KB Financial Group posted net profit in the 3.8 trillion won range for the first half, helped by an increase in fee income and other factors. Profit contribution from non-bank businesses rose to 44%, and it expected annual shareholder returns to reach 3.7 trillion won.

KB Financial said on Wednesday its first-half net profit rose 13.1% from a year earlier to 3.88 trillion won. Second-quarter net profit was 1.99 trillion won.

First-half return on equity was 14.09%, up 1.06 percentage points from a year earlier. Return on assets was 0.95%, and the cost-to-income ratio was 36.2%.

First-half net interest income rose 1.7% from a year earlier to 6.48 trillion won. Lower funding costs and growth in bank loan assets supported interest income.

Second-quarter net interest income fell 5.7% from the previous quarter to 3.14 trillion won. Second-quarter group net interest margin was 1.94% and bank NIM was 1.74%, down 0.05 percentage points and 0.03 percentage points, respectively, from the previous quarter. Funding costs increased as competition in corporate lending intensified and the group secured funds in advance to prepare for a rise in market interest rates in the second half.

Net fee income surged 50.6% from a year earlier to 2.96 trillion won. Fee revenue expanded at capital market-related affiliates such as securities and asset management, and the bank's wealth management fee income also increased. Second-quarter net fee income rose 17.8% from the previous quarter to 1.60 trillion won, the highest on a quarterly basis.

KB Securities led the rise in fee income. KB Securities' first-half net profit rose 135% from a year earlier to 796.3 billion won. Revenue increased evenly across key business areas such as wealth management and sales and trading, based on a boom in capital markets and capital strengthening.

As a result, the share of non-bank affiliates in group net profit rose to 44%. KB Securities' contribution to group net profit alone expanded to about 21%.

Among major affiliates, KB Kookmin Bank's first-half net profit rose 1.7% from a year earlier to 2.23 trillion won. This reflected the disappearance of base effects from a one-off large provision build last year and an increase in wealth management fee income.

KB Kookmin Card posted net profit of 218.9 billion won, up 20.7%. KB Insurance, however, saw net profit fall 14.2% to 478.8 billion won due to rising loss ratios in auto and long-term insurance. KB Life Insurance's net profit also fell 20.4% to 150.6 billion won due to a contraction in the pension market and rising loss ratios and cancellation rates for some products.

The bank delinquency rate was 0.27%, and the non-performing loan ratio was 0.28%. The NPL coverage ratio was 197.3%.

The group's first-half credit loss provision charge was 1.01 trillion won, and the credit cost ratio was 0.39%. The CCR improved by 0.15 percentage points from a year earlier due to provisions built preemptively last year and conservative risk management.

As of end-June, the group's NPL ratio was 0.67% and the NPL coverage ratio was 135.4%. The common equity tier 1 ratio was 13.74% and the BIS capital adequacy ratio was provisionally tallied at 15.91%.

KB Financial's board decided to buy back and cancel 700 billion won worth of treasury shares in the second half and pay a quarterly cash dividend of 1,155 won per share. Total shareholder returns expected this year are 3.7 trillion won.

Na Sang-rok (나상록), KB Financial's chief financial officer, said, "This year's shareholder returns are expected to total about 3.7 trillion won." He said the remaining surplus capital, excluding the 700 billion won allocated to share buybacks and cancellations, will be used as funding for additional shareholder returns in the second half after comprehensively considering this year's profit 규모 and trends in the price-to-book ratio and dividend yield.