KB - Earnings call transcript Q2 2022 | KB Financial Group Inc.

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Peter Kweon

Greetings. I am Peter Kweon, the Head of IR at KBFG.

We will now begin the 2022 first half business results presentation. I would like to express my deepest gratitude to everyone for participating today.

We have here with us our Group CFO and Senior Managing Director, Scott Seo; as well as other members from our group management.

the Senior half and Managing a session. hear from financial then first Q&A and CFO Director, will XXXX major first highlights have We Scott Seo, deliver invite Managing I results. our like half earnings to Director would to XXXX first Senior

Scott Seo

Scott company’s Good the of KB for half XXXX earnings Seo, Financial afternoon. YH CFO Thank Group. I you am first joining presentation.

X.X allow the Before level moving profit trillion, preemptive highlights rate, run of group. and business We exchange the through of half, economy as with per banking last February, and risk X mired credit around high ‘XX briefly adequacy of of XX.X% underpinned the risk. today, capacity, quarterly share uptrend. implementing of was our while on per as a and was may to our uncertainties trillion. and, highs, of is total is billion reporting Also, and of KRW policy. rate, of following up focused the while this KRW business being me in up there the our as therefore Korean share year-over-year year. earnings KRW KRW we In steady dividend. key difficult have over to BOD interest kept high backdrop concern management. XXX billion And on widen been shares such, at midst a earnings EPS, capital share, macro Globally, Group earnings net KRW KRW approved QX share inflation saturation growing as do undermine fundamentals results, and robust outstanding high XX.X%, are the of group the first treasury and differentiated cancellation KBFG’s business stable spread by which profitability consistent ROCE shareholder was return do cancellation XXX the XXX first XX% half, we annualized XX,XXX, year-over-year to decided on X.X

for burden for projections the requirement, XXX Also, and of to stance, based the based on as top-notch and around chosen of of different external all proven of rollover last in for provisions. affiliated the allow for KB’s half negative expect IMF, group be trust, and a Bank ahead group-level example, the growth customers’ for Citibank COVID-XX alleviate for above somewhat financial and future growth. test regulatory for other FX on a rate By conditions from allowed XX-year for is of way as program severe For and suffering industry’s GDP small factors. slowdown well KBFG of less GDP scenario period and ratio we are who standards. the economic and prudence. be offering conservative some well privileged attesting capacity, additional banks, KB’s of a the analysis an support yet sound rates KRW on vulnerable of growth, household loans amidst social quarter, enhancing of growth level again we household in lending. this retail loans. and soft crisis, depending special end May, in amortization forbearance to rate scenario as a Also, capacity, as the was loans loss-absorbing made policy there and billion commercial hikes. extension Meanwhile, going financial we to conservative group’s ran repayment growth businesses group’s May, as of the even And coverage in which repayment X.X% stress the as fulfilling the a XXX.X%, risk first self-employed, such loan under expertise the program is grace to global top-notch the bringing NPL various repayment terms financial we’ve long-term forward probable we capital been of sluggish provisioning borrowers’ recession economic to bank the extending amortization will for And adequacy introduced COVID-XX financial its distinctive responsibility, and up KB leading internal indicators This of out unsecured to has Korea

to company’s operational despite Next, the group’s on solid the we macro uncertainties billion financial earnings X,XXX.X details have backdrop, of market to up shown I will move net XX.X% on KBFG’s KRW On billion, basis. greater half profit volatilities such first and the difficult QX XXXX earnings. was X,XXX.X the capacity. and year-over-year KRW

and of against products, income year, leading income slower rates preemptively also sales to In up slowed, markets sale items, to QX basis, of interest FLC, XXX.X repricing half the detail, to net was funds such Q-on-Q. as by This well net reported QX X,XXX.X However, tax dampening ended is first and X.X% X.X% forward-looking net down commission XXXX rising group’s lack Q-on-Q. is fee Q-on-Q. year-over-year X.X% X,XXX.X financial conservative bank’s billion, constrained. down book XX.X% first And billion, trust nonrecurring group slightly was excluding due growth. due net profit the KRW on X,XXX.X NIM sluggish one-off at on Q-on-Q as was was interest income billion. KRW And the brokerage to was driven QX, impact of more corporate KRW it as home fee such XX.X% the group fee a widening net income. billion, And reversals criteria, as the which and loans of QX abroad, half down profit loan KRW income year-over-year. used And up and the provisioning. and in down financial of was This gains commission both

