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    KB
    Earnings call· Sep 2025(Q3 FY25)

    KB Financial Group Inc. KB

    Oct 30, 2025 Source

    Executive summary

    KB Financial Group Q3 FY25 — Robust Profitability and Capital Adequacy Amidst Market Shifts

    This interpreted earnings call for KB Financial Group highlights a quarter of robust profitability and strong capital adequacy, driven by solid core earnings and effective cost control. The group is strategically rebalancing its earnings structure towards nonbank businesses and capital markets, aligning with government initiatives to revitalize the Korean capital market. While navigating interest rate and FX volatility, management is focused on defending NIM resilience through core deposit growth and maintaining RWA growth within appropriate levels, despite potential regulatory impacts and a cautious outlook on household loan expansion.

    Highlights

    5

    • Group's net profit for Q3 reported KRW 1.686 trillion, with cumulative net profit up 16.6% YoY to KRW 5,121.7 billion.

    • Cumulative group ROE in Q3 improved significantly to 12.78%.

    • Group's CET1 ratio recorded 13.83%, securing one of the highest levels of capital adequacy in the industry.

    • Net fee income grew 3.5% YoY, driven by KB Securities (16.5% growth) and KB Asset Management (23.3% growth).

    • Q3 group credit cost decreased 25 bps QoQ to 30 bps, with cumulative credit cost at 46 bps, transitioning to a lower stabilization trend.

    Concerns

    5

    • Group's cumulative net interest income was flat YoY at KRW 9,704.9 billion.

    • Cumulative group noninterest income decreased 1.1% YoY to KRW 3,739 billion, primarily due to a base effect from KB Insurance IBNR reserves.

    • Household loan growth is expected to show limited growth for the time being due to government policies.

    • The company is facing potential administrative fines, though the amount and timing are not yet finalized.

    • NPL coverage ratio declined from 200% to 130% over the past two years, though management expects it to slightly go up from current levels.

    Guidance & targets

    6
    CategoryTargetConfidence
    Group credit cost
    around the mid-40 bp range
    high materiality
    High
    RWA growth rate
    around 5%
    high materiality
    High
    Loan growth
    about 5%
    medium materiality
    Medium
    Securities investment growth
    about 9%
    medium materiality
    Medium
    Credit cost ratio (CCR)
    early 40% range
    medium materiality
    Medium
    Bank NIM outlook
    quite gradual decline at low single digit
    medium materiality
    Medium

    Segment performance

    1
    SegmentRevenueYoYQoQMargin
    Nonbank Business
    Maintained diversified earnings portfolio with nonbank businesses contributing significantly to group net profit.
    		———37% of cumulative Q3 net profit

    Operational metrics

    10
    Net profit
    KRW 1.686 trillion
    Q3 FY25

    Group's net profit for the quarter.

    Cumulative net profit
    KRW 5,121.7 billion16.6% increase Y-o-Y
    YTD Q3 FY25

    Cumulative net profit as of Q3.

    General G&A
    KRW 5,007.7 billion2.8% increase Y-o-Y
    YTD Q3 FY25

    Cumulative general G&A, reflecting continuous cost efficiency efforts.

    Provisioning decrease due to NPL recovery
    KRW 70 billion
    Q3 FY25

    Amount of provision reversal due to NPL recovery, including overseas bad debt and domestic knowledge complex centers.

    Total cash dividend
    KRW 335.7 billion
    Q3 FY25

    Total cash dividend approved by the Board of Directors for Q3.

    Q3 cash dividend per share (DPS)
    KRW 931increased KRW 135 Y-o-Y
    Q3 FY25

    Q3 cash dividend per share, reflecting increase in total dividend sum and share buyback impact.

    Core deposit growth
    KRW 7.9 trillion
    Q3 FY25

    Growth in core deposits, alleviating funding pressure and defending NIM.

    Core deposit growth (average balance)
    KRW 4.3 trillion
    Q3 FY25

    Increase in core deposit on an average balance basis.

    Provisioning decrease QoQ
    KRW 290.6 billionQ-o-Q
    Q3 FY25

    Main reason for the significant decrease in Q3 provisioning.

    FX effect on RWA
    KRW 48 depreciation
    Q3 FY25

    Depreciation of Korean Won against the U.S. dollar, acting as a driver of RWA growth, but absorbed through management.

    Industry KPIs

    13
    MetricValueDetails
    LoansKRW 375 trillionKRW
    Deposits—
    Rotce ROE12.78%%
    Cet1 ratio13.83%%
    Capital returnsKRW 931KRW
    Fee income linesKRW 2,952.4 billionKRW
    Allowance reservesabout 130%%
    Net interest incomeKRW 9,704.9 billionKRW
    Net interest margin1.96%%
    Net charge offs npls—
    Total operating expenses—
    Provision for credit lossesKRW 364.5 billionKRW
    Efficiency ratio operating leverage37.2%%

    Risks & headwinds

    6
    Continuing slow growth trendOngoing

    Not quantified

    Mitigation: Building well-balanced earnings structure through nonbank subsidiaries portfolio; continuously ensuring stable earnings capacity.

