EX-99.1 2 d494866dex991.htm EX-99.1 EX-99.1

Exhibit 99.1

KB Financial Group Inc. and Subsidiaries

Consolidated Interim Financial Statements

September 30, 2017 and 2016


KB Financial Group Inc. and Subsidiaries

Index

September 30, 2017 and 2016

 

 

     Page(s)  

Report on Review of Interim Financial statements

     1~2  

Consolidated Interim Financial Statements

  

Consolidated Interim Statements of Financial Position

     3  

Consolidated Interim Statements of Comprehensive Income

     4  

Consolidated Interim Statements of Changes in Equity

     5  

Consolidated Interim Statements of Cash Flows

     6  

Notes to the Consolidated Interim Financial Statements

     7~147  

 


Report on Review of Interim Financial Statements

(English Translation of a Report Originally Issued in Korean)

To the Shareholders and Board of Directors of

KB Financial Group Inc.

Reviewed Financial Statements

We have reviewed the accompanying consolidated interim financial statements of KB Financial Group Inc. and its subsidiaries (collectively referred to as the “Group”). These financial statements consist of the consolidated interim statement of financial position of the Group as of September 30, 2017, and the related consolidated interim statements of comprehensive income for the three-month and nine-month periods ended September 30, 2017 and 2016, and consolidated interim statements of changes in equity and cash flows for the nine-month periods ended September 30, 2017 and 2016, and a summary of significant accounting policies and other explanatory notes, expressed in Korean won.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated interim financial statements in accordance with International Financial Reporting Standards as adopted by the Republic of Korea (Korean IFRS) 1034 Interim Financial Reporting, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to issue a report on these consolidated interim financial statements based on our review.

We conducted our review in accordance with quarterly and semi-annual review standards established by the Securities and Futures Commission of the Republic of Korea. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Korean Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.


Conclusion

Based on our review, nothing has come to our attention that causes us to believe the accompanying consolidated interim financial statements are not presented fairly, in all material respects, in accordance with Korean IFRS 1034 Interim Financial Reporting.

Other Matters

We have audited the consolidated statement of financial position of the Group as of December 31, 2016, and the related consolidated statements of comprehensive income, changes in equity and cash flows for the year then ended, in accordance with Korean Standards on Auditing. We expressed an unqualified opinion on those financial statements, not presented herein, in our audit report dated March 14, 2017. The statement of financial position as of December 31, 2016, presented herein for comparative purposes, is consistent, in all material respects, with the above audited statement of financial position as of December 31, 2016.

Review standards and their application in practice vary among countries. The procedures and practices used in the Republic of Korea to review such financial statements may differ from those generally accepted and applied in other countries.

Samil PricewaterhouseCoopers

Seoul, Korea

November 14, 2017

 

This report is effective as of November 14, 2017, the review report date. Certain subsequent events or circumstances, which may occur between the review report date and the time of reading this report, could have a material impact on the accompanying consolidated interim financial statements and notes thereto. Accordingly, the readers of the review report should understand that there is a possibility that the above review report may have to be revised to reflect the impact of such subsequent events or circumstances, if any.

 

2


KB Financial Group Inc. and Subsidiaries    

Consolidated Interim Statements of Financial Position    

September 30, 2017 and December 31, 2016    

 

 

(in millions of Korean won)    Notes    September 30, 2017
(Unaudited)
    December 31, 2016  

Assets

       

Cash and due from financial institutions

   4,6,7,38    W 22,974,483     W 17,884,863  

Financial assets at fair value through profit or loss

   4,6,11      31,585,815       27,858,364  

Derivative financial assets

   4,6,8      2,171,087       3,381,935  

Loans

   4,6,9,10      285,947,141       265,486,134  

Financial investments

   4,6,11      63,417,761       45,147,797  

Investments in associates

   12      334,231       1,770,673  

Property and equipment

   13      4,108,486       3,627,268  

Investment property

   13      946,349       755,011  

Intangible assets

   14      2,973,323       652,316  

Current income tax assets

        17,880       65,738  

Deferred income tax assets

   15,33      4,619       133,624  

Assets held for sale

   16      173,860       52,148  

Assets of disposal group classified as held for sale

   17      2,109,121       —    

Other assets

   4,6,18      16,044,319       8,857,785  
     

 

 

   

 

 

 

Total assets

      W   432,808,475     W   375,673,656  
     

 

 

   

 

 

 

Liabilities

       

Financial liabilities at fair value through profit or loss

   4,6,19    W   13,497,934     W 12,122,836  

Derivative financial liabilities

   4,6,8      2,276,508       3,807,128  

Deposits

   4,6,20      251,404,194       239,729,695  

Debts

   4,6,21      29,606,915       26,251,486  

Debentures

   4,6,22      42,702,671       34,992,057  

Provisions

   23      587,269       537,717  

Net defined benefit liabilities

   24      368,839       96,299  

Current income tax liabilities

        276,345       441,812  

Deferred income tax liabilities

   15,33      572,018       103,482  

Insurance liabilities

   37      31,374,092       7,290,844  

Liabilities of disposal group classified as held for sale

   17      1,831,674       —    

Other liabilities

   4,6,25      24,582,814       19,038,897  
     

 

 

   

 

 

 

Total liabilities

        399,081,273       344,412,253  
     

 

 

   

 

 

 

Equity

       

Share capital

   26      2,090,558       2,090,558  

Capital surplus

   26      17,121,867       16,994,902  

Accumulated other comprehensive income

   26,35      653,204       405,329  

Accumulated other comprehensive income related to disposal group held for sale

   17      (1,124     —    

Retained earnings

   26      14,492,438       12,229,228  

Treasury shares

   26      (636,201     (721,973
     

 

 

   

 

 

 

Equity attributable to shareholders of the Parent Company

        33,720,742       30,998,044  

Non-controlling interests

        6,460       263,359  
     

 

 

   

 

 

 

Total equity

        33,727,202       31,261,403  
     

 

 

   

 

 

 

Total liabilities and equity

      W 432,808,475     W 375,673,656  
     

 

 

   

 

 

 

The accompanying notes are an integral part of these interim consolidated financial statements.

 

3


KB Financial Group Inc. and Subsidiaries    

Consolidated Interim Statements of Comprehensive Income    

Three-Month and Nine-Month Periods Ended September 30, 2017 and 2016    

 

 

          Period Ended September 30  
(In millions of Korean won, except per share amounts)    Notes    2017
(Unauditied)
    2016
(Unauditied)
 
          Three
months
    Nine
months
    Three
months
    Nine
months
 

Interest income

      W 2,939,921     W 8,378,734     W 2,481,557     W 7,412,465  

Interest expense

        (918,471     (2,691,762     (880,796     (2,760,779
     

 

 

   

 

 

   

 

 

   

 

 

 

Net interest income

   5,27      2,021,450       5,686,972       1,600,761       4,651,686  
     

 

 

   

 

 

   

 

 

   

 

 

 

Fee and commission income

        999,403       2,930,452       777,055       2,256,596  

Fee and commission expense

        (508,075     (1,408,276     (401,454     (1,148,556
     

 

 

   

 

 

   

 

 

   

 

 

 

Net fee and commission income

   5,28      491,328       1,522,176       375,601       1,108,040  
     

 

 

   

 

 

   

 

 

   

 

 

 

Insurance income

        2,955,149       6,130,566       270,940       930,629  

Insurance expense

        (2,762,360     (5,730,619     (301,670     (1,019,037
     

 

 

   

 

 

   

 

 

   

 

 

 

Net insurance income(expense)

   5,37      192,789       399,947       (30,730     (88,408
     

 

 

   

 

 

   

 

 

   

 

 

 

Net gains(losses) on financial assets/liabilities
at fair value through profit or loss

   5,29      71,006       426,339       (1,963     117,890  
     

 

 

   

 

 

   

 

 

   

 

 

 

Net other operating expenses

   5,30      (131,936     (590,520     (33,114     (149,107
     

 

 

   

 

 

   

 

 

   

 

 

 

General and administrative expenses

   5,31      (1,307,043     (3,796,635     (994,893     (3,117,994
     

 

 

   

 

 

   

 

 

   

 

 

 

Operating profit before provision for credit losses

   5      1,337,594       3,648,279       915,662       2,522,107  

Provision for credit losses

   5,10,18,23      (172,190     (479,888     (194,227     (507,727
     

 

 

   

 

 

   

 

 

   

 

 

 

Net operating income

   5      1,165,404       3,168,391       721,435       2,014,380  
     

 

 

   

 

 

   

 

 

   

 

 

 

Share of profit of associates

   5,12      19,004       78,119       32,974       193,307  

Net other non-operating income

   5,32      15,115       165,282       7,448       24,330  
     

 

 

   

 

 

   

 

 

   

 

 

 

Net non-operating income

        34,119       243,401       40,422       217,637  
     

 

 

   

 

 

   

 

 

   

 

 

 

Profit before income tax

   5      1,199,523       3,411,792       761,857       2,232,017  

Income tax expense

   5,33      (302,121     (622,052     (184,440     (504,983
     

 

 

   

 

 

   

 

 

   

 

 

 

Profit for the period

   5      897,402       2,789,740       577,417       1,727,034  
     

 

 

   

 

 

   

 

 

   

 

 

 

Items that will not be reclassified to profit or loss:

           

Remeasurements of net defined benefit liabilities

   24      (2,835     (9,962     (1,594     (6,645

Share of other comprehensive income of associates

        —         (131     (297     (98
     

 

 

   

 

 

   

 

 

   

 

 

 
        (2,835     (10,093     (1,891     (6,743
     

 

 

   

 

 

   

 

 

   

 

 

 

Items that may be reclassified subsequently to profit or loss:

           

Exchange differences on translating foreign operations

        (1,249     (33,184     (43,142     (51,445

Valuation gains(losses) on financial investments

        (32,869     196,580       (6,251     136,795  

Shares of other comprehensive income of associates

        (1,145     101,724       (8,328     79,670  

Cash flow hedges

        2,952       5,539       2,408       961  

Gains(losses) on hedges of a net investment in a foreign operation

        (4,304     423       8,555       7,217  

Other comprehensive income of separate account

        (6,611     (7,929     —         —    
     

 

 

   

 

 

   

 

 

   

 

 

 
        (43,226     263,153       (46,758     173,198  
     

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive income for the period, net of tax

        (46,061     253,060       (48,649     166,455  
     

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income for the period

      W 851,341     W 3,042,800     W 528,768     W 1,893,489  
     

 

 

   

 

 

   

 

 

   

 

 

 

Profit is attributable to:

           

Shareholders of the Parent Company

   5    W 897,504     W 2,757,686     W 564,446     W 1,689,813  

Non-controlling interests

   5      (102     32,054       12,971       37,221  
     

 

 

   

 

 

   

 

 

   

 

 

 
   5    W 897,402     W 2,789,740     W 577,417     W 1,727,034  
     

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income for the period is attributable to:

           

Shareholders of the Parent Company

      W 851,531     W 3,007,929     W 515,766     W 1,856,108  

Non-controlling interests

        (190     34,871       13,002       37,381  
     

 

 

   

 

 

   

 

 

   

 

 

 
      W 851,341     W 3,042,800     W 528,768     W 1,893,489  
     

 

 

   

 

 

   

 

 

   

 

 

 

Earnings per share

   36         

Basic earnings per share

      W 2,240     W 6,927     W 1,501     W 4,445  

Diluted earnings per share

        2,228       6,890       1,495       4,425  

The accompanying notes are an integral part of these interim consolidated financial statements.    

