KB Financial Group posts an increase in profitability in 2024

KB Financial Group released its 2024 results in February 2025, posting a 5.3% y/y increase in net interest income (NII) to KRW12,827bn in FY 24. As a result, gross operating profit rose 5.3% to KRW17,028bn, while net operating profit surged 26% to KRW8,045.3bn, supported by a lower provision for credit losses over the year. Net profit therefore rose by 10.5% to KRW5,078.2bn.

KB Financial Group Inc., founded in 2008 in Korea, is one of the country’s leading financial services providers. The group operates through 11 subsidiaries, including KB Kookmin Bank, KB Securities, KB Insurance, KB Kookmin Card, KB Life Insurance, KB Asset Management, KB Capital, KB Real Estate Trust, KB Savings Bank, KB Investment and KB Data Systems. In addition to the Banking business, the company has a well-diversified and balanced business portfolio across securities, insurance, credit cards and insurance, which provides stable profit generation.

The company made progress in expanding its Non-Bank profits from 33% in 2023 to 40% in 2024, with the remaining 60% being contributed by the Bank segment. The company serves through a robust 2,062 network locations, including 1,465 domestic and 597 overseas network locations as of end-2023. In addition, the group employs over 23,000 people globally, with about 37.6m customers.

Key positives in 2024

The group reported ROE that increase to 9.72% in FY 24, from 9.13% in FY 23. This was achieved on the back of decent growth in core earnings and prudent cost management. The recurring ROE, excluding one-off factors, stood at 10.76%. In addition, loans grew by 6.4% to KRW364tn as of end-2024. Household loans increased 6.2% to KRW177tn, driven by mortgage loans on the back of rebound in real estate market; corporate loans increased 6.6% to KRW187tn, helped by modest growth in quality SME and SOHO loans.

The company's cost efficiency has showed a sustained improvement over the past few years, declining from 49.7% in 2021 to 40.7% in 2024. Moreover, the group posted an improvement in its credit cost ratio to 0.43% in FY 24, declining by 24bp from FY 23. This was achieved despite maintaining conservative provisioning levels, reflecting KB Financial Group’s consistent provisioning measures.

KB Financial Group has consistently prioritized returning shareholders wealth over the recent years with Total Shareholder Return (TSR) rising steadily from 20% in 2020 to 39.8% in 2024. TSR amounted to KRW2,020 in 2024, with cash dividends contributing KRW1,200bn and share buybacks making KRW820bn. In 2023, management announced a dividend per share of KRW3,060, reflecting a yield of 5.7%.

Increased cash position

KB Financial Group’s subsidiaries have consistently delivered steady growth in NII over the past few years, with NII of bank, card and others reaching KRW10,224, KRW1,661 and KRW942 respectively, in FY 24. Overall, the company posted a NII CAGR of 6.9% over FY 19-24 to reach KRW12,827bn. However, the non-interest income increased by 13.3% CAGR to KRW4,226bn in FY 24. At the same time, the provision for loan losses rose at a CAGR of 25%. Net income grew at a CAGR of 8.9% to KRW5,078bn, with margins improving from 30.7% in FY 19 to 33.8% in FY 24.

Over the same period, KB Financial Group significantly boosted its cash reserves from KRW6,124bn to KRW 24,609bn, supported by a steady increase in earnings trajectory, and considerable issuance of debt.

In comparison, Hana Financial Group, a local peer, reported a NII CAGR of 8.7% over FY 19-24, reaching KRW8,761bn. Net income therefore increased at a CAGR of 9.3% to KRW3,739bn in FY 24.

Attractive stock returns compared to peer

Over the past year, the company's stock has delivered decent returns of about 18%, reflecting a positive fundamental trajectory. In comparison, Hana Financial Group posted almost flat returns of 3% over the same time.

KB Financial Group is currently trading at a P/B of 0.5x, which is higher than its 3-year historical average of 0.4x and that of Hana Financial Group, which is also trading at 0.4x.

KB Financial Group is pretty much universally liked by 23 analysts, with 22 having ‘Buy’ ratings and just one having a ‘Hold’ rating for an average target price of KRW113,260.9, implying 45% upside potential from the current price. Analysts estimate net profit CAGR of 7% over FY 24-27, reaching KRW6,227bn with margins of 33.9% in FY27, with EPS expected to increase to KRW18,002 in FY 27 from KRW12,880 in FY 24.

Overall, the company appears to be set to post growth over the long term, supported by positive fundamentals, strong balance sheet position, and growth in loan portfolio. In addition, the expansion of the Non-Bank segment augurs well in the long run towards providing stable revenue streams. However, KB Financial Group is prone to a few risks including maintaining enough capital adequacy ratio, credit risk, liquidity risk and risk of regulatory intervention.