UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE13a-16 OR15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the month of March 2019
Commission File Number:000-53445
KB Financial Group Inc.
(Translation of registrant’s name into English)
26,Gukjegeumyung-ro8-gil,Yeongdeungpo-gu, Seoul 07331, Korea
(Address of principal executive office)
Indicate by check mark whether the registrant files or will file annual reports under cover ofForm 20-F orForm 40-F.
Form 20-F ☒ Form 40-F ☐
Indicate by check mark if the registrant is submitting theForm 6-K in paper as permitted byRegulation S-T Rule 101(b)(1): ☐
Note: RegulationS-T Rule 101(b)(1) only permits the submission in paper of a Form6-K if submitted solely to provide an attached annual report to security holders.
Indicate by check mark if the registrant is submitting theForm 6-K in paper as permitted byRegulation S-T Rule 101(b)(7): ☐
Note: RegulationS-T Rule 101(b)(7) only permits the submission in paper of a Form6-K if submitted to furnish a report or other document that the registrant foreign private issuer must furnish and make public under the laws of the jurisdiction in which the registrant is incorporated, domiciled or legally organized (the registrant’s “home country”), or under the rules of the home country exchange on which the registrant’s securities are traded, as long as the report or other document is not a press release, is not required to be and has not been distributed to the registrant’s security holders, and, if discussing a material event, has already been the subject of a Form6-K submission or other Commission filing on EDGAR.
Audit Report of Kookmin Bank for Fiscal Year 2018
On March 12, 2019, KB Financial Group Inc. disclosed audit reports of Kookmin Bank, its wholly-owned subsidiary, for fiscal year 2018 based on the International Financial Reporting Standards as adopted by the Republic of Korea (including the consolidated and separate financial statements of Kookmin Bank as of and for the years ended December 31, 2018 and 2017 and related notes) received from Samil PricewaterhouseCoopers, its independent auditor. The financial statements in such reports have not been approved by the shareholders of Kookmin Bank and remain subject to change.
KB Financial Group Inc. is furnishing the following documents as exhibits to this Form6-K filing:
Exhibit 99.1:An English-language translation of the Consolidated Audit Report of Kookmin Bank for FY 2018.
Exhibit 99.2:An English-language translation of the Separate Audit Report of Kookmin Bank for FY 2018.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
KB Financial Group Inc. | ||||||
| (Registrant) | ||||||
| Date: March 12, 2019 | By: | /s/Ki-Hwan Kim | ||||
| (Signature) | ||||||
| Name:Ki-Hwan Kim | ||||||
| Title: Deputy President and Chief Finance Officer | ||||||
Kookmin Bank and Subsidiaries
Index
December 31, 2018 and 2017
| Page(s) | ||||
| 1~3 | ||||
Consolidated Financial Statements | ||||
| 4 | ||||
| 5 | ||||
| 6 | ||||
| 7 | ||||
| 8~196 | ||||
(English Translation of a Report Originally Issued in Korean)
To the Board of Directors and Shareholder of Kookmin Bank
Opinion
We have audited the accompanying consolidated financial statements of Kookmin Bank and its subsidiaries (collectively referred to as the “Group”), which comprise the consolidated statements of financial position as at December 31, 2018 and 2017 and the consolidated statements of comprehensive income, changes in equity and cash flows for the years then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies and other explanatory information.
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as at December 31, 2018 and 2017, and its consolidated financial performance and cash flows for the years then ended in accordance with International Financial Reporting Standards as adopted by the Republic of Korea (Korean IFRS)
Basis for Opinion
We conducted our audits in accordance with Korean Standards on Auditing. Our responsibilities under those standards are further described in theAuditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Group in accordance with the ethical requirements of the Republic of Korea that are relevant to our audit of the consolidated financial statements and we have fulfilled our other ethical responsibilities in accordance with the ethical requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Other Matter
Auditing standards and their application in practice vary among countries. The procedures and practices used in the Republic of Korea to audit such consolidated financial statements may differ from those generally accepted and applied in other countries.
1
Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with Korean IFRS, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations.
Those charged with governance are responsible for overseeing the Group’s financial reporting process.
Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Korean Standards on Auditing will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.
As part of an audit in accordance with Korean Standards on Auditing, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
| • | Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. |
| • | Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. |
| • | Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. |
| • | Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern. |
2
| • | Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation. |
| • | Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the Group audit. We remain solely responsible for our audit opinion. |
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
/s/ Samil PricewaterhouseCoopers
Seoul, Korea
March 11, 2019
This report is effective as ofMarch 11, 2019,the audit report date. Certain subsequent events or circumstances, which may occur between the audit report date and the time of reading this report, could have a material impact on the accompanying consolidated financial statements and notes thereto. Accordingly, the readers of the audit report should understand that there is a possibility that the above audit report may have to be revised to reflect the impact of such subsequent events or circumstances, if any.
3
Kookmin Bank and Subsidiaries
Consolidated Statements of Financial Position
Years Ended December 31, 2018 and 2017
| (In millions of Korean won) | Notes | 20181 | 2017 | |||||||||
Assets | ||||||||||||
Cash and due from financial institutions | 4,6,7,36 | 14,889,010 | 15,646,318 | |||||||||
Financial assets at fair value through profit or loss (Under Korean IFRS 1039) | 4,6,12 | — | 8,408,730 | |||||||||
Financial assets at fair value through profit or loss | 4,6,8,12 | 12,257,005 | — | |||||||||
Derivative financial assets | 4,6,9 | 1,613,970 | 2,607,659 | |||||||||
Loans at amortized cost | 4,6,8,10,11 | 276,944,202 | 251,710,605 | |||||||||
Financial investments | 4,6,8,12 | 42,723,480 | 40,815,674 | |||||||||
Investments in associates | 13 | 506,664 | 345,892 | |||||||||
Property and equipment | 14 | 3,127,666 | 3,015,594 | |||||||||
Investment property | 8,14 | 257,924 | 337,500 | |||||||||
Intangible assets | 15 | 224,208 | 217,608 | |||||||||
Current income tax assets | 32 | 4,638 | 3,209 | |||||||||
Deferred income tax assets | 16,32 | 3,131 | 2,050 | |||||||||
Assets held for sale | 18 | 16,952 | 155,506 | |||||||||
Other assets | 4,6,17 | 4,390,408 | 6,499,582 | |||||||||
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Total assets | 356,959,258 | 329,765,927 | ||||||||||
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Liabilities | ||||||||||||
Financial liabilities at fair value through profit or loss (Under Korean IFRS 1039) | 4,6 | — | 74,191 | |||||||||
Financial liabilities at fair value through profit or loss | 4,6 | 87,168 | — | |||||||||
Derivative financial liabilities | 4,6,9 | 1,642,409 | 2,608,820 | |||||||||
Deposits | 4,6,19 | 272,484,528 | 252,478,931 | |||||||||
Debts | 4,6,20 | 17,496,055 | 15,810,753 | |||||||||
Debentures | 4,6,21 | 23,163,585 | 19,183,798 | |||||||||
Provisions | 22 | 308,374 | 358,192 | |||||||||
Net defined benefit liabilities | 23 | 166,605 | 8,568 | |||||||||
Current income tax liabilities | 32 | 5,737 | 3,543 | |||||||||
Deferred income tax liabilities | 16,32 | 120,867 | 172,131 | |||||||||
Other liabilities | 4,6,24,30 | 14,816,064 | 13,743,566 | |||||||||
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Total liabilities | 330,291,392 | 304,442,493 | ||||||||||
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Equity | ||||||||||||
Capital stock | 25 | 2,021,896 | 2,021,896 | |||||||||
Capital surplus | 25 | 5,218,788 | 5,219,693 | |||||||||
Accumulated other comprehensive income | 25, 34 | 115,784 | 678,094 | |||||||||
Retained earnings | 25, 33 | 19,311,398 | 17,403,751 | |||||||||
(Provision of regulatory reserve for credit losses | ||||||||||||
December 31, 2018 : | ||||||||||||
December 31, 2017 : | ||||||||||||
(Amounts estimated to be appropriated | ||||||||||||
December 31, 2018 : | ||||||||||||
December 31, 2017 : | ||||||||||||
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Equity attributable to the shareholder of the Parent Company |
| 26,667,866 | 25,323,434 | |||||||||
Non-controlling interest equity | — | — | ||||||||||
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Total equity | 26,667,866 | 25,323,434 | ||||||||||
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Total liabilities and equity | 356,959,258 | 329,765,927 | ||||||||||
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| 1 | The consolidated statement of financial position as at December 31, 2018 is prepared applying Korean IFRS 1109, and the comparative consolidated statement of financial position as at December 31, 2017 has not been restated retrospectively as permitted by the transitional provisions of Korean IFRS 1109. |
The accompanying notes are an integral part of these consolidated financial statements.
4
Kookmin Bank and Subsidiaries
Consolidated Statements of Comprehensive Income
Years Ended December 31, 2018 and 2017
| (In millions of Korean won) | Notes | 20181 | 2017 | |||||||||
Interest income | 10,019,888 | 8,508,893 | ||||||||||
Interest income from financial instruments at fair value through other comprehensive income and amortized cost | 9,797,583 | — | ||||||||||
Interest income from financial instruments at fair value through profit or loss | 222,305 | — | ||||||||||
Interest income from loans and receivables | — | 8,338,424 | ||||||||||
Interest income from financial instruments at fair value through profit or loss (Under Korean IFRS 1039) | — | 170,469 | ||||||||||
Interest expense | (3,919,166 | ) | (2,944,109 | ) | ||||||||
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Net interest income | 26 | 6,100,722 | 5,564,784 | |||||||||
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Fee and commission income | 1,422,791 | 1,471,480 | ||||||||||
Fee and commission expense | (300,043 | ) | (246,791 | ) | ||||||||
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Net fee and commission income | 27 | 1,122,748 | 1,224,689 | |||||||||
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Net losses on financial instruments at fair value through profit or loss (Under Korean IFRS 1039) | 28 | — | (71,207 | ) | ||||||||
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Net gains on financial instruments at fair value through profit or loss | 28 | 326,395 | — | |||||||||
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Net other operating expenses | 29 | (696,486 | ) | (288,087 | ) | |||||||
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General and administrative expenses | 14,15,23,30,40 | (3,766,995 | ) | (3,665,822 | ) | |||||||
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Operating profit before provision for credit losses | 3,086,384 | 2,764,357 | ||||||||||
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Provision for credit losses | 7,11,12,17,22 | (93,916 | ) | (115,166 | ) | |||||||
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Operating profit | 2,992,468 | 2,649,191 | ||||||||||
Share of profit of associates | 13 | 49,698 | 37,571 | |||||||||
Net othernon-operating income | 31 | 44,172 | (73,467 | ) | ||||||||
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Netnon-operating profit | 93,870 | (35,896 | ) | |||||||||
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Profit before income tax expense | 3,086,338 | 2,613,295 | ||||||||||
Income tax expense | 32 | (827,140 | ) | (438,590 | ) | |||||||
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Profit for the year | 2,259,198 | 2,174,705 | ||||||||||
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(Adjusted profit after provision of regulatory reserve for credit losses | 25 | |||||||||||
2018 : | ||||||||||||
2017 : | ||||||||||||
Items that will not be reclassified to profit or loss: | ||||||||||||
Remeasurements of net defined benefit liabilities | 23 | (95,796 | ) | 14,177 | ||||||||
Net losses on equity instruments at fair value through other comprehensive income | (36,013 | ) | — | |||||||||
Items that may be subsequently reclassified to profit or loss: |
| |||||||||||
Currency translation adjustments | 27,383 | (67,106 | ) | |||||||||
Gains on valuation of financial investments | — | 110,188 | ||||||||||
Net gains on debt instruments at fair value through other comprehensive income | 57,188 | — | ||||||||||
Share of other comprehensive income(loss) of associates |
| (3,383 | ) | 91,839 | ||||||||
Gains (losses) on hedging instruments of net investments in foreign operations |
| (25,386 | ) | 26,719 | ||||||||
Gains on cash flow hedging instruments | 3,788 | 7,414 | ||||||||||
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Other comprehensive income for the year, net of tax | 34 | (72,219 | ) | 183,231 | ||||||||
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Total comprehensive income for the year | 2,186,979 | 2,357,936 | ||||||||||
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Profit attributable to: | ||||||||||||
Shareholder of the Parent Company | 2,259,198 | 2,174,705 | ||||||||||
Non-controlling interests | — | — | ||||||||||
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| 2,259,198 | 2,174,705 | |||||||||||
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Total comprehensive income for the year attributable to: |
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Shareholder of the Parent Company | 2,186,979 | 2,357,936 | ||||||||||
Non-controlling interests | — | — | ||||||||||
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| 2,186,979 | 2,357,936 | |||||||||||
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| 1 | The consolidated statements of comprehensive income for the year ended December 31, 2018 are prepared applying Korean IFRS 1109, and the comparative consolidated statements of comprehensive income for the year ended December 31, 2017 have not been restated retrospectively as permitted by transitional provisions of Korean IFRS 1109. |
The accompanying notes are an integral part of these consolidated financial statements.
5
Kookmin Bank and Subsidiaries
Consolidated Statements of Changes in Equity
Years Ended December 31, 2018 and 2017
| Attributable to the shareholder of the Parent Company | ||||||||||||||||||||||||||||
| (In millions of Korean won) | Notes | Capital Stock | Capital Surplus | Accumulated Other Comprehensive Income | Retained Earnings | Non-controlling interests | Total Equity | |||||||||||||||||||||
Balance at January 1, 2017 | 2,021,896 | 5,219,704 | 494,863 | 15,588,539 | — | 23,325,002 | ||||||||||||||||||||||
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Comprehensive income for the year | ||||||||||||||||||||||||||||
Profit for the year | — | — | — | 2,174,705 | — | 2,174,705 | ||||||||||||||||||||||
Remeasurements of net defined benefit liabilities | — | — | 14,177 | — | — | 14,177 | ||||||||||||||||||||||
Currency translation adjustments | — | — | (67,106 | ) | — | — | (67,106 | ) | ||||||||||||||||||||
Gains on valuation of financial investments | — | — | 110,188 | — | — | 110,188 | ||||||||||||||||||||||
Share of other comprehensive income of associates | — | — | 91,839 | — | — | 91,839 | ||||||||||||||||||||||
Gains on hedging instruments of a net investment in a foreign operation | — | — | 26,719 | — | — | 26,719 | ||||||||||||||||||||||
Gains on cash flow hedging instruments | — | — | 7,414 | — | — | 7,414 | ||||||||||||||||||||||
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Total comprehensive income for the year | — | — | 183,231 | 2,174,705 | — | 2,357,936 | ||||||||||||||||||||||
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Transactions with the shareholder | ||||||||||||||||||||||||||||
Dividends | — | — | — | (359,493 | ) | — | (359,493 | ) | ||||||||||||||||||||
Changes in ownership of subsidiaries | — | (11 | ) | — | — | — | (11 | ) | ||||||||||||||||||||
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Total transactions with the shareholder | — | (11 | ) | — | (359,493 | ) | — | (359,504 | ) | |||||||||||||||||||
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Balance at December 31, 2017 | 2,021,896 | 5,219,693 | 678,094 | 17,403,751 | — | 25,323,434 | ||||||||||||||||||||||
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Balance at January 1, 2018 | 2,021,896 | 5,219,693 | 678,094 | 17,403,751 | — | 25,323,434 | ||||||||||||||||||||||
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The effect of changes in accounting policies | 42 | — | — | (490,091 | ) | 274,943 | — | (215,148 | ) | |||||||||||||||||||
Balance after reflecting the change of accounting policies | 2,021,896 | 5,219,693 | 188,003 | 17,678,694 | — | 25,108,286 | ||||||||||||||||||||||
Comprehensive income for the year | ||||||||||||||||||||||||||||
Profit for the year | — | — | — | 2,259,198 | — | 2,259,198 | ||||||||||||||||||||||
Remeasurements of net defined benefit liabilities | — | — | (95,796 | ) | — | — | (95,796 | ) | ||||||||||||||||||||
Net gains on equity instruments at fair value through other comprehensive income | — | — | (36,013 | ) | 13,638 | — | (22,375 | ) | ||||||||||||||||||||
Currency translation adjustments | — | — | 27,383 | — | — | 27,383 | ||||||||||||||||||||||
Net gains on debt instruments at fair value through other comprehensive income | — | — | 57,188 | — | — | 57,188 | ||||||||||||||||||||||
Share of other comprehensive loss of associates | — | — | (3,383 | ) | — | — | (3,383 | ) | ||||||||||||||||||||
Losses on hedging instruments of net investments in foreign operations | — | — | (25,386 | ) | — | — | (25,386 | ) | ||||||||||||||||||||
Gains on cash flow hedging instruments | — | — | 3,788 | — | — | 3,788 | ||||||||||||||||||||||
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Total comprehensive income for the year | — | — | (72,219 | ) | 2,272,836 | — | 2,200,617 | |||||||||||||||||||||
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Transactions with the shareholder | ||||||||||||||||||||||||||||
Dividends | — | — | — | (640,132 | ) | — | (640,132 | ) | ||||||||||||||||||||
Changes in ownership of subsidiaries | — | (905 | ) | — | — | — | (905 | ) | ||||||||||||||||||||
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Total transactions with the shareholder | — | (905 | ) | — | (640,132 | ) | — | (641,037 | ) | |||||||||||||||||||
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Balance at December 31, 2018 | 2,021,896 | 5,218,788 | 115,784 | 19,311,398 | — | 26,667,866 | ||||||||||||||||||||||
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| 1 | The consolidated statement of changes in equity for the year ended December 31, 2018 is prepared applying Korean IFRS 1109, and the comparative consolidated statement of changes in equity for the year ended December 31, 2017 has not been restated retrospectively as permitted by transitional provisions of Korean IFRS 1109. |
The accompanying notes are an integral part of these consolidated financial statements.
6
Kookmin Bank and Subsidiaries
Consolidated Statements of Cash Flows
Years Ended December 31, 2017 and 2016
| (In millions of Korean won) | Notes | 20181 | 2017 | |||||||
Cash flows from operating activities | ||||||||||
Profit for the year | 2,259,198 | 2,174,705 | ||||||||
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Adjustment fornon-cash items | ||||||||||
Net losses on financial assets/liabilities at fair value through profit or loss (Under Korean IFRS 1039) | — | 39,455 | ||||||||
Net gains on financial assets/liabilities at fair value through profit or loss | (56,385 | ) | — | |||||||
Net losses (gains) on derivative financial investments for hedging purposes | 41,522 | (17,327 | ) | |||||||
Adjustment of fair value of derivative financial instruments | 410 | (1,000 | ) | |||||||
Provision for credit losses | 93,916 | 115,166 | ||||||||
Net losses (gains) on financial investments | (88,079 | ) | 69,390 | |||||||
Share of profit of associates and subsidiaries | (49,698 | ) | (37,570 | ) | ||||||
Depreciation and amortization expense | 246,488 | 236,436 | ||||||||
Other net losses (gains) on property and equipment/intangible assets | (139,092 | ) | 15,258 | |||||||
Share-based payment | 4,051 | 33,148 | ||||||||
Post-employment benefits | 140,877 | 147,470 | ||||||||
Net interest expense | 250,854 | 274,832 | ||||||||
Gains on foreign currency translation | (9,004 | ) | (301,414 | ) | ||||||
Other expense | 16,356 | 47,666 | ||||||||
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| 452,216 | 621,510 | |||||||||
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Changes in operating assets and liabilities | ||||||||||
Financial assets at fair value through profit or loss (Under Korean IFRS 1039) | — | (623,731 | ) | |||||||
Financial assets at fair value through profit or loss | (2,983,784 | ) | — | |||||||
Derivative financial instrument | (9,867 | ) | (2,785 | ) | ||||||
Loans at amortized cost | (25,553,376 | ) | (16,964,006 | ) | ||||||
Current income tax assets | (1,416 | ) | 8,728 | |||||||
Deferred income tax assets | (649 | ) | 44,807 | |||||||
Other assets | 1,622,046 | (2,439,559 | ) | |||||||
Financial liabilities at fair value through profit or loss (Under Korean IFRS 1039) | — | 953 | ||||||||
Financial liabilities at fair value through profit or loss | 10,419 | — | ||||||||
Deposits | 19,633,557 | 17,722,080 | ||||||||
Deferred income tax liabilities | 56,200 | 83,671 | ||||||||
Other liabilities | 975,835 | (1,360,225 | ) | |||||||
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| (6,251,035 | ) | (3,530,067 | ) | |||||||
|
|
|
| |||||||
Net cash outflow from operating activities | (3,539,621 | ) | (733,852 | ) | ||||||
|
|
|
| |||||||
Cash flows from investing activities | ||||||||||
Net cash flows from derivative financial instrument for hedging purposes | (14,918 | ) | (23,490 | ) | ||||||
Disposal of financial assets at fair value through profit or loss | 8,303,648 | — | ||||||||
Acquisition of financial assets at fair value through profit or loss | (6,220,238 | ) | — | |||||||
Disposal of financial investments | 53,180,839 | 33,006,057 | ||||||||
Acquisition of financial investments | (57,553,020 | ) | (38,243,965 | ) | ||||||
Disposal of investments in associates | 44,865 | 87,443 | ||||||||
Acquisition of investments in associates | (159,320 | ) | (23,540 | ) | ||||||
Disposal of property and equipment | 1,724 | (58 | ) | |||||||
Acquisition of property and equipment | (333,949 | ) | (218,080 | ) | ||||||
Acquisition of investment property | (179 | ) | (262 | ) | ||||||
Disposal of investment property | 139,639 | — | ||||||||
Disposal of intangible assets | 1,425 | 487 | ||||||||
Acquisition of intangible assets | (53,057 | ) | (51,398 | ) | ||||||
Net cash flows from changes in ownership of subsidiaries | 14,280 | 158,858 | ||||||||
Others | 301,012 | 210,834 | ||||||||
|
|
|
| |||||||
Net cash outflow from investing activities | (2,347,249 | ) | (5,097,114 | ) | ||||||
|
|
|
| |||||||
Cash flows from financing activities | ||||||||||
Net cash flows from derivative financial instrument for hedging purposes | (17,698 | ) | 5,804 | |||||||
Net increase in debts | 1,517,015 | 746,719 | ||||||||
Increase in debentures | 14,209,940 | 13,594,668 | ||||||||
Decrease in debentures | (10,414,512 | ) | (9,026,842 | ) | ||||||
Payment of dividends | (640,132 | ) | (359,493 | ) | ||||||
Net increase(decrease) in other payables from trust accounts | 267,076 | 587,523 | ||||||||
Others | (220,618 | ) | 215,662 | |||||||
|
|
|
| |||||||
Net cash inflow from financing activities | 4,701,071 | 5,764,041 | ||||||||
|
|
|
| |||||||
Exchange gains (losses) on cash and cash equivalents | (35,660 | ) | (193,279 | ) | ||||||
|
|
|
| |||||||
Net decrease in cash and cash equivalents | (1,221,459 | ) | (260,204 | ) | ||||||
Cash and cash equivalents at the beginning of the year | 36 | 6,077,954 | 6,338,158 | |||||||
|
|
|
| |||||||
Cash and cash equivalents at the end of the year | 36 | 4,856,495 | 6,077,954 | |||||||
|
|
|
| |||||||
| 1 | The consolidated statement of cash flows for the year ended December 31, 2018 is prepared applying Korean IFRS 1109, and the comparative consolidated statement of cash flows for the year ended December 31, 2017 has not been restated retrospectively as permitted by transitional provisions of Korean IFRS 1109. |
The accompanying notes are an integral part of these consolidated financial statements.
7
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
1. The Bank
Kookmin Bank (the “Bank” or the “Parent Company”) was incorporated in 1963 under the Citizens National Bank Act to provide banking services to the general public and to small andmedium-sized enterprises. Pursuant to the Repeal Act of the Citizens National Bank Act, effective January 5, 1995, the Bank’s status changed to a financial institution which operates under the Banking Act and Commercial Act.
The Bank merged with Korea Long Term Credit Bank on December 31, 1998, and with its subsidiaries, Daegu, Busan, Jeonnam Kookmin Mutual Savings & Finance Co., Ltd., on August 22, 1999. Pursuant to the directive from the Financial Services Commission related to the Structural Improvement of the Financial Industry Act, the Bank acquired certain assets, including performing loans, and assumed most of the liabilities of Daedong Bank on June 29, 1998. Also, the Bank completed the merger with Housing and Commercial Bank (“H&CB”) on October 31, 2001, and merged with Kookmin Credit Card Co., Ltd., a majority-owned subsidiary, on September 30, 2003. Meanwhile, the Bank spun off its credit card business segment on February 28, 2011, and KB Kookmin Card Co., Ltd. became a subsidiary of KB Financial Group Inc.
The Bank listed its shares on the Stock Market Division of the Korea Exchange (“KRX,” formerly Korea Stock Exchange) in September 1994. As a result of the merger with H&CB, the shareholder of the former Kookmin Bank and H&CB received new common shares of the Bank which were relisted on the KRX on November 9, 2001. In addition, H&CB listed its American Depositary Shares (“ADS”) on the New York Stock Exchange (“NYSE”) on October 3, 2000, prior to the merger. Following the merger with H&CB, the Bank listed its ADS on the NYSE on November 1, 2001. The Bank became a wholly owned subsidiary of KB Financial Group Inc. through a comprehensive stock transfer on September 29, 2008. Subsequently, the Bank’s shares and its ADS, each listed on the KRX and the NYSE, were delisted on October 10, 2008 and September 26, 2008, respectively. As at December 31, 2018, the Bank’spaid-in capital isW2,021,896 million.
The Bank engages in the banking business in accordance with the Banking Act, trust business in accordance with the Financial Investment Services and Capital Markets Act, and other relevant businesses. As at December 31, 2018, the Bank operates 1,057 domestic branches and offices, and six overseas branches (excluding four subsidiaries and three offices).
8
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
2. Basis of Preparation
2.1 Application of Korean IFRS
The Group maintains its accounting records in Korean won and prepares statutory financial statements in the Korean language (Hangul) in accordance with Korean IFRS. The accompanying consolidated financial statements have been condensed, restructured and translated into English from the Korean language financial statements.
The consolidated financial statements of the Bank and its subsidiaries (collectively the “Group”) have been prepared in accordance with Korean IFRS. These are the standards and related interpretations issued by the International Accounting Standards Board (“IASB”) that have been adopted by the Republic of Korea.
The preparation of the consolidated financial statements requires the use of certain critical accounting estimates. It also requires management to exercise judgment in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in Note 2.4.
The Group newly applied the following amended and enacted standards and interpretations from January 1, 2018, and these applications do not have any material impact on the consolidated financial statements, except for the adoption of Korean IFRS 1109Financial Instruments.
| • | Amendments to Korean IFRS 1028Investments in Associates and Joint Ventures |
When an investment in an associate or a joint venture is held by, or it held indirectly through, an entity that is a venture capital organization, or a mutual fund and similar entities, the entity may elect to measure that investment at fair value through profit or loss. The amendments clarify that an entity shall make this election separately for each associate of joint venture, at initial recognition of the associate or joint venture.
| • | Amendments to Korean IFRS 1040Transfers of Investment Property |
Paragraph 57 of Korean IFRS 1040 clarifies that a transfer to, or from, investment property, including property under construction, can only be made if there has been a change in use that is supported by evidence, and provides a list of circumstances as examples.
| • | Amendments to Korean IFRS 1102Share-based Payment |
The amendments clarify 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 Interpretation 2122Foreign Currency Transactions and Advance Consideration |
According to the enactment, 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 payment or receipt of advance consideration. If there are multiple payments or receipts in advance, the entity shall determine a date of the transaction for each payment or receipt of advance consideration.
9
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
| • | Amendments to Korean IFRS 1109Financial Instruments |
The Group adopted Korean IFRS 1109Financial Instruments with a date of initial application of January 1, 2018. As permitted by the transitional provisions of Korean IFRS 1109, comparative periods have not been restated. The Group recognized the difference between the previous carrying amount and the carrying amount at the date of initial application in equity as at January 1, 2018.
For the detail impacts of the adoption of Korean IFRS 1109, see Note 42.
| • | Enactment of Korean IFRS 1115 Revenue from Contracts with Customers |
The Group has adopted Korean IFRS 1115,Revenue from Contracts with Customers from January 1, 2018. The new standard for revenue recognition replaced Korean IFRS 1018Revenue, Korean IFRS 1011Construction Contracts, Interpretation 2031Revenue-Barter Transactions Involving Advertising Services, Interpretation 2113Customer Loyalty Programs, Interpretation 2115Agreements for the Construction of Real Estate and Interpretation 2118Transfers of Assets from Customers.
The Group has changed the following accounting policy for the period beginning on January 1, 2018.
| • | Presentation of interest income arising from financial assets at fair value through profit or loss |
The Group previously recognized interest income arising from financial assets at fair value through profit or loss (under Korean IFRS 1039) as net gains (losses) of financial assets/liabilities at fair value through profit or loss (under Korean IFRS 1039) in the statement of comprehensive income. From January 1, 2018, the Group changed the accounting policy and corresponding interest income is presented as a part of interest income in the statement of comprehensive income. The Group believes the change in accounting policy provides more relevant information. The statements of comprehensive income for the year ended December 31, 2017 have been restated by adjusting classification of interest income.
This change in accounting policy does not have any impact on the statements of financial position as at December 31, 2018 and 2017 and profit for the years ended December 31, 2018 and 2017. The impacts on the statements of comprehensive income for the years ended December 31, 2018 and 2017, are as follows:
| (in millions of Korean won) | 2018 | 2017 | ||||||
Increase in interest income | 222,305 | 170,469 | ||||||
Decrease in net gains on financial instruments at fair value through profit or loss (under Korean IFRS 1109) | (222,305 | ) | — | |||||
Decrease in net gains on financial instruments at fair value through profit or loss (under Korean IFRS 1039) | — | (170,469 | ) | |||||
10
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
Certain new accounting standards and interpretations that have been published but are not mandatory for the reporting period commencing January 1, 2018 and have not been early adopted by the Group 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 1017 Leases, Interpretation 2104Determining whether an Arrangement contains a Lease, Interpretation 2015Operating Leases-Incentives, and Interpretation 2027Evaluating the Substance of TransactionsInvolving the Legal Form of a Lease.
At inception of a contract, the Group shall assess whether the contract is, or contains, a lease. Also, at the date of initial application, the Group shall assess whether the contract is, or contains, a lease in accordance with the standard. However, the Group may not need to reassess all contracts with applying the practical expedient that can be applied to contracts entered before the date of initial application. On the basis of the date of initial application, the Group will assess whether the contract is , or contains, a lease.
For a contract that is, or contains, a lease, the Group shall account for each lease component within the contract as a lease separately fromnon-lease components of the contract. 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. For the all (or partial) contracts that are, or contain, a lease, the Group plans to apply the practical expedient to account for each lease component and any associatednon-lease components as a single lease component.
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). The Group plans to apply the recognition exemption for the short-term contracts of leasing realty for training purposes (a lease term of 12 months or less at the commencement date) and leases for which the underlying asset is of low value (e.g. underlying assets below \5,000,000 or $5,000). For sale and leaseback transactions, an entity (the seller-lessee) shall apply the requirements for determining when a performance obligation is satisfied in Korean IFRS 1115Revenue from Contracts with Customers to determine whether the transfer of an asset is accounted for as a sale of that asset. The entity shall not reassess sale and leaseback transactions entered into before the date of initial application.
The accounting treatment as a lessor did not change significantly from the one under Korean IFRS 1017 Leases. The Group expects the effect on the financial statements applying the new standard will not be significant as accounting for the Group, as a lessor, will not significantly change.
A lessee shall apply this standard to its leases either (a) retrospectively to each prior reporting period presented applying Korean IFRS 1008Accounting Policies, Changes in Accounting Estimates and Errors(Full retrospective application); or (b) with the cumulative effect of initially applying the standard being recognized at the date of initial application.
11
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
The Group plans to apply Korean IFRS 1116 retrospectively with the cumulative effect of initially applying the standard and as such will not restate any comparative information.
The Group performed an impact assessment to identify potential financial effects of applying Korean IFRS 1116. The assessment was performed based on available information as at December 31, 2018 to identify effects on 2019 financial statements.
The total minimum lease payment expected to be paid by the Group in relation to operating leases before discounted to their present value is \ 344,297 million. When the payment is discounted at incremental borrowing rate of the lessee, the total minimum lease payment amounts to \ 330,644 million. Based on the impact assessment, the Group expects the underlying leased asset and a lease liability as at December 31, 2018 to be increased by \ 363,869 million and \ 330,644 million, respectively. The difference between theright-of-use asset and the lease liability is arising from the adjustments made at theright-of-use asset for the lease contracts entered before the date of the adoption of this standard.
The impact assessment may change due to additional information that the Group may obtain after the assessment.
| • | Korean IFRS 1109 Financial Instruments |
The narrow-scope amendments made to Korean IFRS 1109 Financial Instruments enable entities to measure certain prepayable financial assets with negative compensation at amortized cost. When a modification of a financial liability measured at amortized cost that does not result in the derecognition, a modification gain or loss shall be recognized in profit or loss. These amendments will be applied for annual periods beginning on or after January 1, 2019, with early adoption permitted.
| • | Amendments to Korean IFRS 1019 Employee Benefits |
The amendments require that an entity shall calculate current service cost and net interest for the remainder of the reporting period after a plan amendment, curtailment or settlement based on updated actuarial assumptions from the date of the change. The amendments also require that a reduction in a surplus must be recognized in profit or loss even if that surplus was not previously recognized because of the impact of the asset ceiling. The amendments are effective for plan amendments, curtailments and settlements occurring in reporting periods that begin on or after 1 January 2019.
| • | Amendments to Korean IFRS 1028 Investments in Associates and Joint Ventures |
The amendments clarify that an entity shall apply Korean IFRS 1109 to financial instruments in an associate or joint venture to which the equity method is not applied. These include long-term interests that, in substance, form part of the entity’s net investment in an associate or joint venture. The amendments clarify that an entity shall apply Korean IFRS 1109 to other interests in an associate or joint venture to which the equity method is not applied. In addition, the entity shall apply the impairment requirements in Korean IFRS 1109 first to its other long-term interests that, in substance, form part of the entity’s net investment in an associate or joint venture. These amendments will be applied for annual periods beginning on or after January 1, 2019, with early adoption permitted. In accordance with the transitional provisions in Korean IFRS 1109, the restatement of the comparative information is not required and the cumulative effects of initially applying the amendments retrospectively should be recognized in the beginning balance of retained earnings (or other components of equity, as appropriate) at the date of initial application.
12
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
| • | Enactment to Interpretation of Korean IFRS 2123 Uncertainty over Income Tax Treatments |
The Interpretation explains how to recognize and measure deferred and current income tax assets and liabilities where there is uncertainty over a tax treatment, and includes guidance on how to determine whether each uncertain tax treatment is considered separately or together. It also presents examples of circumstances where a judgement or estimate is required to be reassessed. This Interpretation will be applied for annual periods beginning on or after January 1, 2019, and an entity can either restate the comparative financial statements retrospectively or recognize the cumulative effect of initially applying the Interpretation as an adjustment in the beginning balance at the date of initial application.
| • | Annual Improvements to Korean IFRS 2015 – 2017 Cycle: |
(a) Korean IFRS 1103 Business Combination
The amendments clarify that when a party to a joint arrangement obtains control of a business that is a joint operation, and had rights to the assets and obligations for the liabilities relating to that joint operation immediately before the acquisition date, the transaction is a business combination achieved in stages. In such cases, the acquirer shall remeasure its entire previously held interest in the joint operation. These amendments will be applied to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after 1 January 2019, with early adoption permitted.
(b) Korean IFRS 1111 Joint Agreements
The amendments clarify that when a party that participates in, but does not have joint control of, a joint operation might obtain joint control of the joint operation in which the activity of the join operation constitutes a business. In such cases, previously held interests in the joint operation are not remeasured. These amendments will be applied to transactions in which an entity obtains joint control on or after the beginning of the first annual reporting period beginning on or after 1 January 2019, with early adoption permitted.
(c) Paragraph 57A of Korean IFRS 1012 Income Tax
The amendment is applied to all the income tax consequences of dividends and requires an entity to recognize the income tax consequences of dividends in profit or loss, other comprehensive income or equity according to where the entity originally recognized those past transactions or events. These amendments will be applied for annual reporting periods beginning on or after January 1, 2019, with early adoption permitted.
(d) Korean IFRS 1023 Borrowing Costs
The amendments clarify that if a specific borrowing remains outstanding after the related qualifying asset is ready for its intended use (or sale), it becomes part of general borrowings. These amendments will be applied to borrowing costs incurred on or after the beginning of the first annual reporting period beginning on or after January 1, 2019, with early adoption permitted.
13
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
2.2 Measurement Basis
The consolidated financial statements have been prepared under the historical cost convention unless otherwise specified.
2.3 Functional and Presentation Currency
Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (the “functional currency”). The consolidated financial statements are presented in Korean won, which is the Parent Company’s functional and presentation currency. Refer to Notes 3.2.
2.4 Critical Accounting Estimates
The preparation of consolidated 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.
Uncertainty in estimates and assumptions with significant risk that may result in material adjustment to the consolidated financial statements are as follows:
2.4.1 Income Taxes
The Group is operating in numerous countries and the income generated from these operations is subject to income taxes based on tax laws and interpretations of tax authorities in numerous jurisdictions. There are many transactions and calculations for which the ultimate tax determination is uncertain.
If certain portion of the taxable income is not used for investments, increase in wages, and others in accordance with the Tax Law for Promotion of investment and Collaborative Cooperation (Recirculation of Corporate Income), the Group is liable to pay additional income tax calculated based on the tax laws. The new tax law is effective for three years from 2018 and measurement of current and deferred income tax is affected. As the Group’s income tax is dependent on the investments, increase in wages, and others, there exists uncertainty with regard to measuring the final tax effects.
2.4.2 Fair Value of Financial Instruments
The fair value of financial instruments that are not traded in an active market is determined by using valuation techniques. The Group uses its judgment to select a variety of methods and make assumptions that are mainly based on market conditions existing at the end of each reporting period. Refer to Note 6 for details on valuation techniques and inputs used to determine the fair value of financial instruments.
14
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
2.4.3 Provisions for Credit Losses (allowances for loan losses, provisions for acceptances and guarantees, and unused loan commitments)
The Group determines and recognizes allowances for losses on financial assets at amortized cost and fair value through other comprehensive income through impairment test and recognizes provisions for acceptances and guarantees, and unused loan commitments. The accuracy of provisions for credit losses is determined by the methodology and assumptions used for the estimation of expected cash flows of the borrower for individually assessed allowances of loans, collectively assessed allowances for groups of loans, acceptances and guarantees, and unused loan commitments.
2.4.4 Net Defined Benefit Liability
The present value of net defined benefit liability depends on a number of factors that are determined on an actuarial basis using a number of assumptions(Note 23).
2.4.5 Estimated Impairment of Goodwill
The Group tests annually whether goodwill has suffered any impairment. The recoverable amounts of cash-generating units have been determined based onvalue-in-use calculations.(Note 15).
3. Significant Accounting Policies
The significant accounting policies applied in the preparation of these consolidated financial statements are set out below. The items related to financial instruments on the financial statements are accounted for applying Koreans IFRS 1109 for the current period, and Korean IFRS 1039 for the comparative prior period, respectively.
Comparative financial statements are not restated retrospectively and the described accounting policies on financial instruments are applied for the financial statements for the current period. Except for the changes in accounting policies related to financial instruments, these policies have been consistently applied to all periods presented.
3.1 Consolidation
3.1.1 Subsidiaries
Subsidiaries are companies that are controlled by the Group. The Group controls an investee when it is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. The existence and effects of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. Subsidiaries are fully consolidated from the date when control is transferred to the Group andde-consolidated from the date when control is lost.
If a subsidiary uses accounting policies other than those adopted in the consolidated financial statements for like transactions and events in similar circumstances, appropriate adjustments are made to make the subsidiary’s accounting policies conform to those of the Group when the subsidiary’s financial statements are used by the Group in preparing the consolidated financial statements.
Profit or loss and each component of other comprehensive income are attributed to the owners of the Parent Company and to thenon-controlling interests, if any. Total comprehensive income is attributed to the owners of the Parent Company and to thenon-controlling interests even if this results in thenon-controlling interests having a deficit balance.
15
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
Transactions withnon-controlling interests that do not result in loss of control are accounted for as equity transactions; that is, as transactions with the owners in their capacity as owners. The difference between fair value of any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals tonon-controlling interests are also recorded in equity.
When the Group ceases to have control, any retained interest in the entity isre-measured to its fair value at the date when control is lost, with the change in carrying amount recognized in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognized in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognized in other comprehensive income are reclassified to profit or loss.
3.1.2 Associates
Associates are entities over which the Group has significant influence in the financial and operating policy decisions. If the Group holds 20% or more of the voting power of the investee, it is presumed that the Group has significant influence.
Under the equity method, investments in associates are initially recognized at cost and the carrying amount is increased or decreased to recognize the Group’s share of the profit or loss of the investee and changes in the investee’s equity after the date of acquisition. The Group’s share of the profit or loss of the investee is recognized in the Group’s profit or loss. Distributions received from an investee reduce the carrying amount of the investment. Profit and loss resulting from ‘upstream’ and ‘downstream’ transactions between the Group and associates are eliminated to the extent at the Group’s interest in associates. Unrealized losses are eliminated in the same way as unrealized gains except that they are only eliminated to the extent that there is no evidence of impairment.
If associates use accounting policies other than those adopted in the consolidated financial statements for like transactions and events in similar circumstances, appropriate adjustments are made to make the associate’s accounting policies conform to those of the Group when the associate’s financial statements are used by the Group in applying equity method.
After the carrying amount of the investment is reduced to zero, additional losses are provided for, and a liability is recognized, only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the investee.
The Group determines at each reporting period whether there is any objective evidence that the investments in the associates are impaired. If this is the case, the Group calculates the amount of impairment as the difference between the recoverable amount of the associates and its carrying value and recognizes the amount as‘non-operating income (expense)’ in the statement of comprehensive income.
16
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
3.1.3 Structured Entity
A structured entity is an entity that has been designed so that voting or similar rights are not the dominant factor in deciding who controls the entity. When the Group decides whether it has power to the structured entities in which the Group has interests, it considers factors such as the purpose, the form, the practical ability to direct the relevant activities of a structured entity, the nature of its relationship with a structured entity and the amount of exposure to variable returns.
3.1.4 Trusts and Funds
The Group provides management services for trust assets, collective investment and other funds. These trusts and funds are not consolidated in the Group’s consolidated financial statements, except for trusts and funds over which the Group has control.
3.1.5 Intra-group Transactions
All intra-group balances and transactions, and any unrealized gains arising on intra-group transactions, are eliminated in preparing the consolidated financial statements. Unrealized losses are eliminated in the same way as unrealized gains except that they are only eliminated to the extent that there is no evidence of impairment.
3.2 Foreign Currency
3.2.1 Foreign Currency Transactions and Balances
A foreign currency transaction is recorded, on initial recognition in the functional currency, by applying the spot exchange rate between the functional currency and the foreign currency at the date of the transaction. At the end of each reporting period, foreign currency monetary items are translated using the closing rate which is the spot exchange rate at the end of the reporting period.Non-monetary items that are measured at fair value in a foreign currency are translated using the spot exchange rates at the date when the fair value was determined andnon-monetary items that are measured in terms of historical cost in a foreign currency are translated using the spot exchange rate at the date of the transaction. Exchange differences arising on the settlement of monetary items or on translating monetary items at rates different from those at which they were translated on initial recognition during the period or in previous financial statements are recognized in profit or loss in the period in which they arise, except for exchange differences arising on net investments in a foreign operation and financial liability designated as a hedge of the net investment. When gains or losses on anon-monetary item are recognized in other comprehensive income, any exchange component of those gains or losses are also recognized in other comprehensive income. Conversely, when gains or losses on anon-monetary item are recognized in profit or loss, any exchange component of those gains or losses are also recognized in profit or loss.
17
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
3.2.2 Foreign Operations
The financial performance and financial position of all foreign operations, whose functional currencies differ from the Group’s presentation currency, are translated into the Group’s presentation currency using the following procedures.
Assets and liabilities for each statement of financial position presented are translated at the closing rate at the end of the reporting period. Income and expenses in the statement of comprehensive income presented are translated at average exchange rates for the period. All resulting exchange differences are recognized in other comprehensive income.
Any goodwill arising from the acquisition of a foreign operation and any fair value adjustments to the carrying amounts of assets and liabilities arising from the acquisition of that foreign operation are treated as assets and liabilities of the foreign operation. Thus, they are expressed in the functional currency of the foreign operation and are translated into the presentation currency at the closing rate.
On the disposal of a foreign operation, the cumulative amount of the exchange differences relating to that foreign operation, recognized in the separate component of equity, is reclassified from other comprehensive income to profit or loss (as a reclassification adjustment) when the gains or losses on disposal are recognized. On the partial disposal of a subsidiary that includes a foreign operation, the Groupre-attributes the proportionate share of the cumulative amount of the exchange differences recognized in other comprehensive income to thenon-controlling interests in that foreign operation. In any other partial disposal of a foreign operation, the Group reclassifies to profit or loss only the proportionate share of the cumulative amount of the exchange differences recognized in other comprehensive income.
3.3 Recognition and Measurement of Financial Instruments
3.3.1 Initial Recognition
The Group recognizes a financial asset or a financial liability in its statement of financial position when the Group 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 Group 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 Group classifies financial liabilities as financial liabilities at fair value through profit or loss, or other financial liabilities. The classification depends on the Group’s business model for managing financial instruments and the contractual cash flow characteristics of the financial instruments at initial recognition.
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. The fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. 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.
18
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
3.3.2 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 at initial recognition and adjusted to reflect principal repayments, cumulative amortization using the effective interest method and any reduction (directly or through the use of an allowance account) for impairment or uncollectibility.
Fair value
Fair values, which the Group 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 Group uses valuation models that are commonly used by market participants and customized for the Group 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 Group 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.
The Group’s Fair Value Evaluation Committee, which consists of the risk management department, trading department and accounting department, reviews the appropriateness of internally developed valuation models, and approves the selection and changing of the external valuation institution and other considerations related to fair value measurement. The review results on the fair valuation models are reported to the Market Risk Management subcommittee by the Fair Value Evaluation Committee on a regular basis.
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.
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Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
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 Group 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.
3.3.3 Derecognition
Derecognition is the removal of a previously recognized financial asset or financial liability from the statement of financial position. The Group 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 Group has not retained control. If the Group neither transfers nor disposes of substantially all the risks and rewards of ownership of the financial assets, the Group continues to recognize the financial asset to the extent of its continuing involvement in the financial asset.
If the Group 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 Group continues to recognize the transferred asset in its entirely and recognize a financial liability for the consideration received.
The Group writes off the carrying amount and allowance of financial assets in its entirety or to a portion thereof when the principal and interest are determined to be no longer recoverable. In general, the Group considerswrite-off when it is determined that the debtor does not have sufficient resources or income to cover the principal and interest, and thiswrite-off decision is made in accordance with internal regulations. After thewrite-off, the Group can collect thewritten-off loans continuously according to the internal policy. Recovered amounts fromwritten-off financial assets are recognized in 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 expired.
3.3.4 Offsetting
Financial assets and financial liabilities are offset and the net amount are presented in the statement of financial position when, and only when, the Group currently has a legally enforceable right to offset the recognized amounts and intends either to settle on a net basis, or to realize the asset and settle the liability simultaneously.
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Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
3.4 Cash and Cash Equivalents
Cash and cash equivalents 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.
3.5Non-derivative Financial Assets
3.5.1 Financial Assets at Fair Value through Profit or Loss
Financial assets classified as held for trading, financial assets designated by the Group 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 Group 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 using the effective interest method and dividend income from financial assets at fair value through profit or loss are also recognized in profit or loss.
3.5.2 Financial Assets at Fair Value through Other Comprehensive Income
The Group classifies below financial assets as financial assets at fair value through other comprehensive income;
| • | Debt instruments that are held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets, and where the assets’ cash flows represent solely payments of principal and interest on the principal amount outstanding or; |
| • | Equity instruments that are 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. Gains or losses arising from a change in fair value, other than dividend income, interest income using effective interest method and exchange differences arising on monetary items which are recognized directly in profit or loss, are recognized as other comprehensive income in equity.
Upon disposal of financial assets at fair value through other comprehensive income, the cumulative gain or loss previously recognized in other comprehensive income is reclassified to profit or loss. However, cumulative gain or loss of equity instrument designated as fair value through other comprehensive income are not reclassified to profit or loss at disposal.
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Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
Financial assets at fair value through other comprehensive income denominated in foreign currencies are translated at the closing rate. Fair value differences resulting from exchange differences on the amortized cost are recognized in profit or loss, and other changes are recognized as equity.
3.5.3 Financial Assets 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.
These financial assets are subsequently carried at amortized cost using the effective interest method after initial recognition and interest income is recognized using the effective interest method.
The carrying amount of financial assets at amortized cost is presented by deducting allowance for doubtful accounts, and the measurement method is described in Note 3.6.
3.6 Expected Credit Loss of Financial Assets (Debt Instruments)
The Group measures expected credit loss and recognizes loss allowance at the end of the reporting period for financial assets at amortized cost and fair value through other comprehensive income with the exception of financial asset at fair value through profit or loss.
Expected credit losses are estimated at present value of probability-weighted amount that is determined by evaluating a range of possible outcomes. The Group 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.
The approaches of measuring expected credit losses in accordance with Korean IFRS are as follows:
| • | General approach: for financial assets not subject to the below approach and unused loan commitments onoff-balance sheet |
| • | Credit-impaired approach: for financial assets that are credit-impaired at the time of acquisition |
Application of general approach is differentiated depending on whether credit risk has increased significantly after initial recognition. After initial recognition, loss allowances for the assets without significant increase in credit risk are measured at the amount of 12 month expected credit losses, whereas the loss allowances for the assets with significant increase in credit risk are measured at the amount of lifetime expected credit losses. Lifetime is presumed to be a period to the contractual maturity date of financial assets (the expected life of financial assets).
The Group determines whether the credit risk has increased significantly using the following information, and if one or more of the following items are met, it is deemed as significant increase in credit risk. Information of more than 30 days overdue is applied to all subsidiaries, and other information is applied selectively considering specific indicators of each subsidiary or additionally considering specific indicators of each subsidiary. When the contractual cash flows of a financial asset are renegotiated or otherwise modified, the Group determines whether the credit risk has increased significantly using the same following information.
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Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
| • | 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 |
| • | Subsequent managing ratings below certain level in the early warning system |
| • | Debt restructuring (except for impaired financial assets) and |
| • | Credit delinquency information on Korea Federation of Banks, and etc. |
If one or more of the following items are met, it is generally deemed as credit-impaired:
| • | 90 days or more past due |
| • | Legal proceedings related to collection |
| • | A borrower registered on the credit management list of Korea Federation of Banks |
| • | A corporate borrower with the credit rating C or D |
| • | Refinancing or |
| • | Debt restructuring, and etc. |
3.6.1 Forward-looking Information
The Group uses forward-looking information, when it determines whether the credit risk has increased significantly and it measures the expected credit losses.
The Group assumes the risk components have a certain correlation with the economic cycle, and uses statistical methodologies to estimate the relation between key macroeconomic variables and risk components for expected credit losses. The Group has derived a correlation between the time series data of more than 8 years and the key macroeconomic variables, and calculates the expected credit losses by reflecting the results of the correlation on the risk component. The correlation between the major macroeconomic variables and the credit risk is as follows;
| Key macroeconomic variables | Correlation between the major macroeconomic variables and the credit risk | |||
Domestic GDP growth rate | (- | ) | ||
Composite stock index | (- | ) | ||
Construction investment change rate | (- | ) | ||
Housing transaction price index | (- | ) | ||
Consumer price index | (+ | ) | ||
Unemployment rate | (+ | ) | ||
Forward-looking information used in calculation of expected credit losses is based on the macroeconomic forecasts utilized by the management of Bank for its business plan taking into account reliable external agency’s forecasts and others. The forward-looking information is generated by KB Research under KB Financial Group with comprehensive approach to capture the possibility of various economic forecast scenarios that are derived from the internal and external viewpoints of the macroeconomic situation.
3.6.2 Measuring Expected Credit Losses on Financial Assets at Amortized Cost
The expected credit losses on financial assets at amortized cost are measured as the difference between the asset’s contractual terms of cash flow and the present value of estimated future cash flows discounted at the financial asset’s original effective interest rate. The Group estimates expected future cash flows for financial assets that are individually significant (individual assessment of impairment).
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Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
For financial assets that are not individually significant, the Group 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 by discounting the expected future cash flows of a loan at its original effective interest rate and comparing the resultant present value with the loan’s current carrying amount. This process normally encompasses management’s best estimate, such as operating cash flow of the borrower and net realizable value of any collateral held.
Collective assessment of impairment
Collective assessment of impairment is performed by using a methodology based on historical loss experience and reflecting forward-looking information. Such methodology applies factors such as type of collateral, product and borrowers, credit rating, portfolio size, recovery period, probability of default estimated for each group of assets and loss given default by type of recovery method. Also, consistent assumptions are applied to form a formula-based model in estimating expected credit loss and to determine factors on the basis of historical loss experience and forward-looking information. The methodology and assumptions used for collective assessment of impairment are reviewed regularly to reduce any differences between estimated and actual losses.
Lifetime expected credit loss is measured by applying Probability of Default (“PD”) and adjusted Loss Given Default (“LGD”) reflecting the changes in carrying amount to the carrying amount as at the end of the reporting period deducted by expected repayment of principals.
3.6.3 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. However, the loss allowance shall be recognized in other comprehensive income. Upon disposal or repayment of financial assets at fair value through other comprehensive income, the amount of loss allowances is reclassified from other comprehensive income to profit or loss.
3.7 Derivative Financial Instruments
The Group enters into numerous derivative financial instrument contracts such as currency forwards, interest rate swaps, currency swaps and others for trading purposes or to manage its exposures to fluctuations in interest rates and currency exchange, amongst others. The Group’s derivative operations focus on addressing the needs of the Group’s corporate clients to hedge their risk exposure and to hedge the Group’s risk exposure that results from such client contracts. These derivative financial instruments are presented as derivative financial instruments within the consolidated financial statements irrespective of transaction purpose and subsequent measurement requirement.
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Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
The Group designates certain derivatives andnon-derivatives as hedging instruments to hedge the risk of changes in fair value and cash flow of a recognized asset or liability or of an unrecognized firm commitment (fair value hedge and cash flow hedge). The Group designates part of derivatives andnon-derivatives as hedging instruments to hedge the risk of foreign exchange of a net investment in a foreign operation (hedge of net investment).
At the inception of the hedge, there is formal designation and documentation of the hedging relationship and the Group’s risk management objective and strategy for undertaking the hedge. That documentation includes identification of the hedging instrument, the hedged item or transaction, the nature of the risk being hedged and how the entity will assess the hedging instrument’s effectiveness in offsetting the exposure to changes in the hedged item’s fair value attributable to the hedged risk.
See Note 9 for changes in fair value of the hedging instruments and changes in other comprehensive income related to derivatives held for cash flow hedging.
The Group applies hedge accounting for risk management activities aligned with the requirements and qualifying criteria for hedge accounting of Korean IFRS 1109.
3.7.1 Derivative Financial Instruments Held for Trading
All derivative financial instruments, except for derivatives that are designated and qualify for hedge accounting, are measured at fair value. Gains or losses arising from changes in fair value are recognized in profit or loss as part of net gains or losses on financial instruments at fair value through profit or loss.
3.7.2 Fair Value Hedges
If derivatives andnon-derivatives qualify for a fair value hedge, the change in fair value of the hedging instrument and the change in fair value of the hedged item attributable to the hedged risk are recognized in profit or loss as part of other operating income and expenses. If the hedged items are equity instruments for which the Group has elected to present changes in fair value in other comprehensive income, the change in fair value of the hedging instrument and the change in fair value of the hedged item attributable to the hedged risk are recognized in other comprehensive income.
Fair value hedge accounting is discontinued prospectively if the hedging instrument expires or is sold, terminated or exercised, or the hedge no longer meets the criteria for hedge accounting or the Group revokes the designation. Once fair value hedge accounting is discontinued, the adjustment to the carrying amount of a hedged item is amortized to profit or loss by the maturity of the financial instrument using the effective interest method.
3.7.3 Cash Flow Hedges
The effective portion of changes in fair value of derivatives that are designated and qualify as cash flow hedges is recognized in other comprehensive income, limited to the cumulative change in fair value (present value) of the hedged item (the present value of the cumulative change in the future expected cash flows of the hedged item) from the inception of the hedge. The ineffective portion is recognized in gain or loss (other operating income or expense). The associated gains or losses that were previously recognized in other comprehensive income are reclassified from equity to profit or loss (other operating income and expenses) as a reclassification adjustment in the same period or periods during which the hedged forecast cash flows affects profit or loss. Cash flow hedge accounting is discontinued prospectively if the hedging instrument expires or is sold, terminated or exercised, or the hedge no longer meets the criteria for hedge accounting or the Group revokes the designation. When the cash flow hedge accounting is discontinued, the cumulative gains or losses on the hedging instrument that have been recognized in other comprehensive income are reclassified to profit or loss over the period in which the forecast transaction occurs. If the forecast transaction is no longer expected to occur, the cumulative gains or losses that had been recognized in other comprehensive income are immediately reclassified to profit or loss.
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Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
3.7.4 Hedge of Net Investment
If derivatives andnon-derivatives qualify for a net investment hedge, the effective portion of changes in fair value of hedging instrument is recognized in other comprehensive income or loss and the ineffective portion is recognized in net other operating income (expense). The gain or loss on the hedging instrument relating to the effective portion of the hedge that has been recognized in other comprehensive income will be reclassified from other comprehensive income or loss to profit or loss as a reclassification adjustment on the disposal or partial disposal of the foreign operation.
3.7.5 Risk Management Strategy
Interest rate risk arises from changes in fair value resulting from changes in the discount rate of fixed rate financial instruments, and changes in cash flows resulting from changes in the nominal interest rate of floating rate financial instruments. Foreign currencies risk arises from net investment in a foreign operation, whose functional currencies differ from the Group’s functional currency.
While the Group entirely hedges the interest rate risk, the Group hedges the foreign currencies risk only the proportional part of the notional amount.
At inception of the hedge relationship, the Group reviews the hedge effectiveness; and periodically reviews the effectiveness in order to confirm that economic relationship between the hedged item and the hedging instrument exists. The requirement that an economic relationship exists means that the hedging instrument and the hedged item have values that generally move in the opposite direction because of the same risk, which is the hedged risk. The Group designates the exposure of hedged item opposite to the exposure of hedging instruments in order to meet economic relationship requirement.
The Group designates hedge relationship atone-on-one ratio between the nominal amount of hedging instrument and to the nominal amount of hedged item.
Ineffectiveness could arise because of differences in the underlying parameters (acquisition date, credit risk or liquidity and others) or other differences between the hedging instrument and the hedged item that the Group accepts in order to achieve a cost-effective hedging relationship.
The Group avoids the cash flow variability of its floating rate debt securities by using interest rate swaps. Both are linked to the same interest rate; however, the paid amount of the floating rate may be set on different dates. Even if the variability of interest rate related cash flows (as a risk factor) are designated as a hedged item, the difference inset-up dates creates a hedge ineffectiveness.
The Group avoids the variability of fair values of its fixed rate debt securities by using interest rate swaps. The calculating method of the number of the dates for paying fixed-rate interest amount can be different between both. Even if the volatility of the fair value due to the benchmark interest rate (as a risk factor) are designated as a hedged item, the difference calculating inset-up dates creates a hedge ineffectiveness.
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Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
3.7.6 Embedded Derivatives
An embedded derivative is separated from the host contract and accounted for as a derivative if, and only if, 1) the economic characteristics and risks of the embedded derivative are not closely related to those of the host contract, 2) a separate instrument with the same terms as the embedded derivative would meet the definition of a derivative and, 3) the hybrid contract contains a host that is not a financial asset and is not designated as at fair value through profit or loss. Gains or losses arising from a change in the fair value of an embedded derivative separated from the host contract are recognized in profit or loss as part of net gains or losses on financial instruments at fair value through profit or loss.
3.7.7 Day One Gain and Loss
If the Group uses a valuation technique that incorporates data not obtained from observable markets for the fair value at initial recognition of the financial instrument, there may be a difference between the transaction price and the amount determined using that valuation technique. In these circumstances, the difference is deferred and not recognized in profit or loss, and is amortized by using the straight-line method over the life of the financial instrument. If the fair value of the financial instrument is subsequently determined using observable market inputs, the remaining deferred amount is recognized in profit or loss as part of net gains or losses on financial instruments at fair value through profit or loss or other operating income and expenses.
3.8 Property and Equipment
3.8.1 Recognition and Measurement
All property and equipment that qualify for recognition as an asset are measured at cost and subsequently carried at cost less any accumulated depreciation and any accumulated impairment losses.
The cost of property and equipment includes any costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management and the initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located.
Subsequent expenditures are capitalized only when they prolong the useful life or enhance values of the assets but the costs of theday-to-day servicing of the assets such as repair and maintenance costs are recognized in profit or loss as incurred.
3.8.2 Depreciation
Land is not depreciated whereas other property and equipment are depreciated using the method that reflects the pattern in which the asset’s future economic benefits are expected to be consumed by the Group. The depreciable amount of an asset is determined after deducting its residual value. As for leased assets, if there is no reasonable certainty that the Group will obtain ownership by the end of the lease term, the asset is fully depreciated over the shorter of the lease term and its useful life.
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Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
The depreciation methods and estimated useful lives of the assets are as follows:
| Property and equipment | Depreciation method | Estimated useful lives | ||
Buildings and structures | Straight-line | 40 years | ||
Leasehold improvements | Declining-balance | 4 years | ||
Equipment and vehicles | Declining-balance | 4 years |
The residual value, the useful life and the depreciation method applied to an asset are reviewed at least at each financial year end and, if expectations differ from previous estimates or if there has been a significant change in the expected pattern of consumption of the future economic benefits embodied in the asset, the changes are accounted for as a change in an accounting estimate.
3.9 Investment Properties
3.9.1 Recognition and Measurement
Properties held to earn rentals or for capital appreciation or both are classified as investment properties. Investment properties are measured initially at their cost and subsequently the cost model is used.
3.9.2 Depreciation
Land is not depreciated, whereas other investment properties are depreciated using the method that reflects the pattern in which the asset’s future economic benefits are expected to be consumed by the Group. The depreciable amount of an asset is determined after deducting its residual value.
The depreciation method and estimated useful lives of the assets are as follows:
| Investment properties | Depreciation method | Estimated useful lives | ||
Buildings | Straight-line | 40 years |
The residual value, the useful life and the depreciation method applied to an asset are reviewed at least at each financial year end and, if expectations differ from previous estimates or if there has been a significant change in the expected pattern of consumption of the future economic benefits embodied in the asset, the changes are accounted for as a change in an accounting estimate.
3.10 Intangible Assets
Intangible assets are measured initially at cost and subsequently carried at their cost less any accumulated amortization and any accumulated impairment losses.
Intangible assets, except for goodwill and membership rights, are amortized using the straight-line method with no residual value over their estimated useful economic life since the asset is available for use.
| Intangible assets | Amortization method | Estimated useful lives | ||
Industrial property rights | Straight-line | 5 years | ||
Software | Straight-line | 4 ~ 5 years | ||
Others | Straight-line | 1 ~ 10 years |
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Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
The amortization period and the amortization method for intangible assets with a finite useful life are reviewed at least at each financial year end. Where an intangible asset is not being amortized, because its useful life is considered to be indefinite, the Group carries out a review in each accounting period to confirm whether or not events and circumstances still support the assumption of an indefinite useful life. If they do not, the change from the indefinite to finite useful life is accounted for as a change in an accounting estimate.
3.10.1 Goodwill
Recognition and measurement
Goodwill acquired from business combinations before January 1, 2010, is stated at its carrying amount which was recognized under the Group’s previous accounting policy, prior to the transition to Korean IFRS.
Goodwill acquired from business combinations after January 1, 2010, is initially measured as the excess of the aggregate of the consideration transferred, fair value ofnon-controlling interest and the acquisition-date fair value of the acquirer’s previously held equity interest in the acquiree over the net identifiable assets acquired and liabilities assumed. If this consideration is lower than the fair value of the net assets of the business acquired, the difference is recognized in profit or loss.
For each business combination, the Group decides whether thenon-controlling interest in the acquiree is initially measured at fair value or at thenon-controlling interest’s proportionate share of the acquiree’s identifiable net assets at the acquisition date.
Acquisition-related costs incurred to effect a business combination are charged to expenses in the periods in which the costs are incurred and the services are received, except for the costs to issue debt or equity securities.
Additional acquisitions ofnon-controlling interest
Additional acquisitions ofnon-controlling interests are accounted for as equity transactions. Therefore, no additional goodwill is recognized.
Subsequent measurement
Goodwill is not amortized and is stated at cost less accumulated impairment losses. However, goodwill that forms part of the carrying amount of an investment in associates is not separately recognized and an impairment loss recognized is not allocated to any asset, including goodwill, which forms part of the carrying amount of the investment in the associates.
3.10.2 Subsequent Expenditure
Subsequent expenditure is capitalized only when it enhances values of the assets. Internally generated intangible assets, such as goodwill and trade name, are not recognized as assets but expensed as incurred.
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Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
3.11 Leases
3.11.1 Finance Lease
A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership. At the commencement of the lease term, the Group recognizes finance leases as assets and liabilities in its statements of financial position at amounts equal to the fair value of the leased property or, if lower, the present value of the minimum lease payments, each determined at the inception of the lease. Any initial direct costs of the lessee are added to the amount recognized as an asset.
Minimum lease payments are apportioned between the finance charge and the reduction of the outstanding liability. The finance charge is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability. Contingent rents are charged as expenses in the periods in which they are incurred.
The depreciable amount of a leased asset is allocated to each accounting period during the period of expected use on a systematic basis consistent with the depreciation policy the Group adopts for depreciable assets that are owned. If there is reasonable certainty that the lessee will obtain ownership by the end of the lease term, the period of expected use is the useful life of the asset; otherwise, the asset is fully depreciated over the shorter of the lease term and its useful life.
3.11.2 Operating Lease
A lease is classified as an operating lease if it does not transfer substantially all the risks and rewards incidental to ownership.
Leases in the financial statements of lessees
Lease payments under an operating lease (net of any incentives received from the lessor) are recognized as an expense on a straight-line basis over the lease term unless another systematic basis is more representative of the time pattern of the asset’s benefit.
Leases in the financial statements of lessors
Lease income from operating leases are recognized in income on a straight-line basis over the lease term unless another systematic basis is more representative of the time pattern in which use benefit derived from the leased asset is diminished. Initial direct costs incurred by the lessors in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognized as an expense over the lease term on the same basis as the lease income.
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Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
3.12 Greenhouse Gas Emission Rights and Liabilities
The Group measured at zero the emission rights received free of charge from the government following the Enforcement of Allocation and Trading of Greenhouse Gas Emissions Allowances. Emission rights purchased are measured initially at cost and subsequently carried at their costs less any accumulated impairment losses. Emission liabilities are measured as the sum of the carrying amount of emission allowances held by the Group and best estimate of the expenditure required to settle the obligation for any excess emissions at the end of reporting period. The emission rights and liabilities are classified as ‘intangible assets’ and ‘provisions’, respectively, in the consolidated statement of financial position.
The emission rights held for trading are measured at fair value and the changes in fair value are recognized in profit or loss. The changes in fair value and gain or loss on disposal are classified asnon-operating income and expenses.
3.13 Impairment ofNon-Financial Assets
The Group assesses at the end of each reporting period whether there is any indication that anon-financial asset, except for (i) deferred income tax assets, (ii) assets arising from employee benefits and(iii) non-current assets (or group of assets to be sold) classified as held for sale, may be impaired. If any such indication exists, the Group estimates the recoverable amount of the asset. However, irrespective of whether there is any indication of impairment, the Group tests (i) goodwill acquired in a business combination, (ii) intangible assets with an indefinite useful life and (iii) intangible assets not yet available for use for impairment annually by comparing their carrying amount with their recoverable amount.
The recoverable amount is estimated for the individual asset. If it is not possible to estimate the recoverable amount of the individual asset, the Group determines the recoverable amount of the cash-generating unit to which the asset belongs (the asset’s cash-generating unit). A cash-generating unit is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets. The recoverable amount of an asset is the higher of its fair value less costs to sell and its value in use. Value in use is the present value of the future cash flows expected to be derived from an asset or cash-generating unit that are discounted by apre-tax rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the future cash flow estimates have not been adjusted.
If the recoverable amount of an asset is less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. That reduction is an impairment loss and recognized immediately in profit or loss. For the purpose of impairment testing, goodwill acquired in a business combination is allocated to each of the cash-generating units that are expected to benefit from the synergies of the combination. The impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the cash-generating unit and then to the other assets of the unit pro rata on the basis of the carrying amount of each asset in the unit.
An impairment loss recognized for goodwill is not reversed in a subsequent period. The Group assesses at the end of each reporting period whether there is any indication that an impairment loss recognized in prior periods for an asset, other than goodwill, may no longer exist or may have decreased, and an impairment loss recognized in prior periods for an asset other than goodwill shall be reversed if, and only if, there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognized. The increased carrying amount of an asset other than goodwill attributable to a reversal of an impairment loss cannot exceed the carrying amount that would have been determined (net of amortization or depreciation) had no impairment loss been recognized for the asset in prior years.
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Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
3.14Non-Current Assets Held for Sale
Anon-current asset or disposal group is classified as held for sale if its carrying amount will be recovered principally through a sale transaction rather than through continuing use. For being qualified as held for sale, the asset (or disposal group) must be available for immediate sale in its present condition and its sale must be highly probable. Anon-current asset (or disposal group) classified as held for sale is measured at the lower of its carrying amount and fair value less costs to sell which is measured in accordance with the applicable Korean IFRS, immediately before the initial classification of the asset (or disposal group) as held for sale.
Anon-current asset while it is classified as held for sale or while it is part of a disposal group classified as held for sale is not depreciated (or amortized).
Impairment loss is recognized for any initial or subsequent write-down of the asset (or disposal group) to fair value less costs to sell. Gains are recognized for any subsequent increase in fair value less costs to sell of an asset, but not in excess of the cumulative impairment loss that has been recognized.
3.15 Financial Liabilities
The Group classifiesnon-derivative financial liabilities into financial liabilities at fair value through profit or loss or other financial liabilities in accordance with the substance of the contractual arrangement and the definitions of financial liabilities.
The Group recognizes financial liabilities in the statement of financial position when the Group becomes a party to the contractual provisions of the financial liability.
3.15.1 Financial Liabilities at Fair Value through Profit or Loss
Financial liabilities at fair value through profit or loss include financial liabilities held for trading or designated as such upon initial recognition. Subsequent to initial recognition, financial liabilities at fair value through profit or loss are measured at fair value, and changes therein are recognized in profit or loss. Upon initial recognition, transaction costs that are directly attributable to the acquisition are recognized in profit or loss as incurred.
In relation to securities lending or borrowing transactions, the Group records transaction using memorandum value when it borrows securities from Korea Securities Depository and others. The borrowed securities are treated as financial liabilities at fair value through profit or loss when they are sold. Changes in fair value at the end of the reporting period and difference between carrying amount at redemption and purchased amount is recognized as profit or loss.
32
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
3.15.2 Other Financial Liabilities
Non-derivative financial liabilities other than financial liabilities at fair value through profit or loss are classified as other financial liabilities. Other financial liabilities include deposits, debts, debentures and others. Upon of initial recognition, other financial liabilities are measured at fair value minus transaction costs that are directly attributable to the acquisition. Subsequent to initial recognition, other financial liabilities are measured at amortized cost using the effective interest method.
In case an asset is sold under repurchase agreement, the Group does not derecognize the asset while the amount sold is accounted for as financial liabilities.
The Group derecognizes a financial liability from the consolidated statement of financial position only when the obligation specified in the contract is discharged, cancelled or expired.
3.16 Provisions
Provisions are recognized when the Group has a present obligation (legal or constructive) as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. The risks and uncertainties that inevitably surround many events and circumstances are taken into account in reaching the best estimate of provisions, and where the effect of the time value of money is material, the amount of provisions are the present value of the expenditures expected to be required to settle the obligation.
Provisions on confirmed and unconfirmed acceptances and guarantees, unfunded commitments of credit cards and unused credit lines of consumer and corporate loans are recognized using a valuation model that applies the credit conversion factor, probability of default, and loss given default.
Provisions are reviewed at the end of each reporting period and adjusted to reflect the current best estimate. If it is no longer probable that an outflow of resources embodying economic benefits will be required to settle the obligation, the provisions are reversed.
If the Group has a contract that is onerous, the present obligation under the contract is recognized and measured as provisions. An onerous contract is a contract in which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received under it. The unavoidable costs under a contract reflect the minimum net cost to exit from the contract, which is the lower of the cost of fulfilling it and any compensation or penalties arising from failure to fulfill it.
When an onerous contract is occurred, the present obligation under the contract is recognized and measured as provisions.
33
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
3.17 Financial Guarantee Contracts
A financial guarantee contract is a contract that requires the Group to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payments when due according to the original or modified terms of a debt instrument.
Financial guarantee contracts are initially recognized at fair value and classified as other liabilities, and are amortized over the contractual term. After initial recognition, financial guarantee contracts are measured at the higher of:
| • | Provisions measured in accordance with Korean IFRS 1109Financial Instruments and |
| • | The initial amount recognized, less, when appropriate, cumulative amortization recognized in accordance with Korean IFRS 1115Revenue from Contracts with Customers. |
3.18 Equity Instrument Issued by the Group
An equity instrument is any contract or agreement that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares are deducted, net of tax, from the equity.
3.19 Revenue Recognition
The Group recognizes revenues in accordance with the following steps determined in accordance with Korean IFRS 1115Revenue from Contracts with Customers.
| • | 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. |
3.19.1 Interest Income and Expense
Interest income and expense from debt securities at fair value through profit or loss (excluding beneficiary certificates, equity investments, other debt securities and derivative-linked securities), loans, financial instruments at amortized cost and debt securities at fair value through other comprehensive income, are recognized in statement 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 Group 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 Group uses the contractual cash flows over the full contractual term of the financial instrument (or group of financial instruments).
34
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
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 income earned from debt instruments at fair value through profit or loss is also classified as interest income in the statement of comprehensive income.
3.19.2 Fee and Commission Income
The Group recognizes financial service fees in accordance with the purpose of charging the fees and 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 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 related to performance obligations in the contract satisfied over time
As control over related goods and services of fees and commission income of performance obligation contracts transfer over time, commission income is recognized over the period of performance obligations. Fees and commission income, including asset management fees and commission fees are recognized as the related services are rendered.
Fees earned at a point in time
Fees earned at a point in time are recognized when a customer obtains controls of a promised asset and the Group satisfies a performance obligation.
Commission on negotiation or participation in negotiation for the third party such as trading stocks or other securities, arranging transfer and acquisition of business is recognized as revenue when the transaction has been completed.
A syndication fee that arranges a loan and retains no part of the loan package for itself (or retains a part at the same effective interest rate for comparable risk as other participants) is compensation for the service of syndication. Such a fee is recognized as revenue when the syndication has been completed.
35
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
3.19.3 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 (including 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, excluding interest income calculated by the effective interest rate |
| • | Gain or loss from derivatives for trading, including derivatives for hedging that does not meet the criteria for hedge accounting |
3.19.4 Dividend Income
Dividend income is recognized as profit or loss when the right to receive payment is established. Dividend income is recognized as relevant profit or loss on the statement of comprehensive income depending on the classification of equity securities.
3.20 Employee Compensation and Benefits
3.20.1 Post-employment Benefits:
Defined benefit plans
All post-employment benefits, other than defined contribution plans, are classified as defined benefit plans. The amount recognized as a net defined benefit liability is the present value of the defined benefit obligation less the fair value of plan assets at the end of the reporting period.
The present value of the defined benefit obligation is calculated annually by independent actuaries using the Projected Unit Credit method. The rate used to discount post-employment benefit obligations is determined by reference to market yields at the end of the reporting period on high quality corporate bonds. The currency and term of the corporate bonds are consistent with the currency and estimated term of the post-employment benefit obligations. Actuarial gains and losses including experience adjustments and the effects of changes in actuarial assumptions are recognized in other comprehensive income(loss).
When the total of the present value of the defined benefit obligation minus the fair value of plan assets results in an asset, it is recognized to the extent of the present value of any economic benefits available in the form of refunds from the plan or reductions in future contributions to the plan.
Past service cost is the change in the present value of the defined benefit obligation, which arises when the Group introduces a defined benefit plan or changes the benefits of an existing defined benefit plan. Such past service cost is immediately recognized as an expense for the period.
Defined contribution plans
The contributions are recognized as employee benefit expense when they are due.
36
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
3.20.2 Short-term Employee Benefits
Short-term employee benefits are employee benefits(other than termination benefits) that are due to be settled within 12 months after the end of the period in which the employees render the related service. The undiscounted amount of short-term employee benefits expected to be paid in exchange for that service is recognized as a liability(accrued expense), after deducting any amount already paid.
The expected cost of profit-sharing and bonus payments are recognized as liabilities when the Group has a present legal or constructive obligation to make such payments as a result of past events rendered by employees and a reliable estimate of the obligation can be made.
3.20.3 Share-based Payment
The Group has share grant and mileage stock programs to directors and employees of the Group. The Group has a choice of whether to settle share grant in cash or by issuing equity instruments of KB Financial Group Inc., the ultimate parent company, at the date of settlement, while the Group shall settle the mileage stock in cash based on the stock price.
For a share-based payment transaction in which the terms of the arrangement provide the Group with the choice of whether to settle in cash or by issuing equity instruments, the Group determines that it has a present obligation to settle in cash because the Group has a past practice and a stated policy of settling in cash. Therefore, the fair value of the employee service is recognized as expense and accrued expenses over the vesting period. Also, the Group accounts for the mileage stock in accordance with the requirements of cash-settled share-based payment transactions, and recognizes the corresponding liability and expenses at the vesting period.
Until the liability is settled, the Group remeasures the fair value of the liability at the end of each reporting period and at the date of settlement, with any changes in fair value recognized in profit or loss for the period.
3.20.4 Termination Benefits
Termination benefits are payable when employment is terminated by the Group before the normal retirement date, or whenever an employee accepts voluntary redundancy in exchange for these benefits. The Group shall recognize a liability and expense for termination benefits at the earlier of the following dates: when the Group can no longer withdraw the offer of those benefits and when the Group recognizes costs for a restructuring that is within the scope of Korean IFRS 1037 and involves the payment of termination benefits. Termination benefits are measured by considering the number of employees expected to accept the offer in the case of a voluntary early retirement. Termination benefits over 12 months after the reporting period are discounted to present value.
3.21 Income Tax Expenses
Income tax expense comprises current tax expense and deferred income tax expense. Current and deferred income tax are recognized as income or expense for the period, except to the extent that the tax arises from a transaction or an event which is recognized, in the same or a different period outside profit or loss, either in other comprehensive income or directly in equity and a business combination. Income tax expense for the period is recognized based on management’s best estimate of the weighted average annual income tax rate expected for the full financial year.
37
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
3.21.1 Current income tax
Current income tax is the amount of income tax payable in respect of the taxable profit (loss) for a period. A difference between the taxable profit and accounting profit may arise when income or expense is included in accounting profit in one period, but is included in taxable profit in a different period. Differences may also arise if there is revenue that is exempt from taxation, or expense that is not deductible in determining taxable profit (loss). Current income tax liabilities (assets) for the current and prior periods are measured at the amount expected to be paid to (recovered from) the taxation authorities, using the tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.
The Group offsets current income tax assets and current income tax liabilities if, and only if, the Group (a) has a legally enforceable right to set off the recognized amounts and (b) intends either to settle on a net basis, or to realize the asset and settle the liability simultaneously.
3.21.2 Deferred Income Tax
Deferred income tax is recognized, using the asset-liability method, on temporary differences arising between the tax based amount of assets and liabilities and their carrying amount in the consolidated financial statements. Deferred income tax liabilities are recognized for all taxable temporary differences and deferred income tax assets are recognized for all deductible temporary differences to the extent that it is probable that taxable profit will be available against which the deductible temporary difference can be utilized. However, deferred income tax liabilities are not recognized if they arise from the initial recognition of goodwill; deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss.
Deferred income tax is provided on temporary differences arising on investments in subsidiaries, and associates, except for deferred income tax liabilities for which the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future.
The carrying amount of a deferred income tax asset is reviewed at the end of each reporting period. The Group reduces the carrying amount of a deferred income tax asset to the extent that it is no longer probable that sufficient taxable profit will be available to allow the benefit of part or all of that deferred income tax asset to be utilized.
Deferred tax assets and liabilities shall be measured at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and deferred tax assets shall reflect the tax consequences that would follow from the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.
The Group offsets deferred income tax assets and deferred income tax liabilities when the Group has a legally enforceable right to offset current income tax assets against current income tax liabilities; and the deferred income tax assets and the deferred income tax liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity; or different taxable entities which intend either to settle current income tax liabilities and assets on a net basis, or to realize the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred income tax liabilities or assets are expected to be settled or recovered.
38
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
3.21.3 Uncertain Tax Positions
Uncertain tax positions arise from tax treatments applied by the Group which may be challenged by the tax authorities due to the complexity of the transaction or different interpretation of the tax laws, a claim for rectification brought by the Group, an appeal for a refund claimed from the tax authorities related to additional assessments or a tax investigation processed by the tax authorities. The Group recognizes its uncertain tax positions in the consolidated financial statements based on the guidance in Korean IFRS 1012. The income tax asset is recognized if a tax refund is probable for taxes paid and levied by the tax authority, and the amount to be paid as a result of the tax investigation and others is recognized as the current tax payable. However, interest and penalties related to income taxes are recognized in accordance with Korean IFRS 1037 as its economic substances.
3.22 Transactions with the Trust Accounts
Under the Financial Investment Services and Capital Markets Act, the Group recognizes trust accounts (“the trust accounts”) as separate. The borrowings from trust accounts represent transfer of funds in trust accounts into banking accounts. Such borrowings from trust accounts are recorded as receivables from the banking accounts in the trust accounts and as borrowings from trust accounts in the banking accounts. The Group earns trust fees from the trust accounts for its management of trust assets and operations. The reserves for future profits and losses are set up in the trust accounts for profits and losses related to those trust funds with a guarantee of the principal or of the principal and a certain minimum rate of return in accordance with the relevant laws and regulations applicable to trust operations. The reserves are used to provide for the losses on such trust funds and, if the losses incurred are in excess of the reserves, the excess losses are compensation paid as a loss on trust management in other operating expenses and the trust accounts recognize the corresponding compensation as compensation from banking accounts.
3.23 Operating Segments
Operating segments are components of the Group where separate financial information is available and is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance.
Segment information includes items which are directly attributable and reasonably allocated to the segment.
4. Financial Risk Management
4.1 Summary
4.1.1 Overview of Financial Risk Management Policy
The financial risks that the Group is exposed to are credit risk, market risk, liquidity risk, operational risk and others.
The note regarding financial risk management provides information about the risks that the Group is exposed to, including the objectives, policies and processes for managing the risks, the methods used to measure the risks, and capital management. Additional quantitative information is disclosed throughout the consolidated financial statements.
39
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
The Group’s risk management system focuses on increasing transparency, developing the risk management environment, preventing transmission of risk to other risk types, and the preemptive response to risk due to rapid changes in the financial environment to support The Group’s long-term strategy and business decisions efficiently. Credit risk, market risk, liquidity risk, and operational risk have been recognized as The Group’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 Group’s target risk appetite approves significant risk matters and reviews the level of risks that the Group is exposed to and the appropriateness of the Group’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 Group’s risk management.
Risk Management Subcommittee
The Risk Management Subcommittee enforces decisions made by Risk Management Council, and makes practical decisions to implement risk management policies and procedures.
| • | Credit Risk Management Subcommittee |
The Credit Risk Management Subcommittee approves exotic and hybrid products accompanying credit risk and reviews newly developed products accompanying credit risk. Also, it reviews and approves the exposure limits by industry.
| • | Market Risk Management Subcommittee |
The Market Risk Management Subcommittee reviews and makes decisions on setting risk limits and approving the standard for investments in newly developed standard, exotic and hybrid products.
| • | Operational Risk Management Subcommittee |
The Operational Risk Management Subcommittee reviews the issues that have a significant effect on the Group’s operational risk relating to establishment, amendment and abolition of major system, process and others.
Risk Management Group
The Risk Management Group is responsible for managing specific policies, procedures and work processes relating to the Group’s risk management.
40
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
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 a 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, country risk, specific risks and other credit risk exposure components are considered as a whole. The Group uses definition of default as defined and applied in the calculation of Capital Adequacy Ratio (Basel III) in accordance with the new Basel Accord.
4.2.2 Credit Risk Management
The Group measures expected losses and internal capital on assets that are subject to credit risk management whetheron- oroff-balance sheet items and uses expected losses and internal capital as a management indicator. The Group manages credit risk by allocating credit risk internal capital limits.
In addition, the Group controls the credit concentration risk exposure by applying and managing total exposure limits to prevent an excessive risk concentration to each industry and borrower.
The Group has organized a credit risk management group that focuses on credit risk management in accordance with the Group’s credit risk management policy. The Group’s credit group, customer service group and SME/SOHO group, which are independent from the sales department, are responsible for loan policy, loan limit, loan review, credit evaluation, restructuring and subsequent events. The credit risk management group is also responsible for planning risk management policy, applying limits of credit lines, measuring the credit risk internal capital, adjusting credit limits, reviewing credit and verifying credit evaluation models.
4.2.3 Maximum Exposure to Credit Risk
The Group’s maximum exposures of financial instruments excluding equity securities to credit risk without consideration of collateral values as at December 31, 2018 are as follows:
| (In millions of Korean won) | 2018 | |||
Financial assets | ||||
Due from financial institutions 1 | 11,831,688 | |||
Financial assets at fair value through profit or loss | ||||
Securities | 11,883,025 | |||
Loans | 212,596 | |||
Financial instruments indexed to gold | 78,808 | |||
Derivatives | 1,613,970 | |||
Loans at amortized cost1 | 276,944,202 | |||
Financial investments | ||||
Securities at fair value through other comprehensive income | 27,682,463 | |||
Securities at amortized cost1 | 12,792,526 | |||
Loans at fair value through other comprehensive income | 349,547 | |||
Other financial assets1 | 4,199,197 | |||
|
| |||
| 347,588,022 | ||||
|
| |||
Off-balance sheet items2 | ||||
Acceptances and guarantees contracts | 7,277,136 | |||
Financial guarantee contracts | 3,135,589 | |||
Commitments | 81,278,583 | |||
|
| |||
| 91,691,308 | ||||
|
| |||
| 439,279,330 | ||||
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41
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
1Due from financial institutions, loans at amortized cost, securities at amortized cost and other financial assets are presented net of allowance.
2For details of relevant provisions, see Note 22.
The Group’s maximum exposures of financial instruments excluding equity securities and beneficiary certificates, to credit risk without consideration of collateral values as at December 31, 2017 are as follows:
| (In millions of Korean won) | 2017 | |||
Financial assets | ||||
Due from financial institutions | 13,048,893 | |||
Financial assets at fair value through profit or loss (under Korean IFRS 1039) | ||||
Financial assets held for trading1 | 7,974,469 | |||
Financial assets designated at fair value through profit or loss | 95,357 | |||
Derivatives | 2,607,659 | |||
Loans2 | 251,710,605 | |||
Financial investments | ||||
Available-for-sale financial assets | 27,605,761 | |||
Held-to-maturity financial assets | 8,737,150 | |||
Other financial assets2 | 6,341,463 | |||
|
| |||
| 318,121,357 | ||||
|
| |||
Off-balance sheet items | ||||
Acceptances and guarantees contracts | 6,977,468 | |||
Financial guarantee contracts | 2,968,354 | |||
Commitments | 50,851,024 | |||
|
| |||
| 60,796,846 | ||||
|
| |||
| 378,918,203 | ||||
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1The amounts ofW73,856 million as at December 31, 2017, related to financial instruments indexed to the price of gold are included.
2Loans and other financial assets are presented net of allowance for loan losses.
4.2.4 Credit Risk of Loans
The Group maintains an allowance for loan losses associated with credit risk on loans to manage its credit risk.
42
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
The Group 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 occurred in a 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. The Group measures the expected credit losses on loans classified as financial assets measured at amortized cost, and by deducting allowances for credit losses. The expected credit losses of loans classified as financial assets at fair value through other comprehensive income are presented in other comprehensive income on the financial statements.
Credit risk exposure
Loans as at December 31, 2018, are classified as follows:
| (In millions of Korean won) | 2018 | |||||||||||||||||||||||
| Financial instruments applying 12- month expected credit losses | Financial instruments applying lifetime expected credit losses | Financial instruments applying credit impaired approach | Financial instruments not applying expected credit losses | Total | ||||||||||||||||||||
| Non- impaired | Impaired | |||||||||||||||||||||||
Financial assets at amortized cost |
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Corporate |
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Grade 1 | 69,619,761 | 1,451,514 | 1,573 | — | — | 71,072,848 | ||||||||||||||||||
Grade 2 | 54,119,274 | 4,073,167 | 1,610 | — | — | 58,194,051 | ||||||||||||||||||
Grade 3 | 2,698,199 | 1,691,008 | 6,566 | — | — | 4,395,773 | ||||||||||||||||||
Grade 4 | 395,707 | 903,215 | 40,043 | — | — | 1,338,965 | ||||||||||||||||||
Grade 5 | 26,019 | 342,477 | 935,447 | — | — | 1,303,943 | ||||||||||||||||||
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| 126,858,960 | 8,461,381 | 985,239 | — | — | 136,305,580 | |||||||||||||||||||
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Retail |
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Grade 1 | 124,212,610 | 4,387,477 | 8,836 | — | — | 128,608,923 | ||||||||||||||||||
Grade 2 | 4,171,518 | 7,058,259 | 6,218 | — | — | 11,235,995 | ||||||||||||||||||
Grade 3 | 140,074 | 881,415 | 4,158 | — | — | 1,025,647 | ||||||||||||||||||
Grade 4 | 478,701 | 154,535 | 5,103 | — | — | 638,339 | ||||||||||||||||||
Grade 5 | 8,478 | 296,087 | 379,555 | — | — | 684,120 | ||||||||||||||||||
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| 129,011,381 | 12,777,773 | 403,870 | — | — | 142,193,024 | |||||||||||||||||||
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| 255,870,341 | 21,239,154 | 1,389,109 | — | — | 278,498,604 | |||||||||||||||||||
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Financial assets at fair value through other comprehensive income |
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Corporate |
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Grade 1 | 149,226 | 25,731 | — | — | — | 174,957 | ||||||||||||||||||
Grade 2 | 128,712 | 45,878 | — | — | — | 174,590 | ||||||||||||||||||
Grade 3 | — | — | — | — | — | — | ||||||||||||||||||
Grade 4 | — | — | — | — | — | — | ||||||||||||||||||
Grade 5 | — | — | — | — | — | — | ||||||||||||||||||
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43
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
| 277,938 | 71,609 | — | — | — | 349,547 | |||||||||||||||||||
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Retail |
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Grade 1 | — | — | — | — | — | — | ||||||||||||||||||
Grade 2 | — | — | — | — | — | — | ||||||||||||||||||
Grade 3 | — | — | — | — | — | — | ||||||||||||||||||
Grade 4 | — | — | — | — | — | — | ||||||||||||||||||
Grade 5 | — | — | — | — | — | — | ||||||||||||||||||
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| |||||||||||||
| 277,938 | 71,609 | — | — | — | 349,547 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
| 256,148,279 | 21,310,763 | 1,389,109 | — | — | 278,848,151 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
1 Before netting of allowance.
| Corporate | Retail | |||
Grade 1 | AAA ~ BBB+ | 1 ~ 5 grade | ||
Grade 2 | BBB ~ BB | 6 ~ 8 grade | ||
Grade 3 | BB- ~ B | 9 ~ 10 grade | ||
Grade 4 | B- ~ CCC | 11 grade | ||
Grade 5 | CC or under | 12 grade or under |
Loans as at December 31, 2017, are classified as follows:
(In millions of Korean won)
| 2017 | ||||||||||||||||||||||||
| Loans | Retail | Corporate | Total | |||||||||||||||||||||
| Amount | % | Amount | % | Amount | % | |||||||||||||||||||
Neither past due nor impaired | 129,231,082 | 99.04 | 121,257,211 | 98.88 | 250,488,293 | 98.96 | ||||||||||||||||||
Past due but not impaired | 865,485 | 0.66 | 198,270 | 0.16 | 1,063,755 | 0.42 | ||||||||||||||||||
Impaired | 389,552 | 0.30 | 1,182,726 | 0.96 | 1,572,278 | 0.62 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
| 130,486,119 | 100.00 | 122,638,207 | 100.00 | 253,124,326 | 100.00 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Allowances | (318,533 | ) | 0.24 | (1,095,188 | ) | 0.89 | (1,413,721 | ) | 0.56 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Carrying amount | 130,167,586 | 121,543,019 | 251,710,605 | |||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
44
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
Credit qualities of loans that are neither past due nor impaired as at December 31, 2017 are as follows:
(In millions of Korean won)
| 2017 | ||||||||||||
| Retail | Corporate | Total | ||||||||||
Grade 1 | 115,311,505 | 62,287,457 | 177,598,962 | |||||||||
Grade 2 | 12,537,698 | 52,057,018 | 64,594,716 | |||||||||
Grade 3 | 804,042 | 5,341,955 | 6,145,997 | |||||||||
Grade 4 | 398,177 | 1,253,960 | 1,652,137 | |||||||||
Grade 5 | 179,660 | 316,821 | 496,481 | |||||||||
|
|
|
|
|
| |||||||
| 129,231,082 | 121,257,211 | 250,488,293 | ||||||||||
|
|
|
|
|
| |||||||
Credit qualities of loans graded according to internal credit ratings as at December 31, 2017 are as follows:
| Retail | Corporate | |||
Grade 1 | 1 ~ 5 grade | AAA ~ BBB+ | ||
Grade 2 | 6 ~ 8 grade | BBB ~ BB | ||
Grade 3 | 9 ~ 10 grade | BB- ~ B | ||
Grade 4 | 11 grade | B- ~ CCC | ||
Grade 5 | 12 grade or under | CC or under |
Loans that are past due but not impaired as at December 31, 2017 are as follows:
(In millions of Korean won)
| 2017 | ||||||||||||||||
| 1 ~ 29 days | 30 ~ 59 days | 60 ~ 89 days | Total | |||||||||||||
Retail | 736,264 | 87,901 | 41,320 | 865,485 | ||||||||||||
Corporate | 154,706 | 26,654 | 16,910 | 198,270 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| 890,970 | 114,555 | 58,230 | 1,063,755 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
45
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
Impaired loans as at December 31, 2017 are as follows:
(In millions of Korean won)
| 2017 | ||||||||||||
| Retail | Corporate | Total | ||||||||||
Loans | 389,552 | 1,182,726 | 1,572,278 | |||||||||
Allowances | (126,691 | ) | (771,131 | ) | (897,822 | ) | ||||||
Individual | — | (684,377 | ) | (684,377 | ) | |||||||
Collective | (126,691 | ) | (86,754 | ) | (213,445 | ) | ||||||
|
|
|
|
|
| |||||||
| 262,861 | 411,595 | 674,456 | ||||||||||
|
|
|
|
|
| |||||||
Credit risk mitigation by collateral
The quantification of the extent to which collateral and other credit enhancements mitigate credit risk as at December 31, 2018 is as follows:
(In millions of Korean won)
| 2018 | ||||||||||||||||||||||||
| Financial instruments applying 12- month expected credit losses | Financial instruments applying lifetime expected credit losses | Financial instruments applying credit impaired approach | Financial instruments not applying expected credit losses | Total | ||||||||||||||||||||
| Non-impaired | Impaired | |||||||||||||||||||||||
Guarantees | 60,020,814 | 5,864,526 | 146,818 | — | — | 66,032,158 | ||||||||||||||||||
Deposits and savings | 1,372,286 | 76,960 | 5,265 | — | — | 1,454,511 | ||||||||||||||||||
Property and equipment | 2,540,384 | 97,807 | 2,461 | — | — | 2,640,652 | ||||||||||||||||||
Real estate | 145,155,068 | 12,512,423 | 388,109 | — | — | 158,055,600 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
| 209,088,552 | 18,551,716 | 542,653 | — | — | 228,182,921 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
A quantification of the extent to which collateral and other credit enhancements mitigate credit risk as at December 31, 2017, is as follows:
(In millions of Korean won)
| 2017 | ||||||||||||||||||||
| Impaired Loans | Non-impaired Loans | Total | ||||||||||||||||||
| Individual | Collective | Past due | Not past due | |||||||||||||||||
Guarantees | 17,257 | 107,610 | 198,379 | 57,399,810 | 57,723,056 | |||||||||||||||
Deposits and savings | 10,501 | 5,375 | 23,126 | 1,576,897 | 1,615,899 | |||||||||||||||
Property and equipment | 125 | 456 | 43 | 2,091,917 | 2,092,541 | |||||||||||||||
Real estate | 96,010 | 271,937 | 638,044 | 145,583,507 | 146,589,498 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
| 123,893 | 385,378 | 859,592 | 206,652,131 | 208,020,994 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
46
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
4.2.5 Credit Quality of Securities
The credit quality of financial investments excluding equity securities that are exposed to credit risk as at December 31, 2018, are as follows:
| 2018 | ||||||||||||||||||||||||
| Financial instruments applying 12- month expected credit losses | Financial instruments applying lifetime expected credit losses | Financial instruments applying credit impaired approach | Financial instruments not applying expected credit losses | Total | ||||||||||||||||||||
| (In millions of Korean won) | Non- impaired | Impaired | ||||||||||||||||||||||
Securities at amortized cost |
| |||||||||||||||||||||||
Grade 1 | 12,769,605 | — | — | — | — | 12,769,605 | ||||||||||||||||||
Grade 2 | 9,569 | — | — | — | — | 9,569 | ||||||||||||||||||
Grade 3 | 14,649 | — | — | — | — | 14,649 | ||||||||||||||||||
Grade 4 | — | — | — | — | — | — | ||||||||||||||||||
Grade 5 | — | — | — | — | — | — | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
| 12,793,823 | — | — | — | — | 12,793,823 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Securities at fair value through other comprehensive income |
| |||||||||||||||||||||||
Grade 1 | 27,120,098 | — | — | — | — | 27,120,098 | ||||||||||||||||||
Grade 2 | 559,855 | — | — | — | — | 559,855 | ||||||||||||||||||
Grade 3 | — | — | — | — | — | — | ||||||||||||||||||
Grade 4 | 2,510 | — | — | — | — | 2,510 | ||||||||||||||||||
Grade 5 | — | — | — | — | — | — | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
| 27,682,463 | — | — | — | — | 27,682,463 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
| 40,476,286 | — | — | — | — | 40,476,286 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
| 1 | Before netting of allowance. |
The credit qualities of securities, excluding equity securities according to the credit ratings by external rating agencies as at December 31, 2018, are as follows:
Domestic | Foreign | |||||||||||
Credit quality | KIS | NICE P&I | FnPricing Inc. | S&P | Fitch-IBCA | Moody’s | ||||||
Grade 1 | AA0 to AAA | AA0 to AAA | AA0 to AAA | A- to AAA | A- to AAA | A3 to Aaa | ||||||
Grade 2 | A- to AA- | A- to AA- | A- to AA- | BBB- to BBB+ | BBB- to BBB+ | Baa3 to Baa1 | ||||||
Grade 3 | BBB0 to BBB+ | BBB0 to BBB+ | BBB0 to BBB+ | BB to BB+ | BB to BB+ | Ba2 to Ba1 | ||||||
Grade 4 | BB0 to BBB- | BB0 to BBB- | BB0 to BBB- | B+ to BB- | B+ to BB- | B1 to Ba3 | ||||||
Grade 5 | BB- or under | BB- or under | BB- or under | B or under | B or under | B2 or under | ||||||
Debt securities’ credit qualities denominated in Korean won are based on the lowest credit rating by the three domestic credit rating agencies above, and those denominated in foreign currencies are based on the lowest credit ratings by the three foreign credit rating agencies above.
47
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
Financial assets at fair value through profit or loss and financial investments, excluding equity securities and beneficiary certificates, that are exposed to credit risk as at December 31, 2017 are as follows:
| (In millions of Korean won) | 2017 | |||
Securities that are neither past due nor impaired | 44,338,881 | |||
Impaired securities | — | |||
|
| |||
| 44,338,881 | ||||
|
| |||
The credit quality of securities, excluding equity securities and beneficiary certificates, that are neither past due nor impaired as at December 31, 2017, is as follows:
| 2017 | ||||||||||||||||||||||||
| (In millions of Korean won) | Grade 1 | Grade 2 | Grade 3 | Grade 4 | Grade 5 | Total | ||||||||||||||||||
Financial assets held for trading | 6,525,798 | 1,304,926 | 44,157 | 25,732 | — | 7,900,613 | ||||||||||||||||||
Financial assets designated at fair value through profit or loss | 95,357 | — | — | — | — | 95,357 | ||||||||||||||||||
Available-for-sale financial assets | 27,433,166 | 144,312 | 25,762 | 2,521 | — | 27,605,761 | ||||||||||||||||||
Held-to-maturity financial assets | 8,737,150 | — | — | — | — | 8,737,150 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
| 42,791,471 | 1,449,238 | 69,919 | 28,253 | — | 44,338,881 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
The credit qualities of securities, excluding equity securities and beneficiary certificates, according to the credit ratings by external rating agencies as at December 31, 2017, are as follows:
Domestic | Foreign | |||||||||||
Credit quality | KIS | NICE P&I | FnPricing Inc. | S&P | Fitch-IBCA | Moody’s | ||||||
| Grade 1 | AA0 to AAA | AA0 to AAA | AA0 to AAA | A- to AAA | A- to AAA | A3 to Aaa | ||||||
| Grade 2 | A- to AA- | A- to AA- | A- to AA- | BBB- to BBB+ | BBB- to BBB+ | Baa3 to Baa1 | ||||||
| Grade 3 | BBB0 to BBB+ | BBB0 to BBB+ | BBB0 to BBB+ | BB to BB+ | BB to BB+ | Ba2 to Ba1 | ||||||
| Grade 4 | BB0 to BBB- | BB0 to BBB- | BB0 to BBB- | B+ to BB- | B+ to BB- | B1 to Ba3 | ||||||
| Grade 5 | BB- or under | BB- or under | BB- or under | B or under | B or under | B2 or under | ||||||
Credit qualities of debt securities denominated in Korean won are based on the lowest credit rating by the three domestic credit rating agencies above, and those denominated in foreign currencies are based on the lowest credit rating by the three foreign credit rating agencies above.
48
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
4.2.6 Credit Risk of Due from Financial Institutions
The credit quality of due from financial institutions as at December 31, 2018, is classified as follows:
| 2018 | ||||||||||||||||||||
| (In millions of Korean won) | Financial instruments applying 12- month expected credit losses | Financial instruments applying lifetime expected credit losses | Financial instruments applying credit impaired approach | Total | ||||||||||||||||
| Non-impaired | Impaired | |||||||||||||||||||
Due from financial institutions at amortized cost |
| |||||||||||||||||||
Grade 1 | 11,035,800 | — | — | — | 11,035,800 | |||||||||||||||
Grade 2 | 167,900 | — | — | — | 167,900 | |||||||||||||||
Grade 3 | 608,314 | — | — | — | 608,314 | |||||||||||||||
Grade 4 | 19,531 | — | — | — | 19,531 | |||||||||||||||
Grade 5 | 1,691 | — | — | — | 1,691 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
| 11,833,236 | — | — | — | 11,833,236 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
| 1 | Before netting of allowance. |
The classification criteria of the credit quality for due from financial institutions are the same as the criteria for securities (excluding equity securities).
4.2.7 Credit Risk Mitigation of Derivative Financial Instruments
The quantification of the extent to which collateral mitigates credit risk of derivative financial instruments as at December 31, 2018 and 2017, is as follows:
| (In millions of Korean won) | 2018 | 2017 | ||||||
Deposits and savings, securities and others | 381,959 | 1,198,373 | ||||||
4.2.8 Credit Risk Concentration Analysis
Details of the Group’s loans by country as at December 31, 2018 and 2017, are as follows:
| 2018 | ||||||||||||||||||||||||
| (In millions of Korean won) | Retail | Corporate1 | Total | % | Allowances | Carrying amount | ||||||||||||||||||
Korea | 142,003,442 | 132,576,712 | 274,580,154 | 98.40 | (1,524,099 | ) | 273,056,055 | |||||||||||||||||
China | — | 2,278,545 | 2,278,545 | 0.82 | (20,586 | ) | 2,257,959 | |||||||||||||||||
Japan | 106 | 333,918 | 334,024 | 0.12 | (1,865 | ) | 332,159 | |||||||||||||||||
United States | — | 892,958 | 892,958 | 0.32 | (5,165 | ) | 887,793 | |||||||||||||||||
Europe | — | 348,336 | 348,336 | 0.12 | (498 | ) | 347,838 | |||||||||||||||||
Others | 189,476 | 437,254 | 626,730 | 0.22 | (2,189 | ) | 624,541 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
| 142,193,024 | 136,867,723 | 279,060,747 | 100.00 | (1,554,402 | ) | 277,506,345 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
| 1 | Expected credit loss of loans at fair value through other comprehensive income is |
49
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
| 2017 | ||||||||||||||||||||||||
| (In millions of Korean won) | Retail | Corporate | Total | % | Allowances | Carrying amount | ||||||||||||||||||
Korea | 130,390,627 | 119,273,608 | 249,664,235 | 98.63 | (1,369,907 | ) | 248,294,328 | |||||||||||||||||
China | — | 1,867,380 | 1,867,380 | 0.74 | (30,720 | ) | 1,836,660 | |||||||||||||||||
Japan | 539 | 127,009 | 127,548 | 0.05 | (6,268 | ) | 121,280 | |||||||||||||||||
United States | — | 866,867 | 866,867 | 0.34 | (1,599 | ) | 865,268 | |||||||||||||||||
Europe | — | 192,980 | 192,980 | 0.08 | (2,326 | ) | 190,654 | |||||||||||||||||
Others | 94,953 | 310,363 | 405,316 | 0.16 | (2,901 | ) | 402,415 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
| 130,486,119 | 122,638,207 | 253,124,326 | 100.00 | (1,413,721 | ) | 251,710,605 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Details of the Group’s corporate loans by industry as at December 31, 2018 and 2017, are as follows:
| 2018 | ||||||||||||||||
| (In millions of Korean won) | Loans | % | Allowances | Carrying amount | ||||||||||||
Financial institutions | 11,118,159 | 8.12 | (5,798 | ) | 11,112,361 | |||||||||||
Manufacturing | 42,063,832 | 30.73 | (448,644 | ) | 41,615,188 | |||||||||||
Service | 59,278,536 | 43.31 | (249,776 | ) | 59,028,760 | |||||||||||
Wholesale and retail | 16,284,464 | 11.90 | (93,091 | ) | 16,191,373 | |||||||||||
Construction | 2,640,614 | 1.93 | (283,768 | ) | 2,356,846 | |||||||||||
Public | 821,317 | 0.60 | (3,286 | ) | 818,031 | |||||||||||
Others | 4,660,801 | 3.41 | (24,512 | ) | 4,636,289 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
| 136,867,723 | 100.00 | (1,108,875 | ) | 135,758,848 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| 2017 | ||||||||||||||||
| (In millions of Korean won) | Loans | % | Allowances | Carrying amount | ||||||||||||
Financial institutions | 9,041,823 | 7.38 | (6,265 | ) | 9,035,558 | |||||||||||
Manufacturing | 39,127,515 | 31.90 | (434,349 | ) | 38,693,166 | |||||||||||
Service | 52,794,807 | 43.05 | (281,847 | ) | 52,512,960 | |||||||||||
Wholesale and retail | 14,620,777 | 11.92 | (85,972 | ) | 14,534,805 | |||||||||||
Construction | 2,538,256 | 2.07 | (269,185 | ) | 2,269,071 | |||||||||||
Public | 834,687 | 0.68 | (2,911 | ) | 831,776 | |||||||||||
Others | 3,680,342 | 3.00 | (14,659 | ) | 3,665,683 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
| 122,638,207 | 100.00 | (1,095,188 | ) | 121,543,019 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
50
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
Details of the Group’s retail loans by type as at December 31, 2018 and 2017, are as follows:
| 2018 | ||||||||||||||||
| (In millions of Korean won) | Loans | % | Allowances | Carrying amount | ||||||||||||
Housing purpose | 70,178,328 | 49.35 | (28,940 | ) | 70,149,388 | |||||||||||
General purpose | 72,014,696 | 50.65 | (416,587 | ) | 71,598,109 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
| 142,193,024 | 100.00 | (445,527 | ) | 141,747,497 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| 2017 | ||||||||||||||||
| (In millions of Korean won) | Loans | % | Allowances | Carrying amount | ||||||||||||
Housing purpose | 62,319,992 | 47.76 | (14,914 | ) | 62,305,078 | |||||||||||
General purpose | 68,166,127 | 52.24 | (303,619 | ) | 67,862,508 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
| 130,486,119 | 100.00 | (318,533 | ) | 130,167,586 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Details of the Group’s mortgage loans1 as at December 31, 2018, are as follows:
| 2018 | ||||||||||||||||
| (In millions of Korean won) | Loans | % | Allowances | Carrying amount | ||||||||||||
Group1 | 6,671,012 | 7.11 | (3,296 | ) | 6,667,716 | |||||||||||
Group2 | 18,911,235 | 20.16 | (8,322 | ) | 18,902,913 | |||||||||||
Group3 | 35,580,948 | 37.94 | (8,753 | ) | 35,572,195 | |||||||||||
Group4 | 32,256,160 | 34.39 | (12,338 | ) | 32,243,822 | |||||||||||
Group5 | 356,892 | 0.38 | (737 | ) | 356,155 | |||||||||||
Group6 | 16,776 | 0.02 | (35 | ) | 16,741 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
| 93,793,023 | 100.00 | (33,481 | ) | 93,759,542 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| 1 | Retail loans for general purpose with the real estate as collateral are included. |
Ranges | ||
Group1 | LTV 0% to less than 20% | |
Group2 | LTV 20% to less than 40% | |
Group3 | LTV 40% to less than 60% | |
Group4 | LTV 60% to less than 80% | |
Group5 | LTV 80% to less than 100% | |
Group6 | LTV over 100% |
| 1 | LTV: Loan to Value ratio |
51
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
Credit risk by industry of due from financial institutions, securities and derivative financial instruments
Details of the Group’s credit risk concentration of due from financial institutions, securities excluding equity securities and derivative financial instruments as at December 31, 2018, are as follows:
| 2018 | ||||||||||||||||
| (In millions of Korean won) | Amount | % | Allowances | Carrying amount | ||||||||||||
Due from financial institutions at amortized cost | ||||||||||||||||
Finance and insurance | 11,833,236 | 100.00 | (1,548 | ) | 11,831,688 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
| 11,833,236 | 100.00 | (1,548 | ) | 11,831,688 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Securities at fair value through profit or loss1 | ||||||||||||||||
Government and government funded institutions | 2,755,250 | 23.19 | — | 2,755,250 | ||||||||||||
Finance and insurance | 7,523,708 | 63.31 | — | 7,523,708 | ||||||||||||
Others | 1,604,067 | 13.50 | — | 1,604,067 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| 11,883,025 | 100.00 | — | 11,883,025 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
Derivatives | ||||||||||||||||
Government and government funded institutions | 39,290 | 2.43 | — | 39,290 | ||||||||||||
Finance and insurance | 1,485,912 | 92.07 | — | 1,485,912 | ||||||||||||
Others | 88,768 | 5.50 | — | 88,768 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| 1,613,970 | 100.00 | — | 1,613,970 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
Securities at fair value through other comprehensive income2 | ||||||||||||||||
Government and government funded institutions | 7,844,258 | 28.34 | — | 7,844,258 | ||||||||||||
Finance and insurance | 17,770,112 | 64.19 | — | 17,770,112 | ||||||||||||
Others | 2,068,093 | 7.47 | — | 2,068,093 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| 27,682,463 | 100.00 | — | 27,682,463 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
Securities at amortized cost |
| |||||||||||||||
Government and government funded institutions | 1,937,657 | 15.15 | (4 | ) | 1,937,653 | |||||||||||
Finance and insurance | 10,826,102 | 84.62 | (1,287 | ) | 10,824,815 | |||||||||||
Others | 30,064 | 0.23 | (6 | ) | 30,058 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
| 12,793,823 | 100.00 | (1,297 | ) | 12,792,526 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| 65,806,517 | (2,845 | ) | 65,803,672 | |||||||||||||
|
|
|
|
|
| |||||||||||
| 1 | Collective investment securities included in securities at fair value through profit or loss are classified as finance and insurance. |
| 2 | Expected credit loss of securities at fair value through other comprehensive income is |
52
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
Details of the Group’s credit risk of securities, excluding equity securities and beneficiary certificates, and derivative financial instruments by industry as at December 31, 2017, are as follows:
| 2017 | ||||||||
| (In millions of Korean won) | Amount | % | ||||||
Financial assets held for trading | ||||||||
Government and government funded institutions | 2,408,760 | 30.49 | ||||||
Finance and Insurance | 3,876,344 | 49.06 | ||||||
Others | 1,615,509 | 20.45 | ||||||
|
|
|
| |||||
| 7,900,613 | 100.00 | |||||||
|
|
|
| |||||
Financial assets designated at fair value through profit or loss | ||||||||
Finance and Insurance | 95,357 | 100.00 | ||||||
|
|
|
| |||||
| 95,357 | 100.00 | |||||||
|
|
|
| |||||
Derivative financial assets | ||||||||
Government and government funded institutions | 12,099 | 0.47 | ||||||
Finance and Insurance | 2,464,286 | 94.50 | ||||||
Others | 131,274 | 5.03 | ||||||
|
|
|
| |||||
| 2,607,659 | 100.00 | |||||||
|
|
|
| |||||
Available-for-sale financial assets | ||||||||
Government and government funded institutions | 8,188,744 | 29.67 | ||||||
Finance and Insurance | 18,044,307 | 65.36 | ||||||
Others | 1,372,710 | 4.97 | ||||||
|
|
|
| |||||
| 27,605,761 | 100.00 | |||||||
|
|
|
| |||||
Held-to-maturity financial assets | ||||||||
Government and government funded institutions | 2,563,480 | 29.34 | ||||||
Finance and Insurance | 6,073,478 | 69.51 | ||||||
Others | 100,192 | 1.15 | ||||||
|
|
|
| |||||
| 8,737,150 | 100.00 | |||||||
|
|
|
| |||||
| 46,946,540 | ||||||||
|
| |||||||
53
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
Details of the Group’s credit risk of due from financial institutions, securities, excluding equity securities, and derivative financial instruments by country as at December 31, 2018, are as follows:
| 2018 | ||||||||||||||||
| (In millions of Korean won) | Amount | % | Allowances | Carrying amount1 | ||||||||||||
Due from financial institutions at amortized cost | ||||||||||||||||
Korea | 9,478,190 | 80.10 | — | 9,478,190 | ||||||||||||
United States | 667,139 | 5.64 | (6 | ) | 667,133 | |||||||||||
Others | 1,687,907 | 14.26 | (1,542 | ) | 1,686,365 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
| 11,833,236 | 100.00 | (1,548 | ) | 11,831,688 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Securities at fair value through profit or loss | ||||||||||||||||
Korea | 10,524,924 | 88.57 | — | 10,524,924 | ||||||||||||
United States | 726,271 | 6.11 | — | 726,271 | ||||||||||||
Others | 631,830 | 5.32 | — | 631,830 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| 11,883,025 | 100.00 | — | 11,883,025 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
Derivatives |
| |||||||||||||||
Korea | 752,028 | 46.59 | — | 752,028 | ||||||||||||
United States | 285,460 | 17.69 | — | 285,460 | ||||||||||||
France | 222,905 | 13.81 | — | 222,905 | ||||||||||||
Others | 353,577 | 21.91 | — | 353,577 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| 1,613,970 | 100.00 | — | 1,613,970 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
Securities at fair value through other comprehensive income1 | ||||||||||||||||
Korea | 26,139,297 | 94.43 | — | 26,139,297 | ||||||||||||
United States | 711,946 | 2.57 | — | 711,946 | ||||||||||||
Others | 831,220 | 3.00 | — | 831,220 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| 27,682,463 | 100.00 | — | 27,682,463 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
Securities at amortized cost |
| |||||||||||||||
Korea | 11,805,442 | 92.27 | (945 | ) | 11,804,497 | |||||||||||
United States | 155,417 | 1.21 | (32 | ) | 155,385 | |||||||||||
United Kingdom | 705,790 | 5.52 | (247 | ) | 705,543 | |||||||||||
Others | 127,174 | 1.00 | (73 | ) | 127,101 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
| 12,793,823 | 100.00 | (1,297 | ) | 12,792,526 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| 65,806,517 | (2,845 | ) | 65,803,672 | |||||||||||||
|
|
|
|
|
| |||||||||||
| 1 | Expected credit loss of securities at fair value through other comprehensive income is |
54
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
Details of the Group’s credit risk of securities, excluding equity securities and beneficiary certificates, and derivative financial instruments by country as at December 31, 2017, are as follows:
| 2017 | ||||||||
| (In millions of Korean won) | Amount | % | ||||||
Financial assets held for trading | ||||||||
Korea | 7,021,083 | 88.87 | ||||||
Others | 879,530 | 11.13 | ||||||
|
|
|
| |||||
| 7,900,613 | 100.00 | |||||||
|
|
|
| |||||
Financial assets designated at fair value through profit or loss | ||||||||
Korea | 95,357 | 100.00 | ||||||
|
|
|
| |||||
| 95,357 | 100.00 | |||||||
|
|
|
| |||||
Derivative financial assets | ||||||||
Korea | 1,266,612 | 48.57 | ||||||
United States | 303,283 | 11.63 | ||||||
United Kingdom | 52,781 | 2.02 | ||||||
France | 303,883 | 11.65 | ||||||
Others | 681,100 | 26.13 | ||||||
|
|
|
| |||||
| 2,607,659 | 100.00 | |||||||
|
|
|
| |||||
Available-for-sale financial assets | ||||||||
Korea | 27,006,817 | 97.83 | ||||||
Others | 598,944 | 2.17 | ||||||
|
|
|
| |||||
| 27,605,761 | 100.00 | |||||||
|
|
|
| |||||
Held-to-maturity financial assets | ||||||||
Korea | 7,647,772 | 87.53 | ||||||
Others | 1,089,378 | 12.47 | ||||||
|
|
|
| |||||
| 8,737,150 | 100.00 | |||||||
|
|
|
| |||||
| 46,946,540 | ||||||||
|
| |||||||
The counterparties to the financial assets under due from financial institutions and financial instruments indexed to the price of gold within financial assets measured at fair value through profit or loss and derivatives are in the financial and insurance industries which have high credit ratings.
