KB Financial Group, Inc. (NYSE:KB) Q1 2020 Earnings Conference Call - Final Transcript

Apr 23, 2020 • 03:00 am ET

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KB Financial Group, Inc. (NYSE:KB) Q1 2020 Earnings Conference Call - Final Transcript

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Presentation
Operator
Peter Kwon

Greetings. I am Peter Kwon, the Head of IR at KBFG. We will now begin the 2020 Q1 Business Results Presentation. I would like to express my deepest gratitude to everyone for participating in our call.

We have here with us our Group CFO and Deputy President, Kim Ki-Hwan as well as other members from our Group management. We will first hear the 2020 Q1 major financial highlights from our CFO and Deputy President, Kim Ki-Hwan and then have a Q&A session.

I would like to invite our Deputy President to walk us through the 2020 Q1 major financial highlights.

Executive
Ki Hwan Kim

Good afternoon. I am Kim Ki-Hwan, CFO of KB Financial Group. Thank you for joining KBFG's presentation on Q1 2020 business results. Before moving on to the earnings, let me briefly present on our operational backdrop. In Q1, due to COVID-19 pandemic, global production and consumption slowed, leading to a rapid slugging of global real economy. Investment assets contracted as there was move towards safe assets and liquidity as global equity markets triggered off multiple number of circuit breakers, heightening global financial market uncertainties as ever before.

Korean economy also saw great contractions in consumption, slowing of capex investment and exports as signs of economic depression surfaced. In line with the policy stance to respond to such shock, BOK swiftly moved to cut policy rates by 50 basis points last month. Under such trying business environment, bank's Q1 loans in won increased 4.2% year-to-date, attesting to solid asset growth. Net fee and commission income also continued to expand as KBFG manages to sustain its earnings capacity. However, regrettably, COVID-19 pandemic has triggered index declines, rise in exchange rate and credit risk spread, which generated other operating losses with Q1 results reporting somewhat of an underperformance. We believe such a black swan event like the COVID can happen anytime yet again in the future. And so we are determined to build on strong resilience and fundamentals that can help us ride over any crisis that may arise. To this end, based on our unmatched base of 35 million customers, we will enhance core competitiveness of each of our subsidiaries and further bolster both the non-banking and the global business. Although financial business environment is at its worst due to the unforeseen impact of COVID-19, KBFG will leverage this opportunity to solidify its core fundamentals so as to leap forward as a true leading financial group.

Now, I will move on to Q1 2020 financial highlights. KBFG's Q1 2020 net profit was KRW729.5 billion. In the absence of ERP and other seasonality factors, interest income and fee and commission income growth drove 36.4% Q-on-Q growth. However, there was a 13.7% year-on-year decline, a sub-normal performance driven by steepening volatility of the financial market in the first quarter, which led to other operating losses. Aside from this factor, overall earnings capacity of the Group continues to be robust.

I will now elaborate on each line item in more detail. Group's Q1 net interest income