 

4


KB Financial Group Inc. and Subsidiaries

Consolidated Interim Statements of Changes in Equity

Nine-Month Periods Ended September 30, 2017 and 2016

 

 

    Equity attributable to shareholders of the Parent Company              
(in millions of Korean won)  

Share

Capital

   

Capital

Surplus

   

Accumulated

Other

Comprehensive

Income

   

Other
Comprehensive

Income of

Disposal group

Held for sale

   

Retained

Earnings

   

Treasury

Shares

   

Non-controlling

Interests

   

Total

Equity

 

Balance at January 1, 2016

  W   1,931,758     W   15,854,510     W   430,244     W   —       W   10,464,109     W   —       W   222,101     W   28,902,722  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income

               

Profit for the period

    —         —         —         —         1,689,813       —         37,221       1,727,034  

Remeasurements of net defined benefit liabilities

    —         —         (6,567     —         —         —         (78     (6,645

Exchange differences on translating foreign operations

    —         —         (51,445     —         —         —         —         (51,445

Valuation gains of value of financial investments

    —         —         136,762       —         —         —         33       136,795  

Shares of other comprehensive income of associates

    —         —         79,572       —         —         —         —         79,572  

Cash flow hedges

    —         —         756       —         —         —         205       961  

Gains on hedges of a net investment in a foreign operation

    —         —         7,217       —         —         —         —         7,217  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income

    —         —         166,295       —         1,689,813       —         37,381       1,893,489  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Transactions with shareholders

               

Dividends paid to shareholders of the Parent Company

    —         —         —         —         (378,625     —         (5,156     (383,781

Acquisition of treasury shares

    —         —         —         —         —         (476,076     —         (476,076

Others

    —         280       —         —         —         —         —         280  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total transactions with shareholders

    —         280       —         —         (378,625     (476,076     (5,156     (859,577
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at September 30, 2016 (Unaudited)

  W 1,931,758     W 15,854,790     W 596,539     W —       W 11,775,297     W (476,076   W 254,326     W 29,936,634  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at January 1, 2017

  W 2,090,558     W 16,994,902     W 405,329     W —       W 12,229,228     W (721,973   W 263,359     W 31,261,403  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income

               

Profit for the period

    —         —         —         —         2,757,686       —         32,054       2,789,740  

Remeasurements of net defined benefit liabilities

    —         —         (9,882     —         —         —         (80     (9,962

Exchange differences on translating foreign operations

    —         —         (33,312     —         —         —         128       (33,184

Valuation gains of value of financial investments

    —         —         193,640       —         —         —         2,940       196,580  

Shares of other comprehensive income of associates

    —         —         101,593       —         —         —         —         101,593  

Cash flow hedges

    —         —         5,635       —         —         —         (96     5,539  

Losses on hedges of a net investment in a foreign operation

    —         —         423       —         —         —         —         423  

Other comprehensive income of separate account

    —         —         (7,854     —         —         —         (75     (7,929

Transfer to other accounts

    —         —         (2,368     (1,124     3,492       —         —         —    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income

    —         —         247,875       (1,124     2,761,178       —         34,871       3,042,800  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Transactions with shareholders

               

Dividends paid to shareholders of the Parent Company

    —         —         —         —         (497,968     —         (5,156     (503,124

Acquisition of treasury shares

    —         —         —         —         —         (82,279     —         (82,279

Disposal of treasury shares

    —         87,212       —         —         —         168,051       —         255,263  

Changes in interest in subsidiaries

    —         41,352       —         —         —         —         (288,954     (247,602

Others

    —         (1,599)       —         —         —         —         2,340       741  
               

Total transactions with shareholders

    —         126,965       —         —         (497,968)       85,772       (291,770)       (577,001)  
               

Balance at September 30, 2017 (Unaudited)

  W 2,090,558     W 17,121,867     W 653,204     W (1,124   W 14,492,438     W (636,201   W 6,460     W 33,727,202  

The accompanying notes are an integral part of these interim consolidated financial statements.

 

5


KB Financial Group Inc. and Subsidiaries

Consolidated Interim Statements of Cash Flows

Nine-Month Periods Ended September 30, 2017 and 2016

 

 

          Nine-Month Period Ended September 30  
(in millions of Korean won)    Note    2017     2016  
          (Unaudited)     (Unaudited)  

Cash flows from operating activities

       

Profit for the period

      W 2,789,740     W 1,727,034  
     

 

 

   

 

 

 

Adjustment for non-cash items

       

Net loss(gain) on financial assets/liabilities at fair value through profit or loss

        94,090       (38,549

Net loss(gain) on derivative financial instruments for hedging purposes

        101,385       (54,356

Adjustment of fair value of derivative financial instruments

        (683     (1,156

Increase in Provision for credit loss

        479,888       507,727  

Net loss(gain) on financial investments

        60,722       (206,587

Share of profit of associates

        (78,119     (193,307

Depreciation and amortization expense

        380,049       192,905  

Other net losses on property and equipment/intangible assets

        12,513       4,400  

Share-based payments

        48,074       22,192  

Policy reserve appropriation

        1,191,392       305,288  

Post-employment benefits

        174,863       142,306  

Net interest expense

        302,054       309,106  

Loss on foreign currency translation

        (259,709     182,830  

Gains on bargain purchase

        (122,986     —    

Net other expense

        168,054       105,556  
     

 

 

   

 

 

 
        2,551,587       1,278,355  
     

 

 

   

 

 

 

Changes in operating assets and liabilities

       

Financial asset at fair value through profit or loss

        (2,911,811     (2,004,715

Derivative financial instruments

        (53,741     (1,499

Loans

        (16,884,957)       (13,248,060)  

Current income tax assets

        47,865       3,197  

Deferred income tax assets

        30,294       3,999  

Other assets

        (7,092,979     (1,595,277

Financial liabilities at fair value through profit or loss

        1,074,658       737,111  

Deposits

        13,645,523       10,160,329  

Deferred income tax liabilities

        157,721       (30,639

Other liabilities

        (100,045     5,105,906  
     

 

 

   

 

 

 
        (12,087,472     (869,648
     

 

 

   

 

 

 

Net cash inflow(outflow) from operating activities

        (6,746,145     2,135,741  
     

 

 

   

 

 

 

Cash flows from investing activities

       

Disposal of financial investments

        29,715,736       23,144,932  

Acquisition of financial investments

        (34,454,670     (25,112,894

Disposal of investments in associates

        133,874       43,948  

Acquisition of investments in associates

        (42,369     (1,363,719

Disposal of property and equipment

        21,086       656  

Acquisition of property and equipment

        (188,665     (181,607

Disposal of investment property

        2,871       —    

Acquisition of investment property

        (256     (1,085

Disposal of intangible assets

        5,641       5,622  

Acquisition of intangible assets

        (70,830     (68,386

Net cash flows from the change in subsidiaries

        (362,764     —    

Others

        181,517       (273,096)  

Net cash outflow from investing activities

        (5,058,829     (3,805,629
     

 

 

   

 

 

 

Cash flows from financing activities

       

Net cash flows from derivative financial instruments for hedging purposes

        37,182       48,866  

Net increase(decrease) in debts

        4,259,665       43,824  

Increase in debentures

        103,381,766       71,277,620  

Decrease in debentures

        (95,472,496     (69,297,414

Increase in other payables from trust accounts

        1,162,753       1,271,534  

Dividends paid to shareholders of the Parent Company

        (497,968)       (378,625)  

Acquisition of treasury shares

        (82,177)       (460,834)  

Disposal of treasury shares

        3,515       —    

Dividends paid to non-controlling interests

        (5,156     (5,156

Increase in non-controlling interests

        (163,660     —    

Others

        (22,781     (29,270
     

 

 

   

 

 

 

Net cash inflow(outflow) from financing activities

        12,600,643       2,470,545  
     

 

 

   

 

 

 

Effect of exchange rate changes on cash and cash equivalents

        (60,936     62,841  
     

 

 

   

 

 

 

Net increase(decrease) in cash and cash equivalents

        734,733       863,498  

Cash and cash equivalents at the beginning of the period

   38      7,414,836       7,457,919  

Cash and cash equivalents classified as disposal group held for sale

        31,704       —    

Cash and cash equivalents at the end of the period

   38    W 8,181,273     W 8,321,417  
     

 

 

   

 

 

 

The accompanying notes are an integral part of these interim consolidated financial statements.

 

6


KB Financial Group Inc. and Subsidiaries

Notes to the Consolidated Interim Financial Statements

September 30, 2017 and 2016 (Unaudited), and December 31, 2016

 

1. The Parent Company

KB Financial Group Inc. (the Parent Company) was incorporated on September 29, 2008, under the Financial Holding Companies Act of Korea. KB Financial Group Inc. and its subsidiaries (the “Group”) derive substantially all of their revenue and income from providing a broad range of banking and related financial services to consumers and corporations primarily in Korea and in selected international markets. The Parent Company’s principal business includes ownership and management of subsidiaries and associated companies that are engaged in financial services or activities. In 2011, Kookmin Bank spun off its credit card business segment and established a new separate credit card company, KB Kookmin Card Co., Ltd., and KB Investment & Securities Co., Ltd. merged with KB Futures Co., Ltd. The Group established KB Savings Bank Co., Ltd. in January 2012, acquired Yehansoul Savings Bank Co., Ltd. in September 2013, and KB Savings Bank Co., Ltd. merged with Yehansoul Savings Bank Co., Ltd. in January 2014. In March 2014, the Group acquired Woori Financial Co., Ltd. and changed the name to KB Capital Co., Ltd. Meanwhile, the Group included LIG Insurance Co., Ltd. as an associate and changed the name to KB Insurance Co., Ltd. in June 2015. Also, the Group included Hyundai Securities Co., Ltd. as an associate in June 2016 and included as a subsidiary in October 2016 by comprehensive exchange of shares. Hyundai Securities Co., Ltd. merged with KB Investment & Securities Co., Ltd. in December 2016 and changed the name to KB Securities Co., Ltd. in January 2017. KB Insurance Co., Ltd. became one of the subsidiaries through a tender offer in May 2017.

The Parent Company’s share capital as of September 30, 2017, is W 2,090,558 million. The Parent Company has been listed on the Korea Exchange (“KRX”) since October 10, 2008, and on the New York Stock Exchange (“NYSE”) for its American Depositary Shares (“ADS”) since September 29, 2008. Number of shares authorized in its Articles of Incorporation is 1,000 million.

2. Basis of Preparation

2.1 Application of Korean IFRS

The Group maintains its accounting records in Korean won and prepares statutory financial statements in the Korean language (Hangul) in accordance with International Financial Reporting Standards as adopted by the Republic of Korea (Korean IFRS). The accompanying consolidated interim financial statements have been condensed, restructured and translated into English from the Korean language financial statements.

Certain information attached to the Korean language financial statements, but not required for a fair presentation of the Group’s financial position, financial performance or cash flows, is not presented in the accompanying consolidated interim financial statements.

The consolidated financial statements of the Group have been prepared in accordance with Korean IFRS. These are the standards, subsequent amendments and related interpretations issued by the International Accounting Standards Board (“IASB”) that have been adopted by the Republic of Korea.

The preparation of consolidated financial statements requires the use of certain critical accounting estimates. Management also needs to exercise judgment in applying the Group’s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in Note 2.4.

 

7


KB Financial Group Inc. and Subsidiaries

Notes to the Consolidated Interim Financial Statements

September 30, 2017 and 2016 (Unaudited), and December 31, 2016

 

 

The Group’s consolidated interim financial statements for the nine-month period ended September 30, 2017, have been prepared in accordance with Korean IFRS 1034 Interim Financial Reporting. These condensed consolidated interim financial statements have been prepared in accordance with Korean IFRS which is effective or early adopted as of September 30, 2017.

The Group has applied the following standards and amendments for the first time for their annual reporting period commencing January 1, 2017. The adoption of these amendments did not have any impact on the current period or any prior period and is not likely to affect future periods.

 

  Amendments to Korean IFRS 1007 Statement of Cash Flows

Amendments to Korean IFRS 1007 Statement of Cash flows requires to provide disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities, including both changes arising from cash flows and non-cash flows.

 

  Amendments to Korean IFRS 1012 Income Tax

Amendments to Korean IFRS 1012 clarify how to account for deferred tax assets related to debt instruments measured at fair value. Korean IFRS 1012 provides requirements on the recognition and measurement of current or deferred tax liabilities or assets. The amendments issued clarify the requirements on recognition of deferred tax assets for unrealized losses, to address diversity in practice.

 

  Amendments to Korean IFRS 1112 Disclosure of Interests in Other Entities

Amendments to Korean IFRS 1112 clarify when an entity’s interest in a subsidiary, a joint venture or an associate is classified as held for sales in accordance with Korean IFRS 1105, the entity is required to disclose other information except for summarized financial information in accordance with Korean IFRS 1112.