55
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
4.3 Liquidity risk
4.3.1 Overview of Liquidity Risk
Liquidity risk is the risk of insolvency or loss due to a disparity between the inflow and outflow of funds, unexpected outflow of funds, and obtaining funds at a high price or disposing of securities at an unfavorable price due to lack of available funds. The Group manages its liquidity risk through analysis of the contractual maturity of interest-bearing assets and liabilities, assets and liabilities related to the other in and outflows, andoff-balance sheet items related to the inflows and outflows of currency derivative instruments and others.
4.3.2. Liquidity Risk Management and Indicator
The liquidity risk is managed by ALM (‘Asset Liability Management’) and related guidelines which are applied to the risk management policies and procedures that addresses all the possible risks that arise from the overall business of the Group.
The Group has to establish the liquidity risk management strategy including the objectives of liquidity risk management, management policies and internal control system, and obtain approval from Risk Management Committee. Risk Management Committee operates the Risk Management Council for the purpose of efficient risk management, monitors establishment and enforcement of policies based on risk management strategy.
For the purpose of liquidity management, the liquidity gap ratio, liquidity ratio, maturity gap ratio and the results of the stress testing related to liquidity risk on transactions affecting the inflows and outflows of funds and transactions ofoff-balance sheet items are measured, managed and reported to the Risk Management Committee and Risk Management Council on a regular basis.
4.3.3. Analysis of Remaining Contractual Maturity of Financial Assets and Liabilities
Cash flows disclosed below are undiscounted contractual principal and interest to be received (paid) and, thus, differ from the amounts in the financial statements which are based on the present value of expected cash flows. 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 maturity.
56
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
The remaining contractual maturity of financial assets and liabilities, excluding derivatives held for cash flow hedging, as at December 31, 2018 and 2017, is as follows:
| 2018 | ||||||||||||||||||||||||||||
| (In millions of Korean won) | 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 | 4,727,159 | 339,350 | 178,406 | 458,164 | — | — | 5,703,079 | |||||||||||||||||||||
Financial assets at fair value through profit or loss2 | 12,043,909 | 230 | 7,182 | 184,881 | 5,542 | 90,736 | 12,332,480 | |||||||||||||||||||||
Derivatives held for trading2 | 1,533,650 | — | — | — | — | — | 1,533,650 | |||||||||||||||||||||
Derivatives held for hedging3 | — | 2,289 | 1,364 | 16,251 | 20,025 | 40,830 | 80,759 | |||||||||||||||||||||
Loans at amortized cost | — | 18,705,807 | 27,929,002 | 107,831,857 | 71,668,732 | 95,363,933 | 321,499,331 | |||||||||||||||||||||
Financial investments4 | 1,898,944 | 2,176,313 | 3,646,572 | 13,634,982 | 20,703,303 | 2,454,592 | 44,514,706 | |||||||||||||||||||||
Financial assets at fair value through other comprehensive income | 1,898,944 | 1,418,537 | 2,278,547 | 9,765,281 | 14,987,787 | 191,966 | 30,541,062 | |||||||||||||||||||||
Securities at amortized cost | — | 757,776 | 1,368,025 | 3,869,701 | 5,715,516 | 2,262,626 | 13,973,644 | |||||||||||||||||||||
Other financial assets | 285 | 2,449,979 | 520 | 1,020,442 | — | — | 3,471,226 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
| 20,203,947 | 23,673,968 | 31,763,046 | 123,146,577 | 92,397,602 | 97,950,091 | 389,135,231 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Financial liabilities |
| |||||||||||||||||||||||||||
Financial liabilities at fair value through profit or loss2 | 87,168 | — | — | — | — | — | 87,168 | |||||||||||||||||||||
Derivatives held for trading2 | 1,553,858 | — | — | — | — | — | 1,553,858 | |||||||||||||||||||||
Derivatives held for hedging3 | — | 4,091 | (4,249 | ) | (14,415 | ) | 15,660 | 31 | 1,118 | |||||||||||||||||||
Deposits5 | 123,264,494 | 16,840,316 | 27,895,787 | 94,902,004 | 11,164,154 | 2,780,594 | 276,847,349 | |||||||||||||||||||||
Debts | 872 | 2,683,213 | 3,317,577 | 6,830,511 | 4,348,308 | 669,151 | 17,849,632 | |||||||||||||||||||||
Debentures | 30,160 | 702,704 | 2,368,679 | 8,329,923 | 12,113,285 | 673,863 | 24,218,614 | |||||||||||||||||||||
Other financial liabilities | — | 10,451,177 | 2,206 | 76,647 | 60,145 | — | 10,590,175 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
| 124,936,552 | 30,681,501 | 33,580,000 | 110,124,670 | 27,701,552 | 4,123,639 | 331,147,914 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Off-balance sheet items |
| |||||||||||||||||||||||||||
Commitments6 | 81,278,583 | — | — | — | — | — | 81,278,583 | |||||||||||||||||||||
Payment guarantee agreement | 7,277,136 | — | — | — | — | — | 7,277,136 | |||||||||||||||||||||
Financial guarantee contracts7 | 3,135,590 | — | — | — | — | — | 3,135,590 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
| 91,691,309 | — | — | — | — | — | 91,691,309 | ||||||||||||||||||||||
| 1 | The amounts of |
| 2 | Financial liabilities at fair value through profit or loss and derivatives held for trading and financial assets at fair value through profit or loss (excluding loans) are not managed by contractual maturity because they are held for trading or redemption before maturity. Therefore, the carrying amounts are included in the ‘On demand’ category. |
| 3 | Cash flows of derivative instruments held for hedging are shown at net amounts of cash inflows and outflows by remaining contractual maturity. |
| 4 | Equity securities designated as financial assets at fair value through other comprehensive income included in the ‘On demand’ category as most are available for sale at any time. However, in the case of equity investments which are restricted for sale, these will be classified to its respective maturity when the restriction on disposal is released. |
| 5 | Deposits that are contractually repayable on demand or on short notice are included under the ‘On demand’ category. |
| 6 | Unused lines of credit within commitments are included under the ‘On demand’ category as payments can be required upon request. |
| 7 | Financial guarantee contracts are included under the ‘On demand’ category as payments can be required upon request. |
57
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
| 2017 | ||||||||||||||||||||||||||||
| (In millions of Korean won) | 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 | 5,716,586 | 399,460 | 140,676 | 159,353 | — | — | 6,416,075 | |||||||||||||||||||||
Financial assets held for trading2 | 8,313,373 | — | — | — | — | — | 8,313,373 | |||||||||||||||||||||
Financial assets designated at fair value through profit or loss2 | 95,357 | — | — | — | — | — | 95,357 | |||||||||||||||||||||
Derivatives held for trading2 | 2,509,930 | — | — | — | — | — | 2,509,930 | |||||||||||||||||||||
Derivatives held for hedging3 | — | 21,489 | 2,722 | 2,647 | (5,017 | ) | 52,698 | 74,539 | ||||||||||||||||||||
Loans | — | 14,978,083 | 26,503,526 | 96,536,587 | 62,850,146 | 89,830,481 | 290,698,823 | |||||||||||||||||||||
Available-for-sale financial assets4 | 6,056,352 | 1,486,656 | 2,111,060 | 9,396,840 | 15,050,896 | 791,200 | 34,893,004 | |||||||||||||||||||||
Held-to-maturity financial assets | — | 584,825 | 388,928 | 2,608,727 | 4,343,586 | 1,986,169 | 9,912,235 | |||||||||||||||||||||
Other financial assets | 291 | 4,604,953 | — | 1,042,830 | — | — | 5,648,074 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
| 22,691,889 | 22,075,466 | 29,146,912 | 109,746,984 | 82,239,611 | 92,660,548 | 358,561,410 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Financial liabilities |
| |||||||||||||||||||||||||||
Financial liabilities held for trading2 | 74,191 | — | — | — | — | — | 74,191 | |||||||||||||||||||||
Derivatives held for trading2 | 2,558,786 | — | — | — | — | — | 2,558,786 | |||||||||||||||||||||
Derivatives held for hedging3 | — | 4,176 | (4,715 | ) | (19,705 | ) | (7,144 | ) | 244 | (27,144 | ) | |||||||||||||||||
Deposits5 | 124,342,154 | 12,319,041 | 23,092,872 | 82,158,996 | 11,320,759 | 2,801,348 | 256,035,170 | |||||||||||||||||||||
Debts | 936 | 3,843,258 | 1,871,117 | 5,325,664 | 4,462,359 | 573,088 | 16,076,422 | |||||||||||||||||||||
Debentures | 40,655 | 540,471 | 1,218,396 | 5,425,995 | 11,524,310 | 1,536,151 | 20,285,978 | |||||||||||||||||||||
Other financial liabilities | — | 10,055,251 | 774 | 74,577 | 6,794 | 218,097 | 10,355,493 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
| 127,016,722 | 26,762,197 | 26,178,444 | 92,965,527 | 27,307,078 | 5,128,928 | 305,358,896 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Off-balance sheet items |
| |||||||||||||||||||||||||||
Commitments6 | 50,851,024 | — | — | — | — | — | 50,851,024 | |||||||||||||||||||||
Financial guarantee contracts7 | 2,968,354 | — | — | �� | — | — | — | 2,968,354 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
| 53,819,378 | — | — | — | — | — | 53,819,378 | ||||||||||||||||||||||
| 1 | The amounts of |
| 2 | Financial assets held for trading, financial assets designated at fair value through profit or loss, financial liabilities held for trading and derivatives held for trading are not managed by contractual maturity because they are held for trading or redemption before maturity. Therefore, the carrying amounts are included in the ‘On demand’ category. However, the cash flows of the embedded derivatives (e.g. conversion options and others) which are separated from their host contracts, are included in the cash flows of the host contracts. |
| 3 | Cash flows of derivative instruments held for hedging are shown at net amounts of cash inflows and outflows by remaining contractual maturity. |
| 4 | Equity investments in financial assets classified asavailable-for-sale are generally included in the ‘On demand’ category as most are available for sale at any time. However, in the case of equity investments which are restricted for sale, these will be classified to its respective maturity when the restriction on disposal is released. |
| 5 | Deposits that are contractually repayable on demand or on short notice are included under the ‘On demand’ category. |
| 6 | Unused lines of credit within commitments are included under the ‘On demand’ category as payments can be required upon request. |
| 7 | Financial guarantee contracts are included under the ‘On demand’ category as payments can be required upon request. |
58
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
The remaining contractual cash flows of derivatives held for cash flow hedging as at December 31, 2018 and 2017, are as follows:
| 2018 | ||||||||||||||||||||||||
| (In millions of Korean won) | Up to 1 month | 1-3 months | 3-12 months | 1-5 years | Over 5 years | Total | ||||||||||||||||||
Cash flow to be received of net settlement derivatives | 251 | 2,548 | 4,871 | 11,642 | — | 19,312 | ||||||||||||||||||
Cash flow to be paid of net settlement derivatives | 197 | 129 | 493 | 79 | — | 898 | ||||||||||||||||||
| 2017 | ||||||||||||||||||||||||
| (In millions of Korean won) | Up to 1 month | 1-3 months | 3-12 months | 1-5 years | Over 5 years | Total | ||||||||||||||||||
Cash flow to be received of net settlement derivatives | 2 | 198 | 488 | 104 | — | 792 | ||||||||||||||||||
Cash flow to be paid of net settlement derivatives | 94 | 536 | 1,444 | 5,852 | — | 7,926 | ||||||||||||||||||
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, and incurred in securities, derivatives and others. The most significant risks associated with trading positions are interest rate risks and currency risks, and other risks include stock price risks. In addition, the Group is exposed to interest rate risks associated withnon-trading positions. The Group classifies exposures to market risk into either trading ornon-trading positions for managerial purpose.
4.4.2 Risk Management
The Group sets internal capital limits for market risk and interest rate risk and monitors the risks to manage the risk of trading andnon-trading positions. The Group maintains risk management systems and procedures, such as trading policies and procedures, market risk management guidelines for trading positions and ALM risk management guidelines fornon-trading positions in order to manage market risk efficiently. The procedures mentioned are implemented with approval from the Risk Management Committee and Risk Management Council.
The Group establishes market risk management policy, sets position limits, loss limits and VaR limits of each business group and approves newly developed products through its Risk Management Council. The Market Risk Management Subcommittee, which is chaired by the Chief Risk Officer (CRO), is the decision maker and sets position limits, loss limits, VaR limits, sensitivity limits and scenario loss limits for each division, at the level of each individual business department.
The Asset-Liability Management Committee (ALCO) determines the operational standards of interest and commission, the details of establishment and prosecution of the Asset Liability Management (ALM) policies and enacts and amends relevant guidelines. The Risk Management Council monitors the establishment and enforcement of ALM risk management policies and enact and amend ALM risk management guidelines. The interest rate risk limit is set based on the future assets/liabilities position and interest rate volatility estimation reflects the annual work plan. The Financial Planning Department and Risk Management Department measure and monitor the interest risk status and limits on a regular basis. The status and limits of interest rate risks, such as interest rate EaR, duration gap and interest rate VaR, are reported to the ALCO and Risk Management Council on a monthly basis and to the Risk Management Committee on a quarterly basis. To ensure adequacy of interest rate and liquidity risk management, the Risk Management Department assigns the limits, monitors and reviews the risk management procedures and tasks conducted by the Financial Planning Department. Also, the Risk Management Department independently reports related information to management.
59
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
4.4.3 Trading Position
Definition of a trading position
Trading positions subject to market risk management are interest rate, stock price positions for short-term profit-taking and others. Also, they include all foreign exchange rate positions. The basic requirements of trading positions are defined under the Trading Policy and Guideline, are as follows:
| • | The trading position is not restricted for purchase and sale, is measured daily at fair value, and its significant inherent risks are able to be hedged in the market. |
| • | The criteria for classification as a trading position are clearly defined in the Trading Policy and guideline, and separately managed by the trading department. |
| • | The trading position is operated in accordance with the documented trading strategy and managed through position limits. |
| • | The operating department or professional dealers have an authority to enforce a deal on the trading position within predetermined limits withoutpre-approval. |
| • | The trading position is reported periodically to management for the purpose of the Group’s risk management. |
Observation method on market risk arising from trading positions
The Group calculates VaR to measure the market risk by using market risk management systems on the entire trading portfolio. Generally, the Group manages market risk on the trading portfolio. In addition, the Group controls and manages the risk of derivative trading based on the regulations and guidelines formulated by the Financial Supervisory Service.
Value at Risk (VaR)
i. Value at Risk (VaR)
The Group uses theValue-at-Risk methodology to measure the market risk of trading positions.
The Group now uses theten-day VaR, which estimates the maximum amount of loss that could occur in ten days under an historical simulation model which is considered to be a full valuation method. The distributions of portfolio’s value changes are estimated based on the data over the previous 250 business days, andten-day VaR is calculated by subtracting net present market value from the value measured at a 99% confident level of portfolio’s value distribution results.
VaR is a commonly used market risk measurement technique. However, the method has some shortcomings. VaR estimates possible losses over a certain period at a particular confidence level using past market movement data. Past market movements are, however, not necessarily a good indicator of future events, as there may be conditions and circumstances in the future that the model does not anticipate. As a result, the timing and magnitude of the actual losses may vary depending on the assumptions made at the time of the calculation. In addition, the time periods used for the model, generally one or ten days, are assumed to be a sufficient holding period before liquidating the relevant underlying positions. If these holding periods are not sufficient, or too long, the VaR results may understate or overstate the potential loss.
60
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
The Group uses an internal model (VaR) to measure general risk, and a standard method to measure each individual risk. When the internal model is not permitted for certain market risk, the Group uses the standard method. Therefore, the market risk VaR may not reflect the market risk of each individual risk and some specific positions.
ii. Back-Testing
Back-testing is conducted on a daily basis to validate the adequacy of the VaR model. In back- testing, the Group compares both the actual and hypothetical profit or loss with the VaR calculations.
iii. Stress Testing
Stress testing is carried out to analyze the impact of abnormal market situations on the trading andavailable-for-sale portfolio. It reflects changes in interest rates, stock prices, foreign exchange rates, implied volatilities of options and other risk factors that have significant influence on the value of the portfolio. The Group uses historical scenarios and hypothetical scenarios for the analysis of abnormal market situations. Stress testing is performed at least once every quarter.
The units that analyze total VaR can be categorized as follows: ① by product: interest rate products (debt securities in Korean won and foreign currencies, etc.), foreign currency products (spots, futures, and CRS, etc.), equity securities (equities, ELS, etc.), ② by risk factors: interest rates (government bond interest rate in Korean won and foreign currencies, corporate bond interest rate, etc.), exchange rates (USD/KRW, USD/JPY, etc.), and stock market indexes (KOSPI, S&P 500, etc.); the Group previously assesses VaR by product considering timeliness and efficiency.
However, as the amount of investment property in foreign currencies increases, products evaluated as multiple risk factors (i.e. for foreign currency bonds, ① by product: interest rate product ② by risk factor: interest rate and foreign exchange rate) had a tendency that dispersion effect is excessive due to not reflecting the actual hedge position by products in detail; to prevent which, the Group has decided to use VaR by risk factor from 2018.
VaR at a 99%, excluding Stressed Value at Risks, confidence level of interest rate, stock price and foreign exchange rate risk for trading positions with aten-day holding period as at December 31, 2018 and 2017, are as follows:
61
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
| 2018 | ||||||||||||||||
| (In millions of Korean won) | Average | Minimum | Maximum | Ending | ||||||||||||
Interest rate risk | 12,513 | 6,044 | 18,684 | 7,074 | ||||||||||||
Stock price risk | 2,995 | 1,253 | 4,831 | 3,348 | ||||||||||||
Foreign exchange rate risk | 9,443 | 5,033 | 16,453 | 16,453 | ||||||||||||
Deduction of diversification effect | (11,939 | ) | ||||||||||||||
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|
|
|
|
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| |||||||||
Total VaR | 16,221 | 11,653 | 23,078 | 14,936 | ||||||||||||
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|
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|
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|
| |||||||||
| 2017 | ||||||||||||||||
| (In millions of Korean won) | Average | Minimum | Maximum | Ending | ||||||||||||
Interest rate risk | 22,682 | 14,313 | 42,155 | 23,758 | ||||||||||||
Stock price risk | 1,002 | 757 | 1,345 | 1,255 | ||||||||||||
Foreign exchange rate risk | 32,709 | 12,405 | 44,322 | 24,315 | ||||||||||||
Deduction of diversification effect | (29,727 | ) | ||||||||||||||
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| |||||||||
Total VaR | 23,312 | 16,498 | 30,247 | 19,601 | ||||||||||||
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| |||||||||
The required equity capital using the standard method related to the positions which are not measured by VaR as at December 31, 2018 and 2017, is as follows:
| (In millions of Korean won) | 2018 | 2017 | ||||||
Interest rate risk | 112,153 | 98,235 | ||||||
Stock price risk | 19,756 | 1,646 | ||||||
Foreign exchange rate risk | 1,339 | 810 | ||||||
|
|
|
| |||||
| 133,248 | 100,691 | |||||||
|
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|
| |||||
Details of risk factors
i. Interest rate risk
Trading position interest rate risk usually arises from debt securities denominated in Korean won. The Group’s trading strategy is to benefit from short-term movements in the prices of debt securities arising from changes in interest rates. The Group manages interest rate risk on major trading portfolios using market value-based tools such as VaR and sensitivity analysis (Price Value of a Basis Point: PVBP).
ii. Stock price risk
Stock price risk only arises from trading securities denominated in Korean won as the Group does not have any trading exposure to shares denominated in foreign currencies. The trading securities portfolios in Korean won are composed of exchange-traded stocks and derivative instruments linked to stock with strict limits on diversification.
iii. Foreign exchange rate risk
Foreign exchange rate risk arises from holding assets and liabilities denominated in foreign currency and foreign currency derivatives. Net foreign currency exposure mostly occurs from the foreign assets and liabilities which are denominated in US dollars and Chinese yuan. The Group sets both loss limits and net foreign currency exposure limits and manages comprehensive net foreign exchange exposures which consider both trading andnon-trading portfolios.
62
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
4.4.4Non-trading Position
i. Definition ofnon-trading position
Managed interest rate risk innon-trading position includes on oroff-balance sheet assets, liabilities and derivatives that are sensitive to interest rate, except trading position for market risk. The interest rate sensitive assets and liabilities are interest-bearing assets and liabilities that create interest income and expenses.
ii. Observation method on market risk arising fromnon-trading position
Interest rate risk occurs due to mismatches on maturities and interest rate reset periods between interest-bearing assets and liabilities. The Group manages the risk through measuring and managing interest rate VaR and EaR that are maximum expected decreases in net asset value (NPV) and net interest income (NII) for one year, respectively, arising from unfavorable changes in market interest rate.
iii. Interest Rate VaR
Interest rate VaR is the maximum possible loss due to interest rate risk under a normal distribution at a 99.90% confidence level. The measurement results of risk as at December 31, 2018 and 2017, are as follows:
| (In millions of Korean won) | 2018 | 2017 | ||||||
Interest Rate VaR | 168,282 | 350,178 | ||||||
63
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
4.4.5 Financial Assets and Liabilities in Foreign Currencies
Financial assets and liabilities in foreign currencies as at December 31, 2018 and 2017, are as follows:
| 2018 | ||||||||||||||||||||||||||||
| (In millions of Korean won) | USD | JPY | EUR | GBP | CNY | Others | Total | |||||||||||||||||||||
Financial assets | ||||||||||||||||||||||||||||
Cash and due from financial institutions | 1,374,423 | 307,580 | 188,508 | 24,536 | 1,088,299 | 362,727 | 3,346,073 | |||||||||||||||||||||
Financial assets at fair value through profit or loss | 1,756,048 | 44,175 | 69,728 | — | — | 17,773 | 1,887,724 | |||||||||||||||||||||
Derivatives held for trading | 98,101 | — | — | — | 4,643 | — | 102,744 | |||||||||||||||||||||
Derivatives held for hedging | 32,996 | — | — | — | — | — | 32,996 | |||||||||||||||||||||
Loans at amortized cost | 12,155,429 | 333,848 | 571,077 | 5,993 | 990,705 | 396,228 | 14,453,280 | |||||||||||||||||||||
Financial assets at fair value through other comprehensive income | 2,999,581 | 36,538 | 5,134 | — | 125,571 | 3,699 | 3,170,523 | |||||||||||||||||||||
Financial assets at amortized cost | 949,227 | — | — | — | 38,802 | — | 988,029 | |||||||||||||||||||||
Other financial assets | 942,708 | 297,430 | 17,184 | 21,447 | 251,725 | 24,149 | 1,554,643 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
| 20,308,513 | 1,019,571 | 851,631 | 51,976 | 2,499,745 | 804,576 | 25,536,012 | ||||||||||||||||||||||
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| |||||||||||||||
Financial liabilities | ||||||||||||||||||||||||||||
Derivatives held for trading | 103,451 | 14 | 42 | — | 4,062 | — | 107,569 | |||||||||||||||||||||
Derivatives held for hedging | 88,367 | — | — | — | — | — | 88,367 | |||||||||||||||||||||
Deposits | 8,948,057 | 616,551 | 491,628 | 48,264 | 1,263,562 | 450,340 | 11,818,402 | |||||||||||||||||||||
Debts | 8,984,548 | 90,778 | 184,173 | — | 11,393 | 24,057 | 9,294,949 | |||||||||||||||||||||
Debentures | 3,960,312 | — | 31,979 | — | — | 42,240 | 4,034,531 | |||||||||||||||||||||
Other financial liabilities | 898,222 | 103,395 | 130,282 | 3,566 | 265,080 | 41,853 | 1,442,398 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
| 22,982,957 | 810,738 | 838,104 | 51,830 | 1,544,097 | 558,490 | 26,786,216 | ||||||||||||||||||||||
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|
| |||||||||||||||
Off-balance sheet items | 13,573,398 | 32,619 | 1,262 | — | 270,018 | 7,552 | 13,884,849 | |||||||||||||||||||||
| 2017 | ||||||||||||||||||||||||||||
| (In millions of Korean won) | USD | JPY | EUR | GBP | CNY | Others | Total | |||||||||||||||||||||
Financial assets | ||||||||||||||||||||||||||||
Cash and due from financial institutions | 1,509,387 | 250,933 | 131,100 | 19,779 | 815,014 | 236,570 | 2,962,783 | |||||||||||||||||||||
Financial assets held for trading | 1,044,336 | 83,716 | 81,394 | 8,922 | — | 18,145 | 1,236,513 | |||||||||||||||||||||
Derivatives held for trading | 78,769 | 441 | 52 | — | 96 | 202 | 79,560 | |||||||||||||||||||||
Derivatives held for hedging | 29,489 | — | — | — | — | — | 29,489 | |||||||||||||||||||||
Loans | 10,605,408 | 228,747 | 1,503,493 | 9,548 | 795,302 | 220,859 | 13,363,357 | |||||||||||||||||||||
Available-for-sale financial assets | 2,189,461 | 76,185 | 38,936 | — | 38,606 | 20,666 | 2,363,854 | |||||||||||||||||||||
Held-to-maturity financial assets | 1,084,474 | — | — | — | 4,905 | — | 1,089,379 | |||||||||||||||||||||
Other financial assets | 1,509,793 | 452,446 | 406,009 | 13,101 | 199,422 | 201,173 | 2,781,944 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
| 18,051,117 | 1,092,468 | 2,160,984 | 51,350 | 1,853,345 | 697,615 | 23,906,879 | ||||||||||||||||||||||
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| |||||||||||||||
Financial liabilities | ||||||||||||||||||||||||||||
Derivatives held for trading | 56,598 | — | 35 | — | 3,563 | — | 60,196 | |||||||||||||||||||||
Derivatives held for hedging | 49,962 | — | — | — | — | — | 49,962 | |||||||||||||||||||||
Deposits | 8,343,862 | 757,704 | 437,881 | 39,990 | 1,096,430 | 573,326 | 11,249,193 | |||||||||||||||||||||
Debts | 7,130,892 | 44,885 | 77,604 | 737 | — | 10,483 | 7,264,601 | |||||||||||||||||||||
Debentures | 2,940,251 | — | — | — | — | — | 2,940,251 | |||||||||||||||||||||
Other financial liabilities | 2,183,242 | 43,671 | 887,197 | 3,338 | 198,043 | 28,647 | 3,344,138 | |||||||||||||||||||||
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|
|
|
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|
| |||||||||||||||
| 20,704,807 | 846,260 | 1,402,717 | 44,065 | 1,298,036 | 612,456 | 24,908,341 | ||||||||||||||||||||||
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|
| |||||||||||||||
Off-balance sheet items | 11,304,709 | 705 | 2,404 | — | 257,940 | 12,823 | 11,578,581 | |||||||||||||||||||||
64
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
4.5 Operational Risk
4.5.1 Concept
The Group defines operational risk as risk of loss resulting from inadequate or failed internal processes, people, systems and external events. The operational risk includes financial andnon-financial risks.
4.5.2 Risk Management
The purpose of operational risk management is not only to comply with requirements of regulatory authorities but is also to establish an integrated system to cultivate enterprise culture that values importance of risk management, strengthen internal controls, improve processes and provide with timely feedback to management so that eventually mitigate operational risk of the Group. In addition, the Group established Business Continuity Planning (BCP) to ensure critical business functions can be maintained, or restored, in the event of material disruptions arising from internal or external events. It has constructed replacement facilities as well as has carried out full scale test for head office and IT departments to test its BCPs.
4.6 Capital Management
The Group complies with the capital adequacy standard established by the Financial Services Commission. The capital adequacy standard is based on Basel III revised by Basel Committee on Banking Supervision in Bank for International Settlements in June 2011, and was implemented in Korea in December 2013. The Group is required to maintain a minimum Common Equity Tier 1 ratio of at least 4.5%, a minimum Tier 1 ratio of 6.0% and a minimum Total Regulatory Capital of 8.0% as at December 31, 2018. Capital Conservation Buffer of 1.875% and Capital Requirement of Domestic Systemically Important Bank(D-SIB) of 0.75% are additionally applied. Therefore, the Group is required to maintain a capital ratio including a minimum capital ratio and additional capital requirements (a Common Equity Tier 1 Ratio of 7.125% (December 31, 2017 : 6.25%), a Tier 1 Ratio of 8.625% (December 31, 2017 : 7.75%), and a Total Regulatory Capital Ratio of 10.625% (December 31, 2017 : 9.75%)).
The Group’s equity capital is classified into three categories in accordance with Detailed Supervisory Regulations on Banking Business:
| • | Common Equity Tier 1 Capital: Common Equity Tier 1 Capital represents the issued capital that takes the first and proportionately greatest share of any losses and represents the most subordinated claim in liquidation of the Group, and not repaid outside of liquidation. It includes common shares issued, capital surplus, retained earnings,non-controlling interests of consolidated subsidiaries, accumulated other comprehensive income, other capital surplus and others. |
| • | Additional Tier 1 Capital: Additional Tier 1 Capital includes perpetual instruments issued by the Group that meet the criteria for inclusion in Additional Tier 1 capital, and stock surplus resulting from the issue of instruments included in Additional Tier 1 capital and others. |
| • | Tier 2 Capital: Tier 2 Capital represents the capital that takes the proportionate share of losses in the liquidation of the Group. Tier 2 Capital includes a fund raised by issuing subordinated debentures maturing in not less than 5 years that meet the criteria for inclusion in Tier 2 capital, and the allowance for loan losses which are accumulated for assets classified as normal or precautionary in accordance with Regulations on Supervision of Banking Business and others. |
65
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
Risk-weighted asset means the assets weighted according to the inherent risks in the total assets and the possible losses resulting from the errors of internal process and external events which the Group should cover. The Group calculates risk-weighted asset by each risk (credit risk, market risk and operational risk) based on Detailed Regulations on Supervision of Banking Business and uses it for its capital ratio calculation. The Group complied with external capital adequacy requirements as at December 31, 2018 and 2017.
In addition to the capital ratio, the Group assesses its adequacy of capital by using the internal assessment and management policy of the capital adequacy. The assessment of the capital adequacy is conducted by comparing available capital (actual amount of available capital) and internal capital (amount of capital enough to cover all significant risks under target credit rate set by the Group). The Group monitors the soundness of finance and provides risk adjusted basis for performance review using the assessment of the capital adequacy. The internal capital is calculated by adding the stress testing results and other required items to the total internal capitals which are calculated for each risk.
The Risk Management Council of the Group determines the Group’s risk appetite and allocates internal capital by risk type and business group. Each business group efficiently operates its capital within range of granted internal capital. The Risk Management Department of the Group monitors a management of the limit on internal capital and reports the results to management and the Risk Management Council. The Group maintains the adequacy of capital through proactive review and approval of the Risk Management Committee when the internal capital is expected to exceed the limits.
Details of the Group’s capital adequacy calculation in line with Basel III requirements as at December 31, 2018 and 2017, are as follows:
| (In millions of Korean won) | 2018 | 2017 | ||||||
Equity Capital | 27,694,178 | 25,913,677 | ||||||
Tier I Capital | 25,567,995 | 24,040,408 | ||||||
Common Equity Tier 1 Capital | 25,567,995 | 24,040,408 | ||||||
Tier II Capital | 2,126,183 | 1,873,269 | ||||||
Risk-weighted assets: | 178,433,263 | 161,824,686 | ||||||
Credit risk1 | 163,693,288 | 145,958,874 | ||||||
Market risk2 | 4,747,989 | 5,746,686 | ||||||
Operational risk3 | 9,991,986 | 10,119,126 | ||||||
Equity Capital (%): | 15.52 | 16.01 | ||||||
Tier I Capital (%) | 14.33 | 14.86 | ||||||
Common Equity Tier 1 Capital (%) | 14.33 | 14.86 | ||||||
| 1 | Credit risk-weighted assets are measured using the Internal Rating-Based Approach and Standardized Approach. |
| 2 | Market risk-weighted assets are measured using the Internal Model-Based Approach and Standardized Approach. |
| 3 | Operational risk-weighted assets are measured using the Advanced Measurement Approach. |
66
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
5. Segment Information
5.1 Overall Segment Information and Business Segments
The Group is organized into Banking, Retail Banking and Other Activities. These business divisions are based on the nature of the products and services provided, the type or class of customer, and the Group’s management organization.
| • | Corporate banking : The activities within this segment include providing credit, deposit products and other related financial services to large, small andmedium-sized enterprises and SOHOs, and their local subsidiaries-related works |
| • | Retail banking : The activities within this segment include providing credit, deposit products and other related financial services to individuals and households. |
| • | Other activities : The activities within this segment include trading activities in securities and derivatives, funding, trust and other activities. |
Financial information by business segment for the year ended December 31, 2018 is as follows:
| 2018 | ||||||||||||||||||||
| (In millions of Korean won) | Corporate Banking | Retail Banking | Others | Intra-group Adjustment | Total | |||||||||||||||
Operating revenues from external customers | 2,386,035 | 2,989,240 | 1,478,104 | — | 6,853,379 | |||||||||||||||
Segment operating revenues(expenses) | 27,687 | — | (39,343 | ) | 11,656 | — | ||||||||||||||
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| |||||||||||
| 2,413,722 | 2,989,240 | 1,438,761 | 11,656 | 6,853,379 | ||||||||||||||||
Net interest income | 2,753,928 | 2,960,598 | 386,407 | (211 | ) | 6,100,722 | ||||||||||||||
Interest income | 4,267,675 | 4,547,615 | 1,227,614 | (23,016 | ) | 10,019,888 | ||||||||||||||
Interest expense | (1,513,747 | ) | (1,587,017 | ) | (841,207 | ) | 22,805 | (3,919,166 | ) | |||||||||||
Net fee and commission income | 287,978 | 490,447 | 362,846 | (18,523 | ) | 1,122,748 | ||||||||||||||
Fee and commission income | 381,481 | 583,213 | 486,034 | (27,937 | ) | 1,422,791 | ||||||||||||||
Fee and commission expense | (93,503 | ) | (92,766 | ) | (123,188 | ) | 9,414 | (300,043 | ) | |||||||||||
Net gains (losses) on financial assets/ liabilities at fair value through profit or loss | 13,933 | — | 297,938 | 14,524 | 326,395 | |||||||||||||||
Net other operating income (expense) | (642,117 | ) | (461,805 | ) | 391,570 | 15,866 | (696,486 | ) | ||||||||||||
General and administrative expenses | (1,091,556 | ) | (1,970,409 | ) | (706,164 | ) | 1,134 | (3,766,995 | ) | |||||||||||
Operating profit before provision for credit losses | 1,322,166 | 1,018,831 | 732,597 | 12,790 | 3,086,384 | |||||||||||||||
Provision (Reversal) for credit losses | 77,224 | (179,229 | ) | (273 | ) | 8,362 | (93,916 | ) | ||||||||||||
Operating profit | 1,399,390 | 839,602 | 732,324 | 21,152 | 2,992,468 | |||||||||||||||
Share of profit of associates | — | — | 49,698 | — | 49,698 | |||||||||||||||
Net othernon-operating income (expense) | (65 | ) | — | 123,936 | (79,699 | ) | 44,172 | |||||||||||||
Segment profit before income tax expense | 1,399,325 | 839,602 | 905,958 | (58,547 | ) | 3,086,338 | ||||||||||||||
Income tax profit (expense) | (386,764 | ) | (230,891 | ) | (208,403 | ) | (1,082 | ) | (827,140 | ) | ||||||||||
Profit for the year | 1,012,561 | 608,711 | 697,555 | (59,629 | ) | 2,259,198 | ||||||||||||||
Profit attributable to the shareholder of the Parent Company | 1,012,561 | 608,711 | 697,555 | (59,629 | ) | 2,259,198 | ||||||||||||||
Profit attributable tonon-controlling interests | — | — | — | — | — | |||||||||||||||
Total assets1 | 131,303,734 | 140,814,393 | 88,399,951 | (3,558,820 | ) | 356,959,258 | ||||||||||||||
Total liabilities1 | 123,880,329 | 152,173,062 | 55,478,601 | (1,240,600 | ) | 330,291,392 | ||||||||||||||
| 1 | Amounts as at December 31, 2018 before intra-segment transaction adjustment. |
67
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
Financial information by business segment for the year ended December 31, 2017 is as follows:
| 2017 | ||||||||||||||||||||
| (In millions of Korean won) | Corporate Banking | Retail Banking | Others | Intra-group Adjustment | Total | |||||||||||||||
Operating revenues from external customers | 2,080,531 | 2,710,798 | 1,638,850 | — | 6,430,179 | |||||||||||||||
Segment operating revenues(expenses) | 29,935 | — | 6,409 | (36,344 | ) | — | ||||||||||||||
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| |||||||||||
| 2,110,466 | 2,710,798 | 1,645,259 | (36,344 | ) | 6,430,179 | |||||||||||||||
Net interest income | 2,555,780 | 2,647,768 | 361,058 | 178 | 5,564,784 | |||||||||||||||
Interest income | 3,584,021 | 3,935,895 | 1,002,738 | (13,761 | ) | 8,508,893 | ||||||||||||||
Interest expense | (1,028,241 | ) | (1,288,127 | ) | (641,680 | ) | 13,939 | (2,944,109 | ) | |||||||||||
Net fee and commission income | 235,210 | 595,322 | 406,141 | (11,984 | ) | 1,224,689 | ||||||||||||||
Fee and commission income | 315,994 | 668,227 | 506,331 | (19,072 | ) | 1,471,480 | ||||||||||||||
Fee and commission expense | (80,784 | ) | (72,905 | ) | (100,190 | ) | 7,088 | (246,791 | ) | |||||||||||
Net losses on financial assets/ liabilities at fair value through profit or loss (under Korean IFRS 1039) | (1,750 | ) | — | (59,852 | ) | (9,605 | ) | (71,207 | ) | |||||||||||
Net other operating income(expenses) | (678,774 | ) | (532,292 | ) | 937,912 | (14,933 | ) | (288,087 | ) | |||||||||||
General and administrative expenses | (974,096 | ) | (1,946,640 | ) | (747,783 | ) | 2,697 | (3,665,822 | ) | |||||||||||
Operating profit before provision for credit losses | 1,136,370 | 764,158 | 897,476 | (33,647 | ) | 2,764,357 | ||||||||||||||
Reversal (Provision) for credit losses | 6,918 | (122,107 | ) | (466 | ) | 489 | (115,166 | ) | ||||||||||||
Operating profit | 1,143,288 | 642,051 | 897,010 | (33,158 | ) | 2,649,191 | ||||||||||||||
Share of profit of associates | — | — | 37,571 | — | 37,571 | |||||||||||||||
Net othernon-operating income | 1,873 | — | 145,889 | (221,229 | ) | (73,467 | ) | |||||||||||||
Segment profit before income tax expense | 1,145,161 | 642,051 | 1,080,470 | (254,387 | ) | 2,613,295 | ||||||||||||||
Income tax profit (expense) | (276,388 | ) | (155,377 | ) | 2,989 | (9,814 | ) | (438,590 | ) | |||||||||||
Profit for the period | 868,773 | 486,674 | 1,083,459 | (264,201 | ) | 2,174,705 | ||||||||||||||
Profit attributable to the shareholder of the Parent Company | 868,773 | 486,674 | 1,083,459 | (264,201 | ) | 2,174,705 | ||||||||||||||
Profit attributable tonon-controlling interests | — | — | — | — | — | |||||||||||||||
Total assets1 | 117,904,269 | 129,438,168 | 86,034,586 | (3,611,096 | ) | 329,765,927 | ||||||||||||||
Total liabilities1 | 102,224,405 | 147,870,309 | 55,552,078 | (1,204,299 | ) | 304,442,493 | ||||||||||||||
| 1 | Amounts as at December 31, 2017 before intra-segment transaction adjustment. |
68
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
5.2 Services and Geographical Segments
5.2.1 Services Information
Operating revenues from external customers by services for the years ended December 31, 2018 and 2017, are as follows:
| (In millions of Korean won) | 2018 | 2017 | ||||||
Corporate banking service | 2,386,035 | 2,080,531 | ||||||
Retail banking service | 2,989,240 | 2,710,798 | ||||||
Other service | 1,478,104 | 1,638,850 | ||||||
|
|
|
| |||||
| 6,853,379 | 6,430,179 | |||||||
|
|
|
| |||||
5.2.2 Geographical Information
Geographical operating revenues from external customers for the years ended December 31, 2018 and 2017, and majornon-current assets as at December 31, 2018 and 2017, are as follows:
| 2018 | 2017 | |||||||||||||||
| (In millions of Korean won) | Revenues from external customers | Major non-current assets | Revenues from external customers | Major non-current assets | ||||||||||||
Domestic | 6,721,355 | 3,600,570 | 6,339,930 | 3,562,722 | ||||||||||||
United States | 11,727 | 144 | 9,889 | 161 | ||||||||||||
New Zealand | 6,213 | 72 | 5,855 | 57 | ||||||||||||
China | 81,620 | 3,623 | 44,989 | 3,432 | ||||||||||||
Japan | 4,166 | 1,210 | 4,425 | 1,377 | ||||||||||||
Myanmar | 2,675 | 707 | 593 | 653 | ||||||||||||
Vietnam | 7,655 | 239 | 5,474 | 228 | ||||||||||||
Cambodia | 9,849 | 2,696 | 7,476 | 1,753 | ||||||||||||
United Kingdom | 8,119 | 537 | 11,548 | 319 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| 6,853,379 | 3,609,798 | 6,430,179 | 3,570,702 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
69
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
6. Financial Assets and Financial Liabilities
6.1 Classification and Fair Value
Carrying amount and fair values of financial assets and liabilities as at December 31, 2018 and 2017, are as follows:
| 2018 | ||||||||
| (In millions of Korean won) | Carrying amount | Fair value | ||||||
Financial assets | ||||||||
Cash and due from financial institutions | 14,889,010 | 14,885,511 | ||||||
Financial assets at fair value through profit or loss | 12,257,005 | 12,257,005 | ||||||
Debt securities | 11,883,025 | 11,883,025 | ||||||
Equity securities | 82,576 | 82,576 | ||||||
Loans | 212,596 | 212,596 | ||||||
Others | 78,808 | 78,808 | ||||||
Derivatives held for trading | 1,533,650 | 1,533,650 | ||||||
Derivatives held for hedging | 80,321 | 80,321 | ||||||
Loans at amortized cost | 276,944,202 | 276,957,040 | ||||||
Financial assets at fair value through other comprehensive income | 29,930,955 | 29,930,955 | ||||||
Debt securities | 27,682,464 | 27,682,464 | ||||||
Equity securities | 1,898,944 | 1,898,944 | ||||||
Loans | 349,547 | 349,547 | ||||||
Securities at amortized cost | 12,792,526 | 12,823,961 | ||||||
Others | 4,199,197 | 4,199,197 | ||||||
|
|
|
| |||||
| 352,626,866 | 352,667,640 | |||||||
|
|
|
| |||||
Financial liabilities | ||||||||
Financial liabilities at fair value through profit or loss | 87,168 | 87,168 | ||||||
Derivatives held for trading | 1,553,858 | 1,553,858 | ||||||
Derivatives held for hedging | 88,551 | 88,551 | ||||||
Deposits | 272,484,528 | 273,131,227 | ||||||
Debts | 17,496,056 | 17,523,408 | ||||||
Debentures | 23,163,585 | 23,445,303 | ||||||
Other financial liabilities | 13,297,404 | 13,297,394 | ||||||
|
|
|
| |||||
| 328,171,150 | 329,126,909 | |||||||
|
|
|
| |||||
70
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
| 2017 | ||||||||
| (In millions of Korean won) | Carrying amount | Fair value | ||||||
Financial assets | ||||||||
Cash and due from financial institutions | 15,646,318 | 15,646,654 | ||||||
Financial assets held for trading | 8,313,373 | 8,313,373 | ||||||
Debt securities | 7,900,613 | 7,900,613 | ||||||
Equity securities | 338,904 | 338,904 | ||||||
Others | 73,856 | 73,856 | ||||||
Financial assets designated at fair value through profit or loss | 95,357 | 95,357 | ||||||
Derivative-linked securities | 95,357 | 95,357 | ||||||
Derivatives held for trading | 2,527,190 | 2,527,190 | ||||||
Derivatives held for hedging | 80,469 | 80,469 | ||||||
Loans | 251,710,605 | 251,173,805 | ||||||
Available-for-sale financial assets | 32,078,524 | 32,078,524 | ||||||
Debt securities | 27,605,761 | 27,605,761 | ||||||
Equity securities | 4,472,263 | 4,472,263 | ||||||
Others | 500 | 500 | ||||||
Held-to-maturity financial assets | 8,737,150 | 8,774,918 | ||||||
Other financial assets | 6,341,463 | 6,341,463 | ||||||
|
|
|
| |||||
| 325,530,449 | 325,031,753 | |||||||
|
|
|
| |||||
Financial liabilities | ||||||||
Financial liabilities held for trading | 74,191 | 74,191 | ||||||
Derivatives held for trading | 2,558,788 | 2,558,788 | ||||||
Derivatives held for hedging | 50,032 | 50,032 | ||||||
Deposits | 252,478,931 | 252,901,505 | ||||||
Debts | 15,810,753 | 15,808,759 | ||||||
Debentures | 19,183,798 | 19,409,286 | ||||||
Other financial liabilities | 12,733,354 | 12,733,360 | ||||||
|
|
|
| |||||
| 302,889,847 | 303,535,921 | |||||||
|
|
|
| |||||
The fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. The Group discloses the fair value of each 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 a quoted price in an active market.
71
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
Methods of determining fair value for financial instruments are as follows:
| Cash and due from financial institutions | The carrying amounts of cash and demand due from financial institutions and payment due from financial institutions are 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 (Discounted Cash Flow 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 independent third-party pricing services where quoted prices are not available. Pricing services use one or more of the following valuation techniques including DCF Model, FCFE (Free Cash Flow to Equity Model), Comparable Company Analysis, Dividend Discount Model, Risk Adjusted Discount Rate Method, and Net Asset Value Method. | |
| Loans | The fair value of loans is determined through DCF Model and the use of independent third-party pricing services. Fair value measured by DCF Model is determined by discounting the expected cash flows, which are contractual cash flows adjusted by the expected prepayment rate, at appropriate discount rate. Fair value of the other loans that is not determined through DCF model is determined by independent third-party pricing services using Tree Model. | |
| 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 Group uses internally developed valuation models that are widely used by market participants to determine fair values of plain 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, the Monte Carlo Simulation and the Tree model or independent third-party valuation service. For OTC derivatives, the credit risk of counterparty and the Group’s own credit risk are applied through Credit Valuation Adjustment(CVA). | |
| Deposits | The carrying amount of demand deposits is regarded as representative of fair value because they do not have a fixed maturity and are payable on demand. Fair value of time deposits is determined using a DCF model. Fair value is determined by discounting the expected cash flows, which are contractual cash flows adjusted by the expected prepayment rate, at an appropriate discount rate. | |
72
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
| Debts | The 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 (DCF Model) of independent third-party pricing services, which are calculated using market inputs. | |
Other financial assets and other financial 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. However, fair value of finance lease liabilities is measured using a DCF model. | |
Fair value hierarchy
The Group 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.
The Group classifies and discloses the fair value of the financial instruments into the following three-level hierarchy:
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 except for quoted prices included within Level 1 are based on inputs 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.
73
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
Fair value hierarchy of financial assets and liabilities at fair value in the statements of financial position
The fair value hierarchy of financial assets and liabilities at fair value in the statements of financial position as at December 31, 2018 and 2017, are as follows:
| 2018 | ||||||||||||||||
| Fair value hierarchy | ||||||||||||||||
| (In millions of Korean won) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Financial assets | ||||||||||||||||
Financial assets at fair value through profit or loss | ||||||||||||||||
Debt securities | 2,298,811 | 8,103,073 | 1,481,141 | 11,883,025 | ||||||||||||
Equity securities | 43,088 | — | 39,488 | 82,576 | ||||||||||||
Loans | — | — | 212,596 | 212,596 | ||||||||||||
Others | 78,808 | — | — | 78,808 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| 2,420,707 | 8,103,073 | 1,733,225 | 12,257,005 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
Derivatives held for trading | — | 1,533,572 | 78 | 1,533,650 | ||||||||||||
Derivatives held for hedging | — | 80,321 | — | 80,321 | ||||||||||||
Financial assets through other comprehensive income | ||||||||||||||||
Debt securities | 8,998,246 | 18,684,218 | — | 27,682,464 | ||||||||||||
Equity securities | 971,367 | — | 927,577 | 1,898,944 | ||||||||||||
|
| |||||||||||||||
Loans | — | 349,547 | — | 349,547 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| 9,969,613 | 19,033,765 | 927,577 | 29,930,955 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
| 12,390,320 | 28,750,731 | 2,660,880 | 43,801,931 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
Financial liabilities | ||||||||||||||||
Financial liabilities at fair value through profit or loss | 87,168 | — | — | 87,168 | ||||||||||||
Derivatives held for trading | — | 1,553,072 | 786 | 1,553,858 | ||||||||||||
Derivatives held for hedging | — | 88,551 | — | 88,551 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| 87,168 | 1,641,623 | 786 | 1,729,577 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
74
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
| 2017 | ||||||||||||||||
| Fair value hierarchy | ||||||||||||||||
| (In millions of Korean won) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Financial assets | ||||||||||||||||
Financial assets held for trading | ||||||||||||||||
Debt securities | 2,276,513 | 5,624,100 | — | 7,900,613 | ||||||||||||
Equity securities | 299,564 | 39,340 | — | 338,904 | ||||||||||||
Others | 73,856 | — | — | 73,856 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| 2,649,933 | 5,663,440 | — | 8,313,373 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
Financial assets designated at fair value through profit or loss | ||||||||||||||||
Derivative linked securities | — | — | 95,357 | 95,357 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| — | — | 95,357 | 95,357 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
Derivatives held for trading | — | 2,509,871 | 17,319 | 2,527,190 | ||||||||||||
Derivatives held for hedging | — | 79,694 | 775 | 80,469 | ||||||||||||
Available-for-sale financial assets | ||||||||||||||||
Debt securities | 9,384,598 | 18,221,163 | — | 27,605,761 | ||||||||||||
Equity securities1 | 1,303,011 | 1,237,456 | 1,931,796 | 4,472,263 | ||||||||||||
Others | — | 500 | — | 500 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| 10,687,609 | 19,459,119 | 1,931,796 | 32,078,524 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
| 13,337,542 | 27,712,124 | 2,045,247 | 43,094,913 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
Financial liabilities | ||||||||||||||||
Financial liabilities held for trading | 74,191 | — | — | 74,191 | ||||||||||||
Derivatives held for trading | — | 2,557,895 | 893 | 2,558,788 | ||||||||||||
Derivatives held for hedging | — | 49,962 | 70 | 50,032 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| 74,191 | 2,607,857 | 963 | 2,683,011 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
| 1 | The amounts of equity securities carried at cost in “Level 3” which do not have a quoted market price in an active market and cannot be measured reliably at fair value are |
75
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
Valuation techniques and the inputs used in the fair value measurement of financial assets and liabilities classified as Level 2
Valuation techniques and inputs of financial assets and liabilities at fair value in the statements of financial position and classified as Level 2 as at December 31, 2018 and 2017, are as follows:
| Fair value | Valuation techniques | Inputs | ||||||
| (In millions of Korean won) | 2018 | |||||||
Financial assets | ||||||||
Financial assets at fair value through profit or loss | ||||||||
Debt securities | 8,103,073 | DCF Model, Net Asset Value | Discount rate, prices of underlying assets(debt securities, stocks, etc.) | |||||
|
| |||||||
| 8,103,073 | ||||||||
|
| |||||||
Derivatives held for trading | 1,533,572 | DCF Model, Closed Form, FDM | Discount rate, volatility, foreign exchange rate, stock price and others | |||||
Derivatives held for hedging | 80,321 | DCF Model, Closed Form, FDM | Discount rate, volatility, foreign exchange rate and others | |||||
Financial assets at fair value through other comprehensive income | ||||||||
Debt securities | 18,684,218 | DCF Model | Discount rate | |||||
Loans | 349,547 | DCF Model | Discount rate | |||||
|
| |||||||
| 19,033,765 | ||||||||
|
| |||||||
| 28,750,731 | ||||||||
|
| |||||||
Financial liabilities | ||||||||
Derivatives held for trading | 1,553,072 | DCF Model, Closed Form, FDM | Discount rate, volatility, foreign exchange rate, stock price and others | |||||
Derivatives held for hedging | 88,551 | DCF Model, Closed Form, FDM | Discount rate, volatility, foreign exchange rate and others | |||||
|
| |||||||
| 1,641,623 | ||||||||
|
| |||||||
76
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
| Fair value | Valuation techniques | Inputs | ||||||
| (In millions of Korean won) | 2017 | |||||||
Financial assets | ||||||||
Financial assets held for trading | ||||||||
Debt securities | 5,624,100 | DCF Model | Discount rate | |||||
Equity securities | 39,340 | Net Asset Value | Prices of underlying assets(debt securities, stock, etc.) | |||||
|
| |||||||
| 5,663,440 | ||||||||
|
| |||||||
Derivatives held for trading | 2,509,871 | DCF Model, Closed Form, FDM | Discount rate, volatility, foreign exchange rate, stock price and others | |||||
Derivatives held for hedging | 79,694 | DCF Model, Closed Form, FDM | Discount rate, volatility, foreign exchange rate and others | |||||
Available-for-sale financial assets | ||||||||
Debt securities | 18,221,163 | DCF Model | Discount rate | |||||
Equity securities | 1,237,456 | Net Asset Value | Prices of underlying assets(debt securities, stock, etc.) | |||||
Others | 500 | DCF Model | Discount rate | |||||
|
| |||||||
| 19,459,119 | ||||||||
|
| |||||||
| 27,712,124 | ||||||||
|
| |||||||
Financial liabilities | ||||||||
Derivatives held for trading | 2,557,895 | DCF Model, Closed Form, FDM | Discount rate, volatility, foreign exchange rate, stock price and others | |||||
Derivatives held for hedging | 49,962 | DCF Model, Closed Form, FDM | Discount rate, volatility, foreign exchange rate and others | |||||
|
| |||||||
| 2,607,857 | ||||||||
|
| |||||||
77
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
Fair value hierarchy of financial assets and liabilities whose fair value is disclosed
The fair value hierarchy of financial assets and liabilities whose fair value is disclosed as at December 31, 2018 and 2017, is as follows:
| 2018 | ||||||||||||||||
| Fair value hierarchy | ||||||||||||||||
| (In millions of Korean won) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Financial assets | ||||||||||||||||
Cash and due from financial institutions1 | 3,057,323 | 10,827,281 | 1,000,908 | 14,885,512 | ||||||||||||
Loans at amortized cost | — | — | 276,957,040 | 276,957,040 | ||||||||||||
Securities at amortized cost | 4,126,591 | 8,697,370 | — | 12,823,961 | ||||||||||||
Other financial assets2 | — | — | 4,199,197 | 4,199,197 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| 7,183,914 | 19,524,651 | 282,157,145 | 308,865,710 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
Financial liabilities | ||||||||||||||||
Deposits1 | — | 123,778,718 | 149,352,509 | 273,131,227 | ||||||||||||
Debts1 | — | 38,403 | 17,485,005 | 17,523,408 | ||||||||||||
Debentures | — | 23,445,303 | — | 23,445,303 | ||||||||||||
Other financial liabilities3 | — | — | 13,297,394 | 13,297,394 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
(In millions of Korean won) | — | 147,262,424 | 180,134,908 | 327,397,332 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| 1 | The amounts included in Level 2 are the carrying amounts which are reasonable approximation of the fair values. |
| 2 | The amounts of other financial assets included in Level 3 are the carrying amounts which are reasonable approximation of the fair values as at December 31, 2018. |
| 3 | The \ 13,289,339 million of other financial liabilities included in Level 3 are the carrying amounts which are reasonable approximation of fair values as at December 31, 2018. |
| 2017 | ||||||||||||||||
| Fair value hierarchy | ||||||||||||||||
| (In millions of Korean won) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Financial assets | ||||||||||||||||
Cash and due from financial institutions1 | 2,597,423 | 12,223,212 | 826,019 | 15,646,654 | ||||||||||||
Loans | — | — | 251,173,805 | 251,173,805 | ||||||||||||
Held-to-maturity financial assets | 1,197,738 | 7,577,180 | — | 8,774,918 | ||||||||||||
Other financial assets2 | — | — | 6,341,463 | 6,341,463 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| 3,795,161 | 19,800,392 | 258,341,287 | 281,936,840 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
Financial liabilities | ||||||||||||||||
Deposits1 | — | 122,498,859 | 130,402,646 | 252,901,505 | ||||||||||||
Debts1 | — | 19,820 | 15,788,939 | 15,808,759 | ||||||||||||
Debentures | — | 19,409,286 | — | 19,409,286 | ||||||||||||
Other financial liabilities3 | — | — | 12,733,360 | 12,733,360 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| — | 141,927,965 | 158,924,945 | 300,852,910 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
| 1 | The amounts included in Level 2 are the carrying amounts which are reasonable approximation of the fair values. |
| 2 | The amounts of other financial assets included in Level 3 are the carrying amounts which are reasonable approximation of the fair values as at December 31, 2017. |
| 3 | The \12,731,712 million of other financial liabilities included in Level 3 are the carrying amounts which are reasonable approximation of fair values as at December 31, 2017. |
78
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
Valuation techniques and inputs used in the fair value measurement
Valuation techniques and inputs of financial assets and liabilities which are disclosed by the carrying amounts because it is a reasonable approximation of fair value are not subject to be disclosed.
Valuation techniques and inputs of financial assets and liabilities whose fair values are disclosed and classified as Level 2 as at December 31, 2018 and 2017, are as follows:
| 2018 | ||||||||||||
| (In millions of Korean won) | Fair value | Valuation technique | Inputs | |||||||||
Financial assets | ||||||||||||
Securities at amortized cost | 8,697,370 | DCF Model | Discount rate | |||||||||
Financial liabilities | ||||||||||||
Debentures | 23,445,303 | DCF Model | Discount rate | |||||||||
| 2017 | ||||||||||||
| (In millions of Korean won) | Fair value | Valuation technique | Inputs | |||||||||
Financial assets | ||||||||||||
Held-to-maturity financial assets | 7,577,180 | DCF Model | Discount rate | |||||||||
Financial liabilities | ||||||||||||
Debentures | 19,409,286 | DCF Model | Discount rate | |||||||||
Valuation techniques and inputs of financial assets and liabilities whose fair values are disclosed and classified as Level 3 as at December 31, 2018 and 2017, are as follows:
| 2018 | ||||||||||
| (In millions of Korean won) | Fair value | Valuation | Inputs | Unobservable inputs | ||||||
Financial assets | ||||||||||
Cash and due from financial institutions | 1,000,908 | DCF Model | Credit spread, other spread, interest rates | Credit spread, other spread | ||||||
Loans at amortized cost | 276,957,040 | DCF Model | Credit spread, other spread, prepayment rate, interest rate | Credit spread, other spread, prepayment rate | ||||||
|
| |||||||||
| 277,957,948 | ||||||||||
|
| |||||||||
Financial liabilities | ||||||||||
Deposits | 149,352,509 | DCF Model | Other spread, prepayment rate, interest rates | Other spread, prepayment rate | ||||||
Debts | 17,485,005 | DCF Model | Other spread, interest rates | Other spread | ||||||
Other financial liabilities | 8,055 | DCF Model | Other spread, interest rates | Other spread | ||||||
|
| |||||||||
| 166,845,569 | ||||||||||
|
| |||||||||
79
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
| 2017 | ||||||||||||
| (In millions of Korean won) | Fair value | Valuation technique | Inputs | Unobservable inputs | ||||||||
Financial assets | ||||||||||||
Cash and due from financial institutions | 826,019 | DCF Model | Credit spread, other spread, interest rates | Credit spread, other spread | ||||||||
Loans | 251,173,805 | DCF Model | Credit spread, other spread, prepayment rate, interest rates | Credit spread, other spread, prepayment rate | ||||||||
|
| |||||||||||
| 251,999,824 | ||||||||||||
|
| |||||||||||
Financial liabilities | ||||||||||||
Deposits | 130,402,646 | DCF Model | Other spread, prepayment rate, interest rates | Other spread, prepayment rate | ||||||||
Debts | 15,788,939 | DCF Model | Other spread, interest rates | Other spread | ||||||||
Other financial liabilities | 1,648 | DCF Model | Other spread, interest rates | Other spread | ||||||||
|
| |||||||||||
| 146,193,233 | ||||||||||||
|
| |||||||||||
6.2 Level 3 of the Fair Value Hierarchy Disclosure
6.2.1 Valuation Policy and Process of Level 3 Fair Value
The Group uses external, independent and qualified third-party valuation service in addition to internal valuation models to determine the fair value of the Group’s assets at the end of every reporting period.
Where a reclassification between the levels of the fair value hierarchy occurs for a financial asset or liability, the Group’s policy is to recognize such transfers as having occurred at the beginning of the reporting period.
80
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
6.2.2 Changes in Fair Value (Level 3) Measured using Valuation Technique based on Unobservable Inputs in Market
Changes in Level 3 of the fair value hierarchy for the year ended December 31 2018 and 2017, are as follows:
| 2018 | ||||||||||||||||||||
| Financial assets at fair value through profit or loss | Financial investments | Net derivatives financial instruments | ||||||||||||||||||
| (In millions of Korean won) | Securities at fair value through profit or loss | Loans at fair value through profit or loss | Equity securities at fair value through other comprehensive income | Derivatives held for trading | Derivatives held for hedging | |||||||||||||||
Beginning balance1 | 1,277,304 | 132,722 | 750,036 | (771 | ) | 704 | ||||||||||||||
Total gains or losses | ||||||||||||||||||||
- Profit or loss | 19,789 | 4,347 | — | 4,295 | (116 | ) | ||||||||||||||
- Other comprehensive income | — | — | 124,633 | — | — | |||||||||||||||
Purchases | 460,309 | 184,655 | 53,388 | — | — | |||||||||||||||
Sales | (236,705 | ) | (109,128 | ) | (480 | ) | — | — | ||||||||||||
Settlements | — | — | — | (1,220 | ) | (588 | ) | |||||||||||||
Transfers into Level 32 | — | — | — | (3,012 | ) | — | ||||||||||||||
Transferred from Level 32 | (66 | ) | — | — | — | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Ending balance | 1,520,631 | 212,596 | 927,577 | (708 | ) | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
| 1 | Restated based on Korean IFRS 1109. |
| 2 | Transfers between in levels for the financial instruments have occurred due to the change in the availability of observable market data. |
| 2017 | ||||||||||||||||
| Financial assets at fair value through profit or loss | Financial investments | Net derivatives financial instruments | ||||||||||||||
| (In millions of Korean won) | Available-for-sale financial assets | Derivatives held for trading | Derivatives held for hedging | |||||||||||||
| Equity securities | ||||||||||||||||
Beginning balance | 129,535 | 1,845,455 | 9,825 | 1,277 | ||||||||||||
Total gains or losses | ||||||||||||||||
- Profit or loss | 5,638 | 5,946 | (3,543 | ) | (408 | ) | ||||||||||
- Other comprehensive-income (expenses) | — | (27,332 | ) | — | — | |||||||||||
Purchases | 225,000 | 334,436 | 16,452 | — | ||||||||||||
Sales | — | (226,709 | ) | — | — | |||||||||||
Settlements | (264,816 | ) | — | (5,666 | ) | (164 | ) | |||||||||
Transferred from Level 31 | — | — | (642 | ) | — | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Ending balance | 95,357 | 1,931,796 | 16,426 | 705 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| 1 | Transfers between in levels for the financial instruments have occurred due to the change in the availability of observable market data. |
81
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 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 total gains or losses for the period included in profit or loss for financial instruments held at the end of the reporting period in the statements of comprehensive income for the years ended December 31, 2018 and 2017, are as follows:
| 2018 | ||||||||||||
| (In millions of Korean won) | Net losses from financial instruments 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 | 28,103 | (405 | ) | 617 | ||||||||
Total gains or losses for the period included in profit or loss for financial instruments held at the end of the reporting period | 22,187 | (289 | ) | 43 | ||||||||
| 2017 | ||||||||
| (In millions of Korean won) | Net gains on financial instruments at fair value through profit or loss (under Korean IFRS 1039) | Other operating income | ||||||
Total gains or losses included in profit or loss for the period | 2,095 | 5,538 | ||||||
Total gains or losses for the period included in profit or loss for financial instruments held at the end of the reporting period | 1,573 | (2,023 | ) | |||||
82
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
6.2.3 Sensitivity Analysis of Changes in Unobservable Inputs
Information about fair value measurements using unobservable inputs as at December 31, 2018, is as follows:
(In millions of Korean won) | 2018 | |||||||||||||||
| Fair value | Valuation techniques | Inputs | Unobservable inputs | Range of unobservable inputs (%) | Relationship of | |||||||||||
Financial assets | ||||||||||||||||
Financial assets at fair value through profit or loss | ||||||||||||||||
Debt securities | 1,481,141 | Monte Carlo Simulation, Net Asset Value, DCF Model | Price of underlying asset, interest rate, dividend yield, volatilities and correlation of underlying asset, discount rate, liquidation value, volatility of the real estate price | Volatilities of the underlying asset | 19.61 ~ 27.62 | Higher the volatility, higher the fair value fluctuation | ||||||||||
| Correlation of underlying asset | 24.57 ~ 69.18 | Higher the correlation, higher the fair value fluctuation | ||||||||||||||
| Discount rate | 1.95 ~ 4.82 | Lower the discount rate, higher the fair value | ||||||||||||||
| Liquidation value | 0.00 | Higher the liquidation value, higher the fair value fluctuation | ||||||||||||||
| Volatility of the real estate price | 0.00 | Higher real estate price, higher the fair value | ||||||||||||||
Equity securities | 39,488 | DCF Model, Comparable Company Analysis, Adjusted discount rate method | Growth rate, discount rate | Growth rate | 0.00 | Higher the growth rate, higher the fair value | ||||||||||
| Discount rate | 7.58 ~ 14.14 | Lower the discount rate, higher the fair value | ||||||||||||||
Loans | 212,596 | Tree Model | Stock price, volatility of the stock price | Volatility of the stock price | 17.66 ~ 49.28 | Higher the volatility, higher the fair value fluctuation | ||||||||||
Derivatives held for trading | ||||||||||||||||
Stock and index | 78 | Tree Model | Stock price, volatility of the stock price, dividend yield | Volatility of the stock price | 25.29 | Higher the volatility, higher the fair value fluctuation | ||||||||||
Currency | — | DCF Model | Interest rate, foreign exchange rate, loss given default | Loss given default | 100 | Higher the loss given default, lower the fair value | ||||||||||
Financial assets at fair value through other comprehensive income | ||||||||||||||||
Equity securities | 927,577 | DCF Model, Comparable Company Analysis, Adjusted discount rate method | Growth rate, discount rate | Growth rate | 0.00 | Higher the growth rate, higher the fair value | ||||||||||
| Discount rate | 3.87 ~ 17.40 | Lower the discount rate, value | ||||||||||||||
| 2,660,880 | ||||||||||||||||
|
| |||||||||||||||
Financial liabilities | ||||||||||||||||
Derivatives held for trading | ||||||||||||||||
Others | 786 | Monte Carlo Simulation, DCF Model | Stock price, interest rate, volatility of the stock price, volatility of the interest rate, discount rate | Volatility of the stock price | 20.85 | Higher the volatility, higher the fair value fluctuation | ||||||||||
| Volatility of the interest rate | 0.69 | Higher the volatility, higher the fair value fluctuation | ||||||||||||||
| Discount rate | 2.19 ~ 2.26 | Higher the discount rate, lower the fair value | ||||||||||||||
|
|
|
|
|
|
|
|
| ||||||||
| 786 | ||||||||||||||||
|
| |||||||||||||||
Information about fair value measurements using unobservable inputs as at December 31, 2017, is as follows:
83
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
2017 | ||||||||||||||
| (In millions of Korean won) | Fair value | Valuation techniques | Inputs | Unobservable inputs | Range of | Relationship of | ||||||||
Financial assets | ||||||||||||||
Financial assets designated at fair value through profit or loss | ||||||||||||||
Derivative linked securities | 95,357 | MonteCarlo Simulation | | Price of the underlying asset, interest rate, dividend yield, volatility and correlation of the underlying asset | | Volatility of the underlying asset | 15.93 ~ 18.35 | Higher the volatility, higher the fair value fluctuation | ||||||
| Correlation of the underlying assets | 20.18 ~ 57.10 | Higher the correlation, higher the fair value fluctuation | ||||||||||||
Derivatives held for trading | ||||||||||||||
Stock and index | 307 | Tree model | | Stock price, volatility of the stock price, dividend yield | | Volatility of the underlying asset | 12.15 ~ 17.12 | Higher the volatility higher the fair value fluctuation | ||||||
Interest rate | 59 | DCF model | | Interest rate, loss given default | | Loss given default | 0.56 | Higher the loss rate, lower the fair value | ||||||
Others | 16,953 | MonteCarlo Simulation, Tree model | | Stock price, interest rate, volatility of the stock price, volatility of the interest rate | | Volatility of the stock price | 12.16 ~ 29.72 | Higher the volatility, higher the fair value fluctuation | ||||||
| Volatility of the interest rate | 0.47 | Higher the volatility, higher the fair value fluctuation | ||||||||||||
Derivatives held for hedging | ||||||||||||||
Interest rate | 775 | DCF model, Closed Form, Monte Carlo Simulation, FDM | | Price of the underlying asset, interest rate, volatility of the underlying asset | | Volatility of the underlying asset | 3.02 | Higher the volatility, higher the fair value fluctuation | ||||||
Available-for-sale financial assets | ||||||||||||||
Equity securities | 1,931,796 | DCF Model, Comparable Company Analysis, Risk Adjusted Discount Rate Method | | Growth rate, discount rate | | Growth rate | 0.00 ~ 0.50 | Higher the growth rate, higher the fair value | ||||||
| Discount rate | 1.98 ~ 20.51 | Lower the discount rate, higher the fair value | ||||||||||||
| 2,045,247 | ||||||||||||||
| ||||||||||||||
84
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
Financial liabilities | ||||||||||||
Derivatives held for trading | ||||||||||||
893 | MonteCarlo | Stock price, interest rate, volatility of the stock price, volatility of the interest rate, discount rate | Volatility of the stock price | 15.84 | Higher the volatility, higher the fair value fluctuation | |||||||
Others | Volatility of the interest rate | 0.47 | Higher the volatility, higher the fair value fluctuation | |||||||||
| Discount rate | 2.57 ~ 2.69 | Higher the discount rate, lower the fair value | ||||||||||
|
|
|
|
|
| |||||||
Derivatives held for hedging | ||||||||||||
Interest rate | 70 | DCF model, Closed Form, FDM, MonteCarlo Simulation, Tree model | Price of the underlying asset, interest rate, volatility of the underlying asset | Volatility of the underlying asset | 2.64 | Higher the volatility, higher the fair value fluctuation | ||||||
|
|
|
|
|
| |||||||
| 963 | ||||||||||||
| ||||||||||||
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 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 unfavorable. Amongst Level 3 financial instruments subject to sensitivity analysis, there are debt securities, loans, equity-related derivatives, currency-related derivatives, interest rate-related derivatives and other derivatives whose fair value changes are recognized in profit or loss as well as equity securities and beneficiary certificates whose fair value changes are recognized in profit or loss or other comprehensive income or loss.
Sensitivity analysis by type of instrument as a result of varying input parameters are as follows:
| 2018 | ||||||||||||||||
| Recognition in profit or loss | Other comprehensive income | |||||||||||||||
| (In millions of Korean won) | Favorable changes | Unfavorable changes | Favorable changes | Unfavorable changes | ||||||||||||
Financial assets | ||||||||||||||||
Financial assets at fair value through profit or loss | ||||||||||||||||
Debt securities1, 2, 6 | 4,231 | (4,311 | ) | — | — | |||||||||||
Equity securities3 | 5,299 | (2,794 | ) | — | — | |||||||||||
Loans4 | 129 | (46 | ) | — | — | |||||||||||
Derivatives held for trading5 | 20 | (1 | ) | — | — | |||||||||||
Financial assets at fair value through other comprehensive income | ||||||||||||||||
Equity securities3 | — | — | 140,516 | (70,691 | ) | |||||||||||
|
|
|
|
|
|
|
| |||||||||
| 9,679 | (7,152 | ) | 140,516 | (70,691 | ) | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Financial liabilities | ||||||||||||||||
Derivatives held for trading5 | 88 | (124 | ) | — | — | |||||||||||
|
|
|
|
|
|
|
| |||||||||
| 88 | (124 | ) | — | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
85
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
| 2017 | ||||||||||||||||
| Recognition in profit or loss | Other comprehensive income | |||||||||||||||
| (In millions of Korean won) | Favorable changes | Unfavorable changes | Favorable changes | Unfavorable changes | ||||||||||||
Financial assets | ||||||||||||||||
Financial assets designated at fair value through profit or loss | ||||||||||||||||
Derivative linked securities1 | 54 | (112 | ) | — | — | |||||||||||
Derivatives held for trading 5 | 112 | (94 | ) | — | — | |||||||||||
Available-for-sale financial assets 2, 3 | — | — | 100,653 | (54,892 | ) | |||||||||||
|
|
|
|
|
|
|
| |||||||||
| 166 | (206 | ) | 100,653 | (54,892 | ) | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Financial liabilities | ||||||||||||||||
Derivatives held for trading 5 | 86 | (92 | ) | — | — | |||||||||||
Derivatives held for hedging 5 | 2 | (2 | ) | — | — | |||||||||||
|
|
|
|
|
|
|
| |||||||||
| 88 | (94 | ) | — | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| 1 | For derivative linked securities, the changes in fair value are calculated by shifting principal unobservable input parameters such as the volatility of the underlying asset and the correlation of the underlying assets by ± 10%. |
| 2 | For beneficiary certificates, it is difficult to measure the sensitivity amounts per changes in input factor for practical reasons; only for those consisted with real properties, the sensitivity amounts are calculated by increasing and decreasing the correlations between the discount rates(-1~1%), and the rate of increase in property disposal price(-1~1%). For equity investments, the sensitivity amounts are calculated by increasing and decreasing the correlations between the liquidation value(-1~1%) and the discount rates(-1~1%). There were no significant correlation among major unobservable inputs. |
| 3 | For equity securities, the changes in fair value are calculated by shifting principal unobservable input parameters such as discount rate(-1~1%) and growth rate (0~0.5%). |
| 4 | For loans, the changes in fair value are calculated by shifting principal unobservable input parameters such as stock prices and volatilities of stock prices by ± 10% |
| 5 | For derivatives, the changes in fair value are calculated by shifting principal unobservable input parameters such as the price of the underlying asset and the volatility by ± 10%, the loss given default ratio by ± 1%, or discount rate by ± 1%. |
| 6 | The amounts of \ 1,437,513 million and \ 1,192,054 million of financial assets classified as level 3 as at December 31, 2018 and 2017, respectively, are excluded because it is impracticable to calculate sensitivity amounts. |
6.2.4 Day One Gain or Loss
If the Group uses a valuation technique that incorporates data not obtained from observable markets for the fair value at initial recognition of financial instruments, there could be a difference between the transaction price and the amount determined using that valuation technique. In these circumstances, the fair value of financial instruments is recognized as the transaction price and the difference is deferred and not recognized in profit or loss, and is amortized by using the straight-line method over the life of the financial instrument. If the fair value of the financial instruments is subsequently determined using observable market inputs, the remaining deferred amount is recognized in profit or loss.
86
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
The aggregate deferred differences yet to be recognized in profit or loss at the beginning and end of the periods and changes in the balances of these differences are as follows:
| (In millions of Korean won) | 2018 | 2017 | ||||||
Balance at the beginning of the period (A) | (4,054 | ) | (3,494 | ) | ||||
New transactions (B) | — | (1,574 | ) | |||||
Amounts recognized in profit or loss during the period (C= a+b) | 1,138 | 1,014 | ||||||
a.Amortization | 1,138 | 1,014 | ||||||
b.Settlement | — | — | ||||||
|
|
|
| |||||
Balance at the end of the period (A+B+C) | (2,916 | ) | (4,054 | ) | ||||
|
|
|
| |||||
6.3 Carrying Amounts of Financial Instruments by Category
Financial assets and liabilities are measured at fair value or amortized cost. The carrying amounts of financial assets and liabilities by category as at December 31, 2018 and 2017, are as follows:
| 2018 | ||||||||||||||||||||||||
| (In millions of Korean won) | Financial instruments at fair value through profit or loss | Financial instruments measured at fair value through other comprehensive income | Financial instruments designated at fair value through other comprehensive income | Financial instruments at amortized cost | Derivatives held for hedging | Total | ||||||||||||||||||
Financial assets | ||||||||||||||||||||||||
Cash and due from financial institutions | — | — | — | 14,889,010 | — | 14,889,010 | ||||||||||||||||||
Financial assets at fair value through profit or loss | 12,257,005 | — | — | — | — | 12,257,005 | ||||||||||||||||||
Derivatives | 1,533,650 | — | — | — | 80,320 | 1,613,970 | ||||||||||||||||||
Loans at amortized cost | — | — | — | 276,944,202 | — | 276,944,202 | ||||||||||||||||||
Financial investments | — | 28,032,010 | 1,898,944 | 12,792,526 | — | 42,723,480 | ||||||||||||||||||
Other financial assets | — | — | — | 4,199,197 | — | 4,199,197 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
| 13,790,655 | 28,032,010 | 1,898,944 | 308,824,935 | 80,320 | 352,626,864 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
87
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
| 2018 | ||||||||||||||||
| (In millions of Korean won) | Financial instruments at fair value through profit or loss | Financial instruments at amortized cost | Derivatives held for hedging | Total | ||||||||||||
Financial liabilities | ||||||||||||||||
Financial liabilities at fair value through profit or loss | 87,168 | — | — | 87,168 | ||||||||||||
Derivatives | 1,553,858 | — | 88,551 | 1,642,409 | ||||||||||||
Deposits | — | 272,484,528 | — | 272,484,528 | ||||||||||||
Debts | — | 17,496,055 | — | 17,496,055 | ||||||||||||
Debentures | — | 23,163,585 | — | 23,163,585 | ||||||||||||
Other financial liabilities | — | 13,297,404 | — | 13,297,404 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| 1,641,026 | 326,441,572 | 88,551 | 328,171,149 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
| 2017 | ||||||||||||||||||||||||||||
| Financial assets at fair value through profit or loss (under Korean IFRS 1039) | Loans and receivables | Available- for-sale financial assets | Held-to- maturity financial assets | Derivatives held for hedging | Total | |||||||||||||||||||||||
| (In millions of Korean won) | Held for trading | Financial assets designated at fair value through profit or loss | ||||||||||||||||||||||||||
Financial assets | ||||||||||||||||||||||||||||
Cash and due from financial institutions | — | — | 15,646,318 | — | — | — | 15,646,318 | |||||||||||||||||||||
Financial assets at fair value through profit or loss | 8,313,373 | 95,357 | — | — | — | — | 8,408,730 | |||||||||||||||||||||
Derivatives | 2,527,190 | — | — | — | — | 80,469 | 2,607,659 | |||||||||||||||||||||
Loans | — | — | 251,710,605 | — | — | — | 251,710,605 | |||||||||||||||||||||
Financial investments | — | — | — | 32,078,524 | 8,737,150 | — | 40,815,674 | |||||||||||||||||||||
Other financial assets | — | — | 6,341,463 | — | — | — | 6,341,463 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
| 10,840,563 | 95,357 | 273,698,386 | 32,078,524 | 8,737,150 | 80,469 | 325,530,449 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
88
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
| 2017 | ||||||||||||||||
| (In millions of Korean won) | Financial liabilities at fair value through profit or loss Held for trading | Financial liability at amortized cost | Derivatives held for hedging | Total | ||||||||||||
Financial liabilities | ||||||||||||||||
Financial liabilities at fair value through profit or loss | 74,191 | — | — | 74,191 | ||||||||||||
Derivatives | 2,558,788 | — | 50,032 | 2,608,820 | ||||||||||||
Deposits | — | 252,478,931 | — | 252,478,931 | ||||||||||||
Debts | — | 15,810,753 | — | 15,810,753 | ||||||||||||
Debentures | — | 19,183,798 | — | 19,183,798 | ||||||||||||
Other financial liabilities | — | 12,733,354 | — | 12,733,354 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| 2,632,979 | 300,206,836 | 50,032 | 302,889,847 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
6.4 Transfer of Financial Assets
6.4.1 Transferred Financial Assets that are Derecognized in Their Entirety
The Group transferred loans and other financial assets that are derecognized in their entirety to SPEs, while the maximum exposure to loss (carrying amount) from its continuing involvement in the derecognized financial assets as at December 31, 2018 and 2017, are as follows :
2018 | ||||||||||
| (In millions of Korean won) | Type of continuing involvement | Classification of financial instruments | Carrying amount of continuing involvement in statement of financial position | Fair value of continuing involvement in statement of financial position | ||||||
Discovery 2nd Securitization Specialty Co., Ltd. | Subordinated debt | Financial assets at fair value through profit or loss | 6,205 | 6,205 | ||||||
FK 1411 ABS Ltd. | Subordinated debt | Financial assets at fair value through profit or loss | 8,883 | 8,883 | ||||||
AP 3B ABS Ltd. | Subordinated debt | Financial assets at fair value through profit or loss | 5,512 | 5,512 | ||||||
AP 4D ABS Ltd. | Subordinated debt | Financial assets at fair value through profit or loss | 13,494 | 13,494 | ||||||
|
| |||||||||
| 34,094 | 34,094 | |||||||||
|
| |||||||||
| 1 | The recovered portion in excess of the consideration paid attributable to adjustments based on the agreement with the National Happiness Fund fornon-performing loans amounts to |
89
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
2017 | ||||||||||||
| (In millions of Korean won) | Type of continuing | Classification of instruments | Carrying amount of continuing involvement in statement of financial position | Fair value of continuing involvement in statement of financial position | ||||||||
Discovery 2nd Securitization Specialty Co., Ltd. | Subordinated debt | Available-for-sale financial assets | 6,022 | 6,022 | ||||||||
EAK 2nd Securitization Specialty Co., Ltd. | Subordinated debt | Available-for-sale financial assets | 5,339 | 5,339 | ||||||||
FK 1411 ABS Ltd. | Subordinated debt | Available-for-sale financial assets | 9,601 | 9,601 | ||||||||
AP 3B ABS Ltd. | Subordinated debt | Available-for-sale financial assets | 9,902 | 9,902 | ||||||||
AP 4D ABS Ltd.1 | Senior debt | Loans and receivables | 2,248 | 2,251 | ||||||||
| Subordinated debt | Available-for-sale financial assets | 14,160 | 14,160 | |||||||||
|
|
|
| |||||||||
| 47,272 | 47,275 | |||||||||||
|
|
|
| |||||||||
1 The recovered portion in excess of the consideration paid attributable to adjustments based on the agreement with the National Happiness Fund fornon-performing loans amounts toW 2,989 million as at December 31, 2017.
6.4.2 Securities under Repurchase Agreements and Loaned Securities
The Group continues to recognize the financial assets related to repurchase agreements and securities lending transactions on the statements of financial position since those transactions are not qualified for derecognition even though the Group transfers the financial assets. A financial asset is sold under a reverse repurchase agreement to repurchase the same asset at a fixed price, or loaned under a securities lending agreement to be returned as the same asset. Thus, the Group substantially retains all the risks and rewards of ownership of the financial asset. The amounts of transferred assets and related liabilities as at December 31, 2018 and 2017, are as follows:
| 2018 | ||||||||
| (In millions of Korean won) | Carrying amount of transferred assets | Carrying amount of related liabilities | ||||||
Securities under repurchase agreements | 452,487 | 436,471 | ||||||
Loaned securities | 674,431 | — | ||||||
Government and public bonds | 674,431 | — | ||||||
|
|
|
| |||||
| 1,126,918 | 436,471 | |||||||
|
|
|
| |||||
90
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
| 2017 | ||||||||
| (In millions of Korean won) | Carrying amount of transferred assets | Carrying amount of related liabilities | ||||||
Securities under repurchase agreements | 740,618 | 700,466 | ||||||
Loaned securities | 109,379 | — | ||||||
Government and public bonds | 109,379 | — | ||||||
|
|
|
| |||||
| 849,997 | 700,466 | |||||||
|
|
|
| |||||
6.5 Offsetting Financial Assets and Financial Liabilities
The Group enters into International Swaps and Derivatives Association (“ISDA”) master netting agreements and other similar netting arrangements with the Group’s derivative and spot exchange counterparties. Similar netting agreements are also entered into with the Group’s reverse repurchase, securities and others. Pursuant to these agreements, in the event of default by one party, contracts are to be terminated and receivables and payables are to be offset. Further, as the law allows for the right to offset, domestic uncollected receivables balances and domestic accrued liabilities balances are shown in its net settlement balance in the statement of financial position. Account receivables and account payables related to listed securities and derivatives or OTC derivatives settled by the central counterparty are included in the other financial instruments. As the Group has a legally enforceable right to set off the recognized amounts and intends to settle on a net basis, the net amounts of the other financial instruments balances are presented in the statement of financial position.
Details of financial assets subject to offsetting, enforceable master netting arrangements or similar agreements as at December 31, 2018 and 2017, are as follows:
| 2018 | ||||||||||||||||||||||||
| (In millions of Korean won) | Gross amounts of recognized financial assets | Gross amounts of recognized financial liabilities offset in the statement of financial position | Net amounts of financial assets presented in the statement of financial position | Related amounts not offset in the statement of financial position | Net amount | |||||||||||||||||||
| Financial instruments | Cash collateral | |||||||||||||||||||||||
Derivatives held for trading | 1,533,572 | — | 1,533,572 | (1,128,951 | ) | (5,101 | ) | 399,520 | ||||||||||||||||
Derivatives held for hedging | 80,321 | — | 80,321 | (41,634 | ) | — | 38,687 | |||||||||||||||||
Receivable spot exchange | 1,879,572 | — | 1,879,572 | (1,876,844 | ) | — | 2,728 | |||||||||||||||||
Reverse repurchase | 3,021,400 | — | 3,021,400 | (3,021,400 | ) | — | — | |||||||||||||||||
Domestic exchange settlement debits | 27,413,384 | (26,937,034 | ) | 476,350 | — | — | 476,350 | |||||||||||||||||
Other financial instruments | 3,261 | (2,098 | ) | 1,163 | — | — | 1,163 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
| 33,931,510 | (26,939,132 | ) | 6,992,378 | (6,068,829 | ) | (5,101 | ) | 918,448 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
91
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
| 2017 | ||||||||||||||||||||||||
| (In millions of Korean won) | Gross amounts of recognized financial assets | Gross amounts of recognized financial liabilities offset in the statement of financial position | Net amounts of financial assets presented in the statement of financial position | Related amounts not offset in the statement of financial position | Net amount | |||||||||||||||||||
| Financial instruments | Cash collateral | |||||||||||||||||||||||
Derivatives held for trading | 2,509,930 | — | 2,509,930 | (1,888,558 | ) | (191,349 | ) | 430,023 | ||||||||||||||||
Derivatives held for hedging | 80,469 | — | 80,469 | (17,840 | ) | (21,830 | ) | 40,799 | ||||||||||||||||
Receivable spot exchange | 3,447,424 | — | 3,447,424 | (3,447,048 | ) | — | 376 | |||||||||||||||||
Reverse repurchase | 2,579,900 | — | 2,579,900 | (2,579,900 | ) | — | — | |||||||||||||||||
Domestic exchange settlement debits | 30,904,611 | (29,959,914 | ) | 944,697 | — | — | 944,697 | |||||||||||||||||
Other financial instruments | 1,580 | (1,578 | ) | 2 | — | — | 2 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
| 39,523,914 | (29,961,492 | ) | 9,562,422 | (7,933,346 | ) | (213,179 | ) | 1,415,897 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Details of financial liabilities subject to offsetting, enforceable master netting arrangements or similar agreements as at December 31, 2018 and 2017, are as follows:
| 2018 | ||||||||||||||||||||||||
| (In millions of Korean won) | Gross amounts of recognized financial liabilities | Gross amounts of recognized financial assets offset in the statement of financial position | Net amounts of financial liabilities presented in the statement of financial position | Related amounts not offset in the statement of financial position | Net amount | |||||||||||||||||||
| Financial instruments | Cash collateral | |||||||||||||||||||||||
Derivatives held for trading | 1,553,072 | — | 1,553,072 | (1,075,427 | ) | (46,768 | ) | 430,877 | ||||||||||||||||
Derivatives held for hedging | 88,551 | — | 88,551 | (37,564 | ) | (977 | ) | 50,010 | ||||||||||||||||
Payable spot exchange | 1,877,400 | — | 1,877,400 | (1,876,844 | ) | — | 556 | |||||||||||||||||
Repurchase1 | 445,724 | — | 445,724 | (445,724 | ) | — | — | |||||||||||||||||
Domestic exchange settlement credits | 28,616,949 | (26,937,034 | ) | 1,679,915 | (1,679,915 | ) | — | — | ||||||||||||||||
Other financial instruments | 5,154 | (2,098 | ) | 3,056 | — | — | 3,056 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
| 32,586,850 | (26,939,132 | ) | 5,647,718 | (5,115,474 | ) | (47,745 | ) | 484,499 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
92
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
| 2017 | ||||||||||||||||||||||||
| (In millions of Korean won) | Gross amounts of recognized financial liabilities | Gross amounts of recognized financial assets offset in the statement of financial position | Net amounts of financial liabilities | Related amounts not offset in the statement of financial position | Net amount | |||||||||||||||||||
| presented in the statement of financial position | Financial instruments | Cash collateral | ||||||||||||||||||||||
Derivatives held for trading | 2,557,702 | — | 2,557,702 | (1,051,514 | ) | (32,585 | ) | 1,473,603 | ||||||||||||||||
Derivatives held for hedging | 50,032 | — | 50,032 | (7,287 | ) | (9,139 | ) | 33,606 | ||||||||||||||||
Payable spot exchange | 3,448,848 | — | 3,448,848 | (3,447,048 | ) | — | 1,800 | |||||||||||||||||
Repurchase1 | 700,466 | — | 700,466 | (700,466 | ) | — | — | |||||||||||||||||
Domestic exchange settlement credits | 29,999,359 | (29,959,914 | ) | 39,445 | (39,445 | ) | — | — | ||||||||||||||||
Other financial instruments | 1,871 | (1,578 | ) | 293 | (194 | ) | — | 99 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
| 36,758,278 | (29,961,492) | 6,796,786 | (5,245,954) | (41,724) | 1,509,108 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
| 1 | Includes repurchase agreements sold to customers. |
7. Due from Financial Institutions
Details of due from financial institutions as at December 31, 2018 and 2017, are as follows:
| (In millions of Korean won) | Financial Institution | Interest rate (%) | 2018 | 2017 | ||||||||||||
Due from financial institutions in Korean won | Due from Bank of Korea | Bank of Korea | 0.00 ~ 1.78 | 8,723,761 | 8,511,295 | |||||||||||
| Due from banking institutions | KEB Hana Bank and others | 0.00 ~ 1.87 | 268,222 | 111,396 | ||||||||||||
| Due from others | NH Securities Co., Ltd. and others | — | 5,618 | 1,917,633 | ||||||||||||
|
|
|
| |||||||||||||
| 8,997,601 | 10,540,324 | |||||||||||||||
|
|
|
| |||||||||||||
Due from financial institutions in foreign currencies | Due from banks in foreign currencies | Wells Fargo Bank, N.A and others | — | 1,733,095 | 1,670,111 | |||||||||||
| Time deposits in foreign currencies | Bank of Shanghai, Beijing Branch and others | 1.05 ~ 4.10 | 876,596 | 711,347 | ||||||||||||
| Due from others | Morganstanley Bank International and others | — | 225,944 | 127,111 | ||||||||||||
| 2,835,635 | 2,508,569 | |||||||||||||||
|
|
|
| |||||||||||||
| 11,833,236 | 13,048,893 | |||||||||||||||
|
|
|
| |||||||||||||
| 1 | Before netting of allowance |
93
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
Restricted due from financial institutions as at December 31, 2018 and 2017, are as follows:
| (In millions of Korean won) | Financial Institution | 2018 | 2017 | Reason for restriction | ||||||||||
Due from financial institutions in Korean won | Due from Bank of Korea | Bank of Korea | 8,723,761 | 8,511,295 | Bank of Korea Act | |||||||||
| Due from others | NH Securities Co., Ltd. and others | 5,618 | 9,564 | Derivatives margin account | ||||||||||
|
|
|
| |||||||||||
| 8,729,379 | 8,520,859 | |||||||||||||
|
|
|
| |||||||||||
Due from financial institutions in foreign currencies | Due from banks in foreign currencies | Bank of Korea and others | 375,130 | 619,130 | Bank of Korea Act and others | |||||||||
| Time deposits in foreign currencies | China Construction Bank NY Branch and others | 22,362 | 21,428 | New York State Banking Law | ||||||||||
| Due from others | Societe Generale and others | 76,930 | 78,396 | Derivatives margin account | ||||||||||
|
|
|
| |||||||||||
| 474,422 | 718,954 | |||||||||||||
|
|
|
| |||||||||||
| 9,203,801 | 9,239,813 | |||||||||||||
|
|
|
| |||||||||||
Changes in the allowances for due from financial institutions losses
Changes in the allowances for due from financial institutions losses for the year ended December 31, 2018, are as follows:
| 2018 | ||||||||||||
| Financial instruments applying12-month expected credit losses | Financial instruments applying lifetime expected credit losses | |||||||||||
| (In millions of Korean won) | Non-impaired | Impaired | ||||||||||
Beginning1 | 1,530 | — | — | |||||||||
Transfer between stages | — | — | — | |||||||||
Provision (reversal) for loan losses | 10 | — | — | |||||||||
Others (Change of currencies and others) | 8 | — | — | |||||||||
|
|
|
|
|
| |||||||
Ending | 1,548 | — | — | |||||||||
|
|
|
|
|
| |||||||
| 1 | Restated based on Korean IFRS 1109. |
94
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
8. Assets Pledged as Collaterals
Details of assets pledged as collaterals as at December 31, 2018 and 2017, are as follows:
| (In millions of Korean won) | 2018 | |||||||
| Assets pledged | Pledgee | Carrying amount | Reason for the pledge | |||||
Securities at fair value through profit or loss | Korea Exchange and others | 210,345 | Repurchase agreements | |||||
Korea Securities Finance Corp and others | 50,806 | Securities lending transactions | ||||||
Samsung Futures Inc. and others | 20,535 | Derivatives transactions | ||||||
|
| |||||||
| 281,686 | ||||||||
|
| |||||||
Securities at fair value through other comprehensive income | Bank of Korea | 49,948 | Borrowings from Bank of Korea | |||||
| Bank of Korea | 479,784 | Settlement risk of Bank of Korea | ||||||
Korea Development Bank and others | 337,315 | Derivatives transactions | ||||||
|
| |||||||
| 867,047 | ||||||||
|
| |||||||
Securities at amortized cost | Meritz Securities and others | 276,688 | Repurchase agreements | |||||
| Bank of Korea | 1,911,160 | Borrowings from Bank of Korea | ||||||
| Bank of Korea | 1,474,529 | Settlement risk of Bank of Korea | ||||||
Samsung Futures Inc. and others | 194,258 | Derivatives transactions | ||||||
| Others | 156,150 | Others | ||||||
|
| |||||||
| 4,012,785 | ||||||||
|
| |||||||
Mortgage loans | Others | 4,060,863 | Covered Bond | |||||
Building / Land | Samsung Life Insurance Co., Ltd. and others | 209,459 | Others | |||||
|
| |||||||
| 9,431,840 | ||||||||
|
| |||||||
95
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
| (In millions of Korean won) | 2017 | |||||||
| Assets pledged | Pledgee | Carrying amount | Reason for the pledge | |||||
Financial assets held for trading | KB Securities Co., Ltd. | 29,508 | Derivatives transactions | |||||
|
| |||||||
| 29,508 | ||||||||
|
| |||||||
Available-for-sale financial assets | Mizuho Bank, Ltd. and others | 740,132 | Repurchase agreements | |||||
| Bank of Korea | 651,284 | Borrowings from Bank of Korea | ||||||
| Bank of Korea | 750,254 | Settlement risk of Bank of Korea | ||||||
| Deutsche Bank. AG | 58,524 | Derivatives transactions | ||||||
| Others | 19,985 | Others | ||||||
|
| |||||||
| 2,220,179 | ||||||||
|
| |||||||
Held-to-maturity financial assets | Korea Securities Depository and others | 35,026 | Repurchase agreements | |||||
| Bank of Korea | 1,326,558 | Borrowings from Bank of Korea | ||||||
| Bank of Korea | 1,204,990 | Settlement risk of Bank of Korea | ||||||
| KB Securities Co., Ltd. and others | 236,681 | Derivatives transactions | ||||||
| Others | 133,389 | Others | ||||||
|
| |||||||
| 2,936,644 | ||||||||
|
| |||||||
Mortgage loans | Others | 4,950,490 | Covered Bond | |||||
|
| |||||||
Building / Land | Samsung Life Insurance Co., Ltd. and others | 319,064 | Others | |||||
|
| |||||||
| 10,455,885 | ||||||||
|
| |||||||
The fair value of collateral available to sell or repledge regardless of debtor’s default as at December 31, 2018 and 2017, are as follows:
| 2018 | ||||||||
| (In millions of Korean won) | Fair value of collateral | Fair value of collateral sold or repledged | ||||||
Securities | 3,131,496 | — | ||||||
| 2017 | ||||||||
| (In millions of Korean won) | Fair value of collateral | Fair value of collateral sold or repledged | ||||||
Securities | 2,640,078 | — | ||||||
96
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
9. Derivative Financial Instruments and Hedge Accounting
The Group engages in derivative trading activities to hedge the interest rate and foreign currency risk exposures arising from the Group’s own assets and liabilities.
In particular, the Group applies fair value hedge accounting to interest rate swaps that hedge the risk of changes in fair values due to the changes in interest rates of debentures, structured deposits denominated in foreign currencies and debt securities at fair value through other comprehensive income. Also, the Group applies cash flow hedge accounting to interest rate swaps to hedge cash flow risk of floating rate notes denominated in Korean won and borrowings denominated in foreign currencies. In addition, the Group applies net investment hedge accounting by designating debentures denominated in foreign currencies and spot components of the currency forward as hedging instruments that hedge foreign exchange risks on net investments in foreign operations.
Details of derivative financial instruments for trading as at December 31, 2018 and 2017, are as follows:
| 2018 | 2017 | |||||||||||||||||||||||
| (In millions of Korean won) | Notional amount | Assets | Liabilities | Notional amount | Assets | Liabilities | ||||||||||||||||||
Interest rate | ||||||||||||||||||||||||
Futures1 | 857,748 | — | — | 1,194,766 | — | — | ||||||||||||||||||
Swaps | 126,608,935 | 370,004 | 351,607 | 107,934,385 | 389,926 | 328,072 | ||||||||||||||||||
Options | 13,259,000 | 158,295 | 252,243 | 12,615,000 | 130,013 | 226,931 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
| 140,725,683 | 528,299 | 603,850 | 121,744,151 | 519,939 | 555,003 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Currency | ||||||||||||||||||||||||
Forwards | 65,534,154 | 533,435 | 481,187 | 62,354,931 | 1,142,066 | 1,228,052 | ||||||||||||||||||
Futures1 | 419,802 | — | — | 440,903 | — | — | ||||||||||||||||||
Swaps | 35,977,216 | 465,774 | 454,216 | 28,386,919 | 843,854 | 767,344 | ||||||||||||||||||
Options | 2,450,186 | 6,064 | 13,608 | 695,848 | 4,071 | 6,998 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
| 104,381,358 | 1,005,273 | 949,011 | 91,878,601 | 1,989,991 | 2,002,394 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Stock and index | ||||||||||||||||||||||||
Futures1 | 2,006 | — | — | 23,458 | — | — | ||||||||||||||||||
Options | 51,282 | 78 | 211 | 84,742 | 307 | 498 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
| 53,288 | 78 | 211 | 108,200 | 307 | 498 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Others | 745,160 | — | 786 | 1,073,316 | 16,953 | 893 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
| 245,905,489 | 1,533,650 | 1,553,858 | 214,804,268 | 2,527,190 | 2,558,788 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
| 1 | Gains or losses arising from dailymark-to-market futures are reflected in the margin accounts. |
97
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
The average hedge ratio for future nominal cash flows by type of hedge accounting as at December 31, 2018, are as follows:
| 2018 | ||||||||||||||||||||||||||||
| (In millions of Korean won) | 1 year | 2 years | 3 years | 4 years | 5 years | Over 5 years | Total | |||||||||||||||||||||
Fair value hedge | ||||||||||||||||||||||||||||
The nominal amount of the hedged item | 59,134 | 696,513 | 1,347,597 | 567,030 | 195,392 | 979,889 | 3,845,555 | |||||||||||||||||||||
The nominal amount of the hedging instrument | 69,134 | 686,513 | 1,347,597 | 567,030 | 195,392 | 979,889 | 3,845,555 | |||||||||||||||||||||
Average ratio of hedging | 116.91 | 98.56 | 100.00 | 100.00 | 100.00 | 100.00 | 100.00 | |||||||||||||||||||||
Cash flow hedge | ||||||||||||||||||||||||||||
The nominal amount of the hedged item | 2,167,227 | 491,964 | — | 503,145 | — | — | 3,162,336 | |||||||||||||||||||||
The nominal amount of the hedging instrument | 2,167,227 | 491,964 | — | 503,145 | — | — | 3,162,336 | |||||||||||||||||||||
Average ratio of hedging | 100.00 | 100.00 | — | 100.00 | — | — | 100.00 | |||||||||||||||||||||
Net investment in a foreign operation hedges | ||||||||||||||||||||||||||||
The nominal amount of the hedged item | 461,104 | — | — | — | — | — | 461,104 | |||||||||||||||||||||
The nominal amount of the hedging instrument | 461,104 | — | — | — | — | — | 461,104 | |||||||||||||||||||||
Average ratio of hedging | 100.00 | — | — | — | — | — | 100.00 | |||||||||||||||||||||
Fair value hedge
Details of fair value hedged items as at December 31, 2018, are as follows:
| 2018 | ||||||||||||||||||||||
| Carrying amount | Accumulated adjusted amount | Changes in the fair value | ||||||||||||||||||||
| (In millions of Korean won) | Assets | Liabilities | Assets | Liabilities | ||||||||||||||||||
Interest rate | Debt securities in Korean won | 465,213 | — | 1,214 | — | 6,001 | ||||||||||||||||
| Debt securities in foreign currencies | 702,727 | — | (9,790 | ) | — | (1,233 | ) | |||||||||||||||
| Deposits in foreign currencies | — | 805,215 | — | (89,265 | ) | 38,232 | ||||||||||||||||
| Debts in Korean won | — | 349,252 | — | 19,252 | (2,308 | ) | ||||||||||||||||
| Debts in foreign currencies | — | 1,429,457 | — | (24,073 | ) | (1,868 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||
| 1,167,940 | 2,583,924 | (8,576 | ) | (94,086 | ) | 38,824 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||
98
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
Details of derivative instruments designated as fair value hedge as at December 31, 2018 and 2017, are as follows:
| 2018 | ||||||||||||||||
| (In millions of Korean won) | Notional amount | Assets | Liabilities | Changes in the fair value | ||||||||||||
Interest rate | ||||||||||||||||
Swaps | 3,845,555 | 58,934 | 88,017 | (37,637 | ) | |||||||||||
| 2017 | ||||||||||||
| (In millions of Korean won) | Notional amount | Assets | Liabilities | |||||||||
Interest rate | ||||||||||||
Swaps | 2,919,935 | 47,856 | 49,962 | |||||||||
Other | 50,000 | 775 | 70 | |||||||||
|
|
|
|
|
| |||||||
| 2,969,935 | 48,631 | 50,032 | ||||||||||
|
|
|
|
|
| |||||||
The fair value ofnon-derivative financial instruments designated as hedging instruments as at December 31, 2018 and 2017 are as follows:
| (In millions of Korean won) | 2018 | 2017 | ||||||
Deposit in foreign currencies | — | 32,051 | ||||||
Details of the ineffective portion of changes in fair value of derivatives recognized in profit or loss for the year ended December 3`, 2018, are as follows:
| 2018 | ||||
| (In millions of Korean won) | Hedge ineffectiveness recognized in profit or loss | |||
Interest rate | 1,186 | |||
Gains and losses from fair value hedging instruments and hedged items attributable to the hedged risk for the years ended December 31, 2018 and 2017, are as follows:
| (In millions of Korean won) | 2018 | 2017 | ||||||
Gains (losses) on hedging instruments | (41,472 | ) | 16,195 | |||||
Gains (losses) on the hedged item attributable to the hedged risk | 37,305 | (16,368 | ) | |||||
|
|
|
| |||||
| (4,167 | ) | (173 | ) | |||||
|
|
|
| |||||
Cash flow hedge
Details of cash flow hedged items as at December 31, 2018, are as follows:
| 2018 | ||||||||
| (In millions of Korean won) | Changes in fair value | Other comprehensive income for cash flow hedge | ||||||
Interest rate risk | (7,031 | ) | 11,539 | |||||
99
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
The fair value of derivative financial instruments designated as hedging instruments as at December 31, 2018 and 2017, are as follows:
| 2018 | ||||||||||||||||
| (In millions of Korean won) | Notional amount | Assets | Liabilities | Changes in fair value | ||||||||||||
Interest rate | ||||||||||||||||
Swaps | 3,162,336 | 17,022 | 534 | 6,961 | ||||||||||||
| 2017 | ||||||||||||
| (In millions of Korean won) | Notional amount | Assets | Liabilities | |||||||||
Interest rate | ||||||||||||
Swaps | 1,660,670 | 10,440 | — | |||||||||
Gains and losses from cash flow hedging instruments and hedged items attributable to the hedged risk for the years ended December 31, 2018 and 2017, are as follows:
| (In millions of Korean won) | 2018 | 2017 | ||||||
Gains on hedging instruments | 6,961 | 10,694 | ||||||
Effective gains from cash flow hedging instruments | 6,980 | 10,691 | ||||||
Ineffective gains from cash flow hedging instruments | (19 | ) | 3 | |||||
Amounts recognized in other comprehensive income and reclassified from equity to profit or loss for the years ended December 31, 2018 and 2017, are as follows:
| (In millions of Korean won) | 2018 | 2017 | ||||||
Other comprehensive income or loss | 6,980 | 10,691 | ||||||
Reclassification to profit or loss | (1,755 | ) | (444 | ) | ||||
Income tax effect | (1,437 | ) | (2,833 | ) | ||||
|
|
|
| |||||
| 3,788 | 7,414 | |||||||
|
|
|
| |||||
As at December 31, 2018, the hedged items subject to cash flow hedge are exposed to the risk of changes in cash flows until June 9, 2022.
