KB Financial Group headquarters in Seoul (File photo)
KB Financial Group Inc., South Korea’s largest financial holding group, is set to use its excess capital for share buybacks and dividends from next year as measures to boost shareholder returns and corporate value.
KB Financial on Thursday also unveiled a plan to increase its spending on share buyback and dividends to 2 trillion won ($1.5 billion) this year as its net profit was expected to hit a record high in 2024.
“We aim to boost profitability, soundness and shareholder returns to ramp up corporate value,” said KB Financial Group Chairman & CEO Yang Jong Hee.
The plans pushed its stock price to an all-time high on Friday morning. The share rose as much as 11.5% to 103,900 won in the South Korean main stock market where the benchmark Kospi gained up to 1.2%.
TO USE EXCESS CAPITAL
KB Financial decided to use its capital exceeding 13% of its Common Equity Tier 1 (CET1) ratio at the end of this year for share buybacks and dividends in the first half of 2025. The group plans to spend its capital topping 13.5% of the CET1 ratio on repurchasing the group’s own stocks and retiring them in the second half.
The group’s CET1 ratio stood at 13.85% as of the end of the third quarter.
CET1 is a component of Tier 1 capital and comprises primarily of common stock held by a bank or other financial institution. Banks are expected to meet the minimum CET1 ratio requirements to their risk-weighted assets (RWAs) as outlined by their financial regulators.
CET1 ratio compares a bank’s capital against its RWAs to determine its ability to withstand financial distress.
KB Financial plans to manage the growth in its RWAs below an average increase of 6.1% in the last 10 years to achieve the CET1 ratio of mid-13%. The parent of the country’s largest lender KB Kookmin Bank also aims to raise an annual average earnings per share (EPS) growth to 10% while buying back and cancel more than 10 million shares a year.
The group decided to repurchase 100 billion won in its own stocks for cancellations and raise dividends to 795 won per share for the third quarter from 791 won for the second. The plans are expected to increase its spending on shareholder returns to more than 2 trillion won, including 1.2 trillion won for dividends and 820 billion won for share buybacks.
KB Kookmin Bank’s trading floor in Seoul (File photo by News1)
RECORD EARNINGS
KB Financial reported a net profit of 1.6 trillion won in the third quarter, up 17.9% from a year earlier, thanks to higher interest income amid strong loan growth and healthy earnings of non-banking units. The profit was higher than a consensus estimate of 1.5 trillion won.
The group is likely to become the country’s first financial holding company with an annual net profit of more than 5 trillion won as it has already earned 4.4 trillion won in the first three quarters.
Its net interest income rose by 2.5% to 3.2 trillion won in the third quarter on-year, boosting its combined net interest income to 9.5 trillion won in the January-September period.
Net fee and commission income grew 4.6% to 942.7 billion won from July to September, led by strong growth in those earned by its credit card issuer and investment banking unit.
KB Kookmin Bank’s net profit increased 11.5% to 1.1 trillion won in the quarter, while its affiliates such as KB Kookmin Card Co., KB Securities Co. and KB Insurance reported healthy profit growth.
By Bo-Hyung Kim
kph21c@hankyung.com
Jongwoo Cheon edited this article.
