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[Alpha Biz=(Chicago) Reporter Paul Lee] KB Financial Group has decided to immediately purchase and retire treasury stocks worth 300 billion won. The insolvency of the Bank of Bukopin in Indonesia is larger than expected. The background of more than KRW 1 trillion in loan-loss reserves is also the reason for Bukopin Bank's insolvency.
Seo Young-ho, vice president of KB Financial Group, said in an earnings announcement conference call on the 7th, "We took it over because we knew it was an insolvent bank and expected a turnaround, but the insolvency exceeded expectations due to the continued new coronavirus infection (COVID-19)," adding, "We have invested 87 billion won so far and plan to increase an additional 630 billion won in April."
Earlier, Kookmin Bank bought a 22% stake in Bukopin Bank to enter the New Southern Country in 2018 and became the second-largest shareholder. Since then, it has become the largest shareholder (67% stake) in 2020 through two paid-in capital increase. At the end of September last year, KB Bukofin Bank's cumulative loss amounted to 150.469 billion won. Compared to the same period last year, it increased by 117.984 billion won.
KB Financial Group expects KB Bukopin Bank to turn into a surplus in 2025. It is expected to contribute to the Return on Equity (ROE) in 2026. This is two to three years later than KB Financial Group initially expected.
KB Financial Group explained that it could have posted a net profit of 4.9 trillion won without preemptive provisions for Bukopin Bank. However, KB Financial Group expected that the preemptive provisions and the profits of other overseas subsidiaries such as Cambodia Prasak would offset the losses of Bukopin Bank.
Meanwhile, Kookmin Bank predicted that it is difficult to expect net interest margin (NIM) improvement this year. Kim Jae-kwan, vice president of Kookmin Bank, said, "It is hard to expect a significant improvement in NIM as key deposits continue to decline and market interest rates are falling."
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