Hedges of a net investment in a foreign operation
Details of net investment in a foreign operation as at December 31, 2018, are as follows:
| 2018 | ||||||||
| (In millions of Korean won) | Changes in fair value | Other comprehensive income (loss) for hedges of a net investment in a foreign operation | ||||||
Currency (foreign currency risk) | 22,787 | (30,960 | ) | |||||
100
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
Details of derivative financial instruments designated as hedging instruments in hedge of net investment in a foreign operation as at December 31, 2018 and 2017, are as follows:
| 2018 | ||||||||||||||||
| (In millions of Korean won) | Notional amount | Assets | Liabilities | Changes in the fair value | ||||||||||||
Forward exchange contract | 461,104 | 4,365 | — | (19,466 | ) | |||||||||||
Debentures in foreign currencies | 89,448 | — | 89,109 | (3,321 | ) | |||||||||||
|
|
|
|
|
|
|
| |||||||||
| 550,552 | 4,365 | 89,109 | (22,787 | ) | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| 2017 | ||||||||||||
| (In millions of Korean won) | Notional amount | Assets | Liabilities | |||||||||
Forward exchange contract | 471,416 | 21,398 | — | |||||||||
The fair value ofnon-derivative financial instruments designated as hedging instruments as at December 31, 2018 and 2017, is as follows:
| (In millions of Korean won) | 2018 | 2017 | ||||||
Debentures in foreign currencies | 88,785 | 99,994 | ||||||
Gains or losses from hedging instruments in hedge of net investment in a foreign operation and hedged items attributable to the hedged risk for the years ended December 31, 2018 and 2017, are as follows:
| (In millions of Korean won) | 2018 | 2017 | ||||||
Gains (losses) on hedging instruments | (35,015 | ) | 36,044 | |||||
Effective gains (losses) from cash flow hedging instruments (recognized in other comprehensive income or loss) | (35,015 | ) | 34,915 | |||||
Ineffective gains (losses) from cash flow hedging instruments (recognized in profit or loss) | — | 1,129 | ||||||
Gains or losses on the hedging instruments relating to the effective portion of the hedge recognized in other comprehensive income for the years ended December 31, 2018 and 2017, are as follows:
| (In millions of Korean won) | 2018 | 2017 | ||||||
Other comprehensive income (loss) | (35,015 | ) | 34,915 | |||||
Income tax effect | 9,629 | (8,196 | ) | |||||
|
|
|
| |||||
Other comprehensive income (loss) after tax | (25,386 | ) | 26,719 | |||||
|
|
|
| |||||
101
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
10. Loans at Amortized Cost
Loans as at December 31, 2018 and 2017, are as follows:
| (In millions of Korean won) | 2018 | 2017 | ||||||
Loans | 277,916,607 | 252,572,981 | ||||||
Deferred loan origination fees and costs | 581,997 | 551,345 | ||||||
Allowances | (1,554,402 | ) | (1,413,721 | ) | ||||
|
|
|
| |||||
Carrying amount | 276,944,202 | 251,710,605 | ||||||
|
|
|
| |||||
Loans to banks as at December 31, 2018 and 2017, are as follows:
| (In millions of Korean won) | 2018 | 2017 | ||||||
Loans | 3,484,211 | 5,314,577 | ||||||
Allowances | (620 | ) | (77 | ) | ||||
|
|
|
| |||||
Carrying amount | 3,483,591 | 5,314,500 | ||||||
|
|
|
| |||||
Loans to customers other than banks as at December 31, 2018 and 2017 are as follows:
| 2018 | ||||||||||||
| (In millions of Korean won) | Retail | Corporate | Total | |||||||||
Loans in Korean won | 142,003,442 | 116,673,099 | 258,676,541 | |||||||||
Loans in foreign currencies | 189,582 | 4,238,278 | 4,427,860 | |||||||||
Domestic import usance bills | — | 2,817,174 | 2,817,174 | |||||||||
Off-shore funding loans | — | 899,741 | 899,741 | |||||||||
Call loans | — | 1,473,397 | 1,473,397 | |||||||||
Bills bought in Korean won | — | 3,057 | 3,057 | |||||||||
Bills bought in foreign currencies | — | 3,427,368 | 3,427,368 | |||||||||
Guarantee payments under payment guarantee | — | 4,104 | 4,104 | |||||||||
Reverse repurchase agreements | — | 2,951,400 | 2,951,400 | |||||||||
Privately placed bonds | — | 333,751 | 333,751 | |||||||||
|
|
|
|
|
| |||||||
| 142,193,024 | 132,821,369 | 275,014,393 | ||||||||||
Proportion (%) | 51.70 | 48.30 | 100.00 | |||||||||
|
|
|
|
|
| |||||||
Allowances | (445,527 | ) | (1,108,255 | ) | (1,553,782 | ) | ||||||
|
|
|
|
|
| |||||||
| 141,747,497 | 131,713,114 | 273,460,611 | ||||||||||
|
|
|
|
|
| |||||||
102
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
| 2017 | ||||||||||||
| (In millions of Korean won) | Retail | Corporate | Total | |||||||||
Loans in Korean won | 130,390,627 | 105,300,767 | 235,691,394 | |||||||||
Loans in foreign currencies | 95,492 | 3,042,565 | 3,138,057 | |||||||||
Domestic import usance bills | — | 2,128,868 | 2,128,868 | |||||||||
Off-shore funding loans | — | 750,102 | 750,102 | |||||||||
Call loans | — | 335,000 | 335,000 | |||||||||
Bills bought in Korean won | — | 4,168 | 4,168 | |||||||||
Bills bought in foreign currencies | — | 3,875,550 | 3,875,550 | |||||||||
Guarantee payments under payment guarantee | — | 6,373 | 6,373 | |||||||||
Reverse repurchase agreements | — | 1,159,900 | 1,159,900 | |||||||||
Privately placed bonds | — | 720,337 | 720,337 | |||||||||
|
|
|
|
|
| |||||||
| 130,486,119 | 117,323,630 | 247,809,749 | ||||||||||
Proportion (%) | 52.66 | 47.34 | 100.00 | |||||||||
|
|
|
|
|
| |||||||
Allowances | (318,533 | ) | (1,095,111 | ) | (1,413,644 | ) | ||||||
|
|
|
|
|
| |||||||
| 130,167,586 | 116,228,519 | 246,396,105 | ||||||||||
|
|
|
|
|
| |||||||
Changes in deferred loan origination fees and costs for the years ended December 31, 2018 and 2017, are as follows:
| 2018 | ||||||||||||||||||||
| (In millions of Korean won) | Beginning1 | Increase | Decrease | Other | Ending | |||||||||||||||
Deferred loan origination costs |
| |||||||||||||||||||
Loans in Korean won | 562,425 | 333,833 | (304,083 | ) | — | 592,175 | ||||||||||||||
Other origination costs | 456 | 528 | (499 | ) | 1 | 486 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
| 562,881 | 334,361 | (304,582 | ) | 1 | 592,661 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Deferred loan origination fees |
| |||||||||||||||||||
Loans in Korean won | 6,793 | 2,271 | (2,742 | ) | — | 6,322 | ||||||||||||||
Other origination fees | 4,749 | 832 | (1,240 | ) | 1 | 4,342 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
| 11,542 | 3,103 | (3,982 | ) | 1 | 10,664 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
| 551,339 | 331,258 | (300,600 | ) | — | 581,997 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
| 1 | Restated based on Korean IFRS 1109. |
103
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
| 2017 | ||||||||||||||||||||
| (In millions of Korean won) | Beginning | Increase | Decrease | Other | Ending | |||||||||||||||
Deferred loan origination costs |
| |||||||||||||||||||
Loans in Korean won | 582,479 | 267,116 | (287,170 | ) | — | 562,425 | ||||||||||||||
Other origination costs | 295 | 497 | (328 | ) | (2 | ) | 462 | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
| 582,774 | 267,613 | (287,498 | ) | (2 | ) | 562,887 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Deferred loan origination fees |
| |||||||||||||||||||
Loans in Korean won | 9,968 | 1,776 | (4,951 | ) | — | 6,793 | ||||||||||||||
Other origination fees | 2,356 | 3,672 | (1,269 | ) | (10 | ) | 4,749 | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
| 12,324 | 5,448 | (6,220 | ) | (10 | ) | 11,542 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
| 570,450 | 262,165 | (281,278 | ) | 8 | 551,345 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
11. Allowances for Loan Losses
Changes in the allowances for loan losses for the years ended December 31, 2018 and 2017, are as follows:
| 2018 | ||||||||||||||||||||||||||||||||
| Retails | Corporates | |||||||||||||||||||||||||||||||
| Financial instruments applying 12- month expected credit losses | Financial instruments applying lifetime expected credit losses | Financial instruments applying credit impaired approach | Financial instruments applying 12- month expected credit losses | Financial instruments applying lifetime expected credit losses | Financial instruments applying credit impaired approach | |||||||||||||||||||||||||||
| (In millions of Korean won) | Non-impaired | Impaired | Non-impaired | Impaired | ||||||||||||||||||||||||||||
Beginning1 | 162,111 | 155,623 | 133,002 | — | 193,359 | 263,721 | 759,367 | — | ||||||||||||||||||||||||
Transfer between stages | ||||||||||||||||||||||||||||||||
Transfer to12-month expected credit losses | 101,441 | (101,375 | ) | (66 | ) | — | 37,149 | (36,251 | ) | (897 | ) | — | ||||||||||||||||||||
Transfer to lifetime expected credit losses(Non-impaired) | (90,045 | ) | 102,159 | (12,114 | ) | — | (34,450 | ) | 44,741 | (10,291 | ) | — | ||||||||||||||||||||
Transfer to lifetime expected credit losses (Impaired) | (753 | ) | (43,126 | ) | 43,880 | — | (2,289 | ) | (30,694 | ) | 32,982 | — | ||||||||||||||||||||
Write-offs | — | (2 | ) | (297,228 | ) | — | — | (5 | ) | (228,900 | ) | — | ||||||||||||||||||||
Disposal | (248 | ) | (5 | ) | (1,003 | ) | — | (73 | ) | — | (14,172 | ) | — | |||||||||||||||||||
Provision (reversal) for loan losses2,3 | (2,075 | ) | 43,621 | 250,848 | — | 3,438 | 53,762 | 51,051 | — | |||||||||||||||||||||||
Others (change of currency ratio, etc.) | 140 | 319 | 423 | — | 732 | 654 | 25,941 | — | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Ending | 170,571 | 157,214 | 117,742 | — | 197,866 | 295,928 | 615,081 | — | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
| 1 | Restated based on Korean IFRS 1109. |
| 2 | Provision for credit losses in statement of comprehensive income also includes provision (reversal) for unused commitments and guarantees (Note 22), provision (reversal) for financial guarantee contracts (Note 22), provision (reversal) of allowance for other financial assets (Note 17), provision (reversal) of allowance for due from financial institutions (Note 7) and provision (reversal) of allowance for debt securities (Note 12). |
| 3 | Recovery ofwritten-off loans amounting to \ 284,493 million is included. |
104
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
| 2017 | ||||||||||||
|
| |||||||||||
| (In millions of Korean won) | Retail | Corporate | Total | |||||||||
Beginning | 333,269 | 1,262,342 | 1,595,611 | |||||||||
Written-off | (274,714 | ) | (375,705 | ) | (650,419 | ) | ||||||
Recoveries fromwritten-off loans | 136,765 | 272,979 | 409,744 | |||||||||
Sale | (682 | ) | (17,560 | ) | (18,242 | ) | ||||||
Other changes | 1,769 | (88,835 | ) | (87,066 | ) | |||||||
Provision1 | 122,126 | 41,967 | 164,093 | |||||||||
|
|
|
|
|
| |||||||
Ending | 318,533 | 1,095,188 | 1,413,721 | |||||||||
|
|
|
|
|
| |||||||
| 1 | Provision (reversal) for credit losses in statement of comprehensive income also includes provision (reversal) for unused commitments and guarantees (Note 22), provision (reversal) for financial guarantee contracts (Note 22), and provision (reversal) of allowance for other financial assets (Note 17). |
The loan and receivables which werewritten-off but the claims has not been forfeited (i.e. its extinctive prescription did not occur, and that are not collected) amounts to \ 9,712,704 million as at December 31, 2018.
Changes in the gross carrying amounts of loans
Changes in the gross carrying amounts of loans that significantly affect allowances for loan losses for the year ended December 31, 2018, are as follows:
| 2018 | ||||||||||||||||
| Financial instruments applying 12-month expected credit losses | Financial instruments applying lifetime expected credit losses | Financial instruments applying credit impaired approach | ||||||||||||||
| (In millions of Korean won) | Non-impaired | Impaired | ||||||||||||||
Beginning1 | 229,155,046 | 22,264,683 | 1,536,734 | — | ||||||||||||
Transfer between stages | ||||||||||||||||
Transfer to12-month expected credit losses | 7,505,305 | (7,465,523 | ) | (39,782 | ) | — | ||||||||||
Transfer to lifetime expected credit losses(Non-impaired) | (10,092,301 | ) | 10,144,226 | (51,926 | ) | — | ||||||||||
Transfer to lifetime expected credit losses (Impaired) | (638,686 | ) | (761,893 | ) | 1,400,579 | — | ||||||||||
Write-offs | — | (7 | ) | (526,127 | ) | — | ||||||||||
Sale | (484,646 | ) | (3,817 | ) | (190,401 | ) | — | |||||||||
Net increase(decrease) (Execution, repayment and others) | 30,425,623 | (2,938,516 | ) | (739,967 | ) | — | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Ending | 255,870,341 | 21,239,153 | 1,389,110 | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| 1 | Restated based on Korean IFRS 1109. |
105
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
12. Financial Assets at Fair Value through Profit or Loss and Financial Investments
Details of financial assets at fair value through profit or loss and financial investments as at December 31, 2018 and 2017, are as follows:
| (In millions of Korean won) | 2018 | |||
Financial assets at fair value through profit or loss | ||||
Debt securities | ||||
Government and public bonds | 1,948,984 | |||
Financial bonds | 4,933,859 | |||
Corporate bonds | 1,897,070 | |||
Asset-backed securities | 59,807 | |||
Beneficiary certificates | 2,341,301 | |||
Equity investments | 164,777 | |||
Derivative-linked securities | 126,417 | |||
Other debt securities | 410,810 | |||
Equity securities | ||||
Stocks | 82,576 | |||
Loans | ||||
Private placed corporate bonds | 179,714 | |||
Other loans | 32,882 | |||
Others | ||||
Financial instruments indexed to the price of gold | 78,808 | |||
|
| |||
| 12,257,005 | ||||
|
| |||
Financial Investments |
| |||
Financial assets at fair value through other comprehensive income |
| |||
Debt securities | ||||
Government and public bonds | 2,941,069 | |||
Financial bonds | 16,902,114 | |||
Corporate bonds | 6,971,282 | |||
Asset-backed securities | 867,998 | |||
Equity securities | ||||
Stocks | 1,861,901 | |||
Equity investments | 37,043 | |||
Loans | ||||
Private placed corporate bonds | 349,547 | |||
| 29,930,954 | ||||
|
| |||
Financial assets at amortized cost |
| |||
Debt securities | ||||
Government and public bonds | 544,926 | |||
Financial bonds | 6,245,768 | |||
Corporate bonds | 1,413,022 | |||
Asset-backed securities | 4,590,107 | |||
Allowance | (1,297 | ) | ||
|
| |||
| 12,792,526 | ||||
|
| |||
| 42,723,480 | ||||
|
| |||
106
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
| (In millions of Korean won) | 2017 | |||
Financial assets held for trading | ||||
Debt securities | ||||
Government and public bonds | 1,639,136 | |||
Financial bonds | 3,727,349 | |||
Corporate bonds | 2,025,492 | |||
Asset-backed securities | 148,995 | |||
Others | 359,641 | |||
Equity securities | ||||
Stocks | 121,949 | |||
Beneficiary certificates | 216,955 | |||
Others | 73,856 | |||
|
| |||
| 8,313,373 | ||||
|
| |||
Financial assets designated at fair value through profit or loss | ||||
Derivative linked securities | 95,357 | |||
|
| |||
| 8,408,730 | ||||
|
| |||
Available-for-sale financial assets | ||||
Debt securities | ||||
Government and public bonds | 2,820,398 | |||
Financial bonds | 15,838,948 | |||
Corporate bonds | 6,741,055 | |||
Asset-backed securities | 2,205,360 | |||
Equity securities | ||||
Stocks | 1,923,152 | |||
Equity investments | 143,685 | |||
Beneficiary certificates | 2,405,426 | |||
Others | 500 | |||
|
| |||
| 32,078,524 | ||||
|
| |||
Held-to-maturity financial assets | ||||
Debt securities | ||||
Government and public bonds | 1,302,836 | |||
Financial bonds | 1,878,005 | |||
Corporate bonds | 1,360,836 | |||
Asset-backed securities | 4,195,473 | |||
|
| |||
| 8,737,150 | ||||
|
| |||
| 40,815,674 | ||||
|
| |||
Dividend incomes from the equity securities designated at fair value through other comprehensive income for the year ended December 31, 2018 are as follows:
| 2018 | ||||||||
| (In millions of Korean won) | From the financial asset derecognized | From the holding financial asset | ||||||
Stocks Listed | — | 22,173 | ||||||
Unlisted | — | 14,508 | ||||||
Equity investments | — | 2,256 | ||||||
|
|
|
| |||||
| — | 38,937 | |||||||
|
|
|
| |||||
107
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
The derecognized equity securities at fair value through other comprehensive income for the year ended December 31, 2018, are as follows:
| 2018 | ||||||||||
| (In millions of Korean won) | Disposal price | Accumulated OCI as at disposal date | ||||||||
Stocks | Listed | 26,877 | 18,330 | |||||||
| Unlisted | 480 | 480 | ||||||||
|
|
|
| |||||||
| 27,357 | 18,810 | |||||||||
|
|
|
| |||||||
| 1 | In accordance with joint resolution along with the stock price increase, the Group disposed of stocks acquired by a debt to equity swap. |
Provision, and reversal for the allowance of financial investments for the year ended December 31, 2018, are as follows:
| 2018 | ||||||||||||
| (In millions of Korean won) | Impairment losses | Reversal of impairment | Total | |||||||||
Debt instruments at fair value through other comprehensive income | (877 | ) | 342 | (535 | ) | |||||||
|
|
|
|
|
| |||||||
Loans at fair value through other comprehensive income | (905 | ) | 825 | (80 | ) | |||||||
Securities at amortized cost | (202 | ) | 282 | 80 | ||||||||
|
|
|
|
|
| |||||||
| (1,984 | ) | 1,449 | (535 | ) | ||||||||
|
|
|
|
|
| |||||||
The impairment losses and the reversal of impairment losses in financial investments for the year ended December 31, 2017, are as follows:
| 2017 | ||||||||||||
| (In millions of Korean won) | Impairment | Reversal | Net | |||||||||
Available-for-sale financial assets | (12,405 | ) | — | (12,405 | ) | |||||||
108
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
Changes in the allowances for financial investments for the year ended December 31, 2018, are as follows:
| (In millions of Korean won) | 2018 | |||||||||||
Financial credit losses | Financial instruments applying lifetime expected credit losses | |||||||||||
| Non-impaired | Impaired | ||||||||||
Beginning1 | 3,042 | 482 | — | |||||||||
Transfer between stages | ||||||||||||
Transfer to12-month expected credit losses | 125 | (125 | ) | — | ||||||||
Transfer to lifetime expected credit losses | — | — | — | |||||||||
Disposal | (171 | ) | — | — | ||||||||
Provision (reversal) for loan losses | 715 | (180 | ) | — | ||||||||
Others (change of currency ratio, etc.) | 48 | 16 | — | |||||||||
|
|
|
|
|
| |||||||
Ending | 3,759 | 193 | — | |||||||||
|
|
|
|
|
| |||||||
| 1 | Prepared in accordance with Korean IFRS 1109. |
13. Investments in Associates
Investments in associates as at December 31, 2018 and 2017, are as follows:
| (In millions of Korean won) | 2018 | |||||||||||||||||||
| Ownership (%) | Acquisition cost | Share of net asset amount | Carrying amount | Industry | Location | |||||||||||||||
Korea Credit Bureau Co., Ltd.1 | 9.00 | 4,500 | 5,941 | 5,941 | Credit information | Korea | ||||||||||||||
Balhae Infrastructure Fund1 | 12.61 | 104,621 | 108,050 | 108,050 | Investment finance | Korea | ||||||||||||||
KB GwS Private Securities Investment Trust | 20.93 | 89,124 | 106,613 | 106,613 | Investment finance | Korea | ||||||||||||||
Incheon Bridge Co., Ltd. 1 | 14.99 | 9,159 | (16,689 | ) | — | Operation of highways and related facilities | Korea | |||||||||||||
KB Digital innovation & Growth New Technology Business Investment Fund1 | 45.00 | 1,125 | 1,079 | 1,079 | Discovery of and investment in promising FinTech-business venture | Korea | ||||||||||||||
KB12-1 Venture Investment Partnership2 | 80.00 | 17,400 | 49,912 | 49,912 | Investment finance | Korea | ||||||||||||||
Future Planning KBStart-up Creation Fund2 | 50.00 | 14,300 | 18,069 | 18,069 | Investment finance | Korea | ||||||||||||||
KoFC KBIC Frontier Champ2010-5(PEF) | 30.00 | 90 | 140 | 140 | Investment finance | Korea | ||||||||||||||
KoFC POSCO HANWHA KB Shared Growth No.2. Private Equity Fund | 20.00 | 10,376 | 11,681 | 11,681 | Investment finance | Korea | ||||||||||||||
109
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
KB High-tech Company Investment Fund2 | 50.00 | 20,300 | 22,563 | 22,563 | Investment finance | Korea | ||||||||||||||
Aju Good Technology Venture Fund | 38.46 | 18,038 | 18,134 | 18,134 | Investment finance | Korea | ||||||||||||||
KB-KDBC New Technology Business Investment Fund2 | 33.33 | 7,500 | 7,297 | 7,297 | Investment finance | Korea | ||||||||||||||
KBTS Technology Venture Private Equity Fund2 | 30.00 | 7,620 | 7,381 | 7,381 | Investment finance | Korea | ||||||||||||||
KB IP Investment Fund II2 | 37.50 | 3,000 | 2,942 | 2,942 | Investment finance | Korea | ||||||||||||||
KB Digital Innovation Investment Fund Limited partnership2 | 25.74 | 7,700 | 7,617 | 7,617 | Investment finance | Korea | ||||||||||||||
KB-Brain KOSDAQScale-up Fund2 | 21.28 | 4,000 | 3,966 | 3,966 | Investment finance | Korea | ||||||||||||||
KB Star office private real estate Investment Trust No.1 | 21.05 | 20,000 | 20,252 | 20,252 | Investment finance | Korea | ||||||||||||||
Shinla Construction Co., Ltd. 3 | 20.17 | — | (551 | ) | — | Specialty construction | Korea | |||||||||||||
Terra Corporation3 | 24.06 | — | 2 | — | Manufacture of fabricated and processed metal products | Korea | ||||||||||||||
MJT&I Corp.3 | 22.89 | — | (606 | ) | 122 | Wholesale of other merchandise | Korea | |||||||||||||
Jungdong Steel Co., Ltd.3 | 42.65 | — | (433 | ) | — | Wholesale of primary metal | Korea | |||||||||||||
Doosung Metal Co., Ltd3 | 26.49 | — | (16 | ) | — | Manufacture of metal door, windows, shutter and relevant products | Korea | |||||||||||||
Shinhwa Underwear Co., Ltd. 3 | 26.05 | — | (57 | ) | 182 | Manufacture of underwear and sleepwear | Korea | |||||||||||||
DPAPS Co., Ltd.3 | 38.62 | — | 14 | — | Wholesale of paper | Korea | ||||||||||||||
Jaeyang Industry Co., Ltd.3 | 20.86 | — | (552 | ) | — | Manufacture of pouches, cases, and bags | Korea | |||||||||||||
Kendae Co., Ltd.3 | 41.01 | — | (252 | ) | 98 | Screen Printing | Korea | |||||||||||||
Jinseung Tech Co., Ltd.3 | 30.04 | — | (176 | ) | — | Manufacture of other general-purpose machinery n.e.c. | Korea | |||||||||||||
Dongjo Co., Ltd.3 | 29.29 | — | 806 | 115 | Wholesale of agricultural and forestry machinery and equipment | Korea | ||||||||||||||
Korea NM Tech Co., Ltd.3 | 22.41 | — | 552 | — | Manufacture of motor vehicles, trailers and semitrailers | Korea | ||||||||||||||
Jungdo Co., Ltd.3 | 25.34 | — | 1,492 | — | Office, commercial and institutional building construction | Korea | ||||||||||||||
Dae-A Leisure Co., Ltd.3 | 49.36 | — | 1,613 | 578 | Earth works | Korea | ||||||||||||||
Chong Il Machine & Tools Co., Ltd.3 | 20.40 | — | (107 | ) | — | Wholesale machinery and equipment | Korea | |||||||||||||
Imt Technology Co., Ltd.3 | 25.29 | — | 18 | — | Computer Peripherals distribution | Korea | ||||||||||||||
Iwon Alloy Co., Ltd.3 | 23.20 | — | 394 | — | Manufacture of smelting, refining and alloys | Korea | ||||||||||||||
Carlife Co., Ltd.3 | 24.39 | — | (75 | ) | — | Publishing of magazines and periodicals (publishing industry) | Korea |
110
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
Computerlife Co., Ltd.3 | 45.71 | — | (329 | ) | — | Publishing of magazines and periodicals (publishing industry) | Korea | |||||||||||||||
SKYDIGITAL INC.3 | 20.40 | — | (142 | ) | — | Manufacture of multimedia and video devices | Korea | |||||||||||||||
Jo Yang Industrial Co., Ltd.3 | 22.77 | — | 75 | — | Manufacture of special glass | Korea | ||||||||||||||||
PT Bank Bukopin TBK4,5 | 22.00 | 116,422 | 106,484 | 113,932 | Banking | Indonesia | ||||||||||||||||
|
|
|
|
|
| |||||||||||||||||
| 455,275 | 483,102 | 506,664 | ||||||||||||||||||||
|
|
|
|
|
|
| 2017 | ||||||||||||||||||||||
| (In millions of Korean won) | Ownership (%) | Acquisition cost | Share of net asset amount | Carrying amount | Industry | Location | ||||||||||||||||
Balhae Infrastructure Fund 1 | 12.61 | 101,794 | 105,190 | 105,190 | Investment finance | Korea | ||||||||||||||||
Korea Credit Bureau Co., Ltd.1 | 9.00 | 4,500 | 5,056 | 5,056 | Credit information | Korea | ||||||||||||||||
KB12-1 Venture Investment Partnership 2 | 80.00 | 22,800 | 37,239 | 37,239 | Investment finance | Korea | ||||||||||||||||
KoFC KBIC Frontier Champ2010-5(PEF) | 30.00 | 3,891 | 4,504 | 4,137 | Investment finance | Korea | ||||||||||||||||
KB GwS Private Securities Investment Trust | 20.93 | 89,124 | 105,567 | 104,310 | Investment finance | Korea | ||||||||||||||||
Incheon Bridge Co., Ltd.1 | 14.99 | 9,159 | (16,202 | ) | — | Operation of highways and related facilities | Korea | |||||||||||||||
KoFC POSCO HANWHA KB Shared Growth No.2. Private Equity Fund | 20.00 | 10,376 | 13,770 | 13,770 | Investment finance | Korea | ||||||||||||||||
Future Planning KBStart-up Creation Fund 2 | 50.00 | 14,700 | 18,093 | 18,093 | Investment finance | Korea | ||||||||||||||||
KB-KDBC New Technology Business Investment Fund2 | 33.33 | 2,500 | 2,486 | 2,486 | Investment finance | Korea | ||||||||||||||||
Shinla Construction Co., Ltd. 3 | 20.17 | — | (551 | ) | — | Specialty construction | Korea | |||||||||||||||
Terra Corporation 3 | 24.06 | — | 36 | 20 | Manufacture of fabricated and processed metal products | Korea | ||||||||||||||||
MJT&I Corp. 3 | 22.89 | — | (601 | ) | 127 | Wholesale of other merchandise | Korea | |||||||||||||||
Jungdong Steel Co., Ltd. 3 | 42.65 | — | (433 | ) | — | Wholesale of primary metal | Korea | |||||||||||||||
Doosung Metal Co., Ltd. 3 | 26.49 | — | (20 | ) | — | Manufacture of metal door, windows, shutter and relevant products | Korea | |||||||||||||||
Shinhwa Underwear Co., Ltd. 3 | 26.05 | — | (102 | ) | 138 | Manufacture of underwear and sleepwear | Korea | |||||||||||||||
DPAPS Co., Ltd. 3 | 38.62 | — | 155 | — | Wholesale of paper | Korea | ||||||||||||||||
Jaeyang Industry Co., Ltd. 3 | 20.86 | — | (522 | ) | — | Manufacture of luggage and other protective cases | Korea | |||||||||||||||
Keundae Printing Co., Ltd. 3 | 41.01 | — | (223 | ) | 127 | Screen Printing | Korea | |||||||||||||||
Jinseung Tech Co., Ltd. 3 | 30.04 | — | (173 | ) | — | Manufacture of other general-purpose machinery n.e.c. | Korea | |||||||||||||||
Dong Jo Co., Ltd. 3 | 29.29 | — | 691 | — | Wholesale of agricultural and forestry machinery and equipment | Korea | ||||||||||||||||
Korea NM Tech Co., Ltd. 3 | 22.41 | — | 580 | — | Manufacture of motor vehicles, trailers and semitrailers | Korea | ||||||||||||||||
111
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
Jungdo Co., Ltd. 3 | 25.34 | — | 1,652 | — | Office, commercial and institutional building construction | Korea | ||||||||||||||||
Dae-A Leisure Co., Ltd. 3 | 49.36 | — | 1,017 | — | Earth works | Korea | ||||||||||||||||
Daesang Techlon Co., Ltd. 3 | 47.73 | — | 96 | — | Manufacture of Plastic, Teflon etc. | Korea | ||||||||||||||||
KB High-tech Company Investment Fund 2 | 50.00 | 25,000 | 26,847 | 26,847 | Investment finance | Korea | ||||||||||||||||
Aju Good Technology Venture Fund | 38.46 | 8,230 | 7,856 | 8,230 | Investment finance | Korea | ||||||||||||||||
KB Star office private real estate Investment Trust No.1 | 21.05 | 20,000 | 20,122 | 20,122 | Investment finance | Korea | ||||||||||||||||
|
|
|
|
|
| |||||||||||||||||
| 312,074 | 332,130 | 345,892 | ||||||||||||||||||||
|
|
|
|
|
|
| 1 | As at December 31, 2018 and 2017, the Group is represented in the governing bodies of its associates. Therefore, the Group has significant influence over the decision-making process relating to their financial and business policies. |
| 2 | As at December 31, 2018 and 2017, the Group is a partner in a limited partnership and does not have the right to control over these entities. |
| 3 | The investment in associates was reclassified from financial instruments at fair value through other comprehensive income(available-for-sale financial assets) due to termination of rehabilitation procedures. |
| 4 | The Group has entered into an agreement with PT Bosowa Corporindo, the major shareholder of PT Bank Bukopin TBK. Under this agreement, both partiesin have a right of first refusal, atag-along right and a drag-along right. The Group additionally has the drag-along right can be exercised for the duration of two years after three-years from acquisition date, subject to the occurrence of certain situations as defined in the agreement. |
| 5 | The fair value of PT Bank Bukopin TBK’s common stock based on its quoted market price is \ 53,540 million as at December 31, 2018. |
Summarized financial information on the main associates, the carrying amount of the Group’s interest in the main associates and dividends received from the main associates is as follows:
| 20181 | ||||||||||||||||||||||||||||
| (In millions of Korean won) | Total assets | Total liabilities | Paid-in capital | Equity | Share of net asset amount | Unrealized gains and losses and others | Carrying amount | |||||||||||||||||||||
Korea Credit Bureau Co., Ltd. | 88,797 | 22,788 | 10,000 | 66,009 | 5,941 | — | 5,941 | |||||||||||||||||||||
Balhae Infrastructure Fund | 859,040 | 1,843 | 829,995 | 857,197 | 108,050 | — | 108,050 | |||||||||||||||||||||
KB GwS Private Securities Investment Trust | 516,115 | 741 | 425,814 | 515,374 | 106,613 | — | 106,613 | |||||||||||||||||||||
Incheon Bridge Co., Ltd. | 617,560 | 728,896 | 61,096 | (111,336 | ) | (16,689 | ) | 16,689 | — | |||||||||||||||||||
KB Digital Innovation & Growth New Technology Business Investment Fund | 2,398 | — | 2,500 | 2,398 | 1,079 | — | 1,079 | |||||||||||||||||||||
KB12-1 Venture Investment Partnership | 63,628 | 1,238 | 21,750 | 62,390 | 49,912 | — | 49,912 | |||||||||||||||||||||
Future Planning KBStart-up Creation Fund | 38,889 | 2,751 | 28,600 | 36,138 | 18,069 | — | 18,069 | |||||||||||||||||||||
KoFC KBIC Frontier Champ2010-5(PEF) | 469 | 3 | 300 | 466 | 140 | — | 140 | |||||||||||||||||||||
KoFC POSCO HANWHA KB Shared Growth No.2. Private Equity Fund | 59,464 | 1,061 | 51,880 | 58,403 | 11,681 | — | 11,681 | |||||||||||||||||||||
112
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
KB High-tech Company Investment Fund | 45,402 | 276 | 40,600 | 45,126 | 22,563 | — | 22,563 | |||||||||||||||||||||
Aju Good Technology Venture Fund | 47,216 | 66 | 46,900 | 47,150 | 18,134 | — | 18,134 | |||||||||||||||||||||
KB-KDBC New Technology Business Investment Fund | 22,492 | 602 | 22,500 | 21,890 | 7,297 | — | 7,297 | |||||||||||||||||||||
KBTS Technology Venture Private Equity Fund | 24,810 | 208 | 25,400 | 24,602 | 7,381 | — | 7,381 | |||||||||||||||||||||
KB IP Investment Fund II | 7,848 | 3 | 8,000 | 7,845 | 2,942 | — | 2,942 | |||||||||||||||||||||
KB Digital Innovation Investment Fund Limited partnership | 29,601 | 3 | 29,920 | 29,598 | 7,617 | — | 7,617 | |||||||||||||||||||||
KB-Brain KOSDAQScale-up Fund | 18,820 | 181 | 18,800 | 18,639 | 3,966 | — | 3,966 | |||||||||||||||||||||
KB Star office private real estate Investment Trust No.1 | 218,025 | 121,828 | 95,000 | 96,197 | 20,252 | — | 20,252 | |||||||||||||||||||||
PT Bank Bukopin TBK2 | 7,195,249 | 6,711,233 | 106,536 | 484,016 | 106,484 | 7,448 | 113,932 |
| 20181 | ||||||||||||||||||||
| (In millions of Korean won) | Operating revenues | Profit (Loss) | Other comprehensive income | Comprehensive income (loss) | Dividends | |||||||||||||||
Korea Credit Bureau Co., Ltd. | 78,018 | 9,901 | — | 9,901 | 113 | |||||||||||||||
Balhae Infrastructure Fund | 61,525 | 54,241 | — | 54,241 | 6,804 | |||||||||||||||
KB GwS Private Securities Investment Trust | 42,502 | 41,524 | — | 41,524 | 6,385 | |||||||||||||||
Incheon Bridge Co., Ltd. | 94,373 | (2,757 | ) | — | (2,757 | ) | — | |||||||||||||
KB Digital Innovation & Growth New Technology Business Investment Fund | 7 | (82 | ) | (21 | ) | (103 | ) | — | ||||||||||||
KB12-1 Venture Investment Partnership | 38,942 | 35,556 | — | 35,556 | 10,640 | |||||||||||||||
Future Planning KBStart-up Creation Fund | 6,826 | 5,467 | — | 5,467 | 2,600 | |||||||||||||||
KoFC KBIC Frontier Champ2010-5(PEF) | 1,460 | 1,453 | — | 1,453 | 999 | |||||||||||||||
KoFC POSCO HANWHA KB Shared Growth No.2. Private Equity Fund | 2,401 | (12,313 | ) | — | (12,313 | ) | — | |||||||||||||
KB High-tech Company Investment Fund | 5,025 | 86 | — | 86 | — | |||||||||||||||
Aju Good Technology Venture Fund | 2,491 | 1,356 | — | 1,356 | — | |||||||||||||||
KB-KDBC New Technology Business Investment Fund | 39 | (568 | ) | — | (568 | ) | — | |||||||||||||
KBTS Technology Venture Private Equity Fund | — | (798 | ) | — | (798 | ) | — | |||||||||||||
KB IP Investment Fund II | 9 | (155 | ) | — | (155 | ) | — | |||||||||||||
KB Digital Innovation Investment Fund Limited partnership | 24 | (322 | ) | — | (322 | ) | — | |||||||||||||
KB-Brain KOSDAQScale-up Fund | 20 | (161 | ) | — | (161 | ) | — | |||||||||||||
KB Star office private real estate Investment Trust No.1 | 14,092 | 6,135 | — | 6,135 | 1,162 | |||||||||||||||
PT Bank Bukopin TBK | 148,793 | (8,843 | ) | (2,325 | ) | (11,168 | ) | — | ||||||||||||
| 1 | The amounts included in the financial information of the associates are adjusted to reflect adjustments made by the Group, such as fair value adjustments made at the time of acquisition and adjustments for differences in accounting policies. |
| 2 | The goodwill of PT Bank Bukopin TBK amounts to \ 4,101 million. |
113
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
| 20171 | ||||||||||||||||||||||||||||
| (In millions of Korean won) | Total assets | Total liabilities | Paid-in capital | Equity | Share of net asset amount | Unrealized gains and losses and others | Carrying amount | |||||||||||||||||||||
Balhae Infrastructure Fund | 836,309 | 1,800 | 807,567 | 834,509 | 105,190 | — | 105,190 | |||||||||||||||||||||
Korea Credit Bureau Co., Ltd. | 75,504 | 19,323 | 10,000 | 56,181 | 5,056 | — | 5,056 | |||||||||||||||||||||
KB12-1 Venture Investment Partnership | 47,454 | 905 | 28,500 | 46,549 | 37,239 | — | 37,239 | |||||||||||||||||||||
KoFC KBIC Frontier Champ2010-5(PEF) | 15,017 | 4 | 12,970 | 15,013 | 4,504 | (367 | ) | 4,137 | ||||||||||||||||||||
KB GwS Private Securities Investment Trust | 505,115 | 741 | 425,814 | 504,374 | 105,567 | (1,257 | ) | 104,310 | ||||||||||||||||||||
Incheon Bridge Co., Ltd. | 646,811 | 754,900 | 61,096 | (108,089 | ) | (16,202 | ) | 16,202 | — | |||||||||||||||||||
KoFC POSCO HANWHA KB Shared Growth No.2. Private Equity Fund | 70,166 | 1,315 | 51,880 | 68,851 | 13,770 | — | 13,770 | |||||||||||||||||||||
Future Planning KBStart-up Creation Fund | 37,730 | 1,544 | 29,400 | 36,186 | 18,093 | — | 18,093 | |||||||||||||||||||||
KB High-tech Company Investment Fund | 53,949 | 255 | 50,000 | 53,694 | 26,847 | — | 26,847 | |||||||||||||||||||||
Aju Good Technology Venture Fund | 20,676 | 250 | 21,400 | 20,426 | 7,856 | 374 | 8,230 | |||||||||||||||||||||
KB-KDBCPre-IPO New Technology Business Investment Fund | 7,503 | 45 | 7,500 | 7,458 | 2,486 | — | 2,486 | |||||||||||||||||||||
KB Star office private real estate Investment Trust No.1 | 216,041 | 120,462 | 95,000 | 95,579 | 20,122 | — | 20,122 | |||||||||||||||||||||
| 20171 | ||||||||||||||||||||||||||||
| (In millions of Korean won) | Operating revenues | Profit (Loss) | Other comprehensive income | Comprehensive income(loss) | Dividends | |||||||||||||||||||||||
Balhae Infrastructure Fund |
| 113,441 | 104,942 | — | 104,942 | 12,842 | ||||||||||||||||||||||
Korea Credit Bureau Co., Ltd. |
| 68,750 | 3,580 | — | 3,580 | 149 | ||||||||||||||||||||||
KB12-1 Venture Investment Partnership |
| 4,762 | (774 | ) | 4,326 | 3,552 | — | |||||||||||||||||||||
KoFC KBIC Frontier Champ2010-5(PEF) |
| 2,728 | (294 | ) | 142 | (152 | ) | — | ||||||||||||||||||||
KB GwS Private Securities Investment Trust | 35,002 | 34,004 | — | 34,004 | 5,753 | |||||||||||||||||||||||
Incheon Bridge Co., Ltd. | 90,691 | (8,719 | ) | — | (8,719 | ) | — | |||||||||||||||||||||
KoFC POSCO HANWHA KB Shared Growth No.2. Private Equity Fund | 21,916 | 8,624 | 129 | 8,753 | — | |||||||||||||||||||||||
Future Planning KBStart-up Creation Fund | 1,298 | (2,221 | ) | 4 | (2,217 | ) | — | |||||||||||||||||||||
KB High-tech Company Investment Fund | 4,408 | 1,978 | 1,437 | 3,415 | — | |||||||||||||||||||||||
Aju Good Technology Venture Fund | 660 | (841 | ) | — | (841 | ) | — | |||||||||||||||||||||
KB-KDBCPre-IPO New Technology Business Investment Fund | 3 | (42 | ) | — | (42 | ) | — | |||||||||||||||||||||
KB Star office private real estate Investment Trust No.1 |
| 13,071 |
| 5,684 | — | 5,684 | 1,295 | |||||||||||||||||||||
| 1 | The amounts included in the financial information of the associates are adjusted to reflect adjustments made by the Group, such as fair value adjustments made at the time of acquisition and adjustments for differences in accounting policies. |
114
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
Changes in investments in associates for the years ended December 31, 2018 and 2017, are as follows:
| 2018 | ||||||||||||||||||||||||||||
| (In millions of Korean won) | Beginning1 | Acquisition and others | Disposal and others | Dividends | Gains (losses) from using equity method | Other comprehensive income | Ending | |||||||||||||||||||||
Korea Credit Bureau Co., Ltd. | 5,056 | — | — | (113 | ) | 998 | — | 5,941 | ||||||||||||||||||||
Balhae Infrastructure Fund | 105,190 | 4,645 | (1,818 | ) | (6,804 | ) | 6,837 | — | 108,050 | |||||||||||||||||||
KB GwS Private Securities Investment Trust | 104,310 | — | — | (6,386 | ) | 8,689 | — | 106,613 | ||||||||||||||||||||
KB Digital Innovation & Growth New Technology Business Investment Fund | — | 1,125 | — | — | (37 | ) | (9 | ) | 1,079 | |||||||||||||||||||
KB12-1 Venture Investment Partnership | 37,507 | — | (5,400 | ) | (10,640 | ) | 28,445 | — | 49,912 | |||||||||||||||||||
Future Planning KBStart-up Creation Fund | 18,336 | — | (400 | ) | (2,600 | ) | 2,733 | — | 18,069 | |||||||||||||||||||
KoFC KBIC Frontier Champ2010-5(PEF) | 4,137 | — | (3,138 | ) | (999 | ) | 140 | — | 140 | |||||||||||||||||||
KoFC POSCO HANWHA KB Shared Growth No.2. Private Equity Fund | 14,171 | — | — | — | (1,498 | ) | (992 | ) | 11,681 | |||||||||||||||||||
KB High-tech Company Investment Fund | 27,220 | — | (4,700 | ) | — | 43 | — | 22,563 | ||||||||||||||||||||
Aju Good Technology Venture Fund | 8,230 | 9,808 | — | — | 96 | — | 18,134 | |||||||||||||||||||||
KB-KDBC New Technology Business Investment Fund | 2,486 | 5,000 | — | — | (189 | ) | — | 7,297 | ||||||||||||||||||||
KBTS Technology Venture Private Equity Fund | — | 7,620 | — | — | (239 | ) | — | 7,381 | ||||||||||||||||||||
KB IP Investment Fund II | — | 3,000 | — | — | (58 | ) | — | 2,942 | ||||||||||||||||||||
KB Digital Innovation Investment Fund Limited Partnership | — | 7,700 | — | — | (83 | ) | — | 7,617 | ||||||||||||||||||||
KB-Brain KOSDAQScale-up Fund | — | 4,000 | — | — | (34 | ) | — | 3,966 | ||||||||||||||||||||
KB Star office private real estate Investment Trust No.1 | 20,122 | — | — | (1,162 | ) | 1,292 | — | 20,252 | ||||||||||||||||||||
Terra Corporation | 20 | — | — | — | (20 | ) | — | — | ||||||||||||||||||||
MJT&I Corp. | 127 | — | — | — | (5 | ) | — | 122 | ||||||||||||||||||||
Shinhwa Underwear Co., Ltd. | 138 | — | — | — | 44 | — | 182 | |||||||||||||||||||||
Kendae Co.,Ltd. | 127 | — | — | — | (29 | ) | — | 98 | ||||||||||||||||||||
Dongjo Co., Ltd. | — | — | — | — | 115 | — | 115 | |||||||||||||||||||||
Dae-A Leisure Co., Ltd. | — | — | — | — | 3,698 | (3,120 | ) | 578 | ||||||||||||||||||||
PT Bank Bukopin TBK | — | 116,422 | — | — | (1,946 | ) | (544 | ) | 113,932 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
| 347,177 | 159,320 | (15,456 | ) | (28,704 | ) | 48,992 | (4,665 | ) | 506,664 | |||||||||||||||||||
|
|
|
|
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|
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|
| |||||||||||||||
| 1 | Restated based on Korean IFRS 1109. |
115
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
| 2017 | ||||||||||||||||||||||||||||
| (In millions of Korean won) | Beginning | Acquisition and others | Disposal and others | Dividends | Gains (losses) from using equity method | Other comprehensive income | Ending | |||||||||||||||||||||
Balhae Infrastructure Fund | 133,200 | 807 | (29,202 | ) | (12,842 | ) | 13,227 | — | 105,190 | |||||||||||||||||||
Korea Credit Bureau Co., Ltd. | 4,853 | — | — | (149 | ) | 352 | — | 5,056 | ||||||||||||||||||||
KB12-1 Venture Investment Partnership | 38,797 | — | (4,400 | ) | — | (619 | ) | 3,461 | 37,239 | |||||||||||||||||||
KoFC KBIC Frontier Champ2010-5(PEF) | 14,696 | — | (10,500 | ) | — | (102 | ) | 43 | 4,137 | |||||||||||||||||||
KB GwS Private Securities Investment Trust | 102,949 | — | — | (5,753 | ) | 7,114 | — | 104,310 | ||||||||||||||||||||
Incheon Bridge Co., Ltd. | 728 | — | (728 | ) | — | — | — | — | ||||||||||||||||||||
KoFC POSCO HANWHA KB Shared Growth No.2. Private Equity Fund | 19,831 | — | (7,784 | ) | — | 1,698 | 25 | 13,770 | ||||||||||||||||||||
Future Planning KBStart-up Creation Fund | 15,202 | 4,000 | — | — | (1,110 | ) | 1 | 18,093 | ||||||||||||||||||||
KB-KDBCPre-IPO New Technology Business Investment Fund | — | 2,500 | — | — | (14 | ) | — | 2,486 | ||||||||||||||||||||
Terra Corporation | 28 | — | — | — | (8 | ) | — | 20 | ||||||||||||||||||||
MJT&I Corp. | 232 | — | — | — | (105 | ) | — | 127 | ||||||||||||||||||||
Shinhwa Underwear Co., Ltd. | 103 | — | — | — | 35 | — | 138 | |||||||||||||||||||||
Kendae Co.,Ltd. | — | — | — | — | 127 | — | 127 | |||||||||||||||||||||
KB High-tech Company Investment Fund | 15,140 | 10,000 | — | — | 988 | 719 | 26,847 | |||||||||||||||||||||
Aju Good Technology Venture Fund | 1,997 | 6,233 | — | — | — | — | 8,230 | |||||||||||||||||||||
KB Star office private real estate Investment Trust No.1 | 20,220 | — | — | (1,295 | ) | 1,197 | — | 20,122 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
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|
|
| |||||||||||||||
| 367,976 | 23,540 | (52,614 | ) | (20,039 | ) | 22,780 | 4,249 | 345,892 | ||||||||||||||||||||
|
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| |||||||||||||||
116
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
The tables below provide unrecognized share of losses of associates, both for the reporting period and cumulatively, because the Group has stopped recognizing its share of losses of associates when applying the equity method.
| 2018 | 2017 | |||||||||||||||
| (In millions of Korean won) | Unrecognized loss (gain) | Accumulated unrecognized loss | Unrecognized loss (gain) | Accumulated unrecognized loss | ||||||||||||
Incheon Bridge Co., Ltd. | 487 | 16,689 | 16,202 | 16,202 | ||||||||||||
Shinla Construction Co., Ltd. | — | 183 | 7 | 183 | ||||||||||||
Doosung Metal Co., Ltd | (4 | ) | 19 | (31 | ) | 23 | ||||||||||
Jungdong Steel Co., Ltd | — | 487 | 13 | 487 | ||||||||||||
DPAPS Co., Ltd. | 141 | 325 | (4 | ) | 184 | |||||||||||
Jinseung Tech Co., Ltd. | 3 | 3 | — | — | ||||||||||||
Korea NM Tech Co., Ltd. | 28 | 28 | — | — | ||||||||||||
Jungdo Co., Ltd. | 160 | 160 | — | — | ||||||||||||
Jaeyang Industry Co., Ltd. | 30 | 30 | — | — | ||||||||||||
Terra Corporation | 14 | 14 | — | — | ||||||||||||
EJADE Co., Ltd.1 | — | — | (1,112 | ) | — | |||||||||||
JSC Bank CenterCredit1 | — | — | (108,761 | ) | — | |||||||||||
| 1 | Disposal of an investment in an associate was completed during the year ended December 31, 2017. |
14. Property and Equipment, and Investment Properties
Details of property and equipment as at December 31, 2018 and 2017, are as follows:
| 2018 | ||||||||||||||||
| (In millions of Korean won) | Acquisition cost | Accumulated depreciation | Accumulated impairment losses | Carrying amount | ||||||||||||
Land | 1,979,811 | — | (1,018 | ) | 1,978,793 | |||||||||||
Buildings | 1,256,234 | (442,318 | ) | (5,859 | ) | 808,057 | ||||||||||
Leasehold improvements | 794,814 | (700,046 | ) | — | 94,768 | |||||||||||
Equipment and vehicles | 1,147,644 | (993,785 | ) | — | 153,859 | |||||||||||
Constructionin-progress | 81,268 | — | — | 81,268 | ||||||||||||
Finance lease assets | 32,709 | (21,788 | ) | — | 10,921 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
| 5,292,480 | (2,157,937 | ) | (6,877 | ) | 3,127,666 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
117
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
| 2017 | ||||||||||||||||
| (In millions of Korean won) | Acquisition cost | Accumulated depreciation | Accumulated impairment losses | Carrying amount | ||||||||||||
Land | 1,973,230 | — | (1,018 | ) | 1,972,212 | |||||||||||
Buildings | 1,223,088 | (416,165 | ) | (5,859 | ) | 801,064 | ||||||||||
Leasehold improvements | 715,631 | (639,555 | ) | — | 76,076 | |||||||||||
Equipment and vehicles | 1,161,199 | (1,012,373 | ) | — | 148,826 | |||||||||||
Constructionin-progress | 12,187 | — | — | 12,187 | ||||||||||||
Finance lease assets | 23,069 | (17,840 | ) | — | 5,229 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
| 5,108,404 | (2,085,933 | ) | (6,877 | ) | 3,015,594 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Changes in property and equipment for the years ended December 31, 2018 and 2017, are as follows:
| 2018 | ||||||||||||||||||||||||||||
| (In millions of Korean won) | Beginning | Acquisition | Transfers1 | Disposal | Depreciation | Others | Ending | |||||||||||||||||||||
Land | 1,972,212 | 124 | 7,129 | (691 | ) | — | 19 | 1,978,793 | ||||||||||||||||||||
Buildings | 801,064 | — | 40,956 | (4,079 | ) | (29,928 | ) | 44 | 808,057 | |||||||||||||||||||
Leasehold improvements | 76,076 | 1,086 | 69,646 | (242 | ) | (62,035 | ) | 10,237 | 94,768 | |||||||||||||||||||
Equipment and vehicles | 148,826 | 102,974 | 246 | (795 | ) | (97,423 | ) | 31 | 153,859 | |||||||||||||||||||
Constructionin-progress | 12,187 | 229,765 | (160,684 | ) | — | — | — | 81,268 | ||||||||||||||||||||
Finance lease assets | 5,229 | 9,640 | — | — | (3,948 | ) | — | 10,921 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
| 3,015,594 | 343,589 | (42,707 | ) | (5,807 | ) | (193,334 | ) | 10,331 | 3,127,666 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
| 2017 | ||||||||||||||||||||||||||||
| (In millions of Korean won) | Beginning | Acquisition | Transfers1 | Disposal | Depreciation | Others | Ending | |||||||||||||||||||||
Land | 2,059,956 | 16,647 | (104,345 | ) | (19 | ) | — | (27 | ) | 1,972,212 | ||||||||||||||||||
Buildings | 825,958 | — | 5,838 | (1,023 | ) | (29,647 | ) | (62 | ) | 801,064 | ||||||||||||||||||
Leasehold improvements | 63,656 | 586 | 57,548 | (757 | ) | (57,896 | ) | 12,939 | 76,076 | |||||||||||||||||||
Equipment and vehicles | 155,847 | 90,502 | — | (170 | ) | (97,134 | ) | (219 | ) | 148,826 | ||||||||||||||||||
Constructionin-progress | 4,013 | 110,345 | (102,160 | ) | — | — | (11 | ) | 12,187 | |||||||||||||||||||
Finance lease assets | 7,961 | 678 | — | — | (3,410 | ) | — | 5,229 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
| 3,117,391 | 218,758 | (143,119 | ) | (1,969 | ) | (188,087 | ) | 12,620 | 3,015,594 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
| 1 | Including transfers from investment properties and assets held for sale. |
118
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
Changes in accumulated impairment losses of property and equipment for the years ended December 31, 2018 and 2017, are as follows:
(In millions of Korean won)
| 2018 | ||||||||||||||||
Beginning | Impairment | Reversal | Others | Ending | ||||||||||||
(6,877) | — | — | — | (6,877 | ) | |||||||||||
(In millions of Korean won)
| 2018 | ||||||||||||||||
Beginning | Impairment | Reversal | Others | Ending | ||||||||||||
(6,877) | — | — | — | (6,877 | ) | |||||||||||
Details of investment properties as at December 31, 2018 and 2017, are as follows:
| 2018 | ||||||||||||
| (In millions of Korean won) | Acquisition cost | Accumulated depreciation | Carrying amount | |||||||||
Land | 166,737 | — | 166,737 | |||||||||
Buildings | 107,554 | (16,367 | ) | 91,187 | ||||||||
|
|
|
|
|
| |||||||
| 274,291 | (16,367 | ) | 257,924 | |||||||||
|
|
|
|
|
| |||||||
| 2017 | ||||||||||||
| (In millions of Korean won) | Acquisition cost | Accumulated depreciation | Carrying amount | |||||||||
Land | 205,723 | — | 205,723 | |||||||||
Buildings | 152,841 | (21,064 | ) | 131,777 | ||||||||
|
|
|
|
|
| |||||||
| 358,564 | (21,064 | ) | 337,500 | |||||||||
|
|
|
|
|
| |||||||
The valuation technique and input variables that are used to measure the fair value of investment property as at December 31, 2018, are as follows:
| (In millions of Korean won) | 2018 | |||||||
| Fair Value | Valuation technique | Inputs | ||||||
Land and Buildings | 57,025 | Cost approach value | - Price per square meter - Replacement cost | |||||
| 229,450 | Income approach | - Discount rate - Capitalization rate - Vacancy rate | ||||||
As at December 31, 2018 and 2017, fair values of the investment properties amount toW 286,475 million andW 366,811 million, respectively. The investment properties were measured by qualified independent appraisers with experience in valuing similar properties in the same area. In addition, per the fair value hierarchy on Note 6.1, the fair value hierarchy of all investment properties has been categorized and classified as Level 3.
119
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
Rental income from the above investment properties for the years ended December 31, 2018 and 2017, amounts toW 18,162 million andW 17,714 million, respectively.
Changes in investment properties for the years ended December 31, 2018 and 2017, are as follows:
| 2018 | |||||||||||||||||||||||
| (In millions of Korean won) | Beginning | Acquisitions | Transfers | Disposal | Depreciation | Ending | ||||||||||||||||||
Land | 205,723 | — | 17,069 | (56,055 | ) | — | 166,737 | |||||||||||||||||
Buildings | 131,777 | 179 | 13,349 | (50,872 | ) | (3,246 | ) | 91,187 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
| 337,500 | 179 | 30,418 | (106,927 | ) | (3,246 | ) | 257,924 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
| 2017 | ||||||||||||||||||||
| (In millions of Korean won) | Beginning | Acquisitions | Transfers | Depreciation | Ending | |||||||||||||||
Land | 230,254 | — | (24,531 | ) | — | 205,723 | ||||||||||||||
Buildings | 142,626 | 262 | (6,326 | ) | (4,785 | ) | 131,777 | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
| 372,880 | 262 | (30,857 | ) | (4,785 | ) | 337,500 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
15. Intangible Assets
Details of intangible assets as at December 31, 2018 and 2017, are as follows:
| 2018 | ||||||||||||||||
| (In millions of Korean won) | Acquisition cost | Accumulated amortization | Accumulated impairment losses | Carrying amount | ||||||||||||
Goodwill | 66,490 | — | (1,202 | ) | 65,288 | |||||||||||
Other intangible assets | 935,208 | (771,182 | ) | (5,106 | ) | 158,920 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
| 1,001,698 | (771,182 | ) | (6,308 | ) | 224,208 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
| 2017 | ||||||||||||||||
| (In millions of Korean won) | Acquisition cost | Accumulated amortization | Accumulated impairment losses | Carrying amount | ||||||||||||
Goodwill | 66,490 | — | (1,202 | ) | 65,288 | |||||||||||
Other intangible assets | 878,285 | (722,368 | ) | (3,597 | ) | 152,320 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
| 944,775 | (722,368 | ) | (4,799 | ) | 217,608 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Details of goodwill as at December 31, 2018 and 2017, are as follows:
| 2018 | 2017 | |||||||||||||||
| (In millions of Korean won) | Acquisition cost | Carrying amount | Acquisition cost | Carrying amount | ||||||||||||
Housing & Commercial Bank | 65,288 | 65,288 | 65,288 | 65,288 | ||||||||||||
KB Cambodia Bank | 1,202 | — | 1,202 | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| 66,490 | 65,288 | 66,490 | 65,288 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
120
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
Changes in goodwill for the years ended December 31, 2018 and 2017, are as follows:
| 2018 | ||||||||||||||||||||
| (In millions of Korean won) | Beginning | Acquisition | Disposal | Impairment loss | Ending | |||||||||||||||
Housing & Commercial Bank | 65,288 | — | — | — | 65,288 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
| 65,288 | — | — | — | 65,288 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
| 2017 | ||||||||||||||||||||
| (In millions of Korean won) | Beginning | Acquisition | Disposal | Impairment loss | Ending | |||||||||||||||
Housing & Commercial Bank | 65,288 | — | — | — | 65,288 | |||||||||||||||
KB Cambodia Bank | 1,202 | — | — | (1,202 | ) | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
| 66,490 | — | — | — | 65,288 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Changes in accumulated impairment losses for the years ended December 31, 2018 and 2017, are as follows:
| 2018 | ||||||||||||||||||||
| (In millions of Korean won) | Beginning | Impairment | Reversal | Others | Ending | |||||||||||||||
Accumulated impairment losses on other intangible assets | (1,202 | ) | — | — | — | (1,202 | ) | |||||||||||||
| (In millions of Korean won) | 2017 | |||||||||||||||||||
| Beginning | Impairment | Reversal | Others | Ending | ||||||||||||||||
Accumulated impairment losses on other intangible assets | — | (1,202 | ) | — | — | (1,202 | ) | |||||||||||||
Details of allocation of goodwill to cash-generating units and related information for impairment testing as at December 31, 2018, are as follows:
| 2018 | ||||||||||||
| (In millions of Korean won) | Retail Banking | Corporate Banking | Total | |||||||||
Carrying amounts | 49,315 | 15,973 | 65,288 | |||||||||
Recoverable amount exceeded carrying amount | 4,281,676 | 2,875,939 | 7,157,615 | |||||||||
Discount rate (%) | 15.51 | 15.74 | ||||||||||
Permanent growth rate (%) | 1.00 | 1.00 | ||||||||||
121
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
Goodwill is allocated to cash-generating units that are expected to benefit from the synergies of the combination for impairment testing, and cash-generating units consist of an operating segment or units which are not larger than an operating segment. The Group recognized the amount ofW 65,288 million related to goodwill acquired in the merger of Housing & Commercial Bank. Of this amount, the amounts ofW 49,315 million andW 15,973 million were allocated to the Retail Banking and Corporate Banking, respectively. Cash-generating units, to which goodwill has been allocated, is tested for impairment annually and whenever there is an indication that the unit may be impaired, by comparing the carrying amount of the unit, including the goodwill, with the recoverable amount of the unit.
The recoverable amount of a cash-generating unit is measured at the higher of its fair value less costs to sell and its value in use. The fair value less costs to sell is the amount obtainable from the sale in an arm’s length transaction between knowledgeable, willing parties, less the costs of disposal. If it is difficult to measure the amount obtainable from the sale of the cash-generating unit, the Group measures the fair value less costs to sell by reflecting the characteristics of the measured cash-generating unit. If it is not possible to obtain the reliable information to measure the fair value less costs to sell, the Group uses the asset’s value in use as its recoverable amount. Value in use is the present value of the future cash flows expected to be derived from an asset or cash-generating unit. The projections of the future cash flows are based on the most recent financial budget approved by management and generally cover a period of five years. The future cash flows after projection period are estimated on the assumption that the future cash flows will increase by 1.0% annually for Retail Banking, Corporate Banking. The key assumptions used for the estimation of the future cash flows are the market size and the Group’s market share. The discount rate is apre-tax rate that reflects assumptions regarding risk-free interest rate, market risk premium and the risks specific to the asset for which the future cash flow estimates have not been adjusted.
Details of intangible assets, excluding goodwill, as at December 31, 2018 and 2017, are as follows:
| 2018 | ||||||||||||||||
| (In millions of Korean won) | Acquisition cost | Accumulated amortization | Accumulated impairment losses | Carrying amount | ||||||||||||
Industrial property rights | 1,858 | (1,608 | ) | — | 250 | |||||||||||
Software | 769,244 | (673,475 | ) | — | 95,769 | |||||||||||
Other intangible assets | 129,975 | (77,129 | ) | (5,106 | ) | 47,740 | ||||||||||
Finance leases assets | 34,131 | (18,970 | ) | — | 15,161 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
| 935,208 | (771,182 | ) | (5,106 | ) | 158,920 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
| 2017 | ||||||||||||||||
| (In millions of Korean won) | Acquisition cost | Accumulated amortization | Accumulated impairment losses | Carrying amount | ||||||||||||
Industrial property rights | 1,784 | (1,503 | ) | — | 281 | |||||||||||
Software | 713,034 | (624,399 | ) | — | 88,635 | |||||||||||
Other intangible assets | 137,361 | (82,899 | ) | (3,597 | ) | 50,865 | ||||||||||
Finance leases assets | 26,106 | (13,567 | ) | — | 12,539 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
| 878,285 | (722,368 | ) | (3,597 | ) | 152,320 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
122
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
Changes in intangible assets, excluding goodwill, for the years ended December 31, 2018 and 2017, are as follows:
| 2018 | ||||||||||||||||||||||||
| (In millions of Korean won) | Beginning | Acquisition | Disposal | Amortization | Others | Ending | ||||||||||||||||||
Industrial property rights | 281 | 58 | — | (89 | ) | — | 250 | |||||||||||||||||
Software | 88,635 | 45,839 | — | (38,707 | ) | 2 | 95,769 | |||||||||||||||||
Other intangible assets | 50,865 | 7,160 | (2,825 | ) | (5,710 | ) | (1,750 | ) | 47,740 | |||||||||||||||
Finance leases assets | 12,539 | 8,024 | — | (5,402 | ) | — | 15,161 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
| 152,320 | 61,081 | (2,825 | ) | (49,908 | ) | (1,748 | ) | 158,920 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
| 2017 | ||||||||||||||||||||||||
| (In millions of Korean won) | Beginning | Acquisition | Disposal | Amortization | Others | Ending | ||||||||||||||||||
Industrial property rights | 136 | 244 | (8 | ) | (103 | ) | 12 | 281 | ||||||||||||||||
Software | 83,761 | 37,725 | — | (32,779 | ) | (72 | ) | 88,635 | ||||||||||||||||
Other intangible assets | 43,998 | 13,429 | (306 | ) | (6,099 | ) | (157 | ) | 50,865 | |||||||||||||||
Finance leases assets | 16,329 | 793 | — | (4,583 | ) | — | 12,539 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
| 144,224 | 52,191 | (314 | ) | (43,564 | ) | (217 | ) | 152,320 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Changes in accumulated impairment losses on other intangible assets for the years ended December 31, 2018 and 2017, are as follows:
| 2018 | ||||||||||||||||||||
| (In millions of Korean won) | Beginning | Impairment | Reversal | Others | Ending | |||||||||||||||
Accumulated impairment losses on other intangible assets | (3,597 | ) | (1,806 | ) | 31 | 266 | (5,106 | ) | ||||||||||||
| 2017 | ||||||||||||||||||||
| (In millions of Korean won) | Beginning | Impairment | Reversal | Others | Ending | |||||||||||||||
Accumulated impairment losses on other intangible assets | (4,179 | ) | — | 35 | 547 | (3,597 | ) | |||||||||||||
From 2018, the Group has to pay the fine, if the actual emission exceeds the targeted emission amount; therefore, the emission rights (intangible asset) do not occur even if it is below the targeted emission amount.
123
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
Changes in emission rights for the year ended December 31, 2017, are as follows:
| Applicable under 2016 | Applicable under 2017 | Total | ||||||||||||||||||||||
| (KAU, in millions of Korean won) | Quantity | Carrying amount | Quantity | Carrying amount | Quantity | Carrying amount | ||||||||||||||||||
Beginning | 99,283 | — | 104,920 | — | 204,203 | — | ||||||||||||||||||
Additional allocation | 578 | — | 17,046 | — | 17,624 | — | ||||||||||||||||||
Borrowings of emission permits | 18,306 | — | (18,306 | ) | — | — | — | |||||||||||||||||
Surrender of emission permits | (117,484 | ) | — | — | — | (117,484 | ) | — | ||||||||||||||||
Revocation of allocation | (683 | ) | — | (398 | ) | — | (1,081 | ) | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Ending | — | — | 103,262 | — | 103,262 | — | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
16. Deferred Income Tax Assets and Liabilities
Details of deferred income tax assets and liabilities as at December 31, 2018 and 2017, are as follows:
| 2018 | ||||||||||||
| (In millions of Korean won) | Assets | Liabilities | Net amount | |||||||||
Other provisions | 62,179 | — | 62,179 | |||||||||
Impairment losses on property and equipment | 4,132 | — | 4,132 | |||||||||
Share-based payments | 11,868 | — | 11,868 | |||||||||
Provisions for guarantees | 20,298 | — | 20,298 | |||||||||
Gains on valuation of derivatives | — | (13,188 | ) | (13,188 | ) | |||||||
Present value discount | — | (34 | ) | (34 | ) | |||||||
Losses on fair value hedged item | — | (25,873 | ) | (25,873 | ) | |||||||
Accrued interest | — | (41,687 | ) | (41,687 | ) | |||||||
Deferred loan origination fees and costs | — | (139,697 | ) | (139,697 | ) | |||||||
Gains on revaluation | — | (286,739 | ) | (286,739 | ) | |||||||
Investments in subsidiaries and associates | 29,410 | (67,358 | ) | (37,948 | ) | |||||||
Gains on valuation of security investment | — | (53,384 | ) | (53,384 | ) | |||||||
Defined benefit liabilities | 387,667 | — | 387,667 | |||||||||
Accrued expenses | 202,220 | — | 202,220 | |||||||||
Retirement insurance expense | — | (343,176 | ) | (343,176 | ) | |||||||
Adjustments to the prepaid contributions | — | (19,033 | ) | (19,033 | ) | |||||||
Others | 183,561 | (28,902 | ) | 154,659 | ||||||||
|
|
|
|
|
| |||||||
| 901,335 | (1,019,071 | ) | (117,736 | ) | ||||||||
Offsetting of deferred income tax assets and liabilities | (898,204 | ) | 898,204 | — | ||||||||
|
|
|
|
|
| |||||||
| 3,131 | (120,867 | ) | (117,736 | ) | ||||||||
|
|
|
|
|
| |||||||
124
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
| 2017 | ||||||||||||
| (In millions of Korean won) | Assets | Liabilities | Net amount | |||||||||
Other provisions | 71,870 | — | 71,870 | |||||||||
Impairment losses on property and equipment | 5,411 | — | 5,411 | |||||||||
Interest on equity index-linked deposits | 43 | — | 43 | |||||||||
Share-based payments | 17,014 | — | 17,014 | |||||||||
Provisions for guarantees | 24,341 | — | 24,341 | |||||||||
Gains on valuation of derivatives | — | (19,239 | ) | (19,239 | ) | |||||||
Present value discount | — | (58 | ) | (58 | ) | |||||||
Losses on fair value hedged item | — | (15,698 | ) | (15,698 | ) | |||||||
Accrued interest | — | (43,328 | ) | (43,328 | ) | |||||||
Deferred loan origination fees and costs | — | (131,911 | ) | (131,911 | ) | |||||||
Gains on revaluation | — | (306,344 | ) | (306,344 | ) | |||||||
Investments in subsidiaries and associates | 16,697 | (100,238 | ) | (83,541 | ) | |||||||
Gains on valuation of security investment | 21,483 | — | 21,483 | |||||||||
Defined benefit liabilities | 332,930 | — | 332,930 | |||||||||
Accrued expenses | 128,700 | — | 128,700 | |||||||||
Retirement insurance expense | — | (301,261 | ) | (301,261 | ) | |||||||
Adjustments to the prepaid contributions | — | (16,236 | ) | (16,236 | ) | |||||||
Others | 164,322 | (18,579 | ) | 145,743 | ||||||||
|
|
|
|
|
| |||||||
| 782,811 | (952,892 | ) | (170,081 | ) | ||||||||
Offsetting of deferred income tax assets and liabilities | (780,761 | ) | 780,761 | — | ||||||||
|
|
|
|
|
| |||||||
| 2,050 | (172,131 | ) | (170,081 | ) | ||||||||
|
|
|
|
|
| |||||||
Unrecognized deferred income tax liabilities
No deferred income tax liabilities have been recognized for the taxable temporary difference of
W 42,404 million associated with investments in subsidiaries and associates as at December 31, 2018, due to the following reasons:
- The Group is able to control the timing of the reversal of the temporary difference.
- It is probable that the temporary difference will not be reversed in the foreseeable future.
As at December 31, 2018, no deferred income tax liabilities have been recognized for the taxable temporary difference ofW 65,288 million arising from the initial recognition of goodwill from the merger of Housing and Commercial Bank as in 2001.
Unrecognized deferred income tax assets
No deferred income tax assets have been recognized for the deductible temporary difference of
W 8,938 million associated with investments in subsidiaries and associates as at December 31, 2018, because it is not probable that the temporary differences will be reversed in the foreseeable future.
No deferred income tax assets have been recognized for deductible temporary differences of
W 363 million andW 15,029 million associated with accrued expenses and others, respectively, as at December 31, 2018, due to the uncertainty that these will be realized in the future.
125
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
Changes in cumulative temporary differences for the years ended December 31, 2018 and 2017, are as follows:
| 2018 | ||||||||||||||||
| (In millions of Korean won) | Beginning1 | Decrease | Increase | Ending | ||||||||||||
Deductible temporary differences |
| |||||||||||||||
Other provisions | 256,282 | 256,282 | 226,103 | 226,103 | ||||||||||||
Impairment losses on property and equipment | 19,678 | 19,678 | 15,027 | 15,027 | ||||||||||||
Interest on equity index-linked deposits | 155 | 155 | — | — | ||||||||||||
Share-based payments | 61,870 | 61,870 | 43,156 | 43,156 | ||||||||||||
Provisions for guarantees | 98,294 | 98,294 | 73,809 | 73,809 | ||||||||||||
Loss on SPE repurchase | 80,204 | 80,204 | — | — | ||||||||||||
Investment in subsidiaries and associates | 81,336 | 13,835 | 48,382 | 115,883 | ||||||||||||
Gains on valuation of security investment | 75,642 | 75,642 | — | — | ||||||||||||
Defined benefit liabilities | 1,210,654 | 114,562 | 313,608 | 1,409,700 | ||||||||||||
Accrued expenses | 467,999 | 467,999 | 735,712 | 735,712 | ||||||||||||
Others | 881,600 | 353,386 | 154,307 | 682,521 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| 3,233,714 | 1,541,907 | 1,610,104 | 3,301,911 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
Unrecognized deferred income tax assets | ||||||||||||||||
Accrued expenses | — | 363 | ||||||||||||||
Loss on SPE repurchase | 80,204 | — | ||||||||||||||
Investment in subsidiaries and associates | 18,084 | 8,938 | ||||||||||||||
Others | 12,500 | 15,030 | ||||||||||||||
|
|
|
| |||||||||||||
| 3,122,926 | 3,277,580 | |||||||||||||||
Tax rate (%)2 | 27.50 | 27.50 | ||||||||||||||
|
|
|
| |||||||||||||
Total deferred income tax assets from deductible temporary differences | 858,805 | 901,335 | ||||||||||||||
|
|
|
| |||||||||||||
126
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
| 2018 | ||||||||||||||||
| (In millions of Korean won) | Beginning1 | Decrease | Increase | Ending | ||||||||||||
Taxable temporary differences | ||||||||||||||||
Losses from fair value hedge | (57,083 | ) | (57,083 | ) | (94,085 | ) | (94,085 | ) | ||||||||
Accrued interest | (157,556 | ) | (116,532 | ) | (110,564 | ) | (151,588 | ) | ||||||||
Deferred loan origination fees and costs | (479,671 | ) | (479,671 | ) | (507,988 | ) | (507,988 | ) | ||||||||
Gains on valuation of derivatives | (52,764 | ) | (52,764 | ) | (47,956 | ) | (47,956 | ) | ||||||||
Present value discount | (209 | ) | (209 | ) | (124 | ) | (124 | ) | ||||||||
Goodwill from merger | (65,288 | ) | — | — | (65,288 | ) | ||||||||||
Gains on revaluation | (1,113,979 | ) | (71,292 | ) | — | (1,042,687 | ) | |||||||||
Investment in subsidiaries and associates | (370,348 | ) | (130,476 | ) | (47,472 | ) | (287,344 | ) | ||||||||
Gains on valuation of security investment | — | — | (194,124 | ) | (194,124 | ) | ||||||||||
Retirement insurance expense | (1,095,495 | ) | (82,468 | ) | (234,884 | ) | (1,247,911 | ) | ||||||||
Adjustments to the prepaid contributions | (59,040 | ) | (59,040 | ) | (69,212 | ) | (69,212 | ) | ||||||||
Others | (72,737 | ) | (12,708 | ) | (45,069 | ) | (105,098 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
| (3,524,170 | ) | (1,062,243 | ) | (1,351,478 | ) | (3,813,405 | ) | |||||||||
|
|
|
|
|
|
|
| |||||||||
Unrecognized deferred income tax liabilities | ||||||||||||||||
Goodwill from merger | (65,288 | ) | (65,288 | ) | ||||||||||||
Investments in subsidiaries and associates | (4,901 | ) | (42,404 | ) | ||||||||||||
|
|
|
| |||||||||||||
| (3,453,981 | ) | (3,705,713 | ) | |||||||||||||
Tax rate (%)2 | 27.50 | 27.50 | ||||||||||||||
|
|
|
| |||||||||||||
Total deferred income tax liabilities from taxable temporary differences | (949,845 | ) | (1,019,071 | ) | ||||||||||||
|
|
|
| |||||||||||||
| 1 | Restated based on Korean IFRS 1109. |
| 2 | As the corporate tax rate was changed due to the revision of the tax law at the end of 2017, deferred tax assets (liabilities) expected to be realized after 2018 are calculated using 27.5%. |
127
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
| 2017 | ||||||||||||||||
| (In millions of Korean won) | Beginning | Decrease | Increase | Ending | ||||||||||||
Deductible temporary differences |
| |||||||||||||||
Other provisions | 291,350 | 291,350 | 261,346 | 261,346 | ||||||||||||
Impairment losses on property and equipment | 20,812 | 20,812 | 19,678 | 19,678 | ||||||||||||
Interest on equity index-linked deposits | 168 | 168 | 155 | 155 | ||||||||||||
Share-based payments | 43,008 | 43,008 | 61,870 | 61,870 | ||||||||||||
Provisions for guarantees | 126,319 | 126,319 | 88,512 | 88,512 | ||||||||||||
Loss on SPE repurchase | 80,204 | — | — | 80,204 | ||||||||||||
Investment in subsidiaries and associates | 814,685 | 801,876 | 64,499 | 77,308 | ||||||||||||
Gains on valuation of security investment | 282,872 | 282,872 | 78,120 | 78,120 | ||||||||||||
Defined benefit liabilities | 1,239,914 | 205,084 | 175,824 | 1,210,654 | ||||||||||||
Accrued expenses | 959,532 | 959,532 | 467,999 | 467,999 | ||||||||||||
Others | 759,606 | 219,134 | 70,541 | 611,013 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| 4,618,470 | 2,950,155 | 1,288,544 | 2,956,859 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
Unrecognized deferred income tax assets | ||||||||||||||||
Loss on SPE repurchase | 80,204 | 80,204 | ||||||||||||||
Investment in subsidiaries and associates | 788,196 | 18,084 | ||||||||||||||
Others | 21,797 | 12,500 | ||||||||||||||
| 3,728,273 | 2,846,071 | |||||||||||||||
Tax rate (%) | 24.20 | 27.50 | ||||||||||||||
|
|
|
| |||||||||||||
Total deferred income tax assets from deductible temporary differences | 903,002 | 782,811 | ||||||||||||||
|
|
|
| |||||||||||||
128
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
| 2017 | ||||||||||||||||
| (In millions of Korean won) | Beginning | Decrease | Increase | Ending | ||||||||||||
Taxable temporary differences | ||||||||||||||||
Losses from fair value hedge | (59,235 | ) | (59,235 | ) | (57,083 | ) | (57,083 | ) | ||||||||
Accrued interest | (181,165 | ) | (136,158 | ) | (112,549 | ) | (157,556 | ) | ||||||||
Deferred loan origination fees and costs | (497,149 | ) | (497,149 | ) | (479,677 | ) | (479,677 | ) | ||||||||
Gains on valuation of derivatives | (42,294 | ) | (42,294 | ) | (69,960 | ) | (69,960 | ) | ||||||||
Present value discount | (92 | ) | (92 | ) | (209 | ) | (209 | ) | ||||||||
Goodwill from merger | (65,288 | ) | — | — | (65,288 | ) | ||||||||||
Gains on revaluation | (1,119,379 | ) | (5,399 | ) | — | (1,113,980 | ) | |||||||||
Investment in subsidiaries and associates | (387,268 | ) | (71,768 | ) | (52,887 | ) | (368,387 | ) | ||||||||
Retirement insurance expense | (1,119,041 | ) | (170,469 | ) | (146,923 | ) | (1,095,495 | ) | ||||||||
Adjustments to the prepaid contributions | (62,569 | ) | (61,034 | ) | (57,505 | ) | (59,040 | ) | ||||||||
Others | (84,577 | ) | (28,893 | ) | (11,898 | ) | (67,582 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
| (3,618,057 | ) | (1,072,491 | ) | (988,691 | ) | (3,534,257 | ) | |||||||||
|
|
|
|
|
|
|
| |||||||||
Unrecognized deferred income tax liabilities | ||||||||||||||||
Goodwill from merger | (65,288 | ) | (65,288 | ) | ||||||||||||
Investments in subsidiaries and associates | (17,205 | ) | (4,901 | ) | ||||||||||||
|
|
|
| |||||||||||||
| (3,535,564 | ) | (3,464,068 | ) | |||||||||||||
Tax rate (%) | 24.20 | 27.50 | ||||||||||||||
|
|
|
| |||||||||||||
Total deferred income tax liabilities from taxable temporary differences | (855,330 | ) | (952,892 | ) | ||||||||||||
|
|
|
| |||||||||||||
129
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
17. Other Assets
Details of other assets as at December 31, 2018 and 2017, are as follows:
| (In millions of Korean won) | 2018 | 2017 | ||||||
Other financial assets | ||||||||
Other receivables | 1,921,593 | 3,570,556 | ||||||
Accrued income | 793,340 | 777,629 | ||||||
Guarantee deposits | 1,019,169 | 1,041,519 | ||||||
Domestic exchange settlement debits | 476,349 | 944,697 | ||||||
Others | 11,843 | 59,294 | ||||||
Allowances for loan losses | (21,775 | ) | (50,823 | ) | ||||
Present value discount | (1,322 | ) | (1,409 | ) | ||||
|
|
|
| |||||
| 4,199,197 | 6,341,463 | |||||||
|
|
|
| |||||
Othernon-financial assets | ||||||||
Other receivables | 61 | 49 | ||||||
Prepaid expenses | 130,432 | 108,685 | ||||||
Guarantee deposits | 3,061 | 3,131 | ||||||
Others | 74,649 | 68,829 | ||||||
Allowances on other assets | (16,992 | ) | (22,575 | ) | ||||
|
|
|
| |||||
| 191,211 | 158,119 | |||||||
|
|
|
| |||||
| 4,390,408 | 6,499,582 | |||||||
|
|
|
| |||||
Changes in allowances for loan losses on other assets for the years ended December 31, 2018 and 2017, are as follows:
| 2018 | ||||||||||||
| (In millions of Korean won) | Other financial assets | Other non- financial assets | Total | |||||||||
Beginning1 | 54,190 | 22,575 | 76,765 | |||||||||
Provision | 1,179 | (3,720 | ) | (2,541 | ) | |||||||
Written-off | (34,773 | ) | (1,863 | ) | (36,636 | ) | ||||||
Others | 1,179 | — | 1,179 | |||||||||
|
|
|
|
|
| |||||||
Ending | 21,775 | 16,992 | 38,767 | |||||||||
|
|
|
|
|
| |||||||
| 1 | Restated based on Korean IFRS 1109. |
| 2017 | ||||||||||||
| (In millions of Korean won) | Other financial assets | Other non- financial assets | Total | |||||||||
Beginning | 60,062 | 23,305 | 83,367 | |||||||||
Provision | 2,042 | 1,239 | 3,281 | |||||||||
Written-off | (12,413 | ) | (1,969 | ) | (14,382 | ) | ||||||
Others | 1,132 | — | 1,132 | |||||||||
|
|
|
|
|
| |||||||
Ending | 50,823 | 22,575 | 73,398 | |||||||||
|
|
|
|
|
| |||||||
130
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
18. Assets Held for Sale
Details of assets held for sale as at December 31, 2018 and 2017, are as follows:
| 2018 | ||||||||||||||||
| (In millions of Korean won) | Acquisition cost1 | Accumulated impairment losses | Carrying amount | Fair value less costs to sell | ||||||||||||
Land | 16,048 | (3,442 | ) | 12,606 | 16,552 | |||||||||||
Buildings | 9,054 | (4,708 | ) | 4,346 | 4,403 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
| 25,102 | (8,150 | ) | 16,952 | 20,955 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| 2017 | ||||||||||||||||
| (In millions of Korean won) | Acquisition cost1 | Accumulated impairment losses | Carrying amount | Fair value less costs to sell | ||||||||||||
Land | 133,445 | (1,492 | ) | 131,953 | 251,520 | |||||||||||
Buildings | 34,862 | (11,309 | ) | 23,553 | 24,548 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
| 168,307 | (12,801 | ) | 155,506 | 276,068 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| 1 | Acquisition cost of buildings held for sale is net of accumulated depreciation before classified as assets held for sale. |
The valuation technique and input variables that are used to measure the fair value of assets held for sale as at December 31, 2018, are as follows:
| 2018 | ||||||||||||||||||
| (In millions of Korean won) | Fair value | Valuation technique1 | Unobservable inputs2 | Estimated range of unobservable inputs(%) | Effect of unobservable inputs on fair value | |||||||||||||
| | Adjustment index | | 0.30 ~ 1.08 | Fair value increases as the adjustment index rises Fair value | ||||||||||||||
Land and buildings | 20,955 | | Market comparison approach model and others | | Adjustment ratio | -20.00 ~ 0.00 | decreases as the absolute value of adjustment ratio rises | |||||||||||
| 1 | The appraisal value is adjusted by the adjustment ratio in the event the public sale is unsuccessful. |
| 2 | Adjustment index is calculated using the real estate index, the producer price index, or land price volatility. |
The fair values of assets held for sale were measured by qualified independent appraisers with experience in valuing similar properties in the same area. In addition, per the fair value hierarchy on Note 6.1, the fair value hierarchy of all investment properties has been categorized and classified as Level 3.
131
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
Changes in accumulated impairment losses of assets held for sale for the years ended December 31, 2018 and 2017, are as follows:
| (In millions of Korean won) | ||||||||||||||||
| 2018 | ||||||||||||||||
| Beginning | Provision | Reversal | Others | Ending | ||||||||||||
(12,801) | (5,281 | ) | 286 | 9,646 | (8,150 | ) | ||||||||||
| (In millions of Korean won) | ||||||||||||||||
| 2018 | ||||||||||||||||
| Beginning | Provision | Reversal | Others | Ending | ||||||||||||
(13,935) | (16,994 | ) | 5,138 | 12,990 | (12,801 | ) | ||||||||||
As at December 31, 2018, assets held for sale consist of eight real estates of closed offices, which were committed to sell by the management, but not yet sold as at December 31, 2018. Negotiation with buyers is in process for the two assets and the remaining six assets are also being actively marketed.
19. Deposits
Details of deposits as at December 31, 2018 and 2017, are as follows:
| (In millions of Korean won) | 2018 | 2017 | ||||||
Demand deposits | ||||||||
Demand deposits in Korean won | 112,746,957 | 111,232,743 | ||||||
Demand deposits in foreign currencies | 6,242,996 | 6,677,710 | ||||||
|
|
|
| |||||
| 118,989,953 | 117,910,453 | |||||||
|
|
|
| |||||
Time deposits | ||||||||
Time deposits in Korean won | 144,387,450 | 126,778,455 | ||||||
Time deposits in foreign currencies | 5,664,671 | 4,622,516 | ||||||
Fair value adjustments on fair value hedged time deposits in foreign currencies | (89,265 | ) | (51,033 | ) | ||||
|
|
|
| |||||
| 5,575,406 | 4,571,483 | |||||||
|
|
|
| |||||
| 149,962,856 | 131,349,938 | |||||||
|
|
|
| |||||
Certificates of deposits | 3,531,719 | 3,218,540 | ||||||
|
|
|
| |||||
| 272,484,528 | 252,478,931 | |||||||
|
|
|
| |||||
132
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
20. Debts
Details of debts as at December 31, 2018 and 2017, are as follows:
| (In millions of Korean won) | 2018 | 2017 | ||||||
Borrowings | 16,689,574 | 14,114,645 | ||||||
Bonds sold under repurchase agreements and others | 444,066 | 710,370 | ||||||
Call money | 362,415 | 985,738 | ||||||
|
|
|
| |||||
| 17,496,055 | 15,810,753 | |||||||
|
|
|
| |||||
Details of borrowings as at December 31, 2018 and 2017, are as follows:
| (In millions of Korean won) | Lenders | Annual interest rate (%) | 2018 | 2017 | ||||||||||||
Borrowings in Korean won | Borrowings from the Bank of Korea | Bank of Korea | 0.50 ~ 0.75 | 1,672,714 | 1,888,880 | |||||||||||
| Borrowings from the government | SEMAS and others | 0.00 ~ 3.00 | 1,745,939 | 1,726,543 | ||||||||||||
| Borrowings from non- banking financial institutions | Korea Development Bank | 0.22 ~ 2.70 | 372,853 | 342,376 | ||||||||||||
| Other borrowings | Korea Development Bank and others | 0.00 ~ 3.90 | 3,965,534 | 3,300,884 | ||||||||||||
|
|
|
| |||||||||||||
| 7,757,040 | 7,258,683 | |||||||||||||||
|
|
|
| |||||||||||||
Borrowings in foreign currencies | Due to banks | Bank of America N.A. and others | — | 13,353 | 19,820 | |||||||||||
| Borrowings from banking institutions | Central Bank of Uzbekistan and others | 0.00 ~ 3.53 | 7,110,028 | 5,463,262 | ||||||||||||
| Borrowings from other financial institutions | Export Import Bank of Korea and others | 3.20 ~ 3.94 | 18,725 | 76,134 | ||||||||||||
| Other borrowings in foreign currencies | Standard Chartered Bank and others | — | 1,790,428 | 1,296,746 | ||||||||||||
|
|
|
| |||||||||||||
| 8,932,534 | 6,855,962 | |||||||||||||||
|
|
|
| |||||||||||||
| 16,689,574 | 14,114,645 | |||||||||||||||
|
|
|
| |||||||||||||
Details of bonds sold under repurchase agreements and others as at December 31, 2018 and 2017, are as follows:
| (In millions of Korean won) | Lenders | Annual interest rate (%) | 2018 | 2017 | ||||||||||||
Bonds sold under repurchase agreements | Individuals, groups, corporations | 1.23~1.73 | 436,471 | 700,466 | ||||||||||||
Bills sold | Counter sale | 0.10~1.20 | 7,595 | 9,904 | ||||||||||||
|
|
|
| |||||||||||||
| 444,066 | 710,370 | |||||||||||||||
|
|
|
| |||||||||||||
133
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
Details of call money as at December 31, 2018 and 2017, are as follows:
| (In millions of Korean won) | Lenders | Annual interest rate (%) | 2018 | 2017 | ||||||||||||
Call money in Korean | — | — | — | 577,100 | ||||||||||||
won Call money in foreign currencies | | Standard Chartered Bank and others | | 2.42~4.70 | 362,415 | 408,638 | ||||||||||
|
|
|
| |||||||||||||
| 362,415 | 985,738 | |||||||||||||||
|
|
|
| |||||||||||||
21. Debentures
Details of debentures as at December 31, 2018 and 2017, are as follows:
| (In millions of Korean won) | Annual interest rate (%) | 2018 | 2017 | |||||||||
Debentures in Korean won | ||||||||||||
Structured debentures | 5.65 ~ 5.86 | 34,320 | 135,800 | |||||||||
Subordinated fixed rate debentures | 2.96 ~ 4.35 | 3,422,729 | 2,888,411 | |||||||||
Fixed rate debentures | 1.48 ~ 2.44 | 15,024,545 | 13,236,365 | |||||||||
Floating rate debentures | 1.72 ~ 1.77 | 640,000 | — | |||||||||
|
|
|
| |||||||||
| 19,121,594 | 16,260,576 | |||||||||||
|
|
|
| |||||||||
Fair value adjustments on fair value hedged debentures in Korean won | 19,252 | 19,891 | ||||||||||
Discount on debentures in Korean won | (11,792 | ) | (36,920 | ) | ||||||||
|
|
|
| |||||||||
| 19,129,054 | 16,243,547 | |||||||||||
|
|
|
| |||||||||
Debentures in foreign currencies | ||||||||||||
Floating rate debentures | 0.00 ~ 3.72 | 1,344,628 | 835,692 | |||||||||
Fixed rate debentures | 1.63 ~ 3.63 | 2,725,700 | 2,142,800 | |||||||||
|
|
|
| |||||||||
| 4,070,328 | 2,978,492 | |||||||||||
|
|
|
| |||||||||
Fair value adjustments on fair value hedged debentures in foreign currencies | (24,073 | ) | (25,941 | ) | ||||||||
Discount on debentures in foreign currencies | (11,724 | ) | (12,300 | ) | ||||||||
|
|
|
| |||||||||
| 4,034,531 | 2,940,251 | |||||||||||
|
|
|
| |||||||||
| 23,163,585 | 19,183,798 | |||||||||||
|
|
|
| |||||||||
134
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
Changes in debentures based on face value for the years ended December 31, 2018 and 2017, are as follows:
| 2018 | ||||||||||||||||||||
| (In millions of Korean won) | Beginning | Issues | Repayments | Others | Ending | |||||||||||||||
Debentures in Korean won | ||||||||||||||||||||
Structured debentures | 135,800 | — | (101,480 | ) | — | 34,320 | ||||||||||||||
Subordinated fixed rate debentures | 2,888,411 | 600,000 | (65,682 | ) | ��� | 3,422,729 | ||||||||||||||
Fixed rate debentures | 13,236,365 | 11,761,400 | (9,973,220 | ) | — | 15,024,545 | ||||||||||||||
Floating rate debentures | — | 640,000 | — | — | 640,000 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
| 16,260,576 | 13,001,400 | (10,140,382 | ) | — | 19,121,594 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Debentures in foreign currencies | ||||||||||||||||||||
Floating rate debentures | 835,692 | 725,638 | (274,130 | ) | 57,428 | 1,344,628 | ||||||||||||||
Fixed rate debentures | 2,142,800 | 493,022 | — | 89,877 | 2,725,699 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
| 2,978,492 | 1,218,660 | (274,130 | ) | 147,305 | 4,070,327 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
| 19,239,068 | 14,220,060 | (10,414,512 | ) | 147,305 | 23,191,921 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
| 2017 | ||||||||||||||||||||
| (In millions of Korean won) | Beginning | Issues | Repayments | Others | Ending | |||||||||||||||
Debentures in Korean won | ||||||||||||||||||||
Structured debentures | 337,500 | — | (201,700 | ) | — | 135,800 | ||||||||||||||
Subordinated fixed rate debentures | 3,196,993 | — | (308,582 | ) | — | 2,888,411 | ||||||||||||||
Fixed rate debentures | 7,259,095 | 12,198,200 | (6,220,930 | ) | — | 13,236,365 | ||||||||||||||
Floating rate debentures | 680,000 | — | (680,000 | ) | — | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
| 11,473,588 | 12,198,200 | (7,411,212 | ) | — | 16,260,576 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Debentures in foreign currencies | ||||||||||||||||||||
Floating rate debentures | 700,930 | 884,239 | (670,236 | ) | (79,241 | ) | 835,692 | |||||||||||||
Fixed rate debentures | 2,803,721 | 568,150 | (945,394 | ) | (283,677 | ) | 2,142,800 | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
| 3,504,651 | 1,452,389 | (1,615,630 | ) | (362,918 | ) | 2,978,492 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
| 14,978,239 | 13,650,589 | (9,026,842 | ) | (362,918 | ) | 19,239,068 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
135
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
22. Provisions
Details of provisions as at December 31, 2018 and 2017, are as follows:
| (In millions of Korean won) | 2018 | 2017 | ||||||
Provisions for unused loan commitments | 103,882 | 106,963 | ||||||
Provisions for acceptances and guarantees | 73,897 | 88,808 | ||||||
Provisions for asset retirement obligation | 95,396 | 85,575 | ||||||
Others | 35,199 | 76,846 | ||||||
|
|
|
| |||||
| 308,374 | 358,192 | |||||||
|
|
|
| |||||
Changes in provisions for unused loan commitments, acceptances and guarantees for the years ended December 31, 2018 and 2017, are as follows:
| 2018 | ||||||||||||||||||||||||
| Provisions for unused loan commitments | Provisions for acceptances and guarantees | |||||||||||||||||||||||
| 12-month expected credit losses | Lifetime expected credit losses | 12-month expected credit losses | Lifetime expected credit losses | |||||||||||||||||||||
| (In millions of Korean won) | Non- impaired | Impaired | Non- impaired | Impaired | ||||||||||||||||||||
Beginning1 | 74,885 | 27,178 | — | 40,277 | 39,628 | 18,744 | ||||||||||||||||||
Transfer between stages | ||||||||||||||||||||||||
Transfer to12-month expected credit losses | 10,001 | (9,935 | ) | (66 | ) | 661 | (661 | ) | — | |||||||||||||||
Transfer to lifetime expected credit losses | (7,701 | ) | 7,784 | (83 | ) | (534 | ) | 676 | (142 | ) | ||||||||||||||
Impairment | (201 | ) | (667 | ) | 867 | (6 | ) | (87 | ) | 93 | ||||||||||||||
Provision (reversal) for loan losses | (2,204 | ) | 4,377 | (718 | ) | (14,515 | ) | (10,174 | ) | (898 | ) | |||||||||||||
Others (effects of changes in foreign exchange rate, etc.) | 207 | 158 | — | 408 | 243 | 184 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Ending | 74,987 | 28,895 | — | 26,291 | 29,625 | 17,981 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
1 Restated based on Korean IFRS 1109.
| 2017 | ||||||||||||
| (In millions of Korean won) | Provisions for unused loan commitments | Provisions for acceptances and guarantees | Total | |||||||||
Beginning | 124,991 | 126,428 | 251,419 | |||||||||
Effects of changes in foreign exchange rate | (1,317 | ) | (3,370 | ) | (4,687 | ) | ||||||
Reversal | (16,711 | ) | (34,250 | ) | (50,961 | ) | ||||||
|
|
|
|
|
| |||||||
Ending | 106,963 | 88,808 | 195,771 | |||||||||
|
|
|
|
|
| |||||||
136
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
Changes in provisions for asset retirement obligation for the years ended December 31, 2018 and 2017, are as follows:
| (In millions of Korean won) | 2018 | 2017 | ||||||
Beginning | 85,575 | 77,810 | ||||||
Increase | 1,780 | 2,778 | ||||||
Reversal | (154 | ) | (336 | ) | ||||
Used | (2,534 | ) | (6,712 | ) | ||||
Unwinding of discount | 2,305 | 1,746 | ||||||
Effects of changes in foreign exchange rate | 8,424 | 10,289 | ||||||
|
|
|
| |||||
Ending | 95,396 | 85,575 | ||||||
|
|
|
| |||||
Provisions for asset retirement obligation are present value of estimated costs to be incurred for restoration of the leased properties. Actual expenses are expected to be incurred at the end of each lease contract. Three-year historical data of expired leases were used to estimate the average lease year. Also, the average restoration expense based on actual three-year historical data and the three-year historical average inflation rate were used to estimate the present value of estimated costs.
Changes in other provisions for the years ended December 31, 2018 and 2017, are as follows:
| 2018 | ||||||||||||||||||||||||||||
| (In millions of Korean won) | Membership rewards program | Dormant accounts | Litigations | Financial guarantee liabilities1 | Greenhouse Gas Emission liabilities | Others | Total | |||||||||||||||||||||
Beginning | 138 | 5,050 | 7,482 | 2,218 | 177 | 62,137 | 77,202 | |||||||||||||||||||||
Provision (Reversal) | 111 | 2,657 | 184 | 173 | (177 | ) | (10,620 | ) | (7,672 | ) | ||||||||||||||||||
Used and Others | (188 | ) | (3,332 | ) | (1,188 | ) | — | — | (29,623 | ) | (34,331 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Ending | 61 | 4,375 | 6,478 | 2,391 | — | 21,894 | 35,199 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
| 1 | Restated based on Korean IFRS 1109. |
| 2017 | ||||||||||||||||||||||||||||
| (In millions of Korean won) | Membership rewards program | Dormant accounts | Litigations | Financial guarantee liabilities | Greenhouse Gas Emission liabilities1 | Others | Total | |||||||||||||||||||||
Beginning | 115 | 50,396 | 8,537 | 1,870 | 358 | 34,779 | 96,055 | |||||||||||||||||||||
Provision (Reversal) | 185 | 5,133 | 1,390 | (8 | ) | (181 | ) | 27,781 | 34,300 | |||||||||||||||||||
Used and Others | (162 | ) | (50,479 | ) | (2,445 | ) | — | — | (423 | ) | (53,509 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Ending | 138 | 5,050 | 7,482 | 1,862 | 177 | 62,137 | 76,846 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
| 1 | As at December 31, 2017, the estimated greenhouse gas emission is 112,121 tons. |
137
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
23. Net Defined Benefit Liabilities
Defined benefit plan
The Group operates defined benefit plans which have the following characteristics:
- The Group 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 Group.
The net defined benefit liability recognized in the statements of financial position is calculated in accordance with actuarial valuation methods. Data such as discount rates, future salary growth rates, and mortality rates based on market data and historical data are used. Actuarial assumptions may differ from actual results, due to changes in the market, economic trends and mortality trends.
Changes in the net defined benefit liabilities for the years ended December 31, 2018 and 2017, are as follows:
| 2018 | ||||||||||||
| (In millions of Korean won) | Present value of defined benefit obligation | Fair value of plan assets | Net defined benefit liabilities | |||||||||
Beginning | 1,318,665 | (1,310,097 | ) | 8,568 | ||||||||
Current service cost | 136,279 | — | 136,279 | |||||||||
Past service cost1 | 26,663 | — | 26,663 | |||||||||
Interest expense (income) | 37,568 | (37,327 | ) | 241 | ||||||||
Remeasurements : | ||||||||||||
-Actuarial loss arising from experience adjustment | 26,780 | — | 26,780 | |||||||||
—Actuarial loss arising from changes in demographic assumptions | 9,775 | — | 9,775 | |||||||||
—Actuarial loss arising from changes in financial assumptions | 77,611 | — | 77,611 | |||||||||
-Return on plan assets (excluding amounts included in interest income) | — | 17,967 | 17,967 | |||||||||
Contributions | — | (133,000 | ) | (133,000 | ) | |||||||
Payments from plans (benefit payments) | (77,785 | ) | 77,785 | — | ||||||||
Payments from the Group | (4,476 | ) | — | (4,476 | ) | |||||||
Transfer in | 2,677 | (2,497 | ) | 180 | ||||||||
Transfer out | (4,682 | ) | 4,682 | — | ||||||||
Effects of changes in foreign exchange rate | 17 | — | 17 | |||||||||
|
|
|
|
|
| |||||||
Ending | 1,549,092 | (1,382,487 | ) | 166,605 | ||||||||
|
|
|
|
|
| |||||||
| 1 | The amount of |
138
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
| 2017 | ||||||||||||
| (In millions of Korean won) | Present value of defined benefit obligation | Fair value of plan assets | Net defined benefit liabilities | |||||||||
Beginning | 1,380,236 | (1,309,069 | ) | 71,167 | ||||||||
Current service cost | 141,486 | — | 141,486 | |||||||||
Past service cost | 4,185 | — | 4,185 | |||||||||
Interest expense (income) | 30,159 | (28,360 | ) | 1,799 | ||||||||
Remeasurements : | ||||||||||||
-Actuarial loss arising from experience adjustment | 11,520 | — | 11,520 | |||||||||
—Actuarial gain arising from changes in financial assumptions | (42,579 | ) | — | (42,579 | ) | |||||||
-Return on plan assets (excluding amounts included in interest income) | — | 12,356 | 12,356 | |||||||||
Contributions | — | (187,500 | ) | (187,500 | ) | |||||||
Payments from plans (benefit payments) | (199,522 | ) | 199,522 | — | ||||||||
Payments from the Group | (3,978 | ) | — | (3,978 | ) | |||||||
Transfer in | 2,744 | (2,608 | ) | 136 | ||||||||
Transfer out | (5,562 | ) | 5,562 | — | ||||||||
Effects of changes in foreign exchange rate | (24 | ) | — | (24 | ) | |||||||
|
|
|
|
|
| |||||||
Ending | 1,318,665 | (1,310,097 | ) | 8,568 | ||||||||
|
|
|
|
|
| |||||||
Details of the net defined benefit liabilities as at December 31, 2018 and 2017, are as follows:
| (In millions of Korean won) | 2018 | 2017 | ||||||
Present value of defined benefit obligation | 1,549,092 | 1,318,665 | ||||||
Fair value of plan assets | (1,382,487 | ) | (1,310,097 | ) | ||||
|
|
|
| |||||
Net defined benefit liabilities | 166,605 | 8,568 | ||||||
|
|
|
| |||||
Details of post-employment benefits recognized in profit or loss as employee compensation and benefits for the years ended December 31, 2018 and 2017, are as follows:
| (In millions of Korean won) | 2018 | 2017 | ||||||
Current service cost | 136,279 | 141,486 | ||||||
Past service cost | 4,357 | 4,185 | ||||||
Interest expenses of net defined benefit liabilities | 241 | 1,799 | ||||||
|
|
|
| |||||
Total | 140,877 | 147,470 | ||||||
|
|
|
| |||||
139
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
Remeasurements of net defined benefit liabilities recognized as other comprehensive income for the years ended December 31, 2018 and 2017, are as follows:
| (In millions of Korean won) | 2018 | 2017 | ||||||
Remeasurements: | ||||||||
- Actuarial gain arising from changes in demographic assumptions | (9,775 | ) | — | |||||
- Actuarial loss arising from experience adjustment | (26,780 | ) | (11,520 | ) | ||||
- Actuarial gain arising from changes in financial assumptions | (77,611 | ) | 42,579 | |||||
- Return on plan assets (excluding amounts included in interest income) | (17,967 | ) | (12,356 | ) | ||||
Income tax effects | 36,336 | (4,526 | ) | |||||
|
|
|
| |||||
Remeasurements after income tax | (95,797 | ) | 14,177 | |||||
|
|
|
| |||||
Details of fair value of plan assets as at December 31, 2018 and 2017, are as follows:
| 2018 | ||||||||||||
| (In millions of Korean won) | Assets quoted in an active market | Assets not quoted in an active market | Total | |||||||||
Time deposits | — | 1,382,487 | 1,382,487 | |||||||||
| 2017 | ||||||||||||
| (In millions of Korean won) | Assets quoted in an active market | Assets not quoted in an active market | Total | |||||||||
Time deposits | — | 1,310,097 | 1,310,097 | |||||||||
Key actuarial assumptions used as at December 31, 2018 and 2017, are as follows:
| Ratio (%) | ||||||||
| 2018 | 2017 | |||||||
Discount rate | 2.30 | 2.90 | ||||||
Salary growth rate | 3.75 | 3.75 | ||||||
Turnover | 1.00 | 1.00 | ||||||
Mortality assumptions are based on the 8th experience-based mortality table of Korea Insurance Development Institute of 2015.
The sensitivity of the defined benefit obligation to changes in the principal assumptions as at December 31, 2018, is as follows:
| Effect on defined benefit obligation | |||||||||||
| Changes in principal assumption | Increase in principal assumption | Decrease in principal assumption | ||||||||||
Discount rate | 0.5% p | 4.18% decrease | 4.49% increase | |||||||||
Salary growth rate | 0.5% p | 4.12% increase | 3.89% decrease | |||||||||
Turnover | 0.5% p | 0.39% decrease | 0.41% increase | |||||||||
140
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
The above sensitivity analyses are based on a change in an assumption while holding all other assumptions constant. In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated. The sensitivity of the defined benefit obligation to significant actuarial assumptions is calculated using the projected unit credit method which is used to calculate the defined benefit obligation.
Expected maturity analysis of undiscounted pension benefits as at December 31, 2018, is as follows:
| (In millions of Korean won) | Less than 1 year | Between 1 and 2 years | Between 2 and 5 years | Between 5 and 10 years | Over 10 years | Total | ||||||||||||||||||
Pension benefits | 34,207 | 83,204 | 465,152 | 937,292 | 2,708,298 | 4,228,153 | ||||||||||||||||||
The weighted average duration of the defined benefit obligations is 8.86 years.
Expected contributions to plan assets for the period after December 31, 2018, are estimated to be approximatelyW 150,000 million.
24. Other Liabilities
Details of other liabilities as at December 31, 2018 and 2017, are as follows:
| (In millions of Korean won) | 2018 | 2017 | ||||||
Other financial liabilities | ||||||||
Other payables | 2,253,535 | 4,006,412 | ||||||
Prepaid card and debit cards | 2,351 | 2,018 | ||||||
Accrued expenses | 2,679,685 | 2,356,270 | ||||||
Financial guarantee liabilities | 29,867 | 24,337 | ||||||
Deposits for letter of guarantees and others | 156,364 | 351,455 | ||||||
Domestic exchange settlement credits | 1,679,914 | 39,445 | ||||||
Foreign exchanges settlement credits | 102,187 | 124,728 | ||||||
Borrowings from other business accounts | 13,166 | 5,408 | ||||||
Payables to trust accounts | 5,285,108 | 5,018,031 | ||||||
Liabilities incurred from agency relationship | 605,076 | 518,955 | ||||||
Account for agency businesses | 460,949 | 257,760 | ||||||
Others | 29,202 | 28,535 | ||||||
|
|
|
| |||||
| 13,297,404 | 12,733,354 | |||||||
|
|
|
| |||||
Othernon-financial liabilities | ||||||||
Other payables | 847,347 | 384,875 | ||||||
Unearned revenue | 48,188 | 50,139 | ||||||
Accrued expenses | 450,493 | 324,694 | ||||||
Withholding taxes | 93,856 | 145,921 | ||||||
Others | 78,776 | 104,583 | ||||||
|
|
|
| |||||
| 1,518,660 | 1,010,212 | |||||||
|
|
|
| |||||
| 14,816,064 | 13,743,566 | |||||||
|
|
|
| |||||
141
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
25. Equity
25.1 Capital Stock
Details of outstanding shares as at December 31, 2018 and 2017, are as follows:
| Ordinary shares | ||||||||
| 2018 | 2017 | |||||||
Number of shares authorized | 1,000,000,000 | 1,000,000,000 | ||||||
Face value per share (in Korean won) | 5,000 | 5,000 | ||||||
Number of shares | 404,379,116 | 404,379,116 | ||||||
Capital stock1 | 2,021,896 | 2,021,896 | ||||||
| 1 | In millions of Korean won. |
25.2 Capital Surplus
Details of capital surplus as at December 31, 2018 and 2017, are as follows:
| (In millions of Korean won) | 2018 | 2017 | ||||||
Paid-in capital in excess of face value | 4,604,417 | 4,604,417 | ||||||
Gain on business combination | 397,669 | 397,669 | ||||||
Revaluation increment | 177,229 | 177,229 | ||||||
Other capital surplus | 39,473 | 40,378 | ||||||
|
|
|
| |||||
| 5,218,788 | 5,219,693 | |||||||
|
|
|
| |||||
The gain on business combination is a gain from a bargain purchase related to the merger with Korea Long Term Credit Bank on December 31, 1998, in accordance with previous Korean GAAP.
25.3 Accumulated Other Comprehensive Income
Details of accumulated other comprehensive income as at December 31, 2018 and 2017, are as follows:
| (In millions of Korean won) | 2018 | |||
Remeasurements of net defined benefit liabilities | (175,698 | ) | ||
Currency translation differences | (10,328 | ) | ||
Net losses on debt instruments at fair value through other comprehensive income | 22,475 | |||
Net gains on equity instruments at fair value through other comprehensive income | 302,014 | |||
Share of other comprehensive income of associates | (3,259 | ) | ||
Gains on cash flow hedging instruments | 11,539 | |||
Losses on hedges of a net investment in a foreign operations | (30,959 | ) | ||
|
| |||
| 115,784 | ||||
|
| |||
142
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
| (In millions of Korean won) | 2017 | |||
Remeasurements of net defined benefit liabilities | (79,902 | ) | ||
Currency translation differences | (39,597 | ) | ||
Gains on valuation of available-for-sale financial assets | 791,153 | |||
Share of other comprehensive income of associates | 4,262 | |||
Gains on cash flow hedging instruments | 7,751 | |||
Losses on hedges of a net investment in a foreign operations | (5,573 | ) | ||
|
| |||
| 678,094 | ||||
|
| |||
25.4 Retained Earnings
Retained earnings as at December 31, 2018 and 2017, consist of:
| (In millions of Korean won) | 2018 | 2017 | ||||||
Legal reserves | 2,034,015 | 2,033,716 | ||||||
Regulatory reserve for credit losses | 2,150,772 | 2,001,063 | ||||||
Voluntary reserves | 12,522,628 | 11,044,972 | ||||||
Retained earnings before appropriation | 2,603,983 | 2,324,000 | ||||||
|
|
|
| |||||
| 19,311,398 | 17,403,751 | |||||||
|
|
|
| |||||
With respect to the allocation of net profit earned in a fiscal term, the Bank must set aside in its legal reserve an amount equal to at least 10% of its net income after tax as reported in the 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 itspaid-in capital in accordance with Article 40 of the Banking Act. The reserves can only be transferred to capital stock or be used to reduce deficit. With respect to the Group’s branches overseas, a portion of the branch’s net income is appropriated into legal reserves, in line with the financial legislation of the country where the overseas branch is located.
Regulatory Reserve for Credit Losses
Measurement and Disclosure of Regulatory Reserve for Credit Losses are required in accordance with Articles 29.1 through 29.2 of Regulation on Supervision of Banking Business.
Details of the regulatory reserve for credit losses as at December 31, 2018 and 2017, are as follows:
| (In millions of Korean won) | 2018 | 2017 | ||||||
Beginning | 2,150,772 | 2,001,063 | ||||||
Amounts estimated to be appropriated | 140,247 | 149,709 | ||||||
|
|
|
| |||||
Ending | 2,291,019 | 2,150,772 | ||||||
|
|
|
| |||||
143
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
Adjustments to the regulatory reserve for credit losses for the years ended December 31, 2018 and 2017, are as follows:
| (In millions of Korean won) | 2018 | 2017 | ||||||
Provision of regulatory reserve for credit losses1 | 247,207 | 149,709 | ||||||
Adjusted profit after provision of regulatory reserve for credit losses2 | 2,011,991 | 2,024,996 | ||||||
| 1 | The amount expected to be appropriated is the amount required to reserve for credit losses, calculated based on the beginning balance of regulatory reserve for credit losses (including unearned reserves) that reflects the effect of adoption of Korean IFRS 1109 retrospectively. |
| 2 | Adjusted profit after provision of regulatory reserve for credit losses is calculated on the assumption that expected provision of regulatory reserve for credit losses which is measured in accordance with Banking Supervision Regulations would be reflected in net profit for the periods without consideration of income tax effect. |
26. Interest Income and Expense
Details of interest income, expense, and net interest income for the years ended December 31, 2018 and 2017, are as follows:
| (In millions of Korean won) | 2018 | |||
Interest income | ||||
Securities at fair value through profit or loss | 214,455 | |||
Loans at fair value through profit or loss | 7,850 | |||
Securities at fair value through other comprehensive income | 502,093 | |||
Loans at fair value through other comprehensive income | 2,138 | |||
Due from financial institutions at amortized cost | 68,029 | |||
Securities at amortized cost | 320,361 | |||
Loans at amortized cost | 8,798,656 | |||
Others | 106,306 | |||
|
| |||
| 10,019,888 | ||||
|
| |||
Interest expense | ||||
Deposits | 3,019,866 | |||
Debts | 319,017 | |||
Debentures | 501,892 | |||
Others | 78,391 | |||
|
| |||
| 3,919,166 | ||||
|
| |||
Net interest income | 6,100,722 | |||
|
| |||
144
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
| (In millions of Korean won) | 20171 | |||
Interest income | ||||
Due from financial institutions | 72,959 | |||
Loans | 7,503,022 | |||
Financial assets at fair value through profit or loss (under Korean IFRS 1039) | 170,469 | |||
Financial investments | ||||
Available-for-sale financial assets | 389,570 | |||
Held-to-maturity financial assets | 276,756 | |||
Others | 96,117 | |||
|
| |||
| 8,508,893 | ||||
|
| |||
Interest expense | ||||
Deposits | 2,300,198 | |||
Debts | 219,743 | |||
Debentures | 369,224 | |||
Others | 54,944 | |||
|
| |||
| 2,944,109 | ||||
|
| |||
Net interest income | 5,564,784 | |||
|
| |||
| 1 | Interest income for the year ended December 31, 2017 has been restated according to changes in accounting policy concerning interest income reclassification. |
Interest income recognized on impaired loans isW 23,355 million (December 31, 2017:W 30,886 million) for the years ended December 31, 2018.
