KB Financial Group, Inc. Q4 FY2024 earnings call

Business Highlights

• Despite challenges like household debt, real estate market issues, and rate cut cycle, net profit exceeded KRW 5 trillion. Fundamentals remained solid due to business portfolio diversification.
• Implemented Sustainable Value-Up Plan in Oct 2023, first in sector to do share buyback/cancellation and introduced equal quarterly dividend distribution.

Financial Results

• FY '24 net profit KRW 5,078.2 billion, up 10.5% year-over-year. Pre-provisioning operating profit KRW 10,089.6 billion, up 5.9% year-over-year. ROE 9.72%, EPS KRW 12,881.
• BOD decided KRW 300 billion cash payout, DPS KRW 804, total dividend payout KRW 1.2 trillion, KRW 820 billion share buyback in 2024, and KRW 520 billion in 2025.

Earnings Breakdown

• Q4 restated due to insurance accounting changes. Nonbank portfolio contributed to top-line growth. NIM affected by rate cuts but loan demand up. Net fee and commission income despite challenges. SG&A managed with ERP, CIR improved. Provisioning down Y-o-Y but Q4 increased due to conservative stance.

KB Financial Group's FY '24 net profit was KRW 5,078.2 billion, with pre-provisioning operating profit at KRW 10,089.6 billion, up 5.9% year-over-year. ROE for 2024 was 9.72%, improving 0.59 percentage points year-over-year, and EPS was KRW 12,881. Group NIM was KRW 12,826.7 billion, up 5.3% year-over-year. Net fee and commission income in FY '24 was KRW 3,849.6 billion, up 4.8% year-over-year. Other operating income was KRW 351.9 billion, up 8.5% year-over-year. SG&A was KRW 6,938.6 billion, with Group CIR at 40.7%, down 0.4 percentage points year-over-year. Group provisioning for credit losses was KRW 2,044.3 billion, down greatly year-over-year, but Q4 provisioning increased 13.5% quarter-over-quarter due to conservative stance.

Growth

• Growth benchmarked to nominal GDP, aim for steady quarterly growth, expect margin decline due to rate cuts but minimize asset volatility.### Shareholder Return
• Flexible in timing of share buyback and dividend distribution based on CET1 ratio. 2025 cash payout expected to increase by ~KRW 40 billion, share buyback/cancellation in first half and second half.### Loan Growth
• Bank loans in won KRW 364 trillion, up 6.4% YTD. 2025 loan growth expected ~5%, household loans 4%, corporate loans 6% based on high-quality assets and risk management.

• Market volatilities from monetary policy, U.S. election, FX rate surge. - Rate cut cycle affecting profitability. - Asset quality concerns, especially real estate PF and overseas CRE.

Q: Insight on guidance for growth and margin, FX sensitivity on CET1 ratio, shareholder return policy timing.

A: Na Sang Rok responded that growth is benchmarked to nominal GDP, aim for steady quarterly growth; FX impact on CET1 due to Q4 profit decline, cash dividend, and share buyback; shareholder return timing is flexible based on CET1 ratio.

Q: Shareholder return Value-Up plan clarity, loan growth forecast.

A: Bong Joong Kwon and Jong Min Lee responded on flexible timing of share buyback, loan growth expectations with household up 4%, corporate up 6% in 2025.

Q: Share buyback clarity, TSR projection.

A: Na Sang Rok on flexible share buyback, TSR expected to rise in light of year-end profit guidance and CET1 ratio projection.

Q: Insurance rule change impact, CCR outlook.

A: Na Sang Rok on insurance rule impact on CSM and P&L, conservative CCR provisioning due to economic uncertainties and real estate PF risks.

Q: Credit cost detail, provisioning outlook.

A: Na Sang Rok on conservative provisioning stance, mid-40 bps CCR outlook with preemptive provisioning.

Q: Loan growth rationale, RWA growth.

A: Na Sang Rok on loan growth expectations aligned with previous year, RWA growth expected lower than asset growth.