6-K 1 d538255d6k.htm FORM 6-K Form 6-K
Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

Form 6-K

 

 

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16

UNDER THE SECURITIES EXCHANGE ACT OF 1934

For the month of April 2018

Commission File Number: 000-53445

 

 

KB Financial Group Inc.

(Translation of registrant’s name into English)

 

 

26, Gukjegeumyung-ro 8-gil, Yeongdeungpo-gu, Seoul 07331, Korea

(Address of principal executive office)

 

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

Form 20-F  ☒             Form 40-F  ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):  ☐

Note: Regulation S-T Rule 101(b)(1) only permits the submission in paper of a Form 6-K if submitted solely to provide an attached annual report to security holders.

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):  ☐

Note: Regulation S-T Rule 101(b)(7) only permits the submission in paper of a Form 6-K if submitted to furnish a report or other document that the registrant foreign private issuer must furnish and make public under the laws of the jurisdiction in which the registrant is incorporated, domiciled or legally organized (the registrant’s “home country”), or under the rules of the home country exchange on which the registrant’s securities are traded, as long as the report or other document is not a press release, is not required to be and has not been distributed to the registrant’s security holders, and, if discussing a material event, has already been the subject of a Form 6-K submission or other Commission filing on EDGAR.

 

 

 


Table of Contents

TABLE OF CONTENTS

 

1.

 

Introduction to the Company

  

1.1.

 

Business Purpose

  

1.2.

 

History

  

1.3.

 

Overview of the Business Group

  

1.4.

 

Capital Structure

  

1.5.

 

Dividends

  

2.

 

Business

  

2.1.

 

Results of Operations

  

2.2.

 

Sources and Uses of Funds

  

2.3.

 

Other Information to Consider in Making an Investment Decision

  

3.

 

Financial Information

  

3.1.

 

Consolidated Condensed Financial Information

  

3.2.

 

Separate Condensed Financial Information

  

3.3.

 

Other Selected Financial Data

  

3.4.

 

Other Financial Information

  

4.

 

Independent Public Accountants

  

4.1.

 

Audit/ Review Services

  

4.2.

 

Public Company Accounting Oversight Board (“PCAOB”) Audit Services

  

5.

 

Corporate Governance and Affiliated Companies

  

5.1.

 

Board of Directors & Committees under the Board

  

5.2.

 

Audit Committee

  

5.3.

 

Compensation to Directors

  

5.4.

 

Affiliated Companies

  

6.

 

Directors, Senior Management and Employees

  

6.1.

 

Executive Directors

  

6.2.

 

Non-standing Directors

  

6.3.

 

Non-executive Directors

  

6.4.

 

Senior Management

  

6.5.

 

Employees

  

7.

 

Major Shareholders and Related Party Transactions

  

7.1.

 

Major Shareholders

  

7.2.

 

Changes in the Largest Shareholder

  

7.3.

 

Employee Stock Ownership Association

  

7.4.

 

Investments in Affiliated Companies

  

7.5.

 

Related Party Transactions

  


Table of Contents

Summary of Business Report for Fiscal Year 2017

On April 2, 2018, KB Financial Group Inc. (“KB Financial Group”) filed its business report for the fiscal year ended December 31, 2017 (the “Business Report”) with the Financial Services Commission of Korea and the Korea Exchange. This is a summary of the Business Report translated into English.

Except where indicated otherwise, financial information contained in this summary have been prepared in accordance with the Korean equivalent of International Financial Reporting Standards (“K-IFRS”), which differ in certain important respects from generally accepted accounting principles in the United States.

All references to “KB Financial Group,” “we,” “us” or the “Company” are to KB Financial Group and, unless the context requires otherwise, its subsidiaries. In addition, all references to “Won” or “KRW” in this document are to the currency of the Republic of Korea.


Table of Contents
1. Introduction to the Company

 

1.1. Business Purpose

KB Financial Group is a financial holding company that was established in September 2008. Its main business purpose is to hold shares in companies that are engaged in financial or related services, as well as govern and manage such companies. Its consolidated subsidiaries are primarily engaged in the banking business, as well as the credit card business, the financial investment business, the insurance business and other related businesses.

 

1.2. History

 

    September 26, 2008

Obtained final approval from the Financial Services Commission to establish a financial holding company

 

    September 29, 2008

Establishment of the Company through a comprehensive stock transfer and listing on the New York Stock Exchange

 

    October 10, 2008

Listing on the Korea Exchange

 

    October 20, 2008

The largest shareholder of the Company changed from the Korean National Pension Service to ING Bank N.V.

 

    October 31, 2008

The largest shareholder of the Company changed from ING Bank N.V. to the Korean National Pension Service

 

    May 4, 2009

Added Kookmin Bank Cambodia PLC as a second-tier subsidiary

 

    June 22, 2009

Added KB Life Insurance Co., Ltd. (“KB Life Insurance”), formerly a second-tier subsidiary, as a first-tier subsidiary

 

    September 28, 2009

Added Burrill-KB Life Sciences Fund Ltd. as a second-tier subsidiary

 

    December 1, 2009

Added KB-Glenwood Private Equity Fund No. 1 as a second-tier subsidiary

 

    January 22, 2010

The largest shareholder of the Company changed from the Korean National Pension Service to ING Bank N.V.

