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Table of Contents
Independent Auditors’ Review Report
Based on a report originally issued in Korean
The Board of Directors and Stockholders
KB Financial Group Inc.:
Reviewed financial statements
We have reviewed the accompanying condensed separate interim financial statements of KB Financial Group Inc. (the “Company”), which comprise the separate interim statement of financial position as of September 30, 2022, the separate interim statements of comprehensive income for the three-month and nine-month periods ended September 30, 2022 and 2021, the separate interim statements of changes in equity and cash flows for the nine-month periods ended September 30, 2022 and 2021 and notes, comprising a summary of significant accounting policies and other explanatory information.
Management’s responsibility
Management is responsible for the preparation and fair presentation of these condensed separate interim financial statements in accordance with Korean International Financial Reporting Standards (“K-IFRS”) No.1034 Interim Financial Reporting, and for such internal control as management determines is necessary to enable the preparation of the condensed separate interim financial statements that are free from material misstatement, whether due to fraud or error.
Auditors’ review responsibility
Our responsibility is to issue a report on these condensed separate interim financial statements based on our reviews.
We conducted our reviews in accordance with the Review Standards for Quarterly and Semiannual Financial Statements established by the Securities and Futures Commission of the Republic of Korea. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Korean Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our reviews, nothing has come to our attention that causes us to believe that the accompanying condensed separate interim financial statements referred to above are not prepared, in all material respects, in accordance with K-IFRS No.1034 Interim Financial Reporting.
Emphasis of matter
The following matter may be helpful to the readers in their understanding of the condensed separate interim financial statements. Our review conclusion is not affected by this matter.
As described in note 23.2.b) to the condensed separate interim financial statements, the proliferation of COVID-19 has had a negative influence on the global economy, which may have an impact on expected credit losses and potential impairment of assets in a particular portfolio, and it could negatively affect the revenue generation capability of the Company.
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Other matters
The procedures and practices utilized in the Republic of Korea to review such condensed separate interim financial statements may differ from those generally accepted and applied in other countries.
The separate statement of financial position of the Company as of December 31, 2021, and the related separate statements of comprehensive income, changes in equity and cash flows for the year then ended, which are not accompanying this report, were audited by us in accordance with Korean Standards on Auditing and our report thereon, dated March 17, 2022, expressed an unqualified opinion. The accompanying separate statement of financial position of the Company as of December 31, 2021, presented for comparative purposes, is consistent, in all material respects, with the audited separate statement of financial position from which it has been derived.
</s/>KPMG Samjong Accounting Corp. |
Seoul, Korea |
November 14, 2022 |
This report is effective as of November 14, 2022, the review report date. Certain subsequent events or circumstances, which may occur between the review report date and the time of reading this report, could have a material impact on the accompanying condensed separate interim financial statements and notes thereto. Accordingly, the readers of the review report should understand that the above review report has not been updated to reflect the impact of such subsequent events or circumstances, if any.
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KB Financial Group Inc.
Separate Interim Statements of Financial Position
September 30, 2022 and December 31, 2021
(In millions of Korean won)
Notes | September 30, 2022 (Unaudited) | December 31, 2021 | ||||||||||
Assets | ||||||||||||
Cash and due from financial institutions | 4,5,6,22 | |||||||||||
Financial assets at fair value through profit or loss | 4,5,7 | 1,230,069 | 440,760 | |||||||||
Loans measured at amortized cost | 4,5,8 | 308,918 | 249,128 | |||||||||
Investments in subsidiaries | 9 | 26,741,438 | 26,741,438 | |||||||||
Property and equipment | 4,279 | 4,444 | ||||||||||
Intangible assets | 17,119 | 16,673 | ||||||||||
Net defined benefit assets | 12 | — | 221 | |||||||||
Deferred income tax assets | 10 | 18,577 | 5,583 | |||||||||
Other assets | 4,5 | 1,289,285 | 805,056 | |||||||||
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Total assets | ||||||||||||
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Liabilities | ||||||||||||
Debentures | 4,5,11 | |||||||||||
Net defined benefit liabilities | 12 | 1,745 | — | |||||||||
Current income tax liabilities | 870,272 | 570,519 | ||||||||||
Other liabilities | 4,5 | 227,350 | 235,095 | |||||||||
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Total liabilities | 6,134,973 | 6,358,405 | ||||||||||
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Equity | 13 | |||||||||||
Share capital | 2,090,558 | 2,090,558 | ||||||||||
Hybrid securities | 4,433,981 | 2,837,981 | ||||||||||
Capital surplus | 14,754,747 | 14,754,747 | ||||||||||
Accumulated other comprehensive income | (8,685 | ) | (8,330 | ) | ||||||||
Retained earnings | 4,073,194 | 3,974,206 | ||||||||||
Treasury shares | (836,188 | ) | (1,136,188 | ) | ||||||||
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Total equity | 24,507,607 | 22,512,974 | ||||||||||
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Total liabilities and equity | ||||||||||||
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The above separate interim statements of financial position should be read in conjunction with the accompanying notes.
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KB Financial Group Inc.
Separate Interim Statements of Comprehensive Income
Three-Month and Nine-Month Periods Ended September 30, 2022 and 2021
(In millions of Korean won, except per share amounts)
Notes | 2022 (Unaudited) | 2021 (Unaudited) | ||||||||||||||||||
Three months | Nine months | Three months | Nine months | |||||||||||||||||
Interest income | ||||||||||||||||||||
Interest income from financial instruments at amortized cost | 4,249 | 10,414 | 1,544 | 4,192 | ||||||||||||||||
Interest income from financial instruments at fair value through profit or loss | 672 | 1,992 | 1,520 | 2,179 | ||||||||||||||||
Interest expense | (29,359 | ) | (83,951 | ) | (29,103 | ) | (91,573 | ) | ||||||||||||
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Net interest expense | 15 | (24,438) | (71,545) | (26,039) | (85,202) | |||||||||||||||
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Fee and commission income | 417 | 1,576 | 232 | 694 | ||||||||||||||||
Fee and commission expense | (1,380 | ) | (6,674 | ) | (1,176 | ) | (6,409 | ) | ||||||||||||
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Net fee and commission expense | 16 | (963 | ) | (5,098 | ) | (944 | ) | (5,715 | ) | |||||||||||
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Net gains (losses) on financial instruments at fair value through profit or loss | 17 | (230 | ) | (17,090 | ) | 4,540 | 15,893 | |||||||||||||
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Net other operating income | 18 | 200,000 | 1,871,224 | 170,000 | 1,617,949 | |||||||||||||||
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General and administrative expenses | 19 | (21,428) | (63,074) | (21,063) | (65,124) | |||||||||||||||
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Operating income (loss) before provision for credit losses | 152,941 | 1,714,417 | 126,494 | 1,477,801 | ||||||||||||||||
Provision (Reversal) for credit losses | (209 | ) | (211 | ) | 2 | (3 | ) | |||||||||||||
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Net operating income (loss) | 152,732 | 1,714,206 | 126,496 | 1,477,798 | ||||||||||||||||
Net non-operating income (expenses) | 988 | 553 | 1,454 | 1,306 | ||||||||||||||||
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Profit (loss) before income tax benefit | 153,720 | 1,714,759 | 127,950 | 1,479,104 | ||||||||||||||||
Income tax benefit | 20 | 4,216 | 12,860 | 1,443 | 2,352 | |||||||||||||||
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Profit (loss) for the period | 157,936 | 1,727,619 | 129,393 | 1,481,456 | ||||||||||||||||
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Items that will not be reclassified to profit or loss: | ||||||||||||||||||||
Remeasurements of net defined benefit liabilities | (74 | ) | (355 | ) | (42 | ) | (86 | ) | ||||||||||||
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Other comprehensive loss for the period, net of tax | (74 | ) | (355 | ) | (42 | ) | (86 | ) | ||||||||||||
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Total comprehensive income (loss) for the period | ||||||||||||||||||||
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Earnings (loss) per share | 21 | |||||||||||||||||||
Basic earnings (loss) per share | ||||||||||||||||||||
Diluted earnings (loss) per share | 311 | 4,120 | 276 | 3,594 |
The above separate interim statements of comprehensive income should be read in conjunction with the accompanying notes.
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KB Financial Group Inc.
Separate Interim Statements of Changes in Equity
Nine-Month Periods Ended September 30, 2022 and 2021
(In millions of Korean won) | Share capital | Hybrid securities | Capital surplus | Accumulated other comprehensive income | Retained earnings | Treasury shares | Total equity | |||||||||||||||||||||
Balance as of January 1, 2021 | ||||||||||||||||||||||||||||
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Comprehensive income for the period | ||||||||||||||||||||||||||||
Profit for the period | — | — | — | — | 1,481,456 | — | 1,481,456 | |||||||||||||||||||||
Remeasurements of net defined benefit liabilities | — | — | — | (86 | ) | — | — | (86 | ) | |||||||||||||||||||
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Total comprehensive income for the period | — | — | — | (86 | ) | 1,481,456 | — | 1,481,370 | ||||||||||||||||||||
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Transactions with shareholders | ||||||||||||||||||||||||||||
Annual dividends | — | — | — | — | (689,653 | ) | — | (689,653 | ) | |||||||||||||||||||
Quarterly dividends | — | — | — | — | (292,226 | ) | — | (292,226 | ) | |||||||||||||||||||
Issuance of hybrid securities | — | 873,916 | — | — | — | — | 873,916 | |||||||||||||||||||||
Dividends on hybrid securities | — | — | — | — | (51,439 | ) | — | (51,439 | ) | |||||||||||||||||||
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Total transactions with shareholders | — | 873,916 | — | — | (1,033,318 | ) | — | (159,402 | ) | |||||||||||||||||||
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Balance as of September 30, 2021 (Unaudited) | ||||||||||||||||||||||||||||
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Balance as of January 1, 2022 | ||||||||||||||||||||||||||||
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Comprehensive income for the period | ||||||||||||||||||||||||||||
Profit for the period | — | — | — | — | 1,727,619 | — | 1,727,619 | |||||||||||||||||||||
Remeasurements of net defined benefit liabilities | — | — | — | (355 | ) | — | — | (355 | ) | |||||||||||||||||||
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Total comprehensive income for the period | — | — | — | (355 | ) | 1,727,619 | — | 1,727,264 | ||||||||||||||||||||
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Transactions with shareholders | ||||||||||||||||||||||||||||
Annual dividends | — | — | — | — | (853,299 | ) | — | (853,299 | ) | |||||||||||||||||||
Quarterly dividends | — | — | — | — | (389,634 | ) | — | (389,634 | ) | |||||||||||||||||||
Retirement of treasury shares | — | — | — | — | (300,000 | ) | 300,000 | — | ||||||||||||||||||||
Issuance of hybrid securities | — | 1,596,000 | — | — | — | — | 1,596,000 | |||||||||||||||||||||
Dividends on hybrid securities | — | — | — | — | (85,698 | ) | — | (85,698 | ) | |||||||||||||||||||
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Total transactions with shareholders | — | 1,596,000 | — | — | (1,628,631 | ) | 300,000 | 267,369 | ||||||||||||||||||||
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Balance as of September 30, 2022 (Unaudited) | ||||||||||||||||||||||||||||
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The above separate interim statements of changes in equity should be read in conjunction with the accompanying notes.
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KB Financial Group Inc.
Separate Interim Statements of Cash Flows
Nine-Month Periods Ended September 30, 2022 and 2021
(In millions of Korean won)
Notes | 2022 (Unaudited) | 2021 (Unaudited) | ||||||||||
Cash flows from operating activities | ||||||||||||
Profit for the period | ||||||||||||
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Adjustments for non-cash items | ||||||||||||
Depreciation and amortization expense | 4,486 | 4,719 | ||||||||||
Provision for credit losses | 211 | 3 | ||||||||||
Share-based payments | 2,282 | 7,193 | ||||||||||
Net interest expense | 2,477 | 3,477 | ||||||||||
Valuation losses (gains) on financial assets at fair value through profit or loss | 41,846 | (1,311 | ) | |||||||||
Other expenses | 1,633 | 280 | ||||||||||
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52,935 | 14,361 | |||||||||||
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Changes in operating assets and liabilities | ||||||||||||
Due from financial institutions | (30,000 | ) | (90,000 | ) | ||||||||
Deferred income tax assets | (12,860 | ) | (2,384 | ) | ||||||||
Other assets | 385,648 | 9,141 | ||||||||||
Other liabilities | (578,875 | ) | (9,028 | ) | ||||||||
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(236,087 | ) | (92,271 | ) | |||||||||
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Net cash inflow from operating activities | 1,544,467 | 1,403,546 | ||||||||||
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Cash flows from investing activities | ||||||||||||
Acquisition of financial assets at fair value through profit or loss | (830,000 | ) | (3,061,906 | ) | ||||||||
Disposal of financial assets at fair value through profit of loss |
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Acquisition of subsidiaries | — | (19,269 | ) | |||||||||
Acquisition of loans measured at amortized cost | (60,000 | ) | — | |||||||||
Acquisition of property and equipment | (1,425 | ) | (521 | ) | ||||||||
Disposal of property and equipment | — | 194 | ||||||||||
Acquisition of intangible assets | (965 | ) | (2,394 | ) | ||||||||
Disposal of intangible assets | 20 | 3,482 | ||||||||||
Net increase in guarantee deposits paid | (2,325 | ) | (2,358 | ) | ||||||||
Other investing activities | (824 | ) | (1,083 | ) | ||||||||
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Net cash outflow from investing activities | (895,519 | ) | 12,685 | |||||||||
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Cash flows from financing activities | ||||||||||||
Decrease in borrowings | — | (100,000 | ) | |||||||||
Increase in debentures | 498,898 | 389,405 | ||||||||||
Decrease in debentures | (1,020,000 | ) | (920,000 | ) | ||||||||
Dividends paid to shareholders | (1,242,933 | ) | (981,879 | ) | ||||||||
Redemption of principal elements of lease payments | (396 | ) | (367 | ) | ||||||||
Issuance of hybrid securities | 1,596,000 | 873,916 | ||||||||||
Dividends paid on hybrid securities | (85,698 | ) | (51,439 | ) | ||||||||
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Net cash outflow from financing activities | (254,129 | ) | (790,364 | ) | ||||||||
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Net increase in cash and cash equivalents | 394,819 | 625,867 | ||||||||||
Cash and cash equivalents at the beginning of the period | 22 | 518,073 | 23,081 | |||||||||
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Cash and cash equivalents at the end of the period | 22 | |||||||||||
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The above separate interim statements of cash flows should be read in conjunction with the accompanying notes.
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KB Financial Group Inc.
