KB Financial Group Inc. (KB) Q4 2022 Earnings Call Transcript

For the period ending December 31, 2022

February 7, 2023 2:00 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 2022 Annual 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 2022 annual major financial highlights from our CFO and SEVP, and then have a Q&A session.

I would like to invite our SEVP and CFO to deliver 2022 annual earnings results.

Scott YH Seo

Good afternoon. I'm Scott YH Seo, CFO of KBFG. Thank you for joining the company's annual 2022 earnings presentation.

Before looking at the details of the income statement, I will briefly run through the highlights of business performance and key indicators of the group.

KBFG's FY '22 net profit was KRW4,413.3 billion, flat year-over-year but has underperformed market expectations or the consensus estimates of the analysts.

EPS for '22 was KRW11,002, down 1.2% year-over-year, and ROE on common stock basis was 9.9%. As a CFO, it's regretful to have to announce results that fall short of expectations of shareholders and investors. Biggest reason why we fell short of market expectations in '22 net profit is due to preemptive provisioning based on conservative FLC, forward-looking criteria.

For three years up to '22 with the outbreak and spread of COVID-19 and living with COVID, experiences which no one expected drove sense of instability and brought uncertainties to global economy and the financial markets, which heightened concerns. We expect macro uncertainties to grow this year globally and the signals for recession in the domestic economy across consumption, investment and exports are becoming more visible, building on the concern over rise in delinquency ratio and NPL ratio.

At KBFG, to thoroughly prepare against such event, we adopted a more conservative FLC future -- forward-looking criteria versus previous years. Preemptive provisions for domestic operations in '22, reflecting conservative FLC, was KRW242 billion, up more than 30% year-over-year. This is to secure ample room if and when credit risks heighten.

Next, provisions for overseas banks who we acquired that we set aside in Q4 on a consolidated basis was KRW570 billion and was KRW382 billion on an equity holding basis. Although local supervisors continue to operate COVID-19-related forbearance program to prepare for possible deterioration once the program ends, KBFG decided to provision preemptively based on our own credit assessment principles. This additional provisioning done for domestic and overseas was under a conservative approach to enhance forward-looking projections, and as such, there will not be such a large-scale provisioning for overseas operations in the future.