Certain new accounting standards and interpretations that have been published that are not mandatory for annual reporting period commencing January 1, 2017 and have not been early adopted by the Group are set out below.

 

  Amendments to Korean IFRS 1028 Investments in Associates and Joint Ventures

When an investment in an associate or a joint venture is held by, or it held indirectly through, an entity that is a venture capital organization, or a mutual fund, unit trust and similar entities including investment-linked insurance funds, the entity may elect to measure that investment at fair value through profit or loss in accordance with Korean IFRS 1109. The amendments clarify that an entity shall make this election separately for each associate of joint venture, at initial recognition of the associate or joint venture. The Group will apply these amendments retrospectively for annual periods beginning on or after January 1, 2018, and early adoption is permitted. The Group does not expect the amendments to have a significant impact on the consolidated financial statements because the Group is not a venture capital organization.

 

8


KB Financial Group Inc. and Subsidiaries

Notes to the Consolidated Interim Financial Statements

September 30, 2017 and 2016 (Unaudited), and December 31, 2016

 

 

  Amendments to Korean IFRS 1102 Share-based Payment

Amendments to Korean IFRS 1102 clarify accounting for a modification to the terms and conditions of a share-based payment that changes the classification of the transaction from cash-settled to equity-settled. Amendments also clarify that the measurement approach should treat the terms and conditions of a cash-settled award in the same way as for an equity-settled award. The amendments will be effective for annual periods beginning on or after January 1, 2018, with early adoption. The Group does not expect the amendments to have a significant impact on the consolidated financial statements.

 

  Enactments to Interpretation 2122 Foreign Currency Transactions and Advance Consideration

According to these enactments, the date of the transaction for the purpose of determining the exchange rate to use on initial recognition of the related asset, expense or income (or part of it) is the date on which an entity initially recognizes the non-monetary asset or non-monetary liability arising from the payment or receipt of advance consideration. If there are multiple payments or receipts in advance, the entity shall determine a date of the transaction for each payment or receipt of advance consideration. These enactments will be effective for annual periods beginning on or after January 1, 2018, with early adoption permitted. The Group does not expect the enactments to have a significant impact on the consolidated financial statements.

 

  Korean IFRS 1109 Financial Instruments

The new standard for financial instruments issued on September 25, 2015 is effective for annual periods beginning on or after January 1, 2018 with early application permitted. This standard will replace Korean IFRS 1039 Financial Instruments: Recognition and Measurement. The Group will apply the standards for annual periods beginning on or after January 1, 2018.

The standard requires retrospective application with some exceptions. For example, an entity is not required to restate prior periods in relation to classification, measurement and impairment of financial instruments. The standard requires prospective application of its hedge accounting requirements for all hedging relationships except the accounting for time value of options and other exceptions.

Korean IFRS 1109 Financial Instruments requires all financial assets to be classified and measured on the basis of the entity’s business model for managing financial assets and the contractual cash flow characteristics of the financial assets. A new impairment model, an expected credit loss model, is introduced and any subsequent changes in expected credit losses will be recognized in profit or loss. Also, hedge accounting rules amended to extend the hedging relationship, which consists only of eligible hedging instruments and hedged items, qualifies for hedge accounting.

An effective implementation of Korean IFRS 1109 requires preparation processes including financial impact assessment, accounting policy establishment, accounting system development and the system stabilization. The impact on the Group’s financial statements due to the application of the standard is dependent on judgements made in applying the standard, financial instruments held by the Group and macroeconomic variables.

 

9


KB Financial Group Inc. and Subsidiaries

Notes to the Consolidated Interim Financial Statements

September 30, 2017 and 2016 (Unaudited), and December 31, 2016

 

 

Within the Group, Korean IFRS 1109 Task Force Team (‘TFT’) has been set up to prepare for implementation of Korean IFRS 1109 since October 2015. There are three stages for implementation of Korean IFRS, such as analysis, design and implementation, and preparation for application. The Group is analyzing the financial impacts of Korean IFRS 1109 on its consolidated financial statements.

 

Stage

  

Period

  

Process

1    From Oct. to Dec. 2015 (for 3 months)    Analysis of GAAP differences and development of methodology
2    From Jan. to Dec. 2016 (for 12 months)    Development of methodology, definition of business requirement, and the system development and test.
3    From Jan. 2017 to Mar. 2018 (for 15 months)    Preparation for opening balances of the financial statements

Meanwhile, the following areas are likely to be affected in general.

(a) Classification and Measurement of Financial Assets

When implementing Korean IFRS 1109, the classification of financial assets will be driven by the Group’s business model for managing the financial assets and contractual terms of cash flow. The following table shows the classification of financial assets measured subsequently at amortized cost, at fair value through other comprehensive income and at fair value through profit or loss. If a hybrid contract contains a host that is a financial asset, the classification of the hybrid contract shall be determined for the entire contract without separating the embedded derivative.

 

Business model   

Contractual cash flows characteristics

     Solely represent payments of principal and
interest
   All other
Hold the financial asset for the collection of the contractual cash flows    Measured at amortized cost1    Recognized at fair value through profit
or loss2
Hold the financial asset for the collection of the contractual cash flows and trading    Measured at fair value through other comprehensive income1   
Hold for trading and others    Measured at fair value through profit or loss   

 

1 A designation at fair value through profit or loss is allowed only if such designation mitigates an accounting mismatch (irrevocable).
2 A designation at fair value through other comprehensive income is allowed only if the financial instrument is the equity investment that is not held for trading (irrevocable).

With the implementation of Korean IFRS 1109, the criteria to classify the financial assets at amortized cost or at fair value through other comprehensive income are more strictly applied than the criteria applied with Korean IFRS 1039. Accordingly, the financial assets at fair value through profit or loss may increase by implementing Korean IFRS 1109 and may result an extended fluctuation in profit or loss.

 

10


KB Financial Group Inc. and Subsidiaries

Notes to the Consolidated Interim Financial Statements

September 30, 2017 and 2016 (Unaudited), and December 31, 2016

 

 

(b) Classification and Measurement of Financial Liabilities

Korean IFRS 1109 requires the amount of the change in the liability’s fair value attributable to changes in the credit risk to be recognized in other comprehensive income, unless this treatment of the credit risk component creates or enlarges a measurement mismatch. Amounts presented in other comprehensive income are not subsequently transferred to profit or loss.

Under Korean IFRS 1039, all financial liabilities designated at fair value through profit or loss recognized their fair value movements in profit or loss. However, under Korean IFRS 1109, certain fair value movements will be recognized in other comprehensive income and as a result, profit or loss from fair value movements may decrease.

(c) Impairment: Financial Assets and Contract Assets

The new impairment model requires the recognition of impairment provisions based on expected credit losses (ECL) rather than only incurred credit losses as is the case under Korean IFRS 1039. It applies to financial assets classified at amortized cost, debt instruments measured at fair value through other comprehensive income, contract assets, lease receivables, loan commitments and certain financial guarantee contracts.

Under Korean IFRS 1109 ‘expected loss’ model, a credit event (or impairment ‘trigger’) no longer has to occur before credit losses are recognized. The Group will always recognize (at a minimum) 12-month expected credit losses in profit or loss. Lifetime expected losses will be recognized on assets for which there is a significant increase in credit risk after initial recognition.

 

Stage

  

Loss allowance

1    No significant increase in credit risk after initial recognition    12-month expected credit losses: expected credit losses that result from those default events on the financial instrument that are possible within 12 months after the reporting date
2    Significant increase in credit risk after initial recognition    Lifetime expected credit losses: expected credit losses that result from all possible default events over the life of the financial instrument
3    Credit-impaired   

Under Korean IFRS 1109, the asset that is credit-impaired at initial recognition would recognize all changes in lifetime expected credit losses since the initial recognition as a loss allowance with any changes recognized in profit or loss.

(d) Hedge Accounting

Hedge accounting mechanics (fair value hedges, cash flow hedges and hedge of net investments in a foreign operations) required by Korean IFRS 1039 remains unchanged in Korean IFRS 1109, however, the new hedge accounting rules will align the accounting for hedging instruments more closely with the Group’s risk management practices. As a general rule, more hedge relationships might be eligible for hedge accounting, as the standard introduces a more principles-based approach. Korean IFRS 1109 allows more hedging instruments and hedged items to qualify for hedge accounting, and relaxes the hedge accounting requirement by removing two hedge effectiveness tests that are a prospective test to ensure that the hedging relationship is expected to be highly effective and a quantitative retrospective test (within range of 80-125%) to ensure that the hedging relationship has been highly effective throughout the reporting period.

 

11


KB Financial Group Inc. and Subsidiaries

Notes to the Consolidated Interim Financial Statements

September 30, 2017 and 2016 (Unaudited), and December 31, 2016

 

 

With implementation of Korean IFRS 1109, volatility in profit or loss may be reduced as some items that were not eligible as hedged items or hedging instruments under Korean IFRS 1039 are now eligible under Korean IFRS 1109.

Meanwhile, Kookmin Bank(the Bank), a major subsidiary of the Group, performed an impact assessment to identify potential financial effects of applying Korean IFRS 1109. The assessment was performed based on retainable information as at June 30, 2017, and the results of the assessment are explained as below. The Bank plans to perform more detailed analysis on financial effects based on additional information in the future; therefore, the results of the assessment may change due to additional information that the Bank may obtain and decisions derived thereof after the assessment.

(a) Classification and Measurement of Financial Assets

According to Korean IFRS 1109, debt securities those contractual cash flows do not represent solely payments of principal and interest and held for trading, and equity securities that are not designated as instruments measured at fair value through other comprehensive income are measured at fair value through profit or loss. As at June 30, 2017, the Bank holds debt securities, equity securities and other financial assets classified as financial assets at fair value through profit or loss that amount to W8,501,216 million, W155,387 million and W208,390 million, respectively.

Based on results from the impact assessment, if the Bank applies Korean IFRS 1109 to the financial assets measured at fair value through profit or loss as at June 30, 2017, the application will not have a material impact on the financial statements because the majority of the financial assets will still be classified as at fair value through profit or loss.

According to Korean IFRS 1109, a debt security is measured at fair value through other comprehensive income if the objective of the business model is achieved both by collecting contractual cash flows and selling financial assets; and the contractual cash flows represents solely payments of principal and interest on a specific date under contract terms. As at June 30, 2017, the Bank holds debt securities and beneficiary securities of W26,289,316 million classified as financial assets available-for-sale.

Based on results from the impact assessment of Korean IFRS 1109, if Korean IFRS 1109 is applied for the above debt securities classified as financial assets available-for-sale, as at June 30, 2017, the Bank expects the majority of the financial assets to be measured at fair value through other comprehensive income. Meanwhile, the beneficiary securities amounting to W3,994,282 million which of contractual cash flows under the instrument do not solely represent payments of principal and interest on the principal amount, are measured at fair value through profit or loss, accordingly, the Bank expects volatility in profit or loss may be increased.

According to Korean IFRS 1109, equity securities that are not held for trading, the Bank can make an irrevocable election at initial recognition to classify the instruments as assets measured at fair value through other comprehensive income, which all subsequent changes in fair value being recognized in other comprehensive income and not recycled to profit or loss. As at June 30, 2017, the Bank holds equity securities of W2,034,962 million classified as financial assets available-for-sale.

 

12


KB Financial Group Inc. and Subsidiaries

Notes to the Consolidated Interim Financial Statements

September 30, 2017 and 2016 (Unaudited), and December 31, 2016

 

 

Based on results from the impact assessment of Korean IFRS 1109, the Bank plans to designate most equity securities as instruments measured at fair value through profit or loss except some equity instruments, which are classified in financial assets available-for-sale, held for business agreement and investment purpose. Therefore, the Bank expects the application of Korean IFRS 1109 on these financial assets may increase volatility in profit or loss.

According to Korean IFRS 1109, a debt instrument is measured at amortized cost if: a) the objective of the business model is to hold the financial asset for the collection of the contractual cash flows, and b) the contractual cash flows under the instrument solely represent payments of principal and interest. As at June 30, 2017, the Bank measured loans and receivables of W242,661,130 million, cash and due from financial institutions of W15,237,433 million and financial assets held-to-maturity of W8,849,879 million at amortized costs.