Notes to the Separate Interim Financial Statements
September 30, 2022 and 2021 (Unaudited), and December 31, 2021
1. The Company
KB Financial Group Inc. (the “Company”), in accordance with Financial Holding Companies Act, was established on September 29, 2008, through stock transfers with the former shareholders of Kookmin Bank, KB Investment & Securities Co., Ltd., KB Asset Management Co., Ltd., KB Real Estate Trust Co., Ltd., KB Investment Co., Ltd., KB Futures Co., Ltd., KB Credit Information Co., Ltd., and KB Data Systems Co., Ltd., and the Company’s main business purpose is to control subsidiaries that engage in the financial business or subsidiaries closely related to the financial business through the stock ownership. The headquarter is located at 26, Gukjegeumyung-ro 8-gil, Yeongdeungpo-gu, Seoul. The Company’s share capital as of September 30, 2022, isW2,090,558 million. In 2011, Kookmin Bank spun off its credit card business segment and established a new separate credit card company, KB Kookmin Card Co., Ltd., and KB Investment & Securities Co., Ltd. merged with KB Futures Co., Ltd. The Company established KB Savings Bank Co., Ltd. in January 2012, acquired Yehansoul Savings Bank Co., Ltd. in September 2013, and KB Savings Bank Co., Ltd. merged with Yehansoul Savings Bank Co., Ltd. in January 2014. In March 2014, the Company acquired Woori Financial Co., Ltd. and changed the name to KB Capital Co., Ltd. Meanwhile, the Company included LIG Insurance Co., Ltd. as an associate and changed the name to KB Insurance Co., Ltd. in June 2015, and KB Insurance Co., Ltd. became one of the subsidiaries through a tender offer in May 2017. Also, the Company included Hyundai Securities Co., Ltd. as an associate in June 2016 and included as a subsidiary in October 2016 by comprehensive exchange of shares. Hyundai Securities Co., Ltd. merged with KB Investment & Securities Co., Ltd. in December 2016 and changed its name to KB Securities Co., Ltd. in January 2017. In August 2020, the Company acquired Prudential Life Insurance Company of Korea Ltd., which was classified as a subsidiary.
The Company has been listed on the Korea Exchange (“KRX”) since October 10, 2008, and on the New York Stock Exchange (“NYSE”) for its American Depositary Shares (“ADS”) since September 29, 2008. Number of shares authorized on its Articles of Incorporation is 1,000 million.
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KB Financial Group Inc.
Notes to the Separate Interim Financial Statements
September 30, 2022 and 2021 (Unaudited), and December 31, 2021
2. Basis of Preparation
2.1 Application of Korean IFRS
The Company maintains its accounting records in Korean won and prepares statutory financial statements in the Korean language in accordance with International Financial Reporting Standards as adopted by the Republic of Korea (“Korean IFRS”). The accompanying separate financial statements have been translated into English from the Korean language separate financial statements.
The separate financial statements of the Company have been prepared in accordance with Korean IFRS. Korean IFRS 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 separate financial statements requires the use of certain critical accounting estimates. Management also needs to exercise judgment in applying the Company’s accounting policies. The areas that require a more complex and higher level of judgment or areas that require significant assumptions and estimations are disclosed in Note 2.4.
The separate financial statements have been prepared in accordance with Korean IFRS No.1027 Separate Financial Statements.
The Company’s separate interim financial statements for the nine-month period ended September 30, 2022, have been prepared in accordance with Korean IFRS No.1034 Interim Financial Reporting and contain less information than is required in annual separate financial statements. Selected explanatory notes include descriptions of transactions or events that are significant in understanding change in financial position and financial performance of the Company since the end of the previous annual reporting period. These separate interim financial statements have been prepared in accordance with Korean IFRS which is effective or early adopted as of September 30, 2022.
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KB Financial Group Inc.
Notes to the Separate Interim Financial Statements
September 30, 2022 and 2021 (Unaudited), and December 31, 2021
2.1.1 The Company has applied the following amended standards for the first time for its annual reporting period commencing January 1, 2022.
• | Amendments to Korean IFRS No.1116 Leases - COVID-19-Related Rent Concessions, etc. beyond June 30, 2021 |
The application of the practical expedient, a lessee may elect not to assess whether a rent concession occurring as a direct consequence of the COVID-19 pandemic is a lease modification, is extended to lease payments originally due on or before 30 June 2022. A lessee shall apply the practical expedient consistently to eligible contracts with similar characteristics and in similar circumstances. These amendments do not have a significant impact on the financial statements.
• | Amendments to Korean IFRS No.1103 Business Combination – Reference to the Conceptual Framework |
The amendments update a reference of definition of assets and liabilities to qualify for recognition as part of a business combination in revised Conceptual Framework for Financial Reporting. However, the amendments add an exception for the recognition of liabilities and contingent liabilities within the scope of Korean IFRS No.1037 Provisions, Contingent Liabilities and Contingent Assets, and Korean IFRS No.2121 Levies. The amendments also confirm that contingent assets should not be recognized at the acquisition date. These amendments do not have a significant impact on the financial statements.
• | Amendments to Korean IFRS No.1016 Property, Plant and Equipment – Proceeds Before Intended Use |
The amendments prohibit an entity from deducting from the cost of an item of property, plant and equipment any proceeds from selling items produced while the entity is preparing the asset for its intended use. Instead, the entity will recognize the proceeds from selling such items, and the costs of producing those items, as profit or loss. These amendments do not have a significant impact on the financial statements.
• | Amendments to Korean IFRS No.1037 Provisions, Contingent Liabilities and Contingent Assets – Onerous Contracts: Cost of Fulfilling a Contract |
The amendments clarify that the direct costs of fulfilling a contract include both the incremental costs of fulfilling the contract and an allocation of other costs directly related to fulfilling contracts when assessing whether the contract is onerous. These amendments do not have a significant impact on the financial statements.
• | Annual improvements to Korean IFRS 2018-2020 |
These amendments do not have a significant impact on the financial statements.
• | Korean IFRS No.1101 First-time Adoption of Korean International Financial Reporting Standards – Subsidiaries that are first-time adopters |
• | Korean IFRS No.1109 Financial Instruments – Fees related to the 10% test for derecognition of financial liabilities |
• | Korean IFRS No.1116 Leases – Lease incentives |
• | Korean IFRS No.1041 Agriculture – Measuring fair value |
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KB Financial Group Inc.
Notes to the Separate Interim Financial Statements
September 30, 2022 and 2021 (Unaudited), and December 31, 2021
2.1.2 The following amended standards have been published that are not mandatory for December 31, 2022 reporting period and have not been adopted by the Company.
• | Amendments to Korean IFRS No.1001 Presentation of Financial Statements – Classification of Liabilities as Current or Non-current |
The amendments clarify that liabilities are classified as either current or non-current, depending on the substantive rights that exist at the end of the reporting period. Classification is unaffected by the likelihood that an entity will exercise the right to defer settlement of the liability or the management’s expectations thereof. Also, the settlement of liability includes the transfer of the entity’s own equity instruments; however, it would be excluded if an option to settle the liability by the transfer of the entity’s own equity instruments is recognized separately from the liability as an equity component of a compound financial instrument. The amendments should be applied for annual reporting periods beginning on or after January 1, 2023, and earlier application is permitted. The Company does not expect that these amendments have a significant impact on the financial statements.
• | Amendments to Korean IFRS No.1001 Presentation of Financial Statements – Accounting Policy Disclosure |
The amendments require an entity to define and disclose their material accounting policy information. The amendments should be applied for annual reporting periods beginning on or after January 1, 2023, and earlier application is permitted. The Company does not expect that these amendments have a significant impact on the financial statements.
• | Amendments to Korean IFRS No.1008 Accounting Policies, Changes in Accounting Estimates and Errors – Definition of Accounting Estimates |
The amendments introduce the definition of accounting estimates and clarify how to distinguish changes in accounting estimates from changes in accounting policies. The amendments should be applied for annual reporting periods beginning on or after January 1, 2023, and earlier application is permitted. The Company does not expect that these amendments have a significant impact on the financial statements.
• | Amendments to Korean IFRS No.1012 Income Taxes – Deferred Tax Related to Assets and Liabilities Arising from a Single Transaction |
The amendments narrow the scope of the deferred tax recognition exemption so that it no longer applies to transactions that, on initial recognition, give rise to equal taxable and deductible temporary differences. The amendments should be applied for annual reporting periods beginning on or after January 1, 2023, and earlier application is permitted. The Company does not expect that these amendments have a significant impact on the financial statements.
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KB Financial Group Inc.
Notes to the Separate Interim Financial Statements
September 30, 2022 and 2021 (Unaudited), and December 31, 2021
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 separate financial statements of the Company are measured using the currency of the primary economic environment in which the Company operates (“functional currency”). The separate financial statements are presented in Korean won, which is the Company’s functional and presentation currency.
2.4 Critical Accounting Estimates
The Company applies accounting policies and uses judgements, accounting estimates, and assumptions that may have a significant impact on the assets (liabilities) and incomes (expenses) in preparing the separate financial statements. Management’s estimates of outcomes may differ from actual outcomes if management’s estimates and assumptions based on management’s best judgment are different from the actual environment.
Estimates and underlying assumptions are continually evaluated, and changes in accounting estimates are recognized in the period in which the estimates are changed and in any future periods affected.
Significant accounting estimates and assumptions applied in the preparation of these separate interim financial statements are the same as those applied to the separate financial statements for the year ended December 31, 2021, except for the estimates used to determine income tax expense.
3. Significant Accounting Policies
The significant accounting policies and calculation methods applied in the preparation of these separate interim financial statements are the same as those applied to the separate financial statements for the year ended December 31, 2021, except for the impact of changes due to adopting new and amended standards and interpretations described in Note 2.1 and below paragraph.
Income tax expense for the interim period is measured applying the expected average annual income tax rate applicable on expected total annual income.
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KB Financial Group Inc.
Notes to the Separate Interim Financial Statements
September 30, 2022 and 2021 (Unaudited), and December 31, 2021
4. Financial Risk Management
4.1 Summary
4.1.1 Overview of financial risk management policy
The financial risks that the Company is exposed to are credit risk, market risk, liquidity risk, and others.
This note regarding financial risk management provides information about the risks that the Company is exposed to and about its objectives, policies, risk assessment and management procedures, and capital management. Additional quantitative information is disclosed throughout the separate financial statements.
The Company’s risk management system focuses on efficiently supporting long-term strategy and management decisions of the Company by increasing risk transparency, preventing risk transfer between subsidiaries and preemptive response to rapidly changing financial environments. Credit risk, market risk, operational risk, interest rate risk, insurance risk, credit concentration risk, strategy risk, and reputation risk are recognized as significant risks and measured and managed by quantifying them in the form of internal capital or Value at Risk (“VaR”) using statistical methods.
4.1.2 Risk management organization
4.1.2.1 Risk Management Committee
The Risk Management Committee, as the ultimate decision-making body, deals with risk-related issues, such as establishing risk management strategies in accordance with the strategic direction determined by the board of directors, determining the affordable level of risk appetite, reviewing the level of risk and the status of risk management activities, approving the application of risk management systems, methodologies, and major improvements, and establishing and approving risk management policies and procedures to timely recognize, measure, monitor, and control risks arising from various transactions by the Company and subsidiaries (the “Group”).
4.1.2.2 Risk Management Council
The Risk Management Council is responsible for consulting on matters delegated by the Risk Management Committee and requests for review by the Group Management Executive Committee, consulting on details of each subsidiary’s risk management policies and procedures, monitoring the Group’s risk management status, and establishing and implementing necessary measures.
4.1.2.3 Risk Management Department
The Risk Management Department performs the Company’s risk management detailed policies, procedures, and business processes, and is responsible for calculating the Group’s risk-weighted assets, monitoring and managing internal capital limits.
4.2 Credit Risk
4.2.1 Overview of credit risk
Credit risk is the risk of loss from the portfolio of assets held due to the counterparty’s default, breach of contract, and deterioration of credit quality. For risk management purposes, the Company considers default risk of individual borrowers.
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KB Financial Group Inc.
Notes to the Separate Interim Financial Statements
September 30, 2022 and 2021 (Unaudited), and December 31, 2021
4.2.2 Credit risk management
The Company measures the expected losses of assets subject to credit risk management and uses them as a management indicator.
4.2.3 Maximum exposure to credit risk
The Company’s maximum exposures to credit risk without consideration of collateral values in relation to financial instruments other than equity securities as of September 30, 2022 and December 31, 2021, are as follows:
(In millions of Korean won) | September 30, 2022 | December 31, 2021 | ||||||
Due from financial institutions | ||||||||
Loans measured at amortized cost * | 308,918 | 249,128 | ||||||
Loans measured at fair value through profit or loss | 43,367 | 51,154 | ||||||
Other financial assets * | 245,144 | 36,078 | ||||||
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* | After netting of allowance |
4.2.4 Credit risk of loans
The Company maintains allowances for loan losses associated with credit risk of loans to manage its credit risk.
The Company assesses expected credit losses and recognizes loss allowances of financial assets at amortized cost and financial asset at fair value through other comprehensive income. Financial assets at fair value through profit or loss are excluded. Expected credit losses are a probability-weighted estimate of possible credit losses occurring in a certain range by reflecting reasonable and supportable information that is reasonably available at the end of the reporting period without undue cost or effort, including information about past events, current conditions, and forecasts of future economic conditions. The Company measures the expected credit losses on loans classified as financial assets 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 in the financial statements.
Credit qualities of loans measured at amortized cost as of September 30, 2022 and December 31, 2021, are classified as follows:
(In millions of Korean won) | September 30, 2022 | |||||||||||||||||||
12-month expected credit losses | Lifetime expected credit losses | Not applying expected credit losses | Total | |||||||||||||||||
Non-impaired | Impaired | |||||||||||||||||||
Loans measured at amortized cost * | ||||||||||||||||||||
Corporate | ||||||||||||||||||||
Grade 1 | ||||||||||||||||||||
Grade 2 | — | — | — | — | — | |||||||||||||||
Grade 3 | — | — | — | — | — | |||||||||||||||
Grade 4 | — | — | — | — | — | |||||||||||||||
Grade 5 | — | — | — | — | — | |||||||||||||||
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KB Financial Group Inc.
