KB Bank, the Indonesian subsidiary of KB Kookmin Bank (formerly Bukopin Bank), is showing improvement in its profitability. Attention is focused on whether KB Bank, which is a critical concern for both the bank and its holding company, KB Financial Group, will succeed in turning a profit for the first time in seven years.
According to the financial sector on the 24th, KB Bank's interest revenue last year was 98.9 billion won, marking a 40.7% increase compared to 70.3 billion won in 2023. The net interest margin (NIM), the ratio of interest revenue to assets, also rose by 0.54 percentage points, from 0.78% to 1.32% during the same period.
However, the accumulation of loan loss provisions (money set aside for expected bad debts) has increased, widening the loss margin. Since building loan loss provisions is treated as an expense, profits are reduced by that amount. KB Bank's net loss last year was 241 billion won, representing an increase of 67.7 billion won from the previous year's loss of 173.3 billion won.
The rapid cleanup of non-performing loans that had hindered performance in the past has lowered the ratio of non-performing loans from 39.77% in 2023 to 23.10% last year. The annual new loan handling amount increased by 20% during the same period, from 9 trillion rupiah (about 800.1 billion won) to 10.78 trillion rupiah (958.3 billion won). A representative from KB Kookmin Bank noted, "The burden of additional loan loss provisions has been significantly reduced due to the continuous cleaning up of non-performing loans," adding, "We plan to manage the situation to achieve a profit this year through increasing settlement loans and strengthening profitability."
KB Kookmin Bank is in a situation where it must achieve KB Bank's profit this year. This is because both financial authorities and politicians are concerned about the investment and operational deficiencies at KB Bank. During the National Assembly's audit in October last year, it was criticized that KB Kookmin Bank invested 3.1 trillion won to acquire KB Bank but incurred a loss of 1.5 trillion won up to the first half of last year, leading to allegations of 'national wealth outflow.' Financial Supervisory Service Chairman Lee Bok-hyun went to Indonesia last November to discuss the normalization of management and other related matters with local financial authorities.
The normalization of KB Bank is also a top priority task identified by Yang Jong-hee, chairman of KB Financial Group, upon taking office. During his nomination as chairman, Yang stated, "I will look into the normalization issue of Bukopin. Please watch over Bukopin Bank with affection." Yang appointed Lee Jaegun, former president of KB Kookmin Bank, as the head of the group's global institutional sector this year, mandating the normalization of KB Bank. Yang's hiring of the former president is interpreted as a strong commitment to improving KB Bank's performance.
KB Kookmin Bank believes that the introduction of the next-generation banking system (NGBS) in the second quarter will give momentum to KB Bank's operations. This banking system, which the bank has invested over four years in developing, is characterized by automating existing business processes that relied on manual input. It aims to reduce processing times for tasks such as customer registration, account opening, and loan examinations, thereby strengthening operations by focusing on customer service and marketing.