    Interest rate and FX volatilityOngoing

    Not quantified

    Mitigation: Defended group's NIM resilience through strong core deposit base; RWA monitoring and portfolio adjustment to absorb FX effects.

    Government housing market stabilization measuresOngoing

    Not quantified

    Mitigation: Expect limited household loan growth; plan to rebalance household loan portfolio for profitability and focus on robust SMEs.

    Potential administrative finesNear-term

    Amount and timing not finalized

    Mitigation: Actively responding to authorities to minimize impact; working towards a reasonable resolution; committed to protecting shareholder return policy.

    Impact of market policy rate movement on NIMH2 FY25

    Gradual decline at low single digit (H2/Q4)

    Mitigation: Focus on expanding core deposits and reducing funding costs; strengthening deposit base.

    Domestic market recovery and real estate market situationOngoing

    Not quantified

    Mitigation: Close monitoring of vulnerable borrower segments; rigorous control.

    What to watch in Q4 FY25

    5

    Bank NIM trajectory

    Q4 FY25
    Current1.74% (Bank NIM), 1.96% (Group NIM)
    TargetGradual decline at low single digit

    Why it matters

    NIM is a key driver of profitability for banks, and its trajectory will indicate the effectiveness of funding cost management and deposit strategies.

    On an annual basis, in the second half or in Q4, we expect the NIM -- of course, it will be impacted by the movement of the market policy rate. There are multiple views regarding how the market rate is going to go going forward⏳. However, looking at the overall direction forward, we think that in the second half, there's going to be a quite gradual decline at low single digit. That is what we are forecasting.

    Q&A highlights

    6

    Has the decline in NIM stopped, and is a turnaround expected? What was the amount of NPL provision reversal from recovery?

    NIM decline has slowed, with Q3 bank NIM up 1 bp. A gradual, low single-digit decline is expected in H2/Q4 due to market policy rates, but will be offset by core deposit expansion. The NPL provision reversal was around KRW 70 billion, mainly from overseas bad debt recovery and domestic knowledge complex centers.

    “On an annual basis, in the second half or in Q4, we expect the NIM -- of course, it will be impacted by the movement of the market policy rate. There are multiple views regarding how the market rate is going to go going forward. However, looking at the overall direction forward, we think that in the second half, there's going to be a quite gradual decline at low single digit. That is what we are forecasting.”

    asked by Do Ha Kim · answered by Jong-Min Lee

    2 min read6 chapters

    Detailed Narrative

    01

    Strategic Shift Towards Capital Markets and Nonbank Businesses

    KBFG is actively rebalancing its earnings structure, leveraging government initiatives to revitalize the capital market. The company aims to expand brokerage, credit, and investment product sales through its bank and KB Securities WM channels. This strategic pivot is intended to broaden the group's future growth basis and strengthen profit-making capacity, with nonbank businesses already contributing 37% to cumulative Q3 net profit.

    02

    NIM Resilience and Funding Cost Management

    Despite a challenging environment with interest rate and FX volatility🌐, KBFG demonstrated NIM resilience. The bank's NIM remained stable at 1.74% in Q3, and group NIM at 1.96%, primarily due to strong growth in core deposits (KRW 7.9 trillion) and effective funding cost management. Management expects a gradual, low single-digit decline in NIM for the second half of the year, offset by continued focus on core deposit expansion and cost reduction.

    03

    Loan Growth and Portfolio Rebalancing

    Bank loans in Won grew 3.3% YoY and 0.9% QoQ to KRW 375 trillion. Household loans saw limited growth (0.7% QoQ) due to government policies, while corporate loans grew 1.0% QoQ. KBFG plans to rebalance its household loan portfolio for profitability and focus on robust SME loans. For next year, the bank projects an annual loan growth of about 5%, with household loans at 3% and corporate loans at 6-7%.

    04

    Asset Quality Improvement and Credit Cost Outlook

    Q3 provision for credit losses decreased significantly by 44.4% QoQ to KRW 364.5 billion, resulting in a group credit cost of 30 bps (down 25 bps QoQ). This improvement is attributed to conservative provisioning, portfolio enhancement efforts, and NPL recovery. Management expects the full-year 2025 credit cost to be in the mid-40 bp range and aims for an early 40% range in FY26, anticipating a recovery in asset quality.

    05

    Capital Adequacy and RWA Management

    KBFG maintained strong capital adequacy with an estimated group BIS ratio of 16.28% and a CET1 ratio of 13.83% at the end of September 2025. Group RWA increased 3.5% compared to the end of the previous year, reaching KRW 358 trillion. The company actively managed RWA growth, absorbing FX effects through monitoring and portfolio adjustments, and aims to meet a 5% RWA growth rate for FY26.

    06

    Shareholder Return Policy and Future Flexibility

    The Board approved a Q3 cash dividend of KRW 931 DPS, totaling KRW 335.7 billion. Management reiterated its commitment to maintaining the highest level of Total Shareholder Return (TSR) in the industry. While specific future TSR targets were not given, the company emphasized flexibility in timing and size, similar to early implementation of expected shareholder returns in Q2, and will consider the mix of cash dividends and share buybacks based on regulatory requirements and market conditions.

    AI-generated summary of the company’s earnings call. Not investment advice.