27. Net Fee and Commission Income
Details of fee and commission income, and fee and commission expense for the years ended December 31, 2018 and 2017, are as follows:
| (In millions of Korean won) | 2018 | 2017 | ||||||
Fee and commission income | ||||||||
Banking activity fees | 209,499 | 194,624 | ||||||
Lending activity fees | 73,005 | 73,549 | ||||||
Credit card related fees | 1,030 | 1,279 | ||||||
Debit card related fees and commissions | 554 | 649 | ||||||
Agent activity fees | 312,497 | 350,037 | ||||||
Trust and other fiduciary fees | 287,385 | 305,989 | ||||||
Guarantee fees | 32,423 | 29,419 | ||||||
Foreign currency related fees | 92,140 | 93,096 | ||||||
Security activity commissions | 146,883 | 176,209 | ||||||
Other business account commission on consignment | 36,947 | 33,793 | ||||||
Others | 230,428 | 212,836 | ||||||
|
|
|
| |||||
| 1,422,791 | 1,471,480 | |||||||
|
|
|
| |||||
Fee and commission expense | ||||||||
Trading activity related fees1 | 12,427 | 13,277 | ||||||
Lending activity fees | 30,661 | 27,510 | ||||||
Credit card related fees | 18,478 | 1,888 | ||||||
145
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
Outsourcing related fees | 78,986 | 60,753 | ||||||
Foreign currency related fees | 21,402 | 19,410 | ||||||
Management fees ofwritten-off loans | 12,680 | 10,359 | ||||||
Contributions to external institutions | 23,949 | 25,037 | ||||||
Others | 101,460 | 88,557 | ||||||
|
|
|
| |||||
| 300,043 | 246,791 | |||||||
|
|
|
| |||||
Net fee and commission income | 1,122,748 | 1,224,689 | ||||||
|
|
|
|
| 1 | Fees from financial assets/liabilities at fair value through profit or loss. |
28. Net Gains or Losses from Financial Assets/Liabilities at Fair Value through Profit or Loss
28.1 Net Gains or Losses from Financial Assets/Liabilities at Fair Value through Profit or Loss
Net gains or losses from financial assets/liabilities at fair value through profit or loss are composed of dividend income and gains or losses arising from changes in the fair values, sales and redemptions.
Details for the years ended December 31, 2018 and 2017, are as follows:
| (In millions of Korean won) | 2018 | |||
Revenue from financial instruments at fair value through profit or loss |
| |||
Financial assets at fair value through profit or loss | ||||
Debt instruments | 249,860 | |||
Equity instruments | 31,327 | |||
|
| |||
| 281,187 | ||||
|
| |||
Derivatives held for trading | ||||
Interest rate | 1,509,811 | |||
Currency | 3,463,934 | |||
Stock or stock index | 7,048 | |||
Others | 987 | |||
|
| |||
| 4,981,780 | ||||
|
| |||
Financial liabilities at fair value through profit or loss | 377 | |||
Other financial instruments | 22 | |||
|
| |||
| 5,263,366 | ||||
|
| |||
Expense from financial instruments at fair value through profit or loss |
| |||
Financial assets at fair value through profit or loss | ||||
Debt instruments | 169,248 | |||
Equity instruments | 37,844 | |||
|
| |||
| 207,092 | ||||
|
| |||
Derivatives held for trading | ||||
Interest rate | 1,554,325 | |||
Currency | 3,169,608 | |||
Stock or stock index | 4,473 | |||
Others | 1,210 | |||
|
| |||
| 4,729,616 | ||||
|
| |||
Financial liabilities at fair value through profit or loss | 203 | |||
Other financial instruments | 60 | |||
|
| |||
| 4,936,971 | ||||
|
| |||
Net gains or losses from financial assets/liabilities at fair value through profit or loss | 326,395 | |||
146
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
| (In millions of Korean won) | 20171 | |||
Gains related to financial instruments held for trading |
| |||
Financial assets held for trading | ||||
Debt instruments | 27,652 | |||
Equity instruments | 24,142 | |||
| 51,794 | ||||
|
| |||
Derivatives held for trading | ||||
Interest rate | 1,203,802 | |||
Currency | 5,494,382 | |||
Stock or stock index | 496 | |||
Others | 1,658 | |||
|
| |||
| 6,700,338 | ||||
|
| |||
Financial liabilities held for trading | 78 | |||
Other financial instruments | 109 | |||
|
| |||
| 6,752,319 | ||||
|
| |||
Losses related to financial instruments held for trading | ||||
Financial assets held for trading | ||||
Debt instruments | 79,391 | |||
Equity instruments | 6,396 | |||
|
| |||
| 85,787 | ||||
|
| |||
Derivatives held for trading | ||||
Interest rate | 1,163,749 | |||
Currency | 5,573,651 | |||
Stock or stock index | 3,088 | |||
Others | 2,647 | |||
|
| |||
| 6,743,135 | ||||
|
| |||
Financial liabilities held for trading | 125 | |||
Other financial instruments | 117 | |||
|
| |||
| 6,829,164 | ||||
|
| |||
Net gains or losses from financial instruments held for trading | (76,845 | ) | ||
|
| |||
| 1 | Interest income for the year ended December 31, 2017 has been restated according to changes in accounting policy concerning interest income reclassification. |
147
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
28.2 Net Gains or Losses on Financial Instruments Designated at Fair Value through Profit or Loss
Net gain or loss from financial instruments designated at fair value through profit or loss includes dividend income and gains or losses arising from changes in the fair values, sales and redemptions.
There is no financial instruments designated at fair value through profit or loss for the year ended December 31, 2018.
Details of net gains or losses on financial instruments designated at fair value through profit or loss for the year ended December 31, 2017 are as follows:
| (In millions of Korean won) | 2017 | |||
Gains from financial assets designated at fair value through profit or loss | ||||
Financial assets designated at fair value through profit or loss | 6,022 | |||
Losses from financial assets designated at fair value through profit or loss | ||||
Financial assets designated at fair value through profit or loss | 384 | |||
Net gains or losses from financial assets designated at fair value through profit or loss | 5,638 | |||
29. Other Operating Income and Expenses
Details of other operating income and expenses for the years ended December 31, 2018 and 2017, are as follows:
| (In millions of Korean won) | 2018 | |||
Other operating income | ||||
Revenue related to financial assets at fair value through other comprehensive income | ||||
Gains on redemption of the securities at fair value through other comprehensive income | 230 | |||
Gains on sale of the securities at fair value through other comprehensive income | 94,984 | |||
|
| |||
| 95,214 | ||||
|
| |||
Revenue related to financial assets at amortized cost Gains on sale of loans at amortized cost | 15,691 | |||
|
| |||
| 15,691 | ||||
|
| |||
Gains on foreign exchange transactions | 1,147,691 | |||
Dividend income | 38,937 | |||
Others | 86,307 | |||
|
| |||
| 1,383,840 | ||||
|
| |||
Other operating expense | ||||
Expenses related to financial assets at fair value through other comprehensive income |
| |||
Losses on sale of the securities at fair value through other comprehensive income | 7,135 | |||
|
| |||
| 7,135 | ||||
|
| |||
Expenses related to financial assets at amortized cost Losses on sale of loans at amortized cost | 6,674 | |||
|
| |||
| 6,674 | ||||
|
| |||
Losses on foreign exchanges transactions | 1,211,920 | |||
Others | 854,597 | |||
|
| |||
| 2,080,326 | ||||
|
| |||
Net other operating expense | (696,486 | ) | ||
|
| |||
148
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
| (In millions of Korean won) | 2017 | |||
Other operating income |
| |||
Revenue related toavailable-for-sale financial assets |
| |||
Gains on redemption ofavailable-for-sale financial assets | 5 | |||
Gains on sale ofavailable-for-sale financial assets | 90,568 | |||
|
| |||
| 90,573 | ||||
Gains on foreign exchange transactions | 2,257,371 | |||
Dividend income | 112,781 | |||
|
| |||
Others | 91,854 | |||
|
| |||
| 2,552,579 | ||||
|
| |||
Other operating expense |
| |||
Expense related toavailable-for-sale financial assets | ||||
Losses on sale ofavailable-for-sale financial assets | 147,558 | |||
|
| |||
Impairment losses onavailable-for-sale financial assets | 12,405 | |||
|
| |||
| 159,963 | ||||
|
| |||
Losses on foreign exchange transactions | 1,909,984 | |||
|
| |||
Others | 770,719 | |||
|
| |||
| 2,840,666 | ||||
|
| |||
Net other operating expense | (288,087 | ) | ||
|
| |||
149
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
30. General and Administrative Expenses
30.1 General and Administrative Expenses
Details of general and administrative expenses for the years ended December 31, 2018 and 2017, are as follows:
| (In millions of Korean won) | 2018 | 2017 | ||||||
Employee Benefits | ||||||||
Salaries and short-term employee benefits - salaries | 1,522,003 | 1,531,078 | ||||||
Salaries and short-term employee benefits - welfare expense | 652,781 | 644,881 | ||||||
Post-employment benefits - defined benefit plans | 140,877 | 147,470 | ||||||
Post-employment benefits - defined contribution plans | 6,719 | 3,594 | ||||||
Termination benefits | 209,737 | 151,172 | ||||||
Share-based payments | 4,051 | 33,148 | ||||||
|
|
|
| |||||
| 2,536,168 | 2,511,343 | |||||||
|
|
|
| |||||
Depreciation and amortization | 246,488 | 236,436 | ||||||
|
|
|
| |||||
Other general and administrative expenses | ||||||||
Rental expense | 259,194 | 233,780 | ||||||
Tax and dues | 108,389 | 97,786 | ||||||
Communication | 23,163 | 22,281 | ||||||
Electricity and utilities | 21,641 | 22,093 | ||||||
Publication | 9,771 | 11,338 | ||||||
Repairs and maintenance | 11,263 | 11,193 | ||||||
Vehicle | 7,367 | 7,074 | ||||||
Travel | 4,096 | 4,307 | ||||||
Training | 17,521 | 16,764 | ||||||
Service fees | 107,678 | 92,478 | ||||||
Others | 414,256 | 398,949 | ||||||
|
|
|
| |||||
| 984,339 | 918,043 | |||||||
|
|
|
| |||||
| 3,766,995 | 3,665,822 | |||||||
|
|
|
| |||||
150
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
30.2 Share-based Payments
30.2.1 Share Grants
The Group changed the scheme of share-based payment from share option to share grants in November 2007. The share grant award program is an incentive plan that sets, on grant date, the maximum number of shares that can be awarded. Actual shares to be granted is determined in accordance with achievement of performance targets over the vesting period.
Details of the share grants as at December 31, 2018, are as follows:
| (In number of shares) | ||||||||||
Share grants | Grant date | Number of granted shares1, 2 | Vesting conditions | |||||||
Series 69 | 2017.01.01 | 173,030 | Service provision, TSR 30~50%, Performance of the company and responsibilities 50~70% | |||||||
Series 71 | 2017.08.26 | 4,372 | Service provision, TSR 30~50%, Performance of the company and responsibilities 50~70% | |||||||
Series 72 | 2017.08.28 | 5,601 | Service provision, TSR 30~50%, Performance of the company and responsibilities 50~70% | |||||||
Series 73 | 2017.11.21 | 27,786 | Service provision, TSR 30~50%, EPS and Asset Quality 50~70% | |||||||
Series 74 | 2018.01.01 | 190,536 | Service provision, TSR 30~50%, Performance of the company and responsibilities 50~70% | |||||||
Deferred grant in 2015 | — | 33,050 | ||||||||
Deferred grant in 2016 | — | 110,967 | ||||||||
Deferred grant in 2017 | — | 139,697 | ||||||||
|
| |||||||||
| 685,039 | ||||||||||
|
| |||||||||
| 1 | Granted shares in relation to Series 69, 71 ~ 74 represent the total number of shares granted to directors and employees but not vested at the end of reporting period. The number of deferred grants represents residual shares that have been vested at the end of reporting period. |
| 2 | Certain percentages among the granted shares are deferred for over three years to five years from the time of initial exercising. |
Details of share grants linked to short-term performance as at December 31, 2018, are as follows:
Share grants1 | Grant date | Number of vested shares | Vesting conditions | |||||||
Granted shares for 2015 | 2015.01.01 | 58,366 | Vested | |||||||
Granted shares for 2016 | 2016.01.01 | 83,794 | Vested | |||||||
Granted shares for 2017 | 2017.01.01 | 80,331 | Vested | |||||||
Granted shares for 2018 | 2018.01.01 | 109,871 | Proportion to service period | |||||||
| 1 | Options are given to the executives and employees during the year for deferred payment schedule (after the retirement date), payment proportion and payment period. Due to these given options, the deferred payment period might be a maximum of five years after the retirement date. |
151
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
Share grants are measured at fair value using the Monte Carlo Simulation Model and assumptions used in determining the fair value as at December 31, 2018, are as follows:
| (In Korean won) | Expected exercise period (Years) | Risk free rate (%) | Fair value (Market performance condition) | Fair value (Non-market performance condition) | ||||||||||||
Linked to long-term performance |
| |||||||||||||||
Series 69 | 0.00~5.00 | 1.75 | % | 40,224~47,153 | 40,224~47,153 | |||||||||||
Series 71 | 1.00~4.00 | 1.75 | % | 41,473~45,236 | 41,473~45,236 | |||||||||||
Series 72 | 1.00~4.00 | 1.75 | % | 41,473~45,236 | 41,473~45,236 | |||||||||||
Series 73 | 0.89~3.89 | 1.75 | % | 41,614~45,382 | 41,614~45,382 | |||||||||||
Series 74 | 1.00~6.00 | 1.75 | % | 38,510~44,580 | 39,077~45,236 | |||||||||||
Grant deferred in 2015 | 0.00~3.00 | 1.75 | % | — | 42,682~47,153 | |||||||||||
Grant deferred in 2016 | 0.00~5.00 | 1.75 | % | — | 40,224~47,153 | |||||||||||
Grant deferred in 2017 | 0.00~4.00 | 1.75 | % | — | 41,473~47,153 | |||||||||||
Linked to short-term performance |
| |||||||||||||||
Share granted in 2015 | 0.00~5.00 | 1.75 | % | — | 40,224~47,153 | |||||||||||
Share granted in 2016 | 0.00~6.00 | 1.75 | % | — | 39,077~47,153 | |||||||||||
Share granted in 2017 | 0.00~6.00 | 1.75 | % | — | 39,077~47,153 | |||||||||||
Share granted in 2018 | 1.00~6.00 | 1.75 | % | — | 39,077~45,236 | |||||||||||
Expected volatility is based on the historical volatility of the share price over the most recent period that is generally commensurate with the expected term of the grant and the current stock price as at December 31, 2018, was used for the underlying asset price. Also, the average three-year historical dividend rate was used as the expected dividend rate.
As at December 31, 2018 and 2017, the accrued expenses related to share-based payments, including share grants, amounted toW 40,873 million andW 58,897 million, respectively, and the compensation costs from share grants amounting toW 4,051 million andW 33,148 million were incurred during the years ended December 31, 2018 and 2017, respectively.
152
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
30.2.2 Mileage Stock
Details of Mileage Stock as at December 31, 2018, are as follows:
| (In number of shares) | Grant date | Number of granted shares1 | Expected exercise period (Years)1 | Number of exercisable shares2 | ||||||||||||
Share granted in 2016 | 2016.01.23 | 33,829 | 0.00~0.06 | 12,334 | ||||||||||||
| 2016.04.29 | 60 | 0.00~0.33 | 21 | |||||||||||||
| 2016.07.07 | 280 | 0.00~0.52 | 62 | |||||||||||||
| 2016.07.18 | 767 | 0.00~0.55 | — | |||||||||||||
| 2016.08.03 | 107 | 0.00~0.59 | 38 | |||||||||||||
| 2016.08.17 | 51 | 0.00~0.63 | 23 | |||||||||||||
| 2016.08.30 | 256 | 0.00~0.66 | 168 | |||||||||||||
| 2016.09.06 | 206 | 0.00~0.68 | 103 | |||||||||||||
| 2016.10.07 | 105 | 0.00~0.77 | 69 | |||||||||||||
| 2016.11.01 | 118 | 0.00~0.84 | 24 | |||||||||||||
| 2016.12.07 | 211 | 0.00~0.93 | 96 | |||||||||||||
| 2016.12.08 | 43 | 0.00~0.94 | 32 | |||||||||||||
| 2016.12.15 | 12 | 0.00~0.96 | 12 | |||||||||||||
| 2016.12.20 | 309 | 0.00~0.97 | 169 | |||||||||||||
| 2016.12.28 | 76 | 0.00~0.99 | 40 | |||||||||||||
| 2016.12.30 | 210 | 0.00~1.00 | 79 | |||||||||||||
Share granted in 2017 | 2017.01.09 | 28,925 | 0.00~1.02 | 13,198 | ||||||||||||
| 2017.02.03 | 43 | 0.00~1.09 | 28 | |||||||||||||
| 2017.04.03 | 82 | 0.00~1.25 | 61 | |||||||||||||
| 2017.05.22 | 20 | 0.00~1.39 | 20 | |||||||||||||
| 2017.07.03 | 52 | 0.00~1.50 | 52 | |||||||||||||
| 2017.08.07 | 29 | 0.00~1.60 | 19 | |||||||||||||
| 2017.08.08 | 5 | 0.00~1.60 | 2 | |||||||||||||
| 2017.08.16 | 204 | 0.00~1.62 | 166 | |||||||||||||
| 2017.08.17 | 40 | 0.00~1.63 | 32 | |||||||||||||
| 2017.08.24 | 387 | 0.00~1.65 | 323 | |||||||||||||
| 2017.09.08 | 82 | 0.00~1.69 | 73 | |||||||||||||
| 2017.10.20 | 9 | 0.00~1.80 | — | |||||||||||||
| 2017.11.01 | 120 | 0.00~1.84 | 103 | |||||||||||||
| 2017.11.06 | 106 | 0.00~1.85 | 106 | |||||||||||||
| 2017.12.06 | 105 | 0.00~1.93 | 91 | |||||||||||||
| 2017.12.26 | 254 | 0.00~1.99 | 215 | |||||||||||||
| 2017.12.29 | 114 | 0.00~1.99 | 98 | |||||||||||||
Share granted in 2018 | 2018.01.10 | 19,197 | 0.00~2.03 | 18,663 | ||||||||||||
| 2018.02.12 | 9 | 0.00~2.12 | 9 | |||||||||||||
| 2018.04.02 | 115 | 0.00~2.25 | 115 | |||||||||||||
| 2018.04.30 | 86 | 0.00~2.33 | 86 | |||||||||||||
| 2018.05.08 | 170 | 0.00~2.35 | 166 | |||||||||||||
| 2018.06.01 | 140 | 0.00~2.42 | 140 | |||||||||||||
| 2018.07.02 | 180 | 0.00~2.50 | 180 | |||||||||||||
| 2018.08.07 | 194 | 0.00~2.60 | 194 | |||||||||||||
| 2018.08.09 | 47 | 0.00~2.61 | 47 | |||||||||||||
| 2018.08.14 | 30 | 0.00~2.62 | 30 | |||||||||||||
| 2018.08.16 | 130 | 0.00~2.62 | 130 | |||||||||||||
| 2018.09.07 | 106 | 0.00~2.68 | 106 | |||||||||||||
153
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
| 2018.10.04 | 129 | 0.00~2.76 | 129 | |||||||||||||
| 2018.11.01 | 258 | 0.00~2.84 | 258 | |||||||||||||
| 2018.11.06 | 236 | 0.00~2.85 | 236 | |||||||||||||
| 2018.12.04 | 21 | 0.00~2.93 | 21 | |||||||||||||
| 2018.12.07 | 91 | 0.00~2.93 | 91 | |||||||||||||
| 2018.12.03 | 132 | 0.00~2.92 | 132 | |||||||||||||
| 2018.12.12 | 64 | 0.00~2.95 | 64 | |||||||||||||
| 2018.12.18 | 271 | 0.00~2.96 | 271 | |||||||||||||
| 2018.12.19 | 42 | 0.00~2.97 | 42 | |||||||||||||
| 2018.12.31 | 127 | 0.00~3.00 | 127 | |||||||||||||
|
|
|
| |||||||||||||
| 88,992 | 49,094 | |||||||||||||||
|
|
|
|
1Mileage stock is exercisable for two years after one year from the grant date. When the mileage stock is exercised, the closing price of prior month is applied. However, in case of transfer or retirement during the vesting period, mileage stock is exercisable at the closing price of the last month prior to transfer or retirement.
2The exercisable shares are assessed based on the stock price as at December 31, 2018. These shares are vested immediately at grant date.
The accrued expenses for share-based payments in regard to mileage stock as at December 31, 2018 and 2017, areW 2,283 million andW 2,973 million, respectively. The compensation costs amounting toW 1,350 million andW 2,378 million were recognized as an expense for the years ended December 31, 2018 and 2017, respectively.
31.Non-operating Income and Expenses
Details ofnon-operating income and expenses for the years ended December 31, 2018 and 2017, are as follows:
| (In millions of Korean won) | 2018 | 2017 | ||||||
Non-operating income | ||||||||
Gains on disposal in property and equipment and assets held for sale | 152,852 | 3,597 | ||||||
Rental income | 26,429 | 25,063 | ||||||
Others | 17,515 | 42,203 | ||||||
|
|
|
| |||||
| 196,796 | 70,863 | |||||||
|
|
|
| |||||
Non-operating expenses | ||||||||
Losses on disposal in property and equipment and assets held for sale | 5,590 | 6,006 | ||||||
Donation | 91,943 | 39,752 | ||||||
Restoration cost | 1,854 | 3,323 | ||||||
Others | 53,237 | 95,249 | ||||||
|
|
|
| |||||
| 152,624 | 144,330 | |||||||
|
|
|
| |||||
Netnon-operating income (expenses) | 44,172 | (73,467 | ) | |||||
|
|
|
| |||||
154
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
32. Income Tax Expense
Income tax expense for the years ended December 31, 2018 and 2017, are as follows:
| (In millions of Korean won) | 2018 | |||
Tax payable | ||||
Current tax expense | 806,618 | |||
Adjustments recognized in the period for current tax of prior years | (4,856 | ) | ||
|
| |||
| 801,762 | ||||
|
| |||
Changes in deferred income tax assets (liabilities) | 26,696 | |||
Income tax expense of overseas branches | 6,863 | |||
Income tax recognized directly in equity | ||||
Net losses on equity instruments at fair value through other comprehensive income | 13,660 | |||
Net losses on debt instruments at fair value through other comprehensive income | (21,703 | ) | ||
Exchange difference in foreign operation | (9,346 | ) | ||
Remeasurements of net defined benefit liabilities | 36,336 | |||
Gain on hedges of a net investment in a foreign operations | 9,629 | |||
Loss on cash flow hedging instruments | (1,437 | ) | ||
Share of other comprehensive income of associates | 1,283 | |||
|
| |||
| 28,422 | ||||
|
| |||
Reclassification of sale of securities at fair value through other comprehensive income | (5,172 | ) | ||
Consolidated tax effect | (31,431 | ) | ||
|
| |||
Tax expense | 827,140 | |||
|
| |||
| (In millions of Korean won) | 2017 | |||
Tax payable | ||||
Current tax expense | 342,256 | |||
Adjustments recognized in the period for current tax of prior years | (19,160 | ) | ||
|
| |||
| 323,096 | ||||
|
| |||
Changes in deferred income tax assets (liabilities) | 217,754 | |||
Income tax expense of overseas branches | 4,721 | |||
Income tax recognized directly in equity | ||||
Changes in value ofavailable-for-sale financial assets | (82,670 | ) | ||
Exchange difference in foreign operation | 11,835 | |||
Changes in remeasurements of net defined benefit liabilities | (4,526 | ) | ||
Loss on hedging investment of a net investment in a foreign operation | (8,196 | ) | ||
Loss on cash flow hedging instruments | (2,833 | ) | ||
Share of other comprehensive loss of associates | (1,245 | ) | ||
|
| |||
| (87,635 | ) | |||
|
| |||
Consolidated tax effect | (19,346 | ) | ||
|
| |||
Tax expense | 438,590 | |||
|
| |||
1The Group did not recognize deferred income tax assets regarding the loss on valuation of JSC Bank Center Credit’s shares due to the low possibility of the disposal of its shares. Notwithstanding, the Group recognizedW 158,264 million as the reduction of income tax expenses since the sale of its shares was completed during the year ended December 31, 2017.
155
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
An analysis of the net profit before income tax and income tax expense for the years ended December 31, 2018 and 2017, follows:
| (In millions of Korean won) | 2018 | 2017 | ||||||
Profit before income tax | 3,086,338 | 2,613,295 | ||||||
|
|
|
| |||||
Tax at the applicable tax rate1 | 838,381 | 631,955 | ||||||
Non-taxable income | (2,967 | ) | (189,687 | ) | ||||
Non-deductible expense | 12,964 | 8,991 | ||||||
Tax credit and tax exemption | (275 | ) | (296 | ) | ||||
Temporary difference for which no deferred tax is recognized | 1,112 | 1,166 | ||||||
Tax supplementary pay (rebate) for tax of prior years | (2,771 | ) | (8,334 | ) | ||||
Income tax expense of overseas branch | 6,863 | 4,721 | ||||||
Tax effect of investments in subsidiaries | 1,878 | 21,167 | ||||||
Foreign subsidiary tax rate difference effect | (1,470 | ) | 589 | |||||
Consolidated tax effect | (31,431 | ) | (19,347 | ) | ||||
Change in tax rates effect | — | (14,299 | ) | |||||
Others | 4,856 | 1,964 | ||||||
|
|
|
| |||||
Tax expense | 827,140 | 438,590 | ||||||
|
|
|
| |||||
Tax expense / Profit before income tax (%) | 26.80 | 16.78 | ||||||
| 1 | Applicable income tax rate for |
Details of current tax liabilities (income tax payables) and current tax assets (income tax refund receivables) before offsetting, as at December 31, 2018 and 2017, are as follows:
| (In millions of Korean won) | 2018 | 2017 | ||||||
Tax payables after offsetting1, 2 | 623,867 | 232,423 | ||||||
Adjustment on consolidated tax payable and others3 | (31,431 | ) | (19,347 | ) | ||||
Accounts payables4 | (586,699 | ) | (209,533 | ) | ||||
|
|
|
| |||||
Current tax payable | 5,737 | 3,543 | ||||||
|
|
|
| |||||
| 1 | Excludes current tax assets of |
| 2 | Includes income tax payable of |
156
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
| 3 | Tax expense reduced due to the adoption of consolidated tax return was recognized as tax benefit. |
| 4 | The amount of income tax payable by the Bank is reclassified as accounts payable, not to the tax authority, but to KB Financial Group Inc. due to the adoption of consolidated tax return. |
33. Dividends
The dividend to the shareholder of the Bank in respect of the year ended December 31, 2018, ofW1,650 per share, amounting to total dividends ofW667,226 million, is to be proposed at the annual general shareholder’s meeting on March 21, 2019. The Group’s financial statements as at December 31, 2018, do not reflect this dividend payable.
157
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
34. Accumulated Other Comprehensive Income
Details of accumulated other comprehensive income for the years ended December 31, 2018 and 2017, are as follows:
| (In millions of Korean won) | Beginning1 | Changes (excluding reclassification) | Reclassification to profit or loss | Tax effect | Transfer to retained earnings | Ending | ||||||||||||||||||
Remeasurements of net defined benefit liabilities | (79,902 | ) | (132,132 | ) | — | 36,336 | — | (175,698 | ) | |||||||||||||||
Currency translation differences | (37,711 | ) | 21,672 | 15,057 | (9,346 | ) | — | (10,328 | ) | |||||||||||||||
Net gains (losses) on debt instruments at fair value through other comprehensive income | (34,713 | ) | 72,415 | 6,476 | (21,703 | ) | — | 22,475 | ||||||||||||||||
Net gains (losses) on equity instruments at fair value through other comprehensive income | 338,027 | (30,863 | ) | — | 13,660 | (18,810 | ) | 302,014 | ||||||||||||||||
Share of other comprehensive income of associates | 124 | (4,666 | ) | — | 1,283 | — | (3,259 | ) | ||||||||||||||||
Gains(losses) on cash flow hedging instruments | 7,751 | 6,980 | (1,755 | ) | (1,437 | ) | — | 11,539 | ||||||||||||||||
Gains (losses) on hedges of a net investment in a foreign operations | (5,573 | ) | (22,685 | ) | (12,330 | ) | 9,629 | — | (30,959 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
| 188,003 | (89,279 | ) | 7,448 | 28,422 | (18,810 | ) | 115,784 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
| 1 | Restated based on Korean IFRS 1109. |
| 2017 | ||||||||||||||||||||||||
| (In millions of Korean won) | Beginning | Changes (excluding reclassification) | Reclassification to profit or loss | Tax effect | Classified as assets held for sale | Ending | ||||||||||||||||||
Remeasurements of net defined benefit liabilities | (94,079 | ) | 18,703 | — | (4,526 | ) | — | (79,902 | ) | |||||||||||||||
Currency translation differences | 27,509 | (78,941 | ) | — | 11,835 | — | (39,597 | ) | ||||||||||||||||
Gains (losses) on valuation ofavailable-for-sale financial assets | 680,965 | 146,757 | 46,101 | (82,670 | ) | — | 791,153 | |||||||||||||||||
Share of other comprehensive income of associates | (87,577 | ) | 4,249 | — | 20,253 | 67,337 | 4,262 | |||||||||||||||||
Gains (losses) on cash flow hedging instruments | 337 | 10,691 | (444 | ) | (2,833 | ) | — | 7,751 | ||||||||||||||||
Gains (losses) on hedges of a net investment in a foreign operations | (32,292 | ) | 34,915 | — | (8,196 | ) | — | (5,573 | ) | |||||||||||||||
Accumulated other comprehensive income related to held for sale | — | — | 88,835 | (21,498 | ) | (67,337 | ) | — | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
| 494,863 | 136,374 | 134,492 | (87,635 | ) | — | 678,094 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
158
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
35. Trust Accounts
Financial information of the trust segments the Group manages as at December 31, 2018 and 2017, and for the years ended December 31, 2018 and 2017, are as follows:
| Total assets | Operating revenues | |||||||||||||||
| (In millions of Korean won) | 2018 | 2017 | 2018 | 2017 | ||||||||||||
Consolidated | 4,259,441 | 4,148,600 | 127,994 | 110,487 | ||||||||||||
Unconsolidated | 47,644,193 | 43,256,371 | 1,609,587 | 2,590,728 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| 51,903,634 | 47,404,971 | 1,737,581 | 2,701,215 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
1Financial information of the trust accounts are not based on Korean IFRS; it has been prepared in accordance with the Statement of Korea Accounting Standard 5004, Trust Accounts and enforcement regulations of Financial Investment Services under the Financial Investment Services and Capital Markets Act.
Significant receivables and payables related to the Group’s trust accounts as at December 31, 2018 and 2017, are as follows:
| (In millions of Korean won) | 2018 | 2017 | ||||||||
Trust | Assets | |||||||||
Segment | Accrued trust fees | 36,172 | 30,030 | |||||||
Other accrued income | 23,658 | 21,250 | ||||||||
|
|
|
| |||||||
| 59,830 | 51,280 | |||||||||
|
|
|
| |||||||
Liabilities | ||||||||||
Due to trust accounts | 1,160,152 | 1,156,354 | ||||||||
Accrued interest on due to trust accounts | 6,267 | 4,224 | ||||||||
Deposits | 345,873 | 385,596 | ||||||||
Accrued interest on deposits | 24,867 | 25,543 | ||||||||
|
|
|
| |||||||
| 1,537,159 | 1,571,717 | |||||||||
|
|
|
| |||||||
Custody | Assets | |||||||||
Segment | Accrued trust fees | 5,549 | 4,982 | |||||||
|
|
|
| |||||||
Liabilities | ||||||||||
Due to trust accounts | 4,124,955 | 3,861,677 | ||||||||
Accrued interest on due to trust accounts | 4,280 | 3,408 | ||||||||
|
|
|
| |||||||
| 4,129,235 | 3,865,085 | |||||||||
|
|
|
| |||||||
159
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
Significant revenue and expenses related to the Group’s trust accounts for the years ended December 31, 2018 and 2017, are as follows:
| (In millions of Korean won) | 2018 | 2017 | ||||||||
Trust | Revenues | |||||||||
Segment | Fees and commissions from trust accounts | 259,170 | 280,727 | |||||||
Management fees and commissions from retirement pension | 25,321 | 24,590 | ||||||||
Commissions from early termination in trust accounts | 88 | 92 | ||||||||
|
|
|
| |||||||
| 284,579 | 305,409 | |||||||||
|
|
|
| |||||||
Expenses | ||||||||||
Interest expenses on due to trust accounts | 17,842 | 15,440 | ||||||||
Interest expenses on deposits | 21,389 | 29,005 | ||||||||
|
|
|
| |||||||
| 39,231 | 44,445 | |||||||||
|
|
|
| |||||||
Custody | Revenues | |||||||||
Segment | Fees and commissions from trust accounts | 28,215 | 25,261 | |||||||
Commissions from early termination in trust accounts | — | — | ||||||||
| 28,215 | 25,261 | |||||||||
|
|
|
| |||||||
Expenses | ||||||||||
Interest expenses on due to trust accounts | 43,612 | 28,504 | ||||||||
|
|
|
| |||||||
36. Supplemental Cash Flow Information
Cash and cash equivalents as at December 31, 2018 and 2017, are as follows:
| (In millions of Korean won) | 2018 | 2017 | ||||||
Cash | 2,185,156 | 2,167,172 | ||||||
Checks with other banks | 872,166 | 430,253 | ||||||
Due from Bank of Korea | 8,911,607 | 8,981,665 | ||||||
Due from other financial institutions | 2,920,081 | 4,067,228 | ||||||
|
|
|
| |||||
| 14,889,010 | 15,646,318 | |||||||
|
|
|
| |||||
Restricted due from financial institutions | (9,203,801 | ) | (9,239,813 | ) | ||||
Due from financial institutions with original maturities over three months | (828,714 | ) | (328,551 | ) | ||||
|
|
|
| |||||
| (10,032,515 | ) | (9,568,364 | ) | |||||
|
|
|
| |||||
| 4,856,495 | 6,077,954 | |||||||
|
|
|
| |||||
160
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
Significantnon-cash transactions for the years ended December 31, 2018 and 2017, are as follows:
| (In millions of Korean won) | 2018 | 2017 | ||||||
Decrease in loans due to the write-offs | 526,134 | 650,419 | ||||||
Changes in accumulated other comprehensive income due to gains and losses on debt instruments at fair value through other comprehensive income | 57,188 | — | ||||||
Changes in accumulated other comprehensive income due to valuation of financial investments | — | 110,188 | ||||||
Changes in accumulated other comprehensive income due to investment in associates | (4,665 | ) | 3,004 | |||||
Changes in financial investments due todebt-for-equity swap | 22,286 | 10,250 | ||||||
Cash inflows and outflows from income tax, interest and dividends for the years ended December 31, 2018 and 2017, are as follows:
| (In millions of Korean won) | Activities | 2018 | 2017 | |||||||||
Income tax paid | Operating | 396,072 | 401,530 | |||||||||
Interest received | Operating | 10,162,987 | 8,766,970 | |||||||||
Interest paid | Operating | 3,483,064 | 2,937,348 | |||||||||
Dividends received | Operating | 97,440 | 102,328 | |||||||||
Dividends paid | Financing | 640,132 | 359,493 | |||||||||
Changes in liabilities arising from financial activities for the year ended December 31, 2018 are as follows:
| (In millions of Korean won) | Derivative financial instrument for hedging purposes1 | Debts | Debentures | Payables to trust accounts | Finance lease liabilities | Deposits for letter of guarantees and others | Other payable | Total | ||||||||||||||||||||||||
Beginning | (3,659 | ) | 15,810,753 | 19,183,798 | 5,018,031 | 1,642 | 351,455 | 144,636 | 40,506,656 | |||||||||||||||||||||||
Cash flow | (17,698 | ) | 1,517,014 | 3,795,428 | 267,076 | (11,242 | ) | (205,302 | ) | (3,170 | ) | 5,342,106 | ||||||||||||||||||||
Lease newly acquired | — | — | — | — | 17,555 | — | — | 17,555 | ||||||||||||||||||||||||
Exchange differences | — | 169,122 | 147,306 | — | — | — | — | 316,428 | ||||||||||||||||||||||||
Changes in fair values | 30,679 | — | 4,019 | — | — | — | — | 34,698 | ||||||||||||||||||||||||
Changes from business combination | — | — | — | — | — | — | (48,711 | ) | (48,711 | ) | ||||||||||||||||||||||
Other changes fromnon-cash transactions | 5,321 | (833 | ) | 33,034 | — | 110 | 10,211 | 11,429 | 59,272 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Ending | 14,643 | 17,496,056 | 23,163,585 | 5,285,107 | 8,065 | 156,364 | 104,184 | 46,228,004 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
| 1 | Derivative financial instruments held for hedging are shown at net amounts of liabilities and assets. |
161
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
37. Contingent Liabilities and Commitments
Acceptances and guarantees as at December 31, 2018 and 2017, are as follows:
| (In millions of Korean won) | 2018 | 2017 | ||||||
Confirmed acceptances and guarantees |
| |||||||
Confirmed acceptances and guarantees in Korean won | ||||||||
Acceptances and guarantees for KB purchasing loan | 196,517 | 252,817 | ||||||
Others | 597,636 | 530,272 | ||||||
|
|
|
| |||||
| 794,153 | 783,089 | |||||||
|
|
|
| |||||
Confirmed acceptances and guarantees in foreign currencies | ||||||||
Acceptances of letter of credit | 208,926 | 147,987 | ||||||
Letter of guarantees | 53,210 | 60,853 | ||||||
Bid bond | 51,528 | 46,984 | ||||||
Performance bond | 604,311 | 563,506 | ||||||
Refund guarantees | 592,925 | 778,779 | ||||||
Others | 2,539,900 | 1,960,769 | ||||||
|
|
|
| |||||
| 4,050,800 | 3,558,878 | |||||||
|
|
|
| |||||
Financial guarantees | ||||||||
Acceptances and guarantees for mortgage | 50,497 | 57,445 | ||||||
Overseas debt guarantees | 311,796 | 285,577 | ||||||
International financing guarantees in foreign currencies | 110,070 | 46,953 | ||||||
Others | 270,000 | 270,000 | ||||||
|
|
|
| |||||
| 742,363 | 659,975 | |||||||
|
|
|
| |||||
| 5,587,316 | 5,001,942 | |||||||
|
|
|
| |||||
Unconfirmed acceptances and guarantees |
| |||||||
Guarantees of letter of credit | 1,745,340 | 2,250,543 | ||||||
Refund guarantees | 686,843 | 384,958 | ||||||
|
|
|
| |||||
| 2,432,183 | 2,635,501 | |||||||
|
|
|
| |||||
| 8,019,499 | 7,637,443 | |||||||
|
|
|
| |||||
162
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
Guarantee exposure by credit ratings
The credit quality of the guarantees exposure as at December 31, 2018 can be categorized as follows:
| 2018 | ||||||||||||||||
| (In millions of Korean won) | Financial instruments applying12-month expected credit losses | Financial instruments applying lifetime expected credit losses | Total | |||||||||||||
| Non-impaired | Impaired | |||||||||||||||
Confirmed acceptances and guarantees | ||||||||||||||||
Grade 1 | 3,726,259 | 179 | — | 3,726,438 | ||||||||||||
Grade 2 | 1,571,258 | 29,034 | — | 1,600,292 | ||||||||||||
Grade 3 | 84,251 | 13,585 | — | 97,836 | ||||||||||||
Grade 4 | 30,443 | 117,166 | 420 | 148,029 | ||||||||||||
Grade 5 | — | 171 | 14,550 | 14,721 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| 5,412,211 | 160,135 | 14,970 | 5,587,316 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
Unconfirmed acceptances and guarantees |
| |||||||||||||||
Grade 1 | 1,102,478 | 1,747 | — | 1,104,225 | ||||||||||||
Grade 2 | 1,180,137 | 17,795 | — | 1,197,932 | ||||||||||||
Grade 3 | 25,749 | 16,225 | — | 41,974 | ||||||||||||
Grade 4 | 9,627 | 66,186 | — | 75,813 | ||||||||||||
Grade 5 | — | 219 | 12,020 | 12,239 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| 2,317,991 | 102,172 | 12,020 | 2,432,183 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
| 7,730,202 | 262,307 | 26,990 | 8,019,499 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
| 1 | Applied same criteria as the credit quality classification of loans. |
Acceptances and guarantees by counterparty as at December 31, 2018 and 2017, are as follows:
| 2018 | ||||||||||||||||
| (In millions of Korean won) | Confirmed guarantees | Unconfirmed guarantees | Total | Proportion (%) | ||||||||||||
Large companies | 4,775,838 | 1,901,951 | 6,677,789 | 83.27 | ||||||||||||
Small and medium sized companies | 617,458 | 423,947 | 1,041,405 | 12.99 | ||||||||||||
Public and others | 194,020 | 106,285 | 300,305 | 3.74 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| 5,587,316 | 2,432,183 | 8,019,499 | 100.00 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
163
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
| 2017 | ||||||||||||||||
| (In millions of Korean won) | Confirmed guarantees | Unconfirmed guarantees | Total | Proportion (%) | ||||||||||||
Large companies | 4,185,975 | 1,913,114 | 6,099,089 | 79.86 | ||||||||||||
Small and medium sized companies | 621,835 | 492,369 | 1,114,204 | 14.59 | ||||||||||||
Public and others | 194,132 | 230,018 | 424,150 | 5.55 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| 5,001,942 | 2,635,501 | 7,637,443 | 100.00 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
Acceptances and guarantees by industry as at December 31, 2018 and 2017, are as follows:
| 2018 | ||||||||||||||||
| (In millions of Korean won) | Confirmed guarantees | Unconfirmed guarantees | Total | Proportion (%) | ||||||||||||
Financial institutions | 72,071 | 3,736 | 75,807 | 0.95 | ||||||||||||
Manufacturing | 2,981,245 | 1,451,657 | 4,432,902 | 55.27 | ||||||||||||
Service | 931,680 | 84,586 | 1,016,266 | 12.67 | ||||||||||||
Wholesale and retail | 998,333 | 723,367 | 1,721,700 | 21.47 | ||||||||||||
Construction | 280,146 | 40,988 | 321,134 | 4.00 | ||||||||||||
Public | 165,571 | 36,256 | 201,827 | 2.52 | ||||||||||||
Others | 158,270 | 91,593 | 249,863 | 3.12 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| 5,587,316 | 2,432,183 | 8,019,499 | 100.00 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
| 2017 | ||||||||||||||||
| (In millions of Korean won) | Confirmed guarantees | Unconfirmed guarantees | Total | Proportion (%) | ||||||||||||
Financial institutions | 23,317 | 7,353 | 30,670 | 0.40 | ||||||||||||
Manufacturing | 2,799,593 | 1,270,721 | 4,070,314 | 53.29 | ||||||||||||
Service | 655,057 | 100,004 | 755,061 | 9.89 | ||||||||||||
Wholesale and retail | 935,647 | 837,230 | 1,772,877 | 23.21 | ||||||||||||
Construction | 335,156 | 198,996 | 534,152 | 6.99 | ||||||||||||
Public | 165,249 | 129,944 | 295,193 | 3.87 | ||||||||||||
Others | 87,923 | 91,253 | 179,176 | 2.35 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| 5,001,942 | 2,635,501 | 7,637,443 | 100.00 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
164
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
Commitments as at December 31, 2018 and 2017, are as follows:
| (In millions of Korean won) | 2018 | 2017 | ||||||
Commitments | ||||||||
Corporate loan commitments | 36,929,404 | 32,786,234 | ||||||
Retail loan commitments | 41,283,734 | 15,935,382 | ||||||
Other acceptance and guarantees in Korean won | 1,300,000 | 1,000,000 | ||||||
Purchase of securities | 1,765,445 | 1,129,408 | ||||||
|
|
|
| |||||
| 81,278,583 | 50,851,024 | |||||||
|
|
|
| |||||
Financial Guarantees | ||||||||
Credit line | 1,956,426 | 1,953,579 | ||||||
Purchase of securities | 436,800 | 354,800 | ||||||
|
|
|
| |||||
| 2,393,226 | 2,308,379 | |||||||
|
|
|
| |||||
| 83,671,809 | 53,159,403 | |||||||
|
|
|
| |||||
Other Matters (including litigation)
| a) | The Group has filed 50 lawsuits (excluding minor lawsuits in relation to the collection or management of loans), as the plaintiff, involving aggregate claims of |
| b) | As at December 31, 2018, the Group has entered into construction contracts amounting to |
| c) | As at December 31, 2018, the Group has entered into construction contracts amounting to |
| d) | The face values of the securities sold to general customers through tellers’ sale amount to |
165
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
38. Subsidiaries
Details of subsidiaries as at December 31, 2018, are as follows:
Investor | Investee | Ownership (%) | Location | Industry | ||||||
Kookmin Bank | Kookmin Bank Int’l Ltd.(London)1 | 100.00 | United Kingdom | Banking and foreign exchange transaction | ||||||
Kookmin Bank | Kookmin Bank Cambodia PLC. | 100.00 | Cambodia | Banking and foreign exchange transaction | ||||||
Kookmin Bank | Kookmin Bank (China) Ltd. | 100.00 | China | Banking and foreign exchange transaction | ||||||
Kookmin Bank | KB Microfinance Myanmar Co., Ltd | 100.00 | Myanmar | Micro finance services | ||||||
Kookmin Bank | Personal pension trust and 10 others2 | — | Korea | Trust | ||||||
Kookmin Bank | KL the 1st L.L.C. and 33 others3 | — | Korea | Asset-backed Securitization and others | ||||||
Kookmin Bank | KB Wise Star Private Real Estate Feeder Fund 14 | 86.00 | Korea | Investment Trust | ||||||
KB Wise Star Private Real Estate Feeder Fund 1 | KB Star Office Private Real Estate Master Fund 23 | 44.44 | Korea | Investment Trust | ||||||
Kookmin Bank | KB Multi-Asset Private Securities FundS-14 | 99.96 | Korea | Investment Trust | ||||||
Kookmin Bank | KB Multi-Asset Private Securities FundP-14 | 99.96 | Korea | Investment Trust | ||||||
KB Multi-Asset Private Securities FundP-1(Bond Mixed) | KB Multi-Asset Private Securities FundP-1(Bond Mixed) | 100.00 | Korea | Investment Trust | ||||||
Kookmin Bank | Samsung KODEX 10YF-LKTB Inverse ETF(Bond-Derivatives)4 | 88.74 | Korea | Investment Trust | ||||||
Kookmin Bank | KB Haeorum Private Securities 834 | 99.95 | Korea | Investment Trust | ||||||
Kookmin Bank | KB KBSTAR KTB 3Y Futures Inverse ETF4 | 61.56 | Korea | Investment Trust | ||||||
Kookmin Bank | Kiwoom Frontier Private placement fund 10[Bond] 4 | 99.85 | Korea | Investment Trust | ||||||
Kookmin Bank | Tong Yang Safe Plus Qualified Private TrustS-8(Bond) 4 | 99.93 | Korea | Investment Trust | ||||||
Kookmin Bank | Mirae Asset Triumph Global Privately placed Feeder Investment Trust 14 | 99.92 | Korea | Investment Trust | ||||||
Mirae Asset Triumph Global Privately placed Feeder Investment Trust 1 | Mirae Asset Triumph Global Privately placed Feeder Investment Trust 1 | 100.00 | Korea | Investment Trust | ||||||
Kookmin Bank | NH-Amundi Global Private Securities Investment Trust 1(BOND)4 | 83.31 | Korea | Investment Trust | ||||||
Kookmin Bank | Meritz Private Real Estate fundNo.9-24 | 99.98 | Korea | Investment Trust | ||||||
Kookmin Bank | AIP US Red Private Real Estate Trust NO.104 | 99.97 | Korea | Investment Trust | ||||||
| 1 | The Group converted Kookmin Bank Int’l Ltd.(London) into a London branch as at May 16, 2018, which is considered to be a merger transaction between subsidiaries under common control. The Group accounted for the transaction by applying carrying amount method and measured the transferred assets and liabilities at carrying amounts included in the consolidated financial statements. The amounts of the transferred assets and liabilities resulting from the business combination were |
166
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
| 2 | The Group controls the trust because it has power that determines the management performance over the trust, and is exposed to variable returns to absorb losses through the guarantees of payment of principal or, payment of principal and fixed rate of return. |
| 3 | The Group controls these investees because it is exposed to variable returns from its involvement with the investees, and has ability to affect those returns through its power, even though it holds less than a majority of the voting rights of the investees. |
| 4 | The Group controls these investees because it is exposed to variable returns from its involvement with the investees, and has ability to affect those returns through its power. |
The condensed financial information of major subsidiaries as at December 31, 2018 and 2017, and for the years ended December 31, 2018 and 2017, are as follows:
| 2018 | ||||||||||||||||||||
| (In millions of Korean won) | Assets | Liabilities | Equity | Operating revenue | Profit (loss) for the period | |||||||||||||||
Kookmin Bank Int’l Ltd.(London) | 35,923 | 940 | 34,983 | 7,330 | 1,331 | |||||||||||||||
Kookmin Bank Hongkong Ltd.1 | — | — | — | 5,716 | 5,434 | |||||||||||||||
Kookmin Bank Cambodia PLC. | 197,135 | 104,328 | 92,807 | 10,307 | 1,621 | |||||||||||||||
Kookmin Bank (China) Ltd. | 2,605,033 | 2,192,469 | 412,564 | 138,453 | 14,819 | |||||||||||||||
KB Microfinance Myanmar Co., Ltd | 20,941 | 879 | 20,062 | 2,783 | 538 | |||||||||||||||
Personal pension trust and 10 others | 4,284,440 | 4,173,488 | 110,952 | 144,767 | 3,966 | |||||||||||||||
1 Liquidation was completed during the year ended December 31, 2018.
| (In millions of Korean won) | 2017 | |||||||||||||||||||
| Assets | Liabilities | Equity | Operating revenue | Profit (loss) for the period | ||||||||||||||||
Kookmin Bank Int’l Ltd.(London) | 506,474 | 423,252 | 83,222 | 15,931 | 3,022 | |||||||||||||||
Kookmin Bank Hongkong Ltd. | 22,866 | — | 22,866 | — | (1,953 | ) | ||||||||||||||
Kookmin Bank Cambodia PLC. | 133,133 | 76,680 | 56,453 | 8,267 | 984 | |||||||||||||||
Kookmin Bank (China) Ltd. | 2,007,154 | 1,606,434 | 400,720 | 70,142 | 1,118 | |||||||||||||||
KB Microfinance Myanmar Co., Ltd | 10,372 | 400 | 9,972 | 623 | (664 | ) | ||||||||||||||
Personal pension trust and 10 others | 4,162,200 | 4,055,204 | 106,996 | 111,187 | 4,825 | |||||||||||||||
167
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
Nature of the risks associated with interests in consolidated structured entities
Terms of contractual arrangements that provide financial support to a consolidated structured entity are as follows:
- The Group provides the capital commitments ofW 172,000 million to KB Wise Star Private Real Estate Feeder Fund 1st, of whichW 56,717 million has not been utilized and ofW 55,894 million to Meritz Private Real Estate fundNo.9-2, of whichW 36,243 million has not been utilized. Based on the investment agreement, the Group is subject to increase its investment upon the request of the asset management company or agreement among existing investors.
- The Group has provided purchase commitment and grant of credit to the structured entities that are considered as subsidiaries. The Group should purchase unsold commercial paper securities if there is a shortage of the investors for the commercial paper securities issued by the structured entity. If events causing the cessation of the issuance of commercial paper securities occur or if the structured entities become insolvent, the Group should provide loans to the structured entities under certain conditions.
| (In millions of Korean won) | 2018 | |||
KL the 1st L.L.C. | 50,132 | |||
KH the 2nd L.L.C. | 40,988 | |||
KL the International 1st L.L.C. | 30,280 | |||
Silver Investment 2nd Inc. | 50,000 | |||
KL the 3rd L.L.C. | 30,155 | |||
KH the 3rd L.L.C. | 70,100 | |||
KBM the 1st L.L.C. | 50,289 | |||
KY the 1st L.L.C. | 24,035 | |||
KBC the 1st L.L.C. | 35,104 | |||
KH the 4th L.L.C. | 25,130 | |||
KDL the 1st L.L.C. | 32,828 | |||
KB INO 1st L.L.C. | 10,200 | |||
KBH the 1st L.L.C. | 14,070 | |||
KBH the 2nd L.L.C. | 20,187 | |||
LIIV FOR RENTAL 1st L.L.C. | 32,200 | |||
HLD the 3rd L.L.C. | 108,500 | |||
KB HUB the 1st L.L.C. | 30,123 | |||
Leecheon Albatros L.L.C. | 20,200 | |||
KBH the 3rd L.L.C. | 40,167 | |||
KBC the 2nd L.L.C. | 50,141 | |||
KLD the 1st L.L.C. | 9,100 | |||
LOG the 3rd L.L.C. | 24,300 | |||
KB Green 1st L.L.C. | 52,672 | |||
KBL Incheon 1st L.L.C. | 100,968 | |||
KB DTower 1st L.L.C. | 50,017 | |||
KB Display 1st L.L.C. | 100,382 | |||
KBL CC 1st L.L.C. | 90,207 | |||
KB Alminium 1st L.L.C. | 50,208 | |||
KB First Park L.L.C. | 62,919 | |||
KB INO 2nd L.L.C. | 50,049 | |||
168
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
- The Group provides the guarantees of payment of principal or principal and fixed rate of return, in case the operating results of the trusts are less than the guaranteed principal or principal and a fixed rate of return.
Changes in subsidiaries
Kiwoom Frontier Private placement fund 10(Bond) and fourteen other subsidiaries were newly included in the consolidation scope, and Kookmin Bank Hong Kong Ltd. and six other subsidiaries were excluded from the scope of consolidation due to liquidation and resale during the year ended December 31, 2018.
Net cash flow from change in subsidiaries
The net cash inflow from subsidiaries newly consolidated andde-consolidated is amounting toW26,125 million andW40,405 million, respectively for the year ended December 31, 2018.
39. Unconsolidated Structured Entity
The nature, purpose and activities of the unconsolidated structured entities and how the structured entities are financed, are as follows:
Nature | Purpose | Activities | Methods of Financing | |||
Asset—backed securitization | Early cash generation through transfer of securitization assets Fees earned as services to SPC, such as providing lines of credit and ABCP purchase commitments | Fulfillment of Asset-backed securitization plan Purchase and collection securitization assets Issuance and repayment of ABS and ABCP | Issuance of ABS and ABCP based on securitization assets | |||
Project financing | Granting PF loans related to SOC and real property Granting loans to ships/aircrafts SPC | Construction of SOC and real property Building ships/ Construction and purchase of aircrafts | Loan commitments through Credit Line, providing lines of credit and investment agreements | |||
Investment funds | Investment in beneficiary certificates Investment in PEF and partnerships | Management of fund assets Payment of fund fees and allocation of fund profits | Sales of beneficiary certificate instruments Investment of general partners and limited partners | |||
169
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
As at December 31, 2018 and 2017, the size of the unconsolidated structured entities and the risks associated with its interests in unconsolidated structured entities are as follows:
| 2018 | ||||||||||||||||||||
| (In millions of Korean won) | Asset-backed securitization | Project financing | Investment funds | Others | Total | |||||||||||||||
Total assets of the unconsolidated structured entities | 86,639,696 | 20,660,605 | 28,470,016 | 3,878,221 | 139,648,538 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Carrying amount on financial statements | ||||||||||||||||||||
Assets | ||||||||||||||||||||
Financial assets at fair value through profit or loss | 213,279 | 2,270 | 2,241,304 | 17,715 | 2,474,568 | |||||||||||||||
Derivative financial assets | 4,034 | — | 22,250 | — | 26,284 | |||||||||||||||
Loans at amortized cost | 416,246 | 1,764,707 | — | 336,294 | 2,517,247 | |||||||||||||||
Financial investments | 5,458,105 | — | — | — | 5,458,105 | |||||||||||||||
Investments in associates | — | — | 277,645 | — | 277,645 | |||||||||||||||
Other assets | — | — | — | — | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
| 6,091,664 | 1,766,977 | 2,541,199 | 354,009 | 10,753,849 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Liabilities | ||||||||||||||||||||
Deposits | 526,274 | 728,324 | 62,319 | 7,757 | 1,324,674 | |||||||||||||||
Derivative financial liabilities | 331 | — | — | — | 331 | |||||||||||||||
Other liabilities | 981 | 1,112 | 58 | — | 2,151 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
| 527,586 | 729,436 | 62,377 | 7,757 | 1,327,156 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Maximum exposure to loss | ||||||||||||||||||||
Asset1 | 6,091,664 | 1,766,977 | 2,541,199 | 354,009 | 10,753,849 | |||||||||||||||
Purchase and capital commitments | — | 20,000 | 1,664,461 | — | 1,684,461 | |||||||||||||||
Unused providing lines of credit | 1,956,427 | — | — | — | 1,956,427 | |||||||||||||||
Acceptances and guarantees and Loan commitments | 889,315 | 1,193,261 | — | — | 2,082,576 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
| 8,937,406 | 2,980,238 | 4,205,660 | 354,009 | 16,477,313 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Methods of determining the maximum exposure to loss | | Providing lines of credit / Purchase commitments/ Acceptances and guarantees and Loan commitments | | | Loan commitments / Capital commitments / Purchase commitments and Acceptances and guarantees | | | Capital commitments | | | Loan commitments | | ||||||||
170
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
| 2017 | ||||||||||||||||||||
| (In millions of Korean won) | Asset-backed securitization | Project Financing | Investment funds | Others | Total | |||||||||||||||
Total assets of the unconsolidated structured entities | 99,835,410 | 21,636,792 | 25,929,064 | 4,890,100 | 152,291,366 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Carrying amount on financial statements | ||||||||||||||||||||
Assets | ||||||||||||||||||||
Financial assets at fair value through profit or loss | 168,647 | — | — | — | 168,647 | |||||||||||||||
Derivative financial assets | 268 | — | — | — | 268 | |||||||||||||||
Loans | 239,894 | 2,021,225 | — | 327,875 | 2,588,994 | |||||||||||||||
Financial investments | 6,400,833 | 7,867 | 2,309,361 | 17,055 | 8,735,116 | |||||||||||||||
Investments in associates | — | — | 235,234 | — | 235,234 | |||||||||||||||
Other assets | — | 710 | — | — | 710 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
| 6,809,642 | 2,029,802 | 2,544,595 | 344,930 | 11,728,969 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Liabilities | ||||||||||||||||||||
Deposits | 484,890 | 755,242 | 50,832 | 3,985 | 1,294,949 | |||||||||||||||
Derivative financial liabilities | 229 | — | — | — | 229 | |||||||||||||||
Other liabilities | — | 29 | 45 | — | 74 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
| 485,119 | 755,271 | 50,877 | 3,985 | 1,295,252 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Maximum exposure to loss | ||||||||||||||||||||
Asset1 | 6,809,642 | 2,029,802 | 2,544,595 | 344,930 | 11,728,969 | |||||||||||||||
Purchase and capital commitments | 20,000 | — | 1,178,462 | — | 1,198,462 | |||||||||||||||
Unused providing lines of credit | 2,082,736 | — | — | — | 2,082,736 | |||||||||||||||
Acceptances and guarantees and Loan commitments | 382,300 | 1,385,722 | — | — | 1,768,022 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
| 9,294,678 | 3,415,524 | 3,723,057 | 344,930 | 16,778,189 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Methods of determining the maximum exposure to loss | | Providing lines of credit / Purchase commitments / Acceptances and guarantees and Loan commitments | | | Loan commitments / capital commitments / purchase commitments and Acceptances and guarantees | | | Capital commitments | | | Loan commitments | | ||||||||
| 1 | Maximum exposure to loss includes the asset amounts, after deducting loss (provision for assets, impairment losses and others), recognized in the consolidated financial statements of the Group. |
171
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
40. Finance and Operating Leases
40.1 Finance Lease
The future minimum lease payments as at December 31, 2018 and 2017, are as follows:
| (In millions of Korean won) | 2018 | 2017 | ||||||
Net carrying amount of finance lease assets | 26,083 | 17,768 | ||||||
|
|
|
| |||||
Minimum lease payments | ||||||||
Within 1 year | 5,824 | 1,660 | ||||||
1-5 years | 2,406 | — | ||||||
|
|
|
| |||||
| 8,230 | 1,660 | |||||||
|
|
|
| |||||
Present value of minimum lease payments | ||||||||
Within 1 year | 5,716 | 1,642 | ||||||
1-5 years | 2,349 | — | ||||||
|
|
|
| |||||
| 8,065 | 1,642 | |||||||
|
|
|
| |||||
40.2 Operating Lease
40.2.1 The Group as an Operating Lessee
The future minimum lease payments arising from thenon-cancellable lease contracts as at December 31, 2018 and 2017, are as follows:
| (In millions of Korean won) | 2018 | 2017 | ||||||
Minimum lease payments | ||||||||
Within 1 year | 135,474 | 123,869 | ||||||
1-5 years | 192,148 | 138,666 | ||||||
Over 5 years | 16,675 | 34,129 | ||||||
|
|
|
| |||||
| 344,297 | 296,664 | |||||||
|
|
|
| |||||
Minimum sublease payments | (2,323 | ) | (2,461 | ) | ||||
The lease payments reflected in profit or loss for the years ended December 31, 2018 and 2017, are as follows:
| (In millions of Korean won) | 2018 | 2017 | ||||||
Lease payments reflected in profit or loss | ||||||||
Minimum lease payments | 161,936 | 159,413 | ||||||
Sublease payments | (1,769 | ) | (1,177 | ) | ||||
|
|
|
| |||||
| 160,167 | 158,236 | |||||||
|
|
|
| |||||
172
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
40.2.2 The Group as an Operating Lessor
The future minimum lease receipts arising from thenon-cancellable lease contracts as at December 31, 2018 and 2017, are as follows:
| (In millions of Korean won) | 2018 | 2017 | ||||||
Minimum lease receipts | ||||||||
Within 1 year | 17,376 | 17,430 | ||||||
1-5 years | 23,984 | 34,079 | ||||||
|
|
|
| |||||
| 41,360 | 51,509 | |||||||
|
|
|
| |||||
41. Related Party Transactions
Profit or loss arising from transactions with related parties for the years ended December 31, 2018 and 2017, are as follows:
| (In millions of Korean won) | 2018 | 2017 | ||||||||
Parent |
| |||||||||
KB Financial Group Inc. | Fee and commission income | 4,644 | 2,961 | |||||||
Other operating income | — | 110 | ||||||||
Othernon-operating income | 808 | 778 | ||||||||
Interest expense | 5,178 | 3,151 | ||||||||
General and administrative expenses | 778 | 671 | ||||||||
Parent’s subsidiaries |
| |||||||||
KB Asset Management Co., Ltd. | Fee and commission income | 1,085 | 1,125 | |||||||
Othernon-operating income | 4 | 3 | ||||||||
Interest expense | 95 | 272 | ||||||||
Fee and commission expense | 3,157 | 1,488 | ||||||||
General and administrative expenses | 458 | — | ||||||||
KB Real Estate Trust Co., Ltd. | Fee and commission income | 134 | 114 | |||||||
Othernon-operating income | 42 | 44 | ||||||||
Interest expense | 197 | 160 | ||||||||
Fee and commission expense | 2,282 | 1,577 | ||||||||
KB Investment Co., Ltd. | Fee and commission income | 23 | 36 | |||||||
Interest expense | 376 | 270 | ||||||||
KB Credit Information Co., Ltd. | Fee and commission income | 58 | 67 | |||||||
Othernon-operating income | 205 | 231 | ||||||||
Interest expense | 85 | 90 | ||||||||
Fee and commission expense | 16,780 | 13,995 | ||||||||
General and administrative expenses | — | 365 | ||||||||
KB Data System Co., Ltd. | Fee and commission income | 202 | 131 | |||||||
Othernon-operating income | 98 | 95 | ||||||||
Interest expense | 250 | 173 | ||||||||
General and administrative expenses | 50,803 | 45,517 | ||||||||
173
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
KB Life Insurance Co., Ltd. | Fee and commission income | 12,471 | 14,418 | |||||||
Gains on financial instruments at fair value through profit or loss | 14,064 | — | ||||||||
Gains on financial instruments at fair value through profit or loss (under Korean IFRS 1039) | — | 1,302 | ||||||||
Othernon-operating income | 4,284 | 4,223 | ||||||||
Interest expense | 983 | 968 | ||||||||
Fee and commission expense | 12 | 5 | ||||||||
Losses on financial instruments at fair value through profit or loss | 3,421 | — | ||||||||
Losses on financial instruments at fair value through profit or loss (under Korean IFRS 1039) | — | 10,779 | ||||||||
General and administrative expenses | 1,582 | 1,793 | ||||||||
KB Kookmin Card Co., Ltd. | Interest income | 3,855 | 3,549 | |||||||
Fee and commission income | 211,328 | 236,355 | ||||||||
Gains on financial instruments at fair value through profit or loss | 2,730 | — | ||||||||
Gains on financial instruments at fair value through profit or loss (under Korean IFRS 1039) | — | 263 | ||||||||
Reversal of credit losses | 7 | — | ||||||||
Othernon-operating income | 983 | 1,003 | ||||||||
Interest expense | 870 | 1,289 | ||||||||
Fee and commission expense | 1,587 | 777 | ||||||||
Losses on financial instruments at fair value through profit or loss | 400 | — | ||||||||
Losses on financial instruments at fair value through profit or loss (under Korean IFRS 1039) | — | 6,825 | ||||||||
Provision for credit losses | 4 | 292 | ||||||||
General and administrative expenses | 216 | 279 | ||||||||
KB Savings Bank Co., Ltd. | Fee and commission income | 379 | 273 | |||||||
Othernon-operating income | 44 | 47 | ||||||||
Interest expense | 2 | 7 | ||||||||
Fee and commission expense | 24 | — |
174
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
KB Capital Co., Ltd. | Interest income | 1,989 | 89 | |||||||
Fee and commission income | 2,311 | 1,264 | ||||||||
Othernon-operating income | 208 | 156 | ||||||||
Interest expense | 1,138 | 247 | ||||||||
Fee and commission expense | 61 | — | ||||||||
Other operating expense | 5 | — | ||||||||
Provision for credit losses | 163 | 105 | ||||||||
General and administrative expenses | 16 | — | ||||||||
KB Insurance Co., Ltd. | Interest income | 45 | 53 | |||||||
Fee and commission income | 22,948 | 22,856 | ||||||||
Gains on financial instruments at fair value through profit or loss | 24,999 | — | ||||||||
Gains on financial instruments at fair value through profit or loss (under Korean IFRS 1039) | — | 3,345 | ||||||||
Othernon-operating income | 363 | 280 | ||||||||
Interest expense | 2,112 | 2,268 | ||||||||
Fee and commission expense | 967 | — | ||||||||
Losses on financial instruments at fair value through profit or loss | 4,328 | — | ||||||||
Losses on financial instruments at fair value through profit or loss (under Korean IFRS 1039) | — | 53,165 | ||||||||
Other operating expense | 16 | — | ||||||||
General and administrative expenses | 15,667 | 14,663 |
175
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
KB Securities Co., Ltd. | Interest income | 459 | 56 | |||||||
Fee and commission income | 15,770 | 13,511 | ||||||||
Gains on financial instruments at fair value through profit or loss | 8,583 | — | ||||||||
Gains on financial instruments at fair value through profit or loss (under Korean IFRS 1039) | — | 3,295 | ||||||||
Reversal of credit losses | — | 123 | ||||||||
Othernon-operating income | 10,371 | 7,339 | ||||||||
Interest expense | 3,771 | 2,914 | ||||||||
Fee and commission expense | 1,079 | 397 | ||||||||
Losses on financial instruments at fair value through profit or loss | 8,448 | — | ||||||||
Losses on financial instruments at fair value through profit or loss (under Korean IFRS 1039) | — | 7,237 | ||||||||
Provision for credit losses | 21 | — | ||||||||
General and administrative expenses | 8,361 | 803 | ||||||||
Hanbando BTL Private Special Asset Fund | Fee and commission income | 160 | 170 | |||||||
KB Senior Loan Private Fund No.1 | Fee and commission income | 20 | 31 | |||||||
KB Evergreen Private Securities Fund 98(Bond) | Fee and commission income | 5 | — | |||||||
KB AMP Infra Private Special Asset Fund 1 (FoFs) | Fee and commission income | 5 | 10 | |||||||
KB Onkookmin 2020 TDF Fund (FoFs)1 | Fee and commission income | 1 | 1 | |||||||
KB Onkookmin 2025 TDF Fund (FoFs) 1 | Fee and commission income | 1 | 1 | |||||||
KB Onkookmin 2030 TDF Fund (FoFs) 1 | Fee and commission income | 1 | 1 | |||||||
KB Onkookmin 2035 TDF Fund (FoFs) | Fee and commission income | 2 | 1 | |||||||
KB Onkookmin 2040 TDF Fund (FoFs) 1 | Fee and commission income | 1 | 1 | |||||||
KB Onkookmin 2045 TDF Fund (FoFs) | Fee and commission income | 1 | 1 | |||||||
KB Onkookmin 2050 TDF Fund (FoFs) 1 | Fee and commission income | 1 | 1 | |||||||
KB Muni bond Private Securities Fund 1 (USD)(bond) | Fee and commission income | 10 | 2 | |||||||
KB Global Private Real Estate Debt Fund 1 | Fee and commission income | 5 | — | |||||||
KB Na Compass Energy Private Special Asset Fund | Fee and commission income | 5 | — | |||||||
KB Star Office Private Real Estate Investment Trust No.3 | Interest income | 433 | — | |||||||
Interest expense | 48 | — | ||||||||
KB Star Office Private Real Estate Investment Trust No.4 | Interest income | 396 | — | |||||||
Fee and commission income | 10 | — | ||||||||
Interest expense | 13 | — | ||||||||
KB Korea Short Term Premium Private Securities 5(USD)(Bond) | Fee and commission income | 2 | — | |||||||
KB Global Core Bond Securities Master Fund(Bond) | Fee and commission income | 2 | — | |||||||
Associates |
| |||||||||
Korea Credit Bureau Co., Ltd. | Fee and commission income | 4 | 4 | |||||||
Interest expense | 127 | 132 | ||||||||
Fee and commission expense | 1,486 | 1,439 | ||||||||
Incheon Bridge Co., Ltd. | Interest income | 9,426 | 25,511 | |||||||
Fee and commission income | 9 | — | ||||||||
Reversal of credit losses | — | 43 | ||||||||
Interest expense | 296 | 292 | ||||||||
Fee and commission expense | 2 | — | ||||||||
Provision for credit losses | 1 | — | ||||||||
176
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
Jaeyang Industry Co., Ltd. | Interest income | — | 98 | |||||||
Reversal of credit losses | — | 6 | ||||||||
Dongjo Co., Ltd. | Reversal of credit losses | 31 | 2 | |||||||
Dae-A Leisure Co., Ltd. | Interest expense | 9 | 1 | |||||||
KB12-1 Venture Investment Partnership | Interest expense | 24 | 18 | |||||||
Future Planning KBStart-up Creation Fund | Interest expense | 18 | — | |||||||
KB High-tech Company Investment Fund | Interest expense | 27 | 65 | |||||||
Aju Good Technology Venture Fund | Interest expense | 30 | 14 | |||||||
KB-KDBC New Technology Business Investment Fund | Interest expense | 39 | 4 | |||||||
KB Digital Innovation & Growth New Technology Business Investment Fund | Interest expense | 7 | — | |||||||
KB-Brain KOSDAQScale-up Fund | Interest expense | 21 | — | |||||||
Paroman Corporation | Reversal of credit losses | — | 345 | |||||||
KB Star Office Private Real Estate Investment Trust No.1 | Interest expense | 93 | 63 | |||||||
Associates of parent’s subsidiaries |
| |||||||||
SY Auto Capital Co., Ltd. | Interest income | 189 | 102 | |||||||
Fee and commission income | 1 | — | ||||||||
Reversal of credit losses | — | 32 | ||||||||
Interest expense | — | 22 | ||||||||
Provision for credit losses | 14 | — | ||||||||
KB No.8 Special Purpose Acquisition Company1 | Interest expense | 17 | 36 | |||||||
KB No.9 Special Purpose Acquisition Company | Interest expense | 43 | 33 | |||||||
KB No.10 Special Purpose Acquisition Company | Interest expense | 30 | 24 | |||||||
KB No.11 Special Purpose Acquisition Company | Interest expense | 12 | — | |||||||
RAND Bio Science Co., Ltd. | Interest expense | 3 | 16 | |||||||
Wise Asset Management Co., Ltd. | Interest expense | 9 | 5 | |||||||
Food Factory Co., Ltd. | Interest income | 9 | 1 | |||||||
Fee and commission expense | 1 | — | ||||||||
Provision for credit losses | 1 | — | ||||||||
APRO CO.,LTD. | Interest expense | 1 | — | |||||||
Rainist Co., Ltd. | Interest expense | 2 | — | |||||||
Spark Biopharma Inc. | Interest expense | 25 | — | |||||||
KB Pre IPO Secondary Venture Fund 1st | Interest expense | 27 | 60 | |||||||
POSCO-KB Shipbuilding Fund | Interest expense | 81 | 3 | |||||||
Kyobo 7 Special Purpose Acquisition Co., Ltd.1 | Interest expense | — | 1 | |||||||
Inno Lending Co., Ltd.1 | Fee and commission income | 1 | 3 | |||||||
Interest expense | — | 1 | ||||||||
Other |
| |||||||||
Retirement pension | Fee and commission income | 876 | 795 | |||||||
Interest expense | 3 | 3 | ||||||||
| 1 | Excluded from the Group’s related party as of December 31, 2018. |
177
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
Details of receivables and payables, and related allowances for loan losses arising from the related party transactions as at December 31, 2018 and 2017, are as follows:
| (In millions of Korean won) | 2018 | 2017 | ||||||||
Parent | ||||||||||
KB Financial Group Inc. | Other assets | 4,545 | 2,837 | |||||||
Deposits | 69,621 | 46,062 | ||||||||
Other liabilities | 643,010 | 283,610 | ||||||||
Parent’s subsidiaries | ||||||||||
KB Asset Management Co., Ltd. | Other assets | 209 | 231 | |||||||
Deposits | 3,284 | 8,958 | ||||||||
Other liabilities | 316 | 327 | ||||||||
KB Real Estate Trust Co., Ltd. | Deposits | 27,321 | 16,187 | |||||||
Other liabilities | 350 | 347 | ||||||||
KB Investment Co., Ltd. | Deposits | 20,784 | 19,816 | |||||||
Other liabilities | 17 | 62 | ||||||||
KB Credit Information Co., Ltd. | Deposits | 4,240 | 4,444 | |||||||
Other liabilities | 5,659 | 5,714 | ||||||||
KB Data System Co., Ltd. | Other assets | 322 | 319 | |||||||
Deposits | 18,059 | 15,036 | ||||||||
Other liabilities | 4,397 | 4,788 | ||||||||
KB Life Insurance Co., Ltd. | Derivative financial assets | 270 | — | |||||||
Other assets | 1,827 | 562 | ||||||||
Derivative financial liabilities | 1,197 | 6,580 | ||||||||
Deposits | 1,576 | 372 | ||||||||
Debts | 25,000 | 25,000 | ||||||||
Other liabilities | 3,169 | 3,171 | ||||||||
KB Kookmin Card Co., Ltd. | Loans at amortized cost (Gross amount) | 3,354 | 6,806 | |||||||
Allowances | 2 | — | ||||||||
Other assets | 24,582 | 25,454 | ||||||||
Derivative financial liabilities | 612 | 3,298 | ||||||||
Deposits | 84,089 | 85,091 | ||||||||
Provisions | 298 | 777 | ||||||||
Other liabilities | 59,748 | 48,073 | ||||||||
KB Savings Bank Co., Ltd. | Other assets | 2 | 2 | |||||||
Other liabilities | 391 | 391 | ||||||||
178
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
KB Capital Co., Ltd. | Loans at amortized cost (Gross amount) | 54,787 | 19,285 | |||||||
| Allowances | 227 | 105 | ||||||||
| Other assets | 574 | 89 | ||||||||
| Deposits | 64,283 | 73,906 | ||||||||
| Other liabilities | 57 | 45 | ||||||||
KB Insurance Co., Ltd. | Derivative financial assets | 7,034 | — | |||||||
| Other assets | 12,143 | 7,183 | ||||||||
| Derivative financial liabilities | 5,265 | 22,818 | ||||||||
| Deposits | 5,188 | 7,034 | ||||||||
| Debts | 20,000 | 20,000 | ||||||||
| Debentures | 30,002 | 49,981 | ||||||||
| Other liabilities | 2,017 | 2,720 | ||||||||
KB Securities Co., Ltd. | Cash and due from financial institutions | 5,286 | 622 | |||||||
| Derivative financial assets | 3,935 | 1,095 | ||||||||
| Loans at amortized cost (Gross amount) | 25,617 | 4,346 | ||||||||
| Allowances | 21 | — | ||||||||
| Other assets | 8,644 | 2,267 | ||||||||
| Derivative financial liabilities | 1,412 | 1,481 | ||||||||
| Deposits | 334,470 | 436,508 | ||||||||
| Provisions | 37 | 97 | ||||||||
| Other liabilities | 20,372 | 15,387 | ||||||||
Hanbando BTL Private Special Asset Fund | Other assets | 39 | 42 | |||||||
KB Senior Loan Private Fund No.1 | Other assets | 3 | 6 | |||||||
KB AMP Infra Private Special Asset Fund 1 (FoFs) | 1 | — | ||||||||
KB Onkookmin 2025 TDF Fund(FoFs)1 | Other assets | — | 1 | |||||||
KB Onkookmin 2030 TDF Fund(FoFs)1 | Other assets | — | 1 | |||||||
KB Muni bond Private Securities Fund 1(USD)(bond) | Other assets | 2 | 2 | |||||||
KB Global Private Real Estate Debt Fund 1 | Other assets | 2 | — | |||||||
KB Na Compass Energy Private Special Asset Fund | Other assets | 1 | — | |||||||
KB Star Office Private Real Estate Investment Trust No.3 | Loans at amortized cost (Gross amount) | 24,000 | — | |||||||
| Other assets | 12 | — | ||||||||
| Deposits | 5,361 | — | ||||||||
| Other liabilities | 48 | — | ||||||||
KB Star Office Private Real Estate Investment Trust No.4 | Loans at amortized cost (Gross amount) | 20,000 | — | |||||||
| Other assets | 13 | — | ||||||||
| Deposits | 1,629 | — | ||||||||
| Other liabilities | 13 | — |
179
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
KB Korea Short Term Premium Private Securities 5(USD)(Bond) | Other assets | 2 | — | |||||||
KB Global Core Bond Securities Master Fund(Bond) | Other assets | 2 | — | |||||||
Associates | ||||||||||
Korea Credit Bureau Co., Ltd. | Deposits | 15,674 | 25,513 | |||||||
| Other liabilities | 33 | 111 | ||||||||
Incheon Bridge Co., Ltd. | Financial assets at fair value through profit or loss | 32,882 | — | |||||||
| Loans at amortized cost (Gross amount) | 158,200 | 200,400 | ||||||||
| Allowances | 14 | 287 | ||||||||
| Other assets | 736 | 710 | ||||||||
| Deposits | 43,666 | 48,795 | ||||||||
| Provisions | 7 | — | ||||||||
| Other liabilities | 24 | 29 | ||||||||
Terra Co., Ltd. | Deposits | — | 10 | |||||||
Jungdong Steel Co., Ltd. | Deposits | — | 3 | |||||||
Doosung Metal Co., Ltd. | Deposits | 3 | — | |||||||
Jungdo Co., Ltd. | Deposits | 4 | 4 | |||||||
Dongjo Co., Ltd. | Loans at amortized cost (Gross amount) | — | 116 | |||||||
| Allowances | — | 1 | ||||||||
Dae-A Leisure Co., Ltd. | Deposits | 1,229 | 466 | |||||||
| Other liabilities | 7 | 14 | ||||||||
Daesang Techlon Co., Ltd.1 | Deposits | — | 2 | |||||||
Carlife Co., Ltd. | Deposits | 2 | — | |||||||
Computerlife Co., Ltd. | Deposits | 1 | — | |||||||
Skydigital INC. | Deposits | 16 | — | |||||||
KB12-1 Venture Investment Partnership | Deposits | 245 | 4,963 | |||||||
| Other liabilities | 1 | 2 | ||||||||
KB High-tech Company Investment Fund | Deposits | 275 | 7,212 | |||||||
| Other liabilities | — | 5 | ||||||||
Aju Good Technology Venture Fund | Deposits | 6,439 | 2,771 | |||||||
| Other liabilities | 2 | 1 | ||||||||
KB-KDBC New Technology Business Investment Fund | Deposits | 7,088 | 7,500 | |||||||
| Other liabilities | 3 | 4 | ||||||||
KB Digital Innovation & Growth New Technology Business Investment Fund | Deposits | 618 | — | |||||||
KB-Brain KOSDAQScale-up Fund | Deposits | 18,813 | — | |||||||
| Other liabilities | 7 | — | ||||||||
KB Star Office Private Real Estate Investment Trust No.1 | Deposits | 7,946 | 6,962 | |||||||
Other liabilities | 58 | 45 | ||||||||
Associates of parent’s subsidiaries |
180
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
SY Auto Capital Co., Ltd. | Loans at amortized cost (Gross amount) | 8,300 | — | |||||||||||
| Allowances | 18 | — | ||||||||||||
| Other assets | 9 | — | ||||||||||||
| Deposits | 5 | 6 | ||||||||||||
| Provisions | 11 | 29 | ||||||||||||
| Other liabilities | 2 | — | ||||||||||||
KB No.8 Special Purpose Acquisition Company1 | Deposits | — | 2,339 | |||||||||||
| Other liabilities | — | 19 | ||||||||||||
KB No.9 Special Purpose Acquisition Company | Deposits | 2,275 | 2,309 | |||||||||||
| Other liabilities | 42 | 38 | ||||||||||||
KB No.10 Special Purpose Acquisition Company | Deposits | 1,666 | 1,698 | |||||||||||
| Other liabilities | 11 | 10 | ||||||||||||
KB No.11 Special Purpose Acquisition Company | Deposits | 658 | 530 | |||||||||||
| Other liabilities | 2 | — | ||||||||||||
RAND Bio Science Co., Ltd. | Deposits | 232 | 1,032 | |||||||||||
| Other liabilities | — | 4 | ||||||||||||
Wise Asset Management Co., Ltd. | Deposits | 696 | 340 | |||||||||||
| Other liabilities | 2 | 1 | ||||||||||||
Built On Co., Ltd. | Deposits | 7 | 26 | |||||||||||
Food Factory Co., Ltd. | Loans at amortized cost (Gross amount) | 200 | 200 | |||||||||||
| Allowances | 1 | — | ||||||||||||
| Other assets | 1 | 1 | ||||||||||||
| Deposits | 68 | 1 | ||||||||||||
Acts Co., Ltd. | Deposits | 29 | 4 | |||||||||||
Paycoms Co., Ltd. | Deposits | 1 | — | |||||||||||
Big Dipper Co., Ltd. | Deposits | 182 | 473 | |||||||||||
APRO CO.,LTD. | Deposits | 2,201 | — | |||||||||||
Rainist Co., Ltd. | Deposits | 1 | — | |||||||||||
Spark Biopharma Inc. | Deposits | 2,630 | — | |||||||||||
| Other liabilities | 19 | — | ||||||||||||
KB IGen Private Equity Fund No.1 | Deposits | 148 | — | |||||||||||
KB Pre IPO Secondary Venture Fund 1st | Deposits | 1,115 | 2,690 | |||||||||||
| Other liabilities | 1 | 6 | ||||||||||||
Inno Lending Co., Ltd.1 | Deposits | — | 41 | |||||||||||
Key management | Loans at amortized cost (Gross amount) | 2,218 | 1,619 | |||||||||||
| Other assets | 2 | 2 | ||||||||||||
| Deposits | 9,771 | 8,042 | ||||||||||||
Other liabilities | 165 | 121 | ||||||||||||
Other | ||||||||||||||
Retirement pension | Other assets | 331 | 348 | |||||||||||
| Other liabilities | 16,388 | 4,286 |
| 1 | Excluded from the Group’s related party as of December 31, 2018. |
181
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
Notional amount of derivative assets and liabilities arising from the related party transactions as at December 31, 2018 and 2017, are as follows:
| (In millions of Korean won) | 2018 | 2017 | ||||||||
Parent’s subsidiaries | ||||||||||
KB Life Insurance Co., Ltd. | Notional amount of Derivative financial instruments | 252,213 | 155,567 | |||||||
KB Kookmin Card Co., Ltd. | Notional amount of Derivative financial instruments | 62,611 | 79,106 | |||||||
KB Insurance Co., Ltd. | Notional amount of Derivative financial instruments | 1,127,722 | 491,133 | |||||||
KB Securities Co., Ltd. | Notional amount of Derivative financial instruments | 393,515 | 151,204 | |||||||
In accordance with Korean IFRS 1024, the Group includes the Parent, the Parent’s subsidiaries, associates, associates of the Parent’s subsidiaries, key management (including family members), and post-employment benefit plans of the Group and entities regarded as its related parties in the scope of its related parties. Additionally, the Group discloses balances (receivables and payables) and other amounts arising from the related party transactions in the notes to the consolidated financial statements. Refer to Note 13 for details on investments in associates.
Key management includes the directors of the Bank and the executive directors (vice presidents and above) of the Bank and companies where the directors and /or their close family members have control or joint control.
Significant loan transactions with related parties for the years ended December 31, 2018 and 2017, are as follows:
| 20181 | ||||||||||||||||||||
| (In millions of Korean won) | Beginning | Loans | Repayments | Others | Ending | |||||||||||||||
Parent’s subsidiaries | ||||||||||||||||||||
KB Securities Co., Ltd. | 4,346 | 1,369,958 | 1,348,687 | — | 25,617 | |||||||||||||||
KB Kookmin Card Co., Ltd. | 6,806 | 164,635 | 168,087 | — | 3,354 | |||||||||||||||
KB Capital Co., Ltd. | 19,285 | 33,711 | — | 1,791 | 54,787 | |||||||||||||||
KB Star Office Private Real Estate Master Fund 3 | — | 24,000 | — | — | 24,000 | |||||||||||||||
KB Star Office Private Real Estate Master Fund 4 | — | 20,000 | — | — | 20,000 | |||||||||||||||
Associate | ||||||||||||||||||||
Incheon Bridge Co., Ltd. | 203,126 | — | 14,700 | 2,656 | 191,082 | |||||||||||||||
Dongjo Co., Ltd | 116 | — | 116 | — | — | |||||||||||||||
Associate of parent’s subsidiaries | ||||||||||||||||||||
SY Auto Capital Co., Ltd. | — | 50,053 | 41,753 | — | 8,300 | |||||||||||||||
Food Factory Co., Ltd. | 200 | — | — | — | 200 | |||||||||||||||
Key management2,3 | 1,619 | 108 | 836 | 1,327 | 2,218 | |||||||||||||||
182
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
| (In millions of Korean won) | 20171 | |||||||||||||||||||
| Beginning | Loans | Repayments | Others | Ending | ||||||||||||||||
Parent’s subsidiaries | ||||||||||||||||||||
KB Securities Co., Ltd. | — | 1,534,202 | 1,529,856 | — | 4,346 | |||||||||||||||
KB Kookmin Card Co., Ltd. | — | 157,871 | 151,065 | — | 6,806 | |||||||||||||||
KB Capital Co., Ltd. | — | 19,285 | — | — | 19,285 | |||||||||||||||
Associate | ||||||||||||||||||||
Incheon Bridge Co., Ltd. | 209,094 | 202,500 | 211,194 | — | 200,400 | |||||||||||||||
Dongjo Co., Ltd2 | — | — | 130 | 246 | 116 | |||||||||||||||
Jaeyang Industry Co., Ltd. | 303 | — | 290 | (13 | ) | — | ||||||||||||||
Associate of parent’s subsidiaries |
| |||||||||||||||||||
SY Auto Capital Co., Ltd. | 10,000 | 24,031 | 34,031 | — | — | |||||||||||||||
Food Factory Co., Ltd. | — | 200 | — | — | 200 | |||||||||||||||
| 1 | Transactions between related parties, such as settlements arising from operating activities and deposits that can deposit and withdraw frequently, are presented in net amounts. |
| 2 | Includes details of loan transactions that occurred before they became related parties.. |
| 3 | Represents the transactions that have started occurring since the current year. |
Significant borrowing transactions with related parties for the years ended December 31, 2018 and 2017, are as follows:
| (In millions of Korean won) | 2018 | |||||||||||||||||||||||
| Beginning | Increase | Decrease | Others1 | Ending | ||||||||||||||||||||
Parent | ||||||||||||||||||||||||
KB Financial Group Inc.. | Deposits | 46,062 | 1,555,000 | 1,495,000 | (36,441 | ) | 69,621 | |||||||||||||||||
Parent’s subsidiaries | ||||||||||||||||||||||||
KB Asset Management Co., Ltd. | Deposits | 8,958 | — | — | (5,674 | ) | 3,284 | |||||||||||||||||
KB Real Estate Trust Co., Ltd. | Deposits | 16,187 | — | — | 11,134 | 27,321 | ||||||||||||||||||
KB Investment Co., Ltd. | Deposits | 19,816 | 56,200 | 68,200 | 12,968 | 20,784 | ||||||||||||||||||
KB Credit Information Co., Ltd. | Deposits | 4,444 | 1,569 | 1,409 | (364 | ) | 4,240 | |||||||||||||||||
KB Data System Co., Ltd. | Deposits | 15,036 | 11,500 | 10,700 | 2,223 | 18,059 | ||||||||||||||||||
KB Life Insurance Co., Ltd. | Deposits | 372 | — | — | 1,204 | 1,576 | ||||||||||||||||||
| Debts | 25,000 | — | — | — | 25,000 | |||||||||||||||||||
KB Kookmin Card Co., Ltd. | Deposits | 85,091 | 22,000 | 22,000 | (1,002 | ) | 84,089 | |||||||||||||||||
KB Capital Co., Ltd. | Deposits | 73,906 | — | — | (9,623 | ) | 64,283 | |||||||||||||||||
KB Insurance Co., Ltd. | Deposits | 7,034 | — | 1,650 | (196 | ) | 5,188 | |||||||||||||||||
| Debts | 20,000 | — | — | — | 20,000 | |||||||||||||||||||
| Debentures | 49,981 | — | — | (19,979 | ) | 30,002 | ||||||||||||||||||
KB Securities Co., Ltd. | Deposits | 436,508 | 111,996 | 82,512 | (131,522 | ) | 334,470 | |||||||||||||||||
KB Star Office Private Real Estate Master Fund 3 | Deposits | — | 5,361 | — | — | 5,361 | ||||||||||||||||||
KB Star Office Private Real Estate Master Fund 4 | Deposits | — | 1,629 | — | — | 1,629 | ||||||||||||||||||
183
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
Associates | ||||||||||||||||||||||||
Korea Credit Bureau Co., Ltd. | Deposits | 25,513 | 8,000 | 16,000 | (1,839 | ) | 15,674 | |||||||||||||||||
Incheon Bridge Co., Ltd. | Deposits | 48,795 | 1,260 | 1,270 | (5,119 | ) | 43,666 | |||||||||||||||||
Terra Co., Ltd. | Deposits | 10 | — | — | (10 | ) | — | |||||||||||||||||
Jungdong Steel Co., Ltd. | Deposits | 3 | — | — | (3 | ) | — | |||||||||||||||||
Doosung Metal Co., Ltd. | Deposits | — | — | — | 3 | 3 | ||||||||||||||||||
Jungdo Co., Ltd. | Deposits | 4 | — | — | — | 4 | ||||||||||||||||||
Dae-A Leisure Co., Ltd. | Deposits | 466 | 479 | 466 | 750 | 1,229 | ||||||||||||||||||
Daesang Techlon Co., Ltd.2 | Deposits | 2 | — | — | (2 | ) | — | |||||||||||||||||
Carlife Co., Ltd. | Deposits | — | — | — | 2 | 2 | ||||||||||||||||||
Computerlife Co., Ltd. | Deposits | — | — | — | 1 | 1 | ||||||||||||||||||
Skydigital INC. | Deposits | — | — | — | 16 | 16 | ||||||||||||||||||
KB12-1 Venture Investment Partnership | Deposits | 4,963 | — | — | (4,718 | ) | 245 | |||||||||||||||||
Future Planning KBStart-up Creation Fund | Deposits | — | 9,000 | 9,000 | — | — | ||||||||||||||||||
KB High-tech Company Investment Fund | Deposits | 7,212 | — | — | (6,937 | ) | 275 | |||||||||||||||||
Aju Good Technology Venture Fund | Deposits | 2,771 | — | — | 3,668 | 6,439 | ||||||||||||||||||
KB-KDBC New Technology Business Investment Fund | Deposits | 7,500 | — | — | (412 | ) | 7,088 | |||||||||||||||||
KB Digital Innovation & Growth New Technology Business Investment Fund | Deposits | — | — | — | 618 | 618 | ||||||||||||||||||
KB-Brain KOSDAQScale-up Fund | Deposits | — | — | — | 18,813 | 18,813 | ||||||||||||||||||
KB Star Office Private Real Estate Master Fund 1 | 6,962 | 351 | — | 633 | 7,946 | |||||||||||||||||||
Associates of parent’s subsidiaries | ||||||||||||||||||||||||
SY Auto Capital Co., Ltd. | Deposits | 6 | — | — | (1 | ) | 5 | |||||||||||||||||
KB No.8 Special Purpose Acquisition Company 12 | Deposits | 2,339 | — | 2,300 | (39 | ) | — | |||||||||||||||||
KB No.9 Special Purpose Acquisition Company | Deposits | 2,309 | 2,266 | 2,234 | (66 | ) | 2,275 | |||||||||||||||||
KB No.10 Special Purpose Acquisition Company | Deposits | 1,698 | 1,618 | 1,618 | (32 | ) | 1,666 | |||||||||||||||||
KB No.11 Special Purpose Acquisition Company | Deposits | 530 | 530 | 530 | 128 | 658 | ||||||||||||||||||
RAND Bio Science Co., Ltd. | Deposits | 1,032 | — | 500 | (300 | ) | 232 |
184
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
Wise Asset Management Co., Ltd. | Deposits | 340 | 2,366 | 2,008 | (2 | ) | 696 | |||||||||||||||
Built On Co., Ltd. | Deposits | 26 | — | — | (19 | ) | 7 | |||||||||||||||
Food Factory Co., Ltd. | Deposits | 1 | — | — | 67 | 68 | ||||||||||||||||
Acts Co., Ltd. | Deposits | 4 | — | — | 25 | 29 | ||||||||||||||||
Paycoms Co., Ltd. | Deposits | — | — | — | 1 | 1 | ||||||||||||||||
Big Dipper Co., Ltd. | Deposits | 473 | — | — | (291 | ) | 182 | |||||||||||||||
APRO CO.,LTD. | Deposits | — | — | — | 2,201 | 2,201 | ||||||||||||||||
Rainist Co., Ltd. | Deposits | — | — | — | 1 | 1 | ||||||||||||||||
Spark Biopharma Inc. | Deposits | — | 4,300 | 3,300 | 1,630 | 2,630 | ||||||||||||||||
KB IGen Private Equity Fund No. 1 | Deposits | — | — | — | 148 | 148 | ||||||||||||||||
KB Pre IPO Secondary Venture Fund 1st | Deposits | 2,690 | 2,000 | 4,000 | 425 | 1,115 | ||||||||||||||||
POSCO-KB Shipbuilding Fund | Deposits | — | 32,800 | 32,800 | — | — | ||||||||||||||||
Inno Lending Co., Ltd. 2 | Deposits | 41 | — | — | (41 | ) | — | |||||||||||||||
Key management3 | Deposits | 8,042 | 6,605 | 5,140 | 264 | 9,771 | ||||||||||||||||
| 2017 | ||||||||||||||||||||||
| (In millions of Korean won) | Beginning | Increase | Decrease | Others1 | Ending | |||||||||||||||||
Parent | ||||||||||||||||||||||
KB Financial Group Inc.. | Deposits | 57,967 | — | — | (11,905 | ) | 46,062 | |||||||||||||||
Parent’s subsidiaries | ||||||||||||||||||||||
KB Asset Management Co., Ltd. | Deposits | 73,279 | — | 65,000 | 679 | 8,958 | ||||||||||||||||
KB Real Estate Trust Co., Ltd. | Deposits | 21,211 | — | 10,000 | 4,976 | 16,187 | ||||||||||||||||
KB Investment Co., Ltd. | Deposits | 23,954 | 49,000 | 48,537 | (4,601 | ) | 19,816 | |||||||||||||||
KB Credit Information Co., Ltd. | Deposits | 3,465 | 1,819 | 2,399 | 1,559 | 4,444 | ||||||||||||||||
KB Data System Co., Ltd. | Deposits | 10,926 | 10,700 | 7,000 | 410 | 15,036 | ||||||||||||||||
KB Life Insurance Co., Ltd. | Deposits | 700 | — | — | (328 | ) | 372 | |||||||||||||||
| Debts | 25,000 | — | — | — | 25,000 | |||||||||||||||||
KB Kookmin Card Co., Ltd. | Deposits | 160,002 | 22,000 | 22,000 | (74,911 | ) | 85,091 | |||||||||||||||
KB Capital Co., Ltd. | Deposits | 9,075 | — | — | 64,831 | 73,906 | ||||||||||||||||
KB Insurance Co., Ltd. | Deposits | 9,883 | — | — | (2,849 | ) | 7,034 | |||||||||||||||
| Debts | 20,000 | — | — | — | 20,000 | |||||||||||||||||
| Debentures | — | — | — | 49,981 | 49,981 | |||||||||||||||||
KB Securities Co., Ltd. | Deposits | 116,893 | 242,085 | 135,000 | 212,530 | 436,508 | ||||||||||||||||
| Debentures | 300 | — | — | (300 | ) | — | ||||||||||||||||
Associates | ||||||||||||||||||||||
Korea Credit Bureau Co., Ltd. | Deposits | 26,827 | 11,000 | 6,000 | (6,314 | ) | 25,513 | |||||||||||||||
Incheon Bridge Co., Ltd. | Deposits | 38,556 | 1,270 | 21,270 | 30,239 | 48,795 | ||||||||||||||||
Terra Co., Ltd. | Deposits | — | — | — | 10 | 10 | ||||||||||||||||
Jungdong Steel Co., Ltd. | Deposits | 3 | — | — | — | 3 | ||||||||||||||||
Jungdo Co., Ltd. | Deposits | — | — | — | 4 | 4 | ||||||||||||||||
Dae-A Leisure Co., Ltd. | Deposits | — | — | — | 466 | 466 | ||||||||||||||||
185
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
Daesang Techlon Co., Ltd.2 | Deposits | — | — | — | 2 | 2 | ||||||||||||||||
KB12-1 Venture Investment Partnership | Deposits | 4,562 | 4,000 | 4,000 | 401 | 4,963 | ||||||||||||||||
KB High-tech Company Investment Fund | Deposits | 4,643 | 3,000 | 3,000 | 2,569 | 7,212 | ||||||||||||||||
Aju Good Technology Venture Fund | Deposits | 1,201 | — | — | 1,570 | 2,771 | ||||||||||||||||
KB-KDBC New Technology Business Investment Fund | Deposits | — | — | — | 7,500 | 7,500 | ||||||||||||||||
EJADE Co., Ltd.2 | Deposits | 2 | — | — | (2 | ) | — | |||||||||||||||
Associate of Subsidiary | ||||||||||||||||||||||
KB Star Office Private Real Estate Investment Trust No.1 | Deposits | 6,682 | 303 | — | (23 | ) | 6,962 | |||||||||||||||
Associates of parent’s subsidiaries | ||||||||||||||||||||||
KB No.8 Special Purpose Acquisition Company 12 | Deposits | 2,342 | 2,300 | 2,300 | (3 | ) | 2,339 | |||||||||||||||
KB No.9 Special Purpose Acquisition Company | Deposits | 2,399 | — | 100 | 10 | 2,309 | ||||||||||||||||
KB No.10 Special Purpose Acquisition Company | Deposits | 1,754 | 1,618 | 1,600 | (74 | ) | 1,698 | |||||||||||||||
KB No.11 Special Purpose Acquisition Company | Deposits | — | 530 | — | — | 530 | ||||||||||||||||
SY Auto Capital Co., Ltd. | Deposits | 3,997 | 2,000 | 2,000 | (3,991 | ) | 6 | |||||||||||||||
RAND Bio Science Co., Ltd. | Deposits | 2,356 | 1,000 | 2,500 | 176 | 1,032 | ||||||||||||||||
Wise Asset Management Co., Ltd. | Deposits | — | 1,346 | 1,475 | 469 | 340 | ||||||||||||||||
Built On Co., Ltd. | Deposits | — | — | — | 26 | 26 | ||||||||||||||||
Food Factory Co., Ltd. | Deposits | — | — | — | 1 | 1 | ||||||||||||||||
Acts Co., Ltd. | Deposits | — | — | — | 4 | 4 | ||||||||||||||||
Big Dipper Co., Ltd. | Deposits | — | — | — | 473 | 473 | ||||||||||||||||
KB Pre IPO Secondary Venture Fund 1st | Deposits | — | 13,000 | 11,000 | 690 | 2,690 | ||||||||||||||||
POSCO-KB Shipbuilding Fund | Deposits | — | 3,000 | 3,000 | — | — | ||||||||||||||||
Inno Lending Co., Ltd. 2 | Deposits | 1,902 | — | — | (1,861 | ) | 41 | |||||||||||||||
KB IC 3rd Private Equity Fund2 | Deposits | 700 | — | 700 | — | — |
| 1 | Transactions between related parties, such as settlements arising from operating activities and deposits, are excluded. |
| 2 | Not considered to be the Bank’s related party as at December 31, 2018. |
| 3 | Represents the transactions that have started occurring since the current year. |
186
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
Significant contribution and collection arising from transactions with related parties for the year ended December 31, 2018, are as follows:
| (In millions of Korean won) | 2018 | |||||||
| Contribution | Collection and others | |||||||
Parent’s subsidiaries | ||||||||
KB IP Investment Fund | — | 120 | ||||||
Hanbando BTL Private Special Asset Fund | — | 20,257 | ||||||
Hope Sharing BTL Private Special Asset Fund | — | 1,675 | ||||||
KB Mezzanine Private Security Investment Trust No.2 | — | 29,280 | ||||||
KB Senior Loan Private Fund No.1 | — | 31,305 | ||||||
KB Haeoreum private securities investment trust 70(Bond)1 | — | 51,100 | ||||||
KB KBSTAR Short Term KTB Active ETF1 | — | 30,377 | ||||||
KB Star Office Private Real Estate Master Fund 4 | 50,000 | 1,196 | ||||||
KB Star Office Private Real Estate Master Fund 4 | 43,500 | 916 | ||||||
KB Korea Short Term Premium Private Securities 5(USD)(Bond) | 113,220 | — | ||||||
KB Global Core Bond Securities Master Fund(Bond) | 50,000 | — | ||||||
KB Haeoreum private securities investment trust 96 | 50,000 | — | ||||||
KB Korea Short Term Premium Private Securities 4(USD)(Bond) | 44,872 | — | ||||||
Associates | ||||||||
Korea Credit Bureau Co., Ltd. | — | 113 | ||||||
Balhae Infrastructure Fund | 4,645 | 8,623 | ||||||
Daesang Techlon Co., Ltd.1 | — | 42 | ||||||
PT Bank Bukopin TBK | 116,422 | — | ||||||
KoFC KBIC Frontier Champ2010-5 (PEF) | — | 4,800 | ||||||
KB GwS Private Securities Investment Trust | — | 6,386 | ||||||
KB12-1 Venture Investment Partnership | — | 16,040 | ||||||
Future Planning KBStart-up Creation Fund | — | 2,876 | ||||||
KB High-tech Company Investment Fund | — | 4,700 | ||||||
Aju Good Technology Venture Fund | 9,808 | — | ||||||
KB-KDBC New Technology Business Investment Fund | 5,000 | — | ||||||
KBTS Technology Venture Private Equity Fund | 7,620 | — | ||||||
KB Digital Innovation & Growth New Technology Business Investment Fund | 1,125 | — | ||||||
KB IP Investment Fund II | 3,000 | — | ||||||
KB Digital Innovation Investment Fund Limited partnership | 7,700 | — | ||||||
KB-Brain KOSDAQScale-up Fund | 4,000 | — | ||||||
KB Star Office Private Real Estate Investment Trust No.1 | — | 1,162 | ||||||
| 1 | Not considered to be the Bank’s related party as at December 31, 2018. |
187
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
Acceptances and guarantees and unused commitments provided to related parties as at December 31, 2018 and 2017, are as follows:
| (In millions of Korean won) | 2018 | 2017 | ||||||||
Parent’s subsidiaries |
| |||||||||
KB Investment Co., Ltd. | Loss sharing agreements | 1,000 | 1,000 | |||||||
KB Kookmin Card Co., Ltd. | Loan commitment in Korean won | 820,000 | 813,194 | |||||||
Loan commitment in foreign currency | 5,591 | — | ||||||||
Other commitments in Korean won | 1,300,000 | 1,000,000 | ||||||||
KB Securities Co., Ltd. | Loan commitment in Korean won | 137,509 | 135,653 | |||||||
KB Mezzanine Private Security Investment Trust No.2 | Purchase of securities | 11,141 | 11,141 | |||||||
KB Senior Loan Private Fund No.1 | Purchase of securities | 3,770 | 3,770 | |||||||
Associates |
| |||||||||
Balhae Infrastructure Fund | Purchase of securities | 10,453 | 12,564 | |||||||
Incheon Bridge Co., Ltd. | Loan commitment in Korean won | 20,000 | 20,000 | |||||||
KoFC KBIC Frontier Champ2010-5 (PEF) | Purchase of securities | 1,290 | 1,290 | |||||||
KB GwS Private Securities Investment Trust | Purchase of securities | 876 | 876 | |||||||
KoFC POSCO HANWHA KB Shared Growth No.2. Private Equity Fund | Purchase of securities | 10,040 | 10,040 | |||||||
Aju Good Technology Venture Fund | Purchase of securities | 1,960 | 11,768 | |||||||
KB-KDBC New Technology Business Investment Fund | Purchase of securities | 2,500 | 7,500 | |||||||
KBTS Technology Venture Private Equity Fund | Purchase of securities | 7,380 | — | |||||||
KB Digital Innovation & Growth New Technology Business Investment Fund | Purchase of securities | 3,375 | — | |||||||
KB IP Investment Fund | Purchase of securities | 12,000 | — | |||||||
KB Digital Innovation & Growth New Technology Business Investment Fund | Purchase of securities | 27,300 | — | |||||||
KB-Brain KOSDAQScale-up Fund | Purchase of securities | 16,000 | — | |||||||
Associates of parent’s subsidiaries |
| |||||||||
SY Auto Capital Co., Ltd. | Loan commitment in Korean won | 6,700 | 10,000 | |||||||
Key management | Loan commitment in Korean won | 894 | 458 | |||||||
188
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
Acceptances and guarantees and unused commitments received from related parties as at December 31, 2018 and 2017, are as follows:
| (In millions of Korean won) | 2018 | 2017 | ||||||||
Parent’s subsidiaries | ||||||||||
KB Investment Co., Ltd. | Loss sharing agreements | 14,474 | 12,117 | |||||||
KB Real Estate Trust Co., Ltd. | Purchase of securities | 1,319 | 4,319 | |||||||
KB Life Insurance Co., Ltd. | Purchase of securities | 6,595 | 21,595 | |||||||
KB Securities Co., Ltd. | Purchase of securities | 1,319 | 4,319 | |||||||
KB Kookmin Card Co., Ltd. | Loan commitment in Korean won | 87,922 | 85,114 | |||||||
Compensation to key management for the years ended December 31, 2018 and 2017, consists of:
| (In millions of Korean won) | 2018 | |||||||||||||||
| Short-term employee benefits | Post-employment benefits | Share-based payments | Total | |||||||||||||
Registered directors (executive) | 1,278 | 51 | 1,022 | 2,351 | ||||||||||||
Registered directors(non-executive) | 337 | — | — | 337 | ||||||||||||
Non-registered directors | 4,807 | 183 | 3,217 | 8,207 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| 6,422 | 234 | 4,239 | 10,895 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
| (In millions of Korean won) | 2017 | |||||||||||||||
| Short-term employee benefits | Post-employment benefits | Share-based payments | Total | |||||||||||||
Registered directors (executive) | 1,270 | 60 | 1,831 | 3,161 | ||||||||||||
Registered directors(non-executive) | 315 | — | — | 315 | ||||||||||||
Non-registered directors | 4,990 | 178 | 7,966 | 13,134 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| 6,575 | 238 | 9,797 | 16,610 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
Significant operating transactions occurring between the Group and related parties include the establishment of deposit accounts, issuance of general purpose loans, loans on business transactions and trade receivables, and overdraft credit accounts arising from net settlement agreement between the Bank and KB Kookmin Card Co., Ltd.
Collateral offered to related parties as at December 31, 2018 and 2017, are as follows:
| (In millions of Korean won) | 2018 | 2017 | ||||||||||||||||
Assets pledged | Carrying amount | Collateralized amount | Carrying amount | Collateralized amount | ||||||||||||||
Parent’s subsidiaries | ||||||||||||||||||
KB Securities Co., Ltd. | Securities | 62,006 | 62,000 | 75,990 | 76,000 | |||||||||||||
KB Life Insurance Co., Ltd. | Securities | 26,055 | 25,000 | 26,128 | 25,000 | |||||||||||||
| Building/ Land | 209,459 | 32,500 | 229,023 | 32,500 | ||||||||||||||
KB Insurance Co., Ltd. | Securities | 50,000 | 50,000 | 50,000 | 50,000 | |||||||||||||
| Building/ Land | 209,459 | 26,000 | 229,023 | 26,000 | ||||||||||||||
| 1 | Collaterals related to lease contracts arising from operating activities between related parties are excluded. |
189
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
Collateral received from related parties as at December 31, 2018 and 2017, are as follows:
| (In millions of Korean won) | 2018 | 2017 | ||||||||
Parent’s subsidiaries | ||||||||||
KB Securities Co., Ltd. | Time deposits/ Beneficiary right certificate | 178,178 | 167,000 | |||||||
| Securities | 20,000 | 20,000 | ||||||||
KB Life Insurance Co., Ltd. | Securities | 10,000 | 10,000 | |||||||
KB Kookmin Card Co., Ltd. | Time deposits | 22,000 | 22,000 | |||||||
KB Insurance Co., Ltd. | Securities | 66,500 | 58,000 | |||||||
KB Credit Information Co., Ltd. | Time deposits and others | 1,425 | 1,265 | |||||||
KB Star Office Private Real Estate Master Fund 3 | Real estate | 28,800 | — | |||||||
KB Star Office Private Real Estate Master Fund 4 | Real estate | 24,000 | — | |||||||
Key management | Time deposits and others | 401 | 388 | |||||||
| Real estate | 3,182 | 2,287 | ||||||||
| 1 | Collaterals related to lease contracts arising from operating activities between related parties are excluded. |
As at December 31, 2018, Incheon Bridge Co., Ltd., a related party, provides fund management account, civil engineering completed risk insurance, and management rights as senior collateral amounting toW 611,000 million to a financial syndicate that consists of the Group and five other institutions, and as subordinated collateral amounting toW 384,800 million to subordinated debt holders that consist of the Group and two other institutions. Also, it provides certificate of credit guarantee amounting toW 400,000 million as collateral to a financial syndicate consisting of the Group and five other institutions.
The amounts of receivables purchased from KB securities Co., Ltd. areW 7,920,050 million andW 4,168,048 million for the years ended December 31, 2018 and 2017 respectively, and the amounts of receivables sold to KB securities Co., Ltd. areW 3,835,245 million andW 2,204,346 million for the years ended December 31, 2018 and 2017 respectively.
The amounts of intangible assets purchased through KB Data System Co., Ltd. areW 17,831 million andW 12,532 million for the years ended December 31, 2018 and 2017, respectively.
The Bank and KB Kookmin Card Co., Ltd. are jointly and severally liable for the payables of the Bank before thespin-off date.
190
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
42. Adoption of Korean IFRS 1109Financial Instruments
The Group adopted Korean IFRS 1109Financial Instruments, which was issued on September 25, 2015, on January 1, 2018. The application of Korean IFRS 1109 has following impacts on the financial statements.