Notes to the Separate Interim Financial Statements
September 30, 2022 and 2021 (Unaudited), and December 31, 2021
4.2.4 Credit risk of loans (cont’d)
(In millions of Korean won)
December 31, 2021 | ||||||||||||||||||||
12-month expected credit losses | Lifetime expected credit losses | Not applying expected credit losses | Total | |||||||||||||||||
Non-impaired | Impaired | |||||||||||||||||||
Loans measured at amortized cost * | ||||||||||||||||||||
Corporate | ||||||||||||||||||||
Grade 1 | ||||||||||||||||||||
Grade 2 | — | — | — | — | — | |||||||||||||||
Grade 3 | — | — | — | — | — | |||||||||||||||
Grade 4 | — | — | — | — | — | |||||||||||||||
Grade 5 | — | — | — | — | — | |||||||||||||||
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* | Before netting of allowance |
Credit qualities of loans graded according to the probability of default as of September 30, 2022 and December 31, 2021, are as follows:
Range of probability of default (%) | ||
Grade 1 | 0.0 ~ 1.0 | |
Grade 2 | 1.0 ~ 5.0 | |
Grade 3 | 5.0 ~ 15.0 | |
Grade 4 | 15.0 ~ 30.0 | |
Grade 5 | 30.0 ~ |
4.2.5 Credit risk of due from financial institutions
Credit qualities of due from financial institutions as of September 30, 2022 and December 31, 2021, are as follows:
(In millions of Korean won)
September 30, 2022 | ||||||||||||||||||||
12-month expected credit losses | Lifetime expected credit losses | Not applying expected credit losses | Total | |||||||||||||||||
Non-impaired | Impaired | |||||||||||||||||||
Due from financial institutions measured at amortized cost | ||||||||||||||||||||
Grade 1 | ||||||||||||||||||||
Grade 2 | — | — | — | — | — | |||||||||||||||
Grade 3 | — | — | — | — | — | |||||||||||||||
Grade 4 | — | — | — | — | — | |||||||||||||||
Grade 5 | — | — | — | — | — | |||||||||||||||
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KB Financial Group Inc.
Notes to the Separate Interim Financial Statements
September 30, 2022 and 2021 (Unaudited), and December 31, 2021
4.2.5 Credit risk of due from financial institutions (cont’d)
(In millions of Korean won) | December 31, 2021 | |||||||||||||||||||
12-month expected credit losses | Lifetime expected credit losses | Not applying expected credit losses | Total | |||||||||||||||||
Non-impaired | Impaired | |||||||||||||||||||
Due from financial institutions measured at amortized cost | ||||||||||||||||||||
Grade 1 | ||||||||||||||||||||
Grade 2 | — | — | — | — | — | |||||||||||||||
Grade 3 | — | — | — | — | — | |||||||||||||||
Grade 4 | — | — | — | — | — | |||||||||||||||
Grade 5 | — | — | — | — | — | |||||||||||||||
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4.2.6 Credit risk concentration analysis
4.2.6.1 Classifications of corporate loans by industry as of September 30, 2022 and December 31, 2021, are as follows:
(In millions of Korean won) | September 30, 2022 | |||||||||||||||
Corporate loans* | % | Allowances | Carrying amount | |||||||||||||
Financial institutions | 100.00 | |||||||||||||||
(In millions of Korean won) | December 31, 2021 | |||||||||||||||
Corporate loans* | % | Allowances | Carrying amount | |||||||||||||
Financial institutions | 100.00 |
* | Amount includes loans measured at fair value through profit or loss and amortized cost. |
4.2.6.2 Classifications of due from financial institutions by industry as of September 30, 2022 and December 31, 2021, are as follows:
(In millions of Korean won) | September 30, 2022 | |||||||||||||||
Amount | % | Allowances | Carrying amount | |||||||||||||
Due from financial institutions measured at amortized cost | ||||||||||||||||
Financial institutions | 100.00 | |||||||||||||||
(In millions of Korean won) | December 31, 2021 | |||||||||||||||
Amount | % | Allowances | Carrying amount | |||||||||||||
Due from financial institutions measured at amortized cost | ||||||||||||||||
Financial institutions | 100.00 |
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KB Financial Group Inc.
Notes to the Separate Interim Financial Statements
September 30, 2022 and 2021 (Unaudited), and December 31, 2021
4.3 Liquidity Risk
4.3.1 Overview of liquidity risk
Liquidity risk is a risk that the Company becomes insolvent due to the mismatch between the inflow and outflow of funds, unexpected cash outflows, or a risk of loss due to financing funds at a high interest rate or disposing of securities at an unfavorable price due to lack of available funds. The Company manages its liquidity risk through analysis of the contractual maturity of all financial assets and liabilities and discloses in six categories such as on demand, less than one month, between one month to three months, between three months to one year, between one year to five years, and over five years.
4.3.2. Liquidity risk management
The liquidity risk is managed by risk management policies and liquidity risk management guidelines set forth in these policies that apply to all risk management policies and procedures that may arise throughout the overall business of the Company.
4.3.3. Analysis of remaining contractual maturity of financial liabilities
The cash flows disclosed in the maturity analysis are undiscounted contractual amounts including principal and future interest payments; as such, amounts in the table below do not match with those in the statements of financial position which are based on discounted cash flows. The future interest payments for floating-rate liabilities are calculated on the assumption that the current interest rate is the same until maturity.
Remaining contractual maturity of financial liabilities as of September 30, 2022 and December 31, 2021, are as follows:
(In millions of Korean won) | September 30, 2022 | |||||||||||||||||||||||||||
On Demand | Up to 1 month | 1-3 months | 3-12 months | 1-5 years | Over 5 years | Total | ||||||||||||||||||||||
Financial liabilities | ||||||||||||||||||||||||||||
Debentures | ||||||||||||||||||||||||||||
Lease liabilities | — | 48 | 90 | 390 | 454 | — | 982 | |||||||||||||||||||||
Other financial liabilities | — | 5,487 | 15,486 | — | — | — | 20,973 | |||||||||||||||||||||
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(In millions of Korean won) | December 31, 2021 | |||||||||||||||||||||||||||
On Demand | Up to 1 month | 1-3 months | 3-12 months | 1-5 years | Over 5 years | Total | ||||||||||||||||||||||
Financial liabilities | ||||||||||||||||||||||||||||
Debentures | ||||||||||||||||||||||||||||
Lease liabilities | — | 40 | 63 | 263 | 333 | — | 699 | |||||||||||||||||||||
Other financial liabilities | — | 1,491 | — | — | — | — | 1,491 | |||||||||||||||||||||
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KB Financial Group Inc.
Notes to the Separate Interim Financial Statements
September 30, 2022 and 2021 (Unaudited), and December 31, 2021
4.4 Market Risk
4.4.1 Concept
Market risk refers to risks that can result in losses due to changes in market factors such as interest rate, stock price, and foreign exchange rate, etc. The Company manages the market risks by dividing them into those arising from the trading position and those arising from the non-trading position.
4.4.2 Trading position
In accordance with Financial Holding Companies Act, the Company’s main business is to control financial companies or companies closely related to the financial service. And the Company cannot perform any other business other than managing activities as a holding company, therefore there is no risk of trading position.
4.4.3 Non-trading position
Non-trading position refers to the part except trading position, and the main risk the Company is managing is interest rate risk.
4.4.3.1 Interest rate risk
(a) Definition of interest rate risk
Interest rate risk refers to the risk of changes in the value (fair value) of the items in the statement of financial position due to changes in interest rate and the risk of changes in cash flows related to interest income and interest expense arising from investment and financing activities.
(b) Observation method and management indicator on interest rate risk
The main objective of interest rate risk management is to protect the value changes from interest rate fluctuations. In addition to the Interest Rate Risk in the Banking Book (“IRRBB”) standard methodology required for disclosure, the Company applies the IRRBB methodology to measure and manage interest rate risk in a historical-simulation method including interest rate volatility during the past financial crisis (FY2008-FY2009).
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KB Financial Group Inc.
Notes to the Separate Interim Financial Statements
September 30, 2022 and 2021 (Unaudited), and December 31, 2021
5. Financial Assets and Financial Liabilities
5.1 Classification and Fair Value of Financial Instruments
5.1.1 Carrying amount and fair value of financial assets and liabilities by category as of September 30, 2022 and December 31, 2021, are as follows:
(In millions of Korean won) | September 30, 2022 | |||||||
Carrying amount | Fair value | |||||||
Financial assets | ||||||||
Financial assets at fair value through profit or loss | ||||||||
Hybrid securities | ||||||||
Beneficiary certificates | 302,133 | 302,133 | ||||||
Loans | 43,367 | 43,367 | ||||||
Financial assets at amortized cost | ||||||||
Due from financial institutions | 1,032,895 | 1,032,895 | ||||||
Loans | 308,918 | 308,918 | ||||||
Other financial assets | 245,144 | 245,144 | ||||||
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Financial liabilities | ||||||||
Financial liabilities at amortized cost | ||||||||
Debentures | ||||||||
Other financial liabilities | 32,669 | 32,669 | ||||||
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(In millions of Korean won) | December 31, 2021 | |||||||
Carrying amount | Fair value | |||||||
Financial assets | ||||||||
Financial assets at fair value through profit or loss | ||||||||
Hybrid securities | ||||||||
Loans | 51,154 | 51,154 | ||||||
Financial assets at amortized cost | ||||||||
Due from financial institutions | 608,076 | 608,076 | ||||||
Loans | 249,128 | 249,128 | ||||||
Other financial assets | 36,078 | 36,078 | ||||||
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Financial liabilities | ||||||||
Financial liabilities at amortized cost | ||||||||
Debentures | ||||||||
Other financial liabilities | 13,913 | 13,913 | ||||||
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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 Company 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 quoted price in an active market.
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KB Financial Group Inc.
Notes to the Separate Interim Financial Statements
September 30, 2022 and 2021 (Unaudited), and December 31, 2021
5.1.1 Carrying amount and fair value of financial assets and liabilities by category as of September 30, 2022 and December 31, 2021, are as follows: (cont’d)
Methods of determining fair value of financial instruments are as follows:
Cash and due from financial institutions | Fair value of cash is same as carrying amount. Carrying amount of demand deposit and settlement deposit is a reasonable approximation of fair value because these financial instruments do not have a fixed maturity and are receivable on demand. Fair value of general deposit is measured using Discounted Cash Flow (“DCF”) Model. | |
Securities | Fair value of financial instruments that are quoted in an active market is determined using the quoted prices. If there is no quoted price, fair value is determined using external professional valuation institutions. The institutions use one or more valuation techniques that are deemed appropriate considering the characteristics of the financial instruments among DCF Model, Imputed Market Value Model, Free Cash Flow to Equity Model, Dividend Discount Model, Risk Adjusted Discount Rate Method, and Net Asset Value Method. | |
Derivatives | Fair value of exchange traded derivatives is determined using quoted price in an active market, and fair value of OTC derivatives is determined using valuation techniques. The Company uses internally developed valuation models that are widely used by market participants to determine fair value of plain vanilla OTC derivatives including options, interest rate swaps, and currency swaps, based on observable market parameters. However, some complex financial instruments are valued using appropriate models developed from generally accepted market valuation models including the Finite Difference Method (“FDM”), and the MonteCarlo Simulation or valuation results from independent external professional valuation institution. | |
Loans measured at amortized cost | Fair value of loans is determined using DCF model discounting the expected cash flows, which are contractual cash flows adjusted by the expected prepayment rate, at an appropriate discount rate. | |
Borrowings | DCF model is used to determine the fair value of borrowings, but in the case of short-term maturity, carrying amount is a reasonable approximation of fair value. | |
Debentures | Fair value is determined by using valuation results of external professional valuation institutions, which are calculated using market inputs. | |
Other financial assets and other financial liabilities | Carrying amount is a reasonable approximation of fair value because other financial assets and other financial liabilities are temporary accounts used for other various transactions and their maturities are relatively short or not defined. |
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KB Financial Group Inc.
Notes to the Separate Interim Financial Statements
September 30, 2022 and 2021 (Unaudited), and December 31, 2021
5.1.2 Fair value hierarchy
The Company believes that valuation techniques used for measuring the fair value of financial instruments are reasonable and that the fair value recognized in the statements of financial position is appropriate. However, the fair value of the financial instruments recognized in the statements of financial position may be different if other valuation techniques or assumptions are used. Additionally, as there are 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 Company classifies and discloses fair value of the financial instruments into the three fair value levels as follows:
Level 1 : | The fair values are based on quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date. | |
Level 2 : | The fair values are based on inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. | |
Level 3 : | The fair values are based on unobservable inputs for the asset or liability. |
The fair value measurement is categorized in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement. If an observable input requires an adjustment using an unobservable input and that adjustment results in a significantly higher or lower fair value measurement, the resulting measurement would be categorized within Level 3 of the fair value hierarchy.
5.1.2.1 Fair value hierarchy of financial assets and liabilities at fair value in the statements of financial position
Fair value hierarchy of financial assets at fair value in the statements of financial position as of September 30, 2022 and December 31, 2021, are as follows:
(In millions of Korean won) | September 30, 2022 | |||||||||||||||
Fair value hierarchy | Total | |||||||||||||||
Level 1 | Level 2 | Level 3 | ||||||||||||||
Financial assets | ||||||||||||||||
Financial assets at fair value through profit or loss: | ||||||||||||||||
Hybrid securities | ||||||||||||||||
Beneficiary certificates | — | 302,133 | — | 302,133 | ||||||||||||
Loans | — | 43,367 | — | 43,367 | ||||||||||||
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(In millions of Korean won) | December 31, 2021 | |||||||||||||||
Fair value hierarchy | Total | |||||||||||||||
Level 1 | Level 2 | Level 3 | ||||||||||||||
Financial assets | ||||||||||||||||
Financial assets at fair value through profit or loss: | ||||||||||||||||
Hybrid securities | ||||||||||||||||
Loans | — | 51,154 | — | 51,154 | ||||||||||||
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KB Financial Group Inc.
Notes to the Separate Interim Financial Statements
September 30, 2022 and 2021 (Unaudited), and December 31, 2021
5.1.2.1 Fair value hierarchy of financial assets and liabilities at fair value in the statements of financial position (cont’d)
Valuation techniques and inputs of financial assets and liabilities classified as Level 2 and measured at fair value in the statements of financial position as of September 30, 2022 and December 31, 2021, are as follows:
(In millions of Korean won) | September 30, 2022 | |||||||||||
Fair value | Valuation techniques | Inputs | ||||||||||
Financial assets | ||||||||||||
Financial assets at fair value through profit or loss: | ||||||||||||
Beneficiary certificates | DCF model | | Interest rate, Discount | | ||||||||
Loans | 43,367 | DCF model | | Interest rate, Discount | | |||||||
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(In millions of Korean won) | December 31, 2021 | |||||||||||
Fair value | Valuation techniques | Inputs | ||||||||||
Financial assets | ||||||||||||
Financial assets at fair value through profit or loss: | ||||||||||||
Loans | DCF model | | Interest rate, Discount | |
5.1.2.2 Fair value hierarchy of financial assets and liabilities whose fair value is disclosed
Fair value hierarchy of financial assets and liabilities whose fair value is disclosed as of September 30, 2022 and December 31, 2021, are as follows:
(In millions of Korean won) | September 30, 2022 | |||||||||||||||
Fair value hierarchy | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Financial assets | ||||||||||||||||
Cash and due from financial institutions1 | ||||||||||||||||
Loans measured at amortized cost2 | — | — | 308,918 | 308,918 | ||||||||||||
Other financial assets3 | — | — | 245,144 | 245,144 | ||||||||||||
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Financial liabilities | ||||||||||||||||
Debentures | ||||||||||||||||
Other financial liabilities3 | — | — | 32,669 | 32,669 | ||||||||||||
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KB Financial Group Inc.
