KB Financial to use excess capital for share buybacks, dividends
Bo-Hyung Kim
Oct 25, 2024 (Gmt+09:00)
KB Financial Group headquarters in Seoul (File photo) KB Financial Group Inc., South Korea’s largest financial holding group, is set to use its excess capital for share buybacks and dividends next year as measures to boost shareholder returns and corporate value.
KB Financial on Thursday also unveiled a plan to increase its spending on share buybacks and dividends to 2 trillion won ($1.5 billion) this year, with its net profit expected to hit a record high in 2024.
“We aim to boost profitability, soundness and shareholder returns to ramp up corporate value,” said KB Financial Group Chairman & CEO Yang Jong Hee.
The plans lifted its stock price to a record high on Friday morning. KB Financial's stock rose as much as 11.5% to 103,900 won on Korea's main stock exchange, while the benchmark Kospi gained up to 1.2%.
TO USE EXCESS CAPITAL
KB Financial has decided to use its capital in excess of 13% of its Common Equity Tier 1 (CET1) ratio at the end of this year for share buybacks and dividends in the first half of 2025. The group plans to spend its capital topping 13.5% of the CET1 ratio to repurchase the group’s own stocks and retire them in the second half.
The group’s CET1 ratio stood at 13.85% as of the end of the third quarter.
CET1 is a component of Tier 1 capital mainly comprised of common stock held by a bank or other financial institution. Banks are expected to meet minimum CET1 ratio requirements for their risk-weighted assets (RWAs) as outlined by financial regulators.
The CET1 ratio compares a bank’s capital against its RWAs to determine its ability to withstand financial distress.
KB Financial plans to manage the growth of its RWAs, below an average increase of 6.1% over the past 10 years, to achieve a CET1 ratio in the mid-13% range. The parent of the country’s largest lender KB Kookmin Bank also aims to raise its annual average earnings per share (EPS) growth to 10% while buying back and retiring more than 10 million shares a year.
The group decided to repurchase 100 billion won of its own stocks for cancellations and raise dividends to 795 won per share in the third quarter, from 791 won for the second. Its plans are expected to increase its spending on shareholder returns to more than 2 trillion won, including 1.2 trillion won for dividends and 820 billion won for share buybacks.
KB Kookmin Bank’s trading floor in Seoul (File photo by News1) RECORD EARNINGS
KB Financial reported a net profit of 1.6 trillion won in the third quarter, up 17.9% from a year earlier, thanks to higher interest income amid strong lending growth and healthy earnings of non-banking units. Its profit exceeded the consensus estimate of 1.5 trillion won.
The group is on track to become the country’s first financial holding company with an annual net profit of more than 5 trillion won as it has earned 4.4 trillion won in the first three quarters of this year.
Its third quarter net interest income rose by 2.5% to 3.2 trillion won on-year, boosting its combined net interest income to 9.5 trillion won in the January-September period.
Net fee and commission income grew 4.6% to 942.7 billion won from July to September, led by strong earnings growth by its credit card issuer and investment banking unit.
KB Kookmin Bank’s net profit increased 11.5% to 1.1 trillion won in the third quarter, while its affiliates such as KB Kookmin Card Co., KB Securities Co. and KB Insurance also reported healthy profit growth.