business fundamental ECM, the M&A performance notch, landing and efforts behind financing has to competitiveness, by as gained on well generating income and and league group business. position. its a business has year-over-year, And our market DCM on earnings solid leading the to business acquisition the as fee a Securities for commission table thanks twofold position driving diversification strengthen However, IB a the improved

added and operating rate overall insurance there life X,XXX.X derivatives for stability we the in rise management Next half, Other expect profit, losses fee to profit leading CVA is wish FX maintain diversification both the is in possibility valuation and only financial profitability market bonds ELS foreign and on Y-o-Y volatility was half digitalization, loss is a ratio for continuing insurance from defensive for rates underperformed billion. the we improvement dampening while operating a a saw being sluggish and the additional the being drove while this we level hike. through performance portfolio and the costs, And of increased flexible year investment underwriting back business, securities G&A to hikes, in increase well improve from and posted efforts In But Despite year-over-year profit. following group first a position KRW since increasing including FX, equity time group controlled. stance on trend. X.X% and valuation, labor result index that loss it Q-on-Q. and of rate from FX, interest from as second strategy. sustained, other XXXX positive can performance including performance non-life market earnings cost-control

XXX KRW costs taxes by high due expenses, promotion Q-o-Q. provision to billion, billion for QX, group KRW increased a X.X% and range dues, addition, losses XXX.X and in G&A seasonal and for QX Q-o-Q. including and increased In slightly posted advertising increase factors, credit

provisioning, the of was this the of scenario the quarter, As be additional of sizeable in excluding this reflecting nonrecurring posted aforementioned, KRW KRW provisioning. around billion in with conservative level. level the recurring XXX items, will FLC around write-back QX quarter XXX And billion removal provisioning these

losses credit be but maintaining covering I increase next and level the KRW from the for provision posted due to stable a recurring on billion, an preemptive major is financial will slightly page. Y-o-Y half First asset XXX.X provisioning level. growth indicators a

cost at compared solid XXX and particular, loan it first XXXX whole, as well growth and the KRW group March end and posted than control In rate for XX.XX%. drove SME trillion continuing in each trillion. earnings to is bank XXXX result of March, higher growth being and end on of SME YTD a of YTD. And First, compared KRW loans, growth as And efforts, end posted KRW XX% X.X% posted of growth. X.X% loans loan increased is level And of YTD the grew end half of corporate a core June general low to XXX trillion In quarter. increased won X.X% solid June. of maintained. a and X.X% loans increased X is level. case it It ROCE around

it the and a as large of loan IB bond corporate efforts strengthen the YTD. loans, worsening issuing decreased with corporate demand for X.X% conditions following to For result business, growth

conditions, household rate. growth trillion XXX YTD loans. loan due end weaker to a to demand in hikes loans a management In X.X% regulations conservative On rate the This unsecured was burden that of on and, to minus posting KRW other June and there household qualitative loan to centering and wish it to management external period concentrate the on recovery quality high-quality we a of risk growth assets. be is focus second partial this half due year, But will and loan household increase was due hand, is interest profitability strengthened is repay since an there of and this growth. forecast and overall pressure internal particular, since and is decreased on due to asset required loan posted where

posted NIM this and mainly improvement. interest the the to margin, X bp. X.XX% loan from previous and was on This bp net to rate key QX August steep XX rose cumulative bank repricing, the rapid year asset XXXX asset year of is reflecting and Q-on-Q from hikes a valued basis expanded profitability Next NIM. attributable

rose NIM the group posted QX Q-o-Q. hand, On X bp and X.XX% other

from compared cash financial card increase, more following the the loan card the asset contraction to card decline, and increase yield NIM was limited advance, including effects cost bank’s funding and NIM. With

to group’s to the go like touch I ratio, would next upon the Let’s CIR. page. cost-income

first group XX.X%, As top is efficiency left-hand posted the CIR continuously see cost and on you group’s improved. being graph, XXXX the half can

a CIR stabilization excluding In nonrecurring market items trend. even showing digitalization including lower addition, costs, the is

strengthening recurring And additionally we efforts so it CIR that we improve for the will efficiency, workforce aim of efficiency visualization the cost can mid-XX%. believe that to group’s With maintain be to the improved.