On the date of initial application, January 1, 2018, the measurement category of the financial assets in accordance with Korean IFRS 1039 and 1109, are as follows:
| (In millions of Korean won) | ||||||||||||||||||
Measurement categories | Carrying amounts | |||||||||||||||||
December 31, 2017 (Korean IFRS 1039) | January 1, 2018 (Korean IFRS 1109) | Korean IFRS 10391 | Reclassification | Remeasurement | Korean IFRS 11091 | |||||||||||||
Cash and due from financial institutions | Financial assets at amortized cost | 15,646,318 | (1,908,070 | ) | (1,530 | ) | 13,736,718 | |||||||||||
Financial assets at fair value through profit or loss2 | — | 1,908,070 | — | 1,908,070 | ||||||||||||||
|
|
|
|
|
|
|
| |||||||||||
| 15,646,318 | — | (1,530 | ) | 15,644,788 | ||||||||||||||
|
|
|
|
|
|
|
| |||||||||||
Financial assets at fair value through profit or loss (under Korean IFRS 1039) |
| |||||||||||||||||
Financial assets held for trading: debt securities | Financial assets at fair value through profit or loss | 7,900,613 | 312,312 | — | 8,212,925 | |||||||||||||
Financial assets held for trading: equity securities | 338,904 | (216,955 | ) | — | 121,949 | |||||||||||||
Financial assets held for trading: others | 73,856 | — | — | 73,856 | ||||||||||||||
Financial assets designated at fair value through profit or loss | 95,357 | (95,357 | ) | — | — | |||||||||||||
|
|
|
|
|
|
|
| |||||||||||
| 8,408,730 | — | — | 8,408,730 | |||||||||||||||
|
|
|
|
|
|
|
| |||||||||||
Derivative financial assets held for trading | Derivative financial assets held for trading | 2,527,190 | (17,197 | ) | — | 2,509,993 | ||||||||||||
Derivative financial assets held for hedging | Derivative financial assets held for hedging | 80,469 | — | — | 80,469 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||||
| 2,607,659 | (17,197 | ) | — | 2,590,462 | ||||||||||||||
|
|
|
|
|
|
|
| |||||||||||
Loans | Financial assets at amortized cost | 251,710,605 | (132,255 | ) | (289,070 | ) | 251,289,280 | |||||||||||
Financial assets at fair value through profit or loss3 | — | 130,032 | 2,690 | 132,722 | ||||||||||||||
|
|
|
|
|
|
|
| |||||||||||
| 251,710,605 | (2,223 | ) | (286,380 | ) | 251,422,002 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||||
191
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
Financial investments | ||||||||||||||||||
Available-for-sale financial assets: debt securities | Financial assets at fair value through other comprehensive income | 27,605,761 | (2,835,591 | ) | — | 24,770,170 | ||||||||||||
Financial assets at fair value through profit or loss4 | — | 2,549,706 | — | 2,549,706 | ||||||||||||||
Financial assets at amortized cost5 | — | 2,835,591 | 4,118 | 2,839,709 | ||||||||||||||
Available-for-sale financial assets: equity securities | Financial assets at fair value through other comprehensive income | 4,472,263 | (2,587,853 | ) | 276 | 1,884,686 | ||||||||||||
Financial assets at fair value through profit or loss6 | — | 38,147 | (89 | ) | 38,058 | |||||||||||||
Available-for-sale financial assets: others | Financial assets at fair value through other comprehensive income | 500 | (500 | ) | — | — | ||||||||||||
Financial assets at fair value through profit or loss7 | — | 500 | — | 500 | ||||||||||||||
Held-to-maturity financial assets | Financial assets at amortized cost | 8,737,150 | (214,280 | ) | (1,202 | ) | 8,521,668 | |||||||||||
Financial assets at fair value through profit or loss8 | — | 214,280 | (2,004 | ) | 212,276 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||||
| 40,815,674 | — | 1,099 | 40,816,773 | |||||||||||||||
|
|
|
|
|
|
|
| |||||||||||
Other financial assets | Financial assets at amortized cost | 6,341,463 | (1,624 | ) | (3,368 | ) | 6,336,471 | |||||||||||
|
|
|
|
|
|
|
| |||||||||||
| 325,530,449 | (21,044 | ) | (290,179 | ) | 325,219,226 | |||||||||||||
|
|
|
|
|
|
|
|
| 1 | Net of allowance. |
| 2 | The deposits amounting to |
| 3 | The loans amounting to |
| 4 | The equity securities amounting to |
| 5 | The debt securities amounting to |
| 6 | The equity securities amounting to |
| 7 | Other securities amounting to |
| 8 | The structured debt securities amounting to |
192
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
On the date of initial application, January 1, 2018, the measurement category of the financial liabilities in accordance with Korean IFRS 1039 and 1109, are as follows:
| (In millions of Korean won) | ||||||||||||||||||
Measurement categories | Carrying amounts | |||||||||||||||||
December 31, 2017 (Korean IFRS 1039) | January 1, 2018 (Korean IFRS 1109) | Korean IFRS 1039 | Reclassification | Remeasurement | Korean IFRS 1109 | |||||||||||||
Financial liabilities held for trading | Financial liabilities at fair value through profit or loss | 74,191 | — | — | 74,191 | |||||||||||||
Derivative financial liabilities held for trading | Derivative financial liabilities held for trading | 2,558,788 | — | — | 2,558,788 | |||||||||||||
Derivative financial liabilities held for hedging | Derivative financial liabilities held for hedging | 50,032 | — | — | 50,032 | |||||||||||||
Deposits | Financial liabilities at amortized cost | 252,478,931 | — | — | 252,478,931 | |||||||||||||
Debts | Financial liabilities at amortized cost | 15,810,753 | — | — | 15,810,753 | |||||||||||||
Debentures | Financial liabilities at amortized cost | 19,183,798 | — | — | 19,183,798 | |||||||||||||
Other financial liabilities | Financial liabilities at amortized cost | 12,733,354 | (21,044 | ) | — | 12,712,310 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||||
| 302,889,847 | (21,044 | ) | — | 302,868,803 | ||||||||||||||
|
|
|
|
|
|
|
| |||||||||||
On the date of initial application, January 1, 2018, the classification of the financial assets by category in accordance with Korean IFRS 1109, are as follows:
| January 1, 2018 | ||||||||||||||||||||||||
| (In millions of Korean won) | Financial assets at fair value through profit or loss | Debt securities at fair value through other comprehensive income | Equity securities at fair value through other comprehensive income | Financial assets at amortized cost1 | Derivative financial instruments held for hedging | Total | ||||||||||||||||||
Cash and due from financial institutions | — | — | — | 13,736,718 | — | 13,736,718 | ||||||||||||||||||
Financial assets at fair value through profit or loss | 13,250,062 | — | — | — | — | 13,250,062 | ||||||||||||||||||
Derivative financial asset held for trading | 2,509,993 | — | — | — | — | 2,509,993 | ||||||||||||||||||
Derivative financial asset held for hedging | — | — | — | — | 80,469 | 80,469 | ||||||||||||||||||
Loans at amortized cost | — | — | — | 251,289,280 | — | 251,289,280 | ||||||||||||||||||
Financial investments | — | 24,770,170 | 1,884,686 | 11,361,377 | — | 38,016,233 | ||||||||||||||||||
Other financial assets | — | — | — | 6,336,471 | — | 6,336,471 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
| 15,760,055 | 24,770,170 | 1,884,686 | 282,723,846 | 80,469 | 325,219,226 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
| 1 | Net of allowance. |
193
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
On the date of initial application, January 1, 2018, the reclassification from financial assets at fair value through profit or loss to financial assets at amortized cost or financial assets at fair value through other comprehensive income, does not exist.
On the date of initial application, January 1, 2018, the reclassification from certain financial assets, other than financial assets at amortized cost to financial assets at amortized cost, are as follows:
| (In millions of Korean won) | Measurement categories before reclassification | Fair value | Recognizable valuation gain or loss if not reclassified | |||||||||
Currency stabilization bond | Available-for-sale | 1,975,001 | (248 | ) | ||||||||
Asset backed securities | Available-for-sale | 860,590 | (4,046 | ) | ||||||||
|
|
|
| |||||||||
| 2,835,591 | (4,294 | ) | ||||||||||
|
|
|
| |||||||||
On the date of initial application, January 1, 2018, the adjustments from the allowances/provision in accordance with Korean IFRS 1039 to the allowances/provision in accordance with Korean IFRS 1109, are as follows:
Measurement categories | Allowances/Provision | |||||||||||||||||
December 31, 2017 (Korean IFRS 1039) | January 1, 2018 (Korean IFRS 1109) | Korean IFRS 1039 | Reclassification | Remeasurement | Korean IFRS1109 | |||||||||||||
Loans and receivables | ||||||||||||||||||
Due from financial institutions | Financial assets at amortized cost | — | — | 1,530 | 1,530 | |||||||||||||
Loans | Financial assets at amortized cost | 1,378,113 | — | 289,070 | 1,667,183 | |||||||||||||
Financial assets at fair value through profit or loss | 35,608 | (35,608 | ) | — | — | |||||||||||||
Other financial assets | Financial assets at amortized cost | 49,722 | — | 3,368 | 53,090 | |||||||||||||
Available-for-sale | ||||||||||||||||||
Debts securities | Financial assets at fair value through other comprehensive income | — | — | 2,145 | 2,145 | |||||||||||||
Financial assets at amortized cost | — | — | 176 | 176 | ||||||||||||||
Held-to-maturity securities | ||||||||||||||||||
Debts securities | Financial assets at amortized cost | — | — | 1,202 | 1,202 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||||
| 1,463,443 | (35,608 | ) | 297,491 | 1,725,326 | ||||||||||||||
|
|
|
|
|
|
|
| |||||||||||
Unused commitment and guarantee | ||||||||||||||||||
Non-financial guarantee and unused commitment | 195,772 | — | 4,940 | 200,712 | ||||||||||||||
|
|
|
|
|
|
|
| |||||||||||
| 195,772 | — | 4,940 | 200,712 | |||||||||||||||
|
|
|
|
|
|
|
| |||||||||||
Financial guarantee | 1,862 | — | 356 | 2,218 | ||||||||||||||
|
|
|
|
|
|
|
| |||||||||||
| 1,862 | — | 356 | 2,218 | |||||||||||||||
|
|
|
|
|
|
|
| |||||||||||
194
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
On the date of initial application, January 1, 2018, the impacts on accumulated other comprehensive income due to financial assets at fair value through other comprehensive income and others, are as follows:
| (In millions of Korean won) | Impact of application | |||
December 31, 2017 (before adoption of Korean IFRS 1109) | 678,094 | |||
Change of subsequent Measurement category:available-for-sale financial assets to financial assets at amortized cost | 4,294 | |||
Change of subsequent Measurement category:available-for-sale financial assets to financial assets at fair value through profit or loss | (64,987 | ) | ||
Recognition of expected credit losses on debt securities at fair value through other comprehensive income | 2,145 | |||
Reversal of impairment on equity securities at fair value through other comprehensive income | (612,647 | ) | ||
Valuation of fair value of equity securities accounted for under cost method | 276 | |||
Change of gains (losses) from using equity method of associates and joint ventures | (5,709 | ) | ||
Change of gain/loss from foreign currency translation of foreign operations | 1,932 | |||
Tax effect | 184,605 | |||
|
| |||
January 1, 2018 (after adoption of Korean IFRS 1109) | 188,003 | |||
|
| |||
195
Kookmin Bank and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
On the date of initial application, January 1, 2018, the impacts on retained earnings, are as follows:
| (In millions of Korean won) | Impact of application | |||
December 31, 2017 (before adoption of Korean IFRS 1109) | 17,403,751 | |||
Change of subsequent Measurement category:available-for-sale financial assets to financial assets at fair value through profit or loss | 64,987 | |||
Change of subsequent Measurement category:held-to-maturityfinancial assets to financial assets at fair value through profit or loss | (2,004 | ) | ||
Change of subsequent Measurement category: loans and receivables to financial assets at fair value through profit or loss | 2,690 | |||
Recognition of expected credit losses on debt securities at fair value through other comprehensive income | (2,145 | ) | ||
Reversal of impairment on equity securities at fair value through other comprehensive income | 612,647 | |||
Application of expected credit losses on financial assets at amortized cost | (295,346 | ) | ||
Application of expected credit losses on provisions | (5,296 | ) | ||
Valuation of fair value of equity securities accounted for under cost method | (89 | ) | ||
Change of gains (losses) from using equity method of associates and joint ventures | 6,994 | |||
Change of gain/loss from foreign currency translation of foreign operations | (1,932 | ) | ||
Tax effect | (105,563 | ) | ||
|
| |||
January 1, 2018 (after adoption of Korean IFRS 1109) | 17,678,694 | |||
|
| |||
43. Approval of Issuance of the Financial Statements
The issuance of the Group’s consolidated financial statements as at and for the year ended December 31, 2018, was originally approved by the Board of Directors on February 7, 2019, and wasre-approved with revision on February 28, 2019.
196
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Index
December 31, 2018 and 2017
| Page(s) | ||||
| 1~3 | ||||
Separate Financial Statements | ||||
| 4 | ||||
| 5 | ||||
| 6 | ||||
| 7 | ||||
| 8~191 | ||||
Report of Independent Auditor’s Review of Internal Control over Financial Reporting | 192~193 | |||
Report on the Effectiveness of the Internal Control over Financial Reporting | 194 | |||
(English Translation of a Report Originally Issued in Korean)
To the Board of Directors and Shareholder of Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Opinion
We have audited the accompanying separate financial statements of Kookmin Bank (the Bank), which comprise the separate statements of financial position as at December 31, 2018 and 2017 and the separate statements of comprehensive income, changes in equity and cash flows for the years then ended, and notes to the separate financial statements, including a summary of significant accounting policies and other explanatory information.
In our opinion, the accompanying separate financial statements present fairly, in all material respects, the separate financial position of Kookmin Bank as at December 31, 2018 and 2017, and its separate financial performance and cash flows for the years then ended in accordance with International Financial Reporting Standards as adopted by the Republic of Korea (Korean IFRS)
Basis for Opinion
We conducted our audits in accordance with Korean Standards on Auditing. Our responsibilities under those standards are further described in theAuditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with the ethical requirements of the Republic of Korea that are relevant to our audit of the financial statements and we have fulfilled our other ethical responsibilities in accordance with the ethical requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Other Matter
Auditing standards and their application in practice vary among countries. The procedures and practices used in the Republic of Korea to audit such financial statements may differ from those generally accepted and applied in other countries.
1
Responsibilities of Management and Those Charged with Governance for the Financial Statements
Management is responsible for the preparation and fair presentation of the separate financial statements in accordance with Korean IFRS, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations.
Those charged with governance are responsible for overseeing the Company’s financial reporting process.
Auditor’s Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Korean Standards on Auditing will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
As part of an audit in accordance with Korean Standards on Auditing, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
| • | Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. |
| • | Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. |
| • | Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. |
| • | Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s |
2
| • | report. However, future events or conditions may cause the Company to cease to continue as a going concern. |
| • | Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. |
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
/s/ Samil PricewaterhouseCoopers
Seoul, Korea
March 11, 2019
This report is effective as of March 11, 2019, the audit report date. Certain subsequent events or circumstances, which may occur between the audit report date and the time of reading this report, could have a material impact on the accompanying separate financial statements and notes thereto. Accordingly, the readers of the audit report should understand that there is a possibility that the above audit report may have to be revised to reflect the impact of such subsequent events or circumstances, if any.
3
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Separate Statements of Financial Position
December 31, 2018 and 2017
| (In millions of Korean won) | Notes | 20181 | 2017 | |||||||||
Assets | ||||||||||||
Cash and due from financial institutions | 4,6,7,36 | 13,413,780 | 14,628,439 | |||||||||
Financial assets at fair value through profit or loss | 4,6,12 | — | 3,147,115 | |||||||||
Financial assets at fair value through profit or loss | 4,6,8,12 | 8,612,864 | — | |||||||||
Derivative financial assets | 4,6,9 | 1,611,295 | 2,590,960 | |||||||||
Loans at amortized cost | 4,6,8,10,11 | 274,985,803 | 250,119,240 | |||||||||
Financial investments | 4,6,8,12 | 42,559,078 | 42,208,334 | |||||||||
Investments in associates and subsidiaries | 13,38 | 997,389 | 867,073 | |||||||||
Property and equipment | 14 | 3,123,612 | 2,974,656 | |||||||||
Investment property | 14 | 48,466 | 56,438 | |||||||||
Intangible assets | 15 | 221,756 | 214,952 | |||||||||
Current income tax assets | 32 | 2,633 | 1,388 | |||||||||
Assets held for sale | 18 | 16,952 | 155,506 | |||||||||
Other assets | 4,6,17 | 4,384,063 | 6,455,060 | |||||||||
|
|
|
| |||||||||
Total assets | 349,977,691 | 323,419,161 | ||||||||||
|
|
|
| |||||||||
Liabilities | ||||||||||||
Financial liabilities at fair value through profit or loss | 4,6 | — | 74,191 | |||||||||
Financial liabilities at fair value through profit or loss | 4,6 | 87,168 | — | |||||||||
Derivative financial liabilities | 4,6,9 | 1,638,795 | 2,622,912 | |||||||||
Deposits | 4,6,19 | 267,525,970 | 247,712,788 | |||||||||
Debts | 4,6,20 | 17,411,985 | 15,854,911 | |||||||||
Debentures | 4,6,21 | 21,799,085 | 18,167,498 | |||||||||
Provisions | 22 | 307,379 | 357,488 | |||||||||
Net defined benefit liabilities | 23 | 166,525 | 8,568 | |||||||||
Current income tax liabilities | 32 | 4,026 | 2,503 | |||||||||
Deferred income tax liabilities | 16,32 | 78,067 | 128,915 | |||||||||
Other liabilities | 4,6,24,30 | 14,387,972 | 13,248,665 | |||||||||
|
|
|
| |||||||||
Total liabilities | 323,406,972 | 298,178,439 | ||||||||||
|
|
|
| |||||||||
Equity | ||||||||||||
Capital stock | 25 | 2,021,896 | 2,021,896 | |||||||||
Capital surplus | 25 | 5,220,031 | 5,220,031 | |||||||||
Accumulated other comprehensive income | 25,34 | 176,414 | 745,856 | |||||||||
Retained earnings | 25,33 | 19,152,378 | 17,252,939 | |||||||||
(Provision of regulatory reserve for credit losses |
| |||||||||||
December 31, 2018 : | ||||||||||||
December 31, 2017 : | ||||||||||||
(Amounts estimated to be appropriated (reveresd) |
| |||||||||||
December 31, 2018 : | ||||||||||||
December 31, 2017 : | ||||||||||||
|
|
|
| |||||||||
Total equity | 26,570,719 | 25,240,722 | ||||||||||
|
|
|
| |||||||||
Total liabilities and equity | 349,977,691 | 323,419,161 | ||||||||||
|
|
|
| |||||||||
| 1 | The separate statement of financial position for year ended December 31, 2018 is prepared applying Korean IFRS 1109, and the comparative separate statement of financial position for the year ended December 31, 2017 has not been restated retrospectively as permitted by transitional provisions of Korean IFRS 1109. |
The accompanying notes are an integral part of these separate financial statements.
4
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Separate Statements of Comprehensive Income
Years Ended December 31, 2018 and 2017
| (In millions of Korean won) | Notes | 20181 | 2017 | |||||||||
Interest income | 9,737,156 | 8,296,544 | ||||||||||
Interest income from financial instruments at fair value | 9,648,150 | — | ||||||||||
Interest income from financial instruments at fair value | 89,006 | — | ||||||||||
Interest income from loans and receivables | — | 8,235,425 | ||||||||||
Interest income from financial instruments at fair value | — | 61,119 | ||||||||||
Interest expense | (3,749,069) | (2,842,282) | ||||||||||
|
|
|
| |||||||||
Net interest income | 26 | 5,988,087 | 5,454,262 | |||||||||
|
|
|
| |||||||||
Fee and commission income | 1,443,839 | 1,482,130 | ||||||||||
Fee and commission expense | (284,139 | ) | (235,313 | ) | ||||||||
|
|
|
| |||||||||
Net fee and commission income | 27 | 1,159,700 | 1,246,817 | |||||||||
|
|
|
| |||||||||
Net losses on financial assets/liabilities at fair value through profit or loss (Under Korean IFRS 1039) | 28 | — | (71,742 | ) | ||||||||
|
|
|
| |||||||||
Net gains on financial assets/liabilities | 28 | 357,580 | — | |||||||||
|
|
|
| |||||||||
Net other operating expense | 29 | (654,763 | ) | (239,020 | ) | |||||||
|
|
|
| |||||||||
General and administrative expenses | 14,15,23,30,40 | (3,733,708 | ) | (3,632,546) | ||||||||
|
|
|
| |||||||||
Operating profit before provision for credit losses | 3,116,896 | 2,757,771 | ||||||||||
|
|
|
| |||||||||
Provision for credit losses | 7,11,12,17,22 | (99,802 | ) | (112,985 | ) | |||||||
|
|
|
| |||||||||
Operating profit | 3,017,094 | 2,644,786 | ||||||||||
Netnon-operating profit | 31 | 41,367 | 45,765 | |||||||||
|
|
|
| |||||||||
Profit before income tax expense | 3,058,461 | 2,690,551 | ||||||||||
Income tax expense | 32 | (819,144 | ) | (427,635 | ) | |||||||
|
|
|
| |||||||||
Profit for the year | 2,239,317 | 2,262,916 | ||||||||||
|
|
|
| |||||||||
(Adjusted profit after provision of regulatory | 25 | |||||||||||
2018 : | ||||||||||||
2017 : | ||||||||||||
Items that will not be reclassified to profit or loss: | ||||||||||||
Remeasurements of net defined benefit liabilities | 23 | (95,796 | ) | 14,177 | ||||||||
Net losses on equity instruments | (36,013 | ) | — | |||||||||
Items that may be subsequently reclassified to profit or loss: |
| |||||||||||
Currency translation differences | 856 | (2,886 | ) | |||||||||
Gains on valuation of financial investments | — | 126,314 | ||||||||||
Net gains on debt instruments at fair value | 56,992 | — | ||||||||||
Gains on cash flow hedging instruments | 3,788 | 7,414 | ||||||||||
Other comprehensive income for the year, net of tax | 34 | (70,173 | ) | 145,019 | ||||||||
|
|
|
| |||||||||
Total comprehensive income for the year | 2,169,144 | 2,407,935 | ||||||||||
|
|
|
| |||||||||
| 1 | The separate statement of comprehensive income for year ended December 31, 2018 is prepared applying Korean IFRS 1109, and the comparative separate statement of comprehensive income for the year ended December 31, 2017 has not been restated retrospectively as permitted by transitional provisions of Korean IFRS 1109. |
The accompanying notes are an integral part of these separate financial statements.
5
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Separate Statements of Changes in Equity
Years Ended December 31, 2018 and 2017
| (In millions of Korean won) | Notes | Capital Stock | Capital Surplus | Accumulated Other Comprehensive Income | Retained Earnings | Total Equity | ||||||||||||||||||
Balance at January 1, 2017 | 2,021,896 | 5,220,031 | 600,837 | 15,349,516 | 23,192,280 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Comprehensive income for the year | ||||||||||||||||||||||||
Profit for the year | — | — | — | 2,262,916 | 2,262,916 | |||||||||||||||||||
Remeasurements of net defined benefit liabilities |
| — | — | 14,177 | — | 14,177 | ||||||||||||||||||
Currency translation differences | — | — | (2,886 | ) | — | (2,886 | ) | |||||||||||||||||
Gains on valuation of financial investments | — | — | 126,314 | — | 126,314 | |||||||||||||||||||
Gains on cash flow hedging instruments | — | — | 7,414 | — | 7,414 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total comprehensive income for the year | — | — | 145,019 | 2,262,916 | 2,407,935 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Transactions with the shareholder | ||||||||||||||||||||||||
Dividends | — | — | — | (359,493 | ) | (359,493 | ) | |||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total transactions with the shareholder | — | — | — | (359,493 | ) | (359,493 | ) | |||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Balance at December 31, 2017 | 2,021,896 | 5,220,031 | 745,856 | 17,252,939 | 25,240,722 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Balance at January 1, 2018 | 2,021,896 | 5,220,031 | 745,856 | 17,252,939 | 25,240,722 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||
The effect of changing of accounting policies | 41 | — | — | (499,269 | ) | 286,616 | (212,653 | ) | ||||||||||||||||
Balance after reflecting the change of accounting policies |
| 2,021,896 | 5,220,031 | 246,587 | 17,539,555 | 25,028,069 | ||||||||||||||||||
Comprehensive income for the year | ||||||||||||||||||||||||
Profit for the year | — | — | — | 2,239,317 | 2,239,317 | |||||||||||||||||||
Remeasurements of net defined benefit liabilities |
| — | — | (95,796 | ) | — | (95,796 | ) | ||||||||||||||||
Net gains on equity instruments | — | — | (36,013 | ) | 13,638 | (22,375 | ) | |||||||||||||||||
Currency translation differences | — | — | 856 | — | 856 | |||||||||||||||||||
Net gains on debt instruments at fair value through | — | — | 56,992 | — | 56,992 | |||||||||||||||||||
Gains on cash flow hedging instruments | — | — | 3,788 | — | 3,788 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total comprehensive income for the year | — | — | (70,173 | ) | 2,252,955 | 2,182,782 | ||||||||||||||||||
|
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| |||||||||||||||
Transactions with the shareholder | ||||||||||||||||||||||||
Dividends | — | — | — | (640,132 | ) | (640,132 | ) | |||||||||||||||||
|
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|
|
|
|
|
|
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| |||||||||||||||
Total transactions with the shareholder | — | — | — | (640,132 | ) | (640,132 | ) | |||||||||||||||||
|
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|
|
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|
|
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| |||||||||||||||
Balance at December 31, 20181 | 2,021,896 | 5,220,031 | 176,414 | 19,152,378 | 26,570,719 | |||||||||||||||||||
|
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| |||||||||||||||
| 1 | The separate statement of changes in equity for year ended December 31, 2018 is prepared applying Korean IFRS 1109, and the comparative separate statement of changes in equity for the year ended December 31, 2017 has not been restated retrospectively as permitted by transitional provisions of Korean IFRS 1109. |
The accompanying notes are an integral part of these separate financial statements.
6
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Separate Statements of Cash Flows
Years Ended December 31, 2018 and 2017
| (in millions of Korean won) | Notes | 20181 | 2017 | |||||||||
Cash flows from operating activities | ||||||||||||
Profit for the year | 2,239,317 | 2,262,916 | ||||||||||
|
|
|
| |||||||||
Adjustment fornon-cash items | ||||||||||||
Net losses on financial assets/liabilities | — | 26,875 | ||||||||||
Net gains on financial assets/liabilities | (40,016 | ) | — | |||||||||
Net losses(gains) on derivative financial investments | 41,491 | (16,198 | ) | |||||||||
Adjustment of fair value of derivative financial instruments | 410 | (1,000 | ) | |||||||||
Provision for credit losses | 99,802 | 112,985 | ||||||||||
Net losses(gains) on financial investments | (86,994 | ) | 62,394 | |||||||||
Net losses on associates and subsidiaries | 31,263 | 82,956 | ||||||||||
Depreciation and amortization expense | 241,400 | 229,890 | ||||||||||
Other net gains on property and equipment/intangible assets |
| (106,376 | ) | (44,366 | ) | |||||||
Share-based payment | 4,051 | 33,148 | ||||||||||
Post-employment benefits | 140,790 | 147,469 | ||||||||||
Net interest expense | 248,356 | 261,895 | ||||||||||
Losses on foreign currency translation | (10,120 | ) | (298,333 | ) | ||||||||
Other expense | 19,117 | 47,666 | ||||||||||
|
|
|
| |||||||||
| 583,174 | 645,381 | |||||||||||
|
|
|
| |||||||||
Changes in operating assets and liabilities | ||||||||||||
Financial assets at fair value through profit or loss (Under Korean IFRS 1039) |
| — | 531,540 | |||||||||
Financial assets at fair value through profit or loss | (3,066,415 | ) | — | |||||||||
Derivative financial instrument | (11,166 | ) | (2,809 | ) | ||||||||
Loans at amortized cost | (25,022,135 | ) | (16,559,476 | ) | ||||||||
Current income tax assets | (1,245 | ) | 10,730 | |||||||||
Deffered income tax assets | 449 | 84,257 | ||||||||||
Other assets | 2,250,031 | (2,714,221 | ) | |||||||||
Financial liabilities at fair value through profit or loss (Under Korean IFRS 1039) |
| — | 953 | |||||||||
Financial liabilities at fair value through profit or loss | 10,419 | — | ||||||||||
Deposits | 19,411,037 | 17,399,162 | ||||||||||
Deferred income tax liabilities | 55,218 | 32,194 | ||||||||||
Other liabilities | 544,622 | (1,336,412 | ) | |||||||||
|
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| |||||||||
| (5,829,185 | ) | (2,554,082 | ) | |||||||||
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|
|
| |||||||||
Net cash outflow from operating activities | (3,006,694 | ) | 354,215 | |||||||||
|
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|
| |||||||||
Cash flows from investing activities | ||||||||||||
Net cash flows from derivative financial instrument for hedging purposes |
| 3,065 | (3,222 | ) | ||||||||
Disposal of financial assets at fair value through profit or loss | 11,093,020 | — | ||||||||||
Acquisition of financial assets at fair value through profit or loss | (8,901,732 | ) | — | |||||||||
Disposal of financial investments | 53,147,788 | 33,834,099 | ||||||||||
Acquisition of financial investments | (57,399,854 | ) | (39,976,314 | ) | ||||||||
Disposal of investments in associates and subsidiaries | 39,772 | 67,406 | ||||||||||
Acquisition of investments in associates and subsidiaries | (201,348 | ) | (34,968 | ) | ||||||||
Disposal of property and equipment | 1,722 | (58 | ) | |||||||||
Acquisition of property and equipment | (330,618 | ) | (215,674 | ) | ||||||||
Disposal of intangible assets | 1,425 | 233 | ||||||||||
Acquisition of intangible assets | (52,719 | ) | (50,575 | ) | ||||||||
Net cash flows due to conversion of a subsidiary into a branch | 32,903 | 10,245 | ||||||||||
Others | 301,954 | 209,866 | ||||||||||
|
|
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| |||||||||
Net cash outflow from investing activities | (2,264,622 | ) | (6,158,962 | ) | ||||||||
|
|
|
| |||||||||
Cash flows from financing activities | ||||||||||||
Net cash flows from derivative financial instrument for hedging purposes |
| (17,698 | ) | 5,804 | ||||||||
Net increase in debts | 1,346,037 | 834,750 | ||||||||||
Increase in debentures | 9,308,540 | 9,696,468 | ||||||||||
Decrease in debentures | (5,861,362 | ) | (5,395,942 | ) | ||||||||
Payment of dividends | (640,132 | ) | (359,493 | ) | ||||||||
Net increase in other payables from trust accounts | 276,446 | 540,071 | ||||||||||
Others | (212,475 | ) | 148,314 | |||||||||
|
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| |||||||||
Net cash inflow from financing activities | 4,199,356 | 5,469,972 | ||||||||||
|
|
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| |||||||||
Exchange losses on cash and cash equivalents | (29,310 | ) | (192,893 | ) | ||||||||
|
|
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| |||||||||
Net decrease in cash and cash equivalents | (1,101,270 | ) | (527,668 | ) | ||||||||
Cash and cash equivalents at the beginning of the year | 36 | 5,509,846 | 6,037,514 | |||||||||
|
|
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| |||||||||
Cash and cash equivalents at the end of the year | 36 | 4,408,576 | 5,509,846 | |||||||||
|
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| |||||||||
| 1 | The separate statement of cash flows for the year ended December 31, 2018 is prepared applying Korean IFRS 1109, and the comparative separate statement of cash flows for the year ended December 31, 2017 has not been restated retrospectively as permitted by transitional provisions of Korean IFRS 1109. |
The accompanying notes are an integral part of these separate financial statements.
7
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
1. The Bank
Kookmin Bank (the “Bank”) was incorporated in 1963 under the Citizens National Bank Act to provide banking services to the general public and to small andmedium-sized enterprises. Pursuant to the Repeal Act of the Citizens National Bank Act, effective January 5, 1995, the Bank’s status changed to a financial institution which operates under the Banking Act and Commercial Act.
The Bank merged with Korea Long Term Credit Bank on December 31, 1998, and with its subsidiaries, Daegu, Busan, Jeonnam Kookmin Mutual Savings & Finance Co., Ltd., on August 22, 1999. Pursuant to the directive from the Financial Services Commission related to the Structural Improvement of the Financial Industry Act, the Bank acquired certain assets, including performing loans, and assumed most of the liabilities of Daedong Bank on June 29, 1998. Also, the Bank completed the merger with Housing and Commercial Bank (“H&CB”) on October 31, 2001, and merged with Kookmin Credit Card Co., Ltd., a majority-owned subsidiary, on September 30, 2003. Meanwhile, the Bank spun off its credit card business segment on February 28, 2011, and KB Kookmin Card Co., Ltd. became a subsidiary of KB Financial Group Inc.
The Bank listed its shares on the Stock Market Division of the Korea Exchange (“KRX,” formerly Korea Stock Exchange) in September 1994. As a result of the merger with H&CB, the shareholder of the former Kookmin Bank and H&CB received new common shares of the Bank which were relisted on the KRX on November 9, 2001. In addition, H&CB listed its American Depositary Shares (“ADS”) on the New York Stock Exchange (“NYSE”) on October 3, 2000, prior to the merger. Following the merger with H&CB, the Bank listed its ADS on the NYSE on November 1, 2001. The Bank became a wholly owned subsidiary of KB Financial Group Inc. through a comprehensive stock transfer on September 29, 2008. Subsequently, the Bank’s shares and its ADS, each listed on the KRX and the NYSE, were delisted on October 10, 2008 and September 26, 2008, respectively. As at December 31, 2018, the Bank’spaid-in capital isW 2,021,896 million.
The Bank engages in the banking business in accordance with the Banking Act, trust business in accordance with the Financial Investment Services and Capital Markets Act, and other relevant businesses. As at December 31, 2018, the Bank operates 1,057 domestic branches and offices, and six overseas branches (excluding four subsidiaries and three offices).
8
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
2. Basis of Preparation
2.1 Application of Korean IFRS
The Bank maintains its accounting records in Korean won and prepares statutory financial statements in the Korean language (Hangul) in accordance with Korean IFRS. The accompanying separate financial statements have been condensed, restructured and translated into English from the Korean language financial statements.
The separate financial statements of the Bank have been prepared in accordance with Korean IFRS. These are the standards and related interpretations issued by the International Accounting Standards Board (“IASB”) that have been adopted by the Republic of Korea.
The preparation of the separate financial statements requires the use of certain critical accounting estimates. It also requires management to exercise judgment in the process of applying the Bank’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.
The Bank has prepared the separate financial statements in accordance with Korean IFRS 1027 Separate Financial Statements.
The Bank newly applied the following amended and enacted standards and interpretations from January 1, 2018, and these applications do not have a material impact on the separate financial statements, except for the adoption of Korean IFRS 1109Financial Instruments.
| • | Amendments to Korean IFRS 1028Investments in Associates and Joint Ventures |
When an investment in an associate or a joint venture is held by, or it held indirectly through, an entity that is a venture capital organization, or a mutual fund and similar entities, the entity may elect to measure that investment at fair value through profit or loss. The amendments clarify that an entity shall make this election separately for each associate of joint venture, at initial recognition of the associate or joint venture.
| • | Amendments to Korean IFRS 1040Transfers of Investment Property |
Paragraph 57 of Korean IFRS 1040 clarifies that a transfer to, or from, investment property, including property under construction, can only be made if there has been a change in use that is supported by evidence, and provides a list of circumstances as examples.
| • | Amendments to Korean IFRS 1102Share-based Payment |
The amendments clarify 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.
9
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
| • | Enactment of Interpretation 2122Foreign Currency Transactions and Advance Consideration |
According to the enactment, 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 payment or receipt of advance consideration. If there are multiple payments or receipts in advance, the entity shall determine a date of the transaction for each payment or receipt of advance consideration.
| • | Amendments to Korean IFRS 1109Financial Instruments |
The Bank adopted Korean IFRS 1109Financial Instruments with a date of initial application of January 1, 2018. As permitted by the transitional provisions of Korean IFRS 1109, comparative periods have not been restated. The Bank recognized the difference between the previous carrying amount and the carrying amount at the date of initial application in equity as at January 1, 2018.
For the details about impacts of the adoption of this Korean IFRS 1109, see Note 41.
| • | Amendments to Korean IFRS 1115 Revenue from Contracts with Customers |
The Bank has adopted Korean IFRS 1115,Revenue from Contracts with Customers from January 1, 2018. The new standard for revenue recognition replaced Korean IFRS 1018Revenue, Korean IFRS 1011Construction Contracts, Interpretation 2031Revenue-Barter Transactions Involving Advertising Services, Interpretation 2113Customer Loyalty Programs, Interpretation 2115Agreements for the Construction of Real Estate and Interpretation 2118Transfers of Assets from Customers.
The Bank has changed the following accounting policy for the period beginning on January 1, 2018.
| • | Presentation of interest income arising from financial assets at fair value through profit or loss |
The Bank previously recognized interest income arising from financial assets at fair value through profit or loss (under Korean IFRS 1039) as net gains (losses) of financial assets/liabilities at fair value through profit or loss (under Korean IFRS 1039) in the statement of comprehensive income. From January 1, 2018, the Bank changed the accounting policy and corresponding interest income was presented as a part of interest income in the statement of comprehensive income. The Bank believes the change in accounting policy provides more relevant information. The statement of comprehensive income for the year ended December 31, 2017 has been restated by adjusting classification of interest income.
This change in accounting policy does not have any impact on the statements of financial position as at December 31, 2018 and 2017, and profit for the years ended December 31, 2018 and 2017. The impacts on the statements of comprehensive income for 2018 and 2017, are as follows:
| (in millions of Korean won) | 2018 | 2017 | ||||||
Increase in interest income | 89,006 | 61,119 | ||||||
Decrease in net gains on financial assets/liabilities at fair value through profit or loss (under Korean IFRS 1109) | (89,006 | ) | — | |||||
Decrease in net gains on financial assets/liabilities at fair value through profit or loss (under Korean IFRS 1039) | — | (61,119 | ) | |||||
10
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
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 Bank 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, Interpretation 2104Determining whether an Arrangement contains a Lease, Interpretation 2015Operating Leases-Incentives, and Interpretation 2027Evaluating the Substance of Transactions Involving the Legal Form of a Lease.
At inception of a contract, the Bank shall assess whether the contract is, or contains, a lease. Also, at the date of initial application, the Bank shall assess whether the contract is, or contains, a lease in accordance with the standard. However, the Bank may not need to reassess all contracts with applying the practical expedient that can be applied to contracts entered before the date of initial application. On the basis of the date of initial application, the Bank will assess whether the contract is , or contains, a lease.
For a contract that is, or contains, a lease, the Bank shall account for each lease component within the contract as a lease separately fromnon-lease components of the contract. 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. For the all (or partial) contracts that are, or contain, a lease, the Bank plans to apply the practical expedient to account for each lease component and any associatednon-lease components as a single lease component.
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). The Bank plans to apply the recognition exemption for the short-term contracts of leasing realty for training purposes (a lease term of 12 months or less at the commencement date) and leases for which the underlying asset is of low value (e.g. underlying assets belowW 5,000,000 or $ 5,000).
For sale and leaseback transactions, an entity (the seller-lessee) shall apply the requirements for determining when a performance obligation is satisfied in Korean IFRS 1115Revenue from Contracts with Customers to determine whether the transfer of an asset is accounted for as a sale of that asset. The entity shall not reassess sale and leaseback transactions entered into before the date of initial application.
From a lessor’s accounting perspective, Korean IFRS 1116 will not significantly change in comparison to Korean IFRS 1017. For the lease accounting as the lessor from the Bank’s point of view, the Bank expects the impact to the financial statements applying Korean IFRS 1116 will not be significant.
A lessee shall apply this standard to its leases either (a) retrospectively to each prior reporting period presented applying Korean IFRS 1008Accounting Policies, Changes in Accounting Estimates and Errors (Full retrospective application); or (b) with the cumulative effect of initially applying the standard being recognized at the date of initial application.
11
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
The Bank plans to apply Korean IFRS 1116 retrospectively with the cumulative effect of initially applying the standard and as such will not restate any comparative information.
The Bank performed an impact assessment to identify potential financial effects of applying Korean IFRS 1116. The assessment was performed based on available information as at December 31, 2018 to identify effects on 2019 financial statements.
The total minimum lease payment expected to be paid by the Bank in relation to operating leases before discounted to their present value isW 330,758 million. When the payment is discounted at incremental borrowing rate of the lessee, the total minimum lease payment amounts toW 317,665 million. Based on the impact assessment, the Bank expects the underlying leased asset and a lease liability as at December 31, 2018 to be increased byW 350,803 million andW 317,665 million, respectively. The difference between theright-of-use asset and the lease liability is arising from the adjustments made at theright-of-use asset for the lease contracts entered before the date of the adoption of this standard.
The impact assessment may change due to additional information that the Bank may obtain after the assessment.
| • | Korean IFRS 1109 Financial Instruments |
The narrow-scope amendments made to Korean IFRS 1109 Financial Instruments enable entities to measure certain prepayable financial assets with negative compensation at amortized cost. When a modification of a financial liability measured at amortized cost that does not result in the derecognition, a modification gain or loss shall be recognized in profit or loss. These amendments will be applied for annual periods beginning on or after January 1, 2019, with early adoption permitted.
| • | Amendments to Korean IFRS 1019 Employee Benefits |
The amendments require that an entity shall calculate current service cost and net interest for the remainder of the reporting period after a plan amendment, curtailment or settlement based on updated actuarial assumptions from the date of the change. The amendments also require that a reduction in a surplus must be recognized in profit or loss even if that surplus was not previously recognized because of the impact of the asset ceiling. The amendments are effective for plan amendments, curtailments and settlements occurring in reporting periods that begin on or after 1 January 2019.
| • | Amendments to Korean IFRS 1028 Investments in Associates and Joint Ventures |
The amendments clarify that an entity shall apply Korean IFRS 1109 to financial instruments in an associate or joint venture to which the equity method is not applied. These include long-term interests that, in substance, form part of the entity’s net investment in an associate or joint venture. The amendments clarify that an entity shall apply Korean IFRS 1109 to other interests in an associate or joint venture to which the equity method is not applied. In addition, the entity shall apply the impairment requirements in Korean IFRS 1109 first to its other long-term interests that, in substance, form part of the entity’s net investment in an associate or joint venture. These amendments will be applied for annual periods beginning on or after January 1, 2019, with early adoption permitted. In accordance with the transitional provisions in Korean IFRS 1109, the restatement of the comparative information is not required and the cumulative effects of initially applying the amendments retrospectively should be recognized in the beginning balance of retained earnings (or other components of equity, as appropriate) at the date of initial application.
12
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
| • | Enactment to Interpretation of Korean IFRS 2123 Uncertainty over Income Tax Treatments |
The Interpretation explains how to recognize and measure deferred and current income tax assets and liabilities where there is uncertainty over a tax treatment, and includes guidance on how to determine whether each uncertain tax treatment is considered separately or together. It also presents examples of circumstances where a judgement or estimate is required to be reassessed. This Interpretation will be applied for annual periods beginning on or after January 1, 2019, and an entity can either restate the comparative financial statements retrospectively or recognize the cumulative effect of initially applying the Interpretation as an adjustment in the beginning balance at the date of initial application.
| • | Annual Improvements to Korean IFRS 2015 – 2017 Cycle: |
(a) Korean IFRS 1103 Business Combination
The amendments clarify that when a party to a joint arrangement obtains control of a business that is a joint operation, and had rights to the assets and obligations for the liabilities relating to that joint operation immediately before the acquisition date, the transaction is a business combination achieved in stages. In such cases, the acquirer shall remeasure its entire previously held interest in the joint operation. These amendments will be applied to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after 1 January 2019, with early adoption permitted.
(b) Korean IFRS 1111 Joint Agreements
The amendments clarify that when a party that participates in, but does not have joint control of, a joint operation might obtain joint control of the joint operation in which the activity of the join operation constitutes a business. In such cases, previously held interests in the joint operation are not remeasured. These amendments will be applied to transactions in which an entity obtains joint control on or after the beginning of the first annual reporting period beginning on or after 1 January 2019, with early adoption permitted.
(c) Paragraph 57A of Korean IFRS 1012 Income Tax
The amendment is applied to all the income tax consequences of dividends and requires an entity to recognize the income tax consequences of dividends in profit or loss, other comprehensive income or equity according to where the entity originally recognized those past transactions or events. These amendments will be applied for annual reporting periods beginning on or after January 1, 2019, with early adoption permitted.
(d) Korean IFRS 1023 Borrowing Costs
The amendments clarify that if a specific borrowing remains outstanding after the related qualifying asset is ready for its intended use (or sale), it becomes part of general borrowings. These amendments will be applied to borrowing costs incurred on or after the beginning of the first annual reporting period beginning on or after January 1, 2019, with early adoption permitted.
13
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
2.2 Measurement Basis
The separate financial statements have been prepared under the historical cost convention unless otherwise specified.
2.3 Functional and Presentation Currency
Items included in the financial statements of the Bank are measured using the currency of the primary economic environment in which the Bank operates (the “functional currency”). The separate financial statements are presented in Korean won, which is the Bank’s functional and presentation currency. Refer to Notes 3.2.
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.
Uncertainty in estimates and assumptions with significant risk that may result in material adjustment to the separate financial statements are as follows:
2.4.1 Income Taxes
The Bank is operating in numerous countries and the income generated from these operations is subject to income taxes based on tax laws and interpretations of tax authorities in numerous jurisdictions. There are many transactions and calculations for which the ultimate tax determination is uncertain.
If certain portion of the taxable income is not used for investments, increase in wages, and others in accordance with the Tax Law for Promotion of investment and Collaborative Cooperation (Recirculation of Corporate Income), the Bank is liable to pay additional income tax calculated based on the tax laws. The new tax law is effective for three years from 2018 and measurement of current and deferred income tax is affected. As the Bank’s income tax is dependent on the investments, increase in wages, and others, there exists uncertainty with regard to measuring the final tax effects.
14
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
2.4.2 Fair Value of Financial Instruments
The fair value of financial instruments that are not traded in an active market is determined by using valuation techniques. The Bank uses its judgment to select a variety of methods and make assumptions that are mainly based on market conditions existing at the end of each reporting period. Refer to Note 6 for details on valuation techniques and inputs used to determine the fair value of financial instruments.
2.4.3 Provisions for Credit Losses (allowances for loan losses, provisions for acceptances and guarantees, and unused loan commitments)
The Bank determines and recognizes allowances for losses on financial assets at amortized cost and fair value through other comprehensive income through impairment test and recognizes provisions for acceptances and guarantees, and unused loan commitments. The accuracy of provisions for credit losses is determined by the methodology and assumptions used for the estimation of expected cash flows of the borrower for individually assessed allowances of loans, collectively assessed allowances for groups of loans, acceptances and guarantees, and unused loan commitments.
2.4.4 Net Defined Benefit Liability
The present value of net defined benefit liability depends on a number of factors that are determined on an actuarial basis using a number of assumptions(Note 23).
2.4.5 Estimated Impairment of Goodwill
The recoverable amounts of cash-generating units, to determine whether goodwill is impaired, have been determined based onvalue-in-use calculations(Note 15).
15
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
3. Significant Accounting Policies
The significant accounting policies applied in the preparation of these separate financial statements are set out below. The items related to financial instruments on the financial statements are accounted for applying Korean IFRS 1109 for the current period, and Korean IFRS 1039 for the comparative prior period, respectively.
Comparative financial statements are not restated retrospectively and the described accounting policies on financial instruments are applied for the financial statements for the current period. Except for the changes in accounting policies related to financial instruments, these policies have been consistently applied to all periods presented.
3.1 Investments in Associates and Subsidiaries
Associates are entities over which the Bank has significant influence in the financial and operating policy decisions. If the Bank holds 20% or more of the voting power of the investee, it is presumed that the Bank has significant influence.
Subsidiaries are companies that are controlled by the Bank. The Bank controls an investee when it is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. The existence and effects of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Bank controls another entity. Subsidiaries are fully consolidated from the date when control is transferred to the Bank andde-consolidated from the date when control is lost.
Investments in associates and subsidiaries are accounted for at cost in accordance with Korean IFRS 1027. Beneficiary certificates in private equity fund which is consolidated is classified as financial assets at fair value through profit or loss in accordance with Korean IFRS 1109, and measured at fair value in accordance with Korean IFRS 1113.
The Bank determines at each reporting period whether there is any objective evidence that the investments in the associates and subsidiaries are impaired. If this is the case, the Bank calculates the amount of impairment as the difference between the recoverable amount of the associate or subsidiary and its carrying value and recognizes the amount as‘non-operating income (expense)’ in the statement of comprehensive income.
3.2 Foreign Currency
3.2.1 Foreign Currency Transactions and Balances
A foreign currency transaction is recorded, on initial recognition in the functional currency, by applying the spot exchange rate between the functional currency and the foreign currency at the date of the transaction. At the end of each reporting period foreign currency monetary items are translated using the closing rate which is the spot exchange rate at the end of the reporting period.Non-monetary items that are measured at fair value in a foreign currency are translated using the spot exchange rates at the date when the fair value was determined andnon-monetary items that are measured in terms of historical cost in a foreign currency are translated using the spot exchange rate at the date of the transaction. Exchange differences arising on the settlement of monetary items or on translating monetary items at rates different from those at which they were translated on initial recognition during the period or in previous financial statements are recognized in profit or loss in the period in which they arise. When gains or losses on anon-monetary item are recognized in other comprehensive income, any exchange component of those gains or losses are also recognized in other comprehensive income. Conversely, when gains or losses on anon-monetary item are recognized in profit or loss, any exchange component of those gains or losses are also recognized in profit or loss.
16
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
3.2.2 Foreign Operations
The financial performance and financial position of all foreign operations, whose functional currencies differ from the Bank’s presentation currency, are translated into the Bank’s presentation currency using the following procedures.
Assets and liabilities for each statement of financial position presented are translated at the closing rate at the end of the reporting period. Income and expenses in the statement of comprehensive income presented are translated at average exchange rates for the period. All resulting exchange differences are recognized in other comprehensive income.
Any goodwill arising from the acquisition of a foreign operation and any fair value adjustments to the carrying amounts of assets and liabilities arising from the acquisition of that foreign operation are treated as assets and liabilities of the foreign operation. Thus, they are expressed in the functional currency of the foreign operation and are translated into the presentation currency at the closing rate.
On the disposal of a foreign operation, the cumulative amount of the exchange differences relating to that foreign operation, recognized in the separate component of equity, is reclassified from other comprehensive income to profit or loss (as a reclassification adjustment) when the gains or losses on disposal are recognized.
3.3 Recognition and Measurement of Financial Instruments
3.3.1 Initial Recognition
The Bank recognizes a financial asset or a financial liability in its statement of financial position when the Bank 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 Bank 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 Bank classifies financial liabilities as financial liabilities at fair value through profit or loss, or other financial liabilities. The classification depends on the Bank’s business model for managing financial instruments and the contractual cash flow characteristics of the financial instruments at initial recognition.
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. The fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. 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.
17
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
3.3.2 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 at initial recognition and adjusted to reflect principal repayments, cumulative amortization using the effective interest method and any reduction (directly or through the use of an allowance account) for impairment or uncollectibility.
Fair value
Fair values, which the Bank 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 Bank uses valuation models that are commonly used by market participants and customized for the Bank 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 Bank 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.
The Bank’s Fair Value Evaluation Committee, which consists of the risk management department, trading department and accounting department, reviews the appropriateness of internally developed valuation models, and approves the selection and changing of the external valuation institution and other considerations related to fair value measurement. The review results on the fair valuation models are reported to the Market Risk Management subcommittee by the Fair Value Evaluation Committee on a regular basis.
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.
18
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
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 Bank 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.
3.3.3 Derecognition
Derecognition is the removal of a previously recognized financial asset or financial liability from the statement of financial position. The Bank 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 Bank has not retained control. If the Bank neither transfers nor disposes of substantially all the risks and rewards of ownership of the financial assets, the Bank continues to recognize the financial asset to the extent of its continuing involvement in the financial asset.
If the Bank 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 Bank continues to recognize the transferred asset in its entirely and recognize a financial liability for the consideration received.
The Bank writes off the carrying amount and allowance of financial assets in its entirety or to a portion thereof when the principal and interest are determined to be no longer recoverable. In general, the Bank considerswrite-off when it is determined that the debtor does not have sufficient resources or income to cover the principal and interest, and thiswrite-off decision is made in accordance with internal regulations. After thewrite-off, the Bank can collect thewritten-off loans continuously according to the internal policy. Recovered amounts fromwritten-off financial assets are recognized in 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 expired.
3.3.4 Offsetting
Financial assets and financial liabilities are offset and the net amount are presented in the statement of financial position when, and only when, the Bank currently has a legally enforceable right to offset the recognized amounts and intends either to settle on a net basis, or to realize the asset and settle the liability simultaneously.
19
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
3.4 Cash and Cash Equivalents
Cash and cash equivalents 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.
3.5Non-derivative Financial Assets
3.5.1 Financial Assets at Fair Value through Profit or Loss
Financial assets classified as held for trading, financial assets designated by the Bank 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 Bank 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 using the effective interest method and dividend income from financial assets at fair value through profit or loss are also recognized in profit or loss.
3.5.2 Financial Assets at Fair Value through Other Comprehensive Income
The Bank classifies below financial assets as financial assets at fair value through other comprehensive income;
| • | debt instruments that are held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets, and where the assets’ cash flows represent solely payments of principal and interest on the principal amount outstanding or; |
| • | Equity instruments that are 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. Gains or losses arising from a change in fair value, other than dividend income, interest income using effective interest method and exchange differences arising on monetary items which are recognized directly in profit or loss, are recognized as other comprehensive income in equity.
Upon disposal of financial assets at fair value through other comprehensive income, the cumulative gain or loss previously recognized in other comprehensive income is reclassified to profit or loss. However, cumulative gain or loss of equity instrument designated as fair value through other comprehensive income are not reclassified to profit or loss at disposal.
20
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
Financial assets at fair value through other comprehensive income denominated in foreign currencies are translated at the closing rate. Fair value differences resulting from exchange differences on the amortized cost are recognized in profit or loss, and other changes are recognized as equity.
3.5.3 Financial Assets 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. These financial assets are subsequently carried at amortized cost using the effective interest method after initial recognition and interest income is recognized using the effective interest method. The carrying amount of financial assets at amortized cost is presented by deducting allowance for doubtful accounts, and the measurement method is described in Note 3.6.
3.6 Expected Credit Loss of Financial Assets (Debt Instruments)
The Bank measures expected credit loss and recognizes loss allowance at the end of the reporting period for financial assets at amortized cost and fair value through other comprehensive income with the exception of financial asset at fair value through profit or loss.
Expected credit losses are estimated at present value of probability-weighted amount that is determined by evaluating a range of possible outcomes. The Bank 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.
The approaches of measuring expected credit losses in accordance with Korean IFRS are as follows:
| • | General approach: for financial assets not subject to the below approach and unused loan commitments onoff-balance sheet |
| • | Credit-impaired approach: for financial assets that are credit-impaired at the time of acquisition |
Application of general approach is differentiated depending on whether credit risk has increased significantly after initial recognition. After initial recognition, loss allowances for the assets without significant increase in credit risk are measured at the amount of 12 month expected credit losses, whereas the loss allowances for the assets with significant increase in credit risk are measured at the amount of lifetime expected credit losses. Lifetime is presumed to be a period to the contractual maturity date of financial assets (the expected life of financial assets).
The Bank determines whether the credit risk has increased significantly using the following information, and if one or more of the following items are met, it is deemed as significant increase in credit risk. When the contractual cash flows of a financial asset are renegotiated or otherwise modified, the Bank determines whether the credit risk has increased significantly using the same 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 |
| • | Subsequent managing ratings below certain level in the early warning system |
| • | Debt restructuring (except for impaired financial assets) and |
| • | Credit delinquency information on Korea Federation of Banks, and etc. |
21
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
If one or more of the following items are met, it is generally deemed as credit-impaired:
| • | 90 days or more past due |
| • | Legal proceedings related to collection |
| • | A borrower registered on the credit management list of Korea Federation of banks |
| • | A corporate borrower with the credit rating C or D |
| • | Refinancing or |
| • | Debt restructuring, and etc. |
3.6.1 Forward-looking Information
The Bank uses forward-looking information, when it determines whether the credit risk has increased significantly and it measures the expected credit losses.
The Bank assumes the risk components have a certain correlation with the economic cycle, and uses statistical methodologies to estimate the relation between key macroeconomic variables and risk components for the expected credit losses. The Bank has derived a correlation between the time series data of more than 8 years and the key macroeconomic variables, and calculates the expected credit losses by reflecting the results of the correlation on the risk component. The correlation between the major macroeconomic variables and the credit risk is as follows;
| Key macroeconomic variables | Correlation between the major macroeconomic variables and the credit risk | |||
Domestic GDP growth rate | (- | ) | ||
Composite stock index | (- | ) | ||
Construction investment change rate | (- | ) | ||
Housing transaction price index | (- | ) | ||
Consumer price index | (+ | ) | ||
Unemployment rate | (+ | ) | ||
Forward-looking information used in calculation of expected credit losses is based on the macroeconomic forecasts utilized by the management of the Bank for its business plan taking into account reliable external agency’s forecasts and others. The forward-looking information is generated by KB Research under KB Financial Group with comprehensive approach to capture the possibility of various economic forecast scenarios that are derived from the internal and external viewpoints of the macroeconomic situation.
3.6.2 Measuring Expected Credit Losses on Financial at Amortized Cost
The expected credit losses on financial assets at amortized cost are measured as the difference between the asset’s contractual terms of cash flow and the present value of estimated future cash flows discounted at the financial asset’s original effective interest rate. The Bank estimates expected future cash flows for financial assets that are individually significant (individual assessment of impairment).
22
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
For financial assets that are not individually significant, the Bank 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 by discounting the expected future cash flows of a loan at its original effective interest rate and comparing the resultant present value with the loan’s current carrying amount. This process normally encompasses management’s best estimate, such as operating cash flow of the borrower and net realizable value of any collateral held.
Collective assessment of impairment
Collective assessment of impairment is performed by using a methodology based on historical loss experience and reflecting forward-looking information. Such methodology applies factors such as type of collateral, product and borrowers, credit rating, portfolio size, recovery period, probability of default estimated for each group of assets and loss given default by type of recovery method. Also, consistent assumptions are applied to form a formula-based model in estimating expected credit loss and to determine factors on the basis of historical loss experience and forward-looking information. The methodology and assumptions used for collective assessment of impairment are reviewed regularly to reduce any differences between estimated and actual loss.
Lifetime expected credit loss is measured by applying Probability of Default (“PD”) and adjusted Loss Given Default (“LGD”) reflecting the changes in carrying amount to the carrying amount as at the end of the reporting period with deducted by expected repayment of principals.
3.6.3 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. However, the loss allowance shall be recognized in other comprehensive income. Upon disposal or repayment of financial assets at fair value through other comprehensive income, the amount of loss allowances is reclassified from other comprehensive income to profit or loss.
3.7 Derivative Financial Instruments
The Bank enters into numerous derivative financial instrument contracts such as currency forwards, interest rate swaps, currency swaps and others for trading purposes or to manage its exposures to fluctuations in interest rates and currency exchange, amongst others. The Bank’s derivative operations focus on addressing the needs of the Bank’s corporate clients to hedge their risk exposure and to hedge the Bank’s risk exposure that results from such client contracts. These derivative financial instruments are presented as derivative financial instruments within the separate financial statements irrespective of transaction purpose and subsequent measurement requirement.
The Bank designates certain derivatives andnon-derivatives as hedging instruments to hedge the risk of changes in fair value and cash flow of a recognized asset or liability or of an unrecognized firm commitment (fair value hedge and cash flow hedge).
23
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
At the inception of the hedge, there is formal designation and documentation of the hedging relationship and the Bank’s risk management objective and strategy for undertaking the hedge. That documentation includes identification of the hedging instrument, the hedged item or transaction, the nature of the risk being hedged and how the entity will assess the hedging instrument’s effectiveness in offsetting the exposure to changes in the hedged item’s fair value attributable to the hedged risk.
See Note 9 for changes in fair value of the hedging instruments and changes in other comprehensive income related to derivatives held for cash flow hedging.
The Bank applies hedge accounting for risk management activities aligned with the requirements and qualifying criteria for hedge accounting of Korean IFRS 1109.
3.7.1 Derivative Financial Instruments Held for Trading
All derivative financial instruments, except for derivatives that are designated and qualify for hedge accounting, are measured at fair value. Gains or losses arising from changes in fair value are recognized in profit or loss as part of net gains or losses on financial instruments at fair value through profit or loss.
3.7.2 Fair Value Hedges
If derivatives andnon-derivatives qualify for a fair value hedge, the change in fair value of the hedging instrument and the change in fair value of the hedged item attributable to the hedged risk are recognized in profit or loss as part of other operating income and expenses. If the hedged items are equity instruments for which the Bank has elected to present changes in fair value in other comprehensive income, the change in fair value of the hedging instrument and the change in fair value of the hedged item attributable to the hedged risk are recognized in other comprehensive income.
Fair value hedge accounting is discontinued prospectively if the hedging instrument expires or is sold, terminated or exercised, or the hedge no longer meets the criteria for hedge accounting or the Bank revokes the designation. Once fair value hedge accounting is discontinued, the adjustment to the carrying amount of a hedged item is amortized to profit or loss by the maturity of the financial instrument using the effective interest method.
3.7.3 Cash Flow Hedges
The effective portion of changes in fair value of derivatives that are designated and qualify as cash flow hedges is recognized in other comprehensive income, limited to the cumulative change in fair value (present value) of the hedged item (the present value of the cumulative change in the future expected cash flows of the hedged item) from the inception of the hedge. The ineffective portion is recognized in gain or loss (other operating income or expenses). The associated gains or losses that were previously recognized in other comprehensive income are reclassified from equity to profit or loss(other operating income and expenses) as a reclassification adjustment in the same period or periods during which the hedged forecast cash flows affects profit or loss. Cash flow hedge accounting is discontinued prospectively if the hedging instrument expires or is sold, terminated or exercised, or the hedge no longer meets the criteria for hedge accounting or the Bank revokes the designation. When the cash flow hedge accounting is discontinued, the cumulative gains or losses on the hedging instrument that have been recognized in other comprehensive income are reclassified to profit or loss over the period in which the forecast transaction occurs. If the forecast transaction is no longer expected to occur, the cumulative gains or losses that had been recognized in other comprehensive income are immediately reclassified to profit or loss.
24
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
3.7.4 Risk management strategy
Interest rate risk arises from changes in fair value resulting from changes in the discount rate of fixed rate financial instruments, and changes in cash flows resulting from changes in the nominal interest rate of floating rate financial instruments.
The Bank entirely hedges the interest rate risk.
At inception of the hedge relationship, the Bank reviews the hedge effectiveness; and periodically reviews the effectiveness in order to confirm that economic relationship between the hedged item and the hedging instrument exists. The requirement that an economic relationship exists means that the hedging instrument and the hedged item have values that generally move in the opposite direction because of the same risk, which is the hedged risk. The Bank designates the exposure of hedged item opposite to the exposure of hedging instruments in order to meet economic relationship requirement.
The Bank designates hedge relationship atone-on-one ratio between the nominal amount of hedging instrument and to the nominal amount of hedged item.
Ineffectiveness could arise because of differences in the underlying parameters (acquisition date, credit risk or liquidity and others) or other differences between the hedging instrument and the hedged item that the Bank accepts in order to achieve a cost-effective hedging relationship.
The Bank avoids the cash flow variability of its floating rate debt securities by using interest rate swaps. Both are linked to the same interest rate; however, the paid amount of the floating rate may be set on different dates. Even if the variability of interest rate related cash flows (as a risk factor) are designated as a hedged item, the difference inset-up dates creates a hedge ineffectiveness.
The Bank avoids the variability of fair values of its fixed rate debt securities by using interest rate swaps. The calculating method of the number of the dates for paying fixed-rate interest amount can be different between both. Even if the volatility of the fair value due to the benchmark interest rate (as a risk factor) are designated as a hedged item, the difference calculating inset-up dates creates a hedge ineffectiveness.
3.7.5 Embedded Derivatives
An embedded derivative is separated from the host contract and accounted for as a derivative if, and only if, 1) the economic characteristics and risks of the embedded derivative are not closely related to those of the host contract, 2) a separate instrument with the same terms as the embedded derivative would meet the definition of a derivative and, 3) the hybrid contract contains a host that is not a financial asset and is not designated as at fair value through profit or loss. Gains or losses arising from a change in the fair value of an embedded derivative separated from the host contract are recognized in profit or loss as part of net gains or losses on financial instruments at fair value through profit or loss.
25
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
3.7.6 Day One Gain and Loss
If the Bank uses a valuation technique that incorporates data not obtained from observable markets for the fair value at initial recognition of the financial instrument, there may be a difference between the transaction price and the amount determined using that valuation technique. In these circumstances, the difference is deferred and not recognized in profit or loss, and is amortized by using the straight-line method over the life of the financial instrument. If the fair value of the financial instrument is subsequently determined using observable market inputs, the remaining deferred amount is recognized in profit or loss as part of net gains or losses on financial instruments at fair value through profit or loss or other operating income and expenses.
3.8 Property and Equipment
3.8.1 Recognition and Measurement
All property and equipment that qualify for recognition as an asset are measured at cost and subsequently carried at cost less any accumulated depreciation and any accumulated impairment losses.
The cost of property and equipment includes any costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management and the initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located.
Subsequent expenditures are capitalized only when they prolong the useful life or enhance values of the assets but the costs of theday-to-day servicing of the assets such as repair and maintenance costs are recognized in profit or loss as incurred.
3.8.2 Depreciation
Land is not depreciated whereas other property and equipment are depreciated using the method that reflects the pattern in which the asset’s future economic benefits are expected to be consumed by the Bank. The depreciable amount of an asset is determined after deducting its residual value. As for leased assets, if there is no reasonable certainty that the Bank will obtain ownership by the end of the lease term, the asset is fully depreciated over the shorter of the lease term and its useful life.
The depreciation methods and estimated useful lives of the assets are as follows:
Property and equipment | Depreciation method | Estimated useful lives | ||
| Buildings and structures | Straight-line | 40 years | ||
| Leasehold improvements | Declining-balance | 4 years | ||
| Equipment and vehicles | Declining-balance | 4 years |
The residual value, the useful life and the depreciation method applied to an asset are reviewed at least at each financial year end and, if expectations differ from previous estimates or if there has been a significant change in the expected pattern of consumption of the future economic benefits embodied in the asset, the changes are accounted for as a change in an accounting estimate.
26
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
3.9 Investment Properties
3.9.1 Recognition and Measurement
Properties held to earn rentals or for capital appreciation or both are classified as investment properties. Investment properties are measured initially at their cost and subsequently the cost model is used.
3.9.2 Depreciation
Land is not depreciated, whereas other investment properties are depreciated using the method that reflects the pattern in which the asset’s future economic benefits are expected to be consumed by the Bank. The depreciable amount of an asset is determined after deducting its residual value.
The depreciation method and estimated useful lives of the assets are as follows:
Investment Properties | Depreciation method | Estimated useful lives | ||
| Buildings | Straight-line | 40 years |
The residual value, the useful life and the depreciation method applied to an asset are reviewed at least at each financial year end and, if expectations differ from previous estimates or if there has been a significant change in the expected pattern of consumption of the future economic benefits embodied in the asset, the changes are accounted for as a change in an accounting estimate.
3.10 Intangible Assets
Intangible assets are measured initially at cost and subsequently carried at their cost less any accumulated amortization and any accumulated impairment losses.
Intangible assets, except for goodwill and membership rights, are amortized using the straight-line method with no residual value over their estimated useful economic life since the asset is available for use.
Intangible assets | Amortization method | Estimated useful lives | ||
| Industrial property rights | Straight-line | 5 years | ||
| Software | Straight-line | 4~5 years | ||
| Others | Straight-line | 1~10 years |
The amortization period and the amortization method for intangible assets with a finite useful life are reviewed at least at each financial year end. Where an intangible asset is not being amortized because its useful life is considered to be indefinite, the Bank carries out a review in each accounting period to confirm whether or not events and circumstances still support the assumption of an indefinite useful life. If they do not, the change from the indefinite to finite useful life is accounted for as a change in an accounting estimate.
27
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
3.10.1 Goodwill
Recognition and measurement
Goodwill acquired from business combinations before January 1, 2010, is stated at its carrying amount which was recognized under the Bank’s previous accounting policy, prior to the transition to Korean IFRS.
Goodwill acquired from business combinations after January 1, 2010, is initially measured as the excess of the aggregate of the consideration transferred, fair value ofnon-controlling interest and the acquisition-date fair value of the acquirer’s previously held equity interest in the acquiree over the net identifiable assets acquired and liabilities assumed. If this consideration is lower than the fair value of the net assets of the business acquired, the difference is recognized in profit or loss.
Acquisition-related costs incurred to effect a business combination are charged to expenses in the periods in which the costs are incurred and the services are received, except for the costs to issue debt or equity securities.
Subsequent measurement
Goodwill is not amortized and is stated at cost less accumulated impairment losses. However, goodwill that forms part of the carrying amount of an investment in associates is not separately recognized and an impairment loss recognized is not allocated to any asset, including goodwill, which forms part of the carrying amount of the investment in the associates.
3.10.2 Subsequent Expenditure
Subsequent expenditure is capitalized only when it enhances values of the assets. Internally generated intangible assets, such as goodwill and trade name, are not recognized as assets but expensed as incurred.
3.11 Leases
3.11.1 Finance Lease
A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership. At the commencement of the lease term, the Bank recognizes finance leases as assets and liabilities in its statements of financial position at amounts equal to the fair value of the leased property or, if lower, the present value of the minimum lease payments, each determined at the inception of the lease. Any initial direct costs of the lessee are added to the amount recognized as an asset.
Minimum lease payments are apportioned between the finance charge and the reduction of the outstanding liability. The finance charge is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability. Contingent rents are charged as expenses in the periods in which they are incurred.
The depreciable amount of a leased asset is allocated to each accounting period during the period of expected use on a systematic basis consistent with the depreciation policy the Bank adopts for depreciable assets that are owned. If there is reasonable certainty that the lessee will obtain ownership by the end of the lease term, the period of expected use is the useful life of the asset; otherwise, the asset is fully depreciated over the shorter of the lease term and its useful life.
28
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
3.11.2 Operating Lease
A lease is classified as an operating lease if it does not transfer substantially all the risks and rewards incidental to ownership.
Leases in the financial statements of lessees
Lease payments under an operating lease (net of any incentives received from the lessor) are recognized as an expense on a straight-line basis over the lease term unless another systematic basis is more representative of the time pattern of the asset’s benefit.
Leases in the financial statements of lessors
Lease income from operating leases are recognized in income on a straight-line basis over the lease term unless another systematic basis is more representative of the time pattern in which use benefit derived from the leased asset is diminished. Initial direct costs incurred by the lessors in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognized as an expense over the lease term on the same basis as the lease income.
3.12 Greenhouse Gas Emission Rights and Liabilities
The Bank measured at zero the emission rights received free of charge from the government following the Enforcement of Allocation and Trading of Greenhouse Gas Emissions Allowances. Emission rights purchased are measured initially at cost and subsequently carried at their costs less any accumulated impairment losses. Emission liabilities are measured as the sum of the carrying amount of emission allowances held by the Bank and best estimate of the expenditure required to settle the obligation for any excess emissions at the end of reporting period. The emission rights and liabilities are classified as ‘intangible assets’ and ‘provisions’, respectively, in the separate statement of financial position.
The emission rights held for trading are measured at fair value and the changes in fair value are recognized in profit or loss. The changes in fair value and gain or loss on disposal are classified asnon-operating income and expenses.
3.13 Impairment of Non-Financial Assets
The Bank assesses at the end of each reporting period whether there is any indication that anon-financial asset, except for (i) deferred income tax assets, (ii) assets arising from employee benefits and(iii) non-current assets (or group of assets to be sold) classified as held for sale, may be impaired. If any such indication exists, the Bank estimates the recoverable amount of the asset. However, irrespective of whether there is any indication of impairment, the Bank tests (i) goodwill acquired in a business combination, (ii) intangible assets with an indefinite useful life and (iii) intangible assets not yet available for use for impairment annually by comparing their carrying amount with their recoverable amount.
29
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
The recoverable amount is estimated for the individual asset. If it is not possible to estimate the recoverable amount of the individual asset, the Bank determines the recoverable amount of the cash-generating unit to which the asset belongs (the asset’s cash-generating unit). A cash-generating unit is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets. The recoverable amount of an asset is the higher of its fair value less costs to sell and its value in use. Value in use is the present value of the future cash flows expected to be derived from an asset or cash-generating unit that are discounted by apre-tax rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the future cash flow estimates have not been adjusted.
If the recoverable amount of an asset is less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. That reduction is an impairment loss and recognized immediately in profit or loss. For the purpose of impairment testing, goodwill acquired in a business combination is allocated to each of the cash-generating units that are expected to benefit from the synergies of the combination. The impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the cash-generating unit and then to the other assets of the unit pro rata on the basis of the carrying amount of each asset in the unit.
An impairment loss recognized for goodwill is not reversed in a subsequent period. The Bank assesses at the end of each reporting period whether there is any indication that an impairment loss recognized in prior periods for an asset, other than goodwill, may no longer exist or may have decreased, and an impairment loss recognized in prior periods for an asset other than goodwill shall be reversed if, and only if, there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognized. The increased carrying amount of an asset other than goodwill attributable to a reversal of an impairment loss cannot exceed the carrying amount that would have been determined (net of amortization or depreciation) had no impairment loss been recognized for the asset in prior years.
3.14 Non-Current Assets Held for Sale
Anon-current asset or disposal group is classified as held for sale if its carrying amount will be recovered principally through a sale transaction rather than through continuing use. For being qualified as held for sale, the asset (or disposal group) must be available for immediate sale in its present condition and its sale must be highly probable. Anon-current asset (or disposal group) classified as held for sale is measured at the lower of its carrying amount and fair value less costs to sell which is measured in accordance with the applicable Korean IFRS, immediately before the initial classification of the asset (or disposal group) as held for sale.
Anon-current asset while it is classified as held for sale or while it is part of a disposal group classified as held for sale is not depreciated (or amortized).
Impairment loss is recognized for any initial or subsequent write-down of the asset (or disposal group) to fair value less costs to sell. Gains are recognized for any subsequent increase in fair value less costs to sell of an asset, but not in excess of the cumulative impairment loss that has been recognized.
30
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
3.15 Financial Liabilities
The Bank classifiesnon-derivative financial liabilities into financial liabilities at fair value through profit or loss or other financial liabilities in accordance with the substance of the contractual arrangement and the definitions of financial liabilities. The Bank recognizes financial liabilities in the statement of financial position when the Bank becomes a party to the contractual provisions of the financial liability.
3.15.1 Liabilities at Fair Value through Profit or Loss
Financial liabilities at fair value through profit or loss include financial liabilities held for trading or designated as such upon initial recognition. Subsequent to initial recognition, financial liabilities at fair value through profit or loss are measured at fair value, and changes therein are recognized in profit or loss. Upon initial recognition, transaction costs that are directly attributable to the acquisition are recognized in profit or loss as incurred.
In relation to securities lending or borrowing transactions, the Bank records transaction using memorandum value when it borrows securities from Korea Securities Depository and others. The borrowed securities are treated as financial liabilities at fair value through profit or loss when they are sold. Changes in fair value at the end of the reporting period and difference between carrying amount at redemption and purchased amount is recognized as profit or loss.
3.15.2 Other Financial Liabilities
Non-derivative financial liabilities other than financial liabilities at fair value through profit or loss are classified as other financial liabilities. Other financial liabilities include deposits, debts, debentures and others. Upon of initial recognition, other financial liabilities are measured at fair value minus transaction costs that are directly attributable to the acquisition. Subsequent to initial recognition, other financial liabilities are measured at amortized cost using the effective interest method.
In case an asset is sold under repurchase agreement, the Bank continues to recognize the asset with the amount sold being accounted for as borrowing. The Bank derecognizes a financial liability from the separate statement of financial position only when the obligation specified in the contract is discharged, cancelled or expired.
3.16 Provisions
Provisions are recognized when the Bank has a present obligation (legal or constructive) as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. The risks and uncertainties that inevitably surround many events and circumstances are taken into account in reaching the best estimate of provisions, and where the effect of the time value of money is material, the amount of provisions are the present value of the expenditures expected to be required to settle the obligation.
Provisions on confirmed and unconfirmed acceptances and guarantees, unfunded commitments of credit cards and unused credit lines of consumer and corporate loans are recognized using a valuation model that applies the credit conversion factor, probability of default, and loss given default.
31
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
Provisions are reviewed at the end of each reporting period and adjusted to reflect the current best estimate. If it is no longer probable that an outflow of resources embodying economic benefits will be required to settle the obligation, the provisions are reversed.
If the Bank has a contract that is onerous, the present obligation under the contract is recognized and measured as provisions. An onerous contract is a contract in which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received under it. The unavoidable costs under a contract reflect the minimum net cost to exit from the contract, which is the lower of the cost of fulfilling it and any compensation or penalties arising from failure to fulfill it.
When an onerous contract is occurred, the present obligation under the contract is recognized and measured as provisions.
3.17 Financial Guarantee Contracts
A financial guarantee contract is a contract that requires the Bank to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payments when due according to the original or modified terms of a debt instrument.
Financial guarantee contracts are initially recognized at fair value and classified as other liabilities, and are amortized over the contractual term. After initial recognition, financial guarantee contracts are measured at the higher of:
| • | Provisions measured in accordance with Korean IFRS 1109Financial Instruments and |
| • | The initial amount recognized, less, when appropriate, cumulative amortization recognized in accordance with Korean IFRS 1115,Revenue from Contracts with Customers. |
3.18 Equity Instrument Issued by the Bank
An equity instrument is any contract or agreement that evidences a residual interest in the assets of an entity after deducting all of its liabilities.
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares are deducted, net of tax, from the equity.
3.19 Revenue Recognition
The Bank recognizes revenues in accordance with the following steps determined in accordance with Korean IFRS 1115Revenue from Contracts with Customers.
| • | 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. |
32
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
3.19.1 Interest Income and Expense
Interest income of debt instruments at fair value through profit or loss (excluding beneficiary certificates, equity investments and other debt instruments), loans, financial instruments at amortized cost and debt instruments at fair value through other comprehensive income, and interest 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 Bank 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 Bank 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 income earned from debt instruments at fair value through profit or loss is also classified as interest income in the statement of comprehensive income.
3.19.2 Fee and Commission Income
The Bank recognizes financial service fees in accordance with the purpose of charging the fees and 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 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 related to performance obligations in the contract satisfied over time
As control over related goods and services of fees and commission income of performance obligation contracts transfer over time, commission income is recognized over the period of performance obligations. Fees and commission income, including asset management fees and commission fees are recognized as the related services are rendered.
33
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
Fees earned at a point in time
Fees earned at a point in time are recognized when a customer obtains controls of a promised asset and the Bank satisfies a performance obligation.
Commission on negotiation or participation in negotiation for the third party such as trading stocks or other securities, arranging transfer and acquisition of business is recognized as revenue when the transaction has been completed.
A syndication fee that arranges a loan and retains no part of the loan package for itself (or retains a part at the same effective interest rate for comparable risk as other participants) is compensation for the service of syndication. Such a fee is recognized as revenue when the syndication has been completed.
3.19.3 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 (including 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, excluding interest income calculated by the effective interest rate |
| • | Gain or loss from derivatives for trading, including derivatives for hedging that does not meet the criteria for hedge accounting |
3.19.4 Dividend Income
Dividend income is recognized as profit or loss when the right to receive payment is established. Dividend income is recognized as relevant profit or loss on the statement of comprehensive income in depending of the classification of equity securities.
3.20 Employee Compensation and Benefits
3.20.1 Post-employment Benefits:
Defined benefit plans
All post-employment benefits, other than defined contribution plans, are classified as defined benefit plans. The amount recognized as a net defined benefit liability is the present value of the defined benefit obligation less the fair value of plan assets at the end of the reporting period.
The present value of the defined benefit obligation is calculated annually by independent actuaries using the Projected Unit Credit method. The rate used to discount post-employment benefit obligations is determined by reference to market yields at the end of the reporting period on high quality corporate bonds. The currency and term of the corporate bonds are consistent with the currency and estimated term of the post-employment benefit obligations. Actuarial gains and losses including experience adjustments and the effects of changes in actuarial assumptions are recognized in other comprehensive income(loss).
34
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
When the total of the present value of the defined benefit obligation minus the fair value of plan assets results in an asset, it is recognized to the extent of the present value of any economic benefits available in the form of refunds from the plan or reductions in future contributions to the plan.
Past service cost is the change in the present value of the defined benefit obligation, which arises when the Bank introduces a defined benefit plan or changes the benefits of an existing defined benefit plan. Such past service cost is immediately recognized as an expense for the period.
Defined contribution plans
The contributions are recognized as employee benefit expense when they are due.
3.20.2 Short-term Employee Benefits
Short-term employee benefits are employee benefits(other than termination benefits) that are due to be settled within 12 months after the end of the period in which the employees render the related service. The undiscounted amount of short-term employee benefits expected to be paid in exchange for that service is recognized as a liability(accrued expense), after deducting any amount already paid.
The expected cost of profit-sharing and bonus payments are recognized as liabilities when the Bank has a present legal or constructive obligation to make such payments as a result of past events rendered by employees and a reliable estimate of the obligation can be made.
3.20.3 Share-based Payment
The Bank has share grant and mileage stock programs to directors and employees of the Bank. The Bank has a choice of whether to settle share grant in cash or by issuing equity instruments of KB Financial Group Inc., the ultimate parent company, at the date of settlement, while the Bank shall settle the mileage stock in cash based on the stock price.
For a share-based payment transaction in which the terms of the arrangement provide the Bank with the choice of whether to settle in cash or by issuing equity instruments, the Bank determines that it has a present obligation to settle in cash because the Bank has a past practice and a stated policy of settling in cash. Therefore, the fair value of the employee service is recognized as expense and accrued expenses over the vesting period. Also, the Bank accounts for the mileage stock in accordance with the requirements of cash-settled share-based payment transactions, and recognizes the corresponding liability and expenses at the vesting period.
Until the liability is settled, the Bank remeasures the fair value of the liability at the end of each reporting period and at the date of settlement, with any changes in fair value recognized in profit or loss for the period.
3.20.4 Termination Benefits
Termination benefits are payable when employment is terminated by the Bank before the normal retirement date, or whenever an employee accepts voluntary redundancy in exchange for these benefits. The Bank shall recognize a liability and expense for termination benefits at the earlier of the following dates: when the Bank can no longer withdraw the offer of those benefits and when the Bank recognizes costs for a restructuring that is within the scope of Korean IFRS 1037 and involves the payment of termination benefits. Termination benefits are measured by considering the number of employees expected to accept the offer in the case of a voluntary early retirement. Termination benefits over 12 months after the reporting period are discounted to present value.
35
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
3.21 Income Tax Expenses
Income tax expense comprises current tax expense and deferred income tax expense. Current and deferred income tax are recognized as income or expense for the period, except to the extent that the tax arises from a transaction or an event which is recognized, in the same or a different period outside profit or loss, either in other comprehensive income or directly in equity and a business combination.
3.21.1 Current income tax
Current income tax is the amount of income tax payable in respect of the taxable profit (loss) for a period. A difference between the taxable profit and accounting profit may arise when income or expense is included in accounting profit in one period, but is included in taxable profit in a different period. Differences may also arise if there is revenue that is exempt from taxation, or expense that is not deductible in determining taxable profit (loss). Current income tax liabilities (assets) for the current and prior periods are measured at the amount expected to be paid to (recovered from) the taxation authorities, using the tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period
3.21.2 Deferred Income Tax
Deferred income tax is recognized, using the asset-liability method, on temporary differences arising between the taxes based amount of assets and liabilities and their carrying amount in the separate financial statements. Deferred income tax liabilities are recognized for all taxable temporary differences and deferred income tax assets are recognized for all deductible temporary differences to the extent that it is probable that taxable profit will be available against which the deductible temporary difference can be utilized. However, deferred income tax liabilities are not recognized if they arise from the initial recognition of goodwill; deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss.
The carrying amount of a deferred income tax asset is reviewed at the end of each reporting period. The Bank reduces the carrying amount of a deferred income tax asset to the extent that it is no longer probable that sufficient taxable profit will be available to allow the benefit of part or all of that deferred income tax asset to be utilized.
Deferred tax assets and liabilities shall be measured at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and deferred tax assets shall reflect the tax consequences that would follow from the manner in which the Bank expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.
36
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
The Bank offsets deferred income tax assets and deferred income tax liabilities when the Bank has a legally enforceable right to offset current income tax assets against current income tax liabilities; and the deferred income tax assets and the deferred income tax liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity; or different taxable entities which intend either to settle current income tax liabilities and assets on a net basis, or to realize the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred income tax liabilities or assets are expected to be settled or recovered.
3.21.3 Uncertain Tax Positions
Uncertain tax positions arise from tax treatments applied by the Bank which may be challenged by the tax authorities due to the complexity of the transaction or different interpretation of the tax laws, a claim for rectification brought by the Bank, an appeal for a refund claimed from the tax authorities related to additional assessments or a tax investigation processed by the tax authorities. The Bank recognizes its uncertain tax positions in the separate financial statements based on the guidance in Korean IFRS 1012. The income tax asset is recognized if a tax refund is probable for taxes paid and levied by the tax authority, and the amount to be paid as a result of the tax investigation and others is recognized as the current tax payable. However, interest and penalties related to income taxes are recognized in accordance with Korean IFRS 1037 as its economic substances.
3.22 Transactions with the Trust Accounts
Under the Financial Investment Services and Capital Markets Act, the Bank recognizes trust accounts (“the trust accounts”) as separate. The borrowings from trust accounts represent transfer of funds in trust accounts into banking accounts. Such borrowings from trust accounts are recorded as receivables from the banking accounts in the trust accounts and as borrowings from trust accounts in the banking accounts. The Bank earns trust fees from the trust accounts for its management of trust assets and operations. The reserves for future profits and losses are set up in the trust accounts for profits and losses related to those trust funds with a guarantee of the principal or of the principal and a certain minimum rate of return in accordance with the relevant laws and regulations applicable to trust operations. The reserves are used to provide for the losses on such trust funds and, if the losses incurred are in excess of the reserves, the excess losses are compensation paid as a loss on trust management in other operating expenses and the trust accounts recognize the corresponding compensation as compensation from banking accounts.
3.23 Operating Segments
Operating segments are components of the Bank where separate financial information is available and is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance.
Segment information includes items which are directly attributable and reasonably allocated to the segment.
37
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
4. Financial Risk Management
4.1 Summary
4.1.1 Overview of Financial Risk Management Policy
The financial risks that the Bank is exposed to are credit risk, market risk, liquidity risk, operational risk and others.
The note regarding financial risk management provides information about the risks that the Bank is exposed to, including the objectives, policies and processes for managing the risks, the methods used to measure the risks, and capital management. Additional quantitative information is disclosed throughout the separate financial statements.
The Bank’s risk management system focuses on increasing transparency, developing the risk management environment, preventing transmission of risk to other risk types, and the preemptive response to risk due to rapid changes in the financial environment to support the Bank’s long-term strategy and business decisions efficiently. Credit risk, market risk, liquidity risk, and operational risk have been recognized as the Bank’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 Bank’s target risk appetite, approves significant risk matters and reviews the level of risks that the Bank is exposed to and the appropriateness of the Bank’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 Bank’s risk management.
Risk Management Subcommittee
The Risk Management Subcommittee enforces decisions made by Risk Management Council, and makes practical decisions to implement risk management policies and procedures.
| • | Credit Risk Management Subcommittee |
The Credit Risk Management Subcommittee approves exotic and hybrid products accompanying credit risk and reviews newly developed products accompanying credit risk. Also, it reviews and approves the exposure limits by industry.
38
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
| • | Market Risk Management Subcommittee |
The Market Risk Management Subcommittee reviews and makes decisions on setting risk limits and approving the standard for investments in newly developed standard, exotic and hybrid products.
| • | Operational Risk Management Subcommittee |
The Operational Risk Management Subcommittee reviews the issues that have a significant effect on the Bank’s operational risk relating to establishment, amendment and abolition of major system, process and others.
Risk Management Group
The Risk Management Group is responsible for managing specific policies, procedures and work processes relating to the Bank’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 a 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, country risk, specific risks and other credit risk exposure components are considered as a whole. The Bank uses definition of default as defined and applied in the calculation of Capital Adequacy Ratio (Basel III) in accordance with the new Basel Accord.
4.2.2 Credit Risk Management
The Bank measures expected losses and internal capital on assets that are subject to credit risk management whetheron- oroff-balance sheet items and uses expected losses and internal capital as a management indicator. The Bank manages credit risk by allocating credit risk internal capital limits.
In addition, the Bank controls the credit concentration risk exposure by applying and managing total exposure limits to prevent an excessive risk concentration to each industry and borrower.
The Bank has organized a credit risk management group that focuses on credit risk management in accordance with the Bank’s credit risk management policy. The Bank’s credit group, customer service group and SME/SOHO group, which are independent from the sales department, are responsible for loan policy, loan limit, loan review, credit evaluation, restructuring and subsequent events. The credit risk management group is also responsible for planning risk management policy, applying limits of credit lines, measuring the credit risk internal capital, adjusting credit limits, reviewing credit and verifying credit evaluation models.
39
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
4.2.3 Maximum Exposure to Credit Risk
The Bank’s maximum exposures of financial instruments excluding equity securities to credit risk without consideration of collateral values as at December 31, 2018 are as follows:
| (In millions of Korean won) | 2018 | |||
Financial assets | ||||
Due from financial institutions 1 | 10,362,359 | |||
Financial assets at fair value through profit or loss | ||||
Securities | 8,299,293 | |||
Loans | 212,596 | |||
Financial instruments indexed to gold | 78,808 | |||
Derivatives | 1,611,295 | |||
Loans at amortized cost1 | 274,985,803 | |||
Financial investments | ||||
Securities at fair value through other comprehensive income | 27,556,891 | |||
Securities at amortized cost1 | 12,753,724 | |||
Loans at fair value through other comprehensive income | 349,547 | |||
Other financial assets1 | 4,197,708 | |||
|
| |||
| 340,408,024 | ||||
|
| |||
Off-balance sheet items2 | ||||
Acceptances and guarantees contracts | 7,250,061 | |||
Financial guarantee contracts | 4,636,538 | |||
Commitments | 81,137,779 | |||
| 93,024,378 | ||||
|
| |||
| 433,432,402 | ||||
|
| |||
| 1 | Due from financial institutions, loans at amortized cost, securities at amortized cost and other financial assets are presented net of allowance. |
| 2 | For details of relevant provisions, see Note 22. |
The Bank’s maximum exposures of financial instruments, excluding equity securities and beneficiary certificates, to credit risk without consideration of collateral values as at December 31, 2017 are as follows:
| (In millions of Korean won) | 2017 | |||
Financial assets | ||||
Due from financial institutions | 12,034,350 | |||
Financial assets at fair value through profit or loss (under Korean IFRS 1039) | ||||
Financial assets held for trading1 | 3,117,864 | |||
Derivatives | 2,590,960 | |||
Loans2 | 250,119,240 | |||
Financial investments | ||||
Available-for-sale financial assets | 27,417,640 | |||
Held-to-maturity financial assets | 8,732,246 | |||
Other financial assets2 | 6,303,303 | |||
|
| |||
| 310,315,603 | ||||
|
| |||
40
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
Off-balance sheet items | ||||
Acceptances and guarantees contracts | 6,965,502 | |||
Financial guarantee contracts | 4,135,402 | |||
Commitments | 50,785,020 | |||
|
| |||
| 61,885,924 | ||||
|
| |||
| 372,201,527 | ||||
|
|
| 1 | Including financial instruments indexed to gold amounting to |
| 2 | Loans and other financial assets are presented net of allowance. |
4.2.4 Credit Risk of Loans
The Bank maintains an allowance for loan losses associated with credit risk on loans to manage its credit risk.
The Bank assesses expected credit loss on financial asset at amortized cost and financial asset at fair value through other comprehensive income (debt instruments) 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 occurred in a certain range by reflecting reasonable and supportable information that which 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. The Bank measures the expected credit losses on loans classified as financial assets measured at amortized cost, by deducting allowances for credit losses. The expected credit losses of loans classified as financial assets at fair value through other comprehensive income are presented in other comprehensive income on the financial statements.
41
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
Credit risk exposure
Loans as at December 31, 2018, are classified as follows:
| 2018 | ||||||||||||||||||||||||
| Financial instruments applying 12-month expected credit losses | Financial instruments applying lifetime expected credit losses | Financial instruments applying credit impaired approach | Financial instruments not applying expected credit losses | Total | ||||||||||||||||||||
| (In millions of Korean won) | Non-impaired | Impaired | ||||||||||||||||||||||
Financial assets at amortized cost |
| |||||||||||||||||||||||
Corporate |
| |||||||||||||||||||||||
Grade 1 | 68,474,730 | 1,406,552 | 1,573 | — | — | 69,882,855 | ||||||||||||||||||
Grade 2 | 53,896,127 | 4,065,708 | 1,610 | — | — | 57,963,445 | ||||||||||||||||||
Grade 3 | 2,472,873 | 1,677,369 | 6,566 | — | — | 4,156,808 | ||||||||||||||||||
Grade 4 | 395,335 | 902,790 | 40,043 | — | — | 1,338,168 | ||||||||||||||||||
Grade 5 | 20,648 | 342,216 | 920,190 | — | — | 1,283,054 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
| 125,259,713 | 8,394,635 | 969,982 | — | — | 134,624,330 | |||||||||||||||||||
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Retail |
| |||||||||||||||||||||||
Grade 1 | 123,963,709 | 4,387,477 | 8,836 | — | — | 128,360,022 | ||||||||||||||||||
Grade 2 | 4,171,518 | 7,058,259 | 6,218 | — | — | 11,235,995 | ||||||||||||||||||
Grade 3 | 140,074 | 881,415 | 4,158 | — | — | 1,025,647 | ||||||||||||||||||
Grade 4 | 431,480 | 154,506 | 2,582 | — | — | 588,568 | ||||||||||||||||||
Grade 5 | 8,426 | 296,087 | 379,555 | — | — | 684,068 | ||||||||||||||||||
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|
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|
|
|
| |||||||||||||
| 128,715,207 | 12,777,744 | 401,349 | — | — | 141,894,300 | |||||||||||||||||||
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|
| |||||||||||||
| 253,974,920 | 21,172,379 | 1,371,331 | — | — | 276,518,630 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Financial assets at fair value through other comprehensive income |
| |||||||||||||||||||||||
Corporate |
| |||||||||||||||||||||||
Grade 1 | 149,226 | 25,731 | — | — | — | 174,957 | ||||||||||||||||||
Grade 2 | 128,712 | 45,878 | — | — | — | 174,590 | ||||||||||||||||||
Grade 3 | — | — | — | — | — | — | ||||||||||||||||||
Grade 4 | — | — | — | — | — | — | ||||||||||||||||||
Grade 5 | — | — | — | — | — | — | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
| 277,938 | 71,609 | — | — | — | 349,547 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Retail |
| |||||||||||||||||||||||
Grade 1 | — | — | — | — | — | — | ||||||||||||||||||
Grade 2 | — | — | — | — | — | — | ||||||||||||||||||
Grade 3 | — | — | — | — | — | — | ||||||||||||||||||
Grade 4 | — | — | — | — | — | — | ||||||||||||||||||
Grade 5 | — | — | — | — | — | — | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
| — | — | — | — | — | — | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
| 277,938 | 71,609 | — | — | — | 349,547 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
| 254,252,858 | 21,243,988 | 1,371,331 | — | — | 276,868,177 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
| 1 | Before netting of allowance. |
42
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
Corporate | Retail | |||
Grade 1 | AAA ~ BBB+ | 1 ~ 5 grade | ||
Grade 2 | BBB ~ BB | 6 ~ 8 grade | ||
Grade 3 | BB- ~ B | 9 ~ 10 grade | ||
Grade 4 | B- ~ CCC | 11 grade | ||
Grade 5 | CC or under | 12 grade or under |
Loans as at December 31, 2017, are classified as follows:
| 2017 | ||||||||||||||||||||||||
| (In millions of Korean won) | Retail | Corporate | Total | |||||||||||||||||||||
| Amount | % | Amount | % | Amount | % | |||||||||||||||||||
Loans | ||||||||||||||||||||||||
Neither past due nor impaired | 129,053,465 | 99.04 | 119,839,745 | 98.88 | 248,893,210 | 98.96 | ||||||||||||||||||
Past due but not impaired | 863,389 | 0.66 | 197,918 | 0.16 | 1,061,307 | 0.42 | ||||||||||||||||||
Impaired | 386,240 | 0.30 | 1,166,549 | 0.96 | 1,552,789 | 0.62 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
| 130,303,094 | 100.00 | 121,204,212 | 100.00 | 251,507,306 | 100.00 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Allowances | (318,138 | ) | 0.24 | (1,069,928 | ) | 0.88 | (1,388,066 | ) | 0.55 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Carrying amount | 129,984,956 | 120,134,284 | 250,119,240 | |||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
Credit quality of loans that are neither past due nor impaired as at December 31, 2017, are as follows:
| 2017 | ||||||||||||
| (In millions of Korean won) | Retail | Corporate | Total | |||||||||
Grade 1 | 115,146,823 | 61,524,809 | 176,671,632 | |||||||||
Grade 2 | 12,537,698 | 51,891,363 | 64,429,061 | |||||||||
Grade 3 | 804,043 | 4,852,801 | 5,656,844 | |||||||||
Grade 4 | 385,241 | 1,253,960 | 1,639,201 | |||||||||
Grade 5 | 179,660 | 316,812 | 496,472 | |||||||||
|
|
|
|
|
| |||||||
| 129,053,465 | 119,839,745 | 248,893,210 | ||||||||||
|
|
|
|
|
| |||||||
43
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
Credit quality of loans graded according to internal credit ratings as at December 31, 2017, are as follows:
Corporate | Retail | |||
Grade 1 | AAA ~ BBB+ | 1 ~ 5 grade | ||
Grade 2 | BBB ~ BB | 6 ~ 8 grade | ||
Grade 3 | BB- ~ B | 9 ~ 10 grade | ||
Grade 4 | B- ~ CCC | 11 grade | ||
Grade 5 | CC or under | 12 grade or under |
Loans that are past due but not impaired as at December 31, 2017, are as follows:
| 2017 | ||||||||||||||||
| (In millions of Korean won) | 1 ~ 29 days | 30 ~ 59 days | 60 ~ 89 days | Total | ||||||||||||
Retail | 734,224 | 87,845 | 41,320 | 863,389 | ||||||||||||
Corporate | 154,706 | 26,654 | 16,558 | 197,918 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| 888,930 | 114,499 | 57,878 | 1,061,307 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
Impaired loans as at December 31, 2017, are as follows:
| (In millions of Korean won) | 2017 | |||||||||||
| Retail | Corporate | Total | ||||||||||
Loans | 386,240 | 1,166,549 | 1,552,789 | |||||||||
Allowances | (126,439 | ) | (756,664 | ) | (883,103 | ) | ||||||
Individual | — | (670,956 | ) | (670,956 | ) | |||||||
Collective | (126,439 | ) | (85,708 | ) | (212,147 | ) | ||||||
|
|
|
|
|
| |||||||
| 259,801 | 409,885 | 669,686 | ||||||||||
|
|
|
|
|
| |||||||
Credit risk mitigation by collateral
The quantification of the extent to which collateral and other credit enhancements mitigate credit risk as at December 31, 2018, are as follows:
| (In millions of Korean won) | 2018 | |||||||||||||||||||||||
| Financial instruments applying 12-month expected credit losses | Financial instruments applying lifetime expected credit losses | Financial instruments applying credit impaired approach | Financial instruments not applying expected credit losses | Total | ||||||||||||||||||||
| Non-impaired | Impaired | |||||||||||||||||||||||
Guarantees | 59,710,931 | 5,864,526 | 146,818 | — | — | 65,722,275 | ||||||||||||||||||
Deposits and savings | 1,354,807 | 76,960 | 5,265 | — | — | 1,437,032 | ||||||||||||||||||
Property and equipment | 2,411,077 | 72,326 | 2,461 | — | — | 2,485,864 | ||||||||||||||||||
Real estate | 145,007,035 | 12,494,029 | 385,562 | — | — | 157,886,626 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
| 208,483,850 | 18,507,841 | 540,106 | — | — | 227,531,797 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
44
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
The quantification of the extent to which collateral and other credit enhancements mitigate credit risk as at December 31, 2017, are as follows:
| (In millions of Korean won) | 2017 | |||||||||||||||||||
| Impaired Loans | Non-impaired Loans | Total | ||||||||||||||||||
| Individual | Collective | Past due | Not past due | |||||||||||||||||
Guarantees | 17,257 | 107,610 | 198,379 | 57,326,035 | 57,649,281 | |||||||||||||||
Deposits and savings | 10,000 | 5,375 | 21,549 | 1,398,796 | 1,435,720 | |||||||||||||||
Property and equipment | 125 | 456 | 43 | 1,931,149 | 1,931,773 | |||||||||||||||
Real estate | 96,008 | 269,021 | 636,835 | 145,474,803 | 146,476,667 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
| 123,390 | 382,462 | 856,806 | 206,130,783 | 207,493,441 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
4.2.5 Credit Quality of Securities
The credit quality of financial investments excluding equity securities that are exposed to credit risk as at December 31, 2018, are as follows:
| 2018 | ||||||||||||||||||||||||
| Financial instruments applying 12-month expected credit losses | Financial instruments applying lifetime expected credit losses | Financial instruments applying credit impaired approach | Financial instruments not applying expected credit losses | Total | ||||||||||||||||||||
| (In millions of Korean won) | Non-impaired | Impaired | ||||||||||||||||||||||
Securities at amortized cost |
| |||||||||||||||||||||||
Grade 1 | 12,754,979 | — | — | — | — | 12,754,979 | ||||||||||||||||||
Grade 2 | — | — | — | — | — | — | ||||||||||||||||||
Grade 3 | — | — | — | — | — | — | ||||||||||||||||||
Grade 4 | — | — | — | — | — | — | ||||||||||||||||||
Grade 5 | — | — | — | — | — | — | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
| 12,754,979 | — | — | — | — | 12,754,979 | |||||||||||||||||||
Securities at fair value through other comprehensive income |
| |||||||||||||||||||||||
Grade 1 | 27,028,610 | — | — | — | — | 27,028,610 | ||||||||||||||||||
Grade 2 | 525,772 | — | — | — | — | 525,772 | ||||||||||||||||||
Grade 3 | — | — | — | — | — | — | ||||||||||||||||||
Grade 4 | 2,509 | — | — | — | — | 2,509 | ||||||||||||||||||
Grade 5 | — | — | — | — | — | — | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
| 27,556,891 | — | — | — | — | 27,556,891 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
| 40,311,870 | — | — | — | — | 40,311,870 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
| 1 | Before netting of allowance |
The credit qualities of securities, excluding equity securities according to the credit ratings by external rating agencies as at December 31, 2018, are as follows:
| Credit | Domestic | Foreign | ||||||||||
quality | KIS | NICE P&I | FnPricing Inc. | S&P | Fitch-IBCA | Moody’s | ||||||
Grade 1 | AA0 to AAA | AA0 to AAA | AA0 to AAA | A- to AAA | A- to AAA | A3 to Aaa | ||||||
Grade 2 | A- to AA- | A- to AA- | A- to AA- | BBB- to BBB+ | BBB- to BBB+ | Baa3 to Baa1 | ||||||
Grade 3 | BBB0 to BBB+ | BBB0 to BBB+ | BBB0 to BBB+ | BB to BB+ | BB to BB+ | Ba2 to Ba1 | ||||||
Grade 4 | BB0 to BBB- | BB0 to BBB- | BB0 to BBB- | B+ to BB- | B+ to BB- | B1 to Ba3 | ||||||
Grade 5 | BB- or under | BB- or under | BB- or under | B or under | B or under | B2 or under | ||||||
45
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
Credit qualities of debt securities denominated in Korean won are based on the lowest credit rating by the three domestic credit rating agencies above, and those denominated in foreign currencies are based on the lowest credit rating by the three foreign credit rating agencies above.
Financial assets at fair value through profit or loss and financial investments, excluding equity securities and beneficiary certificates, that are exposed to credit risk as at December 31, 2017 are as follows:
| (In millions of Korean won) | 2017 | |||
Securities that are neither past due nor impaired | 39,193,894 | |||
Impaired securities | — | |||
|
| |||
| 39,193,894 | ||||
|
| |||
The credit quality of securities, excluding equity securities and beneficiary certificates that are neither past due nor impaired as at December 31, 2017, is as follows:
(In millions of Korean won)
| 2017 | ||||||||||||||||||||||||
| Grade 1 | Grade 2 | Grade 3 | Grade 4 | Grade 5 | Total | |||||||||||||||||||
Financial assets held for trading | 2,937,846 | 106,162 | — | — | — | 3,044,008 | ||||||||||||||||||
Available-for-sale financial assets | 27,284,952 | 126,939 | 3,228 | 2,521 | — | 27,417,640 | ||||||||||||||||||
Held-to-maturity financial assets | 8,732,246 | — | — | — | — | 8,732,246 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
| 38,955,044 | 233,101 | 3,228 | 2,521 | — | 39,193,894 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
The credit qualities of securities, excluding equity securities and beneficiary certificates, according to the credit ratings by external rating agencies as at December 31, 2017, are as follows:
| Credit | Domestic | Foreign | ||||||||||
quality | KIS | NICE P&I | FnPricing Inc. | S&P | Fitch-IBCA | Moody’s | ||||||
Grade 1 | AA0 to AAA | AA0 to AAA | AA0 to AAA | A- to AAA | A- to AAA | A3 to Aaa | ||||||
Grade 2 | A- to AA- | A- to AA- | A- to AA- | BBB- to BBB+ | BBB- to BBB+ | Baa3 to Baa1 | ||||||
Grade 3 | BBB0 to BBB+ | BBB0 to BBB+ | BBB0 to BBB+ | BB to BB+ | BB to BB+ | Ba2 to Ba1 | ||||||
Grade 4 | BB0 to BBB- | BB0 to BBB- | BB0 to BBB- | B+ to BB- | B+ to BB- | B1 to Ba3 | ||||||
Grade 5 | BB- or under | BB- or under | BB- or under | B or under | B or under | B2 or under | ||||||
Credit qualities of debt securities denominated in Korean won are based on the lowest credit rating by the three domestic credit rating agencies above, and those denominated in foreign currencies are based on the lowest credit rating by the three foreign credit rating agencies above.
46
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
4.2.6 Credit Risk of Due from Financial Institutions
The credit quality of due from financial institutions as at December 31, 2018, is classified as follows:
| 2018 | ||||||||||||||||||||
| (In millions of Korean won) | Financial instruments applying12-month expected credit losses | Financial instruments applying lifetime expected credit losses | Financial instruments applying credit impaired approach | Total | ||||||||||||||||
| Non-impaired | Impaired | |||||||||||||||||||
Due from financial institutions at amortized cost |
| |||||||||||||||||||
Grade 1 | 10,362,365 | — | — | — | 10,362,365 | |||||||||||||||
Grade 2 | — | — | — | — | — | |||||||||||||||
Grade 3 | — | — | — | — | — | |||||||||||||||
Grade 4 | — | — | — | — | — | |||||||||||||||
Grade 5 | — | — | — | — | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
| 10,362,365 | — | — | — | 10,362,365 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
| 1 | Before netting of allowance. |
The classification criteria of the credit quality for due from financial institutions are the same as the criteria for securities (excluding equity securities).
4.2.7 Credit Risk Mitigation of Derivative Financial Instruments
The quantification of the extent to which collateral mitigates credit risk of derivative financial instruments as at December 31, 2018 and 2017, is as follows:
| (In millions of Korean won) | 2018 | 2017 | ||||||
Deposits and savings, securities and others | 381,959 | 1,198,373 | ||||||
4.2.8 Credit Risk Concentration Analysis
Details of the Bank’s loans by jurisdiction as at December 31, 2018 and 2017, are as follows:
| 2018 | ||||||||||||||||||||||||
| Retail | Corporate1 | Total | % | Allowances | Carrying amount | |||||||||||||||||||
Korea | 141,754,541 | 132,231,620 | 273,986,161 | 98.89 | (1,521,921 | ) | 272,464,240 | |||||||||||||||||
Japan | 106 | 333,918 | 334,024 | 0.12 | (1,865 | ) | 332,159 | |||||||||||||||||
United States | — | 839,620 | 839,620 | 0.30 | (4,795 | ) | 834,825 | |||||||||||||||||
China | — | 1,111,453 | 1,111,453 | 0.40 | (2,507 | ) | 1,108,946 | |||||||||||||||||
Others | 139,653 | 669,862 | 809,515 | 0.29 | (1,739 | ) | 807,776 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
| 141,894,300 | 135,186,473 | 277,080,773 | 100.00 | (1,532,827 | ) | 275,547,946 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
| 1 | Expected credit loss of loans at fair value through other comprehensive income is |
47
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
| 2017 | ||||||||||||||||||||||||
| (In millions of Korean won) | Retail | Corporate | Total | % | Allowances | Carrying amount | ||||||||||||||||||
Korea | 130,223,811 | 119,079,878 | 249,303,689 | 99.13 | (1,367,933 | ) | 247,935,756 | |||||||||||||||||
Japan | 539 | 127,009 | 127,548 | 0.05 | (6,268 | ) | 121,280 | |||||||||||||||||
United States | — | 866,867 | 866,867 | 0.34 | (1,599 | ) | 865,268 | |||||||||||||||||
China | — | 904,660 | 904,660 | 0.36 | (9,928 | ) | 894,732 | |||||||||||||||||
Others | 78,744 | 225,798 | 304,542 | 0.12 | (2,338 | ) | 302,204 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
| 130,303,094 | 121,204,212 | 251,507,306 | 100.00 | (1,388,066 | ) | 250,119,240 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Details of the Bank’s corporate loans by industry as at December 31, 2018 and 2017, are as follows:
| (In millions of Korean won) | 2018 | |||||||||||||||
| Loans1 | % | Allowances | Carrying amount | |||||||||||||
Financial institutions | 11,356,143 | 8.40 | (4,667 | ) | 11,351,476 | |||||||||||
Manufacturing | 40,971,041 | 30.31 | (444,637 | ) | 40,526,404 | |||||||||||
Service | 58,908,168 | 43.58 | (235,936 | ) | 58,672,232 | |||||||||||
Wholesale and retail | 16,012,121 | 11.84 | (92,275 | ) | 15,919,846 | |||||||||||
Construction | 2,628,180 | 1.94 | (283,620 | ) | 2,344,560 | |||||||||||
Public | 820,832 | 0.61 | (3,285 | ) | 817,547 | |||||||||||
Others | 4,489,988 | 3.32 | (23,443 | ) | 4,466,545 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
| 135,186,473 | 100.00 | (1,087,863 | ) | 134,098,610 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| 1 | Expected credit loss of loans at fair value through other comprehensive income is |
| (In millions of Korean won) | 2017 | |||||||||||||||
| Loans | % | Allowances | Carrying amount | |||||||||||||
Financial institutions | 9,464,449 | 7.81 | (5,816 | ) | 9,458,633 | |||||||||||
Manufacturing | 38,075,952 | 31.41 | (426,074 | ) | 37,649,878 | |||||||||||
Service | 52,524,954 | 43.34 | (266,685 | ) | 52,258,269 | |||||||||||
Wholesale and retail | 14,123,858 | 11.65 | (84,864 | ) | 14,038,994 | |||||||||||
Construction | 2,526,078 | 2.08 | (269,167 | ) | 2,256,911 | |||||||||||
Public | 817,377 | 0.68 | (2,902 | ) | 814,475 | |||||||||||
Others | 3,671,544 | 3.03 | (14,420 | ) | 3,657,124 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
| 121,204,212 | 100.00 | (1,069,928 | ) | 120,134,284 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
48
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
Details of the Bank’s retail as at December 31, 2018 and 2017, are as follows:
| (In millions of Korean won) | 2018 | |||||||||||||||
| Loans | % | Allowances | Carrying amount | |||||||||||||
Housing purpose | 70,178,329 | 49.46 | (28,940 | ) | 70,149,389 | |||||||||||
General purpose | 71,715,971 | 50.54 | (416,024 | ) | 71,299,947 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
| 141,894,300 | 100.00 | (444,964 | ) | 141,449,336 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| (In millions of Korean won) | 2017 | |||||||||||||||
| Loans | % | Allowances | Carrying amount | |||||||||||||
Housing purpose | 62,319,990 | 47.83 | (14,914 | ) | 62,305,076 | |||||||||||
General purpose | 67,983,104 | 52.17 | (303,224 | ) | 67,679,880 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
| 130,303,094 | 100.00 | (318,138 | ) | 129,984,956 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Details of the Bank’s mortgage loans1 as at December 31, 2018 are as follows:
| (In millions of Korean won) | 2018 | |||||||||||||||
| Loans | % | Allowances | Carrying amount | |||||||||||||
Group1 | 6,671,012 | 7.11 | (3,296 | ) | 6,667,716 | |||||||||||
Group2 | 18,911,235 | 20.16 | (8,322 | ) | 18,902,913 | |||||||||||
Group3 | 35,580,948 | 37.94 | (8,753 | ) | 35,572,195 | |||||||||||
Group4 | 32,256,160 | 34.39 | (12,338 | ) | 32,243,822 | |||||||||||
Group5 | 356,892 | 0.38 | (737 | ) | 356,155 | |||||||||||
Group6 | 16,776 | 0.02 | (35 | ) | 16,741 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
| 93,793,023 | 100.00 | (33,481 | ) | 93,759,542 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| 1 | Retail loans for general purpose with the real estate as collateral are included. |
Ranges | ||
Group 1 | LTV 0% to less than 20% | |
Group 2 | LTV 20% to less than 40% | |
Group 3 | LTV 40% to less than 60% | |
Group 4 | LTV 60% to less than 80% | |
Group 5 | LTV 80% to less than 100% | |
Group 6 | LTV over 100% |
| 1 | LTV: Loan to Value ratio |
49
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
Credit risk by industry of due from financial institutions, securities and derivative financial instruments
Details of the Bank’s credit risk of due from financial institutions, securities excluding equity securities and derivative financial instruments by industry as at December 31, 2018, are as follows:
| (In millions of Korean won) | 2018 | |||||||||||||||
| Amount | % | Allowances | Carrying amount | |||||||||||||
Due from financial institutions at amortized cost |
| |||||||||||||||
Finance and Insurance | 10,362,364 | 100.00 | (5 | ) | 10,362,359 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
| 10,362,364 | 100.00 | (5 | ) | 10,362,359 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Securities at fair value through profit or loss1 |
| |||||||||||||||
Government and government funded institutions | 1,175,311 | 14.16 | — | 1,175,311 | ||||||||||||
Finance and Insurance | 6,632,430 | 79.92 | — | 6,632,430 | ||||||||||||
Others | 491,552 | 5.92 | — | 491,552 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| 8,299,293 | 100.00 | — | 8,299,293 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
Derivatives |
| |||||||||||||||
Government and government funded institutions | 39,290 | 2.44 | — | 39,290 | ||||||||||||
Finance and Insurance | 1,476,717 | 91.65 | — | 1,476,717 | ||||||||||||
Others | 95,288 | 5.91 | — | 95,288 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| 1,611,295 | 100.00 | — | 1,611,295 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
Securities at fair value through other comprehensive income2 |
| |||||||||||||||
Government and government funded institutions | 7,844,258 | 28.47 | — | 7,844,258 | ||||||||||||
Finance and Insurance | 17,706,660 | 64.25 | — | 17,706,660 | ||||||||||||
Others | 2,005,973 | 7.28 | — | 2,005,973 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| 27,556,891 | 100.00 | — | 27,556,891 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
Securities at amortized cost |
| |||||||||||||||
Government and government funded institutions | 1,927,884 | 15.11 | — | 1,927,884 | ||||||||||||
Finance and Insurance | 10,797,031 | 84.65 | (1,249 | ) | 10,795,782 | |||||||||||
Others | 30,064 | 0.24 | (6 | ) | 30,058 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
| 12,754,979 | 100.00 | (1,255 | ) | 12,753,724 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| 60,584,822 | (1,260 | ) | 60,583,562 | |||||||||||||
|
|
|
|
|
| |||||||||||
| 1 | Collective investment securities included in securities at fair value through profit or loss are classified as finance and insurance. |
| 2 | Expected credit loss of securities at fair value through other comprehensive income is |
50
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
Details of the Bank’s credit risk of securities, excluding equity securities and beneficiary certificates, and derivative financial instruments by industry as at December 31, 2017, are as follows:
| (In millions of Korean won) | 2017 | |||||||
| Amount | % | |||||||
Financial assets held for trading | ||||||||
Government and government funded institutions | 1,108,919 | 36.43 | ||||||
Finance and Insurance | 1,765,827 | 58.01 | ||||||
Others | 169,262 | 5.56 | ||||||
|
|
|
| |||||
| 3,044,008 | 100.00 | |||||||
|
|
|
| |||||
Derivative financial assets | ||||||||
Government and government funded institutions | 12,099 | 0.47 | ||||||
Finance and Insurance | 2,447,524 | 94.46 | ||||||
Others | 131,337 | 5.07 | ||||||
|
|
|
| |||||
| 2,590,960 | 100.00 | |||||||
|
|
|
| |||||
Available-for-sale financial assets | ||||||||
Government and government funded institutions | 8,188,744 | 29.87 | ||||||
Finance and Insurance | 17,963,474 | 65.52 | ||||||
Others | 1,265,422 | 4.61 | ||||||
|
|
|
| |||||
| 27,417,640 | 100.00 | |||||||
|
|
|
| |||||
Held-to-maturity financial assets | ||||||||
Government and government funded institutions | 2,563,480 | 29.36 | ||||||
Finance and Insurance | 6,068,574 | 69.50 | ||||||
Others | 100,192 | 1.14 | ||||||
|
|
|
| |||||
| 8,732,246 | 100.00 | |||||||
|
|
|
| |||||
| 41,784,854 | ||||||||
|
| |||||||
51
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
Details of the Bank’s credit risk of due from financial institutions, securities, excluding equity securities and derivative financial instruments by country as at December 31, 2018, are as follows:
| (In millions of Korean won) | 2018 | |||||||||||||||
| Amount | % | Allowances | Carrying amount | |||||||||||||
Due from financial institutions at amortized cost |
| |||||||||||||||
Korea | 9,172,142 | 88.51 | — | 9,172,142 | ||||||||||||
United States | 564,594 | 5.45 | (5 | ) | 564,589 | |||||||||||
Others | 625,628 | 6.04 | — | 625,628 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| 10,362,364 | 100.00 | (5 | ) | 10,362,359 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Securities at fair value through profit or loss |
| |||||||||||||||
Korea | 7,648,895 | 92.16 | — | 7,648,895 | ||||||||||||
United States | 105,541 | 1.27 | — | 105,541 | ||||||||||||
Others | 544,857 | 6.57 | — | 544,857 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| 8,299,293 | 100.00 | — | 8,299,293 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
Derivatives |
| |||||||||||||||
Korea | 756,248 | 46.92 | — | 756,248 | ||||||||||||
United States | 285,460 | 17.72 | — | 285,460 | ||||||||||||
France | 222,905 | 13.83 | — | 222,905 | ||||||||||||
Others | 346,682 | 21.53 | — | 346,682 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| 1,611,295 | 100.00 | — | 1,611,295 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
Securities at fair value through other comprehensive income1 |
| |||||||||||||||
Korea | 26,139,297 | 94.86 | — | 26,139,297 | ||||||||||||
United States | 711,946 | 2.58 | — | 711,946 | ||||||||||||
Others | 705,648 | 2.56 | — | 705,648 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| 27,556,891 | 100.00 | — | 27,556,891 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
Securities at amortized cost |
| |||||||||||||||
Korea | 11,805,442 | 92.56 | (945 | ) | 11,804,497 | |||||||||||
United States | 155,417 | 1.22 | (32 | ) | 155,385 | |||||||||||
United Kingdom | 705,790 | 5.53 | (247 | ) | 705,543 | |||||||||||
Others | 88,330 | 0.69 | (31 | ) | 88,299 | |||||||||||
|
| �� |
|
|
|
|
|
| ||||||||
| 12,754,979 | 100.00 | (1,255 | ) | 12,753,724 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| 60,584,822 | (1,260 | ) | 60,583,562 | |||||||||||||
|
|
|
|
|
| |||||||||||
| 1 | Expected credit loss of securities at fair value through other comprehensive income is |
52
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
Details of the Bank’s credit risk of securities, excluding equity securities and beneficiary certificates, and derivative financial instruments by country as at December 31, 2017, are as follows:
| (In millions of Korean won) | 2017 | |||||||
| Amount | % | |||||||
Financial assets held for trading | ||||||||
Korea | 2,668,545 | 87.67 | ||||||
Others | 375,463 | 12.33 | ||||||
|
|
|
| |||||
| 3,044,008 | 100.00 | |||||||
|
|
|
| |||||
Derivative financial assets | ||||||||
Korea | 1,261,943 | 48.71 | ||||||
United States | 291,307 | 11.24 | ||||||
United Kingdom | 52,781 | 2.04 | ||||||
France | 303,883 | 11.73 | ||||||
Others | 681,046 | 26.28 | ||||||
|
|
|
| |||||
| 2,590,960 | 100.00 | |||||||
|
|
|
| |||||
Available-for-sale financial assets | ||||||||
Korea | 26,875,524 | 98.02 | ||||||
Others | 542,116 | 1.98 | ||||||
|
|
|
| |||||
| 27,417,640 | 100.00 | |||||||
|
|
|
| |||||
Held-to-maturity financial assets | ||||||||
Korea | 7,647,772 | 87.58 | ||||||
Others | 1,084,474 | 12.42 | ||||||
|
|
|
| |||||
| 8,732,246 | 100.00 | |||||||
|
|
|
| |||||
| 41,784,854 | ||||||||
|
| |||||||
The counterparties to the financial assets under due from financial institutions and financial instruments indexed to the price of gold within financial assets measured at fair value through profit or loss and derivatives are in the financial and insurance industries which have high credit ratings.