Based on results from the impact assessment, if the Bank applies Korean IFRS 1109 to the above financial assets, as at June 30, 2017, the application will not have a material impact on the financial statements. This is because the Bank holds the majority of financial assets measured at amortized cost that meets the both criteria: a) the objective of the business model is to hold the financial asset for the collection of the contractual cash flows, and b) the contractual cash flows under the instrument solely represent payments of principal and interest, although loans with conversion right and a part of due from financial institutions which of contractual cash flows do not represent solely payments of principal and interest, are recognized at fair value through profit or loss.

(b) Classification and Measurement of Financial Liabilities

Based on results from the impact assessment of Korean IFRS 1109, the Bank expects that the application will have no impact on the financial statements because the Bank had no financial liabilities designated as at fair value through profit or loss as at June 30, 2017.

(c) Impairment: Financial Assets and Contract Assets

Based on results from the impact assessment, if the Bank applies Korean IFRS 1109, as at June 30, 2017, target of measurement in loss allowance balances and amounts are estimated as follows:

 

     Accounts/Stage           Carrying amounts  
        Balances      Loss allowances
applying Korean
IFRS 1109
 
   Stage 1    W 221,708,221      W 309,556  

Loans

   Stage 2      20,183,037        308,081  
   Stage 3      1,695,315        934,134  

Debt securities/Due from financial institutions

        42,031,940        6,490  
  

 

 

    

 

 

 
   W 285,475,777      W 1,550,219  
  

 

 

    

 

 

 

 

1. The amounts includes other assets (Suspense Receivable as Credit) applying IFRS 1109.

 

13


KB Financial Group Inc. and Subsidiaries

Notes to the Consolidated Interim Financial Statements

September 30, 2017 and 2016 (Unaudited), and December 31, 2016

 

 

Based on results from the impact assessment, if the Bank applies Korean IFRS 1109, as at June 30, 2017, the amounts of Provisions are estimated as follows:

 

     Accounts/Stage    Carrying amounts  
       

Loss allowances

applying Korean IFRS

1109

 
   Stage 1    W 100,797  

Provisions

   Stage 2      555,703  
   Stage 3      21,342  
     

 

 

 
      W 177,842  
     

 

 

 

Based on results from the impact assessment as of June 30, 2017, the Bank expects that there will be decreased 0.05% in BIS ratio(Total Regulatory Capital) compared to the current 16.54% to 16.49%.

The results of the assessment as of June 30, 2017 may change due to additional information obtained after the assessment and related decisions.

(d) Hedge Accounting

As of June 30, 2017, the Bank applies the hedge accounting to its assets and liabilities that amount to W5,363,324 million. With applying the hedge accounting, the Bank recognized the changes in fair value of fair value hedging instruments for W20,575 million in profit or loss, and the reclassification of the changes in fair value of cash flow hedging instruments for W31 million in profit or loss, which were previously recognized in other comprehensive income. As of June 30, 2017, the changes in fair values of cash flow hedging instruments and hedge on net investments in foreign operation which have been recognized in accumulated other comprehensive income amount to W1,005 million and W36,009 million, respectively.

Furthermore, when the Bank first applies Korean IFRS 1109, it may choose as its accounting policy to continue to apply all of the hedge accounting requirements of Korean IFRS 1039 instead of the requirements of Korean IFRS 1109.

 

  Korean IFRS 1115 Revenue from Contracts with Customers

Korean IFRS 1115 Revenue from Contracts with Customers issued on November 6, 2015 replaces Korean IFRS 1018 Revenue, Korean IFRS 1011 Construction Contracts, Interpretation 2031 Revenue-Barter Transactions Involving Advertising Services, Interpretation 2113 Customer Loyalty Programs, Interpretation 2115 Agreements for the Construction of Real Estate and Interpretation 2118 Transfers of assets from customers.

 

14


KB Financial Group Inc. and Subsidiaries

Notes to the Consolidated Interim Financial Statements

September 30, 2017 and 2016 (Unaudited), and December 31, 2016

 

 

Korean IFRS 1018 and other, the current standard, provide revenue recognition criteria by type of transactions; such as, sales goods, the rendering of services, interest income, royalty income, dividend income, and construction contracts. However, Korean IFRS 1115, the new standard, is based on the principle that revenue is recognized when control of a good or service transfers to a customer – so the notion of control replaces the existing notion of risks and rewards. A new five-step process must be applied before revenue from contract with customer can be recognized:

 

  Identify contracts with customers

 

  Identify the separate performance obligation

 

  Determine the transaction price of the contract

 

  Allocate the transaction price to each of the separate performance obligations, and

 

  Recognize the revenue as each performance obligation is satisfied.

The Group will apply new standard for annual reporting periods beginning on or after January 1, 2018, and early adoption is permitted. The Group is analyzing financial impacts of Korean IFRS 1115 on its consolidated financial statements.

2.2 Measurement Basis

The consolidated financial statements have been prepared under the historical cost convention unless otherwise specified.

2.3 Functional and Presentation Currency

Items included in the financial statements of each entity of the Group are measured using the currency of the primary economic environment in which the entity operates (“the functional currency”). The consolidated financial statements are presented in Korean won, which is the Parent Company’s functional and presentation currency.

 

15


KB Financial Group Inc. and Subsidiaries

Notes to the Consolidated Interim Financial Statements

September 30, 2017 and 2016 (Unaudited), and December 31, 2016

 

 

2.4 Critical Accounting Estimates

The preparation of consolidated financial statements requires the application of accounting policies, certain critical accounting estimates and assumptions that may have a significant impact on the assets (liabilities) and incomes (expenses). Management’s estimates of outcomes may differ from actual outcomes if management’s estimates and assumptions based on management’s best judgment at the reporting date are different from the actual environment.

Estimates and assumptions are continually evaluated and any change in an accounting estimate is recognized prospectively by including it in profit or loss in the period of the change, if the change affects that period only. Alternatively if the change in accounting estimate affects both the period of change and future periods, that change is recognized in the profit or loss of all those periods.

The significant accounting estimates and assumptions are consistently applied to all periods presented, except for the assumptions for income tax expense.

3. Significant Accounting Policies

The significant accounting policies and calculation methods applied in the preparation of these consolidated interim financial statements are the same as those that applied to the separate financial statements for the year ended December 31, 2016, except for the impact of changes due to enactment of new standards, amendments and interpretations disclosed in Note 2.1 and the following paragraph.

3.1 Income Tax Expenses for the Interim Period

Income tax expense for the interim period is measured by expected average annual income tax rate applicable on expected total annual income.

4. Financial Risk Management

4.1 Summary

4.1.1 Overview of Financial Risk Management Policy

The financial risks that the Group is exposed to are credit risk, market risk, liquidity risk, operational risk and others.

The Group’s risk management system focuses on increasing transparency, developing the risk management environment, preventing transmission of risk to other related subsidiaries, and the preemptive response to risk due to rapid changes in the financial environment to support the Group’s long-term strategy and business decisions efficiently. Credit risk, market risk, liquidity risk, and operational risk have been recognized as the Group’s key risks. These risks are measured and managed in Internal Capital or VaR (Value at Risk) using a statistical method.

 

16


KB Financial Group Inc. and Subsidiaries

Notes to the Consolidated Interim Financial Statements

September 30, 2017 and 2016 (Unaudited), and December 31, 2016

 

 

4.1.2 Risk Management Organization

Risk Management Committee

The Risk Management Committee establishes risk management strategies in accordance with the directives of the Board of Directors and determines the Group’s target risk appetite. The Committee approves significant risk matters and reviews the level of risks that the Group is exposed to and the appropriateness of the Group’s risk management operations as an ultimate decision-making authority.

Risk Management Council

The Risk Management Council is a consultative group which reviews and makes decisions on matters delegated by the Risk Management Committee, and discusses the detailed issues relating to the Group’s risk management.

Risk Management Division

The Risk Management Division is responsible for monitoring and managing the Group’s internal capital limit and managing detailed policies, procedures and working processes relating to the Group’s risk management.

4.2 Credit Risk

4.2.1 Overview of Credit Risk

Credit risk is the risk of possible losses in an asset portfolio in the event of a counterparty’s default, breach of contract and deterioration in the credit quality of the counterparty. For risk management reporting purposes, the individual borrower’s default risk, country risk, specific risks and other credit risk exposure components are considered as a whole.

4.2.2 Credit Risk Management

The Group measures expected losses and internal capital on assets that are subject to credit risk management whether on- or off-balance sheet items and uses expected losses and internal capital as a management indicator. The Group manages credit risk by allocating credit risk internal capital limits.

In addition, the Group controls the credit concentration risk exposure by applying and managing total exposure limits to prevent an excessive risk concentration to each industry and borrower.

The Group has organized a credit risk management team that focuses on credit risk management in accordance with the Group’s credit risk management policy. Especially, the loan analysis department of Kookmin Bank, one of the subsidiaries, is responsible for loan policy, loan limit, loan review, credit management, restructuring and subsequent event management, independently of operating department. On the other hand, risk management group of Kookmin Bank is responsible for planning risk management policy, applying limits of credit lines, measuring the credit risk internal capital, adjusting credit limits, reviewing credit and verifying credit evaluation models.

 

17


KB Financial Group Inc. and Subsidiaries

Notes to the Consolidated Interim Financial Statements

September 30, 2017 and 2016 (Unaudited), and December 31, 2016

 

 

4.2.3 Maximum Exposure to Credit Risk

The Group’s maximum exposures of financial instruments, excluding equity securities, to credit risk without consideration of collateral values as of September 30, 2017 and December 31, 2016, are as follows:

 

(In millions of Korean won)    September 30, 2017      December 31, 2016  

Financial assets

     

Due from financial institutions

   W   20,120,389      W   15,326,173  

Financial assets at fair value through profit or loss

     

Financial assets held for trading1

     25,131,900        23,058,919  

Financial assets designated at fair value through profit or loss

     1,986,417        1,693,255  

Derivatives

     2,171,087        3,381,935  

Loans2

     285,947,141        265,486,134  

Financial investments

     

Available-for-sale financial assets

     35,745,776        27,445,752  

Held-to-maturity financial assets

     18,019,808        11,177,504  

Other financial assets2

     10,072,028        7,322,335  
  

 

 

    

 

 

 
     399,194,546        354,892,007  
  

 

 

    

 

 

 

Off-balance sheet items

     

Acceptances and guarantees contracts

     7,802,670        7,822,124  

Financial guarantee contracts

     3,828,676        4,746,292  

Commitments

     100,027,799        97,005,556  
  

 

 

    

 

 

 
     111,659,145        109,573,972  
  

 

 

    

 

 

 
   W   510,853,691      W   464,465,979  
  

 

 

    

 

 

 

 

1 Financial instruments indexed to the price of gold amounting to W72,230 million and W72,349 million as of September 30, 2017 and December 31, 2016, respectively, are included.
2  Loans and other financial assets are net of allowance.

4.2.4 Credit Risk of Loans

The Group maintains an allowance for loan losses associated with credit risk on loans to manage its credit risk.

The Group recognizes an impairment loss on loan carried at amortized cost when there is any objective indication of impairment. Impairment loss is defined as incurred loss in accordance with Korean IFRS; therefore, a loss that might occur due to a future event is not recognized in spite of its likelihood. The Group measures inherent incurred losses on loans and presents them in the consolidated financial statements through the use of an allowance account which is offset against the related loans.

