is the same as profit (loss) for the period in the statements of comprehensive income. |
Diluted earnings (loss) per share
Diluted earnings (loss) per share is calculated using the weighted average number of ordinary shares outstanding which is adjusted by the weighted average number of additional ordinary shares that would have been outstanding assuming the conversion of all dilutive potential ordinary shares. The Company’s dilutive potential ordinary shares include stock grants.
52
KB Financial Group Inc.
Notes to Separate Interim Financial Statements
September 30, 2018 and 2017(Unaudited), and December 31, 2017
A calculation is done to determine the number of shares that could have been acquired at fair value (determined as the average market share price of the Company’s outstanding shares for the period) based on the monetary value of the subscription rights attached to the stock grants. The number of shares calculated above is compared with the number of shares that would have been issued assuming the exercise of stock grants.
Adjusted profit (loss) to calculate diluted earnings (loss) per share:
| (In Korean won) | 2018 | |||||||
| Three months | Nine months | |||||||
Profit (loss) attributable to ordinary shares | ||||||||
Adjustment | — | — | ||||||
|
|
|
| |||||
Adjusted profit (loss) for diluted earnings (loss) | ||||||||
|
|
|
| |||||
| (In Korean won) | 2017 | |||||||
| Three months | Nine months | |||||||
Profit (loss) attributable to ordinary shares | ||||||||
Adjustment | — | — | ||||||
|
|
|
| |||||
Adjusted profit (loss) for diluted earnings (loss) | ||||||||
|
|
|
| |||||
Adjusted weighted average number of ordinary shares outstanding to calculate diluted earnings (loss) per share:
| (In number of shares) | 2018 | |||||||
| Three months | Nine months | |||||||
Weighted average number of ordinary shares outstanding | 396,233,674 | 396,624,421 | ||||||
Adjustment | ||||||||
Stock grants | 2,130,765 | 2,304,578 | ||||||
Adjusted weighted average number of ordinary shares outstanding for diluted earnings (loss) per share | 398,364,439 | 398,928,999 | ||||||
| (In number of shares) | 2017 | |||||||
| Three months | Nine months | |||||||
Weighted average number of ordinary shares outstanding | 400,714,004 | 398,102,661 | ||||||
Adjustment | ||||||||
Stock grants | 2,054,206 | 2,175,864 | ||||||
Adjusted weighted average number of ordinary shares outstanding for diluted earnings (loss) per share | 402,768,210 | 400,278,525 | ||||||
53
KB Financial Group Inc.
Notes to Separate Interim Financial Statements
September 30, 2018 and 2017(Unaudited), and December 31, 2017
Diluted earnings per share : for the three-month and nine-month periods ended September 30, 2018 and 2017
| (in Korean won and in number of shares) | 2018 | |||||||
| Three months | Nine months | |||||||
Adjusted profit (loss) for diluted earnings (loss) per share | ||||||||
Adjusted weighted average number of ordinary shares outstanding for diluted earnings (loss) per share | 398,364,439 | 398,928,999 | ||||||
Diluted earnings (loss) per share | ||||||||
| (In Korean won and in number of shares) | 2017 | |||||||
| Three months | Nine months | |||||||
Adjusted profit (loss) for diluted earnings (loss) per share | ||||||||
Adjusted weighted average number of ordinary shares outstanding for diluted earnings (loss) per share | 402,768,210 | 400,278,525 | ||||||
Diluted earnings (loss) per share | ||||||||
28. Supplemental Cash Flow Information
Cash and cash equivalents as of September 30, 2018 and December 31, 2017, are as follows:
| (In millions of Korean won) | September 30, 2018 | December 31, 2017 | ||||||
Due from financial institutions | ||||||||
Restricted cash from financial institutions | (3 | ) | (3 | ) | ||||
|
|
|
| |||||
|
|
|
| |||||
Significantnon-cash transactions for the nine-month periods ended September 30, 2018 and 2017, are as follows:
| (In millions of Korean won) | 2018 | 2017 | ||||||
Changes in receivables and payables from consolidated tax | ||||||||
Changes in receivables and payables relating to share grants | (14,832 | ) | 25,196 | |||||
Reclassified from investments in associates to investments in subsidiaries | — | 1,053,690 | ||||||
Changes in investments in subsidiaries and capital in relation in stock exchange | — | 251,646 | ||||||
Cash inflows and outflows due to interest and dividends for the nine-month periods ended September 30, 2018 and 2017, are as follows:
| (In millions of Korean won) | Activity | 2018 | 2017 | |||||||||
Income tax paid | Operating | |||||||||||
Interest received | Operating | 4,401 | 2,985 | |||||||||
Interest paid | Operating | 86,297 | 68,030 | |||||||||
Dividends received | Operating | 1,099,776 | 718,656 | |||||||||
Dividends paid | Financing | 766,728 | 497,969 | |||||||||
54
KB Financial Group Inc.
