KB trounces Shinhan in Q1 profits

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KB trounces Shinhan in Q1 profits

KB Financial Group narrowly beat the No. 1 Shinhan Financial Group in terms of net profit in the first quarter for the first time in six years.

This an achievement for KB, whose net profit was merely half of Shinhan’s last year.

Since Chairman Yoon Jong-kyoo took office in November, KB made efforts to catch up with the market leader. Yoon ordered executives and employees to “learn from Shinhan” and he even appointed a former Shinhan president as an outside director.

The group said on Tuesday that it earned 605 billion won in net profit for the first three months of this year, up 68.4 percent from the same quarter last year. Compared to the previous quarter, the net profit surged 198 percent.

The group’s total assets stood at 313 trillion won, up 9.4 trillion won from the end of 2014. It is the fourth largest financial group by assets in the country.

The group’s flagship Kookmin Bank saw a 95.2 percent increase on-year in Q1 net profit, posting 476.2 billion won. Its Bank for International Settlements ratio logged 16.37 percent, the highest in the country. The default rate, which indicates the banks’ fiscal soundness, stood at 0.61 percent as of March, down 0.43 percentage point from the same period last year.

While Shinhan saw a dent in its Q1 net profit due to increased allowances for bad debt incurred in the Keangnam Enterprises scandal -- Shinhan Bank is the main creditor of the mid-size construction firm owned by former lawmaker Sung Wan-jong who committed suicide after claiming to have paid off many politicians -- KB’s net profit rose thanks to decreased bad debt allowances and corporate tax refunds from the tax authority. KB’s bad debt allowances were 100 billion won, the smallest since 2008, indicating that the group is managing its bad debt well.

Shinhan Financial Group, which has retained the top position in the financial industry, posted a 598 billion won net profit in the first quarter.

“As the group’s governance is stabilized, sales forces have recovered leading to the net profit growth,” the group said in a statement. “Net earnings from commission fees for wealth management services rose about 22 percent, contributing to the growth.”

KB had a tough year in 2014 as a boardroom feud affected operations of the whole group. Former Group Chairman Lim Young-rok and Bank CEO Lee Kun-ho had conflicts over changing the bank’s main computer system, which led to an ouster of both. Yoon, who spent most of his career at KB, was nominated to take over as both chairman and CEO in November after the feud was concluded.

KB’s competition with Shinhan is clearly demonstrated in its sales strategy, too. The group said on Wednesday it opened its first combined bank and securities services branch in Apgujeong, southern Seoul. Employees of KB Kookmin Bank and KB Investment & Securities will be assigned to the branch to provide customers with both banking and securities investment services.

Shinhan opened a combined corporate banking branch in Pangyo, Gyeonggi on Tuesday.

“KB’s net profit growth was higher than the market expected,” said Choi Jeong-wook, an analyst at Daishin Securities. “Despite low net interest margins, the group’s credit card and trust investment units saw increased profits from commissions, helping improve its overall fiscal soundness.”

BY SONG SU-HYUN [song.suhyun@joongang.co.kr]
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