53
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
4.3 Liquidity risk
4.3.1 Overview of Liquidity Risk
Liquidity risk is the risk of insolvency or loss due to a disparity between the inflow and outflow of funds, unexpected outflow of funds, and obtaining funds at a high price or disposing of securities at an unfavorable price due to lack of available funds. The Bank manages its liquidity risk through analysis of the contractual maturity of interest-bearing assets and liabilities, assets and liabilities related to the other in and outflows, andoff-balance sheet items related to the inflows and outflows of currency derivative instruments and others.
4.3.2 Liquidity Risk Management and Indicator
The liquidity risk is managed by ALM (‘Asset Liability Management’) and related guidelines which are applied to the risk management policies and procedures that addresses all the possible risks that arise from the overall business of the Bank.
The Bank has to establish the liquidity risk management strategy including the objectives of liquidity risk management, management policies and internal control system, and obtain approval from Risk Management Committee. Risk Management Committee operates the Risk Management Council for the purpose of efficient risk management, monitors establishment and enforcement of policies based on risk management strategy.
For the purpose of liquidity management, the liquidity gap ratio, liquidity ratio, maturity gap ratio and the results of the stress testing related to liquidity risk on transactions affecting the inflows and outflows of funds and transactions of off-balance sheet items are measured, managed and reported to the Risk Management Committee and Risk Management Council on a regular basis.
4.3.3 Analysis of Remaining Contractual Maturity of Financial Assets and Liabilities
Cash flows disclosed below are undiscounted contractual principal and interest to be received (paid) and, thus, differ from the amounts in financial statements which are based on the present value of expected cash flows. 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 maturity.
54
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
The remaining contractual maturity of financial assets and liabilities, excluding derivatives held for cash flow hedging, as at December 31, 2018 and 2017, is as follows:
| 2018 | ||||||||||||||||||||||||||||
| (In millions of Korean won) | 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 | 4,408,582 | — | — | — | — | — | 4,408,582 | |||||||||||||||||||||
Financial assets at fair value through profit or loss2 | 8,399,768 | 230 | 7,182 | 184,881 | 5,542 | 90,736 | 8,688,339 | |||||||||||||||||||||
Derivatives held for trading2 | 1,535,339 | — | — | — | — | — | 1,535,339 | |||||||||||||||||||||
Derivatives held for hedging3 | — | (1,332 | ) | 620 | 16,251 | 20,025 | 40,830 | 76,394 | ||||||||||||||||||||
Loans at amortized cost | — | 18,547,767 | 27,835,144 | 106,859,411 | 70,884,404 | 95,290,607 | 319,417,333 | |||||||||||||||||||||
Financial investments | 1,898,915 | 2,170,613 | 3,630,644 | 13,611,640 | 20,571,067 | 2,454,592 | 44,337,471 | |||||||||||||||||||||
Financial assets at fair value through other comprehensive income4 | 1,898,915 | 1,412,984 | 2,262,619 | 9,748,141 | 14,891,941 | 191,966 | 30,406,566 | |||||||||||||||||||||
Securities at amortized cost | — | 757,629 | 1,368,025 | 3,863,499 | 5,679,126 | 2,262,626 | 13,930,905 | |||||||||||||||||||||
Other financial assets | — | 2,441,445 | — | 1,019,223 | — | — | 3,460,668 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
| 16,242,604 | 23,158,723 | 31,473,590 | 121,691,406 | 91,481,038 | 97,876,765 | 381,924,126 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Financial liabilities |
| |||||||||||||||||||||||||||
Financial liabilities at fair value through profit or loss2 | 87,168 | — | — | — | — | — | 87,168 | |||||||||||||||||||||
Derivatives held for trading2 | 1,550,244 | — | — | — | — | — | 1,550,244 | |||||||||||||||||||||
Derivatives held for hedging3 | — | 4,091 | (4,249 | ) | (14,415 | ) | 15,660 | 31 | 1,118 | |||||||||||||||||||
Deposits5 | 122,933,103 | 15,956,422 | 27,749,492 | 94,043,792 | 9,911,549 | 1,279,935 | 271,874,293 | |||||||||||||||||||||
Debts | 602 | 2,799,623 | 3,255,685 | 6,790,902 | 4,216,642 | 669,151 | 17,732,605 | |||||||||||||||||||||
Debentures | 30,160 | 331,604 | 1,385,279 | 8,319,923 | 12,113,285 | 673,863 | 22,854,114 | |||||||||||||||||||||
Other financial liabilities | — | 10,456,755 | 2,203 | 76,647 | 2,406 | — | 10,538,011 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
| 124,601,277 | 29,548,495 | 32,388,410 | 109,216,849 | 26,259,542 | 2,622,980 | 324,637,553 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Off-balance sheet items |
| |||||||||||||||||||||||||||
Commitments6 | 81,137,779 | — | — | — | — | — | 81,137,779 | |||||||||||||||||||||
Payment guarantee agreement | 7,250,059 | — | — | — | — | — | 7,250,059 | |||||||||||||||||||||
Financial guarantee contracts7 | 4,636,540 | — | — | — | — | — | 4,636,540 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
| 93,024,378 | — | — | — | — | — | 93,024,378 | ||||||||||||||||||||||
| 1 | The amounts of |
| 2 | Financial liabilities at fair value through profit or loss and derivatives held for trading and financial assets at fair value through profit or loss (excluding loans) are not managed by contractual maturity because they are held for trading or redemption before maturity. Therefore, the carrying amounts are included in the ‘On demand’ category. |
| 3 | Cash flows of derivative instruments held for hedging are shown at net amounts of cash inflows and outflows by remaining contractual maturity. |
| 4 | Equity securities designated as financial assets at fair value through other comprehensive income included in the ‘On demand’ category as most are available for sale at any time. However, in the case of equity investments which are restricted for sale, these will be classified to its respective maturity when the restriction on disposal is released. |
| 5 | Deposits that are contractually repayable on demand or on short notice are included under the ‘On demand’ category. |
| 6 | Unused lines of credit within commitments are included under the ‘On demand’ category as payments can be required upon request. |
| 7 | Financial guarantee contracts are included under the ‘On demand’ category as payments can be required upon request. |
55
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
| 2017 | ||||||||||||||||||||||||||||
| (In millions of Korean won) | 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 | 5,488,396 | 36,400 | — | 19,688 | — | — | 5,544,484 | |||||||||||||||||||||
Financial assets held for trading2 | 3,147,115 | — | — | — | — | — | 3,147,115 | |||||||||||||||||||||
Derivatives held for trading2 | 2,514,629 | — | — | — | — | — | 2,514,629 | |||||||||||||||||||||
Derivatives held for fair value hedging3 | — | 92 | 2,722 | 2,647 | (5,017 | ) | 52,698 | 53,142 | ||||||||||||||||||||
Loans | — | 14,711,695 | 26,500,812 | 96,096,742 | 61,941,240 | 89,761,518 | 289,012,007 | |||||||||||||||||||||
Available-for-sale financial assets4 | 5,969,230 | 1,477,300 | 2,106,359 | 9,333,028 | 14,935,314 | 786,078 | 34,607,309 | |||||||||||||||||||||
Held-to-maturity financial assets | — | 584,825 | 388,928 | 2,603,641 | 4,343,586 | 1,986,169 | 9,907,149 | |||||||||||||||||||||
Other financial assets | — | 4,585,981 | — | 1,042,579 | — | — | 5,628,560 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
| 17,119,370 | 21,396,293 | 28,998,821 | 109,098,325 | 81,215,123 | 92,586,463 | 350,414,395 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Financial liabilities |
| |||||||||||||||||||||||||||
Financial liabilities held for trading2 | 74,191 | — | — | — | — | — | 74,191 | |||||||||||||||||||||
Derivatives held for trading2 | 2,572,878 | — | — | — | — | — | 2,572,878 | |||||||||||||||||||||
Derivatives held for fair value hedging3 | — | 4,176 | (4,715 | ) | (19,705 | ) | (7,144 | ) | 244 | (27,144 | ) | |||||||||||||||||
Deposits5 | 124,002,566 | 11,384,493 | 23,011,715 | 81,477,161 | 10,134,028 | 1,249,739 | 251,259,702 | |||||||||||||||||||||
Debts | 906 | 4,113,185 | 1,848,033 | 5,230,578 | 4,328,538 | 573,088 | 16,094,328 | |||||||||||||||||||||
Debentures | 40,655 | 342,371 | 400,196 | 5,425,995 | 11,524,310 | 1,536,151 | 19,269,678 | |||||||||||||||||||||
Other financial liabilities | — | 10,136,964 | 774 | 74,577 | — | — | 10,212,315 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
| 126,691,196 | 25,981,189 | 25,256,003 | 92,188,606 | 25,979,732 | 3,359,222 | 299,455,948 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Off-balance sheet items |
| |||||||||||||||||||||||||||
Commitments6 | 50,785,020 | — | — | — | — | — | 50,785,020 | |||||||||||||||||||||
Financial guarantee contracts7 | 4,135,402 | — | — | — | — | — | 4,135,402 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
| 54,920,422 | — | — | — | — | — | 54,920,422 | ||||||||||||||||||||||
| 1 | The amounts of |
| 2 | Financial assets held for trading, financial assets designated at fair value through profit or loss, financial liabilities held for trading and derivatives held for trading are not managed by contractual maturity because they are held for trading or redemption before maturity. Therefore, the carrying amounts are included in the ‘On demand’ category. However, the cash flows of the embedded derivatives (e.g. conversion options and others) which are separated from their host contracts, are included in the cash flows of the host contracts. |
| 3 | Cash flows of derivative instruments held for fair value hedging are shown at net amounts of cash inflows and outflows by remaining contractual maturity. |
| 4 | Equity investments in financial assets classified as financial instruments at fair value through other comprehensive income included in the ‘On demand’ category as most are available for sale at any time. However, in the case of equity investments which are restricted for sale, these will be classified to its respective maturity when the restriction on disposal is released. |
| 5 | Deposits that are contractually repayable on demand or on short notice are included under the ‘On demand’ category. |
| 6 | Unused lines of credit within commitments are included under the ‘On demand’ category as payments can be required upon request. |
| 7 | Financial guarantee contracts are included under the ‘On demand’ category as payments can be required upon request. |
56
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
The remaining contractual cash flows of derivatives held for cash flow hedging as at and December 31, 2018 and 2017, are as follows:
| (In millions of Korean won) | 2018 | |||||||||||||||||||||||
| Up to 1 month | 1-3 months | 3-12 months | 1-5 years | Over 5 years | Total | |||||||||||||||||||
Cash flow to be received of net settlement derivatives | 251 | 2,548 | 4,871 | 11,642 | — | 19,312 | ||||||||||||||||||
Cash flow to be paid of net settlement derivatives | 197 | 129 | 493 | 79 | — | 898 | ||||||||||||||||||
| (In millions of Korean won) | 2017 | |||||||||||||||||||||||
| Up to 1 month | 1-3 months | 3-12 months | 1-5 years | Over 5 years | Total | |||||||||||||||||||
Cash flow to be received of net settlement derivatives | 2 | 198 | 488 | 104 | — | 792 | ||||||||||||||||||
Cash flow to be paid of net settlement derivatives | 94 | 536 | 1,444 | 5,852 | — | 7,926 | ||||||||||||||||||
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, and incurred in securities, derivatives and others. The most significant risks associated with trading positions are interest rate risks and currency risks, and other risks include stock price risks. In addition, the Bank is exposed to interest rate risks associated withnon-trading positions. The Bank classifies exposures to market risk into either trading ornon-trading positions for managerial purpose.
4.4.2 Risk Management
The Bank sets internal capital limits for market risk and interest rate risk and monitors the risks to manage the risk of trading andnon-trading positions. The Bank maintains risk management systems and procedures, such as trading policies and procedures, market risk management guidelines for trading positions and ALM risk management guidelines fornon-trading positions in order to manage market risk efficiently. The procedures mentioned are implemented with approval from the Risk Management Committee and Risk Management Council.
The Bank establishes market risk management policy, sets position limits, loss limits and VaR limits of each business group and approves newly developed products through its Risk Management Council. The Market Risk Management Subcommittee, which is chaired by the Chief Risk Officer (CRO), is the decision maker and sets position limits, loss limits, VaR limits, sensitivity limits and scenario loss limits for each division, at the level of each individual business department.
57
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
The Asset-Liability Management Committee (ALCO) determines the operational standards of interest and commission, the details of establishment and prosecution of the Asset Liability Management (ALM) policies, and enacts and amends relevant guidelines. The Risk Management Council monitors the establishment and enforcement of ALM risk management policies and enact and amend ALM risk management guidelines. The interest rate risk limit is set based on the future assets/liabilities position and interest rate volatility estimation reflects the annual work plan. The Financial Planning Department and Risk Management Department measure and monitor the interest risk status and limits on a regular basis. The status and limits of interest rate risks, such as interest rate EaR, duration gap and interest rate VaR, are reported to the ALCO and Risk Management Council on a monthly basis and to the Risk Management Committee on a quarterly basis. To ensure adequacy of interest rate and liquidity risk management, the Risk Management Department assigns the limits, monitors and reviews the risk management procedures and tasks conducted by the Financial Planning Department. Also, the Risk Management Department independently reports related information to management.
4.4.3 Trading Position
Definition of a trading position
Trading positions subject to market risk management are interest rate, stock price positions for short-term profit-taking and others. Also, they include all foreign exchange rate positions. The basic requirements of trading positions are defined under the Trading Policy and Guideline, are as follows:
| • | The trading position is not restricted for purchase and sale, is measured daily at fair value, and its significant inherent risks are able to be hedged in the market. |
| • | The criteria for classification as a trading position are clearly defined in the Trading Policy and guideline, and separately managed by the trading department. |
| • | The trading position is operated in accordance with the documented trading strategy and managed through position limits. |
| • | The operating department or professional dealers have an authority to enforce a deal on the trading position within predetermined limits withoutpre-approval. |
| • | The trading position is reported periodically to management for the purpose of the Bank’s risk management. |
Observation method on market risk arising from trading positions
The Bank calculates VaR to measure the market risk by using market risk management systems on the entire trading portfolio. Generally, the Bank manages market risk on the trading portfolio. In addition, the Bank controls and manages the risk of derivative trading based on the regulations and guidelines formulated by the Financial Supervisory Service.
Value at Risk (VaR)
i. Value at Risk (VaR)
The Bank uses theValue-at-Risk methodology to measure the market risk of trading positions.
The Bank now uses the ten-day VaR, which estimates the maximum amount of loss that could occur in ten days under an historical simulation model which is considered to be a full valuation method. The distributions of portfolio’s value changes are estimated based on the data over the previous 250 business days, andten-day VaR is calculated by subtracting net present market value from the value measured at a 99% confident level of portfolio’s value distribution results.
58
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
VaR is a commonly used market risk measurement technique. However, the method has some shortcomings. VaR estimates possible losses over a certain period at a particular confidence level using past market movement data. Past market movements are, however, not necessarily a good indicator of future events, as there may be conditions and circumstances in the future that the model does not anticipate. As a result, the timing and magnitude of the actual losses may vary depending on the assumptions made at the time of the calculation. In addition, the time periods used for the model, generally one or ten days, are assumed to be a sufficient holding period before liquidating the relevant underlying positions. If these holding periods are not sufficient, or too long, the VaR results may understate or overstate the potential loss.
The Bank uses an internal model (VaR) to measure general risk, and a standard method to measure each individual risk. When the internal model is not permitted for certain market risk, the Bank uses the standard method. Therefore, the market risk VaR may not reflect the market risk of each individual risk and some specific positions.
ii. Back-Testing
Back-testing is conducted on a daily basis to validate the adequacy of the VaR model. In back- testing, the Bank compares both the actual and hypothetical profit or loss with the VaR calculations.
iii. Stress Testing
Stress testing is carried out to analyze the impact of abnormal market situations on the trading andavailable-for-sale portfolio. It reflects changes in interest rates, stock prices, foreign exchange rates, implied volatilities of options and other risk factors that have significant influence on the value of the portfolio. The Bank uses historical scenarios and hypothetical scenarios for the analysis of abnormal market situations. Stress testing is performed at least once every quarter.
The units that analyze total VaR can be categorized as follows: ① by product: interest rate products (debt securities in Korean won and foreign currencies, etc.), foreign currency products (spots, futures, and CRS, etc.), equity securities (equities, ELS, etc.), ② by risk factors: interest rates (government bond interest rate in Korean won and foreign currencies, corporate bond interest rate, etc.), exchange rates (USD/KRW, USD/JPY, etc.), and stock market indexes (KOSPI, S&P 500, etc.); the Bank previously assesses VaR by product considering timeliness and efficiency.
However, as the amount of investment property in foreign currencies increases, products evaluated as multiple risk factors (i.e. for foreign currency bonds, ① by product: interest rate product ② by risk factor: interest rate and foreign exchange rate) had a tendency that dispersion effect is excessive due to not reflecting the actual hedge position by products in detail; to prevent which, the Bank has decided to use VaR by risk factor from 2018.
59
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
VaR at a 99%, excluding Stressed Value at Risks, confidence level of interest rate, stock price and foreign exchange rate risk for trading positions with aten-day holding period as at December 31, 2018 and 2017, are as follows:
| 2018 | ||||||||||||||||
| (In millions of Korean won) | Average | Minimum | Maximum | Ending | ||||||||||||
Interest rate risk | 6,004 | 3,189 | 9,287 | 5,775 | ||||||||||||
Stock price risk | 188 | 34 | 484 | 63 | ||||||||||||
Foreign exchange rate risk | 11,558 | 5,198 | 23,761 | 22,392 | ||||||||||||
Deduction of diversification effect | (5,738 | ) | ||||||||||||||
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Total VaR | 13,336 | 3,860 | 25,013 | 22,492 | ||||||||||||
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| 2017 | ||||||||||||||||
| (In millions of Korean won) | Average | Minimum | Maximum | Ending | ||||||||||||
Interest rate risk | 26,075 | 13,495 | 37,553 | 26,927 | ||||||||||||
Stock price risk | 56 | 6 | 187 | 187 | ||||||||||||
Foreign exchange rate risk | 32,950 | 12,405 | 45,318 | 25,211 | ||||||||||||
Deduction of diversification effect | (44,464 | ) | ||||||||||||||
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Total VaR | 8,293 | 5,365 | 15,812 | 7,861 | ||||||||||||
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The required equity capital using the standard method related to the positions which are not measured by VaR as at December 31, 2018 and 2017, is as follows:
| (In millions of Korean won) | 2018 | 2017 | ||||||
Interest rate risk | 3,032 | 107 | ||||||
Stock price risk | — | 769 | ||||||
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| 3,032 | 876 | |||||||
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Details of risk factors
i. Interest rate risk
Trading position interest rate risk usually arises from debt securities denominated in Korean won. The Bank’s trading strategy is to benefit from short-term movements in the prices of debt securities arising from changes in interest rates. The Bank manages interest rate risk on major trading portfolios using market value-based tools such as VaR and sensitivity analysis (Price Value of a Basis Point: PVBP).
ii. Stock price risk
Stock price risk only arises from trading securities denominated in Korean won as the Bank does not have any trading exposure to shares denominated in foreign currencies. The trading securities portfolios in Korean won are composed of exchange-traded stocks and derivative instruments linked to stock with strict limits on diversification.
60
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
iii. Foreign exchange rate risk
Foreign exchange rate risk arises from holding assets and liabilities denominated in foreign currency and foreign currency derivatives. Net foreign currency exposure mostly occurs from the foreign assets and liabilities which are denominated in US Dollars and Chinese Yuan. The Bank sets both loss limits and net foreign currency exposure limits and manages comprehensive net foreign exchange exposures which consider both trading andnon-trading portfolios.
4.4.4Non-trading Position
i. Definition ofnon-trading position
Managed interest rate risk innon-trading position includes on oroff-balance sheet assets, liabilities and derivatives that are sensitive to interest rate, except trading position for market risk. The interest rate sensitive assets and liabilities are interest-bearing assets and liabilities that create interest income and expenses.
ii. Observation method on market risk arising fromnon-trading position
Interest rate risk occurs due to mismatches on maturities and interest rate reset periods between interest-bearing assets and liabilities. The Bank manages the risk through measuring and managing interest rate VaR and EaR that are maximum expected decreases in net asset value (NPV) and net interest income (NII) for one year, respectively, arising from unfavorable changes in market interest rate.
iii. Interest Rate VaR
Interest rate VaR is the maximum possible loss due to interest rate risk under a normal distribution at a 99.90% confidence level. The measurement results of risk as at December 31, 2018 and 2017, are as follows:
| (In millions of Korean won) | 2018 | 2017 | ||||||
Interest Rate VaR | 185,612 | 337,465 | ||||||
61
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
4.4.5 Financial Assets and Liabilities in Foreign Currencies
Financial assets and liabilities in foreign currencies as at December 31, 2018 and 2017, are as follows:
| 2018 | ||||||||||||||||||||||||||||
| (In millions of Korean won) | USD | JPY | EUR | GBP | CNY | Others | Total | |||||||||||||||||||||
Financial assets | ||||||||||||||||||||||||||||
Cash and due from financial institutions | 1,055,982 | 305,814 | 187,715 | 24,464 | 212,207 | 358,040 | 2,144,222 | |||||||||||||||||||||
Financial assets at fair value through profit or loss | 1,255,498 | — | 69,728 | — | — | 17,773 | 1,342,999 | |||||||||||||||||||||
Derivatives held for trading | 91,406 | — | — | — | — | — | 91,406 | |||||||||||||||||||||
Derivatives held for hedging | 31,082 | — | — | — | — | — | 31,082 | |||||||||||||||||||||
Loans at amortized cost | 12,705,015 | 333,848 | 571,077 | 5,993 | 8,659 | 378,946 | 14,003,538 | |||||||||||||||||||||
Financial assets at fair value through other comprehensive income | 2,999,553 | 36,538 | 5,134 | — | — | 3,699 | 3,044,924 | |||||||||||||||||||||
Financial assets at amortized cost | 949,227 | — | — | — | — | — | 949,227 | |||||||||||||||||||||
Other financial assets | 938,944 | 297,430 | 17,184 | 21,447 | 236,979 | 21,337 | 1,533,321 | |||||||||||||||||||||
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| 20,026,707 | 973,630 | 850,838 | 51,904 | 457,845 | 779,795 | 23,140,719 | ||||||||||||||||||||||
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Financial liabilities | ||||||||||||||||||||||||||||
Derivatives held for trading | 100,635 | 14 | 42 | — | — | — | 100,691 | |||||||||||||||||||||
Derivatives held for hedging | 88,367 | — | — | — | — | — | 88,367 | |||||||||||||||||||||
Deposits | 8,820,671 | 612,001 | 491,628 | 48,264 | 200,664 | 449,726 | 10,622,954 | |||||||||||||||||||||
Debts | 9,113,898 | 90,778 | 184,173 | — | 5,107 | 22,901 | 9,416,857 | |||||||||||||||||||||
Debentures | 3,960,312 | — | 31,979 | — | — | 42,240 | 4,034,531 | |||||||||||||||||||||
Other financial liabilities | 897,366 | 103,395 | 130,282 | 3,407 | 253,069 | 39,033 | 1,426,552 | |||||||||||||||||||||
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| 22,981,249 | 806,188 | 838,104 | 51,671 | 458,840 | 553,900 | 25,689,952 | ||||||||||||||||||||||
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Off-balance sheet items | 13,608,120 | 31,148 | 1,262 | — | 184,545 | 7,552 | 13,832,627 | |||||||||||||||||||||
62
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
| 2017 | ||||||||||||||||||||||||||||
| (In millions of Korean won) | USD | JPY | EUR | GBP | CNY | Others | Total | |||||||||||||||||||||
Financial assets | ||||||||||||||||||||||||||||
Cash and due from financial institutions | 1,342,405 | 250,808 | 125,644 | 17,770 | 98,121 | 230,836 | 2,065,584 | |||||||||||||||||||||
Financial assets held for trading | 495,988 | 38,179 | 10,670 | — | — | — | 544,837 | |||||||||||||||||||||
Derivatives held for trading | 59,434 | — | — | — | — | — | 59,434 | |||||||||||||||||||||
Derivatives held for hedging | 17,697 | — | — | — | — | — | 17,697 | |||||||||||||||||||||
Loans | 11,005,658 | 228,747 | 1,549,986 | 9,548 | 10,065 | 215,740 | 13,019,744 | |||||||||||||||||||||
Available-for-sale financial assets | 2,045,064 | 76,185 | 33,790 | — | — | 20,666 | 2,175,705 | |||||||||||||||||||||
Held-to-maturity financial assets | 1,084,474 | — | — | — | — | — | 1,084,474 | |||||||||||||||||||||
Other financial assets | 1,499,198 | 452,446 | 405,661 | 13,100 | 183,113 | 192,479 | 2,745,997 | |||||||||||||||||||||
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| 17,549,918 | 1,046,365 | 2,125,751 | 40,418 | 291,299 | 659,721 | 21,713,472 | ||||||||||||||||||||||
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Financial liabilities | ||||||||||||||||||||||||||||
Derivatives held for trading | 55,813 | — | 35 | — | — | — | 55,848 | |||||||||||||||||||||
Derivatives held for hedging | 49,962 | — | — | — | — | — | 49,962 | |||||||||||||||||||||
Deposits | 8,286,679 | 753,426 | 437,873 | 37,516 | 102,049 | 573,275 | 10,190,818 | |||||||||||||||||||||
Debts | 7,312,646 | 44,885 | 118,248 | 1,012 | 4,304 | 10,183 | 7,491,278 | |||||||||||||||||||||
Debentures | 2,940,251 | — | — | — | — | — | 2,940,251 | |||||||||||||||||||||
Other financial liabilities | 2,174,652 | 43,670 | 887,197 | 2,918 | 185,392 | 20,063 | 3,313,892 | |||||||||||||||||||||
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| 20,820,003 | 841,981 | 1,443,353 | 41,446 | 291,745 | 603,521 | 24,042,049 | ||||||||||||||||||||||
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Off-balance sheet items | 11,350,107 | 705 | 10,028 | — | 115,579 | 12,823 | 11,489,242 | |||||||||||||||||||||
4.5 Operational Risk
4.5.1 Concept
The Bank defines operational risk as risk of loss resulting from inadequate or failed internal processes, people, systems and external events. The operational risk includes financial andnon-financial risks.
4.5.2 Risk Management
The purpose of operational risk management is not only to comply with requirements of regulatory authorities but is also to establish an integrated system to cultivate enterprise culture that values importance of risk management, strengthen internal controls, improve processes and provide with timely feedback to management so that eventually mitigate operational risk of the Bank. In addition, the Bank established Business Continuity Planning (BCP) to ensure critical business functions can be maintained, or restored, in the event of material disruptions arising from internal or external events. It has constructed replacement facilities as well as has carried out full scale test for head office and IT departments to test its BCPs.
63
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
4.6 Capital Management
The Bank complies with the capital adequacy standard established by the Financial Services Commission. The capital adequacy standard is based on Basel III revised by Basel Committee on Banking Supervision in Bank for International Settlements in June 2011, and was implemented in Korea in December 2013.
The Bank is required to maintain a minimum Common Equity Tier 1 ratio of at least 4.5%, a minimum Tier 1 ratio of 6.0% and a minimum Total Regulatory Capital of 8.0% as at December 31, 2018. Capital Conservation Buffer of 1.875% and Capital Requirement of Domestic Systemically Important Bank(D-SIB) of 0.75% are additionally applied. Therefore, the Bank is required to maintain a capital ratio including a minimum capital ratio and additional capital requirements (a Common Equity Tier 1 Ratio of 7.125% (December 31, 2017: 6.25%), a Tier 1 Ratio of 8.625% (December 31, 2017: 7.75%), and a Total Regulatory Capital Ratio of 10.625% (December 31, 2017: 9.75%)).
The Bank’s equity capital is classified into three categories in accordance with Detailed Supervisory Regulations on Banking Business:
| • | Common Equity Tier 1 Capital: Common Equity Tier 1 Capital represents the issued capital that takes the first and proportionately greatest share of any losses and represents the most subordinated claim in liquidation of the Bank, and not repaid outside of liquidation. It includes common shares issued, capital surplus, retained earnings,non-controlling interests of consolidated subsidiaries, accumulated other comprehensive income, other capital surplus and others. |
| • | Additional Tier 1 Capital: Additional Tier 1 Capital includes perpetual instruments issued by the Bank that meet the criteria for inclusion in Additional Tier 1 capital, and stock surplus resulting from the issue of instruments included in Additional Tier 1 capital and others. |
| • | Tier 2 Capital: Tier 2 Capital represents the capital that takes the proportionate share of losses in the liquidation of the Bank. Tier 2 Capital includes a fund raised by issuing subordinated debentures maturing in not less than 5 years that meet the criteria for inclusion in Tier 2 capital, and the allowance for loan losses which are accumulated for assets classified as normal or precautionary in accordance with Regulations on Supervision of Banking Business and others. |
Risk weighted asset means the assets weighted according to the inherent risks in the total assets and the possible losses resulting from the errors of internal process and external events which the Bank should cover. The Bank calculates risk weighted asset by each risk (credit risk, market risk and operational risk) based on Detailed Regulations on Supervision of Banking Business and uses it for its capital ratio calculation. The Bank and its subsidiaries complied with external capital adequacy requirements as at December 31, 2018 and 2017.
In addition to the capital ratio, the Bank assesses its adequacy of capital by using the internal assessment and management policy of the capital adequacy. The assessment of the capital adequacy is conducted by comparing available capital (actual amount of available capital) and internal capital (amount of capital enough to cover all significant risks under target credit rate set by the Bank). The Bank monitors the soundness of finance and provides risk adjusted basis for performance review using the assessment of the capital adequacy. The internal capital is calculated by adding the stress testing results and other required items to the total internal capitals which are calculated for each risk.
64
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
The Risk Management Council of the Bank determines the Bank’s risk appetite and allocates internal capital by risk type and business group. Each business group efficiently operates its capital within range of granted internal capital. The Risk Management Department of the Bank monitors a management of the limit on internal capital and reports the results to management and the Risk Management Council. The Bank maintains the adequacy of capital through proactive review and approval of the Risk Management Committee when the internal capital is expected to exceed the limits.
Details of the Bank’s capital adequacy calculation in line with Basel III requirements as at December 31, 2018 and 2017, are as follows:
| (In millions of Korean won) | 2018 | 2017 | ||||||
Equity Capital | 27,694,178 | 25,913,677 | ||||||
Tier I Capital | 25,567,995 | 24,040,408 | ||||||
Common Equity Tier 1 Capital | 25,567,995 | 24,040,408 | ||||||
Tier II Capital | 2,126,183 | 1,873,269 | ||||||
Risk-weighted assets: | 178,433,263 | 161,824,686 | ||||||
Credit risk1 | 163,693,288 | 145,958,874 | ||||||
Market risk2 | 4,747,989 | 5,746,686 | ||||||
Operational risk3 | 9,991,986 | 10,119,126 | ||||||
Equity Capital (%): | 15.52 | 16.01 | ||||||
Tier I Capital (%) | 14.33 | 14.86 | ||||||
Common Equity Tier 1 Capital (%) | 14.33 | 14.86 | ||||||
| 1 | Credit risk weighted assets are measured using the Internal Rating-Based Approach and Standardized Approach. |
| 2 | Market risk weighted assets are measured using the Internal Model-Based Approach and Standardized Approach. |
| 3 | Operational risk weighted assets are measured using the Advanced Measurement Approach. |
5. Segment Information
5.1 Overall Segment Information and Business Segments
The Bank is organized into Corporate Banking, Retail Banking and Other Activities. These business divisions are based on the nature of the products and services provided, the type or class of customer, and the Bank’s management organization.
| • | Corporate banking: The activities within this segment include providing credit, deposit products and other related financial services to large, small andmedium-sized enterprises and SOHOs. |
| • | Retail banking: The activities within this segment include providing credit, deposit products and other related financial services to individuals and households. |
| • | Other activities: The activities within this segment include trading activities in securities and derivatives, funding and other supporting activities. |
65
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
Financial information by business segment as at and for the year ended December 31, 2018 is as follows:
| 2018 | ||||||||||||||||
| (In millions of Korean won) | Corporate Banking | Retail Banking | Others | Total | ||||||||||||
Operating revenues from external customers | 2,362,581 | 2,989,240 | 1,498,783 | 6,850,604 | ||||||||||||
Net interest income | 2,689,712 | 2,960,598 | 337,777 | 5,988,087 | ||||||||||||
Interest income | 4,121,160 | 4,547,615 | 1,068,381 | 9,737,156 | ||||||||||||
Interest expense | (1,431,448 | ) | (1,587,017 | ) | (730,604 | ) | (3,749,069 | ) | ||||||||
Net fee and commission income | 292,799 | 490,447 | 376,454 | 1,159,700 | ||||||||||||
Fee and commission income | 374,598 | 583,213 | 486,028 | 1,443,839 | ||||||||||||
Fee and commission expense | (81,799 | ) | (92,766 | ) | (109,574 | ) | (284,139 | ) | ||||||||
Net gains on financial assets/ liabilities at fair value through profit or loss | — | — | 357,580 | 357,580 | ||||||||||||
Net other operating income(expense) | (619,930 | ) | (461,805 | ) | 426,972 | (654,763 | ) | |||||||||
General and administrative expenses | (1,060,674 | ) | (1,970,409 | ) | (702,625 | ) | (3,733,708 | ) | ||||||||
Operating profit before provision for credit losses | 1,301,907 | 1,018,831 | 796,158 | 3,116,896 | ||||||||||||
Reversal (provision) for credit losses | 79,451 | (179,229 | ) | (24 | ) | (99,802 | ) | |||||||||
Operating profit | 1,381,358 | 839,602 | 796,134 | 3,017,094 | ||||||||||||
Net othernon-operating income (expense) | (78 | ) | — | 41,445 | 41,367 | |||||||||||
Segment profit before income tax expense | 1,381,280 | 839,602 | 837,579 | 3,058,461 | ||||||||||||
Income tax income | (379,851 | ) | (230,891 | ) | (208,402 | ) | (819,144 | ) | ||||||||
Profit for the period | 1,001,429 | 608,711 | 629,177 | 2,239,317 | ||||||||||||
Total assets1 | 127,071,039 | 140,814,393 | 82,092,259 | 349,977,691 | ||||||||||||
Total liabilities1 | 120,196,957 | 152,173,062 | 51,036,953 | 323,406,972 | ||||||||||||
| 1 | Amounts as at December 31, 2018 before intra-segment transaction adjustment. |
66
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
Financial information by business segment as at and for the year ended December 31, 2017 are as follows:
| 2017 | ||||||||||||||||
| (In millions of Korean won) | Corporate Banking | Retail Banking | Others | Total | ||||||||||||
Operating revenues from external customers | 2,069,080 | 2,710,798 | 1,610,439 | 6,390,317 | ||||||||||||
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Net interest income | 2,504,648 | 2,647,768 | 301,846 | 5,454,262 | ||||||||||||
Interest income | 3,477,291 | 3,935,895 | 883,358 | 8,296,544 | ||||||||||||
Interest expense | (972,643 | ) | (1,288,127 | ) | (581,512 | ) | (2,842,282 | ) | ||||||||
Net fee and commission income | 237,626 | 595,322 | 413,869 | 1,246,817 | ||||||||||||
Fee and commission income | 307,593 | 668,227 | 506,310 | 1,482,130 | ||||||||||||
Fee and commission expense | (69,967 | ) | (72,905 | ) | (92,441 | ) | (235,313 | ) | ||||||||
Net losses on financial assets/ liabilities at fair value through profit or loss | — | — | (71,742 | ) | (71,742 | ) | ||||||||||
Net other operating income (expenses) | (673,194 | ) | (532,292 | ) | 966,466 | (239,020 | ) | |||||||||
General and administrative expenses | (943,225 | ) | (1,946,640 | ) | (742,681 | ) | (3,632,546 | ) | ||||||||
Operating profit before provision for credit losses | 1,125,855 | 764,158 | 867,758 | 2,757,771 | ||||||||||||
Reversal (provision) for credit losses | 9,808 | (122,107 | ) | (686 | ) | (112,985 | ) | |||||||||
Operating profit | 1,135,663 | 642,051 | 867,072 | 2,644,786 | ||||||||||||
Net othernon-operating income | 1,727 | — | 44,038 | 45,765 | ||||||||||||
Segment profit before income tax expense | 1,137,390 | 642,051 | 911,110 | 2,690,551 | ||||||||||||
Income tax income(expense) | (275,248 | ) | (155,377 | ) | 2,990 | (427,635 | ) | |||||||||
Profit for the period | 862,142 | 486,674 | 914,100 | 2,262,916 | ||||||||||||
Total assets1 | 114,192,346 | 129,438,168 | 79,788,647 | 323,419,161 | ||||||||||||
Total liabilities1 | 99,086,160 | 147,870,309 | 51,221,970 | 298,178,439 | ||||||||||||
| 1 | Amounts as at December 31, 2017 before intra-segment transaction adjustment. |
67
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
5.2 Services and Geographical Segments
5.2.1 Services Information
Operating revenues from external customers by services for the years ended December 31, 2018 and 2017, are as follows:
| (In millions of Korean won) | 2018 | 2017 | ||||||
Corporate banking service | 2,362,581 | 2,069,080 | ||||||
Retail banking service | 2,989,240 | 2,710,798 | ||||||
Other service | 1,498,783 | 1,610,439 | ||||||
|
|
|
| |||||
| 6,850,604 | 6,390,317 | |||||||
|
|
|
| |||||
5.2.2 Geographical Information
Geographical operating revenues from external customers for the years ended December 31, 2018 and 2017, and majornon-current assets as at December 31, 2018 and 2017, are as follows:
| 2018 | 20171 | |||||||||||||||
| (In millions of Korean won) | Revenues from external customers | Major non-current assets | Revenues from external customers | Major non-current assets | ||||||||||||
Domestic | 6,800,844 | 3,391,111 | 6,351,117 | 3,243,659 | ||||||||||||
China | 16,544 | 521 | 13,557 | 564 | ||||||||||||
United States | 11,727 | 144 | 9,889 | 161 | ||||||||||||
New Zealand | 6,213 | 72 | 5,855 | 57 | ||||||||||||
Japan | 4,166 | 1,210 | 4,425 | 1,377 | ||||||||||||
United Kingdom | 3,455 | 537 | — | — | ||||||||||||
Vietnam | 7,655 | 239 | 5,474 | 228 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| 6,850,604 | 3,393,834 | 6,390,317 | 3,246,046 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
68
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
6. Financial Assets and Financial Liabilities
6.1 Classification and Fair Value
Carrying amount and fair values of financial assets and liabilities as at December 31, 2018 and 2017, are as follows:
| 2018 | ||||||||
| (In millions of Korean won) | Carrying amount | Fair value | ||||||
Financial assets | ||||||||
Cash and due from financial institutions | 13,413,780 | 13,413,780 | ||||||
Financial assets at fair value through profit or loss | 8,612,864 | 8,612,864 | ||||||
Debt securities | 8,299,293 | 8,299,293 | ||||||
Equity securities | 22,167 | 22,167 | ||||||
Loans | 212,596 | 212,596 | ||||||
Others | 78,808 | 78,808 | ||||||
Derivatives held for trading | 1,535,339 | 1,535,339 | ||||||
Derivatives held for hedging | 75,956 | 75,956 | ||||||
Loans at amortized cost | 274,985,803 | 275,009,503 | ||||||
Financial assets at fair value through other comprehensive income | 29,805,354 | 29,805,355 | ||||||
Debt securities | 27,556,893 | 27,556,893 | ||||||
Equity securities | 1,898,914 | 1,898,915 | ||||||
Loans | 349,547 | 349,547 | ||||||
Securities at amortized cost | 12,753,724 | 12,785,117 | ||||||
Others | 4,197,709 | 4,197,709 | ||||||
|
|
|
| |||||
| 345,380,529 | 345,435,623 | |||||||
|
|
|
| |||||
Financial liabilities | ||||||||
Financial liabilities at fair value through profit or loss | 87,168 | 87,168 | ||||||
Derivatives held for trading | 1,550,244 | 1,550,244 | ||||||
Derivatives held for hedging | 88,551 | 88,551 | ||||||
Deposits | 267,525,970 | 268,178,880 | ||||||
Debts | 17,411,985 | 17,436,422 | ||||||
Debentures | 21,799,085 | 22,080,803 | ||||||
Other financial liabilities | 12,887,455 | 12,887,445 | ||||||
|
|
|
| |||||
| 321,350,458 | 322,309,513 | |||||||
|
|
|
| |||||
69
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
| 2017 | ||||||||
| (In millions of Korean won) | Carrying amount | Fair value | ||||||
Financial assets | ||||||||
Cash and due from financial institutions | 14,628,439 | 14,628,510 | ||||||
Financial assets held for trading | 3,147,115 | 3,147,115 | ||||||
Debt securities | 3,044,008 | 3,044,008 | ||||||
Equity securities | 29,251 | 29,251 | ||||||
Others | 73,856 | 73,856 | ||||||
Derivatives held for trading | 2,531,889 | 2,531,889 | ||||||
Derivatives held for hedging | 59,071 | 59,071 | ||||||
Loans | 250,119,240 | 249,591,832 | ||||||
Available-for-sale financial assets | 33,476,088 | 33,476,088 | ||||||
Debt securities | 27,417,640 | 27,417,640 | ||||||
Equity securities | 6,057,948 | 6,057,948 | ||||||
Others | 500 | 500 | ||||||
Held-to-maturity financial assets | 8,732,246 | 8,770,014 | ||||||
Other financial assets | 6,303,303 | 6,303,303 | ||||||
|
|
|
| |||||
| 318,997,391 | 318,507,822 | |||||||
|
|
|
| |||||
Financial liabilities | ||||||||
Financial liabilities held for trading | 74,191 | 74,191 | ||||||
Derivatives held for trading | 2,572,880 | 2,572,880 | ||||||
Derivatives held for hedging | 50,032 | 50,032 | ||||||
Deposits | 247,712,788 | 248,136,414 | ||||||
Debts | 15,854,911 | 15,848,511 | ||||||
Debentures | 18,167,498 | 18,392,986 | ||||||
Other financial liabilities | 12,261,378 | 12,261,382 | ||||||
|
|
|
| |||||
| 296,693,678 | 297,336,396 | |||||||
|
|
|
| |||||
The fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. The Bank discloses the fair value of each 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 a quoted price in an active market.
70
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
Methods of determining fair value for financial instruments are as follows:
Cash and due from financial institutions | The carrying amounts of cash and demand due from financial institutions and payment due from financial institutions are 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 (Discounted Cash Flow 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 independent third-party pricing services where quoted prices are not available. Pricing services use one or more of the following valuation techniques including DCF Model, FCFE (Free Cash Flow to Equity Model), Comparable Company Analysis, Dividend Discount Model, Risk Adjusted Discount Rate Method, and Net Asset Value Method. | |
| Loans | The fair value of loans is determined through DCF Model and the use of independent third-party pricing services. Fair value measured by DCF Model is determined by discounting the expected cash flows, which are contractual cash flows adjusted by the expected prepayment rate, at appropriate discount rate. Fair value of the other loans that is not determined through DCF model is determined by independent third-party pricing services using Tree Model. | |
| 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 Bank uses internally developed valuation models that are widely used by market participants to determine fair values of plain 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, the Monte Carlo Simulation and the Tree model or independent third-party valuation service. For OTC derivatives, the credit risk of counterparty and the Bank’s own credit risk are applied through Credit Valuation Adjustment (CVA). | |
| Deposits | The carrying amount of demand deposits is regarded as representative of fair value because they do not have a fixed maturity and are payable on demand. Fair value of time deposits is determined using a DCF model. Fair value is determined by discounting the expected cash flows, which are contractual cash flows adjusted by the expected prepayment rate, at an appropriate discount rate. | |
71
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
| Debts | The 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 (DCF Model) of independent third-party pricing services, which are calculated using market inputs. | |
Other financial assets and other financial 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. However, fair value of finance lease liabilities is measured using a DCF model. | |
Fair value hierarchy
The Bank 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.
The Bank classifies and discloses the fair value of the financial instruments into the following three-level hierarchy:
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 except for quoted prices included within Level 1 are based on inputs 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.
72
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
Fair value hierarchy of financial assets and liabilities at fair value in the statements of financial position
The fair value hierarchy of financial assets and liabilities at fair value in the statements of financial position as at December 31, 2018 and 2017, are as follows:
| 2018 | ||||||||||||||||
| Fair value hierarchy | ||||||||||||||||
| (In millions of Korean won) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Financial assets | ||||||||||||||||
Financial assets at fair value through profit or loss |
| |||||||||||||||
Debt securities | 1,504,344 | 5,405,005 | 1,389,944 | 8,299,293 | ||||||||||||
Equity securities | 145 | — | 22,022 | 22,167 | ||||||||||||
Loans | — | — | 212,596 | 212,596 | ||||||||||||
Others | 78,808 | — | — | 78,808 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| 1,583,297 | 5,405,005 | 1,624,562 | 8,612,864 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
Derivatives held for trading | — | 1,535,261 | 78 | 1,535,339 | ||||||||||||
Derivatives held for hedging | — | 75,956 | — | 75,956 | ||||||||||||
Financial assets at fair value through other comprehensive income | ||||||||||||||||
Debt securities | 8,998,246 | 18,558,647 | — | 27,556,893 | ||||||||||||
Equity securities | 971,367 | — | 927,548 | 1,898,915 | ||||||||||||
Loans | — | 349,547 | — | 349,547 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| 9,969,613 | 18,908,194 | 927,548 | 29,805,355 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
| 11,552,910 | 25,924,416 | 2,552,188 | 40,029,514 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
Financial liabilities | ||||||||||||||||
Financial liabilities at fair value through profit or loss | 87,168 | — | — | 87,168 | ||||||||||||
Derivatives held for trading | — | 1,550,178 | 66 | 1,550,244 | ||||||||||||
Derivatives held for hedging | — | 88,551 | — | 88,551 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| 87,168 | 1,638,729 | 66 | 1,725,963 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
73
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
| 2017 | ||||||||||||||||
| Fair value hierarchy | ||||||||||||||||
| (In millions of Korean won) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Financial assets | ||||||||||||||||
Financial assets held for trading | ||||||||||||||||
Debt securities | 1,630,126 | 1,413,882 | — | 3,044,008 | ||||||||||||
Equity securities | — | 29,251 | — | 29,251 | ||||||||||||
Others | 73,856 | — | — | 73,856 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| 1,703,982 | 1,443,133 | — | 3,147,115 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
Derivatives held for trading | — | 2,514,570 | 17,319 | 2,531,889 | ||||||||||||
Derivatives held for hedging | — | 58,296 | 775 | 59,071 | ||||||||||||
Available-for-sale financial assets | ||||||||||||||||
Debt securities | 9,384,597 | 18,033,043 | — | 27,417,640 | ||||||||||||
Equity securities1 | 1,602,397 | 2,534,947 | 1,920,604 | 6,057,948 | ||||||||||||
Others | — | 500 | — | 500 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| 10,986,994 | 20,568,490 | 1,920,604 | 33,476,088 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
| 12,690,976 | 24,584,489 | 1,938,698 | 39,214,163 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
Financial liabilities | ||||||||||||||||
Financial liabilities held for trading | 74,191 | — | — | 74,191 | ||||||||||||
Derivatives held for trading | — | 2,572,878 | 2 | 2,572,880 | ||||||||||||
Derivatives held for hedging | — | 49,962 | 70 | 50,032 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| 74,191 | 2,622,840 | 72 | 2,697,103 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
| 1 | The amounts of equity securities carried at cost in “Level 3” which do not have a quoted market price in an active market and cannot be measured reliably at fair value are |
74
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
Valuation techniques and the inputs used in the fair value measurement of financial assets and liabilities classified as Level 2
Valuation techniques and inputs of financial assets and liabilities at fair value in the statements of financial position and classified as Level 2 as at December 31, 2018 and 2017, are as follows:
| Fair value | Valuation techniques | Inputs | ||||||
| (In millions of Korean won) | 2018 | |||||||
Financial assets | ||||||||
Financial assets at fair value through profit or loss | ||||||||
Debt securities | 5,405,005 | DCF Model, Net Asset Value | Discount rate, prices of underlying assets(debt securities, stocks, etc.) | |||||
|
| |||||||
| 5,405,005 | ||||||||
|
| |||||||
Derivatives held for trading | 1,535,261 | DCF Model, Closed Form, FDM | Discount rate, volatility, foreign exchange rate, stock price and others | |||||
Derivatives held for hedging | 75,956 | DCF Model, Closed Form, FDM | Discount rate, volatility, foreign exchange rate and others | |||||
Financial assets at fair value through other comprehensive income | ||||||||
Debt securities | 18,558,647 | DCF Model | Discount rate | |||||
Loans | 349,547 | DCF Model | Discount rate | |||||
|
| |||||||
| 18,908,194 | ||||||||
|
| |||||||
| 25,924,416 | ||||||||
|
| |||||||
Financial liabilities | ||||||||
Derivatives held for trading | 1,550,178 | DCF Model, Closed Form, FDM | Discount rate, volatility, foreign exchange rate, stock price and others | |||||
Derivatives held for hedging | 88,551 | DCF Model, Closed Form, FDM | Discount rate, volatility, foreign exchange rate and others | |||||
|
| |||||||
| 1,638,729 | ||||||||
|
| |||||||
75
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
| Fair value | Valuation techniques | Inputs | ||||||
| (In millions of Korean won) | 2017 | |||||||
Financial assets | ||||||||
Financial assets held for trading | ||||||||
Debt securities | 1,413,882 | DCF Model | Discount rate | |||||
Equity securities | 29,251 | Net Asset Value | Prices of underlying assets(debt securities, stocks, etc.) | |||||
|
| |||||||
| 1,443,133 | ||||||||
|
| |||||||
Derivatives held for trading | 2,514,570 | DCF Model, Closed Form, FDM | Discount rate, volatility, foreign exchange rate, stock price and others | |||||
Derivatives held for hedging | 58,296 | DCF Model, Closed Form, FDM | Discount rate, volatility, foreign exchange rate and others | |||||
Available-for-sale financial assets | ||||||||
Debt securities | 18,033,043 | DCF Model | Discount rate | |||||
Equity securities | 2,534,947 | Net Asset Value | Prices of underlying assets (debt securities, stocks, etc.) | |||||
Others | 500 | DCF Model | Discount rate | |||||
|
| |||||||
| 20,568,490 | ||||||||
|
| |||||||
| 24,584,489 | ||||||||
|
| |||||||
Financial liabilities | ||||||||
Derivatives held for trading | 2,572,878 | DCF Model, Closed Form, FDM | Discount rate, volatility, foreign exchange rate, stock price and others | |||||
Derivatives held for hedging | 49,962 | DCF Model, Closed Form, FDM | Discount rate, volatility, foreign exchange rate and others | |||||
|
| |||||||
| 2,622,840 | ||||||||
|
| |||||||
76
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
Fair value hierarchy of financial assets and liabilities whose fair value is disclosed
The fair value hierarchy of financial assets and liabilities whose fair value is disclosed as at December 31, 2018 and 2017, is as follows:
| 2018 | ||||||||||||||||
| Fair value hierarchy | ||||||||||||||||
| (In millions of Korean won) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Financial assets | ||||||||||||||||
Cash and due from financial institutions1 | 3,051,421 | 10,210,779 | 151,581 | 13,413,781 | ||||||||||||
Loans at amortized cost | — | — | 275,009,503 | 275,009,503 | ||||||||||||
Securities at amortized cost | 4,126,591 | 8,658,526 | — | 12,785,117 | ||||||||||||
Other financial assets2 | — | — | 4,197,709 | 4,197,709 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| 7,178,012 | 18,869,305 | 279,358,793 | 305,406,110 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
Financial liabilities | ||||||||||||||||
Deposits1 | — | 119,650,955 | 148,527,925 | 268,178,880 | ||||||||||||
Debts1 | — | 38,403 | 17,398,019 | 17,436,422 | ||||||||||||
Debentures | — | 22,080,803 | — | 22,080,803 | ||||||||||||
Other financial liabilities3 | — | — | 12,887,445 | 12,887,445 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| — | 141,770,161 | 178,813,389 | 320,583,550 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
| 1 | The amounts included in Level 2 are the carrying amounts which are reasonable approximation of the fair values. |
| 2 | The amounts of other financial assets included in Level 3 are the carrying amounts which are reasonable approximation of the fair values as at December 31, 2018. |
| 3 | The |
77
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
| 2017 | ||||||||||||||||
| Fair value hierarchy | ||||||||||||||||
| (In millions of Korean won) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Financial assets | ||||||||||||||||
Cash and due from financial institutions1 | 2,594,088 | 11,850,752 | 183,670 | 14,628,510 | ||||||||||||
Loans | — | — | 249,591,832 | 249,591,832 | ||||||||||||
Held-to-maturity financial assets | 1,197,739 | 7,572,275 | — | 8,770,014 | ||||||||||||
Other financial assets2 | — | — | 6,303,303 | 6,303,303 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| 3,791,827 | 19,423,027 | 256,078,805 | 279,293,659 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
Financial liabilities | ||||||||||||||||
Deposits1 | — | 118,449,580 | 129,686,834 | 248,136,414 | ||||||||||||
Debts1 | — | 19,820 | 15,828,691 | 15,848,511 | ||||||||||||
Debentures | — | 18,392,986 | — | 18,392,986 | ||||||||||||
Other financial liabilities3 | — | — | 12,261,382 | 12,261,382 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| — | 136,862,386 | 157,776,907 | 294,639,293 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
| 1 | The amounts included in Level 2 are the carrying amounts which are reasonable approximation of the fair values. |
| 2 | The amount of amounts of other financial assets included in Level 3 are the carrying amounts which are reasonable approximation of the fair values as at December 31, 2017. |
| 3 | The |
Valuation techniques and inputs used in the fair value measurement
Valuation techniques and inputs of financial assets and liabilities which are disclosed by the carrying amounts because it is a reasonable approximation of fair value are not subject to be disclosed.
Valuation techniques and inputs of financial assets and liabilities whose fair values are disclosed and classified as Level 2 as at December 31, 2018 and 2017, are as follows:
| 2018 | ||||||||||||
| (In millions of Korean won) | Fair value | Valuation technique | Inputs | |||||||||
Financial assets | ||||||||||||
Securities at amortized cost | 8,658,526 | DCF Model | Discount rate | |||||||||
Financial liabilities | ||||||||||||
Debentures | 22,080,803 | DCF Model | Discount rate | |||||||||
| 2017 | ||||||||||||
| (In millions of Korean won) | Fair value | Valuation technique | Inputs | |||||||||
Financial assets | ||||||||||||
Held-to-maturity financial assets | 7,572,275 | DCF Model | Discount rate | |||||||||
Financial liabilities | ||||||||||||
Debentures | 18,392,986 | DCF Model | Discount rate | |||||||||
78
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
Valuation techniques and inputs of financial assets and liabilities whose fair values are disclosed and classified as Level 3 as at December 31, 2018 and 2017, are as follows:
| 2018 | ||||||||||||
| (In millions of Korean won) | Fair value | Valuation techniques | Inputs | Unobservable inputs | ||||||||
Financial assets | ||||||||||||
Cash and due from financial institutions | 151,581 | DCF Model | Credit spread, other spread, interest rates | Credit spread, other spread | ||||||||
Loans at amortized cost | 275,009,503 | DCF Model | Credit spread, other spread, prepayment rate, interest rate | Credit spread, other spread, prepayment rate | ||||||||
|
| |||||||||||
| 275,161,084 | ||||||||||||
|
| |||||||||||
Financial liabilities | ||||||||||||
Deposits | 148,527,925 | DCF Model | Other spread, prepayment irate, Interest rates | Other spread, prepayment rate | ||||||||
Debts | 17,398,019 | DCF Model | Other spread, interest rates | Other spread | ||||||||
Other financial liabilities | 8,055 | DCF Model | Other spread, interest rates | Other spread | ||||||||
|
| |||||||||||
| 165,933,999 | ||||||||||||
|
| |||||||||||
| 2017 | ||||||||||||
| (In millions of Korean won) | Fair value | Valuation techniques | Inputs | Unobservable inputs | ||||||||
Financial assets | ||||||||||||
Cash and due from financial institutions | 183,670 | DCF Model | Credit spread, other spread, interest rates | Credit spread, other spread, interest rate | ||||||||
Loans | 249,591,832 | DCF Model | Credit spread, other spread, prepayment rate, interest rates | Credit spread, other spread, prepayment rate | ||||||||
|
| |||||||||||
| 249,775,502 | ||||||||||||
|
| |||||||||||
Financial liabilities | ||||||||||||
Deposits | 129,686,834 | DCF Model | Other spread, prepayment rate, interest rates | Other spread, prepayment rate | ||||||||
Debts | 15,828,691 | DCF Model | Other spread, interest rates | Other spread | ||||||||
Other financial liabilities | 1,648 | DCF Model | Other spread, interest rates | Other spread | ||||||||
|
| |||||||||||
| 145,517,173 | ||||||||||||
|
| |||||||||||
6.2 Level 3 of the Fair Value Hierarchy Disclosure
6.2.1 Valuation Policy and Process of Level 3 Fair Value
The Bank uses external, independent and qualified third-party valuation service in addition to internal valuation models to determine the fair value of the Bank’s assets at the end of every reporting period.
Where a reclassification between the levels of the fair value hierarchy occurs for a financial asset or liability, the Bank’s policy is to recognize such transfers as having occurred at the beginning of the reporting period.
79
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
6.2.2 Changes in Fair Value (Level 3) Measured using Valuation Technique based on Unobservable Inputs in Market
Changes in Level 3 of the fair value hierarchy for the years ended December 31, 2018 and 2017, are as follows:
| 2018 | ||||||||||||||||||||
| Financial assets at fair value through profit or loss | Financial investments | Net derivatives financial instruments | ||||||||||||||||||
| (In millions of Korean won) | Securities at fair value through profit or loss | Loans at fair value through profit or loss | Equity securities at fair value through other comprehensive income | Derivatives held for trading | Derivatives held for hedging | |||||||||||||||
Beginning balance1 | 1,170,782 | 132,722 | 750,009 | 121 | 704 | |||||||||||||||
Total gains or losses |
| |||||||||||||||||||
- Profit or loss | 37,092 | 4,347 | — | 4,124 | (115 | ) | ||||||||||||||
- Other comprehensive income | — | — | 124,632 | — | — | |||||||||||||||
Purchases | 376,276 | 184,656 | 53,388 | — | — | |||||||||||||||
Sales | (172,118 | ) | (109,129 | ) | (480 | ) | — | — | ||||||||||||
Settlements | — | — | — | (1,221 | ) | (589 | ) | |||||||||||||
Transfers into Level 32 | — | — | — | (3,012 | ) | — | ||||||||||||||
Transferred from Level 32 | (66 | ) | — | — | — | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Ending balance | 1,411,966 | 212,596 | 927,549 | 12 | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
| 1 | Restated based on Korean IFRS 1109. |
| 2 | Transfers between levels for the financial instruments have occurred due to the change in the availability of observable market data. |
| 2017 | ||||||||||||
| Financial investments | Net derivatives financial instruments | |||||||||||
| (In millions of Korean won) | Available-for-sale financial assets | Derivatives held for trading | Derivatives held for hedging | |||||||||
| Equity securities | ||||||||||||
Beginning balance | 1,853,047 | 9,904 | 1,277 | |||||||||
Total gains or losses | ||||||||||||
- Profit or loss | 5,946 | (2,731 | ) | (408 | ) | |||||||
- Other comprehensive income | (21,816 | ) | — | — | ||||||||
Purchases | 310,136 | 16,452 | — | |||||||||
Sales | (226,709 | ) | — | — | ||||||||
Settlements | — | (5,666 | ) | (164 | ) | |||||||
Transferred from Level 31 | — | (642 | ) | — | ||||||||
|
|
|
|
|
| |||||||
Ending balance | 1,920,604 | 17,317 | 705 | |||||||||
|
|
|
|
|
| |||||||
| 1 | Transfers between levels for the financial instruments have occurred due to the change in the availability of observable market data. |
80
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 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 total gains or losses for the period included in profit or loss for financial instruments held at the end of the reporting period in the statements of comprehensive income for the years ended December 31, 2018 and 2017, are as follows:
| 2018 | ||||||||||||
| (In millions of Korean won) | Net gains on financial instruments 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 | 45,016 | (185 | ) | 617 | ||||||||
Total gains or losses for the period included in profit or loss for financial instruments held at the end of the reporting period | 39,099 | (70 | ) | 43 | ||||||||
| 2017 | ||||||||
| (In millions of Korean won) | Net gains on financial instruments at fair value through profit or loss (under Korean IFRS 1039) | Other operating Income (loss) | ||||||
Total gains or losses included in profit or loss for the period | (2,731 | ) | 5,538 | |||||
Total gains or losses for the period included in profit or loss for financial instruments held at the end of the reporting period | (2,787 | ) | (2,023 | ) | ||||
81
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
6.2.3 Sensitivity Analysis of Changes in Unobservable Inputs
Information about fair value measurements using unobservable inputs as at December 31, 2018 and 2017, is as follows:
| 2018 | ||||||||||||||||
| (In millions of Korean won) | Fair value | Valuation techniques | Inputs | Unobservable inputs | Range of unobservable inputs (%) | Relationship of unobservable | ||||||||||
Financial assets | ||||||||||||||||
Financial assets at fair value through profit or loss | ||||||||||||||||
Volatilities of real estate price | 0.00 | Higher the sale price, higher the fair value | ||||||||||||||
Discount rate | 1.95 ~ 4.82 | Lower the discount rate, higher the fair value | ||||||||||||||
Debt securities | 1,389,944 | Net Asset Value, DCF Model | Volatilities of real estate price, discount rate, liquidation value | Liquidation value | 0.00 | Higher the liquidation value, higher the fair value | ||||||||||
DCF Model, Comparable Company | Growth rate | 0.00 | Higher the growth rate, higher the fair value | |||||||||||||
Equity securities | 22,022 | Analysis, Adjusted discount rate method | Growth rate, discount rate | Discount rate | 7.58 ~ 14.14 | Lower the discount rate, higher the fair value | ||||||||||
Loans | 212,596 | Tree Model | Stock price, volatility of the stock price | Volatility of the stock price | 17.66 ~ 49.28 | Higher the volatility, higher the fair value fluctuation | ||||||||||
Derivatives held for trading | ||||||||||||||||
Stock and index | 78 | Tree Model | Stock price and volatility of the stock price, dividend rate | Volatility of the stock price | 25.29 | Higher the volatility, higher the fair value fluctuation | ||||||||||
Currency | — | DCF Model | Interest rate, foreign exchange rate, loss given default | Loss given default | 100 | Higher the loss given default, lower the fair value | ||||||||||
Financial assets at fair value through other comprehensive income | ||||||||||||||||
DCF Model, Comparable Company | Growth rate, discount rate | Growth rate | 0.00 | Higher the growth rate, higher the fair value | ||||||||||||
Equity securities | 927,549 | Analysis, Adjusted discount rate method | Discount rate | 3.87 ~ 17.40 | Lower the discount rate, higher the fair value | |||||||||||
|
| |||||||||||||||
| 2,552,188 | ||||||||||||||||
|
| |||||||||||||||
Financial liabilities | ||||||||||||||||
Derivatives held for trading | ||||||||||||||||
Others | 66 | Monte Carlo Simulation | Stock price, interest rate, volatility of the stock price, volatility of the interest rate | Volatility of the stock price | 20.85 | Higher the volatility, higher the fair value fluctuation | ||||||||||
Volatility of the interest rate | 0.69 | Higher the volatility, higher the fair value fluctuation | ||||||||||||||
| 66 | ||||||||||||||||
82
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
| 2017 | ||||||||||||||||||
| (In millions of Korean won) | Fair value | Valuation | Inputs | Unobservable inputs | Range of unobservable inputs (%) | Relationship of unobservable | ||||||||||||
Financial assets | ||||||||||||||||||
Derivatives held for trading | ||||||||||||||||||
Stock and index | 307 | Tree Model | Stock price and volatility of the stock price, dividend rate | | Volatility of the stock price | | 12.15 ~ 17.12 | Higher the volatility, higher the fair value fluctuation | ||||||||||
Interest rate | 59 | DCF Model | Interest rate, loss given default | | Loss given default | | 0.56 | Higher the loss given default, lower the fair value | ||||||||||
Others | Stock price, interest rate, volatility of the stock price, | | Volatility of the stock price | | 12.16 ~ 29.72 | Higher the volatility, higher the fair value fluctuation | ||||||||||||
| 16,953 | Monte Carlo Simulation | volatility of the interest rate | | Volatility of the interest rate | | 0.47 | Higher the volatility, higher the fair value fluctuation | |||||||||||
Derivatives held for hedging | ||||||||||||||||||
Interest | 775 | DCF model, Closed Form, FDM, Monte Carlo Simulation | Price of underlying asset, volatility of the underlying asset, interest rate, | | Volatility of the underlying | | 3.02 | Higher the volatility, higher the fair value fluctuation | ||||||||||
Available-for-sale | ||||||||||||||||||
Equity securities | 1,920,604 | DCF Model, comparable company analysis, adjusted discount rate method | Growth rate, discount rate, volatility of the real estate asset | | Growth rate | | 0.00 ~ 0.50 | Higher the growth rate, higher the fair value | ||||||||||
| | Discount rate | | 1.98 ~ 20.51 | Lower the discount rate, higher the fair value | ||||||||||||||
| | Volatility of the real estate price | | 0.00 | Higher real estate price, higher the fair value | ||||||||||||||
|
| |||||||||||||||||
| 1,938,698 | ||||||||||||||||||
|
| |||||||||||||||||
Financial liabilities | ||||||||||||||||||
Derivatives held for trading | ||||||||||||||||||
Others | 2 | Monte Carlo Simulation | Stock price, interest rate, volatility of the stock price, volatility of the interest rate | | Volatility of the stock price | | 15.84 | Higher the volatility, higher the fair value fluctuation | ||||||||||
| | Volatility of the interest rate | | 0.47 | Higher the volatility, higher the fair value fluctuation | ||||||||||||||
Derivatives held for hedging | ||||||||||||||||||
Interest | 70 | DCF model, Closed Form, FDM, Monte Carlo Simulation | Price of the underlying asset, interest rate, volatility of the underlying asset | | Volatility of the underlying asset | | 2.64 | Higher the volatility, higher the fair value fluctuation | ||||||||||
| 72 | ||||||||||||||||||
83
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
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 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 unfavorable. Amongst Level 3 financial instruments subject to sensitivity analysis, there are debt instruments, loans, equity-related derivatives, currency-related derivatives, interest rate-related derivatives and other derivatives whose fair value changes are recognized in profit or loss as well as equity securities whose fair value changes are recognized in profit or loss or other comprehensive income or loss.
Sensitivity analysis by type of instrument as a result of varying input parameters are as follows:
| 2018 | ||||||||||||||||
| Recognition in profit or loss | Other comprehensive income | |||||||||||||||
| .(In millions of Korean won) | Favorable changes | Unfavorable changes | Favorable changes | Unfavorable changes | ||||||||||||
Financial assets | ||||||||||||||||
Financial assets at fair value through profit or loss | ||||||||||||||||
Debt securities3, 5 | 2,714 | (2,688 | ) | — | — | |||||||||||
Equity securities2, 5 | 1,225 | (742 | ) | — | — | |||||||||||
Loans4 | 129 | (46 | ) | — | — | |||||||||||
Derivatives held for trading1 | 20 | (1 | ) | — | — | |||||||||||
Financial assets at fair value through other comprehensive income | ||||||||||||||||
Equity securities2, 5 | — | — | 140,516 | (70,691 | ) | |||||||||||
|
|
|
|
|
|
|
| |||||||||
| 4,088 | (3,477 | ) | 140,516 | (70,691 | ) | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Financial liabilities | ||||||||||||||||
Derivatives held for trading1 | 42 | (77 | ) | — | — | |||||||||||
|
|
|
|
|
|
|
| |||||||||
| 42 | (77 | ) | — | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| 2017 | ||||||||||||||||
| Recognition in profit or loss | Other comprehensive income | |||||||||||||||
| (In millions of Korean won) | Favorable changes | Unfavorable changes | Favorable changes | Unfavorable changes | ||||||||||||
Financial assets | ||||||||||||||||
Derivatives held for trading 1 | 112 | (94 | ) | — | — | |||||||||||
Available-for-sale financial assets 2, 3, 5 | — | — | 98,015 | (53,508 | ) | |||||||||||
|
|
|
|
|
|
|
| |||||||||
| 112 | (94 | ) | 98,015 | (53,508 | ) | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Financial liabilities | ||||||||||||||||
Derivatives held for trading 1 | 2 | (5 | ) | — | — | |||||||||||
Derivatives held for hedging 1 | 2 | (2 | ) | — | — | |||||||||||
|
|
|
|
|
|
|
| |||||||||
| 4 | (7 | ) | — | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| 1 | For derivatives, the changes in fair value are calculated by shifting principal unobservable input parameters such as the price and the volatility of the underlying asset by ± 10% or the loss given default ratio by ± 1%. |
| 2 | For equity securities, the changes in fair value are calculated by shifting principal unobservable input parameters such as discount rate(-1~1%) and growth rate (0~0.5%). |
84
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
| 3 | For beneficiary certificates, it is difficult to measure the sensitivity amounts per changes in input factor for practical reasons; only for those consisted with real properties, the sensitivity amounts are calculated by increasing and decreasing the correlations between the discount rates(-1~1%), and the rate of increase in property disposal price(-1~1%). For equity investments, the sensitivity amounts are calculated by increasing and decreasing the correlations between the liquidation value(-1~1%) and the discount rates(-1~1%). There were no significant correlation among major unobservable inputs. |
| 4 | For loans, the changes in fair value are calculated by shifting principal unobservable input parameters such as stock prices and volatilities of stock prices by ± 10%. |
| 5 | The amounts of |
6.2.4 Day One Gain or Loss
If the Bank uses a valuation technique that incorporates data not obtained from observable markets for the fair value at initial recognition of financial instruments, there could be a difference between the transaction price and the amount determined using that valuation technique. In these circumstances, the fair value of financial instruments is recognized as the transaction price and the difference is deferred and not recognized in profit or loss, and is amortized by using the straight-line method over the life of the financial instrument. If the fair value of the financial instruments is subsequently determined using observable market inputs, the remaining deferred amount is recognized in profit or loss.
The aggregate deferred difference yet to be recognized in profit or loss at the beginning and end of the periods and a reconciliation of changes in the balance of these differences are not existed, as at for years ended December 31, 2018 and 2017.
85
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
6.3 Carrying Amounts of Financial Instruments by Category
Financial assets and liabilities are measured at fair value or amortized cost. The carrying amounts of financial assets and liabilities by category as at December 31, 2018, are as follows:
| 2018 | ||||||||||||||||||||||||
| (In millions of Korean won) | Financial instruments at fair value through profit or loss | Financial instruments mandatorily measured at fair value through other comprehensive income | Financial instruments designated at fair value through other comprehensive income | Financial instruments at amortized cost | Derivatives held for hedging | Total | ||||||||||||||||||
Financial assets | ||||||||||||||||||||||||
Cash and due from financial institutions | — | — | — | 13,413,780 | — | 13,413,780 | ||||||||||||||||||
Financial assets at fair value through profit or loss | 8,612,864 | — | — | — | — | 8,612,864 | ||||||||||||||||||
Derivatives | 1,535,339 | — | — | — | 75,956 | 1,611,295 | ||||||||||||||||||
Loans at amortized cost | — | — | — | 274,985,803 | — | 274,985,803 | ||||||||||||||||||
Financial investments | — | 27,906,440 | 1,898,915 | 12,753,723 | — | 42,559,078 | ||||||||||||||||||
Other financial assets | — | — | — | 4,197,709 | — | 4,197,709 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
| 10,148,203 | 27,906,440 | 1,898,915 | 305,351,015 | 75,956 | 345,380,529 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
| 2018 | ||||||||||||||||
| (In millions of Korean won) | Financial instruments at fair value through profit or loss | Financial instruments at amortized cost | Derivatives held for hedging | Total | ||||||||||||
Financial liabilities | ||||||||||||||||
Financial liabilities at fair value through profit or loss | 87,168 | — | — | 87,168 | ||||||||||||
Derivatives | 1,550,244 | — | 88,551 | 1,638,795 | ||||||||||||
Deposits | — | 267,525,970 | — | 267,525,970 | ||||||||||||
Debts | — | 17,411,985 | — | 17,411,985 | ||||||||||||
Debentures | — | 21,799,085 | — | 21,799,085 | ||||||||||||
Other financial liabilities | — | 12,887,455 | — | 12,887,455 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| 1,637,412 | 319,624,495 | 88,551 | 321,350,458 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
The carrying amounts of financial assets and liabilities by category as at December 31, 2017, are as follows:
| 2017 | ||||||||||||||||||||||||
| (In millions of Korean won) | Financial assets at fair value through profit or loss (under Korean IFRS 1039) | Loans and receivables | Available- for-sale financial assets | Held-to- maturity financial assets | Derivatives held for hedging | Total | ||||||||||||||||||
| Held for trading | ||||||||||||||||||||||||
Financial assets | ||||||||||||||||||||||||
Cash and due from financial institutions | — | 14,628,439 | — | — | — | 14,628,439 | ||||||||||||||||||
86
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
Financial assets at fair value through profit or loss | 3,147,115 | — | — | — | — | 3,147,115 | ||||||||||||||||||
Derivatives | 2,531,889 | — | — | — | 59,071 | 2,590,960 | ||||||||||||||||||
Loans | — | 250,119,240 | — | — | — | 250,119,240 | ||||||||||||||||||
Financial investments | — | — | 33,476,088 | 8,732,246 | — | 42,208,334 | ||||||||||||||||||
Other financial assets | — | 6,303,303 | — | — | — | 6,303,303 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
| 5,679,004 | 271,050,982 | 33,476,088 | 8,732,246 | 59,071 | 318,997,391 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
| 2017 | ||||||||||||||||
| (In millions of Korean won) | Financial liabilities at fair value through profit or loss | Financial liability at amortized cost | Derivatives held for hedging | Total | ||||||||||||
| Held for trading | ||||||||||||||||
Financial liabilities | ||||||||||||||||
Financial liabilities at fair value through profit or loss | 74,191 | — | — | 74,191 | ||||||||||||
Derivatives | 2,572,880 | — | 50,032 | 2,622,912 | ||||||||||||
Deposits | — | 247,712,788 | — | 247,712,788 | ||||||||||||
Debts | — | 15,854,911 | — | 15,854,911 | ||||||||||||
Debentures | — | 18,167,498 | — | 18,167,498 | ||||||||||||
Other financial liabilities | — | 12,261,378 | — | 12,261,378 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| 2,647,071 | 293,996,575 | 50,032 | 296,693,678 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
6.4 Transfer of Financial Assets
6.4.1 Transferred Financial Assets that are derecognized in Their Entirety
The Bank transferred loans and other financial assets that are derecognized in their entirety to SPEs, while the maximum exposure to loss (carrying amount) from its continuing involvement in the derecognized financial assets as at December 31, 2018 and 2017, are as follows:
| 2018 | ||||||||||||||
| (In millions of Korean won) | Type of continuing involvement | Classification of instruments | Carrying amount of continuing involvement in statement of financial position | Fair value of continuing involvement in statement of financial position | ||||||||||
Discovery 2nd Securitization Specialty Co., Ltd. | Subordinated debt | Financial assets at fair value through profit or loss | 6,205 | 6,205 | ||||||||||
FK 1411 ABS Ltd. | Subordinated debt | Financial assets at fair value through profit or loss | 8,883 | 8,883 | ||||||||||
AP 3B ABS Ltd. | Subordinated debt | Financial assets at fair value through profit or loss | 5,512 | 5,512 | ||||||||||
AP 4D ABS Ltd. | Subordinated debt | Financial assets at fair value through profit or loss | 13,494 | 13,494 | ||||||||||
| 34,094 | 34,094 | |||||||||||||
| 1 | The recovered portion in excess of the consideration paid attributable to adjustments based on the agreement with the National Happiness Fund fornon-performing loans amounts to |
87
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
2017 | ||||||||||
| (In millions of Korean won) | Type of continuing involvement | Classification of financial instruments | Carrying amount of continuing | Fair value of continuing involvement in statement of financial position | ||||||
Discovery 2nd Securitization Specialty Co., Ltd. | Subordinated debt | Available-for-sale financial assets | 6,022 | 6,022 | ||||||
EAK 2nd Securitization Specialty Co., Ltd. | Subordinated debt | Available-for-sale financial assets | 5,339 | 5,339 | ||||||
FK 1411 ABS Ltd. | Subordinated debt | Available-for-sale financial assets | 9,601 | 9,601 | ||||||
AP 3B ABS Ltd. | Subordinated debt | Available-for-sale financial assets | 9,902 | 9,902 | ||||||
AP 4D ABS Ltd. | Senior debt | Loans and receivables | 2,248 | 2,251 | ||||||
Subordinated debt | Available-for-sale financial assets | 14,160 | 14,160 | |||||||
|
|
| ||||||||
| 47,272 | 47,275 | |||||||||
|
|
| ||||||||
| 1 | The recovered portion in excess of the consideration paid attributable to adjustments based on the agreement with the National Happiness Fund fornon-performing loans amounts to |
6.4.2 Securities under Repurchase Agreements and Loaned Securities
The Bank continues to recognize the financial assets related to repurchase agreements and securities lending transactions on the statements of financial position since those transactions are not qualified for derecognition even though the Bank transfers the financial assets. A financial asset is sold under a reverse repurchase agreement to repurchase the same asset at a fixed price, or loaned under a securities lending agreement to be returned as the same asset. Thus, the Bank substantially retains all the risks and rewards of ownership of the financial asset. The amounts of transferred assets and related liabilities as at December 31, 2018 and 2017, are as follows:
| 2018 | 2017 | |||||||||||||||
(In millions of Korean won) | Carrying amount of transferred assets | Carrying amount of related liabilities | Carrying amount of transferred assets | Carrying amount of related liabilities | ||||||||||||
Securities under repurchase agreements | 364,886 | 350,771 | 740,618 | 700,466 | ||||||||||||
Loaned securities | 674,431 | — | 109,379 | — | ||||||||||||
Government and public bonds | 674,431 | — | 109,379 | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| 1,039,317 | 350,771 | 849,997 | 700,466 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
88
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
| 6.5 | Offsetting Financial Assets and Financial Liabilities |
The Bank enters into International Swaps and Derivatives Association (“ISDA”) master netting agreements and other similar netting arrangements with the Bank’s derivative and spot exchange counterparties. Similar netting agreements are also entered into with the Bank’s reverse repurchase, securities and others. Pursuant to these agreements, in the event of default by one party, contracts are to be terminated and receivables and payables are to be offset. Further, as the law allows for the right to offset, domestic uncollected receivables balances and domestic accrued liabilities balances are shown in its net settlement balance in the statement of financial position. Account receivables and account payables related to listed securities and derivatives or OTC derivatives settled by the central counterparty are included in the other financial instruments. As the Bank has a legally enforceable right to set off the recognized amounts and intends to settle on a net basis, the net amounts of the other financial instruments balances are presented in the statement of financial position.
Details of financial assets subject to offsetting, enforceable master netting arrangements or similar agreements as at December 31, 2018 and 2017, are as follows:
| 2018 | ||||||||||||||||||||||||
| (In millions of Korean won) | Gross amounts of recognized financial assets | Gross amounts of recognized financial liabilities offset in the statement of financial position | Net amounts of financial assets presented in the statement of financial position | Related amounts not offset in the statement of financial position | ||||||||||||||||||||
| Financial instruments | Cash collateral | Net amount | ||||||||||||||||||||||
Derivatives held for trading | 1,535,262 | — | 1,535,262 | (1,128,951 | ) | (5,102 | ) | 401,209 | ||||||||||||||||
Derivatives held for hedging | 75,956 | — | 75,956 | (41,634 | ) | — | 34,322 | |||||||||||||||||
Receivable spot exchange | 1,879,572 | — | 1,879,572 | (1,876,844 | ) | — | 2,728 | |||||||||||||||||
Reverse repurchase | 3,021,400 | — | 3,021,400 | (3,021,400 | ) | — | — | |||||||||||||||||
Domestic exchange settlement debits | 27,413,384 | (26,937,034 | ) | 476,350 | — | — | 476,350 | |||||||||||||||||
Other financial instruments | 3,261 | (2,098 | ) | 1,163 | — | — | 1,163 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
| 33,928,835 | (26,939,132 | ) | 6,989,703 | (6,068,829 | ) | (5,102 | ) | 915,772 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
| 2017 | ||||||||||||||||||||||||
| (In millions of Korean won) | Gross amounts of recognized financial assets | Gross amounts of recognized financial liabilities offset in the statement of financial position | Net amounts of financial assets presented in the statement of financial position | Related amounts not offset in the statement of financial position | ||||||||||||||||||||
| Financial instruments | Cash collateral | Net amount | ||||||||||||||||||||||
Derivatives held for trading | 2,514,629 | — | 2,514,629 | (1,888,558 | ) | (191,349 | ) | 434,722 | ||||||||||||||||
Derivatives held for hedging | 59,071 | — | 59,071 | (17,840 | ) | (21,830 | ) | 19,401 | ||||||||||||||||
Receivable spot exchange | 3,447,424 | — | 3,447,424 | (3,447,048 | ) | — | 376 | |||||||||||||||||
Reverse repurchase | 2,445,600 | — | 2,445,600 | (2,445,600 | ) | — | — | |||||||||||||||||
Domestic exchange settlement debits | 30,904,611 | (29,959,914 | ) | 944,697 | — | — | 944,697 | |||||||||||||||||
Other financial instruments | 1,580 | (1,578 | ) | 2 | — | — | 2 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
| 39,372,915 | (29,961,492 | ) | 9,411,423 | (7,799,046 | ) | (213,179 | ) | 1,399,198 | ||||||||||||||||
|
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| |||||||||||||
89
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
Details of financial liabilities subject to offsetting, enforceable master netting arrangements or similar agreements as December 31, 2018 and 2017, are as follows:
| 2018 | ||||||||||||||||||||||||
| (In millions of Korean won) | Gross amounts of recognized financial liabilities | Gross amounts of recognized financial assets offset in the statement of financial position | Net amounts of financial liabilities presented in the statement of financial position | Related amounts not offset in the statement of financial position | Net amount | |||||||||||||||||||
| Financial instruments | Cash collateral | |||||||||||||||||||||||
Derivatives held for trading | 1,550,178 | — | 1,550,178 | (1,075,427 | ) | (46,768 | ) | 427,983 | ||||||||||||||||
Derivatives held for hedging | 88,551 | — | 88,551 | (37,564 | ) | (977 | ) | 50,010 | ||||||||||||||||
Payable spot exchange | 1,877,400 | — | 1,877,400 | (1,876,844 | ) | — | 556 | |||||||||||||||||
Repurchase1 | 360,024 | — | 360,024 | (360,024 | ) | — | — | |||||||||||||||||
Domestic exchange settlement credits | 28,616,949 | (26,937,034 | ) | 1,679,915 | (1,679,915 | ) | — | — | ||||||||||||||||
Other financial instruments | 5,154 | (2,098 | ) | 3,056 | — | — | 3,056 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
| 32,498,256 | (26,939,132 | ) | 5,559,124 | (5,029,774 | ) | (47,745 | ) | 481,605 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
| 2017 | ||||||||||||||||||||||||
(In millions of Korean won) | Gross amounts of recognized financial liabilities | Gross amounts of recognized financial assets offset in the statement of financial position | Net amounts of financial liabilities presented in the statement of financial position | Related amounts not offset in the statement of financial position | Net amount | |||||||||||||||||||
| Financial instruments | Cash collateral | |||||||||||||||||||||||
Derivatives held for trading | 2,572,684 | — | 2,572,684 | (1,051,514 | ) | (32,585 | ) | 1,488,585 | ||||||||||||||||
Derivatives held for hedging | 50,032 | — | 50,032 | (7,287 | ) | (9,139 | ) | 33,606 | ||||||||||||||||
Payable spot exchange | 3,448,848 | — | 3,448,848 | (3,447,048 | ) | — | 1,800 | |||||||||||||||||
Repurchase1 | 700,466 | — | 700,466 | (700,466 | ) | — | — | |||||||||||||||||
Domestic exchange settlement credits | 29,999,359 | (29,959,914 | ) | 39,445 | (39,445 | ) | — | — | ||||||||||||||||
Other financial instruments | 1,871 | (1,578 | ) | 293 | (194 | ) | — | 99 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
| 36,773,260 | (29,961,492 | ) | 6,811,768 | (5,245,954 | ) | (41,724 | ) | 1,524,090 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
| 1 | Includes repurchase agreements sold to customers. |
7. Due from Financial Institutions
Details of due from financial institutions as at December 31, 2018 and 2017, are as follows:
| (In millions of Korean won) | Financial Institution | Interest rate (%) | 2018 | 2017 | ||||||||||
Due from financial institutions in Korean won | Due from Bank of Korea | Bank of Korea | 0.00 ~ 1.78 | 8,723,761 | 8,511,295 | |||||||||
Due from banking institutions | KEB Hana Bank | — | 461 | 279 | ||||||||||
Due from others | — | — | — | 1,908,070 | ||||||||||
| 8,724,222 | 10,419,644 | |||||||||||||
Due from financial institutions in foreign currencies | Due from banks in foreign currencies | Bank of Korea and others | — | 1,487,017 | 1,431,387 | |||||||||
Time deposits in foreign currencies | Bank of Communications NY Branch and others | 2.90~3.06 | 22,362 | 77,331 | ||||||||||
Due from others | Societe Generale and others | — | 128,763 | 105,988 | ||||||||||
|
|
|
| |||||||||||
| 1,638,142 | 1,614,706 | |||||||||||||
|
|
|
| |||||||||||
| 10,362,364 | 12,034,350 | |||||||||||||
|
|
|
| |||||||||||
| 1 | Before netting of allowance |
90
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
Restricted due from financial institutions as at December 31, 2018 and 2017, are as follows:
| (In millions of Korean won) | Financial Institution | 2018 | 2017 | Reason for restriction | ||||||||||
Due from financial institutions in Korean won | Due from Bank of Korea | Bank of Korea | 8,723,761 | 8,511,295 | Bank of Korea Act | |||||||||
|
|
|
| |||||||||||
| 8,723,761 | 8,511,295 | |||||||||||||
|
|
|
| |||||||||||
Due from financial institutions in foreign currencies | Due from banks in foreign currencies | Bank of Korea and others | 192,503 | 474,787 | Bank of Korea Act and others | |||||||||
Time deposits in foreign currencies | Bank of Communications NY Branch and others | 22,362 | 21,428 | New York State Banking Law | ||||||||||
| Due from others | Morganstanley Bank International and others | 66,578 | 76,630 | Derivatives margin account | ||||||||||
|
|
|
| |||||||||||
| 281,443 | 572,845 | |||||||||||||
|
|
|
| |||||||||||
| 9,005,204 | 9,084,140 | |||||||||||||
|
|
|
| |||||||||||
Changes in the allowances for due from financial institutions losses
Changes in the allowances for due from financial institutions losses for year ended December 31, 2018, are as follows:
| 2018 | ||||||||||||
| Financial instruments applying 12-month expected credit losses | Financial instruments applying lifetime expected credit losses | |||||||||||
| (In millions of Korean won) | Non-impaired | Impaired | ||||||||||
Beginning1 | 38 | — | — | |||||||||
Transfer between stages | — | — | — | |||||||||
Provision (reversal) for loan losses | (34 | ) | — | — | ||||||||
|
|
|
|
|
| |||||||
Others (change of currencies and others) | 1 | — | — | |||||||||
|
|
|
|
|
| |||||||
Ending | 5 | — | — | |||||||||
|
|
|
|
|
| |||||||
| 1 | Restated based on Korean IFRS 1109. |
91
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
8. Assets Pledged as Collaterals
Details of assets pledged as collaterals as at December 31, 2018 and 2017, are as follows:
| (In millions of Korean won) | 2018 | |||||||
| Assets pledged | Pledgee | Carrying amount | Reason for the pledge | |||||
Securities at fair value through profit or loss | Korea Exchange | 122,744 | Repurchase agreements | |||||
Korea Securities Finance Corp | 39,778 | Securities lending transactions | ||||||
| 162,522 | ||||||||
Securities at fair value through other comprehensive income | Bank of Korea | 49,948 | Borrowings from Bank of Korea | |||||
| Bank of Korea | 479,784 | Settlement risk of Bank of Korea | ||||||
Korea Development Bank and others | 337,315 | Derivatives transactions | ||||||
| 867,047 | ||||||||
|
| |||||||
Securities at amortized cost | Meritz Securities and others | 276,688 | Repurchase agreements | |||||
Bank of Korea | 1,911,160 | Borrowings from Bank of Korea | ||||||
Bank of Korea | 1,474,529 | Settlement risk of Bank of Korea | ||||||
Samsung Futures Inc. and others | 194,258 | Derivatives transactions | ||||||
Others | 156,150 | Others | ||||||
|
| |||||||
| 4,012,785 | ||||||||
|
| |||||||
Mortgage loans | Others | 4,060,863 | Covered Bond | |||||
|
| |||||||
| 9,103,217 | ||||||||
|
| |||||||
| (In millions of Korean won) | 2017 | |||||||
| Assets pledged | Pledgee | Carrying amount | Reason for the pledge | |||||
Available-for-sale financial assets | Mizuho Bank. Ltd and others | 740,132 | Repurchase agreements | |||||
Bank of Korea | 651,283 | Borrowings from Bank of Korea | ||||||
Bank of Korea | 750,254 | Settlement risk of Bank of Korea | ||||||
Deutsche Bank.AG and others | 58,524 | Derivatives transaction | ||||||
Others | 19,985 | Others | ||||||
|
| |||||||
| 2,220,178 | ||||||||
Held-to-maturity financial assets | Korea Securities Depository and others | 35,026 | Repurchase agreements | |||||
Bank of Korea | 1,326,559 | Borrowings from Bank of Korea | ||||||
Bank of Korea | 1,204,990 | Settlement risk of Bank of Korea | ||||||
Samsung Futures Co., Ltd. and others | 236,681 | Derivatives transaction | ||||||
Others | 133,388 | Others | ||||||
|
| |||||||
| 2,936,644 | ||||||||
Mortgage loans | Others | 4,950,490 | Covered Bond | |||||
|
| |||||||
| 10,107,312 | ||||||||
92
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
The fair value of collateral available to sell or repledge regardless of debtor’s default as at December 31, 2018 and 2017, are as follows:
| 2018 | ||||||||
| (In millions of Korean won) | Fair value of collateral | Fair value of collateral sold or repledged | ||||||
Securities | 3,131,496 | — | ||||||
| 2017 | ||||||||
| (In millions of Korean won) | Fair value of collateral | Fair value of collateral sold or repledged | ||||||
Securities | 2,498,828 | — | ||||||
9. Derivative Financial Instruments and Hedge Accounting
The Bank engages in derivative trading activities to hedge the interest rate and foreign currency risk exposures arising from the Bank’s own assets and liabilities. In particular, the Bank applies fair value hedge accounting to interest rate swaps that hedge the risk of changes in fair values due to the changes in interest rates of debentures, structured deposits denominated in foreign currencies and debt securities at fair value through other comprehensive income. Also, the Bank applies cash flow hedge accounting to interest rate swaps that hedge cash flow risk of floating rate notes denominated in Korean won and borrowings denominated in foreign currencies.
Details of derivative financial instruments held for trading as at December 31, 2018 and 2017, are as follows:
| 2018 | 2017 | |||||||||||||||||||||||
| (In millions of Korean won) | Notional amount | Assets | Liabilities | Notional amount | Assets | Liabilities | ||||||||||||||||||
Interest rate | ||||||||||||||||||||||||
Futures1 | 643,952 | — | — | 946,983 | — | — | ||||||||||||||||||
Swaps | 127,469,915 | 376,523 | 350,083 | 108,367,191 | 389,651 | 332,265 | ||||||||||||||||||
Options | 13,259,000 | 158,295 | 252,243 | 12,615,000 | 130,013 | 226,931 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
| 141,372,867 | 534,818 | 602,326 | 121,929,174 | 519,664 | 559,196 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Currency | ||||||||||||||||||||||||
Forwards | 65,084,258 | 528,606 | 479,816 | 62,251,571 | 1,147,040 | 1,238,842 | ||||||||||||||||||
Futures1 | 419,802 | — | — | 440,903 | — | — | ||||||||||||||||||
Swaps | 35,977,216 | 465,774 | 454,217 | 28,386,919 | 843,854 | 767,344 | ||||||||||||||||||
Options | 2,450,186 | 6,063 | 13,608 | 695,848 | 4,071 | 6,998 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
| 103,931,462 | 1,000,443 | 947,641 | 91,775,241 | 1,994,965 | 2,013,184 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Stock and index | ||||||||||||||||||||||||
Futures1 | 2,006 | — | — | — | — | — | ||||||||||||||||||
Options | 51,282 | 78 | 211 | 84,742 | 307 | 498 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
| 53,288 | 78 | 211 | 84,742 | 307 | 498 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Others | 670,860 | — | 66 | 999,016 | 16,953 | 2 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
| 246,028,477 | 1,535,339 | 1,550,244 | 214,788,173 | 2,531,889 | 2,572,880 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
| 1 | Gains or losses arising from dailymark-to-market futures are reflected in the margin accounts. |
93
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
The average hedge ratio for future nominal cash flows by type of hedge accounting as at December 31, 2018, are as follows:
| 2018 | ||||||||||||||||||||||||||||
| (In millions of Korean won) | 1 year | 2 years | 3 years | 4 years | 5 years | Over 5 years | Total | |||||||||||||||||||||
Fair value hedge | ||||||||||||||||||||||||||||
The nominal amount of the hedged item | 59,134 | 696,513 | 1,347,597 | 567,030 | 195,392 | 979,889 | 3,845,555 | |||||||||||||||||||||
The nominal amount of the hedging instrument | 69,134 | 686,513 | 1,347,597 | 567,030 | 195,392 | 979,889 | 3,845,555 | |||||||||||||||||||||
Average ratio of hedging | 116.91 | 98.56 | 100.00 | 100.00 | 100.00 | 100.00 | 100.00 | |||||||||||||||||||||
Cash flow hedge | ||||||||||||||||||||||||||||
The nominal amount of the hedged item | 2,167,227 | 491,964 | — | 503,145 | — | — | 3,162,336 | |||||||||||||||||||||
The nominal amount of the hedging instrument | 2,167,227 | 491,964 | — | 503,145 | — | — | 3,162,336 | |||||||||||||||||||||
Average ratio of hedging | 100.00 | 100.00 | — | 100.00 | — | — | 100.00 | |||||||||||||||||||||
Fair value hedge
Details of fair value hedged as at December 31, 2018, are as follows:
| 2018 | ||||||||||||||||||||
| Carrying amount | Accumulated adjusted amount | Changes in the fair value | ||||||||||||||||||
| (In millions of Korean won) | Assets | Liabilities | Assets | Liabilities | ||||||||||||||||
Interest rate | ||||||||||||||||||||
Debt securities in Korean won | 465,213 | — | 1,214 | — | 6,001 | |||||||||||||||
Debt securities in foreign currencies | 702,727 | — | (9,790 | ) | — | (1,233 | ) | |||||||||||||
Deposits in foreign currencies | — | 805,215 | — | (89,265 | ) | 38,232 | ||||||||||||||
Debts in Korean won | — | 349,252 | — | 19,252 | (2,308 | ) | ||||||||||||||
Debts in foreign currencies | — | 1,429,457 | — | (24,073 | ) | (1,868 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
| 1,167,940 | 2,583,924 | (8,576 | ) | (94,086 | ) | 38,824 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
94
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
Details of derivative financial instruments designated as fair value hedge as at December 31, 2018 and 2017, are as follows:
| 2018 | ||||||||||||||||
| (In millions of Korean won) | Notional amount | Assets | Liabilities | Changes in the fair value | ||||||||||||
Interest rate | ||||||||||||||||
Swaps | 3,845,555 | 58,934 | 88,017 | (37,637 | ) | |||||||||||
| 2017 | ||||||||||||
| (In millions of Korean won) | Notional amount | Assets | Liabilities | |||||||||
Interest rate | ||||||||||||
Swaps | 2,919,935 | 47,856 | 49,962 | |||||||||
Other | 50,000 | 775 | 70 | |||||||||
|
|
|
|
|
| |||||||
| 2,969,935 | 48,631 | 50,032 | ||||||||||
|
|
|
|
|
| |||||||
The fair values ofnon-derivative financial instruments designated as fair value hedging instruments as at December 31, 2018 and 2017, are as follows:
| (In millions of Korean won) | 2018 | 2017 | ||||||
Deposits in foreign currencies | — | 32,051 | ||||||
Details of the ineffective portion of changes in fair value of derivatives recognized in profit or loss for the year ended December 31, 2018, are as follows:
| 2018 | ||||
| (In millions of Korean won) | Hedge ineffectiveness recognized in profit or loss | |||
Interest rate | 1,186 | |||
Gains and losses from fair value hedging instruments and hedged items attributable to the hedged risk for the years ended December 31, 2018 and 2017, are as follows:
| (In millions of Korean won) | 2018 | 2017 | ||||||
Gains (losses) on hedging instruments | (41,472 | ) | 16,195 | |||||
Gains (losses) on the hedged item attributable to the hedged risk | 37,305 | (16,368 | ) | |||||
|
|
|
| |||||
| (4,167 | ) | (173 | ) | |||||
|
|
|
| |||||
95
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
Cash flow hedge
Details of cash flow hedged items subject to cash flow hedges as of December 31, 2018, are as follows:
| 2018 | ||||||||
| (In millions of Korean won) | Changes in fair value | Other comprehensive income for cash flow hedge | ||||||
Interest rate risk | (7,031 | ) | 11,539 | |||||
Details of derivative financial instruments designated as cash flow hedge as at December 31, 2018 and 2017, are as follows:
| 2018 | ||||||||||||||||
| Notional amount | Carrying amount | Changes in fair value | ||||||||||||||
| (In millions of Korean won) | Assets | Liabilities | ||||||||||||||
Interest rate | ||||||||||||||||
Swaps | 3,162,336 | 17,022 | 534 | 6,961 | ||||||||||||
| 2017 | ||||||||||||
| (In millions of Korean won) | Notional amount | Assets | Liabilities | |||||||||
Interest rate | ||||||||||||
Swaps | 1,660,670 | 10,440 | — | |||||||||
Gains and losses from cash flow hedging instruments and hedged items attributable to the hedged risk for the years ended December 31, 2018 and 2017, are as follows:
| (In millions of Korean won) | 2018 | 2017 | ||||||
Gains on hedging instruments | 6,961 | 10,694 | ||||||
Effective gains from cash flow hedging instruments (recognized in other comprehensive income or loss) | 6,980 | 10,691 | ||||||
Ineffective gains from cash flow hedging instruments (recognized in profit or loss) | (19 | ) | 3 | |||||
Amounts recognized in other comprehensive income and reclassified from equity to profit or loss for the years ended December 31, 2018 and 2017, are as follows:
| (In millions of Korean won) | 2018 | 2017 | ||||||
Other comprehensive income or loss | 6,980 | 10,691 | ||||||
Reclassification to profit | (1,755 | ) | (444 | ) | ||||
Income tax effect | (1,437 | ) | (2,833 | ) | ||||
|
|
|
| |||||
| 3,788 | 7,414 | |||||||
|
|
|
| |||||
As at December 31, 2018, the hedged items subject to cash flow hedge are exposed to the risk of changes in cash flows until June 9, 2022.
96
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
10. Loans at Amortized Cost
Loans as at December 31, 2018 and 2017, are as follows:
| (In millions of Korean won) | 2018 | 2017 | ||||||
Loans | 275,936,633 | 250,956,216 | ||||||
Deferred loan origination fees and costs | 581,997 | 551,090 | ||||||
Allowances | (1,532,827 | ) | (1,388,066 | ) | ||||
|
|
|
| |||||
Carrying amount | 274,985,803 | 250,119,240 | ||||||
|
|
|
| |||||
Loans to banks as at December 31, 2018 and 2017, are as follows:
| (In millions of Korean won) | 2018 | 2017 | ||||||
Loans | 4,163,259 | 6,018,909 | ||||||
Allowances | (197 | ) | (77 | ) | ||||
|
|
|
| |||||
Carrying amount | 4,163,062 | 6,018,832 | ||||||
|
|
|
| |||||
Loans to customers other than banks as at December 31, 2018 and 2017, are as follows:
| 2018 | ||||||||||||
| (In millions of Korean won) | Retail | Corporate | Total | |||||||||
Loans in Korean won | 141,754,541 | 115,501,502 | 257,256,043 | |||||||||
Loans in foreign currencies | 139,759 | 3,145,891 | 3,285,650 | |||||||||
Domestic import usance bills | — | 2,817,174 | 2,817,174 | |||||||||
Off-shore funding loans | — | 899,741 | 899,741 | |||||||||
Call loans | — | 1,473,362 | 1,473,362 | |||||||||
Bills bought in Korean won | — | 3,057 | 3,057 | |||||||||
Bills bought in foreign currencies | — | 3,421,392 | 3,421,392 | |||||||||
Guarantee payments under payment guarantee | — | 4,104 | 4,104 | |||||||||
Reverse repurchase agreements | — | 2,951,400 | 2,951,400 | |||||||||
Privately placed bonds | — | 243,448 | 243,448 | |||||||||
|
|
|
|
|
| |||||||
| 141,894,300 | 130,461,071 | 272,355,371 | ||||||||||
Proportion (%) | 52.10 | 47.90 | 100.00 | |||||||||
|
|
|
|
|
| |||||||
Allowances | (444,964 | ) | (1,087,666 | ) | (1,532,630 | ) | ||||||
|
|
|
|
|
| |||||||
| 141,449,336 | 129,373,405 | 270,822,741 | ||||||||||
|
|
|
|
|
| |||||||
| 2017 | ||||||||||||
| (In millions of Korean won) | Retail | Corporate | Total | |||||||||
Loans in Korean won | 130,223,811 | 104,442,685 | 234,666,496 | |||||||||
Loans in foreign currencies | 79,283 | 1,990,056 | 2,069,339 | |||||||||
Domestic import usance bills | — | 2,128,868 | 2,128,868 | |||||||||
Off-shore funding loans | — | 750,102 | 750,102 | |||||||||
Call loans | — | 335,000 | 335,000 | |||||||||
Bills bought in Korean won | — | 4,168 | 4,168 | |||||||||
Bills bought in foreign currencies | — | 3,872,641 | 3,872,641 | |||||||||
97
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
Guarantee payments under payment guarantee | — | 6,373 | 6,373 | |||||||||
Reverse repurchase agreements | — | 1,025,600 | 1,025,600 | |||||||||
Privately placed bonds | — | 629,810 | 629,810 | |||||||||
|
|
|
|
|
| |||||||
| 130,303,094 | 115,185,303 | 245,488,397 | ||||||||||
Proportion (%) | 53.08 | 46.92 | 100.00 | |||||||||
|
|
|
|
|
| |||||||
Allowances | (318,138 | ) | (1,069,851 | ) | (1,387,989 | ) | ||||||
|
|
|
|
|
| |||||||
| 129,984,956 | 114,115,452 | 244,100,408 | ||||||||||
|
|
|
|
|
|
Changes in deferred loan origination fees and costs for the years ended December 31, 2018 and 2017, are as follows:
| 2018 | ||||||||||||||||||||
| (In millions of Korean won) | Beginning1 | Increase | Decrease | Others | Ending | |||||||||||||||
Deferred loan origination costs | ||||||||||||||||||||
Loans in Korean won | 562,425 | 333,833 | (304,083 | ) | — | 592,175 | ||||||||||||||
Other origination costs | 202 | 527 | (244 | ) | 1 | 486 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
| 562,627 | 334,360 | (304,327 | ) | 1 | 592,661 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Deferred loan origination fees | ||||||||||||||||||||
Loans in Korean won | 6,793 | 2,271 | (2,742 | ) | — | 6,322 | ||||||||||||||
Other origination fees | 4,750 | 831 | (1,240 | ) | 1 | 4,342 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
| 11,543 | 3,102 | (3,982 | ) | 1 | 10,664 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
| 551,084 | 331,258 | (300,345 | ) | — | 581,997 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
| 1 | Restated based on Korean IFRS 1109. |
| 2017 | ||||||||||||||||||||
| (In millions of Korean won) | Beginning | Increase | Decrease | Others | Ending | |||||||||||||||
Deferred loan origination costs | ||||||||||||||||||||
Loans in Korean won | 582,479 | 267,116 | (287,170 | ) | — | 562,425 | ||||||||||||||
Other origination costs | 295 | 243 | (328 | ) | (2 | ) | 208 | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
| 582,774 | 267,359 | (287,498 | ) | (2 | ) | 562,633 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Deferred loan origination fees | ||||||||||||||||||||
Loans in Korean won | 9,968 | 1,776 | (4,951 | ) | — | 6,793 | ||||||||||||||
Other origination fees | 2,282 | 3,672 | (1,269 | ) | 65 | 4,750 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
| 12,250 | 5,448 | (6,220 | ) | 65 | 11,543 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
| 570,524 | 261,911 | (281,278 | ) | (67 | ) | 551,090 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
98
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
11. Allowances for Loan Losses
Changes in the allowances for loan losses for the years ended December 31, 2018 and 2017, are as follows:
| 2018 | ||||||||||||||||||||||||||||||||
| Retails | Corporates | |||||||||||||||||||||||||||||||
| Financial instruments applying 12-month expected credit losses | Financial instruments applying lifetime expected credit lcosses | Financial instruments applying credit impaired approach | Financial instruments applying 12-month expected credit losses | Financial instruments applying lifetime expected credit losses | Financial instruments applying credit impaired approach | |||||||||||||||||||||||||||
| (In millions of Korean won) | Non-impaired | Impaired | Non-impaired | Impaired | ||||||||||||||||||||||||||||
Beginning1 | 161,886 | 155,623 | 132,773 | — | 180,822 | 263,536 | 745,011 | — | ||||||||||||||||||||||||
Transfer between stages | ||||||||||||||||||||||||||||||||
Transfer to 12-month expected credit losses | 101,441 | (101,375 | ) | (66 | ) | — | 37,146 | (36,248 | ) | (897 | ) | — | ||||||||||||||||||||
Transfer to lifetime expected creditlosses (Non-impaired) | (90,044 | ) | 102,158 | (12,114 | ) | — | (34,407 | ) | 44,698 | (10,291 | ) | — | ||||||||||||||||||||
Transfer to lifetime expected credit losses (Impaired) | (753 | ) | (43,126 | ) | 43,879 | — | (2,289 | ) | (30,693 | ) | 32,982 | — | ||||||||||||||||||||
Write-offs | — | (2 | ) | (297,228 | ) | — | — | (5 | ) | (228,900 | ) | — | ||||||||||||||||||||
Disposal | (248 | ) | (5 | ) | (1,003 | ) | — | (73 | ) | — | (14,172 | ) | — | |||||||||||||||||||
Provision (reversal) for loan losses2,3 | (2,036 | ) | 43,608 | 250,560 | — | 10,041 | 53,662 | 50,828 | — | |||||||||||||||||||||||
Others (change of currency ratio,etc.) | 44 | 321 | 671 | — | 1,211 | 491 | 25,410 | — | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Ending | 170,290 | 157,202 | 117,472 | — | 192,451 | 295,441 | 599,971 | — | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
| 1 | Restated based on Korean IFRS 1109. |
| 2 | Provision (reversal) for credit losses in statement of comprehensive income also includes provision (reversal) for unused commitments and guarantees (Note 22), provision (reversal) for financial guarantee contracts (Note 22), provision (reversal) of allowance for other financial assets (Note 17), provision (reversal) of allowance for due from financial institutions (Note 7) and provision (reversal) of allowance for debt securities (Note 12). |
| 3 | Recovery ofwritten-off loans amounting to |
| 2017 | ||||||||||||
| (In millions of Korean won) | Retail | Corporate | Total | |||||||||
Beginning | 332,743 | 1,235,183 | 1,567,926 | |||||||||
Written-off | (274,714 | ) | (375,705 | ) | (650,419 | ) | ||||||
Recoveries fromwritten-off loans | 136,522 | 272,979 | 409,501 | |||||||||
Sale | (683 | ) | (17,560 | ) | (18,243 | ) | ||||||
Other changes | 2,081 | (85,428 | ) | (83,347 | ) | |||||||
Provision (reversal) for loan losses1 | 122,189 | 40,459 | 162,648 | |||||||||
|
|
|
|
|
| |||||||
Ending | 318,138 | 1,069,928 | 1,388,066 | |||||||||
|
|
|
|
|
| |||||||
| 1 | Provision (reversal) for credit losses in statement of comprehensive income also includes provision (reversal) for unused commitments and guarantees (Note 22), provision (reversal) for financial guarantee contracts (Note 22), and provision (reversal) off allowance for other financial assets (Note 17). |
99
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
The loan and receivables which werewritten-off but the claims has not been forfeited (i.e. its extinctive prescription did not occur, and that are not collected) amounts toW 9,576,055 million as at December 31, 2018.