 

18


KB Financial Group Inc. and Subsidiaries

Notes to the Consolidated Interim Financial Statements

September 30, 2017 and 2016 (Unaudited), and December 31, 2016

 

 

Loans as of September 30, 2017 and December 31, 2016, are classified as follows:

 

(In millions of Korean won)                                               
     September 30, 2017  
Loans    Retail      Corporate      Credit card      Total  
   Amount     %      Amount     %      Amount     %      Amount     %  

Neither past due nor impaired

   W 141,358,571       99.06      W 128,554,507       98.68      W 14,473,949       95.71      W 284,387,027       98.72  

Past due but not impaired

     824,494       0.58        143,927       0.11        308,421       2.04        1,276,842       0.44  

Impaired

     512,802       0.36        1,573,035       1.21        339,546       2.25        2,425,383       0.84  
  

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 
     142,695,867       100.00        130,271,469       100.00        15,121,916       100.00        288,089,252       100.00  
  

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Less: Allowances1

     (424,574     0.30        (1,281,518     0.98        (436,019     2.88        (2,142,111     0.74  
  

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Carrying amount

   W   142,271,293        W   128,989,951        W   14,685,897        W   285,947,141    
  

 

 

      

 

 

      

 

 

      

 

 

   

 

(In millions of Korean won)                                               
     December 31, 2016  
Loans    Retail      Corporate      Credit card      Total  
   Amount     %      Amount     %      Amount     %      Amount     %  

Neither past due nor impaired

   W 133,491,252       98.86      W 117,346,453       98.44      W 13,001,473       96.09      W 263,839,178       98.53  

Past due but not impaired

     961,370       0.71        202,474       0.17        226,648       1.68        1,390,492       0.52  

Impaired

     575,711       0.43        1,656,387       1.39        302,122       2.23        2,534,220       0.95  
  

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 
     135,028,333       100.00        119,205,314       100.00        13,530,243       100.00        267,763,890       100.00  
  

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Less: Allowances1

     (481,289     0.36        (1,382,172     1.16        (414,295     3.06        (2,277,756     0.85  
  

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Carrying amount

   W   134,547,044        W   117,823,142        W   13,115,948        W   265,486,134    
  

 

 

      

 

 

      

 

 

      

 

 

   

 

1 Collectively assessed allowances for loans are included as they are not impaired individually.

Credit quality of loans that are neither past due nor impaired are as follows:

 

(In millions of Korean won)    September 30, 2017  
     Retail      Corporate      Credit card      Total  

Grade 1

   W 120,726,420      W 67,996,000      W 8,049,463      W 196,771,883  

Grade 2

     16,745,535        52,413,769        4,972,385        74,131,689  

Grade 3

     2,797,544        5,844,374        1,343,120        9,985,038  

Grade 4

     829,800        1,652,982        76,139        2,558,921  

Grade 5

     259,272        647,382        32,842        939,496  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W   141,358,571      W   128,554,507      W   14,473,949      W   284,387,027  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(In millions of Korean won)    December 31, 2016  
     Retail      Corporate      Credit card      Total  

Grade 1

   W 110,720,263      W 57,754,882      W 6,804,763      W 175,279,908  

Grade 2

     18,400,111        49,531,423        4,774,368        72,705,902  

Grade 3

     3,188,861        7,722,663        1,147,814        12,059,338  

Grade 4

     935,265        1,728,631        249,529        2,913,425  

Grade 5

     246,752        608,854        24,999        880,605  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W   133,491,252      W   117,346,453      W   13,001,473      W   263,839,178  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

19


KB Financial Group Inc. and Subsidiaries

Notes to the Consolidated Interim Financial Statements

September 30, 2017 and 2016 (Unaudited), and December 31, 2016

 

 

Credit quality of loans graded according to internal credit ratings are as follows:

 

     Range of Probability of
Default (%)
   Retail    Corporate

Grade 1

   0.0 ~ 1.0    1 ~ 5 grade    AAA ~ BBB+

Grade 2

   1.0 ~ 5.0    6 ~ 8 grade    BBB ~ BB

Grade 3

   5.0 ~ 15.0    9 ~ 10 grade    BB- ~ B

Grade 4

   15.0 ~ 30.0    11 grade    B- ~ CCC

Grade 5

   30.0 ~    12 grade or under    CC or under

Loans that are past due but not impaired are as follows:

 

(In millions of Korean won)                                   
     September 30, 2017  
    

1 ~ 29

days

    

30 ~ 59

days

    

60 ~ 89

days

    

90 days

or more

     Total  

Retail

   W 666,495      W 99,290      W 56,102      W 2,607      W 824,494  

Corporate

     96,015        26,352        21,560        —          143,927  

Credit card

     256,375        33,760        18,286        —          308,421  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W   1,018,885      W   159,402      W   95,948      W   2,607      W   1,276,842  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(In millions of Korean won)                                   
     December 31, 2016  
    

1 ~ 29

days

    

30 ~ 59

days

    

60 ~ 89

days

    

90 days

or more

     Total  

Retail

   W 782,262      W 119,667      W 57,187      W 2,254      W 961,370  

Corporate

     134,432        44,086        23,956        —          202,474  

Credit card

     176,390        31,880        18,378        —          226,648  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W   1,093,084      W   195,633      W   99,521      W   2,254      W   1,390,492  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Impaired loans are as follows:

 

(In millions of Korean won)    September 30, 2017  
     Retail      Corporate      Credit card      Total  

Loans

   W 512,802      W   1,573,035      W 339,546      W 2,425,383  

Allowances under

           

Individual assessment

     (91      (806,057                (806,148

Collective assessment

     (183,221      (113,608      (207,674      (504,503
  

 

 

    

 

 

    

 

 

    

 

 

 
     (183,312      (919,665      (207,674      (1,310,651
  

 

 

    

 

 

    

 

 

    

 

 

 
   W   329,490      W 653,370      W   131,872      W   1,114,732  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

20


KB Financial Group Inc. and Subsidiaries

Notes to the Consolidated Interim Financial Statements

September 30, 2017 and 2016 (Unaudited), and December 31, 2016

 

 

(In millions of Korean won)    December 31, 2016  
     Retail      Corporate      Credit card      Total  

Loans

   W 575,711      W   1,656,387      W 302,122      W 2,534,220  

Allowances under

           

Individual assessment

     (3      (860,829      —          (860,832

Collective assessment

     (217,535      (133,507      (183,211      (534,253
  

 

 

    

 

 

    

 

 

    

 

 

 
     (217,538      (994,336      (183,211      (1,395,085
  

 

 

    

 

 

    

 

 

    

 

 

 
   W   358,173      W 662,051      W   118,911      W   1,139,135  
  

 

 

    

 

 

    

 

 

    

 

 

 

The quantification of the extent to which collateral and other credit enhancements mitigate credit risk as of September 30, 2017 and December 31, 2016, are as follows:

 

(In millions of Korean won)                                   
     September 30, 2017  
     Impaired Loans      Non-impaired Loans         
     Individual      Collective      Past due      Not past due      Total  

Guarantees

   W 15,374      W 127,254      W 174,249      W 56,289,464      W 56,606,341  

Deposits and savings

     11,341        5,101        40,800        3,982,868        4,040,110  

Property and equipment

     3,470        28,919        39,731        10,183,326        10,255,446  

Real estate

     237,129        324,537        473,012        146,593,031        147,627,709  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W   267,314      W   485,811      W   727,792      W   217,048,689      W   218,529,606  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(In millions of Korean won)                                   
     December 31, 2016  
     Impaired Loans      Non-impaired Loans         
     Individual      Collective      Past due      Not past due      Total  

Guarantees

   W 21,168      W 131,752      W 207,493      W 52,994,315      W 53,354,728  

Deposits and savings

     10,849        6,114        51,815        2,115,376        2,184,154  

Property and equipment

     7,083        25,035        28,053        5,380,329        5,440,500  

Real estate

     262,340        341,803        590,196        137,263,717        138,458,056  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W   301,440      W   504,704      W   877,557      W   197,753,737      W   199,437,438  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

4.2.5 Credit Quality of Securities

Financial assets at fair value through profit or loss and financial investments excluding equity securities that are exposed to credit risk as of September 30, 2017 and December 31, 2016, are as follows:

 

(In millions of Korean won)    September 30, 2017      December 31, 2016  

Securities that are neither past due nor impaired1

   W 80,806,871      W 63,298,248  

Impaired securities1

     4,800        4,833  
  

 

 

    

 

 

 
   W   80,811,671      W   63,303,081  
  

 

 

    

 

 

 

 

1 Including debt instruments designated at fair value through profit or loss

 

21


KB Financial Group Inc. and Subsidiaries

Notes to the Consolidated Interim Financial Statements

September 30, 2017 and 2016 (Unaudited), and December 31, 2016

 

 

The credit quality of securities, excluding equity securities, that are neither past due nor impaired as of September 30, 2017 and December 31, 2016, are as follows:

 

(In millions of Korean won)                                          
     September 30, 2017  
     Grade 1      Grade 2      Grade 3      Grade 4      Grade 5      Total  

Securities that are neither past due nor impaired

                 

Financial assets held for trading

   W 21,710,751      W 3,168,877      W 82,078      W 33,421      W 64,543      W 25,059,670  

Financial assets designated at fair value through profit or loss

     1,943,803        42,614        —          —          —          1,986,417  

Available-for-sale financial assets

     33,385,511        2,271,503        81,288        2,673                  35,740,975  

Held-to-maturity financial assets

     18,010,031        —          9,778        —          —          18,019,809  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W   75,050,096      W   5,482,994      W   173,144      W   36,094      W   64,543      W   80,806,871  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(In millions of Korean won)                                          
     December 31, 2016  
     Grade 1      Grade 2      Grade 3      Grade 4      Grade 5      Total  

Securities that are neither past due nor impaired

                 

Financial assets held for trading

   W 20,101,364      W 2,752,038      W 46,113      W 18,397      W 68,658      W 22,986,570  

Financial assets designated at fair value through profit or loss

     1,563,152        120,925        8,176        —          1,002        1,693,255  

Available-for-sale financial assets

     26,082,139        1,310,782        47,998        —          —          27,440,919  

Held-to-maturity financial assets

     11,177,504        —          —          —          —          11,177,504  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W   58,924,159      W   4,183,745      W   102,287      W   18,397      W   69,660      W   63,298,248  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

The credit qualities of securities, excluding equity securities, according to the credit ratings by external rating agencies are as follows:

 

Credit quality   

Domestic

  

Foreign

   KAP    KIS    NICE P&I    FnPricing Inc.    S&P    Fitch-IBCA    Moody’s

Grade 1

   AA0 to AAA    AA0 to AAA    AA0 to AAA    AA0 to AAA    A- to AAA    A- to AAA    A3 to Aaa

Grade 2

   A- to AA-    A- to AA-    A- to AA-    A- to AA-    BBB-to BBB+    BBB-to BBB+    Baa3 to Baa1

Grade 3

   BBB0 to BBB+    BBB0 to BBB+    BBB0 to BBB+    BBB0 to BBB+    BB to BB+    BB to BB+    Ba2 to Ba1

Grade 4

   BB0 to BBB-    BB0 to BBB-    BB0 to BBB-    BB0 to BBB-    B+ to BB-    B+ to BB-    B1 to Ba3

Grade 5

   BB- or under    BB-or under    BB-or under    BB-or under    B or under    B or under    B2 or under

Credit qualities of debit securities denominated in Korean won are based on the lowest credit rating by the domestic credit rating agencies above, and those denominated in foreign currencies are based on the lowest credit rating by the foreign credit rating agencies above.

