Sangsangin Investment & Securities said on the 24th that KB Financial posted a first-quarter "earnings surprise," as profitability in the securities institutional sector was added to the bank's stable profit base. It kept a Buy rating and raised its target price to 190,000 won from 168,000 won. The previous trading day's closing price of KB Financial was 158,000 won.
KB Financial said the previous day that its first-quarter net profit was 1.8924 trillion won, the highest ever. That was up 11.5% from a year earlier.
Kim Hyun-su, an analyst at Sangsangin Investment & Securities, said, "The key to this performance is that record-high noninterest income was added on top of the bank's stable profit base."
KB Financial's first-quarter noninterest income was 1.6509 trillion won, up 27.8% from a year earlier, and net fee income also increased 45.5% to 1.3593 trillion won, expanding the contribution of nonbank income to 43%.
In particular, it analyzed that the strong performance of KB Securities contributed to the results. In the first quarter, KB Securities' controlling interest net income was 347.8 billion won, up 93.3% from a year earlier, and total operating income rose 75% to 849.6 billion won.
Total assets of retail customers were 239.6 trillion won, up 55.9% from a year earlier, and entrusted assets increased 87.7%, which it said translated liquidity inflows into results.
Kim said, "In a liquidity-driven market like now, the larger the capital base of a major securities firm, the faster it can expand margin lending, ultralarge investment banking (IB) products, and retail financial product assets under management (AUM) for individual customers, which is advantageous for both fee income and interest income."
Bank profitability also remains solid. First-quarter net interest income was 3.3 trillion won, up 2.2% from a year earlier, and the bank's net interest margin (NIM) rose 2 basis points from the previous quarter to 1.77%.
According to Sangsangin Investment & Securities, won-denominated loans at KB Bank grew only 0.4% from the end of the previous year, but while household loans were managed at -0.4%, corporate loans increased 1.2%, continuing growth centered on corporate loans. Group selling, general and administrative expenses rose 9.9% from a year earlier due to the education tax rate and performance-linked personnel expenses, but it assessed that the cost-to-income ratio (CIR) is being managed stably at 35.4% thanks to overall revenue growth.
It also said credit cost was 493.2 billion won, and even with the recognition of an additional provision related to equity-linked securities (ELS) of about 98 billion won, the credit cost ratio (CCR) was 40 basis points, indicating overall risk management remains sound.