hikes still stable would like risk credit to low even a additional at I X.XX% the increasing is level. XXXX a to CCR, rate being provisioning, when economic Next, X.XX%. cost. level interest QX rapid downturn, cost at And credit it where posted level. first preemptive in is situation half excluding a is maintained And cover due and at the credit

capital group’s the is Next adequacy.

robust of it of and rate decrease management, YTD. Group to performance the comprehensive you of in just some ratio capital presentation. generation KB with and conclude price level industry. aforementioned, overseas interest the BIS strategic highest the and expansion profit decreased to As so on ratio other please CETX of I buffer asset refer increase XXXX, page I the XX.XX%. half With Financial listening. solid and asset in Thank corporate with hike it expansion, the and end risk-weighted it the accumulated June posted detailed group declines capital financial materials are and business the From back will XXXX first of posted income, But the is securing this, results for With next needed. if related XX.XX%, that

Peter Kweon

[Operator now will Q&A. the Samsung questions Instructions] We from We Jaewoo. Kim will Securities, take Mr. begin

Jaewoo Kim

questions. would like X ask I to

relates decision. question your First to return shareholder

also be and But I this helps sustain alleviation the to is is, as the negative, DPS, you so you’ve banks stance treasury decided the this end able to I have type You’ve There shares. positive that of We decided could And in my the started well would treasury U.S. stance? some with concerned your market. into the see future. be the question cancel concerns and to cancellations, hope to assessment. of we’re that think continue with maintain share-related guess, sustained actually some as

you So be guidance, will have any that helpful. if

with do your Second has to asset quality.

situation is place wondering the difficult, quite that I’m you and economic and sufficient. provisions the is in have challenging mentioned, As whether

NPL As coverage is relatively you mentioned, ratio your high.

However, the may -- NPLs also rise quite steeply. could

or respect there countermeasures risks, other have it insights, types are or If stringently with in you assessment where any or the to place of us. manage concerns Is bank’s you products project biggest share potential And to also, and please risk? do any financing segments? do measures in with that for your asset see you the in your So quality?

Scott Seo

details. with then of to in will the Scott regards provisions Seo, return CFO your And that I us, provision, I have is relating am and you the question of we the KBFG. more details we shareholder Yes, respond to on the so with appropriateness have our who he CRO, provide to will place. with the

past an in appropriate NDR, and to also to considering with top shareholder such big. dividend shareholders amount our Japanese they we what And the confirm and was not domestic cash were U.S. of want to the and fully able and question. steep a able July, cancellation. we of Let stop share Japanese payout balance shareholder dividend through companies which major return. out an started dividend we the to not that dividend. And paying overseas as investors shareholders but banks delivered is me -- payout investors. amount thing the of the foreign to well overall believe of In the and met couple was have had BOD have the that as feedback over listen And these between mix during QX, an I rise and approach. and second we respond continuous banks, we to of have management. the We what market payout years, shareholder return-related the the the June investors And done their and turned We, were had cash treasury quite NDR, are shareholders. as a our friendly We all major course, approaches. se per after our want trend well in very as And

ratio, that first approaches, the to possible. for banks, we’re more, but reach ratio, this those the profit the this that second, commercial look -- handed shares. you as emphasize including bring directly as After share really going I a than numerous of net occasions. increasing payout, to look our There stress make not That’s do buyback banks I just the as That emphasizing the U.S. our for to net is banks. forward. like rises. third banks, reach that understand we focus the major objective, wanted at thing I treasury of guidance year, had our sure of differs different once the over banks, best case XX%, And at DPS we will down regards apply this that Korea. With at X their best cash the our our profit quickly so of it’s would U.S. dividend Fed to payout is we’re for also and situation the they can’t the you of if we’ve X buying payout cash of to to we the point and performance, understand all each test If going our a is as one each least to And some on year XX% The would payout, cancellation. rather to emphasize. direction do payout dividend and well I going our been more the be if for the KRW us of

