Kbank's net profit for the first half of this year fell by nearly 30 percent from a year earlier. However, excluding gains from loan receivables sales reflected in last year's results, net profit rose by more than 77 percent. The increase came as loans to individual business owners (SOHO) more than doubled in a year, improving interest income and net interest margin (NIM). While headline net profit fell, assessments say recurring earning power strengthened after stripping out one-off factors.

Kbank's earnings presentation for the second quarter of 2026 on July 30 showed net profit for the first half at 60.1 billion won, down 28.7 percent from 84.2 billion won a year earlier. However, net profit calculated by simply subtracting pre-tax gains from loan receivables sales for each period rose 77.3 percent to 33.1 billion won from 18.6 billion won in the first half of last year.

The year-on-year decline in net profit is seen as widening as gains from loan receivables sales recorded last year fell this year. Excluding one-off gains, higher interest income from expanded SOHO lending supported results.

Second-quarter net profit down 60.6 percent... base effect in non-interest income

Net profit also fell on a quarterly basis. Kbank's second-quarter net profit was 26.9 billion won, down 60.6 percent from 68.2 billion won a year earlier. It was also down 19.1 percent from 33.2 billion won in the previous quarter. Operating profit was 27.0 billion won, down 61.4 percent from a year earlier and 16.8 percent from the previous quarter.

The decline in net profit was affected by weaker non-interest income. Second-quarter non-interest profit was 9.1 billion won, down 84.8 percent from 59.8 billion won a year earlier. A fall in other non-interest income to 11.4 billion won from 55.0 billion won had a large impact.

Net interest profit, meanwhile, rose 23.8 percent to 127.8 billion won from 103.3 billion won in the second quarter of last year. Interest income increased 7.9 percent while interest expense fell 2.7 percent. Profitability in the interest segment improved as loan assets expanded and funding costs were managed at the same time.

Cost burdens increased. Second-quarter impairment losses on credit losses rose 24.4 percent from a year earlier to 51.4 billion won, and general and administrative expenses increased 12.7 percent to 58.6 billion won. Kbank explained that selling, general and administrative expenses rose as it expanded investment in SOHO and technology.

For the first half as a whole, interest income rose by 41.3 billion won from a year earlier.

Fee income also rose by 1.5 billion won as performance improved for check cards, linked loans and affiliated credit cards. Other operating profit fell by 13.0 billion won due to higher contributions to guarantee funds linked to expanded SOHO lending. Credit loss expense and selling, general and administrative expenses rose by 6.2 billion won and 10.9 billion won, respectively.

SOHO lending doubles in a year... drives interest income growth

SOHO loans were the key driver of results. As of end-June, Kbank's total loan balance stood at 1,978.5 billion won, up 5.5 percent from the previous quarter. It was up about 14 percent from 1,737.4 billion won in the second quarter of last year.

Of that, SOHO loans were 330.1 billion won, up 108.7 percent from 158.2 billion won a year earlier. They increased by about 100.0 billion won in net terms in the first half alone. Net quarterly increases in SOHO loans expanded to 54.8 billion won in the second quarter from 44.2 billion won in the first quarter, after 26.9 billion won in the second quarter of last year. Net increases in SOHO loans have grown for 8 consecutive quarters.

Despite rapid growth in SOHO lending, related asset quality indicators improved. The SOHO delinquency rate fell to 0.51 percent in the second quarter from 0.93 percent a year earlier. The share of secured and guaranteed loans rose to 45.0 percent from 30.5 percent over the same period.

The bank's overall delinquency rate was 0.60 percent, down 0.01 percentage point from 0.61 percent in the previous quarter. The ratio of substandard or below loans was 0.59 percent, keeping a similar level to 0.58 percent in the previous quarter. The cumulative credit loss expense ratio for the first half was 1.08 percent, improving by 0.05 percentage point from a year earlier and 0.01 percentage point from the previous quarter. The allowance for loan losses stood at 303.0 billion won, and the coverage ratio against substandard or below loans was 261.3 percent.

Profitability indicators also rose. The cumulative NIM for the first half was 1.59 percent, up 0.21 percentage point from 1.38 percent a year earlier. NIM excluding digital asset deposits was 1.96 percent. However, the cost-to-income ratio (CIR), a cost efficiency indicator, rose to 41.8 percent this year from 36.8 percent in the second quarter of last year. This is seen as reflecting investment in SOHO and technology and higher general and administrative expenses.

Customers total 16.45 million... reduces reliance on digital asset deposits

Kbank also expanded its customer base. As of end-June, Kbank had 16.45 million customers, up 923,000 from 15.53 million at end-December last year. Compared with 11.47 million in the second quarter of 2024, it increased by about 5 million over two years. Customer penetration against the resident registration population rose to 32 percent from 23 percent over the period.

Total deposits stood at 2,663.7 billion won, down 6.3 percent from end-December last year. That was due to a fall in digital asset deposits to 373.5 billion won from 583.3 billion won at end-December. The share of digital asset deposits in total deposits also fell to 14.0 percent in the second quarter from 24.6 percent in the third quarter of last year.

Time deposits rose to 820.3 billion won from 702.2 billion won in the previous quarter. The cumulative funding cost rate was 2.25 percent, keeping a similar level to 2.23 percent in the previous quarter. This is seen as managing the funding base by maintaining its own deposits and increasing the share of time deposits despite fluctuations in digital asset deposits.

Capital capacity remained high. The preliminary Bank for International Settlements (BIS) total capital ratio at end-second quarter was 20.02 percent, down 1.45 percentage points from the previous quarter but up 5.02 percentage points from a year earlier. The common equity Tier 1 ratio was 18.08 percent, up 5.20 percentage points from a year earlier.

Kbank is expanding digital asset business as a new growth axis along with SOHO lending. It is widening the scope of digital asset trading support with Upbit from individuals to corporate and institutional customers, and is verifying stablecoin payment and settlement infrastructure with Lambda256 and an operating system to convert USDC payment proceeds into won. Overseas, it is reviewing remittance and settlement models using stablecoins through the Pangea project and a partnership with HashKey, among others.

Kbank's task going forward is to maintain the pace of SOHO lending growth while controlling rising credit loss expense and selling, general and administrative expenses. For the expansion of interest income to lead to an increase in net profit even after the base effect from sales gains disappears, SOHO loan asset quality and funding cost management will need to support it.

A Kbank official said, "We further strengthened our earnings base based on expanding our customer base and qualitative and quantitative growth in loans to individual business owners." The official added, "We will solidify a sustainable growth foundation by securing a leading position in future finance areas such as expansion of the individual business owner market, digital assets and stablecoins."