Notes to the Separate Interim Financial Statements
September 30, 2022 and 2021 (Unaudited), and December 31, 2021
5.1.2.2 Fair value hierarchy of financial assets and liabilities whose fair value is disclosed (cont’d)
(In millions of Korean won) | December 31, 2021 | |||||||||||||||
Fair value hierarchy | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Financial assets | ||||||||||||||||
Cash and due from financial institutions1 | ||||||||||||||||
Loans measured at amortized cost2 | — | — | 249,128 | 249,128 | ||||||||||||
Other financial assets3 | — | — | 36,078 | 36,078 | ||||||||||||
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Financial liabilities | ||||||||||||||||
Debentures | ||||||||||||||||
Other financial liabilities3 | — | — | 13,913 | 13,913 | ||||||||||||
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1 | Because due from financial institutions classified as level 2 are deposits on demand and with remaining maturities of less than one year, carrying amounts are reasonable approximations of fair values. |
2 | Because loans measured at amortized cost classified as level 3 are loans with residual maturity of less than one year, carrying amounts are reasonable approximations of fair values. |
3 | For other financial assets and other financial liabilities classified as level 3, carrying amounts are reasonable approximations of fair values. |
Financial assets and liabilities whose carrying amount is a reasonable approximation of fair value, valuation techniques and inputs are not disclosed.
Valuation techniques and inputs of financial assets and liabilities classified as Level 2, and whose fair value is disclosed as of September 30, 2022 and December 31, 2021, are as follows:
(In millions of Korean won) | Fair value | Valuation techniques | Inputs | |||||||||||||
September 30, 2022 | December 31, 2021 | |||||||||||||||
Financial liabilities | ||||||||||||||||
Debentures | DCF model | Discount rate |
5.2 Disclosure of Fair Value Hierarchy Level 3
5.2.1 Valuation policy and process of Level 3 fair value
The Company uses external, independent and qualified valuation service to determine the fair value of financial instruments at the end of every reporting period.
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KB Financial Group Inc.
Notes to the Separate Interim Financial Statements
September 30, 2022 and 2021 (Unaudited), and December 31, 2021
5.2.2 Changes in fair value (Level 3) measured using valuation technique based on unobservable inputs in the market
5.2.2.1 Changes in financial instruments classified as Level 3 of the fair value hierarchy for the nine-month periods ended September 30, 2022 and 2021, are as follows:
(In millions of Korean won) | 2022 | 2021 | ||||||
Financial assetsat fair value through profit or loss | Financial assets at fair value through profit or loss | |||||||
Beginning | ||||||||
Total gains or losses: | ||||||||
- Profit or loss | (35,037 | ) | 1,703 | |||||
- Other comprehensive income | — | — | ||||||
Purchases | 530,000 | — | ||||||
Sales | — | — | ||||||
Issues | — | — | ||||||
Settlements | — | — | ||||||
Transfers into Level 3 | — | — | ||||||
Transfers out of Level 3 | — | — | ||||||
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Ending | ||||||||
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5.2.2.2 In relation to changes in financial instruments classified as Level 3 of the fair value hierarchy, total gains or losses recognized in profit or loss for the period, and total gains or losses recognized in profit or loss from financial instruments held at the end of the reporting period for the nine-month periods ended September 30, 2022 and 2021, are as follows:
(In millions of Korean won) | 2022 | 2021 | ||||||||||||||||||||||
Losses on financial instruments at fair value through profit or loss | Other operating income | Net interest income | Gains on financial instruments at fair value through profit or loss | Other operating income | Net interest income | |||||||||||||||||||
Total gains (losses) included in profit or loss for the period | ||||||||||||||||||||||||
Total gains (losses) for the period included in profit or loss for financial instruments held at the end of the reporting period | (35,037 | ) | — | — | 1,703 | — | — |
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KB Financial Group Inc.
Notes to the Separate Interim Financial Statements
September 30, 2022 and 2021 (Unaudited), and December 31, 2021
5.2.3 Sensitivity analysis of changes in unobservable inputs
5.2.3.1 Information about fair value measurements using unobservable inputs as of September 30, 2022 and December 31, 2021, are as follows:
(In millions of Korean won) | September 30, 2022 | |||||||||||||||
Fair value | Valuation techniques | Inputs | Unobservable inputs | Range of unobservable inputs (%) | Relationship of unobservable inputs to fair value | |||||||||||
Financial assets | ||||||||||||||||
Financial assets at fair value through profit or loss: | ||||||||||||||||
Hybrid securities | Hull and White Model, | Matrix YTM, Additional spread by grade, Risk spread of company, Valid credit rating, Disclosed information of securities, Estimated volatility of Interest rate | Discount rate | 4.16 ~ 6.64 | The lower the discount rate, the higher the fair value | |||||||||||
Volatility of interest rate | 0.82 | The higher the volatility, the higher the fair value fluctuation |
(In millions of Korean won) | December 31, 2021 | |||||||||||||||
Fair value | Valuation techniques | Inputs | Unobservable inputs | Range of unobservable inputs (%) | Relationship of unobservable inputs to fair value | |||||||||||
Financial assets | ||||||||||||||||
Financial assets at fair value through profit or loss: | ||||||||||||||||
Hybrid securities | Hull and White Model, | Matrix YTM, Additional spread by grade, Risk spread of company, Valid credit rating, Disclosed information of securities, Estimated volatility of Interest rate | Discount rate | 2.30 ~ 5.05 | The lower the discount rate, the higher the fair value | |||||||||||
Volatility of interest rate | 0.46 | The higher the volatility, the higher the fair value fluctuation |
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KB Financial Group Inc.
Notes to the Separate Interim Financial Statements
September 30, 2022 and 2021 (Unaudited), and December 31, 2021
5.2.3.2 Sensitivity analysis of changes in unobservable inputs
Sensitivity analysis of financial instruments is performed to measure favorable and unfavorable changes in fair value of financial instruments which are affected by unobservable parameters, using a statistical technique. When the fair value is affected by more than one input parameter, the amounts represent the most favorable or most unfavorable outcome. There are hybrid securities whose fair value changes are recognized in profit or loss.
Results of the sensitivity analysis of changes in unobservable inputs as of September 30, 2022 and December 31, 2021, are as follows:
(In millions of Korean won) | September 30, 2022 | |||||||||||||||
Profit or loss | Other comprehensive income or loss | |||||||||||||||
Favorable changes | Unfavorable changes | Favorable changes | Unfavorable changes | |||||||||||||
Financial assets | ||||||||||||||||
Financial assets at fair value through profit or loss: | ||||||||||||||||
Hybrid securities * |
* | The changes in fair value are calculated by increasing or decreasing discount rates (4.16% ~ 6.64%) by 1%p, which are principal unobservable input parameters. |
(In millions of Korean won) | December 31, 2021 | |||||||||||||||
Profit or loss | Other comprehensive income or loss | |||||||||||||||
Favorable changes | Unfavorable changes | Favorable changes | Unfavorable changes | |||||||||||||
Financial assets | ||||||||||||||||
Financial assets at fair value through profit or loss: | ||||||||||||||||
Hybrid securities * |
* | The changes in fair value are calculated by increasing or decreasing discount rates (2.30% ~ 5.05%) by 1%p, which are principal unobservable input parameters. |
25
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KB Financial Group Inc.
Notes to the Separate Interim Financial Statements
September 30, 2022 and 2021 (Unaudited), and December 31, 2021
6. Due from Financial Institutions
6.1 Details of due from financial institutions as of September 30, 2022 and December 31, 2021, are as follows:
(In millions of Korean won) | Financial Institution | Interest rate (%) as of September 30, 2022 | September 30, 2022 | December 31, 2021 | ||||||||||||
Due from financial institutions in Korean won | Due from banks | Kookmin Bank | 0.00 ~ 2.10 | |||||||||||||
KB Savings Bank Co., Ltd. | 2.50 ~ 2.90 | 120,000 | 90,000 | |||||||||||||
Korea Securities Finance Corp. | 2.7 | 500,000 | — | |||||||||||||
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6.2 Details of restricted due from financial institution as of September 30, 2022 and December 31, 2021, are as follows:
(In millions of Korean won) | Financial Institution | September 30, 2022 | December 31, 2021 | Reasons of restriction | ||||||||
Due from financial institutions in Korean won | Kookmin Bank | Pledged as collateral for the overdraft account |
7. Financial Assets at Fair Value through Profit or Loss
Details of financial assets at fair value through profit or loss as of September 30, 2022 and December 31, 2021, are as follows:
(In millions of Korean won) | September 30, 2022 | December 31, 2021 | ||||||
Financial assets at fair value through profit or loss: | ||||||||
Hybrid securities | ||||||||
Beneficiary certificates | 302,133 | — | ||||||
Loans | 43,367 | 51,154 | ||||||
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8. Loans Measured at Amortized Cost
Details of loans measured at amortized cost as of September 30, 2022 and December 31, 2021, are as follows:
(In millions of Korean won) | September 30, 2022 | December 31, 2021 | ||||||
Loans measured at amortized cost | ||||||||
Less: Allowances for loan losses | (1,082 | ) | (872 | ) | ||||
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26
Table of Contents
KB Financial Group Inc.
Notes to the Separate Interim Financial Statements
September 30, 2022 and 2021 (Unaudited), and December 31, 2021
9. Investments in Subsidiaries
9.1 Details of subsidiaries as of September 30, 2022, are as follows:
Name of subsidiaries | Industry | Location | ||
Kookmin Bank | Banking and foreign exchange transaction | Korea | ||
KB Securities Co., Ltd. | Financial investment | Korea | ||
KB Insurance Co., Ltd. | Non-life insurance | Korea | ||
KB Kookmin Card Co., Ltd. | Credit card and installment financial business | Korea | ||
Prudential Life Insurance Company of Korea Ltd. | Life insurance | Korea | ||
KB Asset Management Co., Ltd. | Investment advisory and investment trust | Korea | ||
KB Capital Co., Ltd. | Financial leasing | Korea | ||
KB Life Insurance Co., Ltd. | Life insurance | Korea | ||
KB Real Estate Trust Co., Ltd. | Real estate trust management | Korea | ||
KB Savings Bank Co., Ltd. | Savings banking | Korea | ||
KB Investment Co., Ltd. | Capital investment | Korea | ||
KB Data System Co., Ltd. | System software, development and supply | Korea | ||
KB Credit Information Co., Ltd. | Collection of receivables and credit investigation | Korea |
9.2 Details of investments in subsidiaries as of September 30, 2022 and December 31, 2021, are as follows:
(In millions of Korean won, except for shares) | As of September 30, 2022 | Carrying amount | ||||||||||||||
Name of subsidiaries | Number of issued shares | Ownership (%) | September 30, 2022 | December 31, 2021 | ||||||||||||
Kookmin Bank | 404,379,116 | 100.00 | ||||||||||||||
KB Securities Co., Ltd. | 298,620,424 | 100.00 | 3,342,391 | 3,342,391 | ||||||||||||
KB Insurance Co., Ltd. | 66,500,000 | 100.00 | 2,375,430 | 2,375,430 | ||||||||||||
KB Kookmin Card Co., Ltd. | 92,000,000 | 100.00 | 1,953,175 | 1,953,175 | ||||||||||||
Prudential Life Insurance Company of Korea Ltd. | 15,000,000 | 100.00 | 2,310,054 | 2,310,054 | ||||||||||||
KB Asset Management Co., Ltd. | 7,667,550 | 100.00 | 96,312 | 96,312 | ||||||||||||
KB Capital Co., Ltd. 1 | 32,175,147 | 100.00 | 873,811 | 873,811 | ||||||||||||
KB Life Insurance Co., Ltd. | 91,200,000 | 100.00 | 485,314 | 485,314 | ||||||||||||
KB Real Estate Trust Co., Ltd. | 16,000,000 | 100.00 | 121,553 | 121,553 | ||||||||||||
KB Savings Bank Co., Ltd. 2 | 8,001,912 | 100.00 | 176,813 | 176,813 | ||||||||||||
KB Investment Co., Ltd. | 22,525,328 | 100.00 | 154,910 | 154,910 | ||||||||||||
KB Data System Co., Ltd. | 800,000 | 100.00 | 6,334 | 6,334 | ||||||||||||
KB Credit Information Co., Ltd. 3 | 1,252,400 | 100.00 | 23,620 | 23,620 | ||||||||||||
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1 | Carrying amount has increased by |
2 | Difference between par value ( |
3 | Reversal of impairment losses of KB Credit Information Co., Ltd. amounting to |
27
Table of Contents
KB Financial Group Inc.
Notes to the Separate Interim Financial Statements
September 30, 2022 and 2021 (Unaudited), and December 31, 2021
10. Deferred Income Tax Assets and Liabilities
Details of deferred income tax assets and liabilities as of September 30, 2022 and December 31, 2021, are as follows:
(In millions of Korean won) | September 30, 2022 | |||||||||||
Assets | Liabilities | Net amount | ||||||||||
Share-based payments | ||||||||||||
Membership rights | 218 | — | 218 | |||||||||
Defined benefit obligation | 3,173 | — | 3,173 | |||||||||
Plan assets | — | (3,173 | ) | (3,173 | ) | |||||||
Short-term employee benefits | 1,710 | — | 1,710 | |||||||||
Losses on valuation of financial assets at fair value through profit or loss | 12,494 | — | 12,494 | |||||||||
Others | 3,361 | (3,058 | ) | 303 | ||||||||
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24,808 | (6,231 | ) | 18,577 | |||||||||
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Offsetting of deferred tax assets and liabilities | (6,231 | ) | 6,231 | — | ||||||||
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(In millions of Korean won) | December 31, 2021 | |||||||||||
Assets | Liabilities | Net amount | ||||||||||
Share-based payments | ||||||||||||
Membership rights | 218 | — | 218 | |||||||||
Defined benefit obligation | 3,189 | — | 3,189 | |||||||||
Plan assets | — | (3,189 | ) | (3,189 | ) | |||||||
Short-term employee benefits | 808 | — | 808 | |||||||||
Losses on valuation of financial assets at fair value through profit or loss | 2,858 | — | 2,858 | |||||||||
Others | 761 | (3,548 | ) | (2,787 | ) | |||||||
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12,320 | (6,737 | ) | 5,583 | |||||||||
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Offsetting of deferred tax assets and liabilities | (6,737 | ) | 6,737 | — | ||||||||
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KB Financial Group Inc.