buyback perspective be and from better If will of the share the our go. those you us treasury believe, Under multiple. only for to it’s mid- canceling to condition, look this we book, shares, at way X.X to price long-term

size of regarding the In the the at of appropriateness looked many terms appropriateness assessment, the of we’ve aspects. provision,

portions And credit U.S. number exposure. level credit certain for products versa. carve-out, you compare to were were book, not banks NPL compare And is there if the our you of credit us versus the excluding the two, If you account provision total in at but U.S., loan U.S., this at some us, loan the banks, card if and no the the is with total the bigger that provision, the book, in against out there against card looking difference. look of even cards, to are vice the

that provisions of credit situation, card between for versus because a there’s U.S. difference the Korea. So

provision Financial have So we’ve on our Group, global possible have in based as we most KB standards, we to credit much our done for and the card. as which criteria, higher-notch best

would turnover So now I to the CRO more like elaboration. little a to provide to

Pil-Kyu Im

KBFG. CRO the I’m Pil-Kyu. Im am I Yes, of

and quality asset the Regarding PF.

You’ve me that so respond also let mentioned to question. PF,

in be whether will there that as be rate do is for there With case. I a think the hike Korea. some the concern systemic Korea, to not interest risk will

at were regulation preemptively time, look in you the crisis, was put by during regulators, that and crisis, to overcome able place global If LTV the crisis. the we the financial the subprime

which X think And do rigorous there an is Phase time. it’s regulation, from XXX there’s that the third was Phase quality-related be X, for will is billion. that, year, if regulations a people, financial and DSR for interest has also above was last a DSR of But rate rules asset well. the there second-tier we as a DSR some and and quality. very Basically, very are So regulation. that. implementation Phase uptrend X know, starting help discipline. will And X, XX% there strong continuous July, Phase tier you And asset as for think KRW we market been

regulation So this safety overall, work system. the will for that as we believe a fence

is year, a than in going to X Now having delinquency savings steep back last that is you the and look household because savings year a of like loans, first impacted lot highly if quite rate believe Pinda Toss. at of for there’s or banks, been that hikes, or the And or reason of we delinquency is to Pay loans said because price at year last half because rate this be they the looking up that, platform-linked are the banks, because look you severely rate, an there XX%. showing if at The years Kakao were reason uptrend. impacted more

level platform-based bank. fee, took these referred the products have loan companies certain they customers, the these and all fintech For of savings of

card, industry really companies. different through The a was loans the captive they it -- platform-linked XX% a this method, This these advance it these card the loans now the picture. what well to market, at not that the savings a did bank interesting credit not impact. savings the factors spill marketing. trying loans than customer in was I bank, the will platforms, fintech household is against methodology because but potential have and was that bank. the loans a What’s it data, that more loans will as credit to card linked utilized industry, of But the different say for best. was actually originated at the credit is base big loans up total as And for marketing savings card at that or you industry, the I’m And so reason because relevant the Credit that platform-linked their unsecured subprime you the risk over new by structure is see between totally accounts if look very X. marketing loan the minimal to is card card is for more mentioned very credit may new

segmentation, So yes, But some with more to hikes, being, depending bank be the within risk the may we that believe contained interest there customer savings time industry. the less be rate the impact. on going for or is

