KB Financial Group Inc. (KB) Q1 2023 Earnings Call Transcript

For the period ending March 31, 2023

April 27, 2023 3:00 a.m. ET

Prepared Remarks

Questions and Answers

Call Participants

Prepared Remarks:

Peter Kweon

Greetings. I am Peter Kweon, the Head of IR at KBFG. We will now begin the 2023 Q1 business results presentation. I would like to express my deepest gratitude to everyone for participating today. We have here with us our group CFO and SEVP, Scott YH Seo, as well as other members from our group management. We will first hear the 2023 Q1 major financial highlights from CFO and SEVP, Scott YH Seo, and then engage in a Q&A session.

I would like to invite our CFO and SEVP to deliver 2020 Q1 earnings results.

Young Ho Seo

Good afternoon. I'm Scott YH Seo, CFO of KB Financial Group. Thank you for joining the company's first quarter 2023 earnings presentation. Before going into the details of Q1 '23 earnings performance, I will first run through key performance metrics for Q1. As you're all aware, starting Q1 of '23 results, our accounts are based on IFRS 19 standards -- IFRS 17 standards, and we have retroactively restated '22 earnings of the group and its insurance subsidiary.

First, KBFG's Q1 net profit was KRW 1,497.6 billion, which is up 2.5% year-over-year. Driven by balanced growth from bank and nonbank business, we were able to report earnings which was 6.5% higher than market consensus. Group's Q1 ROE was 12.4% and annualized EPS, earnings per share, was approximately KRW 15,224, increasing by 2% year-over-year and sustaining an uptrend. PPOP, pre-provisioning operating profit in Q1 was KRW 2,793.8 trillion, growing 36% year-over-year.

SVB bankruptcy in the U.S. and Credit Suisse merger led to greater financial market uncertainties, despite which we were able to drive solid quarterly results driven by strong customer trust, underpinned by KBFG's robust capital base, and large improvements in contributions from sales and trading -- or market business, which was previously under pressure due to greater financial market volatility in 2022 as well as greater profit contribution from our insurance subsidiaries.

As a result, nonbank business share against group's net profit increased to around 41%, while group's earnings profile also improved with contributions from interest income decreasing significantly to 64%. Cost-to-income ratio, which is a measure of cost efficiency, decreased to 35.9% driven by solid profit growth trend and cost efficiency efforts that cut across the entire group.

Now during this quarter, there was a significant increase in the group's PCL. This is largely due to conservative provisioning initiated at the group level for relatively weaker positions at card, capital and savings bank business in light of concerns over economic recession. In addition, 48% of group PCL was reserved as part of the bank's general provisioning irrespective of delinquencies, in loan assets or NPL formation. As a result, NPL coverage ratio for the group and the bank end of March were 196% and 264%, respectively, maintaining highest loss absorption capacity in the industry against potential losses. I am aware of great market concern over the operational headwind faced by the financial industry, looking at group's CET1 ratio for the first quarter of 2023. It reported 13.67%, which shows despite higher shareholder return, there was a 40-basis point improvement versus end of '22. This is a clear demonstration of the fact that KBFG is a strong and stable business partner to our customers.