Notes to the Separate Interim Financial Statements
September 30, 2022 and 2021 (Unaudited), and December 31, 2021
11. Debentures
11.1 Details of debentures as of September 30, 2022 and December 31, 2021, are as follows:
(In millions of Korean won) | ||||||||||||||||||||
Issuance date | Maturity date | Interest rate (%) as of September 30, 2022 | September 30, 2022 | December 31, 2021 | ||||||||||||||||
Unguaranteed debentures No.6 | Feb. 26, 2015 | Feb. 26, 2022 | — | |||||||||||||||||
Unguaranteed debentures No.9 | Jun. 23, 2015 | Jun. 23, 2022 | — | — | 150,000 | |||||||||||||||
Unguaranteed debentures No.12-3 | Nov. 27, 2015 | Nov. 27, 2022 | 2.38 | 50,000 | 50,000 | |||||||||||||||
Unguaranteed debentures No.14-2 | Dec. 9, 2015 | Dec. 9, 2022 | 2.38 | 30,000 | 30,000 | |||||||||||||||
Unguaranteed debentures No.15-3 | May 12, 2016 | May 12, 2026 | 2.01 | 200,000 | 200,000 | |||||||||||||||
Unguaranteed debentures No.16-3 | May 27, 2016 | May 27, 2023 | 1.91 | 150,000 | 150,000 | |||||||||||||||
Unguaranteed debentures No.18-3 | Jul. 25, 2016 | Jul. 25, 2026 | 1.69 | 80,000 | 80,000 | |||||||||||||||
Unguaranteed debentures No.19-3 | Aug. 25, 2016 | Aug. 25, 2026 | 1.69 | 120,000 | 120,000 | |||||||||||||||
Unguaranteed debentures No.22-2 | Feb. 28, 2017 | Feb. 28, 2022 | — | — | 110,000 | |||||||||||||||
Unguaranteed debentures No.25-3 | May 24, 2017 | May 24, 2022 | — | — | 270,000 | |||||||||||||||
Unguaranteed debentures No.25-4 | May 24, 2017 | May 24, 2027 | 2.62 | 80,000 | 80,000 | |||||||||||||||
Unguaranteed debentures No.26-1 | Jun. 27, 2017 | Jun. 27, 2022 | — | — | 50,000 | |||||||||||||||
Unguaranteed debentures No.26-2 | Jun. 27, 2017 | Jun. 27, 2024 | 2.34 | 200,000 | 200,000 | |||||||||||||||
Unguaranteed debentures No.27 | Jul. 19, 2017 | Jul. 19, 2024 | 2.41 | 100,000 | 100,000 | |||||||||||||||
Unguaranteed debentures No.28-1 | Aug. 30, 2017 | Aug. 30, 2022 | — | — | 60,000 | |||||||||||||||
Unguaranteed debentures No.28-2 | Aug. 30, 2017 | Aug. 30, 2024 | 2.43 | 30,000 | 30,000 | |||||||||||||||
Unguaranteed debentures No.28-3 | Aug. 30, 2017 | Aug. 30, 2027 | 2.60 | 60,000 | 60,000 | |||||||||||||||
Unguaranteed debentures No.29-1 | Sep. 19, 2017 | Sep. 19, 2022 | — | — | 150,000 | |||||||||||||||
Unguaranteed debentures No.29-2 | Sep. 19, 2017 | Sep. 19, 2024 | 2.44 | 110,000 | 110,000 | |||||||||||||||
Unguaranteed debentures No.31-2 | Feb. 28, 2018 | Feb. 28, 2023 | 2.81 | 50,000 | 50,000 | |||||||||||||||
Unguaranteed debentures No.31-3 | Feb. 28, 2018 | Feb. 28, 2028 | 3.02 | 60,000 | 60,000 | |||||||||||||||
Unguaranteed debentures No.32-2 | Apr. 6, 2018 | Apr. 6, 2023 | 2.71 | 80,000 | 80,000 | |||||||||||||||
Unguaranteed debentures No.32-3 | Apr. 6, 2018 | Apr. 6, 2028 | 2.86 | 20,000 | 20,000 | |||||||||||||||
Unguaranteed debentures No.33-1 | Jun. 12, 2018 | Jun. 12, 2023 | 2.81 | 100,000 | 100,000 | |||||||||||||||
Unguaranteed debentures No.33-2 | Jun. 12, 2018 | Jun. 12, 2028 | 2.92 | 30,000 | 30,000 | |||||||||||||||
Unguaranteed debentures No.34-2 | Jul. 25, 2018 | Jul. 25, 2023 | 2.65 | 70,000 | 70,000 | |||||||||||||||
Unguaranteed debentures No.34-3 | Jul. 25, 2018 | Jul. 25, 2025 | 2.71 | 20,000 | 20,000 | |||||||||||||||
Unguaranteed debentures No.34-4 | Jul. 25, 2018 | Jul. 25, 2028 | 2.76 | 20,000 | 20,000 | |||||||||||||||
Unguaranteed debentures No.35 | Oct. 5, 2018 | Oct. 5, 2023 | 2.52 | 120,000 | 120,000 | |||||||||||||||
Unguaranteed debentures No.36-1 | Feb. 22, 2019 | Feb. 22, 2022 | — | — | 120,000 | |||||||||||||||
Unguaranteed debentures No.36-2 | Feb. 22, 2019 | Feb. 22, 2024 | 2.11 | 230,000 | 230,000 | |||||||||||||||
Unguaranteed debentures No.36-3 | Feb. 22, 2019 | Feb. 22, 2029 | 2.22 | 60,000 | 60,000 | |||||||||||||||
Unguaranteed debentures No.37-1 | Mar. 15, 2019 | Mar. 15, 2024 | 2.06 | 140,000 | 140,000 | |||||||||||||||
Unguaranteed debentures No.37-2 | Mar. 15, 2019 | Mar. 15, 2029 | 2.16 | 70,000 | 70,000 | |||||||||||||||
Unguaranteed debentures No.38-1 | Jun. 19, 2019 | Jun. 19, 2026 | 1.73 | 80,000 | 80,000 | |||||||||||||||
Unguaranteed debentures No.38-2 | Jun. 19, 2019 | Jun. 19, 2029 | 1.77 | 120,000 | 120,000 | |||||||||||||||
Unguaranteed debentures No.39-1 | Oct. 15, 2019 | Oct. 15, 2024 | 1.60 | 80,000 | 80,000 | |||||||||||||||
Unguaranteed debentures No.39-2 | Oct. 15, 2019 | Oct. 15, 2029 | 1.67 | 40,000 | 40,000 | |||||||||||||||
Unguaranteed debentures No.40-1 | Dec. 4, 2019 | Dec. 4, 2024 | 1.76 | 70,000 | 70,000 | |||||||||||||||
Unguaranteed debentures No.40-2 | Dec. 4, 2019 | Dec. 4, 2029 | 1.87 | 30,000 | 30,000 | |||||||||||||||
Unguaranteed debentures No.41-1 | Jan. 16, 2020 | Jan. 16, 2023 | 1.64 | 110,000 | 110,000 | |||||||||||||||
Unguaranteed debentures No.41-2 | Jan. 16, 2020 | Jan. 16, 2025 | 1.74 | 100,000 | 100,000 | |||||||||||||||
Unguaranteed debentures No.41-3 | Jan. 16, 2020 | Jan. 16, 2030 | 1.88 | 40,000 | 40,000 |
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KB Financial Group Inc.
Notes to the Separate Interim Financial Statements
September 30, 2022 and 2021 (Unaudited), and December 31, 2021
11.1 Details of debentures as of September 30, 2022 and December 31, 2021, are as follows: (cont’d)
(In millions of Korean won) | ||||||||||||||||||||
Issuance date | Maturity date | Interest rate (%) as of September 30, 2022 | September 30, 2022 | December 31, 2021 | ||||||||||||||||
Subordinated debentures No.1-1 | Feb. 18, 2020 | Feb. 18, 2030 | 2.21 | |||||||||||||||||
Subordinated debentures No.1-2 | Feb. 18, 2020 | Feb. 18, 2035 | 2.26 | 30,000 | 30,000 | |||||||||||||||
Unguaranteed debentures No.42-1 | May 13, 2020 | May 13, 2025 | 1.59 | 130,000 | 130,000 | |||||||||||||||
Unguaranteed debentures No.42-2 | May 13, 2020 | May 13, 2030 | 1.78 | 70,000 | 70,000 | |||||||||||||||
Unguaranteed debentures No.43-1 | Jun. 16, 2020 | Jun. 16, 2023 | 1.18 | 50,000 | 50,000 | |||||||||||||||
Unguaranteed debentures No.43-2 | Jun. 16, 2020 | Jun. 16, 2025 | 1.44 | 110,000 | 110,000 | |||||||||||||||
Unguaranteed debentures No.43-3 | Jun. 16, 2020 | Jun. 16, 2030 | 1.63 | 50,000 | 50,000 | |||||||||||||||
Exchangeable bonds No.1 * | Jun. 30, 2020 | Jun. 30, 2025 | — | 240,000 | 240,000 | |||||||||||||||
Unguaranteed debentures No.44-1 | Aug. 11, 2020 | Aug. 11, 2022 | — | — | 80,000 | |||||||||||||||
Unguaranteed debentures No.44-2 | Aug. 11, 2020 | Aug. 11, 2023 | 1.07 | 50,000 | 50,000 | |||||||||||||||
Unguaranteed debentures No.44-3 | Aug. 11, 2020 | Aug. 9, 2024 | 1.18 | 30,000 | 30,000 | |||||||||||||||
Unguaranteed debentures No.44-4 | Aug. 11, 2020 | Aug. 11, 2027 | 1.39 | 20,000 | 20,000 | |||||||||||||||
Unguaranteed debentures No.45 | Nov. 23, 2020 | Nov. 23, 2023 | 1.19 | 60,000 | 60,000 | |||||||||||||||
Unguaranteed debentures No.46-1 | Jan. 14, 2021 | Jan. 13, 2023 | 1.09 | 160,000 | 160,000 | |||||||||||||||
Unguaranteed debentures No.46-2 | Jan. 14, 2021 | Jan. 14, 2026 | 1.43 | 30,000 | 30,000 | |||||||||||||||
Unguaranteed debentures No.46-3 | Jan. 14, 2021 | Jan. 14, 2028 | 1.62 | 10,000 | 10,000 | |||||||||||||||
Unguaranteed debentures No.46-4 | Jan. 14, 2021 | Jan. 14, 2031 | 1.84 | 100,000 | 100,000 | |||||||||||||||
Unguaranteed debentures No.47 | Feb. 24, 2021 | Feb. 24, 2023 | 1.07 | 90,000 | 90,000 | |||||||||||||||
Unguaranteed debentures No.48-1 | Jun. 16, 2022 | Jun. 17, 2024 | 4.15 | 85,000 | — | |||||||||||||||
Unguaranteed debentures No.48-2 | Jun. 16, 2022 | Jun. 16, 2025 | 4.27 | 240,000 | — | |||||||||||||||
Unguaranteed debentures No.48-3 | Jun. 16, 2022 | Jun. 16, 2027 | 4.34 | 80,000 | — | |||||||||||||||
Unguaranteed debentures No.48-4 | Jun. 16, 2022 | Jun. 16, 2032 | 4.40 | 95,000 | — | |||||||||||||||
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5,050,000 | 5,570,000 | |||||||||||||||||||
Less: Bond Discounts | (5,131 | ) | (5,490 | ) | ||||||||||||||||
Less: adjustment on exchange right | (9,263 | ) | (11,719 | ) | ||||||||||||||||
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* | Fair value of the liability component of exchangeable bonds is calculated by using market interest rate of bonds under the same conditions without the exchange right. The residual amount, after deducting liability component from the issuance amount, represents the value of exchange right and is recorded in equity. Shares to be exchanged are 5 million treasury shares of KB Financial Group Inc. with the exchange price of |
30
Table of Contents
KB Financial Group Inc.
Notes to the Separate Interim Financial Statements
September 30, 2022 and 2021 (Unaudited), and December 31, 2021
11.2 Maturities of debentures as of September 30, 2022 and December 31, 2021, are as follows:
(In millions of Korean won) | September 30, 2022 | |||||||||||||||||||||||
Up to 3 months | 3~6 months | 6~12 months | 1~3 years | Over 3 years | Total | |||||||||||||||||||
Debentures in Korean won | ||||||||||||||||||||||||
(In millions of Korean won) | December 31, 2021 | |||||||||||||||||||||||
Up to 3 months | 3~6 months | 6~12 months | 1~3 years | Over 3 years | Total | |||||||||||||||||||
Debentures in Korean won |
11.3 Changes in debentures based on par value for the nine-month periods ended September 30, 2022 and 2021, are as follows:
(In millions of Korean won) | 2022 | |||||||||||||||
Beginning | Issue | Repayment | Ending | |||||||||||||
Debentures in Korean won | ||||||||||||||||
(In millions of Korean won) | 2021 | |||||||||||||||
Beginning | Issue | Repayment | Ending | |||||||||||||
Debentures in Korean won |
31
Table of Contents
KB Financial Group Inc.
Notes to the Separate Interim Financial Statements
September 30, 2022 and 2021 (Unaudited), and December 31, 2021
12. Net Defined Benefit Liabilities
12.1 Defined Benefit Plan
The Company operates defined benefit plans which have the following characteristics:
• | The Company has the obligation to pay the agreed benefits to all its current and former employees. |
• | The Company assumes actuarial risk (that benefits will cost more than expected) and investment risk. |
The net defined benefit liabilities recognized in the statements of financial position are calculated in accordance with actuarial valuation method using assumptions based on market data and historical data such as discount rate, future salary increase rate, and mortality. Actuarial assumptions may differ from actual results, due to changes in the market conditions, economic trends, and mortality trends.
