Founded in 1993 through brothers Tom and David Gardner, The Motley Fool is helping the economic freedom of millions of Americans through our website, podcasts, books, news that are consistent with articles, a radio demonstration, and high-end investment services.
KB Financial Group Inc (NYSE: KB) C Second Quarter 2020 Results July 21, 2020, 3:00 a.m. ET
Peter K – Head of Investor Relations
[Foreign Speech]
Best regards. I’m Peter Kwon, head of foreign affairs at KBFG. We will now begin the presentation of the first component of the 2020 trade results. I explain my deepest thanks to everyone for participating in our appeal.
We have here with us our Group CFO and Deputy President, Kim Ki-Hwan, as well as other members from our Group management. We will first hear the 2020 first half major financial highlights from CFO and Deputy President, Kim Ki-Hwan, and then engage in a Q&A session.
I invite our Vice President to give the most outstanding economic accessories of the first component of 2020.
Kim Ki-Hwan – Chief Financial Officer and Vice President
[Foreign speaking]
Good afternoon. I’m Ki-Hwan Kim, CFO from KB Financial Group. Thank you for joining KBFG’s presentation on sales effects for the first component of 2020.
Before moving on to earnings results, allow me to first present on the operational backdrop. Despite prolonged uncertainties surrounding COVID-19 curve repeating the flattening and rising cycle, helped by strong monetary fiscal policies worldwide in an effort to overcome economic recession, financial markets regained some level of stability. Nevertheless, concerns over global crisis of real economy continues.
If, and the moment a wave of COVID-1 nine hits us despite giant quantitative easing, the economic recovery could well be delayed. Therefore, we do not seem able to reverse our surveillance, and in the face of very low rates, the banking sector may also be guilty of countering structural pressures.
In an unprecedented crisis caused by the pandemic, KBFG will be the best friend up to its role and responsibilities, at the h8 of a leading company, and could proactively respond to changes in the economic paradigm, consolidate our position as a leading economic group. .
First, to help businesses suffering from the pandemic and vulnerable class, we were provided with financial assistance and KB independently administers various programs, adding a strict Jstomer movement to support local small businesses. In addition, we are the best friend committed to asset quality and threat control. We developed an uninterrupted tracking formula for the most powerful problematic loans for friends and conduct ex post confidable control of marginal borrowers and introduce the Group’s threat control formula to organize an imaginable extended economic recession.
Also, to be pre-emptively ready for a possible quality deterioration, we made additional provision of KRW206 billion this quarter. In addition, KBFG is steadfast at its strategic tasks that seek to enhance earnings stability and gain growth engine for the future.
To this end, last April, we acquired PRASAC, Cambodia’s largest microfinance block, as a subsidiary. And in the third quarter, follow the acquisition procedure for Prudential Life Korea, a leading company in terms of capital adequacy and channel competitiveness.
Last month, we also celebrated a strategic alliance with a foreign investor, Carlyle Group, issuing KRW2 of negotiable bonds. The EBE were issued at 0 coupons as the company’s h8 foreign currency premium and own shares were highlighted, KB’s charges and expansion prospect were recognized. It can also be the ultimate production case in the strategic use of own stocks and diversification of investment sources.
The best friend, KB Financial Group, guilt control founded at ESG and the growth of innovation. By adding renewable force and green production for the most environmentally friendly investments, we plan to expand applicable investment loans with ESG products to KRW 5 billion by 2030.
As the recent releases of KB Clean Ocean Deposit and KB Clean Ocean Public Trust show, we have been incorporated into ESG elements incorporated into the design of new products and services. As such, strive to bring ESG’s expansion innovatily to the forefront as a leading economic group.
With that during orientation, I will now move directly to the advertising effects for the first component of 2020. KBFG’s net source of currencies at the time of a quarter of 2020 KRW 981.8 billion. After the resumption of other gains in a stronger capital market position at the time of a quarter and advanced net commission earnings and technical source of coins in, net source of coins at higher through 34.6% T-sur-T.
Net source of first component currencies in KRW 1,711.3 billion, 6.8% year-on-year. But by establishing additional sourcing in accordance with our long-term economic forecasts and ERP completion in the 1st quarter and other point pieces on a recurring basis, our profit captains remain strong despite a challenging opescore environment triggered through the COVID pandemic that has led to economic recessions and interest rate cuts.
Let’s go over to more details. The net interest source of the currency group in the first component of 2020 KRW 4,683.2 billion. Despite the cut in the secret interest rate and the loan forgiveness program in the NIM, supported by a strong expansion in bank and vision repayment lending, the NII grew 2.9% year-over-year.
Net revenue from the first component and the group’s payment was KRW 1.381.3 billion, an increase of 21.6% or KRW 245.6 billion year after year, leading to a strong expansion trend. Although the bank accepts that revenue has declined due to restrictions and limitations on ETF sales and volumes of increased distribution transactions, brokerage payment revenues have increased, mainly through KRW126 billion. In addition, active card marketing and cost-cutting efforts have led to a sustained design in credit card payment revenue.
Second, at the time of a quarter, other revenues were KRW227.7 billion, a mandatory improvement over the previous quarter. We witnessed a recovery in first quarter stock derivatives, foreign currency losses, adding foreign currency bonds, CVA and ELS valuation losses as a result of h8 volatility in economic markets.
