KB Financial Group recorded a net profit exceeding 1 trillion won ($750 million) in the first quarter of 2024 despite the 86.2 billion won int paid in compensation costs related to its troubled sale of Hong Kong’s H-Index-linked securities (ELS). Although it appears that KB Financial Group will lose its position as the market leader, which it held at the end of 2023, to Shinhan Financial Group in the first quarter of 2024, KB Financial Group was deemed to have turned in a solid performance overall considering that it also sold the most ELS products.

Shinhan, Hana, and Woori financial groups are also expected to reflect provisioning liabilities ranging from a minimum of 5 billion won to a maximum of 300 billion won per company as ELS compensation.

KB Financial Group announced on Thursday that its net profit for the first quarter of 2024 amounted to 1.04 trillion won, down 30.5 percent from a year ago. This is due to the significant expansion of non-operating losses resulting from reflecting compensation costs for ELS-related customer damage as provisioning liabilities.

With Shinhan, Hana, and Woori financial groups also announcing their first-quarter results on Friday, the performance of the four major financial groups in the first quarter of the year is directly affected by ELS compensation. Shinhan Financial Group, which is expected to take the top spot for the quarter, could -reflect costs totaling just under 300 billion won in provisioning liabilities related to its ELS compensation. Hana Financial Group is expected to set aside 180 billion to 190 billion won, while Woori Financial Group, with the lowest sales, is expected to set aside around 5 billion to 10 billion won as provisioning liabilities.

“Excluding one-off costs such as ELS compensation, the net profit for the quarter is 1.59 trillion won, and we maintained a solid profit base at the operational level,” a KB Financial Group official said.

The net interest margins (NIM) for KB Financial Group and KB Kookmin Bank in the first quarter were 2.11 percent and 1.87 percent, up by 0.07 percentage points and 0.08 percentage points respectively compared to the same period last year. The group’s interest income for the quarter hit 3.15 trillion won, up 11.6 percent from a year ago.

KB Financial Group’s major subsidiaries, excluding KB Kookmin Bank, continued their growth trajectory. KB Kookmin Bank’s net profit for the first quarter of 2024 is 389.5 billion won, down by 58.2 percent compared to a year earlier thanks to the expansion of non-operating losses related to ELS compensation.

On the other hand, KB Securities recorded a net profit of 198 billion won in the first quarter of 2024, up 40.8 percent thanks to an increase in brokerage income.

KB Insurance’s net profit for the quarter amounted to 292.2 billion won, up 15.1 percent compared to a year earlier. Improvement in the loss ratio was centered on long-term insurance and general insurance. KB Kookmin Card also recorded a net profit of 139.1 billion won in the first quarter of 2024 compared to 82 billion won a year ago.

KB Financial Group decided to introduce quarterly equal dividends based on the total dividend amount as a new shareholder return policy on Thursday, becoming the first Korean financial institution to do so. This is a method of setting the annual total dividend amount in advance at the beginning of the year and executing cash dividends at the same amount every quarter. The per-share dividend increases as the predetermined total dividend amount remains the same even if the company repurchases and retires treasury stock in the future. KB Financial has set the 2024 total cash dividend amount at 1.2 trillion won, and dividends of 300 billion won will be paid quarterly. The per-share dividend for the first quarter was set at 784 won.

By Chae Jong-won and Minu Kim

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