12.2 Details of the net defined benefit liabilities as of September 30, 2022 and December 31, 2021, are as follows:
(In millions of Korean won) | September 30, 2022 | December 31, 2021 | ||||||
Present value of defined benefit obligation | ||||||||
Fair value of plan assets | (19,691 | ) | (22,778 | ) | ||||
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Net defined benefit liabilities (assets) | ||||||||
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12.3 Details of post-employment benefits recognized in profit or loss for the nine-month periods ended September 30, 2022 and 2021, are as follows:
(In millions of Korean won) | 2022 | 2021 | ||||||
Current service cost | ||||||||
Net interest expense on net defined benefit liabilities | (4 | ) | 1 | |||||
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Post-employment benefits | ||||||||
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13. Equity
13.1 Share Capital
13.1.1 Details of share capital as of September 30, 2022 and December 31, 2021, are as follows:
(In millions of Korean won) | September 30, 2022 | December 31, 2021 | ||||||
Type of share | Ordinary share | Ordinary share | ||||||
Number of authorized shares | 1,000,000,000 | 1,000,000,000 | ||||||
Par value per share (In Korean won) | ||||||||
Number of issued shares | 408,897,068 | 415,807,920 | ||||||
Share capital * |
* | Due to the retirement of shares deducted through retained earnings, it is different from the total par value of the shares issued. |
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KB Financial Group Inc.
Notes to the Separate Interim Financial Statements
September 30, 2022 and 2021 (Unaudited), and December 31, 2021
13.1.2 Changes in shares for the nine-month periods ended September 30, 2022 and 2021, are as follows:
(In number of shares) | 2022 | 2021 | ||||||
Beginning | 389,634,335 | 389,634,335 | ||||||
Increase | — | — | ||||||
Decrease | — | — | ||||||
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Ending | 389,634,335 | 389,634,335 | ||||||
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13.2 Hybrid Securities
Details of hybrid securities classified as equity as of September 30, 2022 and December 31, 2021, are as follows:
(In millions of Korean won) | ||||||||||||||||||||
Hybrid securities | Issuance date | Maturity | Interest rate (%) as of September 30, 2022 | September 30, 2022 | December 31, 2021 | |||||||||||||||
The 1-1st | May 2, 2019 | Perpetual bond | 3.23 | |||||||||||||||||
The 1-2nd | May 2, 2019 | Perpetual bond | 3.44 | 49,881 | 49,881 | |||||||||||||||
The 2-1st | May 8, 2020 | Perpetual bond | 3.30 | 324,099 | 324,099 | |||||||||||||||
The 2-2nd | May 8, 2020 | Perpetual bond | 3.43 | 74,812 | 74,812 | |||||||||||||||
The 3-1st | Jul. 14, 2020 | Perpetual bond | 3.17 | 369,099 | 369,099 | |||||||||||||||
The 3-2nd | Jul. 14, 2020 | Perpetual bond | 3.38 | 29,922 | 29,922 | |||||||||||||||
The 4-1st | Oct. 20, 2020 | Perpetual bond | 3.00 | 433,918 | 433,918 | |||||||||||||||
The 4-2nd | Oct. 20, 2020 | Perpetual bond | 3.28 | 64,843 | 64,843 | |||||||||||||||
The 5-1st | Feb. 19, 2021 | Perpetual bond | 2.67 | 419,056 | 419,056 | |||||||||||||||
The 5-2nd | Feb. 19, 2021 | Perpetual bond | 2.87 | 59,862 | 59,862 | |||||||||||||||
The 5-3rd | Feb. 19, 2021 | Perpetual bond | 3.28 | 119,727 | 119,727 | |||||||||||||||
The 6-1st | May 28, 2021 | Perpetual bond | 3.20 | 165,563 | 165,563 | |||||||||||||||
The 6-2nd | May 28, 2021 | Perpetual bond | 3.60 | 109,708 | 109,708 | |||||||||||||||
The 7-1st | Oct. 8, 2021 | Perpetual bond | 3.57 | 208,453 | 208,453 | |||||||||||||||
The 7-2nd | Oct. 8, 2021 | Perpetual bond | 3.80 | 59,834 | 59,834 | |||||||||||||||
The 8-1st | Feb. 16, 2022 | Perpetual bond | 4.00 | 442,955 | — | |||||||||||||||
The 8-2nd | Feb. 16, 2022 | Perpetual bond | 4.30 | 155,626 | — | |||||||||||||||
The 9-1st | May 12, 2022 | Perpetual bond | 4.68 | 478,814 | — | |||||||||||||||
The 9-2nd | May 12, 2022 | Perpetual bond | 4.97 | 19,906 | — | |||||||||||||||
The 10-1st | Aug. 26, 2022 | Perpetual bond | 4.90 | 407,936 | — | |||||||||||||||
The 10-2nd | Aug. 26, 2022 | Perpetual bond | 5.15 | 70,819 | — | |||||||||||||||
The 10-3rd | Aug. 26, 2022 | Perpetual bond | 5.30 | 19,944 | — | |||||||||||||||
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The above hybrid securities are early redeemable by the Company after 5 or 7or 10 years from the issuance date.
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KB Financial Group Inc.
Notes to the Separate Interim Financial Statements
September 30, 2022 and 2021 (Unaudited), and December 31, 2021
13.3 Capital Surplus
Details of capital surplus as of September 30, 2022 and December 31, 2021, are as follows:
(In millions of Korean won) | September 30, 2022 | December 31, 2021 | ||||||
Paid-in capital in excess of par value | ||||||||
Other capital surplus | 1,465,893 | 1,465,893 | ||||||
Gains on sales of treasury shares | 86,646 | 86,646 | ||||||
Consideration for exchange right of exchangeable bonds | 11,933 | 11,933 | ||||||
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13.4 Accumulated Other Comprehensive Income (Loss)
Details of accumulated other comprehensive income (loss) as of September 30, 2022 and December 31, 2021, are as follows:
(In millions of Korean won) | September 30, �� 2022 | December 31, 2021 | ||||||
Remeasurements of net defined benefit liabilities |
13.5 Retained Earnings
13.5.1 Details of retained earnings as of September 30, 2022 and December 31, 2021, are as follows:
(In millions of Korean won) | September 30, 2022 | December 31, 2021 | ||||||
Legal reserves | ||||||||
Voluntary reserves | 982,000 | 982,000 | ||||||
Regulatory reserve for credit losses | 4,490 | 5,154 | ||||||
Unappropriated retained earnings | 2,247,470 | 2,291,704 | ||||||
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With respect to the allocation of net profit earned in a fiscal term, the Company must set aside in its legal reserve an amount equal to at least 10% of its profit after tax as reported in the financial statements, each time it pays dividends on its net profits earned until its legal reserve reaches the aggregate amount of its paid-in capital in accordance with Article 53 of the Financial Holding Company Act. The reserve is not available for the payment of cash dividends, but may be transferred to share capital, or used to reduce accumulated deficit.
13.5.2 Regulatory reserve for credit losses
Measurement and disclosure of regulatory reserve for credit losses are required in accordance with Articles 26 through 28 of the Regulations on Supervision of Financial Holding Companies.
13.5.2.1 Details of regulatory reserve for credit losses as of September 30, 2022 and December 31, 2021, are as follows:
(In millions of Korean won) | September 30, 2022 | December 31, 2021 | ||||||
Amounts before appropriation | ||||||||
Amounts estimated to be appropriated (reversed) | 2,458 | (664 | ) | |||||
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KB Financial Group Inc.
Notes to the Separate Interim Financial Statements
September 30, 2022 and 2021 (Unaudited), and December 31, 2021
13.5.2.2 Regulatory reserve for credit losses estimated to be appropriated (reversed) and adjusted profit (loss) after provision (reversal) of regulatory reserve for credit losses for the three-month and nine-month periods ended September 30, 2022 and 2021, are as follows:
(In millions of Korean won, except for per share amounts) | 2022 | 2021 | ||||||||||||||
Three months | Nine months | Three months | Nine months | |||||||||||||
Regulatory reserve for credit losses estimated to be appropriated (reversed) | ||||||||||||||||
Adjusted profit (loss) after provision (reversal) of regulatory reserve for credit losses1,2 | 122,162 | 1,639,463 | 114,683 | 1,431,267 | ||||||||||||
Adjusted basic earnings (loss) per share after provision (reversal) of regulatory reserve for credit losses1 | 314 | 4,208 | 294 | 3,673 | ||||||||||||
Adjusted diluted earnings (loss) per share after provision (reversal) of regulatory reserve for credit losses1 | 308 | 4,114 | 290 | 3,598 |
1 | Adjusted profit (loss) after provision (reversal) of regulatory reserve for credit losses is not based on Korean IFRS. It is calculated by reflecting provision (reversal) of regulatory reserve for credit losses before tax to the net profit for the period. |
2 | After deducting dividends on hybrid securities |
13.6 Treasury Shares
Changes in treasury shares for the nine-month periods ended September 30, 2022 and 2021, are as follows:
(In millions of Korean won and in number of shares)
2022 | ||||||||||||||||
Beginning | Acquisition | Retirement | Ending | |||||||||||||
Number of treasury shares * | 26,173,585 | — | (6,910,852 | ) | 19,262,733 | |||||||||||
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Carrying amount | ||||||||||||||||
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(In millions of Korean won and in number of shares)
2021 | ||||||||||||||||
Beginning | Acquisition | Retirement | Ending | |||||||||||||
Number of treasury shares * | 26,173,585 | — | — | 26,173,585 | ||||||||||||
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* | 5 million treasury shares are deposited at the Korea Securities Depository for the exchange of exchangeable bonds. |
14. Dividends
The annual dividends to the shareholders of the Company for the year ended December 31, 2021, amounting toW853,299 million (W2,190 per share) were declared at the annual general shareholders’ meeting on March 25, 2022 and paid in April 11, 2022. According to the resolution of the board of directors on April 22, 2022, the quarterly dividend per share ofW500 (total dividend:W194,817 million) with dividend record date of March 31, 2022 were paid on May 9, 2022, and the resolution of the board of directors on July 21, 2022, the quarterly dividend per share ofW500 (total dividend:W194,817 million) with dividend record date of June 30, 2022 were paid on August 8, 2022. Meanwhile, the annual dividends and quarterly dividends paid in 2021 wereW689,653 million (W1,770 per share) andW292,226 million (W750 per share), respectively.
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KB Financial Group Inc.
Notes to the Separate Interim Financial Statements
September 30, 2022 and 2021 (Unaudited), and December 31, 2021
15. Net Interest Expense
Details of interest income, interest expense, and net interest expense for the three-month and nine-month periods ended September 30, 2022 and 2021, are as follows:
(In millions of Korean won) | 2022 | 2021 | ||||||||||||||
Three months | Nine months | Three months | Nine months | |||||||||||||
Interest income | ||||||||||||||||
Due from financial institutions | ||||||||||||||||
Loans measured at amortized cost | 1,828 | 4,637 | 1,017 | 2,976 | ||||||||||||
Loans measured at fair value through profit or loss | 672 | 1,992 | 1,520 | 2,179 | ||||||||||||
Others | 102 | 298 | 85 | 250 | ||||||||||||
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4,921 | 12,406 | 3,064 | 6,371 | |||||||||||||
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Interest expense | ||||||||||||||||
Borrowings | — | — | — | 141 | ||||||||||||
Debentures | 29,354 | 83,938 | 29,100 | 91,423 | ||||||||||||
Others | 5 | 13 | 3 | 9 | ||||||||||||
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29,359 | 83,951 | 29,103 | 91,573 | |||||||||||||
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Net interest expense | ||||||||||||||||
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16. Net Fee and Commission Expense
Details of fee and commission income, fee and commission expense, and net fee and commission expense for the three-month and nine-month periods ended September 30, 2022 and 2021, are as follows:
(In millions of Korean won) | 2022 | 2021 | ||||||||||||||
Three months | Nine months | Three months | Nine months | |||||||||||||
Fee and commission income | ||||||||||||||||
Fees earned in Korean won | ||||||||||||||||
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Fee and commission expense | ||||||||||||||||
Fees paid in Korean won | 1,172 | 6,326 | 1,062 | 6,180 | ||||||||||||
Fees paid in foreign currency | 208 | 348 | 114 | 229 | ||||||||||||
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1,380 | 6,674 | 1,176 | 6,409 | |||||||||||||
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Net fee and commission expense | ||||||||||||||||
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KB Financial Group Inc.
Notes to the Separate Interim Financial Statements
September 30, 2022 and 2021 (Unaudited), and December 31, 2021
17. Net Gains or Losses on Financial Instruments at Fair value through Profit or Loss
Net gains or losses on financial instruments at fair value through profit or loss include dividend income, gains or losses arising from changes in fair value, and gains or losses arising from sales and redemptions. Details of net gains or losses on financial assets at fair value through profit or loss for the three-month and nine-month periods ended September 30, 2022 and 2021, are as follows:
(In millions of Korean won) | 2022 | 2021 | ||||||||||||||
Three months | Nine months | Three months | Nine months | |||||||||||||
Gains on financial instruments at fair value through profit or loss | ||||||||||||||||
Dividend income from financial assets at fair value through profit or loss | ||||||||||||||||
Gains on valuation of financial assets at fair value through profit or loss | 2,221 | 4,587 | 755 | 3,269 | ||||||||||||
Gains on disposal of financial assets at fair value through profit or loss | 754 | 754 | — | — | ||||||||||||
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12,083 | 29,343 | 5,910 | 17,851 | |||||||||||||
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Losses on financial instruments at fair value through profit or loss | ||||||||||||||||
Losses on valuation of financial assets at fair value through profit or loss | 12,313 | 46,433 | 1,370 | 1,958 | ||||||||||||
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12,313 | 46,433 | 1,370 | 1,958 | |||||||||||||
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Net gains (losses) on financial instruments at fair value through profit or loss | ||||||||||||||||
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18. Net Other Operating Income and Expenses
Details of other operating income and expenses for the three-month and nine-month periods ended September 30, 2022 and 2021, are as follows:
(In millions of Korean won) | 2022 | 2021 | ||||||||||||||
Three months | Nine months | Three months | Nine months | |||||||||||||
Other operating income | ||||||||||||||||
Dividend income from subsidiaries | ||||||||||||||||
Others | — | 1 | — | — | ||||||||||||
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200,000 | 1,871,224 | 170,000 | 1,617,949 | |||||||||||||
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Net other operating income | ||||||||||||||||
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KB Financial Group Inc.