 

22


KB Financial Group Inc. and Subsidiaries

Notes to the Consolidated Interim Financial Statements

September 30, 2017 and 2016 (Unaudited), and December 31, 2016

 

 

4.2.6 Credit Risk Concentration Analysis

Details of the Group’s regional loans as of September 30, 2017 and December 31, 2016, are as follows:

 

(In millions of Korean won)       
     September 30, 2017  
     Retail      Corporate      Credit card      Total      %      Allowances    

Carrying

amount

 

Korea

   W 142,600,348      W 126,607,941      W 15,118,253      W 284,326,542        98.69      W (2,092,403   W 282,234,139  

Europe

     —          237,010        334        237,344        0.08        (2,873     234,471  

China

     —          1,899,665        1,595        1,901,260        0.66        (31,515     1,869,745  

Japan

     587        105,313        210        106,110        0.04        (8,461     97,649  

United States

     —          1,030,092        692        1,030,784        0.36        (2,219     1,028,565  

Others

     94,932        391,448        832        487,212        0.17        (4,640     482,572  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 
   W 142,695,867      W 130,271,469      W 15,121,916      W 288,089,252        100.00      W (2,142,111   W 285,947,141  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

 

(In millions of Korean won)       
     December 31, 2016  
     Retail      Corporate      Credit card      Total      %      Allowances    

Carrying

amount

 

Korea

   W 134,956,004      W 116,271,176      W 13,526,026      W 264,753,206        98.88      W (2,234,971   W 262,518,235  

Europe

     1        206,580        245        206,826        0.08        (1,719     205,107  

China

     —          1,328,525        2,570        1,331,095        0.50        (23,500     1,307,595  

Japan

     1,352        90,977        205        92,534        0.03        (10,385     82,149  

United States

     —          984,472        566        985,038        0.37        (2,032     983,006  

Others

     70,976        323,584        631        395,191        0.14        (5,149     390,042  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 
   W 135,028,333      W 119,205,314      W 13,530,243      W 267,763,890        100.00      W (2,277,756   W 265,486,134  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Details of the Group’s industrial corporate loans as of September 30, 2017 and December 31, 2016, are as follows:

 

(In millions of Korean won)    September 30, 2017  
     Loans      %      Allowances      Carrying amount  

Financial institutions

   W 10,704,264        8.22      W (46,866    W 10,657,398  

Manufacturing

     39,727,304        30.49        (494,906      39,232,398  

Service

     54,148,072        41.56        (299,446      53,848,626  

Wholesale & Retail

     15,354,730        11.79        (93,196      15,261,534  

Construction

     3,303,071        2.54        (267,537      3,035,534  

Public sector

     1,098,740        0.84        (16,001      1,082,739  

Others

     5,935,288        4.56        (63,566      5,871,722  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 130,271,469        100.00      W (1,281,518    W   128,989,951  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

23


KB Financial Group Inc. and Subsidiaries

Notes to the Consolidated Interim Financial Statements

September 30, 2017 and 2016 (Unaudited), and December 31, 2016

 

 

(In millions of Korean won)    December 31, 2016  
     Loans      %      Allowances      Carrying amount  

Financial institutions

   W 10,603,474        8.90      W (20,870    W 10,582,604  

Manufacturing

     36,505,044        30.62        (539,512      35,965,532  

Service

     48,529,236        40.71        (307,132      48,222,104  

Wholesale & Retail

     14,246,756        11.95        (116,233      14,130,523  

Construction

     3,381,470        2.84        (357,439      3,024,031  

Public sector

     886,583        0.74        (6,318      880,265  

Others

     5,052,751        4.24        (34,668      5,018,083  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 119,205,314        100.00      W (1,382,172    W   117,823,142  
  

 

 

    

 

 

    

 

 

    

 

 

 

Types of the Group’s retail and credit card loans as of September 30, 2017 and December 31, 2016, are as follows:

 

(In millions of Korean won)    September 30, 2017  
     Loans      %      Allowances      Carrying amount  

Housing

   W 62,518,974        39.61      W (21,532    W 62,497,442  

General

     80,176,893        50.81        (403,042      79,773,851  

Credit card

     15,121,916        9.58        (436,019      14,685,897  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 157,817,783        100.00      W (860,593    W   156,957,190  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(In millions of Korean won)    December 31, 2016  
     Loans      %      Allowances      Carrying amount  

Housing

   W 59,015,452        39.73      W (22,787    W 58,992,665  

General

     76,012,881        51.17        (458,502      75,554,379  

Credit card

     13,530,243        9.10        (414,295      13,115,948  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 148,558,576        100.00      W (895,584    W   147,662,992  
  

 

 

    

 

 

    

 

 

    

 

 

 

Details of the Group’s industrial securities, excluding equity securities, and derivative financial instruments as of September 30, 2017 and December 31, 2016, are as follows:

 

(In millions of Korean won)    September 30, 2017  
     Amount      %  

Financial assets held for trading

     

Government and government funded institutions

   W 8,018,211        32.00  

Banking and insurance

     11,214,699        44.75  

Others

     5,826,760        23.25  
  

 

 

    

 

 

 
     25,059,670        100.00  
  

 

 

    

 

 

 

Financial assets designated at fair value through profit or loss

     

Government and government funded institutions

     39,870        2.01  

Banking and insurance

     1,614,146        81.26  

Others

     332,401        16.73  
  

 

 

    

 

 

 
     1,986,417        100.00  
  

 

 

    

 

 

 

Derivative financial assets

     

Government and government funded institutions

     10,266        0.47  

Banking and insurance

     2,002,899        92.26  

Others

     157,922        7.27  
  

 

 

    

 

 

 
     2,171,087        100.00  
  

 

 

    

 

 

 

 

24


KB Financial Group Inc. and Subsidiaries

Notes to the Consolidated Interim Financial Statements

September 30, 2017 and 2016 (Unaudited), and December 31, 2016

 

 

Available-for-sale financial assets

     

Government and government funded institutions

     8,579,551        24.00  

Banking and insurance

     18,811,963        52.63  

Others

     8,354,262        23.37  
  

 

 

    

 

 

 
     35,745,776        100.00  
  

 

 

    

 

 

 

Held-to-maturity financial assets

     

Government and government funded institutions

     8,370,026        46.45  

Banking and insurance

     7,867,009        43.66  

Others

     1,782,773        9.89  
  

 

 

    

 

 

 
     18,019,808        100.00  
  

 

 

    

 

 

 
   W   82,982,758     
  

 

 

    

 

(In millions of Korean won)    December 31, 2016  
     Amount      %  

Financial assets held for trading

     

Government and government funded institutions

   W 7,875,106        34.26  

Banking and insurance

     11,408,503        49.63  

Others

     3,702,961        16.11  
  

 

 

    

 

 

 
     22,986,570        100.00  
  

 

 

    

 

 

 

Financial assets designated at fair value through profit or loss

     

Banking and insurance and others

     1,693,255        100.00  
  

 

 

    

 

 

 
     1,693,255        100.00  
  

 

 

    

 

 

 

Derivative financial assets

     

Government and government funded institutions

     104,025        3.08  

Banking and insurance

     2,998,412        88.66  

Others

     279,498        8.26  
  

 

 

    

 

 

 
     3,381,935        100.00  
  

 

 

    

 

 

 

Available-for-sale financial assets

     

Government and government funded institutions

     10,579,880        38.55  

Banking and insurance

     13,901,908        50.65  

Others

     2,963,964        10.80  
  

 

 

    

 

 

 
     27,445,752        100.00  
  

 

 

    

 

 

 

Held-to-maturity financial assets

     

Government and government funded institutions

     5,373,994        48.08  

Banking and insurance

     5,471,443        48.95  

Others

     332,067        2.97  
  

 

 

    

 

 

 
     11,177,504        100.00  
  

 

 

    

 

 

 
   W   66,685,016     
  

 

 

    

 

25


KB Financial Group Inc. and Subsidiaries

Notes to the Consolidated Interim Financial Statements

September 30, 2017 and 2016 (Unaudited), and December 31, 2016

 

 

Details of the Group’s regional securities, excluding equity securities, and derivative financial instruments by country, as of September 30, 2017 and December 31, 2016, are as follows:

 

(In millions of Korean won)    September 30, 2017  
     Amount      %  

Financial assets held for trading

     

Korea

   W 23,380,101        93.30  

United States

     531,060        2.12  

Others

     1,148,509        4.58  
  

 

 

    

 

 

 
     25,059,670        100.00  
  

 

 

    

 

 

 

Financial assets designated at fair value through profit or loss

 

  

Korea

     1,193,600        60.09  

United States

     70,556        3.55  

Others

     722,261        36.36  
  

 

 

    

 

 

 
     1,986,417        100.00  
  

 

 

    

 

 

 

Derivative financial assets

     

Korea

     1,151,923        53.05  

United States

     255,917        11.79  

Others

     763,247        35.16  
  

 

 

    

 

 

 
     2,171,087        100.00  
  

 

 

    

 

 

 

Available-for-sale financial assets

     

Korea

     33,188,365        92.84  

United States

     1,283,065        3.59  

Others

     1,274,346        3.57  
  

 

 

    

 

 

 
     35,745,776        100.00  
  

 

 

    

 

 

 

Held-to-maturity financial assets

     

Korea

     15,970,595        88.62  

United States

     913,055        5.07  

Others

     1,136,158        6.31  
  

 

 

    

 

 

 
     18,019,808        100.00  
  

 

 

    

 

 

 
   W   82,982,758     
  

 

 

    
(In millions of Korean won)    December 31, 2016  
     Amount      %  

Financial assets held for trading

     

Korea

   W 22,359,665        97.27  

United States

     141,022        0.61  

Others

     485,883        2.12  
  

 

 

    

 

 

 
     22,986,570        100.00  
  

 

 

    

 

 

 

Financial assets designated at fair value through profit or loss

     

Korea

     1,232,226        72.77  

United States

     72,837        4.30  

Others

     388,192        22.93  
  

 

 

    

 

 

 
     1,693,255        100.00  
  

 

 

    

 

 

 

Derivative financial assets

     

Korea

     2,323,198        68.69  

United States

     291,160        8.61  

Others

     767,577        22.70  
  

 

 

    

 

 

 
     3,381,935        100.00  
  

 

 

    

 

 

 

Available-for-sale financial assets

     

Korea

     26,855,024        97.85  

United States

     141,473        0.52  

Others

     449,255        1.63  
  

 

 

    

 

 

 
     27,445,752        100.00  
  

 

 

    

 

 

 

Held-to-maturity financial assets

     

Korea

     10,029,429        89.73  

United States

     193,360        1.73  

Others

     954,715        8.54  
  

 

 

    

 

 

 
     11,177,504        100.00  
  

 

 

    

 

 

 
   W 66,685,016     
  

 

 

    

 

26


KB Financial Group Inc. and Subsidiaries

Notes to the Consolidated Interim Financial Statements

September 30, 2017 and 2016 (Unaudited), and December 31, 2016

 

 

Financial instruments and derivatives indexed to the price of gold that are recognized as due from financial institutions and financial assets held for trading are mostly related to financial and insurance industries with high credit ratings.

4.3 Liquidity Risk

4.3.1 Overview of Liquidity Risk

Liquidity risk is a risk that the Group becomes insolvent due to uncertain liquidity caused by unexpected cash outflows, or a risk of borrowing high interest debts or disposal of liquid and other assets at a substantial discount. The Group manages its liquidity risk through analysis of the contractual maturity of interest-bearing assets and liabilities, assets and liabilities related to the other cash flow, and off-balance sheet items related to cash flow of currency derivative instruments and others.

Cash flows disclosed for the maturity analysis are undiscounted contractual principal and interest to be received (paid) and; thus, are not identical to the amount in the financial statements that are based on the present value of expected cash flows in some cases. The amount of interest to be received or paid on floating rate assets and liabilities is measured on the assumption that the current interest rate would be the same through the maturity.

4.3.2. Liquidity Risk Management and Indicator

The liquidity risk is managed by risk management policy and liquidity risk management guidelines which are applied to the risk management policies and procedures that address all the possible risks that arise from the overall business of the Group.

The Group computes and manages cumulative liquidity gap and liquidity rate subject to every transactions that affect cash flow in Korean won and foreign currencies and off-balance sheet transactions in relation to the liquidity. The Group regularly reports to the Risk Planning Council and Risk Management Committee.

4.3.3. Analysis of Remaining Contractual Maturity of Financial Assets and Liabilities

Cash flows disclosed below are undiscounted contractual principal and interest to be received (paid) and; thus, are not identical to the amount in the consolidated financial statements that are based on the present value of expected cash flows. The amount of interest to be received or paid on floating rate assets and liabilities is measured on the assumption that the current interest rate would be the same through the maturity.

