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Fundamental View
AS OF 06 May 2025KB Financial Group has grown steadily through the acquisitions of non-bank companies in Korea and small banks in Indonesia and Cambodia. Its banking subsidiary, Kookmin Bank, operates the largest branch network in Korea, with a particularly strong presence in the retail market. This makes it a systemically important bank, with strong potential government support if needed.
The group has a good track record, and its large mass-market franchise gives it a strong customer base. It has a well-diversified business and the highest CET1 ratio among the four major financial groups.
Business Description
AS OF 06 May 2025- KB Financial Group (KBFG) is a well-diversified and well-run group. Its main subsidiaries, in addition to Kookmin Bank (KB), are Kookmin Card, KB Insurance, KB Securities, KB Capital (leasing), and KB Asset Management.
- KB was the result of several mergers after the Asian economic crisis of the late 1990s. Its main predecessors were Citizen's National Bank and Housing & Commercial Bank, both retail-focused banks that have given it the leading position in Korean retail banking.
- For the near term, the group doesn't expect further M&A. It has looked for growth overseas, focusing on Indonesia (where it has taken a 67% stake in Bank Bukopin) and Cambodia (it took a 100% shareholding in Prasac, a micro-finance lender, over 2020-21). It also bought Prudential Financial's Korean insurance business in 2020, which was subsequently merged with KB Insurance.
Risk & Catalysts
AS OF 06 May 2025As one of Korea’s “Big Four” financial groups, we believe that KBFG would likely receive governmental support if needed.
Credit costs normalised to 45 bp in FY24 (from a spike to 73 bp in FY23) – a level more consistent with peers, but 1Q25 credit costs at 54 bp were higher than peers again.
KBFG has the highest NIM among the four FGs, largely thanks to the highest NIM at Kookmin bank among the Big 4 banks.
KBFG is expanding by business line and overseas with a focus on Indonesia and Cambodia—markets with more favourable demographics, growth potential, and profit margins than Korea but also more risk. The profit plan for the Indonesian investment has been slower than expected, and significant provisions have been set aside since 4Q22 for non-viable assets.
Key Metric
AS OF 06 May 2025| KRW bn | FY21 | FY22 | FY23 | FY24 | 1Q25 |
|---|---|---|---|---|---|
| Pre-Provision Profit ROA | 1.14% | 1.05% | 1.36% | 1.37% | 1.54% |
| ROA | 0.69% | 0.57% | 0.65% | 0.68% | 0.90% |
| ROE | 10.2% | 8.8% | 9.1% | 9.7% | 13.0% |
| Provisions/Loans | 0.31% | 0.45% | 0.73% | 0.45% | 0.56% |
| NPL ratio | 0.33% | 0.34% | 0.57% | 0.65% | 0.76% |
| CET1 Ratio | 13.5% | 13.2% | 13.6% | 13.5% | 13.7% |
| Equity/Assets | 7.3% | 7.9% | 8.2% | 7.9% | 7.8% |
| Net Interest Margin | 1.83% | 1.96% | 2.08% | 2.03% | 2.01% |
CreditSight View Comment
AS OF 28 Apr 2025KBFG is one of the “Big 4” finanical groups in South Korea, and its banking subsidiary, Kookmin Bank, enjoys the strongest franchise with a particularly strong presence in the retail market. This makes it a systemically important bank, with strong potential government support if needed. KBFG has a good track record and a well-diversified business. Capital standing is the key strength, with the current highest group CET1 ratio. Credit costs are relatively high compared to peers in recent years, but its NPL coverage ratio is also the highest. More recently, KBFG delivered a relatively better set of 1Q25 results among the Big 4, and it was the only FG to still witness modest profit growth when excluding the impact of ELS compensation costs from 1Q24.
Recommendation Reviewed: April 28, 2025
Recommendation Changed: September 22, 2020
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