Notes to the Separate Interim Financial Statements
September 30, 2022 and 2021 (Unaudited), and December 31, 2021
19. General and Administrative Expenses
19.1 Details of general and administrative expenses for the three-month and nine-month periods ended September 30, 2022 and 2021, are as follows:
(In millions of Korean won) | 2022 | 2021 | ||||||||||||||
Three months | Nine months | Three months | Nine months | |||||||||||||
Expenses related to employee | ||||||||||||||||
Employee benefits—salaries | ||||||||||||||||
Employee benefits—others | 1,225 | 3,379 | 1,171 | 3,387 | ||||||||||||
Post-employment benefits—defined benefit plans | 535 | 1,684 | 534 | 1,600 | ||||||||||||
Post-employment benefits—defined contribution plans | — | (2 | ) | — | — | |||||||||||
Share-based payments | 593 | 2,282 | 1,663 | 7,193 | ||||||||||||
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12,409 | 37,240 | 12,915 | 40,082 | |||||||||||||
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Depreciation and amortization | 1,648 | 4,486 | 1,623 | 4,719 | ||||||||||||
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Other general and administrative expenses | ||||||||||||||||
Travel | 316 | 512 | — | 10 | ||||||||||||
Communications | 218 | 772 | 623 | 1,283 | ||||||||||||
Tax and dues | 49 | 363 | 46 | 338 | ||||||||||||
Publication | 70 | 245 | 63 | 246 | ||||||||||||
Rental expense | 473 | 1,336 | 413 | 1,211 | ||||||||||||
Vehicle | 54 | 120 | 35 | 93 | ||||||||||||
Service fees | 3,362 | 10,433 | 3,189 | 10,605 | ||||||||||||
Advertising | 154 | 607 | 96 | 573 | ||||||||||||
Training | 368 | 701 | 235 | 504 | ||||||||||||
Others | 2,307 | 6,259 | 1,825 | 5,460 | ||||||||||||
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7,371 | 21,348 | 6,525 | 20,323 | |||||||||||||
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KB Financial Group Inc.
Notes to the Separate Interim Financial Statements
September 30, 2022 and 2021 (Unaudited), and December 31, 2021
19.2 Share-based Payments
Share-based payments plan for executives and employees of the Company and its subsidiaries as of September 30, 2022, are as follows:
19.2.1 Stock grants linked to long-term performance
(In number of shares) | Grant date | Number of granted shares1 | Vesting conditions2 | |||||
KB Financial Group Inc. | ||||||||
Series 27 | Jun. 16, 2020 | 184 | Services fulfillment, market performance3 30%, and non-market performance4 70% | |||||
Series 28 | Nov. 21, 2020 | 68,135 | Services fulfillment, market performance3 35%, and non-market performance5 65% | |||||
Series 29 | Jan. 1, 2021 | 79,840 | Services fulfillment, market performance3 0~30%, and non-market performance4 70~100% | |||||
Series 30 | Apr. 1, 2021 | 3,069 | Services fulfillment, market performance3 30%, and non-market performance4 70% | |||||
Series 33 | Jan. 1, 2022 | 70,050 | Services fulfillment, market performance3 0~30%, and non-market performance4 70~100% | |||||
Series 34 | Feb. 1, 2022 | 654 | Services fulfillment, market performance3 30%, and non-market performance4 70% | |||||
Series 35 | May 27, 2022 | 6,126 | Services fulfillment, market performance3 30%, and non-market performance4 70% | |||||
Deferred grant in 2015 | 4,243 | Satisfied | ||||||
Deferred grant in 2016 | 3,533 | Satisfied | ||||||
Deferred grant in 2017 | 1,127 | Satisfied | ||||||
Deferred grant in 2018 | 1,766 | Satisfied | ||||||
Deferred grant in 2019 | 7,598 | Satisfied | ||||||
Deferred grant in 2020 | 37,334 | Satisfied | ||||||
Deferred grant in 2021 | 27,204 | Satisfied | ||||||
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310,863 | ||||||||
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Kookmin Bank | ||||||||
Series 80 | Mar. 1, 2020 | 7,982 | Services fulfillment, market performance3 30~50%, and non-market performance4 50~70% | |||||
Series 81 | Jan. 1, 2021 | 140,093 | Services fulfillment, market performance3 0~30%, and non-market performance4 70~100% | |||||
Series 82 | Mar. 1, 2021 | 18,202 | Services fulfillment, market performance3 0~30%, and non-market performance4 70~100% | |||||
Series 83 | Apr. 1, 2021 | 15,278 | Services fulfillment, market performance3 0~30%, and non-market performance4 70~100% | |||||
Series 85 | Jan. 1, 2022 | 341,056 | Services fulfillment, market performance3 30~50%, and non-market performance4 50~70% | |||||
Services fulfillment, market performance3 30%, and EPS & Asset Quality6 70% | ||||||||
Series 86 | Feb. 1, 2022 | 3,813 | Services fulfillment, market performance3 0~30%, and non-market performance4 70~100% | |||||
Series 87 | Mar. 1, 2022 | 6,199 | Services fulfillment, market performance3 0~30%, and non-market performance4 70~100% | |||||
Series 88 | Mar. 14, 2022 | 5,891 | Services fulfillment, market performance3 0~30%, and non-market performance4 70~100% | |||||
Series 89 | May 26, 2022 | 7,849 | Services fulfillment, market performance3 0~30%, and non-market performance4 70~100% | |||||
Series 90 | Jun. 1, 2022 | 7,079 | Services fulfillment, market performance3 0~30%, and non-market performance4 70~100% |
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Table of Contents
KB Financial Group Inc.
Notes to the Separate Interim Financial Statements
September 30, 2022 and 2021 (Unaudited), and December 31, 2021
19.2.1 Stock grants linked to long-term performance (cont’d)
(In number of shares) | Grant date | Number of granted shares1 | Vesting conditions2 | |||||
Series 91 | Jul. 18, 2022 | 10,334 | Services fulfillment, market performance3 0~30%, and non-market performance4 70~100% | |||||
Series 92 | Aug. 24, 2022 | 7,281 | Services fulfillment, market performance3 0~30%, and non-market performance4 70~100% | |||||
Deferred grant in 2016 | 2,426 | Satisfied | ||||||
Deferred grant in 2017 | 4,582 | Satisfied | ||||||
Deferred grant in 2018 | 2,287 | Satisfied | ||||||
Deferred grant in 2019 | 32,756 | Satisfied | ||||||
Deferred grant in 2020 | 53,502 | Satisfied | ||||||
Deferred grant in 2021 | 156,939 | Satisfied | ||||||
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823,549 | ||||||||
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Other subsidiaries | ||||||||
Stock granted in 2010 | 106 | |||||||
Stock granted in 2011 | 146 | |||||||
Stock granted in 2012 | 420 | |||||||
Stock granted in 2013 | 544 | |||||||
Stock granted in 2014 | 1,028 | |||||||
Stock granted in 2015 | 2,374 | |||||||
Stock granted in 2016 | 3,749 | |||||||
Stock granted in 2017 | 14,006 | Services fulfillment, market performance3 0~50%, | ||||||
Stock granted in 2018 | 26,572 | and non-market performance4 50~100% | ||||||
Stock granted in 2019 | 42,273 | |||||||
Stock granted in 2020 | 165,810 | |||||||
Stock granted in 2021 | 505,328 | |||||||
Stock granted in 2022 | 261,463 | |||||||
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1,023,819 | ||||||||
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2,158,231 | ||||||||
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1 | Granted shares represent the total number of shares initially granted to executives and employees who have residual shares as of September 30, 2022 (Deferred grants are residual shares vested as of September 30, 2022). |
2 | Executives and employees were given the right of choice about the timing of the deferred payment (after the date of retirement), payment ratio, and payment period. Accordingly, a certain percentage of the granted shares is deferred for up to five years after the date of retirement after the deferred grant has been confirmed. |
3 | Relative TSR (Total Shareholders Return): [(Fair value at the end of the contract—Fair value at the beginning of the contract) + (Total amount of dividend per share paid during the contract period)] / Fair value at the beginning of the contract |
4 | Performance results of company and employee |
5 | EPS (Earnings Per Share), Asset Quality, HCROI (Human Capital Return on Investment), Profit from non-banking segments |
6 | EPS, Asset Quality |
The stock grant linked to long-term performance 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 pre-set performance targets over the vesting period.
40
Table of Contents
KB Financial Group Inc.
Notes to the Separate Interim Financial Statements
September 30, 2022 and 2021 (Unaudited), and December 31, 2021
19.2.2 Stock grants linked to short-term performance
(In number of shares) | Estimated number of vested shares* | Vesting conditions | ||||
KB Financial Group Inc. | ||||||
Stock granted in 2015 | 3,725 | Satisfied | ||||
Stock granted in 2016 | 4,223 | Satisfied | ||||
Stock granted in 2017 | 1,401 | Satisfied | ||||
Stock granted in 2018 | 760 | Satisfied | ||||
Stock granted in 2019 | 9,354 | Satisfied | ||||
Stock granted in 2020 | 24,408 | Satisfied | ||||
Stock granted in 2021 | 35,497 | Satisfied | ||||
Stock granted in 2022 | 41,090 | Proportional to service period | ||||
Kookmin Bank | ||||||
Stock granted in 2015 | 1,292 | Satisfied | ||||
Stock granted in 2016 | 4,875 | Satisfied | ||||
Stock granted in 2017 | 1,998 | Satisfied | ||||
Stock granted in 2018 | 2,109 | Satisfied | ||||
Stock granted in 2019 | 43,780 | Satisfied | ||||
Stock granted in 2020 | 92,576 | Satisfied | ||||
Stock granted in 2021 | 101,308 | Satisfied | ||||
Stock granted in 2022 | 151,697 | Proportional to service period | ||||
Other subsidiaries | ||||||
Stock granted in 2015 | 5,762 | Satisfied | ||||
Stock granted in 2016 | 25,831 | Satisfied | ||||
Stock granted in 2017 | 46,223 | Satisfied | ||||
Stock granted in 2018 | 99,594 | Satisfied | ||||
Stock granted in 2019 | 243,130 | Satisfied | ||||
Stock granted in 2020 | 433,210 | Satisfied | ||||
Stock granted in 2021 | 610,167 | Satisfied | ||||
Stock granted in 2022 | 293,959 | Proportional to service period | ||||
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2,277,969 | ||||||
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* | Executives and employees were given the right of choice about the timing of the deferred payment (after the date of retirement), payment ratio, and payment period. Accordingly, a certain percentage of the granted shares is deferred for up to five years after the date of retirement after the deferred grant has been confirmed. |
Share-based payments arrangement for subsidiaries was transferred to the Company in 2010, and the related compensation cost paid to the executives and employees of subsidiaries is reimbursed by subsidiaries. The accrued expenses for share-based payments as of September 30, 2022 and December 31, 2021, areW155,555 million andW193,023 million, respectively, and the receivables to be reimbursed by subsidiaries for the compensation costs as of September 30, 2022 and December 31, 2021, areW141,546 million andW176,709 million, respectively. And compensation costs from share-based payments amounting toW2,282 million andW7,193 million were recognized for the nine-month periods ended September 30, 2022 and 2021, respectively.
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Table of Contents
KB Financial Group Inc.
Notes to the Separate Interim Financial Statements
September 30, 2022 and 2021 (Unaudited), and December 31, 2021
20. Income Tax Benefit
Details of income tax benefit for the nine-month periods ended September 30, 2022 and 2021, are as follows:
(In millions of Korean won) | 2022 | 2021 | ||||||
Income tax payable | ||||||||
Changes in deferred tax assets and liabilities | 12,994 | 2,384 | ||||||
Origination and reversal of temporary differences | 12,994 | 2,384 | ||||||
Income tax recognized directly in equity | (134 | ) | (32 | ) | ||||
Remeasurements of net defined benefit liabilities | (134 | ) | (32 | ) | ||||
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Income tax benefit | ||||||||
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21. Earnings per Share
21.1 Basic Earnings per Share
Basic earnings per share is calculated from the earnings attributable to ordinary shares.
21.1.1 Weighted average number of ordinary shares outstanding
(In number of shares) | 2022 | 2021 | ||||||||||||||
Three months | Nine months | Three months | Nine months | |||||||||||||
Number of issued ordinary shares (A) | 408,897,068 | 408,897,068 | 415,807,920 | 415,807,920 | ||||||||||||
Number of treasury shares (B) * | (19,262,733 | ) | (19,262,733 | ) | (26,173,585 | ) | (26,173,585 | ) | ||||||||
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Weighted average number of ordinary shares outstanding (C=A+B) | 389,634,335 | 389,634,335 | 389,634,335 | 389,634,335 | ||||||||||||
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* | The number of treasury shares have excluded the initial redemption of treasury shares from February 14, 2022, and the 2nd redemption from August 1, 2022. |
21.1.2 Basic earnings per share
(In Korean won and in number of shares) | 2022 | |||||||
Three months | Nine months | |||||||
Profit (loss) for the period | ||||||||
Deduction: Dividends on hybrid securities | (34,514,700,000 | ) | (85,698,100,000 | ) | ||||
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Profit (loss) attributable to the ordinary equity holders (A) | 123,421,818,702 | 1,641,921,267,508 | ||||||
Weighted average number of ordinary shares outstanding (B) | 389,634,335 | 389,634,335 | ||||||
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Basic earnings (loss) per share (A/B) | ||||||||
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(In Korean won and in number of shares) | 2021 | |||||||
Three months | Nine months | |||||||
Profit (loss) for the period | ||||||||
Deduction: Dividends on hybrid securities | (20,097,875,000 | ) | (51,439,625,000 | ) | ||||
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Profit (loss) attributable to the ordinary equity holders (A) | 109,295,825,894 | 1,430,016,660,286 | ||||||
Weighted average number of ordinary shares outstanding (B) | 389,634,335 | 389,634,335 | ||||||
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Basic earnings (loss) per share (A/B) | ||||||||
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Table of Contents
KB Financial Group Inc.
Notes to the Separate Interim Financial Statements
September 30, 2022 and 2021 (Unaudited), and December 31, 2021
21.2 Diluted Earnings per Share
Diluted earnings per share is calculated through increasing the weighted average number of ordinary shares outstanding by the weighted average number of additional ordinary shares that would have been outstanding assuming the conversion of all dilutive potential ordinary shares. The Company has dilutive potential ordinary shares such as stock grants and ordinary share exchange right of exchangeable bonds.
A calculation is done to determine the number of shares that could have been acquired at fair value (determined as the average market share price during the period) based on the monetary value of stock grants. The number of shares calculated above is compared with the number of shares that would have been issued assuming the settlement of stock grants.
Exchangeable bonds are included in potential ordinary shares from the exercisable date of the exchange right, and interest expense after tax for the period is added to profit for diluted earnings per share.