Notes to Separate Interim Financial Statements
September 30, 2018 and 2017(Unaudited), and December 31, 2017
29. Contingent Liabilities and Commitments
Commitments made with financial institutions as of September 30, 2018 and December 31, 2017, are as follows:
| (In millions of Korean won) | September 30, 2018 | December 31, 2017 | ||||||||||||||
| Amount of commitment | Amounts borrowed | Amount of commitment | Amounts borrowed | |||||||||||||
Standard Chartered Bank Korea Ltd | ||||||||||||||||
NongHyup Bank | — | — | 150,000 | — | ||||||||||||
Woori Bank | — | — | 80,000 | — | ||||||||||||
KEB Hana Bank | 50,000 | — | 50,000 | — | ||||||||||||
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30. Related Party Transactions
Significant related party transactions for the nine-month periods ended September 30, 2018 and 2017, are as follows:
| (In millions of Korean won) | 2018 | 2017 | ||||||||||
Subsidiaries | Kookmin Bank | Interest income | 4,342 | 3,076 | ||||||||
Fee and commission income | 436 | 523 | ||||||||||
Net other operating income | 640,132 | 359,493 | ||||||||||
General and administrative expenses | 3,785 | 2,875 | ||||||||||
KB Life Insurance Co., Ltd. | General and administrative expenses | — | 13 | |||||||||
KB Securities Co., Ltd. | Net other operating income | 139,157 | — | |||||||||
General and administrative expenses | 795 | 638 | ||||||||||
KB Insurance Co., Ltd. | Net other operating income | 49,875 | 15,884 | |||||||||
General and administrative expenses | 724 | 651 | ||||||||||
KB Kookmin Card Co., Ltd. | Net other operating income | 180,044 | 250,056 | |||||||||
General and administrative expenses | 616 | 364 | ||||||||||
Netnon-operating income | 1 | 3 | ||||||||||
KB Asset Management Co., Ltd. | Net other operating income | 50,000 | 50,000 | |||||||||
KB Capital Co., Ltd. | Net gains on financial assets at fair value through profit or loss (under Korean IFRS 1039) | — | 3,777 | |||||||||
Net gains on financial assets at fair value through profit or loss | 13,865 | — | ||||||||||
| Net other operating income | 10,746 | 5,590 | ||||||||||
| General and administrative expenses | — | 34 | ||||||||||
| KB Savings Bank Co., Ltd. | Net other operating income | 8,802 | 5,521 | |||||||||
| KB Real Estate Trust. Co., Ltd. | Net other operating income | 10,800 | 20,000 | |||||||||
| KB Investment Co., Ltd. | Interest income | 344 | 44 | |||||||||
| Net other operating income | — | 3,000 | ||||||||||
| KB Data Systems Co., Ltd. | General and administrative expenses | 1067 | 897 | |||||||||
Significant receivables and payables, and related allowance for loan losses arising from the related party transactions as of September 30, 2018 and December 31, 2017, are as follows:
55
KB Financial Group Inc.
