Kookmin FG (KBFG) has grown steadily through the acquisitions of non-bank companies in Korea and small banks outside Korea. Its banking subsidiary Kookmin Bank operates the largest branch network in Korea, with a particularly strong presence in the retail market. This makes it a systemically important bank with strong potential government support if needed.

The group has a good track record and its large mass market franchise gives it a strong customer base. It has a well diversified business. It had the highest CET1 ratio amongst peers but is now broadly flat to Hana FG. Its FY22 operating performance was the weakest amongst four Korean FGs, due to significant pre-emptive provisions set aside for its Indonesian subsidiary.

As one of the “Big Four” financial groups in Korea, we believe that KBFG would very likely receive governmental support if needed.

Credit costs are rising from very low levels as expected, but normalized credit costs (excluding additional provisions) are still stable.

NIM growth challenge came in earlier than expected with 4Q NIM only up 1 bp QoQ, as rising yields were offset by increased finance costs and some amount of moral suasion by the government to not pass on rate increases / reduce mortgage rates.

KBFG is expanding by business line and overseas with a focus on Indonesia and Cambodia – markets with more favourable demographics, growth potential and profit margins than Korea, but also more risk. The profit plan of the Indonesian investment has been slower than expected and significant pre-emptive provisions were set aside in 4Q22 for it.