 

27


KB Financial Group Inc. and Subsidiaries

Notes to the Consolidated Interim Financial Statements

September 30, 2017 and 2016 (Unaudited), and December 31, 2016

 

 

The remaining contractual maturity of financial assets and liabilities, excluding derivatives held for cash flow hedging, as of September 30, 2017 and December 31, 2016, are as follows:

 

(In millions of Korean won)   September 30, 2017  
    On demand    

Up to

1 month

   

1-3

months

   

3-12

months

   

1-5

years

   

Over 5

years

    Total  

Financial assets

 

       

Cash and due from financial institutions1

  W 6,623,795     W 1,339,830     W 442,054     W 565,846     W 179,290     W 52,735     W 9,203,550  

Financial assets held for trading2

    29,514,017       —         —         —         —         —         29,514,017  

Financial assets designated at fair value through profit or loss2

    2,071,798       —         —         —         —         —         2,071,798  

Derivatives held for trading2

    2,041,919       —         —         —         —         —         2,041,919  

Derivatives held for fair value hedging3

    46       7,452       9,410       6,693       (2,818     53,357       74,140  

Loans

    2,785,054       22,528,556       27,087,059       101,861,057       76,517,873       96,401,864       327,181,463  

Available-for-sale financial assets4

    11,262,672       501,535       984,929       10,047,565       19,239,735       9,061,285       51,097,721  

Held-to-maturity financial assets

    —         570,410       368,220       3,632,642       7,024,998       12,029,467       23,625,737  

Other financial assets

    188,268       7,574,492       43,700       1,334,253       76,042       17,058       9,233,813  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  W 54,487,569     W 32,522,275     W 28,935,372     W 117,448,056     W 103,035,120     W 117,615,766     W 454,044,158  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(In millions of Korean won)   September 30, 2017  
    On demand    

Up to

1 month

   

1-3

months

   

3-12

months

   

1-5

years

   

Over 5

years

    Total  

Financial liabilities

 

           

Financial liabilities held for trading2

  W 2,350,115     W —       W —       W —       W —       W —       W 2,350,115  

Financial liabilities designated at fair value through profit or loss2

    11,147,819       —         —         —         —         —         11,147,819  

Derivatives held for trading2

    2,167,883       —         —         —         —         —         2,167,883  

Derivatives held for fair value hedging3

    2,409       (3,660     8,999       (49,631     (4,910     985       (45,808

Deposits5

    122,818,752       12,007,892       25,029,987       80,068,857       11,312,895       3,702,428       254,940,811  

Debts

    6,174,076       10,085,706       3,406,483       5,670,475       4,083,399       573,218       29,993,357  

Debentures

    42,627       974,830       2,559,323       8,563,509       28,283,764       3,400,197       43,824,250  

Other financial liabilities

    200,983       13,002,224       149,795       206,013       305,425       997,898       14,862,338  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  W 144,904,664     W 36,066,992     W 31,154,587     W 94,459,223     W 43,980,573     W 8,674,726     W 359,240,765  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Off- balance sheet items

 

           

Commitments6

  W 100,027,799     W —       W —       W —       W —       W —       W 100,027,799  

Financial guarantee contract7

    3,828,676       —         —         —         —         —         3,828,676  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  W 103,856,475     W —       W —       W —       W —       W —       W 103,856,475  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

28


KB Financial Group Inc. and Subsidiaries

Notes to the Consolidated Interim Financial Statements

September 30, 2017 and 2016 (Unaudited), and December 31, 2016

 

 

(In millions of Korean won)   December 31, 2016  
    On demand    

Up to

1 month

   

1-3

months

   

3-12

months

   

1-5

years

   

Over 5

years

    Total  

Financial assets

 

       

Cash and due from financial institutions1

  W 6,431,488     W 815,026     W 414,076     W 629,696     W 353,581     W —       W 8,643,867  

Financial assets held for trading2

    26,099,518       —         —         —         —         —         26,099,518  

Financial assets designated at fair value through profit or loss2

    1,758,846       —         —         —         —         —         1,758,846  

Derivatives held for trading2

    3,263,115       —         —         —         —         —         3,263,115  

Derivatives held for fair value hedging3

    —         4,075       1,719       1,791       (584     53,185       60,186  

Loans

    25,333       24,246,878       27,731,932       88,710,331       73,969,738       90,290,586       304,974,798  

Available-for-sale financial assets4

    6,444,890       617,457       1,734,077       6,027,364       17,804,826       3,916,630       36,545,244  

Held-to-maturity financial assets

    —         280,822       552,875       1,423,078       6,478,050       4,457,977       13,192,802  

Other financial assets

    138,840       5,316,491       34,215       1,188,493       42,957       10,408       6,731,404  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  W 44,162,030     W 31,280,749     W 30,468,894     W 97,980,753     W 98,648,568     W 98,728,786     W 401,269,780  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(In millions of Korean won)   December 31, 2016  
    On demand    

Up to

1 month

   

1-3

months

   

3-12

months

   

1-5

years

   

Over 5

years

    Total  

Financial liabilities

 

       

Financial liabilities held for trading2

  W 1,143,510     W —       W —       W —       W —       W —       W 1,143,510  

Financial liabilities designated at fair value through profit or loss2

    10,979,326       —         —         —         —         —         10,979,326  

Derivatives held for trading2

    3,712,015       —         —         —         —         —         3,712,015  

Derivatives held for fair value hedging3

    (1,145     3,462       (5,114     8,081       (37,880     —         (32,596

Deposits5

    118,054,880       13,886,329       24,840,830       72,178,631       10,393,616       3,790,933       243,145,219  

Debts

    8,473,706       5,830,600       3,567,985       5,124,571       4,195,123       116,023       27,308,008  

Debentures

    52,188       2,078,866       2,403,874       7,493,938       20,673,639       3,273,158       35,975,663  

Other financial liabilities

    1,656,767       10,969,703       29,248       114,381       354,976       895,950       14,021,025  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  W 144,071,247     W 32,768,960     W 30,836,823     W 84,919,602     W 35,579,474     W 8,076,064     W 336,252,170  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Off- balance sheet items

 

         

Commitments6

  W 97,005,556     W —       W —       W —       W —       W —       W 97,005,556  

Financial guarantee contract7

    4,746,292       —         —         —         —         —         4,746,292  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  W 101,751,848     W —       W —       W —       W —       W —       W 101,751,848  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

29


KB Financial Group Inc. and Subsidiaries

Notes to the Consolidated Interim Financial Statements

September 30, 2017 and 2016 (Unaudited), and December 31, 2016

 

 

1 The amounts of W13,773,342 million and W9,307,958 million, which are restricted due from the financial institutions as of September 30, 2017 and December 31, 2016, respectively, are excluded.
2  Financial assets/liabilities held for trading, financial assets/liabilities designated at fair value through profit or loss and derivatives held for trading are not managed by contractual maturity because they are expected to be traded or redeemed before maturity. Therefore, the carrying amounts of those financial instruments are classified as ‘On demand’ category. However, the cash flows of the embedded derivatives (e.g. conversion options and others) which are separated from their host contracts in accordance with the requirement of Korean IFRS 1039, are considered in the cash flows of the host contracts.
3 Cash flows of derivative instruments held for fair value hedging are shown at net cash flow by remaining contractual maturity.
4 Equity investments in financial assets classified as available-for-sale are generally included in the ‘On demand’ category as most are available for sale at any time. However, in the case of equity investments restricted for sale, they are shown in the period in which the restriction is expected to expire.
5 Deposits that are contractually repayable on demand or on short notice are classified under the ‘On demand’ category.
6 Commitments are included under the ‘On demand’ category because payments will be made upon request.
7  The financial guarantee contracts are included under the ‘On demand’ category as payments will be made upon request.

The contractual cash flows of derivatives held for cash flow hedging as of September 30, 2017 and December 31, 2016, are as follows:

 

(In millions of Korean won)      
    September 30, 2017  
   

Up to

1 month

   

1-3

months

   

3-12

months

   

1-5

years

   

Over

5 years

    Total  

Net cash flow of net settlement derivatives

  W (244   W (2,188   W (6,373   W (8,654   W 50     W (17,409

Cash flow to be received of total settlement derivatives

    73,716       228,828       1,216,485       1,013,274         —         2,532,303  

Cash flow to be paid of total settlement derivatives

  W (72,209   W (226,105   W (1,198,936   W (974,883   W        W (2,472,133

 

30


KB Financial Group Inc. and Subsidiaries

Notes to the Consolidated Interim Financial Statements

September 30, 2017 and 2016 (Unaudited), and December 31, 2016

 

 

(In millions of Korean won)       
     December 31, 2016  
    

Up to

1 month

    1-3
months
   

3-12

months

   

1-5

years

   

Over

5 years

     Total  

Net cash flow of net settlement derivatives

   W (283   W (1,078   W (3,088   W (3,141   W —        W (7,590

Cash flow to be received of total settlement derivatives

     302       948       245,909       121,152       —          368,311  

Cash flow to be paid of total settlement derivatives

     (522     (1,080     (224,600     (110,373     —          (336,575

4.4 Market Risk

4.4.1 Concept

Market risk is the risk of possible losses which arise from changes in market factors; such as, interest rate, stock price, foreign exchange rate and other market factors that affect the fair value or future cash flows of financial instruments; such as, securities and derivatives amongst others. The most significant risks associated with trading positions are interest rate risks, currency risks and also, stock price risks. In addition, the Group is exposed to interest rate risks associated with non-trading positions. The Group classifies exposures to market risk into either trading or non-trading positions. The Group measures and manages market risk separately for each subsidiary.

4.4.2 Risk Management

The Group sets internal capital limits for market risk and interest rate risk and monitors the risks to manage the risk of trading and non-trading positions. The Group maintains risk management systems and procedures; such as, trading policies and procedures, and market risk management guidelines for trading positions, and interest rate risk management guidelines for non-trading positions in order to manage market risk efficiently. The procedures mentioned are implemented with approval from the Risk Management Committee and Risk Management Council.

Kookmin Bank, one of the subsidiaries, establishes market risk management policy, sets position limits, loss limits and VaR limits of each business group and approves newly developed instruments through its Risk Management Council. The Market Risk Management Committee, which is chaired by the Chief Risk Officer (CRO), is the decision maker and sets position limits, loss limits, VaR limits, sensitivity limits and scenario loss limits for each division, at the level of each individual business department.

 

31


KB Financial Group Inc. and Subsidiaries

Notes to the Consolidated Interim Financial Statements

September 30, 2017 and 2016 (Unaudited), and December 31, 2016

 

 

The ALCO of Kookmin Bank determines the operational standards of interest and commission, the details of the establishment and prosecution of the Asset Liability Management (ALM) policies and enacts and amends relevant guidelines. The Risk Management Committee and Risk Management Council monitor the establishment and enforcement of ALM risk management policies, and enact and amend ALM risk management guidelines. The interest rate risk limit is set based on the future assets/liabilities position and interest rate volatility estimation reflects the annual work plan. The Financial Planning Department and Risk Management Department measures and monitors the interest risk on a regular basis. The status and limits of interest rate risks; such as, interest rate EaR, duration gap and interest rate VaR (Value at Risk), are reported to the ALCO and Risk Management Council on a monthly basis and to the Risk Management Committee on a quarterly basis. To ensure adequacy of interest rate and liquidity risk management, the Risk Management Department assigns the limits, monitors and reviews the risk management procedures and tasks conducted by the Financial Planning Department. Also, the Risk Management Department independently reports related information to the management.

4.5 Operational Risk

4.5.1 Concept

The Group defines operational risk broadly to include all financial and non-financial risks that may arise from operating activities and could cause a negative effect on capital.

4.5.2 Risk Management

The purpose of operational risk management is not only to comply with supervisory and regulatory requirements but also to promote a risk management culture, strengthen internal controls, innovate processes and provide timely feedback to management and employees. In addition, Kookmin Bank established Business Continuity Plans (BCP) to ensure critical business functions can be maintained, or restored, in the event of material disruptions arising from internal or external events. It has constructed replacement facilities as well as has carried out exercise drills for head office and IT departments to test its BCPs.