Notes to Separate Interim Financial Statements
September 30, 2018 and 2017(Unaudited), and December 31, 2017
| (In millions of Korean won) | September 30, 2018 | December 31, 2017 | ||||||||||
Subsidiaries | Kookmin Bank | Cash and due from financial institutions | 210,642 | 46,062 | ||||||||
Other assets | 576,595 | 283,610 | ||||||||||
Other liabilities | 3,140 | 2,837 | ||||||||||
KB Securities Co., Ltd. | Other assets | 30,628 | 18,630 | |||||||||
Other liabilities | 795 | 26,192 | ||||||||||
KB Insurance Co., Ltd. | Other assets | 41,475 | 13,991 | |||||||||
Other liabilities | 402 | — | ||||||||||
KB Kookmin Card Co., Ltd. | Other assets | 46,146 | 107,637 | |||||||||
Other liabilities | 1,280 | 569 | ||||||||||
KB Life Insurance Co., Ltd. | Other assets | 5,796 | 5,404 | |||||||||
Other liabilities | 5,012 | 7,647 | ||||||||||
KB Asset Management Co., Ltd. | Other assets | 10,771 | 23,223 | |||||||||
KB Capital Co., Ltd. | Financial assets at fair value through profit or loss (under Korean IFRS 1039) | — | 284,485 | |||||||||
Financial assets at fair value through profit or loss | 288,157 | — | ||||||||||
Other assets | 14,329 | 4,928 | ||||||||||
KB Savings Bank Co., Ltd. | Other assets | 1,290 | 4,824 | |||||||||
KB Real Estate Trust Co., Ltd. | Other assets | 13,999 | 12,488 | |||||||||
KB Investment Co., Ltd. | Loans at amortized cost | 50,000 | 10,000 | |||||||||
Other assets | 1,400 | 1,481 | ||||||||||
Other liabilities | 277 | — | ||||||||||
KB Credit Information Co., Ltd. | Other assets | 1,148 | 1,160 | |||||||||
Other liabilities | — | 16 | ||||||||||
KB Data Systems Co., Ltd. | Tangible assets | 6 | 214 | |||||||||
Other assets | 2,155 | 2,735 | ||||||||||
Other liabilities | 272 | 98 | ||||||||||
According to Korean IFRS 1024, the Company includes subsidiaries and key management (including family members) in the scope of related parties. Additionally, the Company discloses balances (receivables and payables) and other amounts arising from the related party transactions in the notes to the separate financial statements. Refer to Note 9 for details on subsidiaries.
Key management includes the directors of the Company, their close family members, and the companies where the directors and/or their close family members have control or joint control.
Unused commitments by a related party as of September 30, 2018 and December 31, 2017, are as follows:
| (In millions of Korean won) | September 30, 2018 | December 31, 2017 | ||||||||||
| Subsidiary | KB Kookmin Card Co., Ltd. | Unused commitments of credit card | ||||||||||
56
KB Financial Group Inc.
Notes to Separate Interim Financial Statements
September 30, 2018 and 2017(Unaudited), and December 31, 2017
Compensation to key management for the nine-month periods ended September 30, 2018 and 2017, consists of:
| (In millions of Korean won) | 2018 | |||||||||||||||
Short-term employee benefits | Post- employment benefits | Share-based payments | Total | |||||||||||||
Registered director (executive) | ||||||||||||||||
Registered director(non-executive) | 421 | — | — | 421 | ||||||||||||
Non-registered director | 1,807 | 46 | 641 | 2,494 | ||||||||||||
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| (In millions of Korean won) | 2017 | |||||||||||||||
Short-term employee benefits | Post- employment benefits | Share-based payments | Total | |||||||||||||
Registered director (executive) | ||||||||||||||||
Registered director(non-executive) | 382 | — | — | 382 | ||||||||||||
Non-registered director | 2,558 | 97 | 4,222 | 6,877 | ||||||||||||
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