Insurance subscription functionality also took a step forward due to full minimization in the claims index. As there are some new volatility in the economic market position due to the resurgence of COVID-1nine and the deterioration of the real economy, continue with a defensive stance in the middle era and could manage our profits solidly.
Then there are the General and Administrative Expenses of the Group. Q2 Group GA was KRW1, 586.4 billion in seasonal factors, i.e. establishing an aspect for banks and social assistance fund cards and paying taxes and including PRASAC, the sub-subsidiary, in finance, GA rose 8.7% Q-on-Q. But those factors, there’s only been a slight design in Q-on-Q. For the first component of the year, the combined apple recorded KRW 3.0four5.6 billion, year after year and well controlled thanks to our cost reduction efforts throughout the Group.
Then there’s the source of loss on accounts receivable. The provision for debt losses at the time of a quarter reached KRW 296 billion, a distribution of 21.5% T-o-Q. This is the result of additional provisioning based on the FOC, or a scenario of long-term economic outlook, despite some large-scale reversals. Excluding those exceptional items, it decreased by approximately 26% Q-o-Q.
During the quarter, KB implemented prospective search criteria from a cautious approach and reclassified some high-threat loans from Stage 1 to Stage 2. KBFG has provided approximately KRW206 billion additional to its ability to respond to long-term uncertainties.
For registration, at the end of June, the Group’s delinquency policy rate, adding up to the reserve of provisions for bad debts, stood at 296.5%, an improvement of 3% Q-o-Q and was reset to an h8 level. I go to the main economic knowledge on the next page. The group’s accumulated ROE in the first component of 2020 was 8.88% and the recurring ROE, excluding additional provisioning, was rather stable. These effects are the result of our ongoing efforts to strengthen our non-banking site. And in the future, KBFG will respond to low expansion interest rates and co-pays and the best friend will diversify our currencies based.
Then I’ll cover the loans from the expanding bank earned. At the end of June 2020, the bank’s loans in won were 287 trillion KRW, a distribution of up to 6.8% due to the birth of the year and 2.4% in the quarter. In the case of family loans, driven by an emphasis on the expansion of Jeonse loans and quality unsecured loans, it has increased by 4.2% due to the birth of the year and directly compared to the end of the previous quarter, maximum guaranteed loans have been securitised and there has been a slight decrease in expansion.
In the termination business, the completion of companies, SMEs and large companies grew at a rate of 10% due to the birth of the year and 4.2% in T-O-Q. In particular, the completion of SMEs, adding SOHO loans, has increased through KRW 8 trillion due to the year’s birth of the expansion of COVID-19-like financial aid programmes.
KBFG at the time a component this year will continue to have qualitative growth, focused on quality assets and has also strengthened the final review criteria such as preventive threat control and a possible NPL relief measure. KBFG plans to focus more on profitability and asset quality control in the future.
Then comes NIM. Nim Bank’s second quarter call was 1.50%, 6 Q-o-Q bplaystation. This is the most important friend due to a slight contraction in asset yields, with interest rate cuts and a partial design in the foreign currency liquidity control burden, the financial burden has been eased by expanding deposits at reasonable prices and minimizing term deposits.
Conversely, at the time a quarter the NIM organization recorded 1.74%, minimizing average rate revenue, adding auto loans and currency advances. The NIM card also fell, causing a Q-o-Q drop of 10 pb. Given the recent cut in key interest rates and the expansion of termination policies, it can be very difficult to safeguard our NIM this year. But founded on the channel’s increased competitiveness in Korea, focus more on expanding base deposits at reasonable prices and implementing a selective and con-utilating pricing program to provide direct protection to the NIM as much as possible.
Let’s go straight to the next page. First, I’ll detail the cost-source of the Group’s coins. The COMBINED GROUP CIR for the first component of 2020 recorded 50.6%. Excluding unique items, adding digitization expenses, adding next-generation IT investment costs, the recurring ERB is 48.5% and monitors an imperative on the previous year’s recurring E ROI point. With the expansion of currencies with no interest in resources and cost-cutting efforts across the Group, the inability of currencies is the best friend gradually improving in a tangible way, and we expect it to reach an average of 40% in the medium and long term.
So literally my best friend would love to hide the price of the credit relationship. The organization’s credit charges in the second quarter of 2020 recorded 0.29% and a higher Q-o-Q thanks to the additional provisions I misrepresented earlier. However, excluding 0.14% unique parts, it is very well controlled at a low level. Next, I will talk about the Group’s BIS solvency index. The BRI organizational rate at the end of June 2020 is 14.13%. The CET1 ratio was 12.80%, very similar to the previous quarter.
Despite the risk weighted asset growth following corporate loan and unsecured loan centered loan growth, along with sound net profit growth, strategic capital adequacy management, including issuance of hybrid bonds and disposition of securities, FVOCI, we are maintaining the industry highest level of capital buffer. Please refer to the following pages since they cover the details related to the earnings that I just aforementioned.
With this instead, conclude the presentation of the first KBFG 2020 component control results. Thank you for your attention.
Runtime: 0 minutes
Peter K – Head of Investor Relations
Kim Ki-Hwan – Chief Financial Officer and Vice President
More KB analytics
All source of coins in call transcripts