And the are credit or borrowers undermined, managing be that that. worthiness forward, we if So And if are that’s could will situation. Entry very you we be do there’s And assess that preemptively going risk rigorously. we banking and going ready place for potential have for we we model where whose to tightly is in to significantly a picture. there actually events done any as the know, believe the also, continue overall regarding sector, so. management quite is

loans, So if restructuring to, period, their their further about collaterals or repayment think the we extend for need enhancing instance, can cetera. et they they

management delinquency well of regarding thing in of of all all despite have that, place. also we mechanism that The And is, going is So management. importance up. delinquency there’s management expert another

for the capital we using overall the management, adopted delinquency at and card, learning machine bank. group are for AI savings So and bank, and We’ve that AL bank. credit level, ML-based

management open also good good also that do system we between. and so will in a in can a September, and everything can We do management, exit we actually entry

could against of fend company. have degradation all place we quality prevent asset the in that So needed any against we the or of system so

that. I’m overly concerned about not So

a have there financing all sites, that going could for forward, risk, we audit the also in lots, and as sites, articles. XX about we have is in was But not KRW basically, conducted so Bridge related, is of contractor-related we we risk. all the potential real risky exposed exposure. risk we estate place well We has loan, place. for thing place. just monitored special each -- is we Appropriately, different which all loans the in billion to parameters bridge there categorized in senior a when decide of unsold all construction and of another And senior. that comes potential we the all what management debt the for of real site issues, the KRW XX.X be featured KRW which significant. risk highly PF to work Also, also XX already be is needs so company-related we have highly that work us And KRW been inspections. we to -- and we’ve our also a billion reviews XX believe that process -- and underwriting appropriately management, which have that, needs PF, have think recently position, project have help in And if are a potential but regions, observed. that process Any risk, So XX.X risk PF not site, billion it them. it’s to as depending potential prone all assessment on is different have we’ve the them a or issues, site estate-related trillion variables And not to issue done loans. is regime we’re so manage

the PF that not I security well any side, financing-related are the you -- we exposures, So today. tell of as protected. can are problem all for And we on to experiencing side, and with regards project security

Peter Kweon

We will take the next Citi question, from Yafei Securities. Tian

Yafei Tian

the it some super quarter. little breakdown trading-related that be give A income down? a is one is Yes, relatively couple. a this lower a will detail losses Would that possible of helpful. bit line first granular of I for the there more be there weighing have to is

is one has margin Second the Clearly, BOK the terms in quarter rates. of on first interest the more end since hawkish raising turned outlook. of net

net perhaps outlook more bank? the relief banks same So regulator provide loan vulnerable would borrowers their to margin the the to the to interest for burden. debt that we also time, change are At prevent servicing seeing

So And of we a thinking and the of need tax on balance banks maybe some customers? to current along in discussion proposing environment? benefits with how any should bank-related rising the a just to of probably rates of would pass that, finally, there are this potential

Peter Kweon

answer so Yafei, more soon bear a will please We for question, your you. Thank just minutes. few

Unidentified Company Representative

I I’m bank. the of the And the question would for like CFO NIM, [ph], Kim first. the bank answer to Jae-keun

the NIM, QX, was bank in it X.XX%. Regarding

expecting we bps first rose a quarter, XX by NIM, cumulative the may as be additional And see the second it the on bps year, the basis X improvement compared We that a XX of bp, improved. to previous So X and are in early prudently, bp can have that was to And in this improved. will basis, NIM believe on X year. you compared expanded we half, the well. the it half in yearly to

there’s less borrowers. loans, was policies there competition the banks. will as be more because that to we know for And to need the mentioned However, help household vulnerable be you, demand by will there some between

spread the decline. So an effect be from there will

trend range do the limited, continue. improvement be will believe might but we that NIM the So improvement

to and improve are order direction. the profitability portfolio on consistently, assets, on we in our to and profitability based addition, management plan we this in steadfastly move managed working In

Unidentified Company Representative

your FX and fixed you yield, I would high. answer you can the very related trading was see was so to as there increase To some an in know, to like question fluctuations your volatility income question, answer trading.

believe will direction that be the we believe In However, the in will half, improvement be there trading, we profit. that in follows. second the as

please our give will than trading be and more more to happy For we forecast. with details, detailed more information contact you about team, IR