 

32


KB Financial Group Inc. and Subsidiaries

Notes to the Consolidated Interim Financial Statements

September 30, 2017 and 2016 (Unaudited), and December 31, 2016

 

 

4.6 Financial Instruments in Foreign Currencies

Details of financial instruments denominated in foreign currencies translated into Korean won as of September 30, 2017 and December 31, 2016, are as follows:

 

(In millions of Korean won)   September 30, 2017  
    USD     JPY     EUR     GBP     CNY     Others     Total  

Financial Assets

             

Cash and due from financial institutions

  W 2,151,787     W 253,956     W 361,219     W 30,771     W 940,236     W 344,593     W 4,082,562  

Financial assets held for trading

    2,614,525       108,335       66,410       8,998       15,436       39,442       2,853,146  

Financial assets designated at fair value through profit or loss

    920,822       —         —         —         —         —         920,822  

Derivatives held for trading

    92,982       489       36,717       —         1,048       131,935       263,171  

Derivatives held for hedging

    8,978       —         —         —         —         —         8,978  

Loans

    11,489,516       274,068       1,210,399       9,194       704,677       243,115       13,930,969  

Available-for-sale financial assets

    6,270,229       108,726       109,562       —         40,785       65,966       6,595,268  

Held-to-maturity financial assets

    2,104,291       —         —         —         5,164       4,614       2,114,069  

Other financial assets

    2,030,367       58,264       31,640       5,207       47,174       414,482       2,587,134  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  W 27,683,497     W 803,838     W 1,815,947     W 54,170     W 1,754,520     W 1,244,147     W 33,356,119  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Financial liabilities

             

Financial liabilities designated at fair value through profit or loss

  W 1,762,569     W —       W —       W —       W —       W —       W 1,762,569  

Derivatives held for trading

    139,928       3,154       75,505       —         217       267,141       485,945  

Derivatives held for hedging

    49,612       —         —         —         —         —         49,612  

Deposits

    7,526,951       582,704       317,293       48,034       1,115,380       391,161       9,981,523  

Debts

    8,902,958       45,388       99,091       790       70,767       22,709       9,141,703  

Debentures

    3,647,842       —         —         —         —         117,343       3,765,185  

Other financial liabilities

    2,595,416       58,689       47,285       2,229       49,898       148,070       2,901,587  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  W 24,625,276     W 689,935     W 539,174     W 51,053     W 1,236,262     W 946,424     W 28,088,124  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Off-balance sheet items

  W 13,848,409     W 8,670     W 44,994     W 477     W 288,392     W 130,775     W 14,321,717  

 

33


KB Financial Group Inc. and Subsidiaries

Notes to the Consolidated Interim Financial Statements

September 30, 2017 and 2016 (Unaudited), and December 31, 2016

 

 

(In millions of Korean won)   December 31, 2016  
    USD     JPY     EUR     GBP     CNY     Others     Total  

Financial Assets

             

Cash and due from financial institutions

  W 2,562,178     W 209,264     W 353,841     W 17,224     W 601,317     W 343,825     W 4,087,649  

Financial assets held for trading

    1,078,304       123,733       2,927       —         6,275       —         1,211,239  

Financial assets designated at fair value through profit or loss

    458,422       —         —         —         —         —         458,422  

Derivatives held for trading

    84,938       13       24,616       —         —         90,626       200,193  

Derivatives held for hedging

    5,917       —         —         —         —         —         5,917  

Loans

    10,824,626       342,100       895,208       5,799       552,966       180,445       12,801,144  

Available-for-sale financial assets

    2,214,244       150,510       —         —         35,873       1,033       2,401,660  

Held-to-maturity financial assets

    1,148,075       —         —         —         —         —         1,148,075  

Other financial assets

    930,606       245,827       35,981       30,793       176,833       648,089       2,068,129  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  W 19,307,310     W 1,071,447     W 1,312,573     W 53,816     W 1,373,264     W 1,264,018     W 24,382,428  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Financial liabilities

             

Financial liabilities designated at fair value through profit or loss

  W 457,766     W —       W —       W —       W —       W —       W 457,766  

Derivatives held for trading

    105,918       —         129,349       —         —         315,403       550,670  

Derivatives held for hedging

    63,634       —         —         —         —         —         63,634  

Deposits

    7,259,601       597,173       457,447       52,710       791,825       399,683       9,558,439  

Debts

    7,273,597       169,507       83,105       279       85,123       37,491       7,649,102  

Debentures

    3,830,709       —         —         —         —         —         3,830,709  

Other financial liabilities

    1,453,669       52,275       534,224       1,429       176,382       294,933       2,512,912  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  W 20,444,894     W 818,955     W 1,204,125     W 54,418     W 1,053,330     W 1,047,510     W 24,623,232  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Off-balance sheet items

  W 14,570,708     W 822     W 39,000     W —       W 131,210     W 470,900     W 15,212,640  

 

34


KB Financial Group Inc. and Subsidiaries

Notes to the Consolidated Interim Financial Statements

September 30, 2017 and 2016 (Unaudited), and December 31, 2016

 

 

5. Segment Information

5.1 Overall Segment Information and Business Segments

The Group classifies reporting segments based on the nature of the products and services provided, the type of customer, and the Group’s management organization.

 

Banking Business

  

Corporate Banking

  

The activities within this segment include providing credit, deposit products and other related financial services to large, small and medium-sized enterprises and SOHOs.

  

Retail Banking

  

The activities within this segment include providing credit, deposit products and other related financial services to individuals and households.

  

Other Banking Services

  

The activities within this segment include trading activities in securities and derivatives, funding and other supporting activities.

Securities Business

  

The activities within this segment include investment banking, brokerage services and other supporting activities.

Non-life Insurance Business

  

The activities within this segment include non-life insurance and other supporting activities.

Credit Card Business

  

The activities within this segment include credit sale, cash service, card loan and other supporting activities.

Life Insurance Business    The activities within this segment include life insurance and other supporting activities.

 

35


KB Financial Group Inc. and Subsidiaries

Notes to the Consolidated Interim Financial Statements

September 30, 2017 and 2016 (Unaudited), and December 31, 2016

 

 

Financial information by business segment for the nine-month period ended September 30, 2017, is as follows:

 

(In millions of Korean won)   Banking business        
    Corporate
Banking
    Retail
Banking
    Other
Banking
Services
    Sub-total     Securities     Non-life
Insurance
    Credit Card     Life
Insurance
    Others     Intra-group
Adjustments
    Total  

Operating income from external customers

  W 1,540,637     W 1,975,075     W 1,018,774     W 4,534,486     W 776,699     W 776,147     W 983,395     W 108,223     W 265,964     W —       W 7,444,914  

Intra-segment operating income(expenses)

    14,541       —         159,834       174,375       (1,480     (2,827     (158,140     (24,492     136,914       (124,350     —    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  W 1,555,178     W 1,975,075     W 1,178,608     W 4,708,861     W 775,219     W 773,320     W 825,255     W 83,731     W 402,878     W (124,350   W 7,444,914  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net interest income

    1,889,344       1,951,413       131,750       3,972,507       218,320       303,702       804,769       161,838       222,837       2,999       5,686,972  

Interest income

    2,637,264       2,902,057       587,937       6,127,258       369,167       303,787       994,913       161,859       430,958       (9,208     8,378,734  

Interest expense

    (747,920     (950,644     (456,187     (2,154,751     (150,847     (85     (190,144     (21     (208,121     12,207       (2,691,762

Net fee and commission income

    175,031       435,904       299,057       909,992       395,179       (62,798     109,245       (2,696     181,665       (8,411     1,522,176  

Fee and commission income

    233,257       486,852       370,581       1,090,690       457,004       783       1,406,877       55       216,436       (241,393     2,930,452  

Fee and commission expense

    (58,226     (50,948     (71,524     (180,698     (61,825     (63,581     (1,297,632     (2,751     (34,771     232,982       (1,408,276

Net insurance income

    —         —         —         —         —         472,604       16,108       (102,296     —         13,531       399,947  

Insurance income

    —         —         —         —         —         5,347,661       27,577       763,447       —         (8,119     6,130,566  

Insurance expenses

    —         —         —         —         —         (4,875,057     (11,469     (865,743     —         21,650       (5,730,619

Net gains (losses) on financial assets/ liabilities at fair value through profit or loss

    (307     —         110,293       109,986       270,122       14,138       —         5,948       21,082       5,063       426,339  

Net other operating income (expense)

    (508,890     (412,242     637,508       (283,624     (108,402     45,674       (104,867     20,937       (22,706     (137,532     (590,520

General and administrative expenses

    (646,961     (1,269,055     (500,156     (2,416,172     (547,338     (395,360     (277,119     (53,355     (202,338     95,047       (3,796,635

Operating profit before provision for credit losses

    908,217       706,020       678,452       2,292,689       227,881       377,960       548,136       30,376       200,540       (29,303     3,648,279  

Provision (reversal) for credit losses

    (84,560     (83,989     (504     (169,053     (22,327     (8,996     (239,374     (690     (39,486     38       (479,888

 

36


KB Financial Group Inc. and Subsidiaries

Notes to the Consolidated Interim Financial Statements

September 30, 2017 and 2016 (Unaudited), and December 31, 2016

 

 

Net operating income

    823,657       622,031       677,948       2,123,636       205,554       368,964       308,762       29,686       161,054       (29,265     3,168,391  

Share of profit of associates

    —         —         31,186       31,186       213       —         (306     —         5,521       41,505       78,119  

Net other non-operating income (expense)

    1,954       —         37,126       39,080       11,160       8,710       (5,948     (145     7,128       105,297       165,282  

Segment profits before income tax

    825,611       622,031       746,260       2,193,902       216,927       377,674       302,508       29,541       173,703       117,537       3,411,792  

Income tax expense

    (200,203     (150,532     (1,904     (352,639     (56,870     (96,298     (68,625     (6,267     (53,303     11,950       (622,052

Profit for the period

    625,408       471,499       744,356       1,841,263       160,057       281,376       233,883       23,274       120,400       129,487       2,789,740  

Profit attributable to shareholders of the Parent Company

    625,408       471,499       744,356       1,841,263       160,057       281,277       233,883       23,274       120,746       97,186       2,757,686  

Profit attributable to non-controlling interests

    —         —         —         —         —         99       —         —         (346     32,301       32,054  

Total assets1

    117,323,006       126,259,223       83,025,035       326,607,264       37,654,142       31,893,630       17,348,777       9,070,957       37,245,333       (27,011,628     432,808,475  

Total liabilities1

    99,399,883       146,200,043       55,953,563       301,553,489       33,326,871       28,670,658       13,391,307       8,518,145       14,642,014       (1,021,211     399,081,273  

 

1  Assets and liabilities of the reporting segments are amounts before intra-segment transaction adjustment.

 

37


KB Financial Group Inc. and Subsidiaries

Notes to the Consolidated Interim Financial Statements

September 30, 2017 and 2016 (Unaudited), and December 31, 2016

 

 

Financial information by business segment for the nine-month period ended September 30, 2016, is as follows:

 

(In millions of
Korean won)
  Banking business        
    Corporate
Banking
    Retail
Banking
    Other
Banking
Services
    Sub-total     Investment &
Securities
    Credit Card     Life
Insurance
    Others     Intra-group
Adjustments
    Total  

Operating income from external customers

  W 1,308,935     W 1,651,337     W 1,167,521     W 4,127,793     W 154,489     W 932,206     W 110,101     W 315,512     W —       W 5,640,101  

Intra-segment operating income(expenses)

    21,422       —         174,014       195,436       3,622       (189,911     (20,771     138,218       (126,594     —    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  W 1,330,357     W 1,651,337     W 1,341,535     W 4,323,229     W 158,111     W 742,295     W 89,330     W 453,730     W (126,594   W 5,640,101  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net interest income

    1,694,006       1,730,376       105,250       3,529,632       7,945       727,355       176,530       209,961       263       4,651,686  

Interest income

    2,458,404       2,793,447       651,365       5,903,216       33,023       942,872       176,549       367,834       (11,029     7,412,465  

Interest expense

    (764,398     (1,063,071     (546,115     (2,373,584     (25,078     (215,517     (19     (157,873     11,292       (2,760,779

Net fee and commission income

    176,769       387,885       254,679       819,333       79,723       52,363       (174     157,833       (1,038     1,108,040  

Fee and commission income

    218,539       444,502       316,331       979,372       85,859       1,223,167       75       186,057       (217,934     2,256,596  

Fee and commission expense

    (41,770     (56,617     (61,652     (160,039     (6,136     (1,170,804     (249     (28,224     216,896       (1,148,556

Net insurance income

    —         —         —         —         —         15,946       (125,670     —         21,316       (88,408

Insurance income

    —         —         —         —         —         26,091       904,538       —         —         930,629  

Insurance expenses

    —         —         —         —         —         (10,145     (1,030,208     —         21,316       (1,019,037

Net gains(losses) on financial assets/ liabilities at fair value through profit or loss

    (5,393     —         24,354       18,961       79,472       —         6,212       18,806       (5,561     117,890  

Net other operating income(expense)

    (535,025     (466,924     957,252       (44,697     (9,029     (53,369     32,432       67,130       (141,574     (149,107

General and administrative expenses

    (561,960     (1,264,757     (723,146