Changes in the gross carrying amounts of loans
Changes in the gross carrying amounts of loans that significantly affect allowances for loan losses for the year ended December 31, 2018, are as follows:
| 2018 | ||||||||||||||||
| Financial instruments applying 12-month expected credit losses | Financial instruments applying lifetime expected credit losses | Financial instruments applying credit impaired approach | ||||||||||||||
| (In millions of Korean won) | Non-impaired | Impaired | ||||||||||||||
Beginning1 | 227,614,957 | 22,207,255 | 1,517,232 | — | ||||||||||||
Transfer between stages | ||||||||||||||||
Transfer to12-month expected credit losses | 7,505,230 | (7,465,448 | ) | (39,782 | ) | — | ||||||||||
Transfer to lifetime expected credit losses(Non-impaired) | (10,068,530 | ) | 10,120,456 | (51,926 | ) | — | ||||||||||
Transfer to lifetime expected credit losses (Impaired) | (638,622 | ) | (761,883 | ) | 1,400,505 | — | ||||||||||
Write-offs | — | (7 | ) | (526,127 | ) | — | ||||||||||
Sale | (484,646 | ) | (3,817 | ) | (190,401 | ) | — | |||||||||
Net increase(decrease) (Execution, repayment and others) | 30,046,529 | (2,924,176 | ) | (738,169 | ) | — | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Ending | 253,974,918 | 21,172,380 | 1,371,332 | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| 1 | Restated based on Korean IFRS 1109. |
100
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
12. Financial Assets at Fair Value through Profit or Loss and Financial Investments
Details of financial assets at fair value through profit or loss and financial investments as at December 31, 2018 and 2017, are as follows:
| (In millions of Korean won) | 2018 | |||
Financial assets at fair value through profit or loss | ||||
Debt securities | ||||
Government and public bonds | 1,144,734 | |||
Financial bonds | 2,888,573 | |||
Corporate bonds | 336,790 | |||
Beneficiary certificates | 3,696,533 | |||
Equity investments | 164,777 | |||
Other debt securities | 67,886 | |||
Equity securities | ||||
Stocks | 22,167 | |||
Loans | ||||
Private placed corporate bonds | 179,714 | |||
Other loans | 32,882 | |||
Others | ||||
Financial instruments indexed to the price of gold | 78,808 | |||
|
| |||
| 8,612,864 | ||||
|
| |||
Financial Investments |
| |||
Financial assets at fair value through other comprehensive income |
| |||
Debt securities | ||||
Government and public bonds | 2,941,069 | |||
Financial bonds | 16,838,663 | |||
Corporate bonds | 6,909,162 | |||
Asset-backed securities | 867,997 | |||
Equity securities | ||||
Stocks | 1,861,873 | |||
Equity investments | 37,043 | |||
|
| |||
Loans | ||||
Private placed corporate bonds | 349,547 | |||
|
| |||
| 29,805,354 | ||||
|
| |||
Financial assets at amortized cost |
| |||
Debt securities | ||||
Government and public bonds | 544,926 | |||
Financial bonds | 6,206,924 | |||
Corporate bonds | 1,413,022 | |||
Asset-backed securities | 4,590,107 | |||
Allowance | (1,255 | ) | ||
|
| |||
| 12,753,724 | ||||
|
| |||
| 42,559,078 | ||||
|
| |||
101
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
| (In millions of Korean won) | 2017 | |||
Financial assets held for trading | ||||
Debt securities | ||||
Government and public bonds | 1,071,617 | |||
Financial bonds | 1,765,827 | |||
Corporate bonds | 206,564 | |||
Equity securities | ||||
Beneficiary certificates | 29,251 | |||
Others | 73,856 | |||
|
| |||
| 3,147,115 | ||||
|
| |||
Available-for-sale financial assets | ||||
Debt securities | ||||
Government and public bonds | 2,820,398 | |||
Financial bonds | 15,752,775 | |||
Corporate bonds | 6,639,107 | |||
Asset-backed securities | 2,205,360 | |||
Equity securities | ||||
Stocks | 1,908,846 | |||
Equity investments | 143,685 | |||
Beneficiary certificates | 4,005,417 | |||
Others | 500 | |||
|
| |||
| 33,476,088 | ||||
|
| |||
Held-to-maturity financial assets | ||||
Debt securities | ||||
Government and public bonds | 1,302,836 | |||
Financial bonds | 1,873,101 | |||
Corporate bonds | 1,360,836 | |||
Asset-backed securities | 4,195,473 | |||
|
| |||
| 8,732,246 | ||||
|
| |||
| 42,208,334 | ||||
|
| |||
102
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
Dividend incomes from the equity securities designated at fair value through other comprehensive income for the year ended December 31, 2018 are as follows:
| 2018 | ||||||||||
| (In millions of Korean won) | From the financial asset derecognized | From the remaining financial asset | ||||||||
Stocks | Listed | — | 22,173 | |||||||
| Unlisted | — | 14,504 | ||||||||
Equity investments | — | 2,256 | ||||||||
|
|
|
| |||||||
| — | 38,933 | |||||||||
|
|
|
| |||||||
The derecognized equity securities at fair value through other comprehensive income for the year ended December 31, 2018, are as follows:
| 2018 | ||||||||||
| (In millions of Korean won) | Disposal price | Accumulated OCI as at disposal date | ||||||||
Stocks 1 | Listed | 26,877 | 18,330 | |||||||
| Unlisted | 480 | 480 | ||||||||
|
|
|
| |||||||
| 27,357 | 18,810 | |||||||||
|
|
|
| |||||||
| 1 | In accordance with joint resolution along the stock price increase, the Bank disposed of stocks acquired by a debt to equity swap. |
Provision and reversal for the allowance of financial investments for the year ended December 31, 2018, are as follows:
| 2018 | ||||||||||||
| Impairment losses | Reversal of impairment | Total | ||||||||||
Debt instruments at fair value through other comprehensive income | (835 | ) | 328 | (507 | ) | |||||||
|
|
|
|
|
| |||||||
Loans at fair value through other comprehensive income | (905 | ) | 825 | (80 | ) | |||||||
Securities at amortized cost | (159 | ) | 280 | 121 | ||||||||
|
|
|
|
|
| |||||||
| (1,899 | ) | 1,433 | (466 | ) | ||||||||
|
|
|
|
|
| |||||||
The impairment losses and the reversal of impairment losses in financial investments for the year ended December 31, 2017, are as follows:
| 2017 | ||||||||||||
| (In millions of Korean won) | Impairment | Reversal | Net | |||||||||
Available-for-sale financial assets | (12,405 | ) | — | (12,405 | ) | |||||||
103
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
Changes in the allowances for financial investments for the year ended December 31, 2018, are as follows:
| 2018 | ||||||||||||
| Financial instruments applying 12- month expected credit losses | Financial instruments applying lifetime expected credit losses | |||||||||||
| (In millions of Korean won) | Non-impaired | Impaired | ||||||||||
Beginning1 | 2,505 | 435 | — | |||||||||
Transfer between stages | ||||||||||||
Transfer to12-month expected credit losses | 125 | (125 | ) | — | ||||||||
Transfer to lifetime expected credit losses | — | — | — | |||||||||
Disposal | (171 | ) | — | — | ||||||||
Provision (reversal) for loan losses | 646 | (180 | ) | — | ||||||||
Others (change of currency ratio, etc.) | 563 | 63 | — | |||||||||
|
|
|
|
|
| |||||||
Ending | 3,668 | 193 | — | |||||||||
|
|
|
|
|
| |||||||
| 1 | Restated based on Korean IFRS 1109. |
13. Investments in Associates and Subsidiaries
Investments in associates and subsidiaries as at December 31, 2018 and 2017, are as follows:
| 2018 | ||||||||||||||||||||
(In millions of Korean won, In thousands of US dollars) | Ownership (%) | Acquisition cost | Share of net asset amount | Carrying amount | Industry | Location | ||||||||||||||
Associates | ||||||||||||||||||||
Korea Credit Bureau Co., Ltd.1 | 9.00 | 4,500 | 5,941 | 2,769 | Credit information | Korea | ||||||||||||||
Balhae Infrastructure Fund1 | 12.61 | 104,621 | 108,050 | 108,282 | Investment finance | Korea | ||||||||||||||
KB GwS Private Securities Investment Trust | 20.93 | 89,124 | 106,613 | 89,124 | Investment finance | Korea | ||||||||||||||
Incheon Bridge Co., Ltd.1 | 14.99 | 9,158 | (16,689 | ) | 9,158 | Operation of highways and related facilities | Korea | |||||||||||||
KB digital innovation & growth New Technology Business Investment Fund1 | 45.00 | 1,125 | 1,079 | 1,125 | Discovery of and investment in promising FinTech-business venture | Korea | ||||||||||||||
KB12-1 Venture Investment Partnership2 | 80.00 | 17,400 | 49,912 | 17,400 | Investment finance | Korea | ||||||||||||||
Future Planning KBStart-up Creation Fund2 | 50.00 | 14,300 | 18,069 | 14,300 | Investment finance | Korea | ||||||||||||||
KoFC KBIC Frontier Champ2010-5(PEF) | 30.00 | 90 | 140 | 37 | Investment finance | Korea | ||||||||||||||
KoFC POSCO HANWHA KB Shared Growth No.2. Private Equity Fund | 20.00 | 10,376 | 11,681 | 10,376 | Investment finance | Korea | ||||||||||||||
KB High-tech Company Investment Fund 2 | 50.00 | 20,300 | 22,563 | 20,300 | Investment finance | Korea | ||||||||||||||
Aju Good Technology Venture Fund | 38.46 | 18,038 | 18,134 | 18,038 | Investment finance | Korea | ||||||||||||||
KB-KDBC New Technology Business Investment Fund2 | 33.33 | 7,500 | 7,297 | 7,500 | Investment finance | Korea | ||||||||||||||
104
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
KBTS Technology Venture Private Equity Fund2 | 30.00 | 7,620 | 7,381 | 7,620 | Investment finance | Korea | ||||||||||||||||||||
KB IP Investment Fund II2 | 37.50 | 3,000 | 2,942 | 3,000 | Investment finance | Korea | ||||||||||||||||||||
KB Digital Innovation Investment Fund Limited partnership2 | 25.74 | 7,700 | 7,617 | 7,700 | Investment finance | Korea | ||||||||||||||||||||
KB-Brain KOSDAQScale-up Fund2 | 21.28 | 4,000 | 3,966 | 4,000 | Investment finance | Korea | ||||||||||||||||||||
Shinla Construction Co., Ltd.4 | 20.17 | — | (551 | ) | — | Specialty construction | Korea | |||||||||||||||||||
Terra Corporation4 | 24.06 | — | 2 | — | Manufacture of fabricated and processed metal products | Korea | ||||||||||||||||||||
MJT&I Corp.4 | 22.89 | — | (606 | ) | — | Wholesale of other merchandise | Korea | |||||||||||||||||||
Jungdong Steel Co., Ltd.4 | 42.65 | — | (433 | ) | — | Wholesale of primary metal | Korea | |||||||||||||||||||
Doosung Metal Co., Ltd.4 | 26.49 | — | (16 | ) | — | Manufacture of metal door, windows, shutter and relevant products | Korea | |||||||||||||||||||
Shinhwa Underwear Co., Ltd.4 | 26.05 | — | (57 | ) | — | Manufacture of underwear and sleepwear | Korea | |||||||||||||||||||
DPAPS Co., Ltd.4 | 38.62 | — | 14 | — | Wholesale of paper | Korea | ||||||||||||||||||||
Jaeyang Industry Co., Ltd.4 | 20.86 | — | (552 | ) | — | Manufacture of luggage and other protective cases | Korea | |||||||||||||||||||
Kendae Co., Ltd.4 | 41.01 | — | (252 | ) | — | Screen printing | Korea | |||||||||||||||||||
Jinseung Tech Co., Ltd.4 | 30.04 | — | (176 | ) | — | Manufacture of other general-purpose machinery n.e.c. | Korea | |||||||||||||||||||
Dongjo Co., Ltd.4 | 29.29 | — | 806 | — | Wholesale of agricultural and forestry machinery and equipment | Korea | ||||||||||||||||||||
Korea NM Tech Co., Ltd.4 | 22.41 | — | 552 | — | Manufacture of motor vehicles, trailers and semitrailers | Korea | ||||||||||||||||||||
Jungdo Co., Ltd.4 | 25.34 | — | 1,492 | — | Office, commercial and institutional building construction | Korea | ||||||||||||||||||||
Dae-A Leisure Co., Ltd.4 | 49.36 | — | 1,613 | — | Earth works | Korea | ||||||||||||||||||||
Chong Il Machine & Tools Co., Ltd.4 | 20.40 | — | (107 | ) | — | Wholesale machinery and equipment | Korea | |||||||||||||||||||
Imt Technology Co., Ltd.4 | 25.29 | — | 18 | — | Computer Peripherals Distribution | Korea | ||||||||||||||||||||
Iwon Alloy Co., Ltd.4 | 23.20 | — | 394 | — | Manufacture of smelting, refining and alloys | Korea | ||||||||||||||||||||
Carlife Co., Ltd.4 | 24.39 | — | (75 | ) | — | Publishing of magazines and periodicals (publishing industry) | Korea | |||||||||||||||||||
Computerlife Co., Ltd.4 | 45.71 | — | (329 | ) | — | Publishing of magazines and periodicals (publishing industry) | Korea | |||||||||||||||||||
SKYDIGITAL INC.4 | 20.40 | — | (142 | ) | — | Manufacture of multimedia and video devices | Korea | |||||||||||||||||||
Jo Yang Industrial Co., Ltd.4 | 22.77 | — | 75 | — | Manufacture of special glass | Korea | ||||||||||||||||||||
PT Bank Bukopin TBK5,6 | 22.00 | 116,422 | 106,484 | 116,422 | Banking | Indonesia | ||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||
| 435,274 | 462,850 | 437,151 | ||||||||||||||||||||||||
Subsidiaries | ||||||||||||||||||||||||||
Kookmin Bank Int’l Ltd.(London)3 | 100.00 | USD | 30,392 | 34,983 | 32,917 | Banking | | United Kingdom |
| |||||||||||||||||
Kookmin Bank Hongkong Ltd.3 | — | — | — | — | — | China | ||||||||||||||||||||
Kookmin Bank Cambodia PLC.3 | 100.00 | USD | 76,259 | 92,807 | 86,761 | Banking | Cambodia | |||||||||||||||||||
Kookmin Bank(China) Ltd.3 | 100.00 | USD | 383,875 | 412,564 | 418,155 | Banking | China | |||||||||||||||||||
KB Microfinance Myanmar Co., Ltd.3 | 100.00 | USD | 20,000 | 20,062 | 22,405 | Micro finance services | Myanmar | |||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||
| USD | 510,526 | 560,416 | 560,238 | |||||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||
| 1,023,333 | 997,389 | |||||||||||||||||||||||||
|
|
|
| |||||||||||||||||||||||
105
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
| 2017 | ||||||||||||||||||||||||
(In millions of Korean won, In thousands of US dollars) | Ownership (%) | Acquisition cost | Share of net asset amount | Carrying amount | Industry | Location | ||||||||||||||||||
Associates | ||||||||||||||||||||||||
Balhae Infrastructure Fund1 | 12.61 | 101,794 | 105,190 | 105,455 | Investment finance | Korea | ||||||||||||||||||
Korea Credit Bureau Co., Ltd.1 | 9.00 | 4,500 | 5,056 | 2,769 | Credit information | Korea | ||||||||||||||||||
KB12-1 Venture Investment Partnership 2 | 80.00 | 22,800 | 37,239 | 22,800 | Investment finance | Korea | ||||||||||||||||||
KoFC KBIC Frontier Champ2010-5(PEF) | 30.00 | 3,891 | 4,504 | 1,585 | Investment finance | Korea | ||||||||||||||||||
KB GwS Private Securities Investment Trust | 20.93 | 89,124 | 105,567 | 89,124 | Investment finance | Korea | ||||||||||||||||||
Incheon Bridge Co., Ltd.1 | 14.99 | 9,159 | (16,202 | ) | 8,393 | Operation of highways and related facilities | Korea | |||||||||||||||||
KoFC POSCO HANWHA KB Shared Growth No.2. Private Equity Fund | 20.00 | 10,376 | 13,770 | 10,376 | Investment finance | Korea | ||||||||||||||||||
Future Planning KBStart-up Creation Fund2 | 50.00 | 14,700 | 18,093 | 14,700 | Investment finance | Korea | ||||||||||||||||||
Shinla Construction Co., Ltd. 4 | 20.17 | — | (551 | ) | — | Specialty construction | Korea | |||||||||||||||||
Terra Corporation 4 | 24.06 | — | 36 | — | Manufacture of fabricated and processed metal products | Korea | ||||||||||||||||||
MJT&I Corp.4 | 22.89 | — | (601 | ) | — | Wholesale of other merchandise | Korea | |||||||||||||||||
Jungdong Steel Co., Ltd.4 | 42.65 | — | (433 | ) | — | Wholesale of primary metal | Korea | |||||||||||||||||
Doosung Metal Co., Ltd.4 | 26.49 | — | (20 | ) | — | Manufacture of metal door, windows, shutter and relevant products | Korea | |||||||||||||||||
Shinhwa Underwear Co., Ltd.4 | 26.05 | — | (102 | ) | — | Manufacture of underwear and sleepwear | Korea | |||||||||||||||||
DPAPS Co., Ltd.4 | 38.62 | — | 155 | — | Wholesale of paper | Korea | ||||||||||||||||||
Jaeyang Industry Co., Ltd.4 | 20.86 | — | (522 | ) | — | Manufacture of luggage and other protective cases | Korea | |||||||||||||||||
Keundae Printing Co., Ltd.4 | 41.01 | — | (223 | ) | — | Screen printing | Korea | |||||||||||||||||
Jinseung Tech Co., Ltd.4 | 30.04 | — | (173 | ) | — | Manufacture of other general-purpose machinery n.e.c. | Korea | |||||||||||||||||
Dong Jo Co., Ltd.4 | 29.29 | — | 691 | — | Wholesale of agricultural and forestry machinery and equipment | Korea | ||||||||||||||||||
Korea NM Tech Co., Ltd.4 | 22.41 | — | 580 | — | Manufacture of motor vehicles, trailers and semitrailers | Korea | ||||||||||||||||||
Jungdo Co., Ltd.4 | 25.34 | — | 1,652 | — | Office, commercial and institutional building construction | Korea | ||||||||||||||||||
Dae-A Leisure Co., Ltd.4 | 49.36 | — | 1,017 | — | Earth works | Korea | ||||||||||||||||||
Daesang Techlon Co., Ltd.4 | 47.73 | — | 96 | — | Manufacture of Plastic, Teflon etc. | Korea | ||||||||||||||||||
KB High-tech Company Investment Fund 2 | 50.00 | 25,000 | 26,847 | 25,000 | Investment finance | Korea | ||||||||||||||||||
Aju Good Technology Venture Fund | 38.46 | 8,230 | 7,856 | 8,230 | Investment finance | Korea | ||||||||||||||||||
KB-KDBC New Technology Business Investment Fund2 | 33.33 | 2,500 | 2,486 | 2,500 | Investment finance | Korea | ||||||||||||||||||
|
|
|
| |||||||||||||||||||||
| 292,074 | 312,008 | 290,932 | ||||||||||||||||||||||
|
|
|
| |||||||||||||||||||||
Subsidiaries | ||||||||||||||||||||||||
Kookmin Bank Int’l Ltd.(London)3 | 100.00 | USD | 30,392 | 83,222 | 67,396 | Banking | United Kingdom | |||||||||||||||||
Kookmin Bank Hong Kong Ltd.3 | 100.00 | USD | 20,000 | 22,866 | 23,451 | — | China | |||||||||||||||||
Kookmin Bank Cambodia PLC.3 | 100.00 | USD | 47,846 | 56,453 | 55,711 | Banking | Cambodia | |||||||||||||||||
Kookmin Bank(China) Ltd.3 | 100.00 | USD | 383,875 | 400,720 | 418,155 | Banking | China | |||||||||||||||||
KB Microfinance Myanmar Co., Ltd.3 | 100.00 | USD | 10,000 | 9,972 | 11,428 | Micro finance services | Myanmar | |||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
| USD | 492,113 | 573,233 | 576,141 | |||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
| 885,241 | 867,073 | |||||||||||||||||||||||
|
|
|
| |||||||||||||||||||||
| 1 | As at December 31,2018 and 2017, the Bank is represented in the governing bodies of its associates. Therefore, the Bank has significant influence over the decision-making process relating to their financial and business policies. |
| 2 | As at December 31,2018 and 2017, the Bank is a partner in a limited partnership and does not have the right to control over these entities. |
106
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
| 3 | Acquisition costs of investments in subsidiaries are presented in US dollars. |
| 4 | The investment in associates was reclassified from financial instruments at fair value through other comprehensive income due to termination of rehabilitation procedures. |
| 5 | The Bank has entered into an agreement with PT Bosowa Corporindo, the major shareholder of PT Bank Bukopin TBK. Under this agreement, both parties have a right of first refusal, atag-along right and a drag-along right. The Bank additionally has the drag-along right that can be exercised for the duration of two years after three-years from acquisition date, subject to the occurrence of certain situations as defined in the agreement. |
| 6 | The fair value of PT Bank Bukopin TBK’s common stock based on its quoted market price is |
Changes in investments in associates and subsidiaries for the years ended December 31, 2018 and 2017, are as follows:
| 2018 | ||||||||||||||||||||
| (In millions of Korean won) | Beginning | Acquisition and others | Disposal and others | Impairment | Ending | |||||||||||||||
Associates | ||||||||||||||||||||
Korea Credit Bureau Co., Ltd. | 2,769 | — | — | — | 2,769 | |||||||||||||||
Balhae Infrastructure Fund | 105,455 | 4,646 | (1,819 | ) | — | 108,282 | ||||||||||||||
KB GwS Private Securities Investment Trust | 89,124 | — | — | — | 89,124 | |||||||||||||||
Incheon Bridge Co., Ltd. | 8,393 | — | — | 765 | 9,158 | |||||||||||||||
KB Digital Innovation & Growth New Technology Business Investment Fund | — | 1,125 | — | — | 1,125 | |||||||||||||||
KB12-1 Venture Investment Partnership | 22,800 | — | (5,400 | ) | — | 17,400 | ||||||||||||||
Future Planning KBStart-up Creation Fund | 14,700 | — | (400 | ) | — | 14,300 | ||||||||||||||
KoFC KBIC Frontier Champ 2010-5 (PEF) | 1,585 | — | (1,548 | ) | — | 37 | ||||||||||||||
KoFC POSCO HANWHA KB Shared Growth No.2. Private Equity Fund | 10,376 | — | — | — | 10,376 | |||||||||||||||
KB High-tech Company Investment Fund | 25,000 | — | (4,700 | ) | — | 20,300 | ||||||||||||||
Aju Good Technology Venture Fund | 8,230 | 9,808 | — | — | 18,038 | |||||||||||||||
KB-KDBC New Technology Business Investment Fund | 2,500 | 5,000 | — | — | 7,500 | |||||||||||||||
KBTS Technology Venture Private Equity Fund | — | 7,620 | — | — | 7,620 | |||||||||||||||
KB IP Investment Fund II | — | 3,000 | — | — | 3,000 | |||||||||||||||
KB Digital Innovation Investment Fund Limited partnership | — | 7,700 | — | — | 7,700 | |||||||||||||||
KB-Brain KOSDAQScale-up Fund | — | 4,000 | — | — | 4,000 | |||||||||||||||
PT Bank Bukopin TBK1 | — | 116,422 | — | — | 116,422 | |||||||||||||||
Subsidiaries | ||||||||||||||||||||
Kookmin Bank Int’l Ltd.(London)2 | 67,396 | — | — | (34,479 | ) | 32,917 | ||||||||||||||
Kookmin Bank Hongkong Ltd. | 23,451 | — | (23,451 | ) | — | — | ||||||||||||||
Kookmin Bank Cambodia PLC. | 55,711 | 31,050 | — | — | 86,761 | |||||||||||||||
Kookmin Bank(China) Ltd. | 418,155 | — | — | — | 418,155 | |||||||||||||||
KB Microfinance Myanmar Co., Ltd. | 11,428 | 10,977 | — | — | 22,405 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
| 867,073 | 201,348 | (37,318 | ) | (33,714 | ) | 997,389 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
107
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
| 2017 | ||||||||||||||||||||
| (In millions of Korean won) | Beginning | Acquisition and others | Disposal and others | Impairment | Ending | |||||||||||||||
Associates | ||||||||||||||||||||
Balhae Infrastructure Fund | 133,850 | 807 | (29,202 | ) | — | 105,455 | ||||||||||||||
Korea Credit Bureau Co., Ltd. | 2,769 | — | — | — | 2,769 | |||||||||||||||
JSC Bank CenterCredit | 30,111 | — | (30,111 | ) | — | — | ||||||||||||||
KB12-1 Venture Investment Partnership | 27,200 | — | (4,400 | ) | — | 22,800 | ||||||||||||||
KoFC KBIC Frontier Champ 2010-5 (PEF) | 12,085 | — | (10,500 | ) | — | 1,585 | ||||||||||||||
KB GwS Private Securities Investment Trust | 89,124 | — | — | — | 89,124 | |||||||||||||||
Incheon Bridge Co., Ltd. | 24,677 | — | (15,520 | ) | (764 | ) | 8,393 | |||||||||||||
KoFC POSCO HANWHA KB Shared Growth No.2. Private Equity Fund | 18,160 | — | (7,784 | ) | — | 10,376 | ||||||||||||||
Future Planning KBStart-up Creation Fund | 10,700 | 4,000 | — | — | 14,700 | |||||||||||||||
KB-KDBC New Technology Business Investment Fund | — | 2,500 | — | — | 2,500 | |||||||||||||||
KB High-tech Company Investment Fund | 15,000 | 10,000 | — | — | 25,000 | |||||||||||||||
Aju Good Technology Venture Fund | 1,997 | 6,233 | — | — | 8,230 | |||||||||||||||
Subsidiaries | ||||||||||||||||||||
Kookmin Bank Int’l Ltd.(London) | 67,396 | — | — | — | 67,396 | |||||||||||||||
Kookmin Bank Hongkong Ltd.2 | 105,643 | — | — | (82,192 | ) | 23,451 | ||||||||||||||
Kookmin Bank Cambodia PLC. | 55,711 | — | — | — | 55,711 | |||||||||||||||
Kookmin Bank(China) Ltd. | 418,155 | — | — | — | 418,155 | |||||||||||||||
KB Microfinance Myanmar Co., Ltd. | — | 11,428 | — | — | 11,428 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
| 1,012,578 | 34,968 | (97,517 | ) | (82,956 | ) | 867,073 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
| 1 | The goodwill of PT Bank Bukopin TBK amounts to |
| 2 | Impairment losses were recognized due to decrease in net asset value resulting from dividend payment during the years ended December 31, 2018 and 2017. |
108
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
14. Property and Equipment, and Investment Properties
Details of property and equipment as at December 31, 2018 and 2017, are as follows:
| 2018 | ||||||||||||||||
| (In millions of Korean won) | Acquisition cost | Accumulated depreciation | Accumulated impairment losses | Carrying amount | ||||||||||||
Land | 1,979,811 | — | (1,018 | ) | 1,978,793 | |||||||||||
Buildings | 1,256,234 | (442,317 | ) | (5,859 | ) | 808,058 | ||||||||||
Leasehold improvements | 788,444 | (694,884 | ) | — | 93,560 | |||||||||||
Equipment and vehicles | 1,136,854 | (985,842 | ) | — | 151,012 | |||||||||||
Constructionin-progress | 81,268 | — | — | 81,268 | ||||||||||||
Finance lease assets | 32,709 | (21,788 | ) | — | 10,921 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
| 5,275,320 | (2,144,831 | ) | (6,877 | ) | 3,123,612 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
| 2017 | ||||||||||||||||
| (In millions of Korean won) | Acquisition cost | Accumulated depreciation | Accumulated impairment losses | Carrying amount | ||||||||||||
Land | 1,949,332 | — | (1,018 | ) | 1,948,314 | |||||||||||
Buildings | 1,207,836 | (415,017 | ) | (5,859 | ) | 786,960 | ||||||||||
Leasehold improvements | 710,060 | (634,803 | ) | — | 75,257 | |||||||||||
Equipment and vehicles | 1,151,915 | (1,004,994 | ) | — | 146,921 | |||||||||||
Constructionin-progress | 11,975 | — | — | 11,975 | ||||||||||||
Finance lease assets | 23,069 | (17,840 | ) | — | 5,229 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
| 5,054,187 | (2,072,654 | ) | (6,877 | ) | 2,974,656 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Changes in property and equipment for the years ended December 31, 2018 and 2017, are as follows:
| 2018 | ||||||||||||||||||||||||||||
| (In millions of Korean won) | Beginning | Acquisition | Transfers1 | Disposal | Depreciation | Others | Ending | |||||||||||||||||||||
Land | 1,948,314 | 124 | 31,027 | (691 | ) | — | 19 | 1,978,793 | ||||||||||||||||||||
Buildings | 786,960 | — | 54,904 | (4,079 | ) | (29,771 | ) | 44 | 808,058 | |||||||||||||||||||
Leasehold improvements | 75,257 | 15 | 69,646 | (242 | ) | (61,345 | ) | 10,229 | 93,560 | |||||||||||||||||||
Equipment and vehicles | 146,921 | 100,958 | 247 | (795 | ) | (96,378 | ) | 59 | 151,012 | |||||||||||||||||||
Construction-in-progress | 11,975 | 229,521 | (160,684 | ) | — | — | 456 | 81,268 | ||||||||||||||||||||
Finance lease assets | 5,229 | 9,640 | — | — | (3,948 | ) | — | 10,921 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
| 2,974,656 | 340,258 | (4,860 | ) | (5,807 | ) | (191,442 | ) | 10,807 | 3,123,612 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
109
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
| 2017 | ||||||||||||||||||||||||||||
| (In millions of Korean won) | Beginning | Acquisition | Transfers1 | Disposal | Depreciation | Others | Ending | |||||||||||||||||||||
Land | 2,041,605 | 16,647 | (109,892 | ) | (19 | ) | — | (27 | ) | 1,948,314 | ||||||||||||||||||
Buildings | 814,712 | — | 2,391 | (1,023 | ) | (29,058 | ) | (62 | ) | 786,960 | ||||||||||||||||||
Leasehold improvements | 62,741 | 9 | 57,548 | (757 | ) | (57,575 | ) | 13,291 | 75,257 | |||||||||||||||||||
Equipment and vehicles | 154,685 | 88,896 | — | (170 | ) | (96,505 | ) | 15 | 146,921 | |||||||||||||||||||
Construction-in-progress | 4,013 | 110,122 | (102,160 | ) | — | — | — | 11,975 | ||||||||||||||||||||
Finance lease assets | 7,961 | 678 | — | — | (3,410 | ) | — | 5,229 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
| 3,085,717 | 216,352 | (152,113 | ) | (1,969 | ) | (186,548 | ) | 13,217 | 2,974,656 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
| 1 | Including transfers from investment properties and assets held for sale. |
Changes in accumulated impairment losses of property and equipment for the years ended December 31, 2018 and 2017, are as follows:
| (In millions of Korean won) | 2018 |
|
| |||||||||||||
| Beginning | Impairment | Reversal | Others | Ending | ||||||||||||
| (6,877) | — | — | — | (6,877 | ) | |||||||||||
(In millions of Korean won)
| 2017 | ||||||||||||||||
| Beginning | Impairment | Reversal | Others | Ending | ||||||||||||
| (6,877) | — | — | — | (6,877 | ) | |||||||||||
Details of investment properties as at December 31, 2018 and 2017, are as follows:
| 2018 | ||||||||||||
| (In millions of Korean won) | Acquisition cost | Accumulated depreciation | Carrying amount | |||||||||
Land | 33,793 | — | 33,793 | |||||||||
Buildings | 22,521 | (7,848 | ) | 14,673 | ||||||||
|
|
|
|
|
| |||||||
| 56,314 | (7,848 | ) | 48,466 | |||||||||
|
|
|
|
|
| |||||||
| 2017 | ||||||||||||
| (In millions of Korean won) | Acquisition cost | Accumulated depreciation | Carrying amount | |||||||||
Land | 40,621 | — | 40,621 | |||||||||
Buildings | 24,684 | (8,867 | ) | 15,817 | ||||||||
|
|
|
|
|
| |||||||
| 65,305 | (8,867 | ) | 56,438 | |||||||||
|
|
|
|
|
| |||||||
110
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
The valuation technique and input variables that are used to measure the fair value of investment property as at December 31, 2018, are as follows:
| 2018 | ||||||||
| (In millions of Korean won) | Fair Value | Valuation technique | Inputs | |||||
Land and Buildings | 57,025 | Cost approach value | - Price per square meter - Replacement cost | |||||
As at December 31, 2018 and 2017, fair values of the investment properties amount toW 57,025 million andW 63,144 million, respectively. The investment properties were measured by qualified independent appraisers with experience in valuing similar properties in the same area. In addition, per the fair value hierarchy on Note 6.1, the fair value hierarchy of all investment properties has been categorized and classified as Level 3.
Rental income from the above investment properties for the years ended December 31, 2018 and 2017, amounts toW 667 million andW 718 million, respectively.
Changes in investment properties for the years ended December 31, 2018 and 2017, are as follows:
| 2018 | ||||||||||||||||||||
| (In millions of Korean won) | Beginning | Acquisitions | Transfers | Depreciation | Ending | |||||||||||||||
Land | 40,621 | — | (6,828 | ) | — | 33,793 | ||||||||||||||
Buildings | 15,817 | — | (599 | ) | (545 | ) | 14,673 | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
| 56,438 | — | (7,427 | ) | (545 | ) | 48,466 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
| 2017 | ||||||||||||||||||||
| (In millions of Korean won) | Beginning | Acquisitions | Transfers | Depreciation | Ending | |||||||||||||||
Land | 59,604 | — | (18,982 | ) | — | 40,621 | ||||||||||||||
Buildings | 19,326 | — | (2,879 | ) | (631 | ) | 15,817 | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
| 78,930 | — | (21,861 | ) | (631 | ) | 56,438 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
15. Intangible Assets
Details of intangible assets as at December 31, 2018 and 2017, are as follows:
| 2018 | ||||||||||||||||
| (In millions of Korean won) | Acquisition cost | Accumulated amortization | Accumulated impairment losses | Carrying amount | ||||||||||||
Goodwill | 65,288 | — | — | 65,288 | ||||||||||||
Other intangible assets | 922,023 | (760,448 | ) | (5,107 | ) | 156,468 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
| 987,311 | (760,448 | ) | (5,107 | ) | 221,756 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
111
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
| 2017 | ||||||||||||||||
| (In millions of Korean won) | Acquisition cost | Accumulated amortization | Accumulated impairment losses | Carrying amount | ||||||||||||
Goodwill | 65,288 | — | — | 65,288 | ||||||||||||
Other intangible assets | 865,116 | (711,855 | ) | �� | (3,597 | ) | 149,664 | |||||||||
|
|
|
|
|
|
|
| |||||||||
| 930,404 | (711,855 | ) | (3,597 | ) | 214,952 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
The goodwill arose from the merger of Housing & Commercial Bank (“H&CB”), and there is no change in goodwill for the years ended December 31, 2018 and 2017.
Details of allocation of goodwill to cash-generating units and related information for impairment testing as at December 31, 2018, are as follows:
| (In millions of Korean won) | Housing & Commercial Bank | |||||||||||
| Retail Banking | Corporate Banking | Total | ||||||||||
Carrying amounts | 49,315 | 15,973 | 65,288 | |||||||||
Recoverable amount exceeded carrying amount | 4,281,676 | 2,875,939 | 7,157,615 | |||||||||
Discount rate (%) | 15.51 | 15.74 | ||||||||||
Permanent growth rate (%) | 1.00 | 1.00 | ||||||||||
Goodwill is allocated to cash-generating units that are expected to benefit from the synergies of the combination for impairment testing, and cash-generating units consist of an operating segment or units which are not larger than an operating segment. The Bank recognized the amount ofW 65,288 million related to goodwill acquired in the merger of Housing & Commercial Bank. Of this amount, the amount ofW 49,315 million andW 15,973 million were allocated to the Retail Banking and Corporate Banking, respectively. Cash-generating units, to which goodwill has been allocated, is tested for impairment annually and whenever there is an indication that the unit may be impaired by comparing the carrying amount of the unit, including the goodwill, with the recoverable amount of the unit.
The recoverable amount of a cash-generating unit is measured at the higher of its fair value less costs to sell and its value in use. The fair value less costs to sell is the amount obtainable from the sale in an arm’s length transaction between knowledgeable, willing parties, less the costs of disposal. If it is difficult to measure the amount obtainable from the sale of the cash-generating unit, the Bank measures the fair value less costs to sell by reflecting the characteristics of the measured cash-generating unit. If it is not possible to obtain the reliable information to measure the fair value less costs to sell, the Bank uses the asset’s value in use as its recoverable amount. Value in use is the present value of the future cash flows expected to be derived from an asset or cash-generating unit. The projections of the future cash flows are based on the most recent financial budget approved by management and generally cover a period of five years. The future cash flows after projection period are estimated on the assumption that the future cash flows will increase by 1.0% annually for Retail Banking and Corporate Banking. The key assumptions used for the estimation of the future cash flows are the market size and the Bank’s market share. The discount rate is apre-tax rate that reflects assumptions regarding risk-free interest rate, market risk premium and the risks specific to the asset for which the future cash flow estimates have not been adjusted.
112
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
Details of intangible assets, excluding goodwill, as at December 31, 2018 and 2017, are as follows:
| 2018 | ||||||||||||||||
| (In millions of Korean won) | Acquisition cost | Accumulated amortization | Accumulated impairment losses | Carrying amount | ||||||||||||
Industrial property rights | 1,494 | (1,243 | ) | — | 251 | |||||||||||
Software | 765,802 | (671,084 | ) | — | 94,718 | |||||||||||
Other intangible assets | 120,596 | (69,152 | ) | (5,107 | ) | 46,337 | ||||||||||
Finance leases assets | 34,131 | (18,969 | ) | — | 15,162 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
| 922,023 | (760,448 | ) | (5,107 | ) | 156,468 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
| 2017 | ||||||||||||||||
| (In millions of Korean won) | Acquisition cost | Accumulated amortization | Accumulated impairment losses | Carrying amount | ||||||||||||
Industrial property rights | 1,435 | (1,154 | ) | — | 281 | |||||||||||
Software | 709,641 | (622,243 | ) | — | 87,398 | |||||||||||
Other intangible assets | 127,934 | (74,891 | ) | (3,597 | ) | 49,446 | ||||||||||
Finance leases assets | 26,106 | (13,567 | ) | — | 12,539 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
| 865,116 | (711,855 | ) | (3,597 | ) | 149,664 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Changes in intangible assets, excluding goodwill, for the years ended December 31, 2018 and 2017, are as follows:
| 2018 | ||||||||||||||||||||||||
| (In millions of Korean won) | Beginning | Acquisition | Disposal | Amortization | Others | Ending | ||||||||||||||||||
Industrial property rights | 281 | 59 | — | (89 | ) | — | 251 | |||||||||||||||||
Software | 87,398 | 45,500 | — | (38,224 | ) | 44 | 94,718 | |||||||||||||||||
Other intangible assets | 49,446 | 7,160 | (2,825 | ) | (5,698 | ) | (1,746 | ) | 46,337 | |||||||||||||||
Finance leases assets | 12,539 | 8,025 | — | (5,402 | ) | — | 15,162 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
| 149,664 | 60,744 | (2,825 | ) | (49,413 | ) | (1,702 | ) | 156,468 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
| 2017 | |||||||||||||||||||||||
| (In millions of Korean won) | Beginning | Acquisition | Disposal | Amortization | Others | Ending | ||||||||||||||||||
Industrial property rights | 122 | 244 | (8 | ) | (91 | ) | 14 | 281 | ||||||||||||||||
Software | 82,863 | 36,913 | — | (32,373 | ) | (5 | ) | 87,398 | ||||||||||||||||
Other intangible assets | 41,697 | 13,418 | (306 | ) | (5,665 | ) | 302 | 49,446 | ||||||||||||||||
Finance leases assets | 16,329 | 792 | — | (4,582 | ) | — | 12,539 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
| 141,011 | 51,367 | (314 | ) | (42,711 | ) | 311 | 149,664 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
113
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
Changes in accumulated impairment losses on intangible assets for the years ended December 31, 2018 and 2017, are as follows:
| 2018 | ||||||||||||||||||||
| (In millions of Korean won) | Beginning | Impairment | Reversal | Others | Ending | |||||||||||||||
Accumulated impairment losses on other intangible assets | (3,597 | ) | (1,806 | ) | 31 | 265 | (5,107 | ) | ||||||||||||
| 2017 | ||||||||||||||||||||
| (In millions of Korean won) | Beginning | Impairment | Reversal | Others | Ending | |||||||||||||||
Accumulated impairment losses on other intangible assets | (3,875 | ) | — | 35 | 243 | (3,597 | ) | |||||||||||||
From 2018, the Bank has to pay the fine, if the actual emission exceeds the targeted emission amount; therefore, the emission rights (intangible asset) do not occur even if it is below the targeted emission amount
Changes in emission rights for the year ended December 31, 2017, are as follows:
| Applicable under 2016 | Applicable under 2017 | Total | ||||||||||||||||||||||
| (KAU, In millions of Korean won) | Quantity | Carrying amount | Quantity | Carrying amount | Quantity | Carrying amount | ||||||||||||||||||
Beginning | 99,283 | — | 104,920 | — | 204,203 | — | ||||||||||||||||||
Additional allocation | 578 | — | 17,046 | — | 17,624 | — | ||||||||||||||||||
Borrowings of emission permits | 18,306 | — | (18,306 | ) | — | — | — | |||||||||||||||||
Surrender of emission permits | (117,484 | ) | — | — | — | (117,484 | ) | — | ||||||||||||||||
Revocation of allocation | (683 | ) | — | (398 | ) | — | (1,081 | ) | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Ending | — | — | 103,262 | — | 103,262 | — | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
114
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
16. Deferred Income Tax Assets and Liabilities
Details of deferred income tax assets and liabilities as at December 31, 2018 and 2017, are as follows:
| 2018 | ||||||||||||
| (In millions of Korean won) | Assets | Liabilities | Net amount | |||||||||
Other provisions | 62,179 | — | 62,179 | |||||||||
Impairment losses on property and equipment | 4,132 | — | 4,132 | |||||||||
Share-based payments | 11,868 | — | 11,868 | |||||||||
Provisions for guarantees | 20,298 | — | 20,298 | |||||||||
Gains on valuation of derivatives | — | (13,188 | ) | (13,188 | ) | |||||||
Present value discount | — | (34 | ) | (34 | ) | |||||||
Losses on fair value hedged item | — | (25,873 | ) | (25,873 | ) | |||||||
Accrued interest | — | (41,687 | ) | (41,687 | ) | |||||||
Deferred loan origination fees and costs | — | (139,697 | ) | (139,697 | ) | |||||||
Gains on revaluation | — | (286,739 | ) | (286,739 | ) | |||||||
Investments in subsidiaries and associates | 13,018 | — | 13,018 | |||||||||
Gains on valuation of security investment | — | (53,384 | ) | (53,384 | ) | |||||||
Defined benefit liabilities | 387,667 | — | 387,667 | |||||||||
Accrued expenses | 202,220 | — | 202,220 | |||||||||
Retirement insurance expenses | — | (343,176 | ) | (343,176 | ) | |||||||
Adjustments to the prepaid contributions | — | (19,033 | ) | (19,033 | ) | |||||||
Others | 163,719 | (20,357 | ) | 143,362 | ||||||||
|
|
|
|
|
| |||||||
| 865,101 | (943,168 | ) | (78,067 | ) | ||||||||
Offsetting of deferred income tax assets and liabilities | (865,101 | ) | 865,101 | — | ||||||||
|
|
|
|
|
| |||||||
| — | (78,067 | ) | (78,067 | ) | ||||||||
|
|
|
|
|
| |||||||
115
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
| 2017 | ||||||||||||
| (In millions of Korean won) | Assets | Liabilities | Net amount | |||||||||
Other provisions | 71,870 | — | 71,870 | |||||||||
Impairment losses on property and equipment | 5,411 | — | 5,411 | |||||||||
Interest on equity index-linked deposits | 43 | — | 43 | |||||||||
Share-based payments | 17,014 | — | 17,014 | |||||||||
Provisions for guarantees | 24,341 | — | 24,341 | |||||||||
Gains on valuation of derivatives | — | (19,239 | ) | (19,239 | ) | |||||||
Present value discount | — | (58 | ) | (58 | ) | |||||||
Losses on fair value hedged item | — | (15,698 | ) | (15,698 | ) | |||||||
Accrued interest | — | (43,328 | ) | (43,328 | ) | |||||||
Deferred loan origination fees and costs | — | (131,911 | ) | (131,911 | ) | |||||||
Gains on revaluation | — | (306,344 | ) | (306,344 | ) | |||||||
Investments in subsidiaries and associates | 9,271 | (29,022 | ) | (19,751 | ) | |||||||
Gains on valuation of security investment | 21,483 | — | 21,483 | |||||||||
Defined benefit liabilities | 332,930 | — | 332,930 | |||||||||
Accrued expenses | 128,700 | — | 128,700 | |||||||||
Retirement insurance expenses | — | (301,261 | ) | (301,261 | ) | |||||||
Adjustments to the prepaid contributions | — | (16,236 | ) | (16,236 | ) | |||||||
Others | 141,444 | (18,325 | ) | 123,119 | ||||||||
|
|
|
|
|
| |||||||
| 752,507 | (881,422 | ) | (128,915 | ) | ||||||||
Offsetting of deferred income tax assets and liabilities | (752,507 | ) | 752,507 | — | ||||||||
|
|
|
|
|
| |||||||
| — | (128,915 | ) | (128,915 | ) | ||||||||
|
|
|
|
|
| |||||||
Unrecognized deferred income tax liabilities
As at December 31, 2018, no deferred income tax liabilities have been recognized for the taxable temporary difference ofW 65,288 million arising from the initial recognition of goodwill from the merger of Housing and Commercial Bank in 2001.
Unrecognized deferred income tax assets
No deferred income tax assets have been recognized for the deductible temporary difference ofW 5,923 million associated with investments in associates and subsidiaries as at December 31, 2018, because it is not probable that the temporary differences will be reversed in the foreseeable future.
No deferred income tax assets have been recognized for deductible temporary differences ofW 363 million andW 15,030 million associated with accrued expenses and others, respectively, as at December 31, 2018, due to the uncertainty that these will be realized in the future.
116
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
Changes in cumulative temporary differences for the years ended December 31, 2018 and 2017, are as follows:
| 2018 | ||||||||||||||||
| (In millions of Korean won) | Beginning1 | Decrease | Increase | Ending | ||||||||||||
Deductible temporary differences | ||||||||||||||||
Other provisions | 256,282 | 256,282 | 226,103 | 226,103 | ||||||||||||
Impairment losses on property and equipment | 19,678 | 19,678 | 15,027 | 15,027 | ||||||||||||
Interest on equity index-linked deposits | �� | 155 | 155 | — | — | |||||||||||
Share-based payments | 61,870 | 61,870 | 43,156 | 43,156 | ||||||||||||
Provisions for guarantees | 98,294 | 98,294 | 73,809 | 73,809 | ||||||||||||
Loss on SPE repurchase | 80,204 | 80,204 | — | — | ||||||||||||
Investment in subsidiaries and associates | 39,634 | — | 13,627 | 53,261 | ||||||||||||
Gains on valuation of security investment | 75,642 | 75,642 | — | — | ||||||||||||
Defined benefit liabilities | 1,210,654 | 114,562 | 313,608 | 1,409,700 | ||||||||||||
Accrued expenses | 467,999 | 467,999 | 735,712 | 735,712 | ||||||||||||
Others | 797,433 | 325,886 | 138,823 | 610,370 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| 3,107,845 | 1,500,572 | 1,559,865 | 3,167,138 | |||||||||||||
|
|
|
| |||||||||||||
Unrecognized deferred income tax assets |
| |||||||||||||||
Accrued expenses | — | 363 | ||||||||||||||
Loss on SPE repurchase | 80,204 | — | ||||||||||||||
Investment in subsidiaries and associates | 5,923 | 5,923 | ||||||||||||||
Others | 12,500 | 15,030 | ||||||||||||||
|
|
|
| |||||||||||||
| 3,009,218 | 3,145,822 | |||||||||||||||
|
|
|
| |||||||||||||
Tax rate (%)2 | 27.50 | 27.50 | ||||||||||||||
Total deferred income tax assets from deductible temporary differences | 827,535 | 865,101 | ||||||||||||||
|
|
|
| |||||||||||||
117
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
| 2018 | ||||||||||||||||
| (In millions of Korean won) | Beginning1 | Decrease | Increase | Ending | ||||||||||||
Taxable temporary differences | ||||||||||||||||
Losses from fair value hedge | (57,083 | ) | (57,083 | ) | (94,085 | ) | (94,085 | ) | ||||||||
Accrued interest | (157,556 | ) | (116,532 | ) | (110,565 | ) | (151,589 | ) | ||||||||
Deferred loan origination fees and costs | (479,671 | ) | (479,671 | ) | (507,988 | ) | (507,988 | ) | ||||||||
Gains on valuation of derivatives | (52,764 | ) | (52,764 | ) | (47,956 | ) | (47,956 | ) | ||||||||
Present value discount | (209 | ) | (209 | ) | (124 | ) | (124 | ) | ||||||||
Goodwill from merger | (65,288 | ) | — | — | (65,288 | ) | ||||||||||
Gains on revaluation | (1,113,979 | ) | (71,292 | ) | — | (1,042,687 | ) | |||||||||
Investments in subsidiaries and associates | (105,534 | ) | (105,534 | ) | — | — | ||||||||||
Retirement insurance expenses | (1,095,495 | ) | (82,468 | ) | (234,884 | ) | (1,247,911 | ) | ||||||||
Adjustments to the prepaid contributions | (59,040 | ) | (59,040 | ) | (69,212 | ) | (69,212 | ) | ||||||||
Gains on valuation of security investment | — | — | (194,124 | ) | (194,124 | ) | ||||||||||
Others | (68,946 | ) | (10,679 | ) | (15,759 | ) | (74,026 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
| (3,255,565 | ) | (1,035,272 | ) | (1,274,697 | ) | (3,494,990 | ) | |||||||||
|
|
|
| |||||||||||||
Unrecognized deferred income tax liabilities | ||||||||||||||||
Goodwill from merger | (65,288 | ) | (65,288 | ) | ||||||||||||
|
|
|
| |||||||||||||
| (3,190,277 | ) | (3,429,702 | ) | |||||||||||||
|
|
|
| |||||||||||||
Tax rate (%)2 | 27.50 | 27.50 | ||||||||||||||
|
|
|
| |||||||||||||
Total deferred income tax liabilities from taxable temporary differences | (877,326 | ) | (943,168 | ) | ||||||||||||
|
|
|
| |||||||||||||
| 1 | Restated based on Korean IFRS 1109. |
| 2 | As the corporate tax rate was changed due to the revision of the tax law at the end of 2017, deferred tax assets (liabilities) expected to be realized after 2018 are calculated using 27.5%. |
118
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
| 2017 | ||||||||||||||||
| (In millions of Korean won) | Beginning | Decrease | Increase | Ending | ||||||||||||
Deductible temporary differences | ||||||||||||||||
Other provisions | 291,350 | 291,350 | 261,346 | 261,346 | ||||||||||||
Impairment losses on property and equipment | 20,812 | 20,812 | 19,678 | 19,678 | ||||||||||||
Interest on equity index-linked deposits | 168 | 168 | 155 | 155 | ||||||||||||
Share-based payments | 43,008 | 43,008 | 61,870 | 61,870 | ||||||||||||
Provisions for guarantees | 126,319 | 126,319 | 88,512 | 88,512 | ||||||||||||
Loss on SPE repurchase | 80,204 | — | — | 80,204 | ||||||||||||
Investment in subsidiaries and associates | 766,614 | 756,182 | 29,202 | 39,634 | ||||||||||||
Gains on valuation of security investment | 282,872 | 282,872 | 78,120 | 78,120 | ||||||||||||
Defined benefit liabilities | 1,239,914 | 205,084 | 175,824 | 1,210,654 | ||||||||||||
Accrued expenses | 959,532 | 959,532 | 467,999 | 467,999 | ||||||||||||
Others | 670,520 | 194,905 | 51,230 | 526,845 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| 4,481,313 | 2,880,232 | 1,233,936 | 2,835,017 | |||||||||||||
|
|
|
| |||||||||||||
Unrecognized deferred income tax assets |
| |||||||||||||||
Loss on SPE repurchase | 80,204 | 80,204 | ||||||||||||||
Investment in subsidiaries and associates | 762,105 | 5,923 | ||||||||||||||
Others | 21,797 | 12,500 | ||||||||||||||
|
|
|
| |||||||||||||
| 3,617,207 | 2,736,390 | |||||||||||||||
|
|
|
| |||||||||||||
Tax rate (%) | 24.20 | 27.50 | ||||||||||||||
|
|
|
| |||||||||||||
Total deferred income tax assets from deductible temporary differences | 876,034 | 752,507 | ||||||||||||||
|
|
|
| |||||||||||||
| 2017 | ||||||||||||||||
| (In millions of Korean won) | Beginning | Decrease | Increase | Ending | ||||||||||||
Taxable temporary differences | ||||||||||||||||
Losses from fair value hedge | (59,235 | ) | (59,235 | ) | (57,083 | ) | (57,083 | ) | ||||||||
Accrued interest | (181,166 | ) | (136,159 | ) | (112,549 | ) | (157,556 | ) | ||||||||
Deferred loan origination fees and costs | (497,149 | ) | (497,149 | ) | (479,677 | ) | (479,677 | ) | ||||||||
Gains on valuation of derivatives | (42,294 | ) | (42,294 | ) | (69,960 | ) | (69,960 | ) | ||||||||
Present value discount | (92 | ) | (92 | ) | (209 | ) | (209 | ) | ||||||||
Goodwill from merger | (65,288 | ) | — | — | (65,288 | ) | ||||||||||
Gains on revaluation | (1,119,379 | ) | (5,399 | ) | — | (1,113,980 | ) | |||||||||
Investments in subsidiaries and associates | (105,534 | ) | — | — | (105,534 | ) | ||||||||||
Retirement insurance expenses | (1,119,042 | ) | (170,469 | ) | (146,922 | ) | (1,095,495 | ) | ||||||||
Adjustments to the prepaid contributions | (62,569 | ) | (61,034 | ) | (57,505 | ) | (59,040 | ) | ||||||||
Others | (84,483 | ) | (28,891 | ) | (11,045 | ) | (66,637 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
| (3,336,231 | ) | (1,000,722 | ) | (934,950 | ) | (3,270,459 | ) | |||||||||
|
|
|
| |||||||||||||
Unrecognized deferred income tax liabilities | ||||||||||||||||
Goodwill from merger | (65,288 | ) | (65,288 | ) | ||||||||||||
|
|
|
| |||||||||||||
| (3,270,943 | ) | (3,205,171 | ) | |||||||||||||
|
|
|
| |||||||||||||
Tax rate (%) | 24.20 | 27.50 | ||||||||||||||
|
|
|
| |||||||||||||
Total deferred income tax liabilities from taxable temporary differences | (791,568 | ) | (881,422 | ) | ||||||||||||
|
|
|
| |||||||||||||
119
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
17. Other Assets
Details of other assets as at December 31, 2018 and 2017, are as follows:
| (In millions of Korean won) | 2018 | 2017 | ||||||
Other financial assets | ||||||||
Other receivables | 1,912,455 | 3,547,926 | ||||||
Accrued income | 802,972 | 763,040 | ||||||
Guarantee deposits | 1,017,948 | 1,041,273 | ||||||
Domestic exchange settlement debits | 476,349 | 944,697 | ||||||
Others | 11,312 | 58,763 | ||||||
Allowances for loan losses | (21,417 | ) | (50,541 | ) | ||||
Present value discount | (1,910 | ) | (1,855 | ) | ||||
|
|
|
| |||||
| 4,197,709 | 6,303,303 | |||||||
|
|
|
| |||||
Othernon-financial assets | ||||||||
Other receivables | 61 | 49 | ||||||
Prepaid expenses | 125,363 | 102,777 | ||||||
Guarantee deposits | 3,050 | 3,090 | ||||||
Others | 74,872 | 68,416 | ||||||
Allowances on other assets | (16,992 | ) | (22,575 | ) | ||||
|
|
|
| |||||
| 186,354 | 151,757 | |||||||
|
|
|
| |||||
| 4,384,063 | 6,455,060 | |||||||
|
|
|
| |||||
Changes in allowances for loan losses on other assets for the years ended December 31, 2018 and 2017, are as follows:
| 2018 | ||||||||||||
| (In millions of Korean won) | Other financial assets | Other non- financial assets | Total | |||||||||
Beginning1 | 53,805 | 22,575 | 76,380 | |||||||||
Provision | 1,197 | (3,720 | ) | (2,523 | ) | |||||||
Written-off | (34,764 | ) | (1,863 | ) | (36,627 | ) | ||||||
Others | 1,179 | — | 1,179 | |||||||||
|
|
|
|
|
| |||||||
Ending | 21,417 | 16,992 | 38,409 | |||||||||
|
|
|
|
|
| |||||||
| 1 | Restated based on Korean IFRS 1109. |
| 2017 | ||||||||||||
| (In millions of Korean won) | Other financial assets | Other non- financial assets | Total | |||||||||
Beginning | 59,805 | 23,305 | 83,110 | |||||||||
Provision | 1,996 | 1,240 | 3,236 | |||||||||
Written-off | (12,392 | ) | (1,970 | ) | (14,362 | ) | ||||||
Others | 1,132 | — | 1,132 | |||||||||
|
|
|
|
|
| |||||||
Ending | 50,541 | 22,575 | 73,116 | |||||||||
|
|
|
|
|
| |||||||
120
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
18. Assets Held for Sale
Details of assets held for sale as at December 31, 2018 and 2017, are as follows:
| 2018 | ||||||||||||||||
| (In millions of Korean won) | Acquisition cost1 | Accumulated impairment losses | Carrying amount | Fair value less costs to sell | ||||||||||||
Land | 16,048 | (3,442 | ) | 12,606 | 16,552 | |||||||||||
Buildings | 9,054 | (4,708 | ) | 4,346 | 4,403 | |||||||||||
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|
|
|
|
|
|
| |||||||||
| 25,102 | (8,150 | ) | 16,952 | 20,955 | ||||||||||||
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|
|
|
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|
| |||||||||
| 2017 | ||||||||||||||||
| (In millions of Korean won) | Acquisition cost1 | Accumulated impairment losses | Carrying amount | Fair value less costs to sell | ||||||||||||
Land | 133,445 | (1,492 | ) | 131,953 | 251,520 | |||||||||||
Buildings | 34,862 | (11,309 | ) | 23,553 | 24,548 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
| 168,307 | (12,801 | ) | 155,506 | 276,068 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| 1 | Acquisition cost of buildings held for sale is net of accumulated depreciation before classified as assets held for sale. |
The valuation technique and input variables that are used to measure the fair value of assets held for sale as at December 31, 2018, are as follows:
| 2018 | ||||||||||
| (In millions of Korean won) | Fair value | Valuation technique1 | Unobservable | Estimated range of | Effect of inputs on fair value | |||||
| Land and buildings | 20,955 | Market comparison approach model and others | Adjustment index | 0.30 ~ 1.08 | Fair value increases as the adjustment index rises | |||||
| Adjustment ratio | -20.00 ~ 0.00 | Fair value decreases as the absolute value of adjustment ratio rises | ||||||||
| 1 | The appraisal value is adjusted by the adjustment ratio in the event the public sale is unsuccessful. |
| 2 | Adjustment index is calculated using the real estate index, the producer price index, or land price volatility. |
Among assets held for sale, real estates were measured by an independent evaluator who has recently assessed similar properties in the area of the qualifying real estates. All of assets held for sale are included in level 3 in accordance with Note6-1. (2).
121
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
Changes in accumulated impairment losses of assets held for sale for the years ended December 31, 2018 and 2017, are as follows:
(In millions of Korean won)
| 2018 |
|
| |||||||||||||||
| Beginning | Provision | Reversal | Others | Ending | ||||||||||||||
| (12,801 | ) | (5,281 | ) | 286 | 9,646 | (8,150 | ) | |||||||||||
| (In millions of Korean won) | 2017 |
|
| |||||||||||||||
| Beginning | Provision | Reversal | Others | Ending | ||||||||||||||
| (13,935 | ) | (16,994 | ) | 5,138 | 12,990 | (12,801 | ) | |||||||||||
As at December 31, 2018, assets held for sale consist of eight real estates of closed offices, which were committed to sell by the management, but not yet sold as at December 31, 2018. Negotiation with buyers is in process for the two assets and the remaining six assets are also being actively marketed.
19. Deposits
Details of deposits as at December 31, 2018 and 2017, are as follows:
| (In millions of Korean won) | 2018 | 2017 | ||||||
Demand deposits | ||||||||
Demand deposits in Korean won | 112,780,132 | 111,234,450 | ||||||
Demand deposits in foreign currencies | 6,161,617 | 6,584,271 | ||||||
|
|
|
| |||||
| 118,941,749 | 117,818,721 | |||||||
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|
| |||||
Time deposits | ||||||||
Time deposits in Korean won | 140,591,165 | 123,068,980 | ||||||
Time deposits in foreign currencies | 4,550,602 | 3,657,580 | ||||||
Fair value adjustments on fair value hedged time deposits in foreign currencies | (89,265 | ) | (51,033 | ) | ||||
|
|
|
| |||||
| 4,461,337 | 3,606,547 | |||||||
|
|
|
| |||||
| 145,052,502 | 126,675,527 | |||||||
|
|
|
| |||||
Certificates of deposits | 3,531,719 | 3,218,540 | ||||||
|
|
|
| |||||
| 267,525,970 | 247,712,788 | |||||||
|
|
|
| |||||
20. Debts
Details of debts as at December 31, 2018 and 2017, are as follows:
| (In millions of Korean won) | 2018 | 2017 | ||||||
Borrowings | 16,747,057 | 14,177,282 | ||||||
Bonds sold under repurchase agreements and others | 358,366 | 710,370 | ||||||
Call money | 306,562 | 967,259 | ||||||
|
|
|
| |||||
| 17,411,985 | 15,854,911 | |||||||
|
|
|
| |||||
122
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
Details of borrowings as at December 31, 2018 and 2017, are as follows:
| (In millions of Korean won) | Lenders | Annual interest rate (%) | 2018 | 2017 | ||||||||||||
Borrowings in Korean won | Borrowings from the Bank of Korea | Bank of Korea | 0.50~0.75 | 1,672,714 | 1,888,880 | |||||||||||
Borrowings from the Government | SEMAS and others | 0.00~3.00 | 1,745,940 | 1,726,543 | ||||||||||||
Borrowings from non - banking financial institutions | Korea Development Bank | 0.22 ~ 2.70 | 372,853 | 342,376 | ||||||||||||
Other borrowings | Korea Development Bank and others | 0.00~3.88 | 3,845,256 | 3,118,364 | ||||||||||||
|
|
|
| |||||||||||||
| 7,636,763 | 7,076,163 | |||||||||||||||
|
|
|
| |||||||||||||
Borrowings in foreign currencies | Due to banks | Kookmin Bank (China) Limited. and others | — | 38,403 | 19,820 | |||||||||||
Borrowings from banking institutions | Central Bank of Uzbekistan and others | 0.00 ~ 3.52 | 7,039,389 | 5,408,642 | ||||||||||||
Borrowings from other financial institutions | Export Import Bank of Korea and others | 3.20 ~ 3.94 | 18,725 | 76,134 | ||||||||||||
Other borrowings in foreign currencies | Standard Chartered Bank and others | — | 2,013,777 | 1,596,523 | ||||||||||||
| 9,110,294 | 7,101,119 | |||||||||||||||
|
|
|
| |||||||||||||
| 16,747,057 | 14,177,282 | |||||||||||||||
|
|
|
| |||||||||||||
Details of bonds sold under repurchase agreements and others as at December 31, 2018 and 2017, are as follows:
| (In millions of Korean won) | Lenders | Annual interest rate (%) | 2018 | 2017 | ||||||||||
Bonds sold under repurchase agreements | Individuals, groups, corporations | 1.23~1.73 | 350,771 | 700,466 | ||||||||||
Bills sold | Counter sale | 0.10~1.20 | 7,595 | 9,904 | ||||||||||
|
|
|
| |||||||||||
| 358,366 | 710,370 | |||||||||||||
|
|
|
| |||||||||||
Details of call money as at December 31, 2018 and 2017, are as follows:
| (In millions of Korean won) | Lenders | Annual rate (%) | 2018 | 2017 | ||||||||||
Call money in Korean won | — | — | — | 577,100 | ||||||||||
Call money in foreign currencies | Central Bank of Uzbekistan and others | 2.42 ~ 4.70 | 306,562 | 390,159 | ||||||||||
|
|
|
| |||||||||||
| 306,562 | 967,259 | |||||||||||||
|
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|
| |||||||||||
123
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
21. Debentures
Details of debentures as at December 31, 2018 and 2017, are as follows:
| (In millions of Korean won) | Annual interest rate (%) | 2018 | 2017 | |||||||||
Debentures in Korean won | ||||||||||||
Structured debentures | 5.65 ~ 5.86 | 34,320 | 135,800 | |||||||||
Subordinated fixed rate debentures | 2.96 ~ 4.35 | 3,422,729 | 2,888,411 | |||||||||
Fixed rate debentures | 1.48 ~ 2.44 | 13,660,045 | 12,220,065 | |||||||||
Floating rate debentures | 1.72 ~ 1.77 | 640,000 | — | |||||||||
|
|
|
| |||||||||
| 17,757,094 | 15,244,276 | |||||||||||
Fair value adjustments on fair value hedged debentures in Korean won | 19,252 | 19,891 | ||||||||||
Discount on debentures in Korean won | (11,792 | ) | (36,920 | ) | ||||||||
|
|
|
| |||||||||
| 17,764,554 | 15,227,247 | |||||||||||
|
|
|
| |||||||||
Debentures in foreign currencies | ||||||||||||
Floating rate debentures | 0.00 ~ 3.72 | 1,344,628 | 835,692 | |||||||||
Fixed rate debentures | 1.63 ~ 3.63 | 2,725,700 | 2,142,800 | |||||||||
|
|
|
| |||||||||
| 4,070,328 | 2,978,492 | |||||||||||
Fair value adjustments on fair value hedged debentures in foreign currencies | (24,073 | ) | (25,941 | ) | ||||||||
Discount on debentures in foreign currencies | (11,724 | ) | (12,300 | ) | ||||||||
|
|
|
| |||||||||
| 4,034,531 | 2,940,251 | |||||||||||
|
|
|
| |||||||||
| 21,799,085 | 18,167,498 | |||||||||||
|
|
|
| |||||||||
124
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
Changes in debentures based on face value for the years ended December 31, 2018 and 2017, are as follows:
| 2018 | ||||||||||||||||||||
| (In millions of Korean won) | Beginning | Issues | Repayments | Others | Ending | |||||||||||||||
Debentures in Korean won | ||||||||||||||||||||
Structured debentures | 135,800 | — | (101,480 | ) | — | 34,320 | ||||||||||||||
Subordinated fixed rate debentures | 2,888,411 | 600,000 | (65,682 | ) | — | 3,422,729 | ||||||||||||||
Fixed rate debentures | 12,220,065 | 6,860,000 | (5,420,020 | ) | — | 13,660,045 | ||||||||||||||
Floating rate debentures | — | 640,000 | — | — | 640,000 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
| 15,244,276 | 8,100,000 | (5,587,182 | ) | — | 17,757,094 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Debentures in foreign currencies | ||||||||||||||||||||
Floating rate debentures | 835,692 | 725,638 | (274,130 | ) | 57,428 | 1,344,628 | ||||||||||||||
Fixed rate debentures | 2,142,800 | 493,022 | — | 89,878 | 2,725,700 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
| 2,978,492 | 1,218,660 | (274,130 | ) | 147,306 | 4,070,328 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
| 18,222,768 | 9,318,660 | (5,861,312 | ) | 147,306 | 21,827,422 | |||||||||||||||
|
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|
|
|
|
|
|
| |||||||||||
| 2017 | ||||||||||||||||||||
| (In millions of Korean won) | Beginning | Issues | Repayments | Others | Ending | |||||||||||||||
Debentures in Korean won | ||||||||||||||||||||
Structured debentures | 337,500 | — | (201,700 | ) | — | 135,800 | ||||||||||||||
Subordinated fixed rate debentures | 3,196,993 | — | (308,582 | ) | — | 2,888,411 | ||||||||||||||
Fixed rate debentures | 6,510,095 | 8,300,000 | (2,590,030 | ) | — | 12,220,065 | ||||||||||||||
Floating rate debentures | 680,000 | — | (680,000 | ) | — | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
| 10,724,588 | 8,300,000 | (3,780,312 | ) | — | 15,244,276 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Debentures in foreign currencies | ||||||||||||||||||||
Floating rate debentures | 700,930 | 884,239 | (670,236 | ) | (79,241 | ) | 835,692 | |||||||||||||
Fixed rate debentures | 2,803,721 | 568,150 | (945,394 | ) | (283,677 | ) | 2,142,800 | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
| 3,504,651 | 1,452,389 | (1,615,630 | ) | (362,918 | ) | 2,978,492 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
| 14,229,239 | 9,752,389 | (5,395,942 | ) | (362,918 | ) | 18,222,768 | ||||||||||||||
|
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|
|
|
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|
| |||||||||||
125
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
22. Provisions
Details of provisions as at December 31, 2018 and 2017, are as follows:
| (In millions of Korean won) | 2018 | 2017 | ||||||
Provisions for unused loan commitments | 102,975 | 106,555 | ||||||
Provisions for acceptances and guarantees | 73,809 | 88,512 | ||||||
Provisions for asset retirement obligation | 95,396 | 85,575 | ||||||
Others | 35,199 | 76,846 | ||||||
|
|
|
| |||||
| 307,379 | 357,488 | |||||||
|
|
|
| |||||
Changes in provisions for unused loan commitments, acceptances and guarantees for the years ended December 31, 2018 and 2017, are as follows:
| 2018 | ||||||||||||||||||||||||
| Provisions for unused loan commitments | Provisions for acceptances and guarantees | |||||||||||||||||||||||
| 12-month expected credit losses | Lifetime expected credit losses | 12-month expected credit losses | Lifetime expected credit losses | |||||||||||||||||||||
| (In millions of Korean won) | Non- impaired | Impaired | Non- impaired | Impaired | ||||||||||||||||||||
Beginning1 | 74,317 | 27,174 | — | 39,922 | 39,628 | 18,744 | ||||||||||||||||||
Transfer between stages | ||||||||||||||||||||||||
Transfer to12-month expected credit losses | 10,002 | (9,935 | ) | (66 | ) | 661 | (661 | ) | — | |||||||||||||||
Transfer to lifetime expected credit losses | (7,701 | ) | 7,784 | (83 | ) | (534 | ) | 676 | (142 | ) | ||||||||||||||
Impairment | (201 | ) | (667 | ) | 867 | (6 | ) | (87 | ) | 93 | ||||||||||||||
Provision (reversal) for loan losses | (2,541 | ) | 4,369 | (718 | ) | (14,244 | ) | (10,174 | ) | (898 | ) | |||||||||||||
Others (effects of changes in foreign exchange rate, etc.) | 212 | 162 | — | 404 | 243 | 184 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Ending | 74,088 | 28,887 | — | 26,203 | 29,625 | 17,981 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
| 1 | Restated based on Korean IFRS 1109. |
| 2017 | ||||||||||||
| (In millions of Korean won) | Provisions for unused loan commitments | Provisions for acceptances and guarantees | Total | |||||||||
Beginning | 124,966 | 126,319 | 251,285 | |||||||||
Effects of changes in foreign exchange rate | (1,300 | ) | (3,362 | ) | (4,662 | ) | ||||||
Reversal | (17,111 | ) | (34,540 | ) | (51,651 | ) | ||||||
Others | — | 95 | 95 | |||||||||
|
|
|
|
|
| |||||||
Ending | 106,555 | 88,512 | 195,067 | |||||||||
|
|
|
|
|
| |||||||
126
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
Changes in provisions for asset retirement obligation for the years ended December 31, 2018 and 2017, are as follows:
| (In millions of Korean won) | 2018 | 2017 | ||||||
Beginning | 85,575 | 77,810 | ||||||
Increase | 1,780 | 2,778 | ||||||
Reversal | (154 | ) | (336 | ) | ||||
Used | (2,534 | ) | (6,712 | ) | ||||
Unwinding of discount | 2,305 | 1,746 | ||||||
Effects of changes in interest rate | 8,424 | 10,289 | ||||||
|
|
|
| |||||
Ending | 95,396 | 85,575 | ||||||
|
|
|
| |||||
Provisions for asset retirement obligation are present value of estimated costs to be incurred for restoration of the leased properties. Actual expenses are expected to be incurred at the end of each lease contract. Three-year historical data of expired leases were used to estimate the average lease year. Also, the average restoration expense based on actual three-year historical data and the three-year historical average inflation rate were used to estimate the present value of estimated costs.
Changes in other provisions for the years ended December 31, 2018 and 2017, are as follows:
| 2018 | ||||||||||||||||||||||||||||
| (In millions of Korean won) | Membership rewards program | Dormant accounts | Litigations | Financial guarantee liabilities1 | Greenhouse Gas Emission liabilities | Others | Total | |||||||||||||||||||||
Beginning | 138 | 5,050 | 7,482 | 2,218 | 177 | 62,137 | 77,202 | |||||||||||||||||||||
Provision (reversal) | 110 | 2,657 | 184 | 173 | (177 | ) | (10,621 | ) | (7,674 | ) | ||||||||||||||||||
Used and Others | (187 | ) | (3,331 | ) | (1,188 | ) | — | — | (29,623 | ) | (34,329 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Ending | 61 | 4,376 | 6,478 | 2,391 | — | 21,893 | 35,199 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
| 1 | Restated based on Korean IFRS 1109. |
| 2017 | ||||||||||||||||||||||||||||
| (In millions of Korean won) | Membership rewards program | Dormant accounts | Litigations | Financial guarantee liabilities | Greenhouse Gas Emission liabilities1 | Others | Total | |||||||||||||||||||||
Beginning | 115 | 50,396 | 8,537 | 1,870 | 358 | 34,779 | 96,055 | |||||||||||||||||||||
Provision (Reversal) | 185 | 5,133 | 1,390 | (8 | ) | (181 | ) | 27,781 | 34,300 | |||||||||||||||||||
Used and Others | (162 | ) | (50,479 | ) | (2,445 | ) | — | — | (423 | ) | (53,509 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Ending | 138 | 5,050 | 7,482 | 1,862 | 177 | 62,137 | 76,846 | |||||||||||||||||||||
|
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|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
| 1 | As at December 31, 2017, the estimated greenhouse gas emission is 112,121 tons. |
127
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
23. Net Defined Benefit Liabilities
Defined benefit plan
The Bank operates defined benefit plans which have the following characteristics:
| • | The Bank 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 Bank. |
The net defined benefit liabilities recognized in the statements of financial position is calculated in accordance with actuarial valuation methods. Data such as discount rates, future salary growth rates, and mortality rates based on market data and historical data are used. Actuarial assumptions may differ from actual results, due to changes in the market, economic trends and mortality trends.
Changes in the net defined benefit liabilities for the years ended December 31, 2018 and 2017, are as follows:
| 2018 | ||||||||||||
| (In millions of Korean won) | Present value of defined benefit obligation | Fair value of plan assets | Net defined benefit liabilities | |||||||||
Beginning | 1,318,665 | (1,310,097 | ) | 8,568 | ||||||||
Current service cost | 136,192 | — | 136,192 | |||||||||
Past service cost1 | 26,663 | — | 26,663 | |||||||||
Interest expense (income) | 37,568 | (37,327 | ) | 241 | ||||||||
Remeasurements : | ||||||||||||
-Actuarial loss arising from experience adjustment | 26,780 | — | 26,780 | |||||||||
-Actuarial loss arising from changes in demographic assumptions | 9,775 | — | 9,775 | |||||||||
-Actuarial loss arising from changes in financial assumptions | 77,611 | — | 77,611 | |||||||||
-Return on plan assets (excluding amounts included in interest income) | — | 17,967 | 17,967 | |||||||||
Contributions | — | (133,000 | ) | (133,000 | ) | |||||||
Payments from plans (benefit payments) | (77,785 | ) | 77,785 | — | ||||||||
Payments from the Bank | (4,469 | ) | — | (4,469 | ) | |||||||
Transfer in | 2,677 | (2,497 | ) | 180 | ||||||||
Transfer out | (4,682 | ) | 4,682 | — | ||||||||
Effects of changes in foreign exchange rate | 17 | — | 17 | |||||||||
|
|
|
|
|
| |||||||
Ending | 1,549,012 | (1,382,487 | ) | 166,525 | ||||||||
|
|
|
|
|
| |||||||
| 1 | The amont of 22,306 million was transferred from other provisions as at December 31, 2017. |
128
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
| 2017 | ||||||||||||
| (In millions of Korean won) | Present value of defined benefit obligation | Fair value of plan assets | Net defined benefit liabilities | |||||||||
Beginning | 1,380,204 | (1,309,069 | ) | 71,135 | ||||||||
Current service cost | 141,485 | — | 141,485 | |||||||||
Past service cost | 4,185 | — | 4,185 | |||||||||
Interest expense(income) | 30,159 | (28,360 | ) | 1,799 | ||||||||
Remeasurements : | ||||||||||||
-Actuarial loss arising from experience adjustment | 11,520 | — | 11,520 | |||||||||
-Actuarial gain arising from changes in financial assumptions | (42,579 | ) | — | (42,579 | ) | |||||||
-Return on plan assets (excluding amounts included in interest income) | — | 12,356 | 12,356 | |||||||||
Contributions | — | (187,500 | ) | (187,500 | ) | |||||||
Payments from plans (benefit payments) | (199,522 | ) | 199,522 | — | ||||||||
Payments from the Bank | (3,977 | ) | — | (3,977 | ) | |||||||
Transfer in | 2,744 | (2,608 | ) | 136 | ||||||||
Transfer out | (5,562 | ) | 5,562 | — | ||||||||
Effects of changes in foreign exchange rate | (24 | ) | — | (24 | ) | |||||||
Others | 32 | — | 32 | |||||||||
|
|
|
|
|
| |||||||
Ending | 1,318,665 | (1,310,097 | ) | 8,568 | ||||||||
|
|
|
|
|
| |||||||
Details of the net defined benefit liabilities as December 31, 2018 and 2017, are as follows:
| (In millions of Korean won) | 2018 | 2017 | ||||||
Present value of defined benefit obligation | 1,549,012 | 1,318,665 | ||||||
Fair value of plan assets | (1,382,487 | ) | (1,310,097 | ) | ||||
|
|
|
| |||||
Net defined benefit liabilities | 166,525 | 8,568 | ||||||
|
|
|
| |||||
Details of post-employment benefits recognized in profit or loss as employee compensation and benefits for the years ended December 31, 2018 and 2017, are as follows:
| (In millions of Korean won) | 2018 | 2017 | ||||||
Current service cost | 136,192 | 141,485 | ||||||
|
|
|
| |||||
Past service cost | 4,357 | 4,185 | ||||||
Interest expenses of net defined benefit liabilities | 241 | 1,799 | ||||||
|
|
|
| |||||
Total | 140,790 | 147,469 | ||||||
|
|
|
| |||||
129
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
Remeasurements of net defined benefit liabilities recognized as other comprehensive income for the years ended December 31, 2018 and 2017, are as follows:
| (In millions of Korean won) | 2018 | 2017 | ||||||
Remeasurements: | ||||||||
-Actuarial loss arising from experience adjustment | (9,775 | ) | — | |||||
-Actuarial gain arising from changes in demographic assumptions | (26,780 | ) | (11,520 | ) | ||||
-Actuarial gain arising from changes in financial assumptions | (77,611 | ) | 42,579 | |||||
-Return on plan assets (excluding amounts included in interest income) | (17,967 | ) | (12,356 | ) | ||||
Income tax effects | 36,336 | (4,526 | ) | |||||
|
|
|
| |||||
Remeasurements after income tax | (95,797 | ) | 14,177 | |||||
|
|
|
| |||||
Details of fair value of plan assets as at December 31, 2018 and 2017, are as follows:
| 2018 | ||||||||||||
| (In millions of Korean won) | Assets quoted in an active market | Assets not quoted in an active market | Total | |||||||||
Time deposits | — | 1,382,487 | 1,382,487 | |||||||||
| 2017 | ||||||||||||
| (In millions of Korean won) | Assets quoted in an active market | Assets not quoted in an active market | Total | |||||||||
Time deposits | — | 1,310,097 | 1,310,097 | |||||||||
Key actuarial assumptions used as at December 31, 2018 and 2017, are as follows:
| Ratio (%) | ||||||||
| 2018 | 2017 | |||||||
Discount rate | 2.30 | 2.90 | ||||||
Salary growth rate | 3.75 | 3.75 | ||||||
Turnover | 1.00 | 1.00 | ||||||
Mortality assumptions are based on the 8th experience-based mortality table of Korea Insurance Development Institute of 2015.
The sensitivity of the defined benefit obligation to changes in the principal assumptions as at December 31, 2018, is as follows:
| Effect on defined benefit obligation | ||||||||||||
| Changes in principal assumption | Increase in principal assumption | Decrease in principal assumption | ||||||||||
Discount rate | 0.5% p | 4.18% decrease | 4.49% increase | |||||||||
Salary growth rate | 0.5% p | 4.12% increase | 3.89% decrease | |||||||||
Turnover | 0.5% p | 0.39% decrease | 0.41% increase | |||||||||
130
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
The above sensitivity analyses are based on a change in an assumption while holding all other assumptions constant. In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated. The sensitivity of the defined benefit obligation to significant actuarial assumptions is calculated using the projected unit credit method which is used to calculate the defined benefit obligation.
Expected maturity analysis of undiscounted pension benefits as at December 31, 2018, is as follows:
| (In millions of Korean won) | Less than 1 year | Between 1 and 2 years | Between 2 and 5 years | Between 5 and 10 years | Over 10 years | Total | ||||||||||||||||||
Pension benefits | 34,207 | 83,204 | 465,152 | 937,292 | 2,708,298 | 4,228,153 | ||||||||||||||||||
The weighted average duration of the defined benefit obligations is 8.86 years.
Expected contributions to plan assets for the period after December 31, 2018, are estimated to be approximatelyW 150,000 million.
24. Other Liabilities
Details of other liabilities as at December 31, 2018 and 2017, are as follows:
| (In millions of Korean won) | 2018 | 2017 | ||||||
Other financial liabilities | ||||||||
Other payables | 2,093,647 | 3,767,618 | ||||||
Prepaid card and debit cards | 2,351 | 2,018 | ||||||
Accrued expenses | 2,305,494 | 2,011,695 | ||||||
Financial guarantee liabilities | 44,256 | 37,620 | ||||||
Deposits for letter of guarantees and others | 148,032 | 340,866 | ||||||
Domestic exchange settlement credits | 1,679,914 | 39,445 | ||||||
Foreign exchanges settlement credits | 102,170 | 124,706 | ||||||
Borrowings from other business accounts | 13,166 | 5,408 | ||||||
Payables to trust accounts | 5,403,198 | 5,126,752 | ||||||
Liabilities incurred from agency relationship | 605,076 | 518,955 | ||||||
Account for agency businesses | 460,949 | 257,760 | ||||||
Others | 29,202 | 28,535 | ||||||
|
|
|
| |||||
| 12,887,455 | 12,261,378 | |||||||
|
|
|
| |||||
Othernon-financial liabilities | ||||||||
Other payables | 847,346 | 384,875 | ||||||
Unearned revenue | 31,941 | 28,928 | ||||||
Accrued expenses | 450,493 | 324,694 | ||||||
Withholding taxes | 92,962 | 145,319 | ||||||
Others | 77,775 | 103,471 | ||||||
|
|
|
| |||||
| 1,500,517 | 987,287 | |||||||
|
|
|
| |||||
| 14,387,972 | 13,248,665 | |||||||
|
|
|
| |||||
131
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
25. Equity
25.1 Capital Stock
Details of outstanding shares as at December 31, 2018 and 2017, are as follows:
| Ordinary shares | ||||||||
| 2018 | 2017 | |||||||
Number of shares authorized | 1,000,000,000 | 1,000,000,000 | ||||||
Face value per share (in Korean Won) | 5,000 | 5,000 | ||||||
Number of shares | 404,379,116 | 404,379,116 | ||||||
Capital stock1 | 2,021,896 | 2,021,896 | ||||||
| 1 | In millions of Korean won. |
25.2 Capital Surplus
Details of capital surplus as at December 31, 2018 and 2017, are as follows:
| (In millions of Korean won) | 2018 | 2017 | ||||||
Paid-in capital in excess of face value | 4,604,417 | 4,604,417 | ||||||
Gain on business combination | 397,669 | 397,669 | ||||||
Revaluation increment | 177,229 | 177,229 | ||||||
Other capital surplus | 40,716 | 40,716 | ||||||
|
|
|
| |||||
| 5,220,031 | 5,220,031 | |||||||
|
|
|
| |||||
The gain on business combination is a gain from a bargain purchase related to the merger with Korea Long Term Credit Bank on December 31, 1998, in accordance with previous Korean GAAP.
25.3 Accumulated Other Comprehensive Income
Details of accumulated other comprehensive income as at December 31, 2018 and 2017, are as follows:
| (In millions of Korean won) | 2018 | |||
Remeasurements of net defined benefit liabilities | (175,698 | ) | ||
Currency translation differences | 3,873 | |||
Net gains on debt instruments at fair value through other comprehensive income | 21,648 | |||
Net gains on equity instruments at fair value through other comprehensive income | 315,052 | |||
Gains on cash flow hedging instruments | 11,539 | |||
|
| |||
| 176,414 | ||||
|
| |||
132
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
| (In millions of Korean won) | 2017 | |||
Remeasurements of net defined benefit liabilities | (79,902 | ) | ||
Currency translation differences | 1,434 | |||
Gains on valuation ofavailable-for-sale financial assets | 816,573 | |||
Gains on cash flow hedging instruments | 7,751 | |||
|
| |||
| 745,856 | ||||
|
| |||
25.4 Retained Earnings
Retained earnings as at December 31, 2018 and 2017, consist of:
| (In millions of Korean won) | 2018 | 2017 | ||||||
Legal reserves | 2,033,926 | 2,033,626 | ||||||
Regulatory reserve for credit losses | 2,137,264 | 1,989,616 | ||||||
Voluntary reserves | 12,441,522 | 10,966,730 | ||||||
Retained earnings before appropriation | 2,539,666 | 2,262,967 | ||||||
|
|
|
| |||||
| 19,152,378 | 17,252,939 | |||||||
|
|
|
| |||||
With respect to the allocation of net profit earned in a fiscal term, the Bank 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 itspaid-in capital in accordance with Article 40 of the Banking Act. The reserves can only be transferred to capital stock or be used to reduce deficit. With respect to the Bank’s branches overseas, a portion of the branch’s net income is appropriated into legal reserves, in line with the financial legislation of the country where the overseas branch is located.
The appropriation of retained earnings for the years ended December 31, 2018 and 2017, (Dates of appropriation: March 21, 2019 and March 22, 2018 for the years ended December 31, 2018 and 2017, respectively) is follows:
| (In millions of Korean won) | 2018 | 2017 | ||||||||||||||
Retained earnings before appropriation | ||||||||||||||||
Unappropriated retained earnings carried forward from prior year | 95 | 51 | ||||||||||||||
Effect of change in accounting policies | 286,616 | — | ||||||||||||||
Reclassification of sale of securities at fair value through other comprehensive income | 13,638 | — | ||||||||||||||
Net income | 2,239,317 | 2,539,666 | 2,262,916 | 2,262,967 | ||||||||||||
Transfers such as voluntary reserves | ||||||||||||||||
Reserve for research and manpower development | 487 | 486 | ||||||||||||||
Revaluation of property and equipment | 56,387 | 10,222 | ||||||||||||||
Reserve for electronic financial transaction accidents | 1,000 | 57,874 | — | 10,708 | ||||||||||||
133
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
Appropriation | ||||||||||||||||
Legal reserve | 1,789,700 | 1,485,500 | ||||||||||||||
Voluntary reserves | 132,861 | 147,648 | ||||||||||||||
Regulatory reserve for credit losses | 667,226 | 640,132 | ||||||||||||||
Cash dividends (dividends per share(%) 2018 : | 667,226 | 640,132 | ||||||||||||||
Other reserve | 7,699 | 2,597,486 | 300 | 2,273,580 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Unappropriated retained earnings carried forward to subsequent year | 54 | 95 | ||||||||||||||
|
|
|
|
Regulatory Reserve for Credit Losses
Measurement and disclosure of regulatory reserve for credit losses are required in accordance with Articles 29.1 through 29.2 of Regulation on Supervision of Banking Business.
Details of the amounts estimated to be appropriated as at December 31, 2018 and 2017, are as follows:
| (In millions of Korean won) | 2018 | 2017 | ||||||
Beginning | 2,137,264 | 1,989,616 | ||||||
Amounts estimated to be appropriated | 132,861 | 147,648 | ||||||
|
|
|
| |||||
Ending | 2,270,125 | 2,137,264 | ||||||
|
|
|
| |||||
Adjustments to the regulatory reserve for credit losses for the years ended December 31, 2018 and 2017, are as follows:
| (In millions of Korean won) | 2018 | 2017 | ||||||
Provision of regulatory reserve for credit losses1 | 239,973 | 147,648 | ||||||
Adjusted profit after provision of regulatory reserve for credit losses2 | 1,999,344 | 2,115,268 | ||||||
| 1 | The amount expected to be appropriated is the amount required to reserve for credit losses, calculated based on the beginning balance of regulatory reserve for credit losses (including unearned reserves) that reflects the effect of adoption of Korean IFRS 1109 retrospectively. |
| 2 | Adjusted profit after provision of regulatory reserve for credit losses is calculated on the assumption that expected provision of regulatory reserve for credit losses which is measured in accordance with Banking Supervision Regulations would be reflected in net profit for the periods without consideration of income tax effect. |
134
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
26. Interest Income and Expense
Details of interest income, expense, and net interest income for the years ended December 31, 2018 and 2017, are as follows:
| (In millions of Korean won) | 2018 | |||
Interest income | ||||
Securities at fair value through profit or loss | 81,156 | |||
Loans at fair value through profit or loss | 7,850 | |||
Securities at fair value through other comprehensive income | 498,189 | |||
Loans at fair value through other comprehensive income | 2,138 | |||
Due from financial institutions at amortized cost | 30,854 | |||
Securities at amortized cost | 319,563 | |||
Loans at amortized cost | 8,692,723 | |||
Others | 104,683 | |||
|
| |||
| 9,737,156 | ||||
|
| |||
Interest expense | ||||
Deposits | 2,884,339 | |||
Debts | 306,288 | |||
Debentures | 477,150 | |||
Others | 81,292 | |||
|
| |||
| 3,749,069 | ||||
|
| |||
Net interest income | 5,988,087 | |||
|
| |||
| (In millions of Korean won) | 20171 | |||
Interest income | ||||
Due from financial institutions | 49,097 | |||
Loans | 7,427,864 | |||
Financial assets at fair value through profit or loss (under Korean IFRS 1039) | 61,119 | |||
Financial investments | ||||
Available-for-sale financial assets | 385,845 | |||
Held-to-maturity financial assets | 276,591 | |||
Others | 96,028 | |||
|
| |||
| 8,296,544 | ||||
|
| |||
Interest expense | ||||
Deposits | 2,223,975 | |||
Debts | 207,545 | |||
Debentures | 353,697 | |||
Others | 57,065 | |||
|
| |||
| 2,842,282 | ||||
|
| |||
Net interest income | 5,454,262 | |||
|
| |||
| 1 | Interest income for the year ended December 31, 2017 has been restated according to changes in accounting policy concerning interest income reclassification. |
Interest income recognized on impaired loans isW 23,042 million (December 31, 2017:W 30,524 million) for the years ended December 31, 2018.
135
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
27. Net Fee and Commission Income
Details of fee and commission income, and fee and commission expense for the years ended December 31, 2018 and 2017, are as follows:
| (In millions of Korean won) | 2018 | 2017 | ||||||
Fee and commission income | ||||||||
Banking activity fees | 209,499 | 194,624 | ||||||
Lending activity fees | 73,005 | 73,549 | ||||||
Credit card related fees | 1,030 | 1,280 | ||||||
Debit card related fees and commissions | 554 | 649 | ||||||
Agent activity fees | 312,497 | 350,036 | ||||||
Trust and other fiduciary fees | 305,893 | 317,977 | ||||||
Guarantee fees | 32,256 | 29,360 | ||||||
Foreign currency related fees | 85,424 | 84,757 | ||||||
Security activity commissions | 146,928 | 176,209 | ||||||
Other business account commission on consignment | 36,947 | 33,793 | ||||||
Others | 239,806 | 219,896 | ||||||
|
|
|
| |||||
| 1,443,839 | 1,482,130 | |||||||
|
|
|
| |||||
Fee and commission expense | ||||||||
Trading activity related fees1 | 11,952 | 13,206 | ||||||
Lending activity fees | 30,661 | 27,510 | ||||||
Credit card related fees | 18,478 | 1,888 | ||||||
Outsourcing related fees | 78,464 | 60,718 | ||||||
Foreign currency related fees | 17,585 | 15,281 | ||||||
Management fees ofwritten-off loans | 12,624 | 10,299 | ||||||
Contributions to external institutions | 23,949 | 25,037 | ||||||
Others | 90,426 | 81,374 | ||||||
|
|
|
| |||||
| 284,139 | 235,313 | |||||||
|
|
|
| |||||
Net fee and commission income | 1,159,700 | 1,246,817 | ||||||
|
|
|
| |||||
| 1 | Fees from financial assets/liabilities at fair value through profit or loss. |
136
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
28. Net Gains or Losses from Financial Assets/Liabilities at Fair Value through Profit or Loss
Net gains or losses from financial assets/liabilities at fair value through profit or loss are composed of gains or losses from financial instruments held for trading includes dividend income and, gains or losses arising from changes in the fair values, sales and redemptions.
Details for the years ended December 31, 2018 and 2017, are as follows:
| (In millions of Korean won) | 2018 | |||
Revenue from financial instruments at fair value through profit or loss |
| |||
Financial assets at fair value through profit or loss | ||||
Debt instruments | 216,321 | |||
Equity instruments | 1,937 | |||
|
| |||
| 218,258 | ||||
|
| |||
Derivatives held for trading | ||||
Interest rate | 1,415,631 | |||
Currency | 3,380,603 | |||
Stock or stock index | 906 | |||
Others | 298 | |||
|
| |||
| 4,797,438 | ||||
|
| |||
Financial liabilities at fair value through profit or loss | 377 | |||
Other financial instruments | 22 | |||
|
| |||
| 5,016,095 | ||||
|
| |||
Expense from financial instruments at fair value through profit or loss |
| |||
Financial assets at fair value through profit or loss | ||||
Debt instruments | 148,576 | |||
Equity instruments | 2,483 | |||
|
| |||
| 151,059 | ||||
|
| |||
Derivatives held for trading | ||||
Interest rate | 1,409,686 | |||
Currency | 3,095,659 | |||
Stock or stock index | 1,079 | |||
Others | 779 | |||
|
| |||
| 4,507,203 | ||||
|
| |||
Financial liabilities at fair value through profit or loss | 193 | |||
Other financial instruments | 60 | |||
|
| |||
| 4,658,515 | ||||
|
| |||
Net gains or losses from financial assets/liabilities at fair value through profit or loss | 357,580 | |||
|
| |||
137
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
| (In millions of Korean won) | 20171 | |||
Gains related to financial instruments held for trading |
| |||
Financial assets held for trading | ||||
Debt instruments | 14,672 | |||
Derivatives held for trading | ||||
Interest rate | 1,197,017 | |||
Currency | 5,487,318 | |||
Stock or stock index | 362 | |||
Others | 1,658 | |||
|
| |||
| 6,686,355 | ||||
|
| |||
Financial liabilities held for trading | 78 | |||
Other financial instruments | 109 | |||
|
| |||
| 6,701,214 | ||||
|
| |||
Losses related to financial instruments held for trading | ||||
Financial assets held for trading | ||||
Debt instruments | 31,713 | |||
|
| |||
| 31,713 | ||||
|
| |||
Derivatives held for trading | ||||
Interest rate | 1,157,911 | |||
Currency | 5,578,860 | |||
Stock or stock index | 2,396 | |||
Others | 1,834 | |||
|
| |||
| 6,741,001 | ||||
|
| |||
Financial liabilities held for trading | 125 | |||
Other financial instruments | 117 | |||
|
| |||
| 6,772,956 | ||||
|
| |||
Net gains or losses from financial instruments held for trading | (71,742 | ) | ||
|
| |||
| 1 | Interest income for the year ended December 31, 2017 has been restated according to changes in accounting policy concerning interest income reclassification. |
138
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
29. Other Operating Income and Expense
Details of other operating income and expenses for years ended December 31, 2018 and 2017, are as follows:
| (In millions of Korean won) | 2018 | |||
Other operating income | ||||
Revenue related to financial assets at fair value through other comprehensive income |
| |||
Gains on redemption of the securities at fair value through other comprehensive income | 230 | |||
Gains on sale of the securities at fair value through other comprehensive income | 93,899 | |||
|
| |||
| 94,129 | ||||
|
| |||
Revenue related to financial assets at amortized cost | ||||
Gains on sale of loans at amortized cost | 15,691 | |||
|
| |||
| 15,691 | ||||
|
| |||
Gains on foreign exchange transactions | 1,112,384 | |||
Dividend income | 38,933 | |||
Others | 84,381 | |||
|
| |||
| 1,345,518 | ||||
|
| |||
Other operating expense | ||||
Expenses related to financial assets at fair value through other comprehensive income |
| |||
Losses on sale of the securities at fair value through other comprehensive income | 7,135 | |||
|
| |||
| 7,135 | ||||
|
| |||
Expenses related to financial assets at amortized cost | ||||
Losses on sale of loans at amortized cost | 6,674 | |||
|
| |||
| 6,674 | ||||
|
| |||
Losses on foreign exchanges transactions | 1,160,270 | |||
Others | 826,202 | |||
|
| |||
| 2,000,281 | ||||
Net other operating expense | (654,763 | ) | ||
|
| |||
139
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
| (In millions of Korean won) | 2017 | |||
Other operating income |
| |||
Revenue related toavailable-for-sale financial assets |
| |||
Gains on redemption ofavailable-for-sale financial assets | 5 | |||
Gains on sale ofavailable-for-sale financial assets | 98,487 | |||
|
| |||
| 98,492 | ||||
Gains on foreign exchange transactions | 2,260,280 | |||
Dividend income | 121,012 | |||
Others | 90,715 | |||
|
| |||
| 2,570,499 | ||||
|
| |||
Other operating expense |
| |||
Expense related toavailable-for-sale financial assets | ||||
Losses on sale ofavailable-for-sale financial assets | 148,481 | |||
Impairment losses onavailable-for-sale financial assets | 12,405 | |||
|
| |||
| 160,886 | ||||
|
| |||
Losses on foreign exchange transactions | 1,887,034 | |||
Others | 761,599 | |||
|
| |||
| 2,809,519 | ||||
|
| |||
Net other operating expense | (239,020 | ) | ||
|
| |||
140
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
30. General and Administrative Expenses
30.1 General and Administrative Expenses
Details of general and administrative expenses for the years ended December 31, 2018 and 2017, are as follows:
| (In millions of Korean won) | 2018 | 2017 | ||||||
Employee Benefits | ||||||||
Salaries and short-term employee benefits - salaries | 1,509,641 | 1,518,626 | ||||||
Salaries and short-term employee benefits - welfare expense | 649,848 | 642,097 | ||||||
Post-employment benefits - defined benefit plans | 140,790 | 147,469 | ||||||
Post-employment benefits - defined contribution plans | 6,719 | 3,594 | ||||||
Termination benefits | 209,737 | 151,172 | ||||||
Share-based payments | 4,051 | 33,148 | ||||||
|
|
|
| |||||
| 2,520,786 | 2,496,106 | |||||||
|
|
|
| |||||
Depreciation and amortization | 241,400 | 229,890 | ||||||
|
|
|
| |||||
Other general and administrative expenses | ||||||||
Rental expense | 253,302 | 228,401 | ||||||
Tax and dues | 106,563 | 96,324 | ||||||
Communication | 23,038 | 22,113 | ||||||
Electricity and utilities | 21,456 | 21,909 | ||||||
Publication | 9,667 | 11,237 | ||||||
Repairs and maintenance | 11,194 | 11,099 | ||||||
Vehicle | 7,172 | 6,925 | ||||||
Travel | 3,683 | 3,975 | ||||||
Training | 17,460 | 16,688 | ||||||
Service fees | 107,036 | 91,999 | ||||||
Others | 410,951 | 395,880 | ||||||
|
|
|
| |||||
| 971,522 | 906,550 | |||||||
|
|
|
| |||||
| 3,733,708 | 3,632,546 | |||||||
|
|
|
| |||||
30.2 Share-based Payments
30.2.1 Share Grants
The Bank changed the scheme of share-based payment from share option to share grants in November 2007. The share grant award program is an incentive plan that sets, on grant date, the maximum number of shares that can be awarded. Actual shares to be granted is determined in accordance with achievement of performance targets over the vesting period.
141
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
Details of the share grants as at December 31, 2018, are as follows:
| (In number of shares) | ||||||||||
Share grants | Grant date | Number of granted shares1, 2 | Vesting conditions | |||||||
Series 69 | 2017.01.01 | 173,030 | Service provision, TSR 30~50%, Performance of the company and responsibilities 50~70% | |||||||
Series 71 | 2017.08.26 | 4,372 | Service provision, TSR 30~50%, Performance of the company and responsibilities 50~70% | |||||||
Series 72 | 2017.08.28 | 5,601 | Service provision, TSR 30~50%, Performance of the company and responsibilities 50~70% | |||||||
Series 73 | 2017.11.21 | 27,786 | Service provision, TSR 30~50%, Performance of the bank 50~70% | |||||||
Series 74 | 2018.01.01 | 190,536 | Service provision, TSR 30~50%, Performance of the company and responsibilities 50~70% | |||||||
Deferred grant in 2015 | — | 33,050 | ||||||||
Deferred grant in 2016 | — | 110,967 | ||||||||
Deferred grant in 2017 | — | 139,697 | ||||||||
|
| |||||||||
| 685,039 | ||||||||||
|
| |||||||||
| 1 | Granted shares in relation to Series 69, 71 ~ 74 represent the total number of shares granted to directors and employees but not vested at the end of reporting period. The number of deferred grants represents residual shares that have been vested at the end of reporting period. |
| 2 | Certain percentages among the granted shares are deferred for over three years to five years from the time of initial exercising. |
Details of share grants linked to short-term performance as at December 31, 2018, are as follows:
Share grants1 | Grant date | Number of vested shares | Vesting conditions | |||||||
Granted shares for 2015 | 2015.01.01 | 58,366 | Vested | |||||||
Granted shares for 2016 | 2016.01.01 | 83,794 | Vested | |||||||
Granted shares for 2017 | 2017.01.01 | 80,331 | Vested | |||||||
Granted shares for 2018 | 2018.01.01 | 109,871 | Proportion to service period | |||||||
| 1 | Options are given to the executives and employees during the year for deferred payment schedule (after the retirement date), payment proportion and payment period. Due to these given options, the deferred payment period might be a maximum of five years after the retirement date. |
142
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
Share grants are measured at fair value using the MonteCarlo Simulation Model and assumptions used in determining the fair value as at December 31, 2018, are as follows:
| (In Korean won) | Expected exercise period (Years) | Risk free rate (%) | Fair value (Market performance condition) | Fair value (Non-market performance condition) | ||||||||||||
Linked to long-term performance |
| |||||||||||||||
Series 69 | 0.00~5.00 | 1.75 | % | 40,224~47,153 | 40,224~47,153 | |||||||||||
Series 71 | 1.00~4.00 | 1.75 | % | 41,473~45,236 | 41,473~45,236 | |||||||||||
Series 72 | 1.00~4.00 | 1.75 | % | 41,473~45,236 | 41,473~45,236 | |||||||||||
Series 73 | 0.89~3.89 | 1.75 | % | 41,614~45,382 | 41,614~45,382 | |||||||||||
Series 74 | 1.00~6.00 | 1.75 | % | 38,510~44,580 | 39,077~45,236 | |||||||||||
Grant deferred in 2015 | 0.00~3.00 | 1.75 | % | — | 42,682~47,153 | |||||||||||
Grant deferred in 2016 | 0.00~5.00 | 1.75 | % | — | 40,224~47,153 | |||||||||||
Grant deferred in 2017 | 0.00~4.00 | 1.75 | % | — | 41,473~47,153 | |||||||||||
Linked to short-term performance |
| |||||||||||||||
Share granted in 2015 | 0.00~5.00 | 1.75 | % | — | 40,224~47,153 | |||||||||||
Share granted in 2016 | 0.00~6.00 | 1.75 | % | — | 39,077~47,153 | |||||||||||
Share granted in 2017 | 0.00~6.00 | 1.75 | % | — | 39,077~47,153 | |||||||||||
Share granted in 2018 | 1.00~6.00 | 1.75 | % | — | 39,077~45,236 | |||||||||||
Expected volatility is based on the historical volatility of the share price over the most recent period that is generally commensurate with the expected term of the grant and the current stock price as at December 31, 2018, was used for the underlying asset price. Also, the average three-year historical dividend rate was used as the expected dividend rate.
As at December 31, 2018 and 2017, the accrued expenses related to share-based payments including share grants, amounted toW 40,873 million andW 58,897 million, respectively, and the compensation costs from share grants amounting toW 4,051 million andW 33,148 million were incurred during the years ended December 31, 2018 and 2017, respectively.
143
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
30.2.2 Mileage Stock
Details of Mileage Stock as at December 31, 2018, are as follows:
| (In number of shares) | Grant date | Number of granted shares1 | Expected exercise period (Years)1 | Number of exercisable shares2 | ||||||||||||
Share granted in 2016 | 2016.01.23 | 33,829 | 0.00~0.06 | 12,334 | ||||||||||||
| 2016.04.29 | 60 | 0.00~0.33 | 21 | |||||||||||||
| 2016.07.07 | 280 | 0.00~0.52 | 62 | |||||||||||||
| 2016.07.18 | 767 | 0.00~0.55 | — | |||||||||||||
| 2016.08.03 | 107 | 0.00~0.59 | 38 | |||||||||||||
| 2016.08.17 | 51 | 0.00~0.63 | 23 | |||||||||||||
| 2016.08.30 | 256 | 0.00~0.66 | 168 | |||||||||||||
| 2016.09.06 | 206 | 0.00~0.68 | 103 | |||||||||||||
| 2016.10.07 | 105 | 0.00~0.77 | 69 | |||||||||||||
| 2016.11.01 | 118 | 0.00~0.84 | 24 | |||||||||||||
| 2016.12.07 | 211 | 0.00~0.93 | 96 | |||||||||||||
| 2016.12.08 | 43 | 0.00~0.94 | 32 | |||||||||||||
| 2016.12.15 | 12 | 0.00~0.96 | 12 | |||||||||||||
| 2016.12.20 | 309 | 0.00~0.97 | 169 | |||||||||||||
| 2016.12.28 | 76 | 0.00~0.99 | 40 | |||||||||||||
| 2016.12.30 | 210 | 0.00~1.00 | 79 | |||||||||||||
Share granted in 2017 | 2017.01.09 | 28,925 | 0.00~1.02 | 13,198 | ||||||||||||
| 2017.02.03 | 43 | 0.00~1.09 | 28 | |||||||||||||
| 2017.04.03 | 82 | 0.00~1.25 | 61 | |||||||||||||
| 2017.05.22 | 20 | 0.00~1.39 | 20 | |||||||||||||
| 2017.07.03 | 52 | 0.00~1.50 | 52 | |||||||||||||
| 2017.08.07 | 29 | 0.00~1.60 | 19 | |||||||||||||
| 2017.08.08 | 5 | 0.00~1.60 | 2 | |||||||||||||
| 2017.08.16 | 204 | 0.00~1.62 | 166 | |||||||||||||
| 2017.08.17 | 40 | 0.00~1.63 | 32 | |||||||||||||
| 2017.08.24 | 387 | 0.00~1.65 | 323 | |||||||||||||
| 2017.09.08 | 82 | 0.00~1.69 | 73 | |||||||||||||
| 2017.10.20 | 9 | 0.00~1.80 | — | |||||||||||||
| 2017.11.01 | 120 | 0.00~1.84 | 103 | |||||||||||||
| 2017.11.06 | 106 | 0.00~1.85 | 106 | |||||||||||||
| 2017.12.06 | 105 | 0.00~1.93 | 91 | |||||||||||||
| 2017.12.26 | 254 | 0.00~1.99 | 215 | |||||||||||||
| 2017.12.29 | 114 | 0.00~1.99 | 98 | |||||||||||||
Share granted in 2018 | 2018.01.10 | 19,197 | 0.00~2.03 | 18,663 | ||||||||||||
| 2018.02.12 | 9 | 0.00~2.12 | 9 | |||||||||||||
| 2018.04.02 | 115 | 0.00~2.25 | 115 | |||||||||||||
| 2018.04.30 | 86 | 0.00~2.33 | 86 | |||||||||||||
| 2018.05.08 | 170 | 0.00~2.35 | 166 | |||||||||||||
| 2018.06.01 | 140 | 0.00~2.42 | 140 | |||||||||||||
| 2018.07.02 | 180 | 0.00~2.50 | 180 | |||||||||||||
| 2018.08.07 | 194 | 0.00~2.60 | 194 | |||||||||||||
| 2018.08.09 | 47 | 0.00~2.61 | 47 | |||||||||||||
| 2018.08.14 | 30 | 0.00~2.62 | 30 | |||||||||||||
144
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
| 2018.08.16 | 130 | 0.00~2.62 | 130 | |||||||||||
| 2018.09.07 | 106 | 0.00~2.68 | 106 | |||||||||||
| 2018.10.04 | 129 | 0.00~2.76 | 129 | |||||||||||
| 2018.11.01 | 258 | 0.00~2.84 | 258 | |||||||||||
| 2018.11.06 | 236 | 0.00~2.85 | 236 | |||||||||||
| 2018.12.04 | 21 | 0.00~2.93 | 21 | |||||||||||
| 2018.12.07 | 91 | 0.00~2.93 | 91 | |||||||||||
| 2018.12.03 | 132 | 0.00~2.92 | 132 | |||||||||||
| 2018.12.12 | 64 | 0.00~2.95 | 64 | |||||||||||
| 2018.12.18 | 271 | 0.00~2.96 | 271 | |||||||||||
| 2018.12.19 | 42 | 0.00~2.97 | 42 | |||||||||||
| 2018.12.31 | 127 | 0.00~3.00 | 127 | |||||||||||
|
|
|
| |||||||||||
| 88,992 | 49,094 | |||||||||||||
|
|
|
|
| 1 | Mileage stock is exercisable for two years after one year from the grant date. When the mileage stock is exercised, the closing price of prior month is applied. However, in case of transfer or retirement during the vesting period, mileage stock is exercisable at the closing price of the last month prior to transfer or retirement. |
| 2 | The exercisable shares are assessed based on the stock price as at December 31, 2018. These shares are vested immediately at grant date. |
The accrued expenses for share-based payments in regard to mileage stock as at December 31, 2018 and 2017, areW2,283 million andW 2,973 million, respectively. The compensation costs amounting toW1,350 million andW 2,378 million were recognized as an expense for the years ended December 31, 2018 and 2017, respectively.