21.2.1 Adjusted profit for diluted earnings per share
(In Korean won) | 2022 | |||||||
Three months | Nine months | |||||||
Profit (loss) attributable to the ordinary equity holders * | ||||||||
Adjustment: | ||||||||
Interest expense on exchangeable bonds | 600,130,825 | 1,780,822,991 | ||||||
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Adjusted profit (loss) for diluted earnings (loss) per share | ||||||||
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(In Korean won) | 2021 | |||||||
Three months | Nine months | |||||||
Profit (loss) attributable to the ordinary equity holders * | ||||||||
Adjustment: | ||||||||
Interest expense on exchangeable bonds | 591,619,704 | 1,755,567,167 | ||||||
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Adjusted profit (loss) for diluted earnings (loss) per share | ||||||||
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* | The amount is after deducting dividends on hybrid securities. |
21.2.2 Weighted average number of ordinary shares outstanding for diluted earnings per share
(In number of shares) | 2022 | 2021 | ||||||||||||||
Three months | Nine months | Three months | Nine months | |||||||||||||
Weighted average number of ordinary shares outstanding | 389,634,335 | 389,634,335 | 389,634,335 | 389,634,335 | ||||||||||||
Adjustment: | ||||||||||||||||
Stock grants | 4,008,204 | 4,328,225 | 3,495,172 | 3,697,690 | ||||||||||||
Exchangeable bonds | 5,000,000 | 5,000,000 | 5,000,000 | 5,000,000 | ||||||||||||
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Adjusted weighted average number of ordinary shares outstanding for diluted earnings (loss) per share | 398,642,539 | 398,962,560 | 398,129,507 | 398,332,025 | ||||||||||||
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Table of Contents
KB Financial Group Inc.
Notes to the Separate Interim Financial Statements
September 30, 2022 and 2021 (Unaudited), and December 31, 2021
21.2.3 Diluted earnings per share
(In Korean won and in number of shares) | 2022 | |||||||
Three months | Nine months | |||||||
Adjusted profit (loss) for diluted earnings (loss) per share | ||||||||
Adjusted weighted average number of ordinary shares outstanding for diluted earnings (loss) per share | 398,642,539 | 398,962,560 | ||||||
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Diluted earnings (loss) per share | ||||||||
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(In Korean won and in number of shares) | 2021 | |||||||
Three months | Nine months | |||||||
Adjusted profit (loss) for diluted earnings (loss) per share | ||||||||
Adjusted weighted average number of ordinary shares outstanding for diluted earnings (loss) per share | 398,129,507 | 398,332,025 | ||||||
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22. Statement of Cash Flows
22.1 Details of cash and cash equivalents as of September 30, 2022 and December 31, 2021, are as follows:
(In millions of Korean won) | September 30, 2022 | December 31, 2021 | ||||||
Due from financial institutions | ||||||||
Deduction: | ||||||||
Restricted due from financial institutions | (3 | ) | (3 | ) | ||||
Due from financial institutions with original maturities over three months | (120,000 | ) | (90,000 | ) | ||||
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(120,003 | ) | (90,003 | ) | |||||
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22.2 Significant non-cash transactions for the nine-month periods ended September 30, 2022 and 2021, are as follows:
(In millions of Korean won) | 2022 | 2021 | ||||||
Changes in receivables and payables from consolidated tax return | ||||||||
Changes in receivables and payables related to stock grants | (35,163 | ) | 36,565 | |||||
Changes in receivables related to quarterly dividends of subsidiaries | 200,000 | — |
22.3 Cash inflows and outflows from income tax, interest, and dividends for the nine-month periods ended September 30, 2022 and 2021, are as follows:
(In millions of Korean won) | Activity | 2022 | 2021 | |||||||||
Income tax paid | Operating | |||||||||||
Interest received | Operating | 9,591 | 6,593 | |||||||||
Interest paid | Operating | 81,014 | 89,126 | |||||||||
Dividends received | Operating | 1,694,465 | 1,632,573 | |||||||||
Dividends paid | Financing | 1,328,631 | 1,033,318 |
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Table of Contents
KB Financial Group Inc.
Notes to the Separate Interim Financial Statements
September 30, 2022 and 2021 (Unaudited), and December 31, 2021
23. Contingent Liabilities and Commitments
23.1 Commitments made with financial institutions as of September 30, 2022 and December 31, 2021, are as follows:
(In millions of Korean won) | September 30, 2022 | December 31, 2021 | ||||||||||||||||||
Amount of commitments | Amount borrowed | Amount of commitments | Amount borrowed | |||||||||||||||||
General loan | Hana Bank |
23.2 Other Matters (including litigation)
a) The Company has 1 pending lawsuit as a defendant with aggregate claims amount of \ 0.1 million, which arose in the normal course of the management activities, as of September 30, 2022.
b) The proliferation of COVID-19 has had a negative impact on the global economy, which may have an impact on the expected credit losses and potential impairment of assets in a particular portfolio, and it could negatively affect the revenue generation capability of the Company as follows:
• | There is a possibility of uncertainty about the credit risk of a borrower that could be affected by COVID-19. |
• | Uncertainty may arise about forward-looking macroeconomic information related to expected credit losses. |
• | Korean won may depreciate against major foreign currencies. This may result in an increase in principal and interest payments on liabilities denominated in foreign currencies, and losses on foreign exchange transactions. |
• | A significant decrease in the fair value of the Company’s investment in an entity that could be affected by COVID-19 pandemic can occur. |
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Table of Contents
KB Financial Group Inc.
Notes to the Separate Interim Financial Statements
September 30, 2022 and 2021 (Unaudited), and December 31, 2021
24. Related Party Transactions
According to Korean IFRS No.1024, the Company includes subsidiaries and key management personnel (including family members) in the scope of related parties. The Company discloses balances (receivables and payables) and other amounts arising from transactions with related parties in the notes to the financial statements. Refer to Note 9 for details of subsidiaries. Key management personnel include the executives of the Company, their close family members, and the companies where the executives and/or their close family members have control or joint control.
24.1 Details of significant profit or loss arising from transactions with related parties for the nine-month periods ended September 30, 2022 and 2021, are as follows:
(In millions of Korean won) | ||||||||||
Subsidiaries | Profit or loss | 2022 | 2021 | |||||||
Kookmin Bank | Interest income | |||||||||
Fee and commission income | 1,061 | 694 | ||||||||
Net other operating income * | 1,031,167 | 917,941 | ||||||||
General and administrative expenses | 8,312 | 8,036 | ||||||||
Net non-operating income | — | 1,448 | ||||||||
KB Securities Co., Ltd. | Interest expense | 15 | — | |||||||
Fee and commission income | 166 | — | ||||||||
Net losses on financial assets at fair value through profit or loss | (14,920 | ) | — | |||||||
Net other operating income * | 400,000 | 200,000 | ||||||||
General and administrative expenses | 307 | 423 | ||||||||
KB Insurance Co., Ltd. | Fee and commission income | 229 | — | |||||||
General and administrative expenses | 1,307 | 1,166 | ||||||||
KB Kookmin Card Co., Ltd. | Fee and commission income | 53 | — | |||||||
Net other operating income * | 250,056 | 200,008 | ||||||||
General and administrative expenses | 15 | 142 | ||||||||
Net non-operating income | 4 | 3 | ||||||||
Prudential Life Insurance Company of Korea Ltd. | Fee and commission income | 40 | — | |||||||
Net other operating income * | 100,000 | 200,000 | ||||||||
General and administrative expenses | 454 | 582 | ||||||||
KB Asset Management Co., Ltd. | Net other operating income * | 40,000 | 55,000 | |||||||
KB Capital Co., Ltd | Fee and commission income | 22 | — | |||||||
Net gains on financial assets at fair value through profit or loss | 3,885 | 16,285 | ||||||||
KB Life Insurance Co., Ltd. | Fee and commission income | 32 | — | |||||||
General and administrative expenses | 203 | 302 | ||||||||
KB Real Estate Trust. Co., Ltd. | Net other operating income * | 40,000 | 35,000 | |||||||
KB Savings Bank Co., Ltd. | Interest income | 2,777 | 836 | |||||||
Fee and commission income | 2 | — | ||||||||
Net losses on financial assets at fair value through profit or loss | (8,941 | ) | (393 | ) | ||||||
KB Investment Co., Ltd. | Interest income | 4,637 | 2,976 | |||||||
Net other operating income * | 10,000 | 10,000 | ||||||||
Provision for credit losses | 211 | 3 | ||||||||
KB Data Systems Co., Ltd. | General and administrative expenses | 1,910 | 1,469 |
* | Net other operating income includes dividend income from subsidiaries. |
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Table of Contents
KB Financial Group Inc.
Notes to the Separate Interim Financial Statements
September 30, 2022 and 2021 (Unaudited), and December 31, 2021
24.2 Details of significant outstanding balances of receivables and payables arising from transactions with related parties as of September 30, 2022 and December 31, 2021, are as follows:
(In millions of Korean won) | ||||||||||
Subsidiaries | Assets or liabilities | September 30, 2022 | December 31, 2021 | |||||||
Kookmin Bank | Cash and due from financial institutions | |||||||||
Other assets | 652,735 | 462,250 | ||||||||
Other liabilities | 6,950 | 71 | ||||||||
Property and equipment | 491 | 518 | ||||||||
KB Securities Co., Ltd. | Financial assets at fair value through profit or loss | 410,780 | — | |||||||
Other assets | 54,571 | 106,320 | ||||||||
Other liabilities | 22,736 | 85 | ||||||||
KB Insurance Co., Ltd. | Other assets | 115,759 | 37,209 | |||||||
Other liabilities | 772 | 6 | ||||||||
KB Kookmin Card Co., Ltd. | Other assets | 70,904 | 88,060 | |||||||
Other liabilities | 681 | 700 | ||||||||
Prudential Life Insurance Company of Korea Ltd. | Other assets | 108,809 | 2,626 | |||||||
Other liabilities | 456 | 7,264 | ||||||||
KB Asset Management Co., Ltd. | Other assets | 13,353 | 20,502 | |||||||
KB Capital Co., Ltd. | Financial assets at fair value through profit or loss | 473,789 | 389,606 | |||||||
Other assets | 47,476 | 40,701 | ||||||||
KB Life Insurance Co., Ltd. | Other assets | 3,807 | 5,196 | |||||||
Other liabilities | 4,893 | 10,877 | ||||||||
KB Real Estate Trust Co., Ltd. | Other assets | 7,629 | 19,360 | |||||||
KB Savings Bank Co., Ltd. | Cash and due from financial institutions | 120,000 | 90,000 | |||||||
Financial assets at fair value through profit or loss | 43,367 | 51,154 | ||||||||
Other assets | 4,532 | 7,984 | ||||||||
Other liabilities | 67 | 67 | ||||||||
KB Investment Co., Ltd. | Loans measured at amortized cost (gross amount) | 310,000 | 250,000 | |||||||
Allowances for credit losses | 1,082 | 872 | ||||||||
Other assets | 4,760 | 9,157 | ||||||||
Other liabilities | 1,178 | — | ||||||||
KB Data Systems Co., Ltd. | Property and equipment | — | 68 | |||||||
Intangible assets | 1,716 | 3,341 | ||||||||
Other assets | 1,692 | 2,554 | ||||||||
Other liabilities | 177 | 160 | ||||||||
KB Credit Information Co., Ltd. | Other assets | 923 | 1,239 |
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Table of Contents
KB Financial Group Inc.
Notes to the Separate Interim Financial Statements
September 30, 2022 and 2021 (Unaudited), and December 31, 2021
24.3 Right-of-use assets and lease liabilities with related parties as of September 30, 2022 and December 31, 2021, are as follows:
(In millions of Korean won) | September 30, 2022 | December 31, 2021 | ||||||
Subsidiary | Kookmin Bank | Right-of-use assets |
24.4 Unused commitments provided from related parties as of September 30, 2022 and December 31, 2021, are as follows:
(In millions of Korean won) | September 30, 2022 | December 31, 2021 | ||||||
Subsidiary | KB Kookmin Card Co., Ltd. | Unused lines of credit for credit card |
24.5 Share transactions with related parties for the nine-month periods ended September 30, 2022 and 2021, are as follows:
(In millions of Korean won) | 2022 | 2021 | ||||||
Subsidiary | KB Capital Co., Ltd. | Acquisition of hybrid securities | ||||||
KB Securities Co., Ltd. | Acquisition of hybrid securities | 430,000 | — |
24.6 Details of significant lending transactions with related parties for the nine-month periods ended September 30, 2022 and 2021, are as follows:
(In millions of Korean won) | 2022 | |||||||||||||||||
Beginning | Loan | Collection | Ending | |||||||||||||||
Subsidiary | KB Investment Co., Ltd. | |||||||||||||||||
KB Savings Bank Co., Ltd. * | 70,000 | — | — | 70,000 | ||||||||||||||
(In millions of Korean won) | 2021 | |||||||||||||||||
Beginning | Loan | Collection | Ending | |||||||||||||||
Subsidiary | KB Investment Co., Ltd. | |||||||||||||||||
KB Savings Bank Co., Ltd. * | — | 70,000 | — | 70,000 |
* | Par value of subordinated bond issued by KB Savings Bank Co., Ltd. The difference between par value and fair value at the acquisition date was accounted for as investments in subsidiaries. |
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Table of Contents
KB Financial Group Inc.
Notes to the Separate Interim Financial Statements
September 30, 2022 and 2021 (Unaudited), and December 31, 2021
24.7 Details of compensation to key management personnel for the nine-month periods ended September 30, 2022 and 2021, are as follows:
(In millions of Korean won) | 2022 | |||||||||||||||
Short-term employee benefits | Post-employment benefits | Share-based payments | Total | |||||||||||||
Registered directors (executive) | ||||||||||||||||
Registered directors (non-executive) | 479 | — | — | 479 | ||||||||||||
Non-registered directors | 5,263 | 106 | 2,021 | 7,390 | ||||||||||||
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(In millions of Korean won) | 2021 | |||||||||||||||
Short-term employee benefits | Post-employment benefits | Share-based payments | Total | |||||||||||||
Registered directors (executive) | ||||||||||||||||
Registered directors (non-executive) | 456 | — | — | 456 | ||||||||||||
Non-registered directors | 4,316 | 46 | 5,652 | 10,014 | ||||||||||||
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25. Events after the Reporting Period
According to the resolution of the board of directors on October 25, 2022, the quarterly dividend per share ofW500 (total dividend:W194,817 million) with dividend record date of September 30, 2022 were paid on November 10, 2022. The Company’s financial statements as of September 30, 2022, do not reflect this dividend payable.
49