Peter Kweon

next go question. so you’re don’t Yes, the we’ll I connected, think to

Unidentified Analyst

hike is will time that the to When simple. the X%. on question also is go biggest to comes concern for My quite as household that first -- loans to going will is to have this this well, the quite interest BOK The apply up loans, that X.X% end people could rates significantly. rate year of household corporate loans by

end So loans what as year estimate, by end you we believe be of of this that household interest is are previous up that’s If lending the expected go the pressure. really compared to of our -- for to burden case, to XX% going because to think do going feel the the the according year, the the see year. are to by borrowers household really rate to going the the is

to So bank’s from stress? is make measures ways some are and to your would understand maintain are. of burden perspective, interest you sure your base the that for like what and the what customer the alleviate there no excessive So I

you investment it side, And property. quite decide are lot to. could a respond, felt into basically seems for of people if rate the if financial loans. And a these a of you corporate But it’s difficult is quite finance made question. by BOK’s a that guess difficult is mutual to and the I household Second a corporate use borrowers. on out there bit stability And not made is at report you under like seems where the burden question it cases lending, look a name floating of took there loan a short-term

under out of or a as who are Chinese corporate. customers borrowers, than people, the So seems And these of household taking are of as customers these when a would excuse of have at me, stress. borrowers banking interest the you to risk you customers, work -- may so types this. more there And redundant a the name further if name also, loan under from the XX% these look lot of or well this rates as their rising hike, as be

these fend of for your are off to So risk? borrowers, plans types potential what a

Pil-Kyu Im

Yes, I holding am company. Im Pil-Kyu, the CRO of the

type household of will is points about saying have this bring. year, on lending XXX would that and what an and that the basis of end our what On side, impact BOK rates impact

household cycle, months. if it’s Now look usually X loan, look at if the repricing you at our

every So XX% of months loans and the come X will XX% year. every

rate, our through that to year-end the So its interest do are will assessment. by of this We rises after to the rate up a to and looking if year, X basically, correlation that believe retroactive will repricing. impact. subject an have about the be at XX% loans delinquency gone XX% the When year, impacts we

unsecured experience. tick we That see XX-month our rate. after a meaningful the delinquency the loans, bank’s been For about has period, in

when see. So we to we able our is the that run data, that were result basically

when the that’s start interest to the months it lag. bank on lag, XX has So bank, impact on We an and about later. XX-month see the having about impact rate time rises the actually

So our we had what set for as provision. household also this the booked preemptively, household loans. ample the amount these provisions. for mentioned, corporate we the well also we year for this And CFO ample as aside And loans, provisions of for did we’ve was, loans, has

also terms for amortization at-risk In reprogram of we do corporate hikes, yes, borrowers. long-term interest And as be customers, rate there or have vulnerable some just program. could or we

it can we bank convert borrowers and the quality we burden long-term who them mitigate our be the And us into customers program. of make helps if risk, that a any at may use a also, of for of And assets. maintain for program, make borrowers. we So repayment we repayment to sure as could

mechanisms the past then second more at of are, experiences, point, granular level. really and operating So these we these question. at different about you this all were asked our And

unsecured they’re card, market, If the second-tier and look are than bank, credit the all And rated. financial about all at also, capital more amortization. our XX% fixed -- loans, you savings

impacted nonbank be interest who’ve individual some regards could with financing, under under loans in going as rate by rates, the these [Seo], the are be for you’ve to an mutual Mr. a mentioned, there not increases to corporate. hike. So the But received interest borrowers affiliates and

based these So borrowers multiple people risk you loans. can get manage these there multiple controlling and are very very, profile, array think multiple these borrowers of contact we I hold hold who banks in all borrowers loans, rigorous which loans. we but with me closely we on in because banking manage -- we’ve been or one-on-one, sector, these we in And of in of very who person also managing Korea, the multiple the

that could much potential limited any and could I So constrained. tell bank, risk pretty have on it’s our that, you,

Peter Kweon

coming for so a will the queue, minutes remaining. in other seems will that very any in. than this answer. And more important can no be if or there are wait until no there questions we please happy quarter, you had there I It in sizable much us, we and for other very answer that be because nonrecurring Thank the further see your questions, detailed question. believe we we other might few questions not are you have items if questions to contact

in. a believe other more So, I coming questions no And we have we but that seconds, be have it the highlights. major just we conclude. for few And this, that waiting with will covered seems we will

KB Financial (KB) 21 Jul 222022 Q2 Earnings call transcript