31.Non-operating Income and Expenses
Details ofnon-operating income and expenses for the years ended December 31, 2018 and 2017, are as follows:
| (In millions of Korean won) | 2018 | 2017 | ||||||
Non-operating income | ||||||||
Gains on disposal in property and equipment and assets held for sale | 120,137 | 58,895 | ||||||
Rental income | 8,934 | 8,067 | ||||||
Dividend income from associates and subsidiaries | 78,206 | 156,433 | ||||||
Others | 20,762 | 45,220 | ||||||
|
|
|
| |||||
| 228,039 | 268,615 | |||||||
|
|
|
| |||||
Non-operating expenses | ||||||||
Losses on disposal in property and equipment and assets held for sale | 5,590 | 2,581 | ||||||
Donation | 91,943 | 39,752 | ||||||
Restoration cost | 1,854 | 3,323 | ||||||
Others | 87,285 | 177,194 | ||||||
|
|
|
| |||||
| 186,672 | 222,850 | |||||||
|
|
|
| |||||
Netnon-operating income (expenses) | 41,367 | 45,765 | ||||||
|
|
|
| |||||
145
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
32. Income Tax Expense
Income tax expense the years ended December 31, 2018 and 2017, are as follows:
| (In millions of Korean won) | 2018 | |||
Tax payable | ||||
Current tax expense | 798,523 | |||
Adjustments recognized in the period for current tax of prior years | (4,856 | ) | ||
|
| |||
| 793,667 | ||||
|
| |||
Changes in deferred income tax assets (liabilities) | 28,276 | |||
|
| |||
Income tax expense of overseas branches | 6,863 | |||
|
| |||
Income tax recognized directly in equity | ||||
Net losses on debt instruments at fair value through other comprehensive income | (21,618 | ) | ||
Remeasurements of net defined benefit liabilities | 36,336 | |||
Net gains on equity instruments at fair value through other comprehensive income | 13,660 | |||
Cash flow hedges | (1,437 | ) | ||
Reclassification of sale of securities at fair value through other comprehensive income | (5,172 | ) | ||
|
| |||
| 26,941 | ||||
|
| |||
Consolidated tax effect | (31,431 | ) | ||
|
| |||
Tax expense | 819,144 | |||
|
| |||
| (In millions of Korean won) | 2017 | |||
Tax payable | ||||
Current tax expense | 344,761 | |||
Adjustments recognized in the period for current tax of prior years | (19,160 | )�� | ||
|
| |||
| 325,601 | ||||
|
| |||
Changes in deferred income tax assets (liabilities) | 213,381 | |||
|
| |||
Income tax expense of overseas branches | 4,721 | |||
|
| |||
Income tax recognized directly in equity | ||||
Changes in value ofavailable-for-sale financial assets | (89,362 | ) | ||
Remeasurements of net defined benefit liabilities | (4,526 | ) | ||
Cash flow hedges | (2,833 | ) | ||
|
| |||
| (96,721 | ) | |||
|
| |||
Consolidated tax effect | (19,347 | ) | ||
|
| |||
Tax expense | 427,635 | |||
|
| |||
| 1 | The Bank did not recognize deferred income tax assets regarding the loss on valuation of JSC Bank Center Credit’s shares due to the low possibility of the disposal of its shares. Notwithstanding, the Bank recognized |
146
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
An analysis of the net profit before income tax and income tax expense for the years ended December 31, 2018 and 2017, follows:
| (In millions of Korean won) | 2018 | 2017 | ||||||
Profit before income tax | 3,058,461 | 2,690,551 | ||||||
|
|
|
| |||||
Tax at the applicable tax rate1 | 830,745 | 650,684 | ||||||
Non-taxable income | (2,967 | ) | (189,687 | ) | ||||
Non-deductible expense | 12,964 | 8,992 | ||||||
Tax credit and tax exemption | (275 | ) | (296 | ) | ||||
Temporary difference for which no deferred tax is recognized | 1,112 | 1,166 | ||||||
Tax supplementary pay (rebate) for tax of prior years | (2,771 | ) | (8,334 | ) | ||||
Income tax expense of overseas branch | 6,863 | 4,721 | ||||||
Effect of tax rate change | — | (22,051 | ) | |||||
Consolidated tax effect | (31,431 | ) | (19,347 | ) | ||||
Others | 4,904 | 1,787 | ||||||
|
|
|
| |||||
Tax expense | 819,144 | 427,635 | ||||||
|
|
|
| |||||
Tax expense / Profit before income tax (%) | 26.78 | 15.89 | ||||||
| 1 | Applicable income tax rate for |
Details of current tax liabilities (income tax payables) and current tax assets (income tax refund receivables) before offsetting, as at December 31, 2018 and 2017, are as follows:
| (In millions of Korean won) | 2018 | 2017 | ||||||
Tax payables after offsetting1, 2 | 622,155 | 231,383 | ||||||
Adjustment on consolidated tax payable and others3 | (31,431 | ) | (19,347 | ) | ||||
Accounts payables4 | (586,699 | ) | (209,533 | ) | ||||
|
|
|
| |||||
Current tax payable | 4,025 | 2,503 | ||||||
|
|
|
| |||||
| 1 | Excludes current tax assets of |
| 2 | Includes income tax payable of |
| 3 | Tax expense reduced due to the adoption of consolidated tax return was recognized as tax benefit. |
| 4 | The amount of income tax payable by the Bank is reclassified as accounts payable, not to the tax authority, but to KB Financial Group Inc. due to the adoption of consolidated tax return. |
147
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
33. Dividends
The dividend to the shareholder of the Bank in respect of the year ended December 31, 2018, ofW1,650 per share, amounting to total dividends ofW667,226 million, is to be proposed at the annual general shareholder’s meeting on March 21, 2019. The Bank’s financial statements as at December 31, 2018, do not reflect this dividend payable.
34. Accumulated Other Comprehensive Income
Details of accumulated other comprehensive income for the years ended December 31, 2018 and 2017, are as follows:
| 2018 | ||||||||||||||||||||||||||||
| (In millions of Korean won) | Beginning1 | Changes (excluding reclassification) | Reclassification to profit or loss | Tax effect | Transfer to retained earnings | Others | Ending | |||||||||||||||||||||
Remeasurements of net defined benefit liabilities | (79,902 | ) | (132,132 | ) | — | 36,336 | — | — | (175,698 | ) | ||||||||||||||||||
Currency translation differences | 3,017 | 856 | — | — | — | — | 3,873 | |||||||||||||||||||||
Net gains (losses) on debt instruments at fair value through other comprehensive income | (35,344 | ) | 72,021 | 6,455 | (21,618 | ) | — | 134 | 21,648 | |||||||||||||||||||
Net gains (losses) on equity instruments at fair value through other comprehensive income | 351,065 | (30,863 | ) | — | 13,660 | (18,810 | ) | — | 315,052 | |||||||||||||||||||
Gains(losses) on cash flow hedging instruments | 7,751 | 6,980 | (1,755 | ) | (1,437 | ) | — | — | 11,539 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
| 246,587 | (83,138 | ) | 4,700 | 26,941 | (18,810 | ) | 134 | 176,414 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
| 1 | Restated based on Korean IFRS 1109. |
| 2017 | ||||||||||||||||||||
| (In millions of Korean won) | Beginning | Changes (excluding reclassification) | Reclassification to profit or loss | Tax effect | Ending | |||||||||||||||
Remeasurements of net defined benefit liabilities | (94,079 | ) | 18,703 | — | (4,526 | ) | (79,902 | ) | ||||||||||||
Currency translation differences | 4,320 | (2,886 | ) | — | — | 1,434 | ||||||||||||||
Gains (losses) on valuation ofavailable-for-sale financial assets | 690,259 | 169,575 | 46,101 | (89,362 | ) | 816,573 | ||||||||||||||
Gains (losses) on cash flow hedging instruments | 337 | 10,691 | (444 | ) | (2,833 | ) | 7,751 | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
| 600,837 | 196,083 | 45,657 | (96,721 | ) | 745,856 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
148
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
35. Trust Accounts
Financial information of the trust segments the Bank manages as at December 31, 2018 and 2017, and for years ended December 31, 2018 and 2017, are as follows:
| Total assets | Operating revenues | |||||||||||||||
| (In millions of Korean won) | 2018 | 2017 | 2018 | 2017 | ||||||||||||
Consolidated | 4,259,441 | 4,148,600 | 127,994 | 110,487 | ||||||||||||
Unconsolidated | 47,644,193 | 43,256,371 | 1,609,587 | 2,590,728 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| 51,903,634 | 47,404,971 | 1,737,581 | �� | 2,701,215 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| 1 | Financial information of the trust accounts are not based on Korean IFRS; it has been prepared in accordance with the Statement of Korea Accounting Standard 5004, Trust Accounts and enforcement regulations of Financial Investment Services under the Financial Investment Services and Capital Markets Act. |
Significant receivables and payables related to the Bank’s trust accounts as at December 31, 2018 and 2017, are as follows:
| (In millions of Korean won) | 2018 | 2017 | ||||||||
Assets | ||||||||||
Accrued trust fees | 53,618 | 46,524 | ||||||||
Other accrued income | 23,658 | 21,250 | ||||||||
|
|
|
| |||||||
| 77,276 | 67,774 | |||||||||
|
|
|
| |||||||
Trust Segment | Liabilities | |||||||||
Due to trust accounts | 1,278,243 | 1,265,074 | ||||||||
Accrued interest on due to trust accounts | 6,531 | 4,449 | ||||||||
Deposits | 345,873 | 385,597 | ||||||||
Accrued interest on deposits | 24,868 | 25,544 | ||||||||
|
|
|
| |||||||
| 1,655,515 | 1,680,664 | |||||||||
|
|
|
| |||||||
Assets | ||||||||||
Accrued trust fees | 5,549 | 4,982 | ||||||||
|
|
|
| |||||||
Custody Segment | Liabilities | |||||||||
Due to trust accounts | 4,124,955 | 3,861,677 | ||||||||
Accrued interest on due to trust accounts | 4,280 | 3,408 | ||||||||
|
|
|
| |||||||
| 4,129,235 | 3,865,085 | |||||||||
|
|
|
| |||||||
149
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
Significant revenue and expenses related to the Bank’s trust accounts for the years ended December 31, 2018 and 2017, are as follows:
| (In millions of Korean won) | 2018 | 2017 | ||||||||
Revenues | ||||||||||
Fees and commissions from trust accounts | 277,677 | 292,716 | ||||||||
Trust Segment | Management fees and commissions from retirement pension | 25,321 | 24,590 | |||||||
Commissions from early termination in trust accounts | 87 | 88 | ||||||||
|
|
|
| |||||||
| 303,085 | 317,394 | |||||||||
Expenses | ||||||||||
Interest expenses on due to trust accounts | 20,742 | 17,560 | ||||||||
Interest expenses on deposits | 21,389 | 29,005 | ||||||||
|
|
|
| |||||||
| 42,131 | 46,565 | |||||||||
Revenues | ||||||||||
Fees and commissions from trust accounts | 28,216 | 25,261 | ||||||||
|
|
|
| |||||||
Custody Segment | Expenses | |||||||||
Interest expenses on due to trust accounts | 43,613 | 28,504 | ||||||||
|
|
|
| |||||||
As at December 31, 2018 and 2017, the carrying amounts of the trust accounts for which the Bank guarantees payment of principal or payment of principal and fixed rate of return are as follows:
| (In millions of Korean won) | 2018 | 2017 | ||||||||
Trust accounts guaranteeing repayment of principal | Old age pension | 1,791 | 1,955 | |||||||
Personal pension | 1,883,905 | 1,872,089 | ||||||||
Pension | 2,218,351 | 2,115,220 | ||||||||
Retirement | 9,705 | 10,979 | ||||||||
New personal pension | 90,893 | 90,582 | ||||||||
New old age pension | 4,801 | 5,325 | ||||||||
Retail | 12,940 | 14,559 | ||||||||
Corporate | 1,344 | 1,372 | ||||||||
Installment | 18,025 | 19,789 | ||||||||
|
|
|
| |||||||
| 4,241,755 | 4,131,870 | |||||||||
|
|
|
| |||||||
Trust accounts guaranteeing repayment of principal and fixed rate of return | Development money | 17,594 | 16,639 | |||||||
Unspecified monetary | 92 | 91 | ||||||||
|
|
|
| |||||||
| 17,686 | 16,730 | |||||||||
|
|
|
| |||||||
| 4,259,441 | 4,148,600 | |||||||||
|
|
|
| |||||||
150
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
| 1 | Trust account is not based on theK-IFRS, but is prepared in accordance with the Trust Accounts of Trustee; Financial Accounting Standards No.5004 and Regulations on Financial Investment Business under the Financial Investment Services and Capital Markets Act. |
As at December 31, 2018 and 2017, there is no amount the Bank has to pay in relation to the management results of the trust accounts in accordance with the guarantees of payment of principal or payment of principal and fixed rate of return.
36. Supplemental Cash Flow Information
Cash and cash equivalents as at December 31, 2018 and 2017, are as follows:
| (In millions of Korean won) | 2018 | 2017 | ||||||
Cash | 2,179,255 | 2,163,836 | ||||||
Checks with other banks | 872,166 | 430,253 | ||||||
Due from Bank of Korea | 8,911,607 | 8,981,665 | ||||||
Due from other financial institutions | 1,450,752 | 3,052,685 | ||||||
|
|
|
| |||||
| 13,413,780 | 14,628,439 | |||||||
|
|
|
| |||||
Restricted due from financial institutions | (9,005,204 | ) | (9,084,140 | ) | ||||
Due from financial institutions with original maturities over three months | — | (34,453 | ) | |||||
|
|
|
| |||||
| (9,005,204 | ) | (9,118,593 | ) | |||||
|
|
|
| |||||
| 4,408,576 | 5,509,846 | |||||||
|
|
|
| |||||
Significantnon-cash transactions for the years ended December 31, 2018 and 2017, are as follows:
| (In millions of Korean won) | 2018 | 2017 | ||||||
Decrease in loans due to the write-offs | 526,134 | 650,419 | ||||||
Changes in accumulated other comprehensive income due to gains and losses on debt instruments at fair value through other comprehensive income | 56,992 | — | ||||||
Changes in accumulated other comprehensive income due to valuation of financial investments | — | 126,314 | ||||||
Changes in financial investments due todebt-for-equity swap | 22,286 | 10,250 | ||||||
Cash inflows and outflows from income tax, interest and dividends for years ended December 31, 2018 and 2017, are as follows:
| (In millions of Korean won) | Activities | 2018 | 2017 | |||||||||
Income tax paid | Operating | 388,897 | 399,280 | |||||||||
Interest received | Operating | 9,995,892 | 8,564,606 | |||||||||
Interest paid | Operating | 3,390,941 | 2,818,781 | |||||||||
Dividends received | Operating | 173,812 | 259,188 | |||||||||
Dividends paid | Financing | 640,132 | 359,493 | |||||||||
151
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
Changes in liabilities arising from financial activities for the year ended December 31, 2018 are as follows:
| (In millions of Korean won) | ||||||||||||||||||||||||||||
| Derivative financial instrument for hedging purposes1 | Debts | Debentures | Payables to trust accounts | Finance lease liabilities | Deposits for letter of guarantees and others | Total | ||||||||||||||||||||||
Beginning | (3,659 | ) | 15,854,911 | 18,167,498 | 5,126,752 | 1,642 | 340,866 | 39,488,010 | ||||||||||||||||||||
Cash flow | (17,698 | ) | 1,346,037 | 3,447,178 | 276,446 | (11,242 | ) | (201,236 | ) | 4,839,485 | ||||||||||||||||||
Lease newly acquired | — | — | — | — | 17,555 | — | 17,555 | |||||||||||||||||||||
Exchange differences | — | 179,864 | 147,306 | — | — | — | 327,170 | |||||||||||||||||||||
Changes in fair values | 30,679 | — | 4,067 | — | — | — | 34,746 | |||||||||||||||||||||
Changes from business combination | — | 31,998 | — | — | — | — | 31,998 | |||||||||||||||||||||
Other changes fromnon-cash transactions | 5,321 | (825 | ) | 33,035 | — | 109 | 8,401 | 46,041 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Ending | 14,643 | 17,411,985 | 21,799,084 | 5,403,198 | 8,064 | 148,031 | 44,785,005 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
| 1 | Derivative financial instruments held for hedging are shown at net amounts of liabilities and assets. |
152
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
37. Contingent Liabilities and Commitments
Acceptances and guarantees as at December 31, 2018 and 2017, are as follows:
| (In millions of Korean won) | 2018 | 2017 | ||||||
Confirmed acceptances and guarantees | ||||||||
Confirmed acceptances and guarantees in Korean won | ||||||||
Acceptances and guarantees for KB purchasing loan | 196,517 | 252,817 | ||||||
Others | 597,636 | 530,272 | ||||||
|
|
|
| |||||
| 794,153 | 783,089 | |||||||
|
|
|
| |||||
Confirmed acceptances and guarantees in foreign currencies | ||||||||
Acceptances of letter of credit | 208,926 | 147,987 | ||||||
Letter of guarantees | 53,210 | 60,853 | ||||||
Bid bond | 51,528 | 46,984 | ||||||
Performance bond | 604,311 | 563,506 | ||||||
Refund guarantees | 592,925 | 778,779 | ||||||
Others | 2,513,553 | 1,948,907 | ||||||
|
|
|
| |||||
| 4,024,453 | 3,547,016 | |||||||
|
|
|
| |||||
Financial guarantees | ||||||||
Acceptances and guarantees for mortgage | 50,497 | 57,445 | ||||||
Overseas debt guarantees | 463,245 | 451,325 | ||||||
International financing guarantees in foreign currencies | 110,070 | 46,953 | ||||||
Others | 270,000 | 270,000 | ||||||
|
|
|
| |||||
| 893,812 | 825,723 | |||||||
|
|
|
| |||||
| 5,712,418 | 5,155,828 | |||||||
|
|
|
| |||||
Unconfirmed acceptances and guarantees | ||||||||
Guarantees of letter of credit | 1,744,612 | 2,250,439 | ||||||
Refund guarantees | 686,843 | 384,958 | ||||||
|
|
|
| |||||
| 2,431,455 | 2,635,397 | |||||||
|
|
|
| |||||
| 8,143,873 | 7,791,225 | |||||||
|
|
|
| |||||
153
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
Guarantee exposure by credit ratings
The credit quality of the guarantees exposure as at December 31, 2018 can be categorized as follows:
| 2018 | ||||||||||||||||
| Financial instruments applying12-month expected credit losses | Financial instruments applying lifetime expected credit losses | Total | ||||||||||||||
| (In millions of Korean won) | Non-impaired | Impaired | ||||||||||||||
Confirmed acceptances and guarantees1 |
| |||||||||||||||
Grade 1 | 3,864,908 | — | — | 3,864,908 | ||||||||||||
Grade 2 | 1,579,619 | 29,034 | — | 1,608,653 | ||||||||||||
Grade 3 | 62,522 | 13,585 | — | 76,107 | ||||||||||||
Grade 4 | 30,443 | 117,166 | 420 | 148,029 | ||||||||||||
Grade 5 | — | 171 | 14,550 | 14,721 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| 5,537,492 | 159,956 | 14,970 | 5,712,418 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
Unconfirmed acceptances and guarantees1 |
| |||||||||||||||
Grade 1 | 1,102,294 | 1,747 | — | 1,104,041 | ||||||||||||
Grade 2 | 1,180,137 | 17,795 | — | 1,197,932 | ||||||||||||
Grade 3 | 25,205 | 16,225 | — | 41,430 | ||||||||||||
Grade 4 | 9,627 | 66,186 | — | 75,813 | ||||||||||||
Grade 5 | — | 219 | 12,020 | 12,239 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| 2,317,263 | 102,172 | 12,020 | 2,431,455 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
| 7,854,755 | 262,128 | 26,990 | 8,143,873 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
| 1 | Applied same criteria as the credit quality classification of loans. |
Acceptances and guarantees by counterparty as at December 31, 2018 and 2017, are as follows:
| 2018 | ||||||||||||||||
| (In millions of Korean won) | Confirmed guarantees | Unconfirmed guarantees | Total | Proportion (%) | ||||||||||||
Large companies | 4,914,524 | 1,901,767 | 6,816,291 | 83.70 | ||||||||||||
Small and medium sized companies | 603,874 | 423,947 | 1,027,821 | 12.62 | ||||||||||||
Public and others | 194,020 | 105,741 | 299,761 | 3.68 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| 5,712,418 | 2,431,455 | 8,143,873 | 100.00 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
154
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
| 2017 | ||||||||||||||||
| (In millions of Korean won) | Confirmed guarantees | Unconfirmed guarantees | Total | Proportion (%) | ||||||||||||
Large companies | 4,344,763 | 1,913,114 | 6,257,877 | 80.32 | ||||||||||||
Small and medium sized companies | 616,933 | 492,265 | 1,109,198 | 14.24 | ||||||||||||
Public and others | 194,132 | 230,018 | 424,150 | 5.44 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| 5,155,828 | 2,635,397 | 7,791,225 | 100.00 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
Acceptances and guarantees by industry as at December 31, 2018 and 2017, are as follows:
| 2018 | ||||||||||||||||
| (In millions of Korean won) | Confirmed guarantees | Unconfirmed guarantees | Total | Proportion (%) | ||||||||||||
Financial institutions | 72,991 | 3,736 | 76,727 | 0.94 | ||||||||||||
Manufacturing | 3,085,119 | 1,450,929 | 4,536,048 | 55.70 | ||||||||||||
Service | 951,988 | 84,586 | 1,036,574 | 12.73 | ||||||||||||
Wholesale and retail | 998,333 | 723,367 | 1,721,700 | 21.14 | ||||||||||||
Construction | 280,146 | 40,988 | 321,134 | 3.94 | ||||||||||||
Public | 165,571 | 36,256 | 201,827 | 2.48 | ||||||||||||
Others | 158,270 | 91,593 | 249,863 | 3.07 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| 5,712,418 | 2,431,455 | 8,143,873 | 100.00 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
| 2017 | ||||||||||||||||
| (In millions of Korean won) | Confirmed guarantees | Unconfirmed guarantees | Total | Proportion (%) | ||||||||||||
Financial institutions | 24,783 | 7,353 | 32,136 | 0.41 | ||||||||||||
Manufacturing | 2,893,858 | 1,270,655 | 4,164,513 | 53.45 | ||||||||||||
Service | 683,674 | 100,004 | 783,678 | 10.06 | ||||||||||||
Wholesale and retail | 957,097 | 837,193 | 1,794,290 | 23.03 | ||||||||||||
Construction | 334,994 | 198,996 | 533,990 | 6.85 | ||||||||||||
Public | 165,249 | 129,944 | 295,193 | 3.79 | ||||||||||||
Others | 96,173 | 91,252 | 187,425 | 2.41 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| 5,155,828 | 2,635,397 | 7,791,225 | 100.00 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
155
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
Commitments as at December 31, 2018 and 2017, are as follows:
| ||||||||
| (In millions of Korean won) | 2018 | 2017 | ||||||
Commitments | ||||||||
Corporate loan commitments | 36,695,640 | 32,534,513 | ||||||
Retail loan commitments | 41,283,734 | 15,935,382 | ||||||
Other acceptance and guarantees in Korean won | 1,300,000 | 1,000,000 | ||||||
Purchase of securities | 1,858,405 | 1,315,125 | ||||||
|
|
|
| |||||
| 81,137,779 | 50,785,020 | |||||||
|
|
|
| |||||
Financial Guarantees | ||||||||
Credit line | 1,956,426 | 1,953,579 | ||||||
Purchase of securities | 1,786,300 | 1,356,100 | ||||||
|
|
|
| |||||
| 3,742,726 | 3,309,679 | |||||||
|
|
|
| |||||
| 84,880,505 | 54,094,699 | |||||||
|
|
|
| |||||
Other Matters (including litigation)
a) The Bank has filed 50 lawsuits (excluding minor lawsuits in relation to the collection or management of loans), as the plaintiff, involving aggregate claims ofW 361,685 million, and faces 93 lawsuits as the defendant (excluding minor lawsuits in relation to the collection or management of loans) involving aggregate damages ofW 205,557 million, which arose in the normal course of the business and are still pending as at December 31, 2018.
b) As at December 31, 2018, the Bank has entered into construction contracts amounting toW151,280 million related to the construction of integrated headquarter building and payments made up to December 31, 2018 amount toW7,605 million.
c) As at December 31, 2018, the Bank has entered into construction contracts amounting toW116,563 million related to the construction of integrated IT center, and payments made up to December 31, 2018 amount toW42,857 million.
d) The face values of the securities sold to general customers through tellers’ sale amount toW 372 million andW 372 million as at December 31, 2018 and 2017, respectively.
156
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
38. Subsidiaries
Details of subsidiaries as at December 31, 2018, are as follows:
Investor | Investee | Ownership (%) | Location | Industry | ||||||
Kookmin Bank | Kookmin Bank Int’l Ltd.(London)1 | 100.00 | United Kingdom | Banking and foreign exchange transaction | ||||||
Kookmin Bank | Kookmin Bank Cambodia PLC. | 100.00 | Cambodia | Banking and foreign exchange transaction | ||||||
Kookmin Bank | Kookmin Bank (China) Ltd. | 100.00 | China | Banking and foreign exchange transaction | ||||||
Kookmin Bank | KB Microfinance Myanmar Co., Ltd | 100.00 | Myanmar | Micro finance services | ||||||
Kookmin Bank | Personal pension trust and 10 others2 | — | Korea | Trust | ||||||
Kookmin Bank | KL the 1st L.L.C. and 33 others3 | — | Korea | Asset-backed securitization and others | ||||||
Kookmin Bank | KB Wise Star Private Real Estate Feeder Fund 14 | 86.00 | Korea | Investment Trust | ||||||
KB Wise Star Private Real Estate Feeder Fund 1 | KB Star Office Private Real Estate Master Fund 23 | 44.44 | Korea | Investment Trust | ||||||
Kookmin Bank | KB Multi-Asset Private Securities FundS-14 | 99.96 | Korea | Investment Trust | ||||||
Kookmin Bank | KB Multi-Asset Private Securities FundP-14 | 99.96 | Korea | Investment Trust | ||||||
KB Multi-Asset Private Securities FundP-1(Bond Mixed) | KB Multi-Asset Private Securities FundP-1(Bond Mixed)4 | 100.00 | Korea | Investment Trust | ||||||
Kookmin Bank | Samsung KODEX 10YF-LKTB Inverse ETF(Bond-Derivatives)4 | 88.74 | Korea | Investment Trust | ||||||
Kookmin Bank | KB Haeorum Private Securities 834 | 99.95 | Korea | Investment Trust | ||||||
Kookmin Bank | KB KBSTAR KTB 3Y Futures Inverse ETF4 | 61.56 | Korea | Investment Trust | ||||||
Kookmin Bank | Kiwoom Frontier Private placement fund 10[Bond] 4 | 99.85 | Korea | Investment Trust | ||||||
Kookmin Bank | Tong Yang Safe Plus Qualified Private TrustS-8(Bond) 4 | 99.93 | Korea | Investment Trust | ||||||
Kookmin Bank | Mirae Asset Triumph Global Privately placed Feeder Investment Trust 14 | 99.92 | Korea | Investment Trust | ||||||
Mirae Asset Triumph Global Privately placed Feeder Investment Trust 1 | Mirae Asset Triumph Global Privately placed Feeder Investment Trust 1 | 100.00 | Korea | Investment Trust | ||||||
Kookmin Bank | NH-Amundi Global Private Securities Investment Trust 1(BOND)4 | 83.31 | Korea | Investment Trust | ||||||
Kookmin Bank | Meritz Private Real Estate fundNo.9-24 | 99.98 | Korea | Investment Trust | ||||||
Kookmin Bank | AIP US Red Private Real Estate Trust NO.104 | 99.97 | Korea | Investment Trust | ||||||
| 1 | The Bank converted Kookmin Bank Int’l Ltd.(London) into a London branch as at May 16, 2018, which is considered to be a merger transaction between subsidiaries under common control. The Bank accounted for the transaction by applying carrying amount method and measured the transferred assets and liabilities at carrying amounts included in the consolidated financial statements. The amounts of the transferred assets and liabilities resulting from the business combination were |
157
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
| 2 | The Bank controls the trust because it has power that determines the management performance over the trust, and is exposed to variable returns to absorb losses through the guarantees of payment of principal or payment of principal and fixed rate of return. |
| 3 | The Bank controls these investees because it is exposed to variable returns from its involvement with the investees, and has ability to affect those returns through its power, even though it holds less than a majority of the voting rights of the investees. |
| 4 | The Bank controls these investees because it is exposed to variable returns from its involvement with the investees, and has ability to affect those returns through its power. |
The condensed financial information of major subsidiaries as at December 31, 2018 and 2017, and for the years ended December 31, 2018 and 2017, are as follows:
| 2018 | ||||||||||||||||||||
| (In millions of Korean won) | Assets | Liabilities | Equity | Operating revenue | Profit (loss) for the period | |||||||||||||||
Kookmin Bank Int’l Ltd. (London) | 35,923 | 940 | 34,983 | 7,330 | 1,331 | |||||||||||||||
Kookmin Bank Hongkong Ltd.1 | — | — | — | 5,716 | 5,434 | |||||||||||||||
Kookmin Bank Cambodia PLC. | 197,135 | 104,328 | 92,807 | 10,307 | 1,621 | |||||||||||||||
Kookmin Bank (China) Ltd. | 2,605,033 | 2,192,469 | 412,564 | 138,453 | 14,819 | |||||||||||||||
KB Microfinance Myanmar Co., Ltd | 20,941 | 879 | 20,062 | 2,783 | 538 | |||||||||||||||
Personal pension trust and 10 others | 4,284,440 | 4,173,488 | 110,952 | 144,767 | 3,966 | |||||||||||||||
| 1 | Liquidation was completed during the year ended December 31, 2018. |
| 2017 | ||||||||||||||||||||
| (In millions of Korean won) | Assets | Liabilities | Equity | Operating revenue | Profit (loss) for the period | |||||||||||||||
Kookmin Bank Int’l Ltd. (London) | 506,474 | 423,252 | 83,222 | 15,931 | 3,022 | |||||||||||||||
Kookmin Bank Hongkong Ltd. | 22,866 | — | 22,866 | — | (1,953 | ) | ||||||||||||||
Kookmin Bank Cambodia PLC. | 133,133 | 76,680 | 56,453 | 8,267 | 984 | |||||||||||||||
Kookmin Bank (China) Ltd. | 2,007,154 | 1,606,434 | 400,720 | 70,142 | 1,118 | |||||||||||||||
KB Microfinance Myanmar Co., Ltd | 10,372 | 400 | 9,972 | 623 | (664 | ) | ||||||||||||||
Personal pension trust and 10 others | 4,162,200 | 4,055,204 | 106,996 | 111,187 | 4,825 | |||||||||||||||
158
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
Nature of the risks associated with interests in consolidated structured entities
Terms of contractual arrangements that provide financial support to a consolidated structured entity are as follows:
| • | The Bank provides the capital commitments of |
| • | The Bank has provided purchase commitment and grant of credit to the structured entities that are considered as subsidiaries. The Bank should purchase unsold commercial paper securities if there is a shortage of the investors for the commercial paper securities issued by the structured entity. If events causing the cessation of the issuance of commercial paper securities occur or if the structured entities become insolvent, the Bank should provide loans to the structured entities under certain conditions. |
| (In millions of Korean won) | 2018 | |||
KL the 1st L.L.C. | 50,132 | |||
KH the 2nd L.L.C. | 40,988 | |||
KL the International 1st L.L.C. | 30,280 | |||
Silver Investment 2nd Inc. | 50,000 | |||
KL the 3rd L.L.C. | 30,155 | |||
KH the 3rd L.L.C. | 70,100 | |||
KBM the 1st L.L.C. | 50,289 | |||
KY the 1st L.L.C. | 24,035 | |||
KBC the 1st L.L.C. | 35,104 | |||
KH the 4th L.L.C. | 25,130 | |||
KDL the 1st L.L.C. | 32,828 | |||
KB INO 1st L.L.C. | 10,200 | |||
KBH the 1st L.L.C. | 14,070 | |||
KBH the 2nd L.L.C. | 20,187 | |||
LIIV FOR RENTAL 1st L.L.C. | 32,200 | |||
HLD the 3rd L.L.C. | 108,500 | |||
KB HUB the 1st L.L.C. | 30,123 | |||
Leecheon Albatros L.L.C. | 20,200 | |||
KBH the 3rd L.L.C. | 40,167 | |||
KBC the 2nd L.L.C. | 50,141 | |||
KLD the 1st L.L.C. | 9,100 | |||
LOG the 3rd L.L.C. | 24,300 | |||
KB Green 1st L.L.C. | 52,672 | |||
KBL Incheon 1st L.L.C. | 100,968 | |||
KB DTower 1st L.L.C. | 50,017 | |||
KB Display 1st L.L.C. | 100,382 | |||
KBL CC 1st L.L.C. | 90,207 | |||
KB Alminium 1st L.L.C. | 50,208 | |||
KB First Park L.L.C. | 62,919 | |||
KB INO 2nd L.L.C. | 50,049 | |||
159
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
| • | The Bank provides the guarantees of payment of principal or principal and fixed rate of return, in case the operating results of the trusts are less than the guaranteed principal or principal and a fixed rate of return. |
Changes in subsidiaries
Kiwoom Frontier Private placement fund 10(Bond) and fourteen other subsidiaries were newly included in the consolidation scope, and Kookmin Bank Hong Kong Ltd. and six other subsidiaries were excluded from the scope of consolidation due to liquidation and resale during the year ended December 31, 2018.
39. Finance and Operating Leases
39.1 Finance Lease
The future minimum lease payments as at December 31, 2018 and 2017, are as follows:
| (In millions of Korean won) | 2018 | 2017 | ||||||
Net carrying amount of finance lease assets | 26,083 | 17,768 | ||||||
Minimum lease payments | ||||||||
Within 1 year | 5,824 | 1,660 | ||||||
1-5 years | 2,406 | — | ||||||
|
|
|
| |||||
| 8,230 | 1,660 | |||||||
|
|
|
| |||||
Present value of minimum lease payments | ||||||||
Within 1 year | 5,716 | 1,642 | ||||||
1-5 years | 2,349 | — | ||||||
|
|
|
| |||||
| 8,065 | 1,642 | |||||||
|
|
|
| |||||
39.2 Operating Lease
39.2.1 The Bank as an Operating Lessee
The future minimum lease payments arising from thenon-cancellable lease contracts as at December 31, 2018 and 2017, are as follows:
| (In millions of Korean won) | 2018 | 2017 | ||||||
Minimum lease payments | ||||||||
Within 1 year | 131,418 | 119,273 | ||||||
1-5 years | 182,665 | 138,368 | ||||||
Over 5 years | 16,675 | 34,128 | ||||||
|
|
|
| |||||
| 330,758 | 291,769 | |||||||
|
|
|
| |||||
Minimum sublease payments | (2,323 | ) | (2,461 | ) | ||||
160
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
The lease payments reflected in profit or loss for the years ended December 31, 2018 and 2017, are as follows:
| (In millions of Korean won) | 2018 | 2017 | ||||||
Lease payments reflected in profit or loss | ||||||||
Minimum lease payments | 156,181 | 154,383 | ||||||
Sublease payments | (1,769 | ) | (1,177 | ) | ||||
|
|
|
| |||||
| 154,412 | 153,206 | |||||||
|
|
|
| |||||
39.2.2 The Bank as an Operating Lessor
The future minimum lease receipts arising from thenon-cancellable lease contracts as at December 31, 2018 and 2017, are as follows:
| (In millions of Korean won) | 2018 | 2017 | ||||||
Minimum lease receipts | ||||||||
Within 1 year | 4,464 | 4,322 | ||||||
1-5 years | 2,322 | 2,471 | ||||||
|
|
|
| |||||
| 6,786 | 6,793 | |||||||
|
|
|
| |||||
40. Related Party Transactions
Profit and loss arising from transactions with related parties for the years ended December 31, 2018 and 2017, are as follows:
| (In millions of Korean won) | 2018 | 2017 | ||||||||
Parent | ||||||||||
KB Financial Group Inc. | Fee and commission income | 4,644 | 2,961 | |||||||
Other operating income | — | 110 | ||||||||
Othernon-operating income | 808 | 778 | ||||||||
Interest expense | 5,178 | 3,151 | ||||||||
General and administrative expenses | 778 | 671 | ||||||||
Subsidiaries | ||||||||||
Kookmin Bank Hongkong Ltd.1 | Reversal for credit losses | — | 126 | |||||||
Othernon-operating income | — | 2,326 | ||||||||
Kookmin Bank Int’l Ltd. (London) | Interest income | 1,068 | 4,295 | |||||||
Fee and commission income | 10 | 23 | ||||||||
Othernon-operating income | 131 | 303 | ||||||||
Kookmin Bank Cambodia PLC. | Interest income | 1,105 | 490 | |||||||
Fee and commission income | 14 | 13 | ||||||||
Othernon-operating income | 212 | 431 | ||||||||
Kookmin Bank (China) Ltd. | Interest income | 17,739 | 6,580 | |||||||
Fee and commission income | 119 | 98 | ||||||||
KB Microfinance Myanmar Co.,Ltd. | Othernon-operating income | 77 | 80 | |||||||
Trust | Fee and commission income | 18,508 | 11,970 | |||||||
Interest expense | 2,901 | 2,120 | ||||||||
Securitization SPE | Interest expense | 1 | 1 | |||||||
KB Wise Star Private Real Estate Feeder Fund 1st | Fee and commission income | 17 | 15 | |||||||
Interest expense | 7 | 6 | ||||||||
161
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
Structured entities | Interest income | 166 | 130 | |||||||
Fee and commission income | 9,026 | 6,808 | ||||||||
Gains on financial assets/liabilities at fair value through profit or loss | 12,999 | — | ||||||||
Gains on financial assets/liabilities at fair value through profit or loss (under Korean IFRS 1039) | — | 2,500 | ||||||||
Interest expense | 23 | — | ||||||||
Losses on financial assets/liabilities at fair value through profit or loss | 595 | — | ||||||||
Losses on financial assets/liabilities at fair value through profit or loss (under Korean IFRS 1039) | — | 4,962 | ||||||||
Provision for credit losses | 6 | 2 | ||||||||
KB Multi-Asset Private Securities Fund (BondMixed-ETF)1 | Fee and commission income | 53 | 40 | |||||||
KB Multi-Asset Private Securities FundS-1(Bond Mixed) | Fee and commission income | 37 | 13 | |||||||
KB Multi-Asset Private Securities Master FundP-1(Bond Mixed) | Fee and commission income | 36 | 9 | |||||||
Gains on financial assets/liabilities at fair value through profit or loss | 15,199 | — | ||||||||
Losses on financial assets/liabilities at fair value through profit or loss | 7,103 | — | ||||||||
Losses on financial assets/liabilities at fair value through profit or loss (under Korean IFRS 1039) | — | 15,139 | ||||||||
KB Haeoreum private securities investment trust 83(Bond) | Fee and commission income | 91 | 5 | |||||||
Mirae Asset Triumph Global Privately placed Feeder Investment Trust 1 | Fee and commission income | 25 | — | |||||||
NH-Amundi Global Private Securities Investment Trust 1(BOND) | Fee and commission income | 3 | — | |||||||
Private Equity Fund1 | Interest income | — | 162 | |||||||
Fee and commission income | — | 77 | ||||||||
Interest expense | — | 9 |
162
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
Parent’s subsidiaries | ||||||||||
KB Asset Management Co., Ltd. | Fee and commission income | 1,085 | 1,125 | |||||||
Othernon-operating income | 4 | 3 | ||||||||
Interest expense | 95 | 272 | ||||||||
General and administrative expenses | 458 | — | ||||||||
KB Real Estate Trust Co., Ltd. | Fee and commission income | 134 | 114 | |||||||
Othernon-operating income | 42 | 44 | ||||||||
Interest expense | 197 | 160 | ||||||||
Fee and commission expense | 2,282 | 1,577 | ||||||||
KB Investment Co., Ltd. | Fee and commission income | 23 | 36 | |||||||
Interest expense | 376 | 270 | ||||||||
KB Credit Information Co., Ltd. | Fee and commission income | 58 | 67 | |||||||
Othernon-operating income | 205 | 231 | ||||||||
Interest expense | 85 | 90 | ||||||||
Fee and commission expense | 16,738 | 13,965 | ||||||||
General and administrative expenses | — | 365 | ||||||||
KB Data System Co., Ltd. | Fee and commission income | 202 | 131 | |||||||
Othernon-operating income | 98 | 95 | ||||||||
Interest expense | 250 | 173 | ||||||||
General and administrative expenses | 50,803 | 45,517 | ||||||||
KB Life Insurance Co., Ltd. | Fee and commission income | 12,471 | 14,418 | |||||||
Gains on financial assets/liabilities at fair value through profit or loss | 14,064 | — | ||||||||
Gains on financial assets/liabilities at fair value through profit or loss (under Korean IFRS 1039) | — | 1,302 | ||||||||
Othernon-operating income | 82 | 122 | ||||||||
Interest expense | 8 | 9 | ||||||||
Fee and commission expense | 12 | 5 | ||||||||
Losses on financial assets/liabilities at fair value through profit or loss | 3,421 | — | ||||||||
Losses on financial assets/liabilities at fair value through profit or loss (under Korean IFRS 1039) | — | 10,779 | ||||||||
General and administrative expenses | 1,582 | 1,793 | ||||||||
KB Kookmin Card Co., Ltd. | Interest income | 3,855 | 3,549 | |||||||
Fee and commission income | 211,328 | 236,355 | ||||||||
Gains on financial assets/liabilities at fair value through profit or loss | 2,730 | — | ||||||||
Gains on financial assets/liabilities at fair value through profit or loss(under Korean IFRS 1039) | — | 263 |
163
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
Reversal of credit losses | 7 | — | ||||||||
Othernon-operating income | 983 | 1,003 | ||||||||
Interest expense | 870 | 1,289 | ||||||||
Fee and commission expense | 1,587 | 777 | ||||||||
Losses on financial assets/liabilities at fair value through profit or loss | 400 | — | ||||||||
Losses on financial assets/liabilities at fair value through profit or loss (under Korean IFRS 1039) | — | 6,825 | ||||||||
Provision for credit losses | — | 292 | ||||||||
General and administrative expenses | 216 | 279 | ||||||||
KB Savings Bank Co., Ltd. | Fee and commission income | 379 | 273 | |||||||
Othernon-operating income | 44 | 47 | ||||||||
Interest expense | 2 | 7 | ||||||||
Fee and commission expense | 24 | — | ||||||||
KB Capital Co., Ltd. | Interest income | 1,989 | 89 | |||||||
Fee and commission income | 2,311 | 1,264 | ||||||||
Othernon-operating income | 208 | 156 | ||||||||
Interest expense | 1,138 | 247 | ||||||||
Fee and commission expense | 61 | — | ||||||||
Other operating expense | 5 | — | ||||||||
Provision for credit losses | 163 | 105 | ||||||||
General and administrative expenses | 16 | — | ||||||||
KB Insurance Co., Ltd. | Interest income | 45 | 53 | |||||||
Fee and commission income | 22,948 | 22,856 | ||||||||
Gains on financial instruments at fair value through profit or loss | 24,999 | — | ||||||||
Gains on financial instruments at fair value through profit or loss (under Korean IFRS 1039) | — | 3,345 | ||||||||
Othernon-operating income | 363 | 280 | ||||||||
Interest expense | 1,265 | 1,340 | ||||||||
Fee and commission expense | 967 | — | ||||||||
Losses on financial instruments at fair value through profit or loss | 4,328 | — | ||||||||
Losses on financial instruments at fair value through profit or loss (under Korean IFRS 1039) | — | 53,165 |
164
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
Other operating expense | 16 | — | ||||||||
General and administrative expenses | 15,667 | 14,663 | ||||||||
KB Securities Co., Ltd. | Interest income | 459 | 56 | |||||||
Fee and commission income | 15,770 | 13,511 | ||||||||
Gains on financial assets/liabilities at fair value through profit or loss | 8,583 | — | ||||||||
Gains on financial assets/liabilities at fair value through profit or loss (under Korean IFRS 1039) | — | 3,295 | ||||||||
Reversal of credit losses | — | 123 | ||||||||
Othernon-operating income | 2,667 | 1,615 | ||||||||
Interest expense | 3,771 | 2,910 | ||||||||
Fee and commission expense | 957 | 291 | ||||||||
Losses on financial assets/liabilities at fair value through profit or loss | 8,448 | — | ||||||||
Losses on financial assets/liabilities at fair value through profit or loss (under Korean IFRS 1039) | — | 7,237 | ||||||||
Provision for credit losses | 21 | — | ||||||||
General and administrative expenses | 8,361 | 803 | ||||||||
Hanbando BTL Private Special Asset Fund | Fee and commission income | 160 | 170 | |||||||
KB Senior Loan Private Fund No.1 | Fee and commission income | 20 | 31 | |||||||
KB Evergreen Private Securities Fund 98(Bond) | Fee and commission income | 5 | — | |||||||
KB AMP Infra Private Special Asset Fund 1(FoFs) | Fee and commission income | 5 | 10 | |||||||
KB Onkookmin 2020 TDF Fund(FoFs) 1 | Fee and commission income | 1 | 1 | |||||||
KB Onkookmin 2025 TDF Fund(FoFs) 1 | Fee and commission income | 1 | 1 | |||||||
KB Onkookmin 2030 TDF Fund(FoFs) 1 | Fee and commission income | 1 | 1 | |||||||
KB Onkookmin 2035 TDF Fund(FoFs) | Fee and commission income | 2 | 1 | |||||||
KB Onkookmin 2040 TDF Fund(FoFs) 1 | Fee and commission income | 1 | 1 | |||||||
KB Onkookmin 2045 TDF Fund(FoFs) | Fee and commission income | 1 | 1 | |||||||
KB Onkookmin 2050 TDF Fund(FoFs) 1 | Fee and commission income | 1 | 1 |
165
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
KB Muni bond Private Securities Fund 1(USD)(bond) | Fee and commission income | 10 | 2 | |||||||
KB Global Private Real Estate Debt Fund 1 | Fee and commission income | 5 | — | |||||||
KB Na Compass Energy Private Special Asset Fund | Fee and commission income | 5 | — | |||||||
KB Star Office Private Real Estate Master Fund 3 | Interest income | 433 | — | |||||||
| Interest expense | 48 | — | ||||||||
KB Star Office Private Real Estate Master Fund 4 | Interest income | 396 | — | |||||||
| Fee and commission income | 10 | — | ||||||||
| Interest expense | 13 | — | ||||||||
KB Korea Short Term Premium Private Securities 5(USD)(Bond) | Fee and commission income | 2 | — | |||||||
KB Global Core Bond Securities Master Fund(Bond) | Fee and commission income | 2 | — | |||||||
Associates | ||||||||||
Korea Credit Bureau Co., Ltd. | Fee and commission income | 4 | 4 | |||||||
| Interest expense | 127 | 132 | ||||||||
| Fee and commission expense | 1,486 | 1,439 | ||||||||
Incheon Bridge Co., Ltd. | Interest income | 9,426 | 25,511 | |||||||
| Fee and commission income | 9 | — | ||||||||
| Reversal of credit losses | — | 43 | ||||||||
| Interest expense | 296 | 292 | ||||||||
| Fee and commission expense | 2 | — | ||||||||
| Provision for credit losses | 1 | — | ||||||||
Jaeyang Industry Co., Ltd. | Interest income | — | 98 | |||||||
| Reversal of credit losses | — | 6 | ||||||||
Dongjo Co., Ltd. | Reversal of credit losses | 31 | 2 | |||||||
Dae-A Leisure Co., Ltd. | Interest expense | 9 | 1 | |||||||
KB12-1 Venture Investment Partnership | Interest expense | 24 | 18 | |||||||
Future Planning KBStart-up Creation Fund | Interest expense | 18 | — | |||||||
KB High-tech Company Investment Fund | Interest expense | 27 | 65 | |||||||
Aju Good Technology Venture Fund | Interest expense | 30 | 14 | |||||||
KB-KDBC New Technology Business Investment Fund | Interest expense | 39 | 4 | |||||||
KB Digital Innovation & Growth New Technology Business Investment Fund | Interest expense | 7 | — | |||||||
KB-Brain KOSDAQScale-up Fund | Interest expense | 21 | — | |||||||
Paroman Corporation1 | Reversal of credit losses | — | 345 | |||||||
Associate of Subsidiary | ||||||||||
KB Star Office Private Real Estate Investment Trust No.1 | Interest expense | 93 | 63 |
166
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
Associates of parent’s subsidiaries | ||||||||||
SY Auto Capital Co., Ltd. | Interest income | 189 | 102 | |||||||
| Fee and commission income | 1 | — | ||||||||
| Reversal of credit losses | — | 32 | ||||||||
| Interest expense | — | 22 | ||||||||
| Provision for credit losses | 14 | — | ||||||||
KB No.8 Special Purpose Acquisition Company1 | Interest expense | 17 | 36 | |||||||
KB No.9 Special Purpose Acquisition Company | Interest expense | 43 | 33 | |||||||
KB No.10 Special Purpose Acquisition Company | Interest expense | 30 | 24 | |||||||
KB No.11 Special Purpose Acquisition Company | Interest expense | 12 | — | |||||||
RAND Bio Science Co., Ltd. | Interest expense | 3 | 16 | |||||||
Wise Asset Management Co., Ltd. | Interest expense | 9 | 5 | |||||||
Food Factory Co., Ltd. | Interest income | 9 | 1 | |||||||
| Fee and commission expense | 1 | — | ||||||||
| Provision for credit losses | 1 | — | ||||||||
APRO CO.,LTD. | Interest expense | 1 | — | |||||||
Rainist Co., Ltd. | Interest expense | 2 | — | |||||||
Spark Biopharma Inc. | Interest expense | 25 | — | |||||||
KB Pre IPO Secondary Venture Fund 1st | Interest expense | 27 | 60 | |||||||
POSCO-KB Shipbuilding Fund | Interest expense | 81 | 3 | |||||||
Kyobo 7 Special Purpose Acquisition Co., Ltd.1 | Interest expense | — | 1 | |||||||
Inno Lending Co., Ltd. 1 | Fee and commission income | 1 | 3 | |||||||
| Interest expense | — | 1 | ||||||||
Other | ||||||||||
Retirement pension | Fee and commission income | 876 | 795 | |||||||
| Interest expense | 3 | 3 |
| 1 | Not related parties of the Bank as at December 31, 2018 |
Details of receivables and payables, and related allowances for loan losses arising from the related party transactions as at December 31, 2018 and 2017, are as follows:
| (In millions of Korean won) | 2018 | 2017 | ||||||||
Parent | ||||||||||
KB Financial Group Inc. | Other assets | 4,545 | 2,837 | |||||||
| Deposits | 69,621 | 46,062 | ||||||||
| Other liabilities | 643,010 | 283,610 | ||||||||
167
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
Subsidiaries | ||||||||||
Kookmin Bank Hongkong Ltd.1 | Deposits | — | 22,209 | |||||||
Kookmin Bank Int’l Ltd. (London) | Cash and due from financial institutions | — | 5,292 | |||||||
| Loans at amortized cost (Gross amount) | — | 332,051 | ||||||||
| Other assets | 580 | 9,568 | ||||||||
| Debts | — | 124,543 | ||||||||
| Other liabilities | — | 127 | ||||||||
Kookmin Bank Cambodia PLC. | Cash and due from financial institutions | 228 | — | |||||||
| Loans at amortized cost (Gross amount) | 55,905 | 42,856 | ||||||||
| Other assets | 739 | 139 | ||||||||
| Deposits | 2,017 | 5,096 | ||||||||
| Debts | — | 1,342 | ||||||||
| Other liabilities | 19 | 42 | ||||||||
Kookmin Bank (China) Ltd. | Cash and due from financial institutions | 14,717 | 4,898 | |||||||
| Loans at amortized cost (Gross amount) | 860,937 | 514,272 | ||||||||
| Other assets | 41,518 | 12,661 | ||||||||
| Deposits | 1,963 | 1,064 | ||||||||
| Debts | 248,398 | 173,892 | ||||||||
| Other liabilities | 210 | 1,236 | ||||||||
KB Microfinance Myanmar Co., Ltd. | Other liabilities | 10 | 12 | |||||||
Trust | Other assets | 17,446 | 16,494 | |||||||
| Other liabilities | 118,355 | 108,945 | ||||||||
Securitization SPE | Deposits | 1,310 | 1,323 | |||||||
KB Wise Star Private Real Estate Feeder Fund 1st | Other assets | 5 | 4 | |||||||
| Deposits | 413 | 405 | ||||||||
| Other liabilities | 2 | 2 | ||||||||
Structured entities | Derivative assets | 6,519 | 106 | |||||||
| Loans at amortized cost (Gross amount) | 3,129 | 2,077 | ||||||||
| Allowances | 5 | 3 | ||||||||
| Other assets | 187 | 2 | ||||||||
| Derivative liabilities | 746 | 4,192 | ||||||||
| Deposits | 31,866 | 384 | ||||||||
| Provisions | 4 | 5 | ||||||||
| Other liabilities | 1,931 | 1,130 | ||||||||
KB Multi-Asset Private Securities Fund 1 (Bond Mixed-FoFs)1 | Other assets | — | 9 | |||||||
KB Multi-Asset Private Securities FundS-1(Bond Mixed) | Other assets | 4 | 4 | |||||||
KB Multi-Asset Private Securities Master FundP-1(Bond Mixed) | Derivative liabilities | 4,058 | 15,139 |
168
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
KB Haeoreum private securities investment trust 83(Bond) | Other assets | 6 | 5 | |||||||
Mirae Asset Triumph Global Privately placed Feeder Investment Trust 1 | Other assets | 7 | — | |||||||
NH-Amundi Global Private Securities Investment Trust 1(BOND) | Other assets | 3 | — | |||||||
Parent’s subsidiaries | ||||||||||
KB Asset Management Co., Ltd. | Other assets | 209 | 231 | |||||||
| Deposits | 3,284 | 8,958 | ||||||||
| Other liabilities | 6 | 6 | ||||||||
KB Real Estate Trust Co., Ltd. | Deposits | 27,321 | 16,187 | |||||||
| Other liabilities | 350 | 347 | ||||||||
KB Investment Co., Ltd. | Deposits | 20,784 | 19,816 | |||||||
| Other liabilities | 17 | 62 | ||||||||
KB Credit Information Co., Ltd. | Deposits | 4,240 | 4,444 | |||||||
| Other liabilities | 5,659 | 5,710 | ||||||||
KB Data System Co., Ltd. | Other assets | 322 | 319 | |||||||
| Deposits | 18,059 | 15,036 | ||||||||
| Other liabilities | 4,397 | 4,788 | ||||||||
KB Life Insurance Co., Ltd. | Derivative assets | 270 | — | |||||||
| Other assets | 1,827 | 562 | ||||||||
| Derivative liabilities | 1,197 | 6,580 | ||||||||
| Deposits | 1,576 | 372 | ||||||||
| Other liabilities | 507 | 556 | ||||||||
KB Kookmin Card Co., Ltd. | Loans at amortized cost (Gross amount) | — | 6,806 | |||||||
| Other assets | 24,582 | 25,454 | ||||||||
| Derivative liabilities | 612 | 3,298 | ||||||||
| Deposits | 84,089 | 85,091 | ||||||||
| Provisions | 296 | 777 | ||||||||
| Other liabilities | 59,748 | 48,073 | ||||||||
KB Savings Bank Co., Ltd. | Other assets | 2 | 2 | |||||||
| Other liabilities | 391 | 391 | ||||||||
KB Capital Co., Ltd. | Loans at amortized cost (Gross amount) | 54,787 | 19,285 | |||||||
| Allowances | 227 | 105 | ||||||||
| Other assets | 574 | 89 | ||||||||
| Deposits | 64,283 | 73,906 | ||||||||
| Other liabilities | 57 | 45 | ||||||||
KB Insurance Co., Ltd. | Derivative assets | 7,034 | — | |||||||
| Other assets | 12,143 | 7,183 | ||||||||
| Derivative liabilities | 5,265 | 22,818 | ||||||||
| Deposits | 2,745 | 2,941 | ||||||||
| Debentures | 30,002 | 49,981 | ||||||||
| Other liabilities | 1,929 | 2,146 | ||||||||
KB Securities Co., Ltd. | Derivative assets | 3,935 | 1,095 |
169
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
| Loans at amortized cost (Gross amount) | 25,617 | 4,346 | ||||||||
| Allowances | 21 | — | ||||||||
| Other assets | 8,644 | 2,267 | ||||||||
| Derivative liabilities | 1,412 | 1,481 | ||||||||
| Deposits | 334,470 | 436,508 | ||||||||
| Provisions | 37 | 97 | ||||||||
| Other liabilities | 15,473 | 11,769 | ||||||||
Hanbando BTL Private Special Asset Fund | Other assets | 39 | 42 | |||||||
KB Senior Loan Private Fund No.1 | Other assets | 3 | 6 | |||||||
KB AMP Infra Private Special Asset Fund 1(FoFs) | Other assets | 1 | — | |||||||
KB Onkookmin 2025 TDF Fund(FoFs)1 | Other assets | — | 1 | |||||||
KB Onkookmin 2030 TDF Fund(FoFs)1 | Other assets | — | 1 | |||||||
KB Muni bond Private Securities Fund 1(USD)(Bond) | Other assets | 2 | 2 | |||||||
KB Global Private Real Estate Debt Fund 1 | Other assets | 2 | — | |||||||
KB Na Compass Energy Private Special Asset Fund | Other assets | 1 | — | |||||||
KB Star Office Private Real Estate Master Fund 3 | Loans at amortized cost (Gross amount) | 24,000 | — | |||||||
| Other assets | 12 | — | ||||||||
| Deposits | 5,361 | — | ||||||||
| Other liabilities | 48 | — | ||||||||
KB Star Office Private Real Estate Master Fund 4 | Loans at amortized cost (Gross amount) | 20,000 | — | |||||||
| Other assets | 13 | — | ||||||||
| Deposits | 1,629 | — | ||||||||
| Other liabilities | 13 | — | ||||||||
KB Korea Short Term Premium Private Securities 5(USD)(Bond) | Other assets | 2 | — | |||||||
KB Global Core Bond Securities Master Fund(Bond) | Other assets | 2 | — | |||||||
Associates | ||||||||||
Korea Credit Bureau Co., Ltd. | Deposits | 15,674 | 25,513 | |||||||
| Other liabilities | 33 | 111 | ||||||||
Incheon Bridge Co., Ltd. | Financial assets at fair value through profit or loss | 32,882 | — | |||||||
Loans at amortized cost (Gross amount) | 158,200 | 200,400 | ||||||||
Allowances | 14 | 287 | ||||||||
Other assets | 736 | 710 |
170
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
| Deposits | 43,666 | 48,795 | ||||||||
| Provisions | 7 | — | ||||||||
| Other liabilities | 24 | 29 | ||||||||
Terra Co., Ltd. | Deposits | — | 10 | |||||||
Jungdong Steel Co., Ltd. | Deposits | — | 3 | |||||||
Doosung Metal Co., Ltd. | Deposits | 3 | — | |||||||
Jungdo Co., Ltd. | Deposits | 4 | 4 | |||||||
Dongjo Co., Ltd. | Loans at amortized cost (Gross amount) | — | 116 | |||||||
| Allowances | — | 1 | ||||||||
Dae-A Leisure Co., Ltd. | Deposits | 1,229 | 466 | |||||||
| Other liabilities | 7 | 14 | ||||||||
Daesang Techlon Co., Ltd.1 | Deposits | — | 2 | |||||||
Carlife Co., Ltd. | Deposits | 2 | — | |||||||
Computerlife Co., Ltd. | Deposits | 1 | — | |||||||
Skydigital INC. | Deposits | 16 | — | |||||||
KB12-1 Venture Investment Partnership | Deposits | 245 | 4,963 | |||||||
| Other liabilities | 1 | 2 | ||||||||
KB High-tech Company Investment Fund | Deposits | 275 | 7,212 | |||||||
| Other liabilities | — | 5 | ||||||||
Aju Good Technology Venture Fund | Deposits | 6,439 | 2,771 | |||||||
| Other liabilities | 2 | 1 | ||||||||
KB-KDBC New Technology Business Investment Fund | Deposits | 7,088 | 7,500 | |||||||
| Other liabilities | 3 | 4 | ||||||||
KB Digital Innovation & Growth New Technology Business Investment Fund | Deposits | 618 | — | |||||||
KB-Brain KOSDAQScale-up Fund | Deposits | 18,813 | — | |||||||
| Other liabilities | 7 | — | ||||||||
Associate of Subsidiary | ||||||||||
KB Star Office Private Real Estate Investment Trust No.1 | Deposits | 7,946 | 6,962 | |||||||
| Other liabilities | 58 | 45 |
171
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
Associates of parent’s subsidiaries | ||||||||||
SY Auto Capital Co., Ltd. | Loans at amortized cost (Gross amount) | 8,300 | — | |||||||
| Allowances | 18 | — | ||||||||
| Other assets | 9 | — | ||||||||
| Deposits | 5 | 6 | ||||||||
| Provisions | 11 | 29 | ||||||||
| Other liabilities | 2 | — | ||||||||
KB No.8 Special Purpose Acquisition Company1 | Deposits | — | 2,339 | |||||||
| Other liabilities | — | 19 | ||||||||
KB No.9 Special Purpose Acquisition Company | Deposits | 2,275 | 2,309 | |||||||
| Other liabilities | 42 | 38 | ||||||||
KB No.10 Special Purpose Acquisition Company | Deposits | 1,666 | 1,698 | |||||||
| Other liabilities | 11 | 10 | ||||||||
KB No.11 Special Purpose Acquisition Company | Deposits | 658 | 530 | |||||||
| Other liabilities | 2 | — | ||||||||
RAND Bio Science Co., Ltd. | Deposits | 232 | 1,032 | |||||||
| Other liabilities | — | 4 | ||||||||
Wise Asset Management Co., Ltd. | Deposits | 696 | 340 | |||||||
| Other liabilities | 2 | 1 | ||||||||
Built On Co., Ltd. | Deposits | 7 | 26 | |||||||
Food Factory Co., Ltd. | Loans at amortized cost (Gross amount) | 200 | 200 | |||||||
| Allowances | 1 | — | ||||||||
| Other assets | 1 | 1 | ||||||||
| Deposits | 68 | 1 | ||||||||
Acts Co., Ltd. | Deposits | 29 | 4 | |||||||
Paycoms Co., Ltd. | Deposits | 1 | — | |||||||
Big Dipper Co., Ltd. | Deposits | 182 | 473 | |||||||
APRO CO.,LTD. | Deposits | 2,201 | — | |||||||
Rainist Co., Ltd. | Deposits | 1 | — | |||||||
Spark Biopharma Inc. | Deposits | 2,630 | — | |||||||
| Other liabilities | 19 | — | ||||||||
KB IGen Private Equity Fund No.1 | Deposits | 148 | — | |||||||
KB Pre IPO Secondary Venture Fund 1st | Deposits | 1,115 | 2,690 | |||||||
| Other liabilities | 1 | 6 | ||||||||
Inno Lending Co., Ltd. 1 | Deposits | — | 41 | |||||||
Key management | Loans at amortized cost (Gross amount) | 2,218 | 1,619 | |||||||
| Other assets | 2 | 2 | ||||||||
| Deposits | 8,119 | 6,179 | ||||||||
| Other liabilities | 37 | 34 | ||||||||
Other | ||||||||||
Retirement pension | Other assets | 331 | 348 | |||||||
| Other liabilities | 16,388 | 4,286 |
172
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
| 1 | Not considered to be the Bank’s related party as at December 31, 2018. |
Notional amount of derivative assets and liabilities arising from the related party transactions as at December 31, 2018 and 2017, are as follows:
| (In millions of Korean won) | 2018 | 2017 | ||||||||
Subsidiaries |
| |||||||||
KL the 1st L.L.C. | Notional amount of Derivative financial instruments | 50,000 | 50,000 | |||||||
KH the 2nd L.L.C | Notional amount of Derivative financial instruments | 40,000 | 40,000 | |||||||
Silver Investment 2nd Inc. | Notional amount of Derivative financial instruments | 50,000 | 50,000 | |||||||
KL International the 1st L.L.C. | Notional amount of Derivative financial instruments | 30,000 | 40,000 | |||||||
KL the 3rd L.L.C. | Notional amount of Derivative financial instruments | 30,000 | 30,000 | |||||||
KBM the 1st L.L.C. | Notional amount of Derivative financial instruments | 50,000 | 50,000 | |||||||
KY the 1st L.L.C. | Notional amount of Derivative financial instruments | 24,000 | 24,000 | |||||||
KH the 3rd L.L.C. | Notional amount of Derivative financial instruments | 70,000 | 70,000 | |||||||
KBC the 1st L.L.C. | Notional amount of Derivative financial instruments | 35,000 | 35,000 | |||||||
KH the 4th L.L.C. | Notional amount of Derivative financial instruments | 25,000 | 25,000 | |||||||
KDL the 1st L.L.C. | Notional amount of Derivative financial instruments | 29,000 | 43,000 | |||||||
KL Food the 1st L.L.C. 1 | Notional amount of Derivative financial instruments | — | 50,000 | |||||||
KBH the 1st L.L.C. | Notional amount of Derivative financial instruments | 12,500 | 18,500 | |||||||
KBH the 2nd L.L.C. | Notional amount of Derivative financial instruments | 18,000 | 26,000 | |||||||
KB INO 1st L.L.C. | Notional amount of Derivative financial instruments | 10,000 | 40,000 | |||||||
LIIV FOR RENTAL 1st L.L.C. | Notional amount of Derivative financial instruments | 24,000 | 60,000 | |||||||
HLD the 3rd L.L.C. | Notional amount of Derivative financial instruments | 109,200 | 106,100 | |||||||
Leecheon Albatros L.L.C | Notional amount of Derivative financial instruments | 20,000 | 30,000 | |||||||
KB HUB the 1st L.L.C. | Notional amount of Derivative financial instruments | 30,000 | 30,000 | |||||||
KBH the 3rd L.L.C. | Notional amount of Derivative financial instruments | 40,000 | 50,000 | |||||||
KBC the 2nd L.L.C. | Notional amount of Derivative financial instruments | 50,000 | 50,000 | |||||||
173
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
KLD 1st L.L.C. | Notional amount of Derivative financial instruments | 9,300 | 8,100 | |||||||
LOG the 3rd L.L.C. | Notional amount of Derivative financial instruments | 24,300 | 24,300 | |||||||
KB Green 1st L.L.C. | Notional amount of Derivative financial instruments | 52,500 | 35,000 | |||||||
KB Multi-Asset Private Securities Master FundP-1(Bond Mixed) | Notional amount of Derivative financial instruments | 231,447 | 219,637 | |||||||
KBL Incheon 1st L.L.C. | Notional amount of Derivative financial instruments | 100,000 | — | |||||||
KB DTower 1st L.L.C. | Notional amount of Derivative financial instruments | 50,000 | — | |||||||
KB Display 1st L.L.C. | Notional amount of Derivative financial instruments | 100,000 | — | |||||||
KBL CC 1st L.L.C. | Notional amount of Derivative financial instruments | 90,000 | — | |||||||
KB Alminium 1st L.L.C. | Notional amount of Derivative financial instruments | 50,000 | — | |||||||
KB INO 2nd L.L.C. | Notional amount of Derivative financial instruments | 50,000 | — | |||||||
Parent’s subsidiaries |
| |||||||||
KB Life Insurance Co., Ltd. | Notional amount of Derivative financial instruments | 252,213 | 155,567 | |||||||
KB Kookmin Card Co., Ltd. | Notional amount of Derivative financial instruments | 62,611 | 79,106 | |||||||
KB Insurance Co., Ltd. | Notional amount of Derivative financial instruments | 1,127,722 | 491,133 | |||||||
KB Securities Co., Ltd. | Notional amount of Derivative financial instruments | 393,515 | 151,204 | |||||||
In accordance with Korean IFRS 1024, the Bank includes the parent, subsidiaries, the parent’s subsidiaries, associates, associates of the parent’s subsidiaries, key management (including family members), and post-employment benefit plans of the Bank and entities regarded as its related parties in the scope of its related parties. Additionally, the Bank 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 13 for details on investments in associates and subsidiaries.
Key management includes the directors of the Bank and the executive directors (vice-presidents and above) of the Bank and companies where the directors and/or their close family members have control or joint control.
174
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
Significant loan transactions with related parties for the years ended December 31, 2018 and 2017, are as follows:
| 20181 | ||||||||||||||||||||
| (In millions of Korean won) | Beginning | Loans | Repayments | Others | Ending | |||||||||||||||
Subsidiaries | ||||||||||||||||||||
Kookmin Bank Int’l Ltd. (London) | 332,051 | 42,853 | 226,989 | (147,915 | ) | — | ||||||||||||||
Kookmin Bank Cambodia PLC. | 42,856 | 55,577 | 43,903 | 1,375 | 55,905 | |||||||||||||||
Kookmin Bank (China) Ltd. | 514,272 | 1,206,165 | 885,046 | 25,546 | 860,937 | |||||||||||||||
Structured entities2 | 2,077 | 19,162 | 18,110 | — | 3,129 | |||||||||||||||
Parent’s subsidiaries | ||||||||||||||||||||
KB Securities Co., Ltd. | 4,346 | 1,369,958 | 1,348,687 | — | 25,617 | |||||||||||||||
KB Kookmin Card Co., Ltd. | 6,806 | 161,281 | 168,087 | — | — | |||||||||||||||
KB Capital Co., Ltd. | 19,285 | 33,711 | — | 1,791 | 54,787 | |||||||||||||||
KB Star Office Private Real Estate Master Fund 3 | — | 24,000 | — | — | 24,000 | |||||||||||||||
KB Star Office Private Real Estate Master Fund 4 | — | 20,000 | — | — | 20,000 | |||||||||||||||
Associate | ||||||||||||||||||||
Incheon Bridge Co., Ltd. | 203,126 | — | 14,700 | 2,656 | 191,082 | |||||||||||||||
Dongjo Co., Ltd | 116 | — | 116 | — | — | |||||||||||||||
Associate of parent’s subsidiary |
| |||||||||||||||||||
SY Auto Capital Co., Ltd. | — | 50,053 | 41,753 | — | 8,300 | |||||||||||||||
Food Factory Co., Ltd | 200 | — | — | — | 200 | |||||||||||||||
Key management5,6 | 1,619 | 108 | 836 | 1,327 | 2,218 | |||||||||||||||
| 20171 | ||||||||||||||||||||
| (In millions of Korean won) | Beginning | Loans | Repayments | Others | Ending | |||||||||||||||
Subsidiaries | ||||||||||||||||||||
Kookmin Bank Hongkong Ltd. | 326,295 | — | — | (326,295 | ) | — | ||||||||||||||
Kookmin Bank Int’l Ltd. (London) | 349,270 | 596,162 | 584,072 | (29,309 | ) | 332,051 | ||||||||||||||
Kookmin Bank Cambodia PLC. | 24,170 | 44,481 | 22,296 | (3,499 | ) | 42,856 | ||||||||||||||
Kookmin Bank (China) Ltd. | 386,720 | 608,412 | 428,423 | (52,437 | ) | 514,272 | ||||||||||||||
Private equity fund3 | 47,100 | — | 47,100 | — | — | |||||||||||||||
Structured entities4 | 3,084 | 13,928 | 14,871 | (64 | ) | 2,077 | ||||||||||||||
Parent’s subsidiaries | ||||||||||||||||||||
KB Securities Co., Ltd. | — | 1,534,202 | 1,529,856 | — | 4,346 | |||||||||||||||
KB Kookmin Card Co., Ltd. | — | 157,871 | 151,065 | — | 6,806 | |||||||||||||||
KB Capital Co., Ltd. | — | 19,285 | — | — | 19,285 | |||||||||||||||
Associate | ||||||||||||||||||||
Incheon Bridge Co., Ltd. | 209,094 | 202,500 | 211,194 | — | 200,400 | |||||||||||||||
Dongjo Co., Ltd | — | — | 130 | 246 | 116 | |||||||||||||||
Jaeyang Industry Co., Ltd. | 303 | — | 290 | (13 | ) | — | ||||||||||||||
Associate of parent’s subsidiary |
| |||||||||||||||||||
SY Auto Capital Co., Ltd. | 10,000 | 24,031 | 34,031 | — | — | |||||||||||||||
Food Factory Co., Ltd. | — | 200 | — | — | 200 | |||||||||||||||
175
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
| 1 | Transactions between related parties, such as settlements arising from operating activities and daylight overdraft to be repaid on the day of handling, are excluded. |
| 2 | Includes details of KL Food the 1st L.L.C. that are excluded from related parties. |
| 3 | Not considered to be the Bank’s related party as at December 31, 2018. |
| 4 | Includes details of KBY the 1st L.L.C. that are excluded from related parties. |
| 5 | Includes details of loan transactions that occurred before they became related parties. |
| 6 | Represents the transactions that have started occurring since the current year. |
Significant borrowing transactions with related parties for the years ended December 31, 2018 and 2017, are as follows:
| 2018 | ||||||||||||||||||||||
| (In millions of Korean won) | Beginning | Increase | Decrease | Others1 | Ending | |||||||||||||||||
Parent’s subsidiaries | ||||||||||||||||||||||
KB Financial Group Inc.. | Deposits | 46,062 | 1,555,000 | 1,495,000 | (36,441 | ) | 69,621 | |||||||||||||||
Subsidiaries | ||||||||||||||||||||||
Kookmin Bank Hongkong Ltd.2 | Deposits | 22,209 | — | — | (22,209 | ) | — | |||||||||||||||
Kookmin Bank Int’l Ltd. (London) | Deposits | 124,543 | — | — | (124,543 | ) | — | |||||||||||||||
Kookmin Bank Cambodia PLC. | Deposits | 5,096 | — | — | (3,079 | ) | 2,017 | |||||||||||||||
| Debts | 1,342 | (1,342 | ) | — | ||||||||||||||||||
Kookmin Bank (China) Ltd. | Deposits | 1,064 | — | — | 899 | 1,963 | ||||||||||||||||
| Debts | 173,892 | 74,506 | 248,398 | |||||||||||||||||||
Securitization SPE | Deposits | 1,323 | — | — | (13 | ) | 1,310 | |||||||||||||||
KB Wise Star Private Real Estate Feeder Fund 1st | Deposits | 405 | 8 | — | — | 413 | ||||||||||||||||
Structured entities | Deposits | 384 | — | — | 31,482 | 31,866 | ||||||||||||||||
Parent’s subsidiaries | ||||||||||||||||||||||
KB Asset Management Co., Ltd. | Deposits | 8,958 | — | — | (5,674 | ) | 3,284 | |||||||||||||||
KB Real Estate Trust Co., Ltd. | Deposits | 16,187 | — | — | 11,134 | 27,321 | ||||||||||||||||
KB Investment Co., Ltd. | Deposits | 19,816 | 56,200 | 68,200 | 12,968 | 20,784 | ||||||||||||||||
KB Credit Information Co., Ltd. | Deposits | 4,444 | 1,569 | 1,409 | (364 | ) | 4,240 | |||||||||||||||
KB Data System Co., Ltd. | Deposits | 15,036 | 11,500 | 10,700 | 2,223 | 18,059 | ||||||||||||||||
KB Life Insurance Co., Ltd. | Deposits | 372 | — | — | 1,204 | 1,576 | ||||||||||||||||
KB Kookmin Card Co., Ltd. | Deposits | 85,091 | 22,000 | 22,000 | (1,002 | ) | 84,089 | |||||||||||||||
KB Capital Co., Ltd. | Deposits | 73,906 | — | — | (9,623 | ) | 64,283 | |||||||||||||||
KB Insurance Co., Ltd. | Deposits | 2,941 | — | — | (196 | ) | 2,745 | |||||||||||||||
176
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
| Debentures | 49,981 | — | — | (19,979 | ) | 30,002 | ||||||||||||||||
KB Securities Co., Ltd. | Deposits | 436,508 | 111,996 | 82,512 | (131,522 | ) | 334,470 | |||||||||||||||
KB Star Office Private Real Estate Master Fund 3 | Deposits | — | 5,361 | — | — | 5,361 | ||||||||||||||||
KB Star Office Private Real Estate Master Fund 4 | Deposits | — | 1,629 | — | — | 1,629 | ||||||||||||||||
Associates | ||||||||||||||||||||||
Korea Credit Bureau Co., Ltd. | Deposits | 25,513 | 8,000 | 16,000 | (1,839 | ) | 15,674 | |||||||||||||||
Incheon Bridge Co., Ltd. | Deposits | 48,795 | 1,260 | 1,270 | (5,119 | ) | 43,666 | |||||||||||||||
Terra Co., Ltd. | Deposits | 10 | — | — | (10 | ) | — | |||||||||||||||
Jungdong Steel Co., Ltd. | Deposits | 3 | — | — | (3 | ) | — | |||||||||||||||
Doosung Metal Co., Ltd. | Deposits | — | — | — | 3 | 3 | ||||||||||||||||
Jungdo Co., Ltd. | Deposits | 4 | — | — | — | 4 | ||||||||||||||||
Dae-A Leisure Co., Ltd. | Deposits | 466 | 479 | 466 | 750 | 1,229 | ||||||||||||||||
Daesang Techlon Co., Ltd.2 | Deposits | 2 | — | — | (2 | ) | — | |||||||||||||||
Carlife Co., Ltd. | Deposits | — | — | — | 2 | 2 | ||||||||||||||||
Computerlife Co., Ltd. | Deposits | — | — | — | 1 | 1 | ||||||||||||||||
Skydigital INC. | Deposits | — | — | — | 16 | 16 | ||||||||||||||||
KB12-1 Venture Investment Partnership | Deposits | 4,963 | — | — | (4,718 | ) | 245 | |||||||||||||||
Future Planning KBStart-up Creation Fund | Deposits | — | 9,000 | 9,000 | — | — | ||||||||||||||||
KB High-tech Company Investment Fund | Deposits | 7,212 | — | — | (6,937 | ) | 275 | |||||||||||||||
Aju Good Technology Venture Fund | Deposits | 2,771 | — | — | 3,668 | 6,439 | ||||||||||||||||
KB-KDBC New Technology Business Investment Fund | Deposits | 7,500 | — | — | (412 | ) | 7,088 | |||||||||||||||
KB Digital Innovation & Growth New Technology Business Investment Fund | Deposits | — | — | — | 618 | 618 | ||||||||||||||||
KB-Brain KOSDAQ Scale-up Fund | Deposits | — | — | — | 18,813 | 18,813 | ||||||||||||||||
Associate of Subsidiary | ||||||||||||||||||||||
KB Star Office Private Real Estate Investment Trust No.1 | Deposits | 6,962 | 351 | — | 633 | 7,946 | ||||||||||||||||
Associates of parent’s subsidiaries | ||||||||||||||||||||||
SY Auto Capital Co., Ltd. | Deposits | 6 | — | — | (1 | ) | 5 | |||||||||||||||
KB No.8 Special Purpose Acquisition Company 12 | Deposits | 2,339 | — | 2,300 | (39 | ) | — |
177
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
KB No.9 Special Purpose Acquisition Company | Deposits | 2,309 | 2,266 | 2,234 | (66 | ) | 2,275 | |||||||||||||||||
KB No.10 Special Purpose Acquisition Company | Deposits | 1,698 | 1,618 | 1,618 | (32 | ) | 1,666 | |||||||||||||||||
KB No.11 Special Purpose Acquisition Company | Deposits | 530 | 530 | 530 | 128 | 658 | ||||||||||||||||||
RAND Bio Science Co., Ltd. | Deposits | 1,032 | — | 500 | (300 | ) | 232 | |||||||||||||||||
Wise Asset Management Co., Ltd. | Deposits | 340 | 2,366 | 2,008 | (2 | ) | 696 | |||||||||||||||||
Built On Co., Ltd. | Deposits | 26 | — | — | (19 | ) | 7 | |||||||||||||||||
Food Factory Co., Ltd. | Deposits | 1 | — | — | 67 | 68 | ||||||||||||||||||
Acts Co., Ltd. | Deposits | 4 | — | — | 25 | 29 | ||||||||||||||||||
Paycoms Co., Ltd. | Deposits | — | — | — | 1 | 1 | ||||||||||||||||||
Big Dipper Co., Ltd. | Deposits | 473 | — | — | (291 | ) | 182 | |||||||||||||||||
APRO CO.,LTD. | Deposits | — | — | — | 2,201 | 2,201 | ||||||||||||||||||
Rainist Co., Ltd. | Deposits | — | — | — | 1 | 1 | ||||||||||||||||||
Spark Biopharma Inc. | Deposits | — | 4,300 | 3,300 | 1,630 | 2,630 | ||||||||||||||||||
KB IGen Private Equity Fund No. 1 | Deposits | — | — | — | 148 | 148 | ||||||||||||||||||
KB Pre IPO Secondary Venture Fund 1st | Deposits | 2,690 | 2,000 | 4,000 | 425 | 1,115 | ||||||||||||||||||
POSCO-KB Shipbuilding Fund | Deposits | — | 32,800 | 32,800 | — | — | ||||||||||||||||||
Inno Lending Co., Ltd. 2 | Deposits | 41 | — | — | (41 | ) | — | |||||||||||||||||
Key management3 | Deposits | 6,179 | 6,605 | 5,140 | 475 | 8,119 | ||||||||||||||||||
| 20171 | ||||||||||||||||||||||||
| (In millions of Korean won) | Beginning | Increase | Decrease | Others | Ending | |||||||||||||||||||
Parent’s subsidiaries | ||||||||||||||||||||||||
KB Financial Group Inc. | Deposits | 57,967 | — | — | (11,905 | ) | 46,062 | |||||||||||||||||
Subsidiaries | ||||||||||||||||||||||||
Kookmin Bank Hongkong Ltd.2 | Deposits | — | — | — | 22,209 | 22,209 | ||||||||||||||||||
| Debts | 260,507 | — | — | (260,507 | ) | — | ||||||||||||||||||
Kookmin Bank Int’l Ltd. (London) | Debts | 149,930 | — | — | (25,387 | ) | 124,543 | |||||||||||||||||
Kookmin Bank Cambodia PLC. | Deposits | 4,833 | — | — | 263 | 5,096 | ||||||||||||||||||
| Debts | 4,569 | — | — | (3,227 | ) | 1,342 | ||||||||||||||||||
Kookmin Bank (China) Ltd. | Deposits | 3,672 | — | — | (2,608 | ) | 1,064 | |||||||||||||||||
| Debts | 211,544 | — | — | (37,652 | ) | 173,892 | ||||||||||||||||||
Securitization SPE | Deposits | 1,296 | — | — | 27 | 1,323 | ||||||||||||||||||
KB Wise Star Private Real Estate Feeder Fund 1st | Deposits | 397 | 8 | — | — | 405 | ||||||||||||||||||
Private equity fund2 | Deposits | 776 | — | — | (776 | ) | — | |||||||||||||||||
Structured entities | Deposits | 128 | — | — | 256 | 384 | ||||||||||||||||||
178
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
Parent’s subsidiaries | ||||||||||||||||||||||
KB Asset Management Co., Ltd. | Deposits | 73,279 | — | 65,000 | 679 | 8,958 | ||||||||||||||||
KB Real Estate Trust Co., Ltd. | Deposits | 21,211 | — | 10,000 | 4,976 | 16,187 | ||||||||||||||||
KB Investment Co., Ltd. | Deposits | 23,954 | 49,000 | 48,537 | (4,601 | ) | 19,816 | |||||||||||||||
KB Credit Information Co., Ltd. | Deposits | 3,465 | 1,819 | 2,399 | 1,559 | 4,444 | ||||||||||||||||
KB Data System Co., Ltd. | Deposits | 10,926 | 10,700 | 7,000 | 410 | 15,036 | ||||||||||||||||
KB Life Insurance Co., Ltd. | Deposits | 700 | — | — | (328 | ) | 372 | |||||||||||||||
KB Kookmin Card Co., Ltd. | Deposits | 160,002 | 22,000 | 22,000 | (74,911 | ) | 85,091 | |||||||||||||||
KB Capital Co., Ltd. | Deposits | 9,075 | — | — | 64,831 | 73,906 | ||||||||||||||||
KB Insurance Co., Ltd. | Deposits | 2,951 | — | — | (10 | ) | 2,941 | |||||||||||||||
| Debenture | — | — | — | 49,981 | 49,981 | |||||||||||||||||
KB Securities Co., Ltd. | Deposits | 116,893 | 242,085 | 135,000 | 212,530 | 436,508 | ||||||||||||||||
| Debenture | 300 | — | — | (300 | ) | — | ||||||||||||||||
Associates | ||||||||||||||||||||||
Korea Credit Bureau Co., Ltd. | Deposits | 26,827 | 11,000 | 6,000 | (6,314 | ) | 25,513 | |||||||||||||||
Incheon Bridge Co., Ltd. | Deposits | 38,556 | 1,270 | 21,270 | 30,239 | 48,795 | ||||||||||||||||
Terra Co., Ltd. | Deposits | — | — | — | 10 | 10 | ||||||||||||||||
Jungdong Steel Co., Ltd. | Deposits | 3 | — | — | — | 3 | ||||||||||||||||
Jungdo Co., Ltd. | Deposits | — | — | — | 4 | 4 | ||||||||||||||||
Dae-A Leisure Co., Ltd. | Deposits | — | — | — | 466 | 466 | ||||||||||||||||
Daesang Techlon Co., Ltd.2 | Deposits | — | — | — | 2 | 2 | ||||||||||||||||
KB12-1 Venture Investment Partnership | Deposits | 4,562 | 4,000 | 4,000 | 401 | 4,963 | ||||||||||||||||
KB High-tech Company Investment Fund | Deposits | 4,643 | 3,000 | 3,000 | 2,569 | 7,212 | ||||||||||||||||
Aju Good Technology Venture Fund | Deposits | 1,201 | — | — | 1,570 | 2,771 | ||||||||||||||||
KB-KDBC New Technology Business Investment Fund | Deposits | — | — | — | 7,500 | 7,500 | ||||||||||||||||
EJADE Co., Ltd.2 | Deposits | 2 | — | — | (2 | ) | — | |||||||||||||||
Associate of Subsidiary | ||||||||||||||||||||||
KB Star Office Private Real Estate Investment Trust No.1 | Deposits | 6,682 | 303 | — | (23 | ) | 6,962 | |||||||||||||||
Associates of parent’s subsidiaries | ||||||||||||||||||||||
KB No.8 Special Purpose Acquisition Company 12 | Deposits | 2,342 | 2,300 | 2,300 | (3 | ) | 2,339 | |||||||||||||||
KB No.9 Special Purpose Acquisition Company | Deposits | 2,399 | — | 100 | 10 | 2,309 | ||||||||||||||||
KB No.10 Special Purpose Acquisition Company | Deposits | 1,754 | 1,618 | 1,600 | (74 | ) | 1,698 |
179
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
KB No.11 Special Purpose Acquisition Company | Deposits | — | 530 | — | — | 530 | ||||||||||||||||
SY Auto Capital Co., Ltd. | Deposits | 3,997 | 2,000 | 2,000 | (3,991 | ) | 6 | |||||||||||||||
RAND Bio Science Co., Ltd. | Deposits | 2,356 | 1,000 | 2,500 | 176 | 1,032 | ||||||||||||||||
Wise Asset Management Co., Ltd. | Deposits | — | 1,346 | 1,475 | 469 | 340 | ||||||||||||||||
Built On Co., Ltd. | Deposits | — | — | — | 26 | 26 | ||||||||||||||||
Food Factory Co., Ltd. | Deposits | — | — | — | 1 | 1 | ||||||||||||||||
Acts Co., Ltd. | Deposits | — | — | — | 4 | 4 | ||||||||||||||||
Big Dipper Co., Ltd. | Deposits | — | — | — | 473 | 473 | ||||||||||||||||
KB Pre IPO Secondary Venture Fund 1st | Deposits | — | 13,000 | 11,000 | 690 | 2,690 | ||||||||||||||||
POSCO-KB Shipbuilding Fund | Deposits | — | 3,000 | 3,000 | — | — | ||||||||||||||||
Inno Lending Co., Ltd. 2 | Deposits | 1,902 | — | — | (1,861 | ) | 41 | |||||||||||||||
KB IC 3rd Private Equity Fund2 | Deposits | 700 | — | 700 | — | — |
| 1 | Transactions between related parties, such as settlements arising from operating activities and deposits that can deposit and withdraw frequently, are presented in net amounts. |
| 2 | Not considered to be the Bank’s related party as at December 31, 2018. |
| 3 | Represents the transactions that have started occurring since the current year. |
Significant contribution and collection arising from transactions with related parties for the year ended December 31, 2018, are as follows:
| 2018 | ||||||||
| (In millions of Korean won) | Contribution | Collection and others | ||||||
Subsidiaries |
| |||||||
Kookmin Bank Hongkong Ltd.1 | — | 23,610 | ||||||
Kookmin Bank Int’l Ltd. (London) | — | 50,664 | ||||||
Kookmin Bank Cambodia PLC. | 31,050 | — | ||||||
KB Microfinance Myanmar Co.,Ltd | 10,979 | — | ||||||
KB Wise Star Private Real Estate Feeder Fund 1st | 43,000 | 35,183 | ||||||
KB Multi-Asset Private Securities Fund 1 (Bond Mixed-FoFs)1 | — | 297,888 | ||||||
KB KBSTAR Short Term KTB Active ETF1 | — | 81,255 | ||||||
SAMSUNG KODEX 10YF-LKTB INV ETF | 558,823 | 610,663 | ||||||
KB Haeoreum private securities investment trust 83(Bond) | — | 305,140 | ||||||
KB KBSTAR KTB 3Y Futures Inverse ETF | 1,289,671 | 1,296,352 | ||||||
Kiwoom Frontier Private placement fund 10[Bond] | 300,000 | 101,958 | ||||||
Tong Yang Safe Plus Qualified Private TrustS-8(Bond) | 300,000 | 152,219 | ||||||
Mirae Asset Triumph Global Privately placed Feeder Investment Trust | 240,000 | — | ||||||
KODEX 3YF-KTB Inverse ETF1 | 199,857 | 199,051 | ||||||
NH-Amundi Global Private Securities Investment Trust 1(BOND) | 112,325 | — | ||||||
Meritz Private Real Estate fundNo.9-2 | 19,134 | 199 | ||||||
180
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
AIP US Red Private Real Estate Trust NO.10 | 33,832 | 319 | ||||||
Parent’s subsidiaries | ||||||||
KB IP Investment Fund | — | 120 | ||||||
Hanbando BTL Private Special Asset Fund | — | 20,257 | ||||||
Hope Sharing BTL Private Special Asset Fund | — | 1,675 | ||||||
KB Mezzanine Private Security Investment Trust No.2 | — | 29,280 | ||||||
KB Senior Loan Private Fund No.1 | — | 31,305 | ||||||
KB Haeoreum private securities investment trust 70(Bond)1 | — | 51,100 | ||||||
KB KBSTAR Mid-long Term KTB Active ETF | — | 30,377 | ||||||
KB Star Office Private Real Estate Master Fund 4 | 43,500 | 916 | ||||||
KB Korea Short Term Premium Private Securities 5(USD)(Bond) | 113,220 | — | ||||||
KB Global Core Bond Securities Master Fund(Bond) | 50,000 | — | ||||||
KB Haeoreum private securities investment trust 96 | 50,000 | — | ||||||
KB Korea Short Term Premium Private Securities 4(USD)(Bond) | 44,872 | — | ||||||
Associates | ||||||||
Korea Credit Bureau Co., Ltd. | — | 113 | ||||||
Balhae Infrastructure Fund | 4,645 | 8,623 | ||||||
Daesang Techlon Co., Ltd.1 | — | 42 | ||||||
PT Bank Bukopin TBK | 116,422 | — | ||||||
KoFC KBIC Frontier Champ2010-5 (PEF) | — | 4,800 | ||||||
KB GwS Private Securities Investment Trust | — | 6,386 | ||||||
KB12-1 Venture Investment Partnership | — | 16,040 | ||||||
Future Planning KBStart-up Creation Fund | — | 2,876 | ||||||
KB High-tech Company Investment Fund | — | 4,700 | ||||||
Aju Good Technology Venture Fund | 9,808 | — | ||||||
KB-KDBC New Technology Business Investment Fund | 5,000 | — | ||||||
KBTS Technology Venture Private Equity Fund | 7,620 | — | ||||||
KB Digital Innovation & Growth New Technology Business Investment Fund | 1,125 | — | ||||||
KB IP Investment Fund II | 3,000 | — | ||||||
KB Digital Innovation Investment Fund Limited partnership | 7,700 | — | ||||||
KB-Brain KOSDAQScale-up Fund2 | 4,000 | — |
| 1 | Not considered to be the Bank’s related party as at December 31, 2018. |
Acceptances and guarantees and unused commitments to related parties as at December 31, 2018 and 2017, are as follows:
| (In millions of Korean won) | 2018 | 2017 | ||||||||
Subsidiaries | ||||||||||
KB Wise Star Private Real Estate Feeder Fund 1st | Purchase of securities | 56,717 | 185,717 | |||||||
Structured entities | Loan commitment in Korean won | 6,151 | 3,143 | |||||||
Purchase of securities | 1,349,500 | 1,001,300 | ||||||||
Meritz Private Real Estate fundNo.9-2 1st | Purchase of securities | 36,243 | — | |||||||
181
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
Parent’s subsidiaries | ||||||||||
KB Investment Co., Ltd. | Loss sharing agreements | 1,000 | 1,000 | |||||||
KB Kookmin Card Co., Ltd. | Loan commitment in Korean won | 820,000 | 813,194 | |||||||
Other commitments in Korean won | 1,300,000 | 1,000,000 | ||||||||
KB Securities Co., Ltd. | Loan commitment in Korean won | 137,509 | 135,653 | |||||||
KB Mezzanine Private Security Investment Trust No.2 | Purchase of securities | 11,141 | 11,141 | |||||||
KB Senior Loan Private Fund No.1 | Purchase of securities | 3,770 | 3,770 | |||||||
Associates | ||||||||||
Balhae Infrastructure Fund | Purchase of securities | 10,453 | 12,564 | |||||||
Incheon Bridge Co., Ltd. | Loan commitment in Korean won | 20,000 | 20,000 | |||||||
KoFC KBIC Frontier Champ2010-5 (PEF) | Purchase of securities | 1,290 | 1,290 | |||||||
KB GwS Private Securities Investment Trust | Purchase of securities | 876 | 876 | |||||||
KoFC POSCO HANWHA KB Shared Growth No.2. Private Equity Fund | Purchase of securities | 10,040 | 10,040 | |||||||
Aju Good Technology Venture Fund | Purchase of securities | 1,960 | 11,768 | |||||||
KB-KDBC New Technology Business Investment Fund | Purchase of securities | 2,500 | 7,500 | |||||||
KBTS Technology Venture Private Equity Fund | Purchase of securities | 7,380 | — | |||||||
KB Digital Innovation & Growth New Technology Business Investment Fund | Purchase of securities | 3,375 | — | |||||||
KB IP Investment Fund | Purchase of securities | 12,000 | — | |||||||
KB Digital Innovation & Growth New Technology Business Investment Fund | Purchase of securities | 27,300 | — | |||||||
KB-Brain KOSDAQScale-up Fund | Purchase of securities | 16,000 | — | |||||||
Associates of parent’s subsidiaries | ||||||||||
SY Auto Capital Co., Ltd. | Loan commitment in Korean won | 6,700 | 10,000 | |||||||
Key management | Loan commitment in Korean won | 894 | 458 |
182
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
Acceptances and gurantees and unused commitments received from related parties as at December 31, 2018 and 2017, are as follows:
| (In millions of Korean won) | 2018 | 2017 | ||||||||
Parent’s subsidiaries | ||||||||||
KB Investment Co., Ltd. | Loss sharing agreements | 14,474 | 12,117 | |||||||
KB Kookmin Card Co., Ltd. | Loan commitment in Korean won | 87,922 | 85,114 | |||||||
Compensation to key management for the years ended December 31, 2018 and 2017, consists of:
| 2018 | ||||||||||||||||
|
| |||||||||||||||
| (In millions of Korean won) | Short-term employee benefits | Post- employment benefits | Share-based payments | Total | ||||||||||||
Registered directors (executive) | 1,278 | 51 | 1,022 | 2,351 | ||||||||||||
Registered directors(non-executive) | 337 | — | — | 337 | ||||||||||||
Non-registered directors | 4,807 | 183 | 3,217 | 8,207 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| 6,422 | 234 | 4,239 | 10,895 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
| (In millions of Korean won) | 2017 | |||||||||||||||
| Short-term employee benefits | Post- employment benefits | Share-based payments | Total | |||||||||||||
Registered directors (executive) | 1,270 | 60 | 1,831 | 3,161 | ||||||||||||
Registered directors(non-executive) | 315 | — | — | 315 | ||||||||||||
Non-registered directors | 4,990 | 178 | 7,966 | 13,134 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
| 6,575 | 238 | 9,797 | 16,610 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
Significant operating transactions occurring between the Bank and related parties include the establishment of deposit accounts, issuance of general purpose loans, loans on business transactions and trade receivables, and providing foreign currency remittances and related services. Other significant transactions include the grant of credit due to acceptance of banker’s usance that the Bank issues and overdraft credit accounts arising from net settlement agreement between the Bank and KB Kookmin Card Co., Ltd.
Collateral offered to related parties as at December 31, 2018 and 2017, are as follows:
| (In millions of Korean won) | 2018 | 2017 | ||||||||||||||||||
| Assets pledged | Carrying amount | Collateralized amount | Carrying amount | Collateralized amount | ||||||||||||||||
Parent’s subsidiaries | ||||||||||||||||||||
KB Securities Co., Ltd. | Securities | 62,006 | 62,000 | 75,990 | 76,000 | |||||||||||||||
KB Life Insurance Co., Ltd. | Securities | 26,055 | 25,000 | 26,128 | 25,000 | |||||||||||||||
KB Insurance Co., Ltd. | Securities | 50,000 | 50,000 | 50,000 | 50,000 | |||||||||||||||
| 1 | Collaterals related to lease contracts arising from operating activities between related parties are excluded. |
183
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
Collateral received from related parties as at December 31, 2018 and 2017, are as follows:
| (In millions of Korean won) | 2018 | 2017 | ||||||||
Subsidiary | ||||||||||
Taejon Samho The First Co., Ltd. | Beneficiary certificate of land development trust | 130,000 | 130,000 | |||||||
Parent’s subsidiaries | ||||||||||
KB Securities Co., Ltd. | Time deposits/ Beneficiary right certificate | 178,178 | 167,000 | |||||||
Securities | 20,000 | 20,000 | ||||||||
KB Life Insurance Co., Ltd. | Securities | 10,000 | 10,000 | |||||||
KB Kookmin Card Co., Ltd. | Time deposits | 22,000 | 22,000 | |||||||
KB Insurance Co., Ltd. | Securities | 66,500 | 58,000 | |||||||
KB Credit Information Co., Ltd. | Time deposits and others | 1,425 | 1,265 | |||||||
KB Star Office Private Real Estate Master Fund 3 | Real estate | 28,800 | — | |||||||
KB Star Office Private Real Estate Master Fund 4 | Real estate | 24,000 | — | |||||||
Key management | Time deposits and others | 401 | 388 | |||||||
Real estate | 3,182 | 2,287 | ||||||||
| 1 | Collaterals related to lease contracts arising from operating activities between related parties are excluded. |
As at December 31, 2018, Incheon Bridge Co., Ltd., a related party, provides fund management account, civil engineering completed risk insurance, and management rights as senior collateral amounting toW 611,000 million to a financial syndicate that consists of the Bank and five other institutions, and as subordinated collateral amounting toW 384,800 million to subordinated debt holders that consist of the Bank and two other institutions. Also, it provides certificate of credit guarantee amounting toW 400,000 million as collateral to a financial syndicate consisting of the Bank and five other institutions.
The amounts of debt securities purchased through KB securities Co., Ltd. areW 7,920,050 million andW 4,168,048 million for the years ended December 31, 2018 and 2017, respectively, and the amounts of debts securities sold through KB securities Co., Ltd. areW 3,835,245 million andW 2,204,346 million for the years ended December 31, 2018 and 2017, respectively.
The amounts of intangible Assets purchased through KB Data System Co., Ltd. areW 17,831 million andW 12,532 million for the years ended December 31, 2018 and 2017, respectively.
The Bank and KB Kookmin Card Co., Ltd. are jointly and severally liable for the payables of the Bank before thespin-off date.
184
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
41. Adoption of Korean IFRS 1109Financial Instruments
The Bank adopted Korean IFRS 1109Financial Instruments, which was issued on September 25, 2015, on January 1, 2018. The application of Korean IFRS 1109 has following impacts on the financial statements.
On the date of initial application, January 1, 2018, the measurement category of the financial assets in accordance with Korean IFRS 1039 and 1109, are as follows:
| (In millions of Korean won) | ||||||||||||||||||
Measurement categories | Carrying amounts | |||||||||||||||||
December 31, 2017 (Korean IFRS 1039) | January 1, 2018 (Korean IFRS 1109) | Korean IFRS 10391 | Reclassification | Remeasurement | Korean IFRS 11091 | |||||||||||||
Cash and due from financial institutions | Financial assets at amortized cost | 14,628,439 | (1,908,070 | ) | (38 | ) | 12,720,331 | |||||||||||
Financial assets at fair value through profit or loss2 | — | 1,908,070 | — | 1,908,070 | ||||||||||||||
|
|
|
|
|
|
|
| |||||||||||
| 14,628,439 | — | (38 | ) | 14,628,401 | ||||||||||||||
|
|
|
|
|
|
|
| |||||||||||
Financial assets at fair value through profit or loss (under Korean IFRS 1039) |
| |||||||||||||||||
Financial assets held for trading: debt securities | Financial assets at fair value through profit or loss | 3,044,008 | 29,251 | — | 3,073,259 | |||||||||||||
Financial assets held for trading: equity securities | 29,251 | (29,251 | ) | — | — | |||||||||||||
Financial assets held for trading: others | 73,856 | — | — | 73,856 | ||||||||||||||
|
|
|
|
|
|
|
| |||||||||||
| 3,147,115 | — | — | 3,147,115 | |||||||||||||||
|
|
|
|
|
|
|
| |||||||||||
Derivative financial assets held for trading | Derivative financial assets held for trading | 2,531,889 | (17,197 | ) | — | 2,514,692 | ||||||||||||
Derivative financial assets held for hedging | Derivative financial assets held for hedging | 59,071 | — | — | 59,071 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||||
| 2,590,960 | (17,197 | ) | — | 2,573,763 | ||||||||||||||
|
|
|
|
|
|
|
| |||||||||||
Loans | Financial assets at amortized cost | 250,119,240 | (132,254 | ) | (287,193 | ) | 249,699,793 | |||||||||||
Financial assets at fair value through profit or loss3 | — | 130,032 | 2,690 | 132,722 | ||||||||||||||
|
|
|
|
|
|
|
| |||||||||||
| 250,119,240 | (2,222 | ) | (284,503 | ) | 249,832,515 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||||
185
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
| Financial investments | ||||||||||||||||||
Available-for-sale financial assets: debt securities | Financial assets at fair value through other comprehensive income | 27,417,640 | (2,835,591 | ) | — | 24,582,049 | ||||||||||||
Financial assets at fair value through profit or loss4 | — | 4,149,698 | — | 4,149,698 | ||||||||||||||
Financial assets at amortized cost5 | — | 2,835,591 | 4,118 | 2,839,709 | ||||||||||||||
Available-for-sale financial assets: equity securities | Financial assets at fair value through other comprehensive income | 6,057,948 | (4,173,565 | ) | 276 | 1,884,659 | ||||||||||||
Financial assets at fair value through profit or loss6 | — | 23,867 | (87 | ) | 23,780 | |||||||||||||
Available-for-sale financial assets: others | Financial assets at fair value through other comprehensive income | 500 | (500 | ) | — | — | ||||||||||||
Financial assets at fair value through profit or loss7 | — | 500 | — | 500 | ||||||||||||||
Held-to-maturity financial assets | Financial assets at amortized cost | 8,732,246 | (214,280 | ) | (1,200 | ) | 8,516,766 | |||||||||||
Financial assets at fair value through profit or loss8 | — | 214,280 | (2,004 | ) | 212,276 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||||
| 42,208,334 | — | 1,103 | 42,209,437 | |||||||||||||||
|
|
|
|
|
|
|
| |||||||||||
Other financial assets | Financial assets at amortized cost | 6,303,303 | (1,625 | ) | (3,264 | ) | 6,298,414 | |||||||||||
|
|
|
|
|
|
|
| |||||||||||
| 318,997,391 | (21,044 | ) | (286,702 | ) | 318,689,645 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||||
| 1 | Net of allowance. |
| 2 | The deposits amounting to |
| 3 | The loans amounting to |
| 4 | The equity securities amounting to |
| 5 | The debt securities amounting to |
| 6 | The equity securities amounting to |
| 7 | Other securities amounting to |
| 8 | The structured debt securities amounting to |
186
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
On the date of initial application, January 1, 2018, the measurement category of the financial liabilities in accordance with Korean IFRS 1039 and 1109, are as follows:
| (In millions of Korean won) | ||||||||||||||||||||
Measurement categories | Carrying amounts | |||||||||||||||||||
| December 31, 2017 (Korean IFRS 1039) | January 1, 2018 (Korean IFRS 1109) | Korean IFRS 1039 | Reclassification | Remeasurement | Korean IFRS 1109 | |||||||||||||||
Financial liabilities held for trading | | Financial liabilities at fair value through profit or loss | | 74,191 | — | — | 74,191 | |||||||||||||
Derivative financial liabilities held for trading | | Derivative financial instruments held for trading | | 2,572,880 | — | — | 2,572,880 | |||||||||||||
Derivative financial liabilities held for hedging | | Derivative financial liabilities held for hedging | | 50,032 | — | — | 50,032 | |||||||||||||
Deposits | | Financial liabilities at amortized cost | | 247,712,788 | — | — | 247,712,788 | |||||||||||||
Debts | | Financial liabilities at amortized cost | | 15,854,911 | — | — | 15,854,911 | |||||||||||||
Debentures | | Financial liabilities at amortized cost | | 18,167,498 | — | — | 18,167,498 | |||||||||||||
Other financial liabilities | | Financial liabilities at amortized cost | | 12,261,378 | (21,044 | ) | — | 12,240,334 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
| 296,693,678 | (21,044 | ) | — | 296,672,634 | ||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
187
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
On the date of initial application, January 1, 2018, the classification of the financial assets by category in accordance with Korean IFRS 1109, are as follows:
| January 1, 2018 | ||||||||||||||||||||||||
| (In millions of Korean won) | Financial assets at fair value through profit or loss | Debt securities at fair value through other comprehensive income | Equity securities at fair value through other comprehensive income | Financial assets at amortized cost1 | Derivative instruments held for hedging | Total | ||||||||||||||||||
Cash and due from financial institutions | — | — | — | 12,720,331 | — | 12,720,331 | ||||||||||||||||||
Financial assets at fair value through profit or loss | 9,574,161 | — | — | — | — | 9,574,161 | ||||||||||||||||||
Derivative assets designated for trading | 2,514,692 | — | — | — | — | 2,514,692 | ||||||||||||||||||
Derivative assets held for hedging | — | — | — | — | 59,071 | 59,071 | ||||||||||||||||||
Loans at amortized cost | — | — | — | 249,699,793 | — | 249,699,793 | ||||||||||||||||||
Financial investments | — | 24,582,049 | 1,884,659 | 11,356,475 | — | 37,823,183 | ||||||||||||||||||
Other financial assets | — | — | — | 6,298,414 | — | 6,298,414 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
| 12,088,853 | 24,582,049 | 1,884,659 | 280,075,013 | 59,071 | 318,689,645 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
| 1 | Net of allowance. |
On the date of initial application, January 1, 2018, the reclassification from financial assets at fair value through profit or loss to financial assets at amortized cost or financial assets at fair value through other comprehensive income, does not exist.
On the date of initial application, January 1, 2018, the reclassification from certain financial assets, other than financial assets at amortized cost to financial assets at amortized cost, are as follows:
| (In millions of Korean won) | Measurement categories before reclassification | Fair value | Recognizable valuation gain or loss if not reclassified | |||||||||
Currency stabilization bond | Available-for-sale | 1,975,001 | (248 | ) | ||||||||
Asset backed securities | Available-for-sale | 860,590 | (4,046 | ) | ||||||||
|
|
|
| |||||||||
| 2,835,591 | (4,294 | ) | ||||||||||
|
|
|
| |||||||||
188
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
On the date of initial application, January 1, 2018, the adjustments from the allowances/provision in accordance with Korean IFRS 1039 to the allowances (provision) in accordance with Korean IFRS 1109, are as follows:
Measurement categories | Allowances(Provision) | |||||||||||||||||
December 31, 2017 (Korean IFRS 1039) | January 1, 2018 (Korean IFRS 1109) | Korean IFRS 1039 | Reclassification | Remeasurement | Korean IFRS 1109 | |||||||||||||
Loans and receivables |
| |||||||||||||||||
Due from financial institutions | Financial assets at amortized cost | — | — | 38 | 38 | |||||||||||||
Loans | Financial assets at amortized cost | 1,352,458 | — | 287,193 | 1,639,651 | |||||||||||||
| Financial assets at fair value through profit or loss | 35,608 | (35,608 | ) | — | — | |||||||||||||
Other financial assets | Financial assets at amortized cost | 49,440 | — | 3,264 | 52,704 | |||||||||||||
Available-for-sale |
| |||||||||||||||||
Debts securities | Financial assets at fair value through other comprehensive income | — | — | 1,564 | 1,564 | |||||||||||||
| Financial assets at amortized cost | — | — | 176 | 176 | ||||||||||||||
Held-to-maturity securities |
| |||||||||||||||||
Debts securities | Financial assets at amortized cost | — | — | 1,200 | 1,200 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||||
| 1,437,506 | (35,608 | ) | 293,435 | 1,695,333 | ||||||||||||||
|
|
|
|
|
|
|
| |||||||||||
Unused commitment and guarantee | ||||||||||||||||||
Non-financial guarantee and unused commitment | 195,068 | — | 4,717 | 199,785 | ||||||||||||||
|
|
|
|
|
|
|
| |||||||||||
| 195,068 | — | 4,717 | 199,785 | |||||||||||||||
|
|
|
|
|
|
|
| |||||||||||
Financial guarantee | 1,862 | — | 356 | 2,218 | ||||||||||||||
|
|
|
|
|
|
|
| |||||||||||
| 1,862 | — | 356 | 2,218 | |||||||||||||||
|
|
|
|
|
|
|
| |||||||||||
189
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
On the date of initial application, January 1, 2018, the impacts on accumulated other comprehensive income due to financial assets at fair value through other comprehensive income and others, are as follows:
| (In millions of Korean won) | Impact of application | |||
December 31, 2017 (before adoption of Korean IFRS 1109) | 745,856 | |||
Change of subsequent measurement category: available-for-sale financial assets to financial assets at amortized cost | 4,294 | |||
Change of subsequent measurement category: available-for-sale financial assets to financial assets at fair value through profit or loss | (84,315 | ) | ||
Recognition of expected credit losses on debt securities at fair value through other comprehensive income | 1,564 | |||
Reversal of impairment on equity securities at fair value through other comprehensive income | (612,647 | ) | ||
Valuation of fair value of equity securities accounted for under cost method | 276 | |||
Change of gain/loss from foreign currency translation of foreign operations | 1,583 | |||
Tax effect | 189,976 | |||
|
| |||
January 1, 2018 (after adoption of Korean IFRS 1109) | 246,587 | |||
|
| |||
190
Kookmin Bank
(A wholly owned subsidiary of KB Financial Group Inc.)
Notes to the Separate Financial Statements
December 31, 2018 and 2017
On the date of initial application, January 1, 2018, the impacts on retained earnings, are as follows:
| (In millions of Korean won) | Impact of application | |||
December 31, 2017 (before adoption of Korean IFRS 1109) | 17,252,939 | |||
Change of subsequent measurement category:available-for-sale financial assets to financial assets at fair value through profit or loss | 84,315 | |||
Change of classification/subsequent measurement category:held-to-maturityfinancial assets to financial assets at fair value through profit or loss | (2,004 | ) | ||
Change of subsequent measurement category: loans and receivables to financial assets at fair value through profit or loss | 2,690 | |||
Recognition of expected credit losses on debt securities at fair value through other comprehensive income | (1,564 | ) | ||
Reversal of impairment on equity securities at fair value through other comprehensive income | 612,647 | |||
Application of expected credit losses on financial assets at amortized cost | (291,871 | ) | ||
Application of expected credit losses on provisions | (5,073 | ) | ||
Valuation of fair value of equity securities accounted for under cost method | (87 | ) | ||
Change of gain/loss from foreign currency translation of foreign operations | (1,583 | ) | ||
Tax effect | (110,854 | ) | ||
|
| |||
January 1, 2018 (after adoption of Korean IFRS 1109) | 17,539,555 | |||
|
| |||
42. Approval of Issuance of the Financial Statements
The issuance of the Bank’s separate financial statements as at and for the year ended December 31, 2018, was originally approved by the Board of Directors on February 7, 2019, and wasre-approved with revision on February 28, 2019.
191
Report on Independent Auditor’s
Review of Internal Control over Financial Reporting
To the President of
Kookmin Bank
We have reviewed the accompanying management’s report on the effectiveness of the Internal Control over Financial Reporting (“ICFR”) of Kookmin Bank (the “Bank”) as of December 31, 2018. The Bank’s management is responsible for designing and operating ICFR and for its assessment of the effectiveness of ICFR. Our responsibility is to review the management’s report on the effectiveness of the ICFR and issue a report based on our review. The management’s report on the effectiveness of the ICFR of the Bank states that “Based on the assessment results, Chief Executive Officer and ICFR Officer believe that the Bank’s ICFR, as at December 31, 2018, is designed and operating effectively, in all material respects, in conformity with the Best Practice Guideline”
Our review was conducted in accordance with the ICFR review standards established by the Korean Institute of Certified Public Accountants. Those standards require that we plan and perform, in all material respects, the review of management’s report on the effectiveness of the ICFR to obtain a lower level of assurance than an audit. A review is to obtain an understanding of a company’s ICFR and consists principally of inquiries of management and, when deemed necessary, a limited inspection of underlying documents, which is substantially less in scope than an audit.
A Bank’s ICFR is a system to monitor and operate those policies and procedures designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with International Financial Reporting Standards as adopted by the Republic of Korea. Because of its inherent limitations, ICFR may not prevent or detect a material misstatement of the financial statements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
192
Based on our review, nothing has come to our attention that causes us to believe that management’s report on the effectiveness of the ICFR, referred to above, is not presented fairly, in all material respects, in accordance with the Best Practice Guideline.
Our review is based on the Bank’s ICFR as of December 31, 2018, and we did not review management’s assessment of its ICFR subsequent to December 31, 2018. This report has been prepared pursuant to the Acts on External Audit for Stock Companies, etc. in Korea and may not be appropriate for other purposes or for other users.
Samil PricewaterhouseCoopers
March 11, 2019
193
Report on the Effectiveness of
the Internal Control over Financial Reporting
To the Shareholders, Board of Directors and Auditor (Audit Committee) of
Kookmin Bank
We, as the Chief Executive Officer (“CEO”) and the Internal Control over Financial Reporting(“ICFR”) Officer of Kookmin Bank (“the Bank”), assessed the effectiveness of the design and operation of the Bank’s Internal Control over Financial Reporting for the year ended December 31, 2018.
The Bank’s management, including ourselves, is responsible for designing and operating ICFR. We assessed the design and operating effectiveness of the ICFR in the prevention and detection of an error or fraud which may cause material misstatements in the preparation and disclosure of reliable financial statements. We followed the ‘Best Practice Guideline’ which is established by the Operating Committee of Internal Control over Financial Reporting in Korea (the “ICFR Committee”) to evaluate the effectiveness of the ICFR design and operation.
Based on the assessment results, we believe that the Bank’s ICFR, as at December 31, 2018, is designed and operating effectively, in all material respects, in conformity with the Best Practice Guideline.
We certify that this report does not contain any untrue statement of a fact, or omit to state a fact necessary to be presented herein. We also certify that this report does not contain or present any statement which cause material misunderstandings, and we have reviewed and verified this report with sufficient due care.
February 21, 2019
Yin Hur, President and Chief Executive Officer
Jae Keun Lee,Internal Control over Financial Reporting Officer
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