 

    July 6, 2010

Added KBIC Private Equity Fund No. 3 as a second-tier subsidiary

 

    December 13, 2010

Added KoFC KBIC Frontier Champ 2010-5 PEF as a second-tier subsidiary


Table of Contents
    March 2, 2011

Added KB Kookmin Card Co., Ltd. as a first-tier subsidiary

 

    March 14, 2011

KB Futures Co., Ltd. was merged into KB Investment & Securities Co., Ltd. (“KB Investment & Securities”)

 

    July 8, 2011

The largest shareholder of the Company changed from ING Bank N.V. to the Korean National Pension Service

 

    November 12, 2011

Closed KB Investment & Securities Hong Kong Ltd.

 

    January 13, 2012

Added KB Savings Bank Co., Ltd. (“KB Savings Bank”) as a first-tier subsidiary

 

    May 11, 2012

Added KoFC POSCO HANWHA KB Shared Growth No. 2. Private Equity Fund as a second-tier subsidiary

 

    June 8, 2012

Liquidated Burrill-KB Life Sciences Fund Ltd.

 

    July 2, 2012

Added KoFC Value-up Private Equity Fund as a second-tier subsidiary

 

    October 10, 2012

Added Kookmin Bank (China) Ltd. as a second-tier subsidiary

 

    June 20, 2013

Acquired the remaining shares of KB Life Insurance, which increased the Company’s shareholding to 100%

 

    September 2, 2013

Added Yehansoul Savings Bank as a first-tier subsidiary

 

    January 13, 2014

Yehansoul Savings Bank was merged into KB Savings Bank

 

    March 20, 2014

Added KB Capital Co., Ltd. (“KB Capital”) as a first-tier subsidiary

 

    July 2, 2014

Added Korea GCC Global Cooperation Private Equity Fund as a second-tier subsidiary

 

    June 24, 2015

Added KB Insurance Co., Ltd. (“KB Insurance”) as a non-consolidated first-tier subsidiary.

 

    November 23, 2015

Acquired additional shares of KB Insurance, which increased the Company’s shareholding from 19.47% to 33.29%.

 

    May 31, 2016

Added Hyundai Securities Co., Ltd. (“Hyundai Securities”) as a non-consolidated first-tier subsidiary


Table of Contents
    June 21, 2016

Disposed of LIG Investment & Securities, Co., Ltd., a second-tier subsidiary

 

    June 28, 2016

Acquired treasury shares of Hyundai Securities, which increased the Company’s equity ownership in Hyundai Securities from 22.56% to 29.62%

 

    September 9, 2016

Liquidated NPS-KBIC No. 1 Private Equity Fund

 

    November 29, 2016

Established KB Golden Life Care Co., Ltd. as a second-tier subsidiary

 

    December 22, 2016

Established KB Private Equity Fund III as a second-tier subsidiary

 

    December 30, 2016

Purchased new shares of KB Insurance in a rights offering, which increased the Company’s shareholding in KB Insurance from 33.29% to 39.81%

 

    December 30, 2016

Merged KB Investment & Securities with and into Hyundai Securities, with Hyundai Securities as the surviving entity, then changed its name to KB Securities Co., Ltd. (“KB Securities”)

 

    February 8, 2017

Added KB KOLAO LEASING Co., Ltd. as a second-tier subsidiary

 

    March 8, 2017

Added KB Microfinance Myanmar Co., Ltd. as a second-tier subsidiary

 

    March 22, 2017

Liquidated KBIC Private Equity Fund No. 3, a second-tier subsidiary

 

    May 19, 2017

Conducted a tender offer, which increased the Company’s shareholding in KB Insurance from 39.81% to 94.30%.

 

    May 19, 2017

Conducted a tender offer, which increased the Company’s shareholding in KB Capital from 52.02% to 79.70%

 

    July 7, 2017

Converted KB Insurance and KB Capital into wholly-owned subsidiaries of the Company through comprehensive stock swaps

 

    September 29, 2017

Added KB Asset Management Singapore Pte. Ltd. as a second-tier subsidiary (changed from a second-tier subsidiary of KB Securities to a first-tier subsidiary of KB Asset Management Co., Ltd.)

 

    October 9, 2017

Added Maritime Securities Incorporation as a second-tier subsidiary

 

    October 16, 2017

Disposed of Hyundai Savings Bank, Co., Ltd., a second-tier subsidiary

 

    December 22, 2017

Disposed of Hyundai Asset Management, Co., Ltd., a second-tier subsidiary


Table of Contents
1.3. Overview of the Business Group

 

          (As of December 31, 2017)

Type

  

Name of Company

  

Controlling Company

  

Remarks

Holding Company

   KB Financial Group    -    Listed

1st Tier Subsidiaries

   Kookmin Bank    KB Financial Group    Not listed
   KB Securities Co., Ltd.    KB Financial Group    Not listed
   KB Insurance Co., Ltd.    KB Financial Group    Not listed
   KB Kookmin Card Co., Ltd.    KB Financial Group    Not listed
   KB Life Insurance Co., Ltd.    KB Financial Group    Not listed
   KB Asset Management Co., Ltd.    KB Financial Group    Not listed
   KB Capital Co., Ltd.    KB Financial Group    Not listed
   KB Savings Bank Co., Ltd.    KB Financial Group    Not listed
   KB Real Estate Trust Co., Ltd.    KB Financial Group    Not listed
   KB Investment Co., Ltd.    KB Financial Group    Not listed
   KB Credit Information Co., Ltd.    KB Financial Group    Not listed
   KB Data Systems Co., Ltd.    KB Financial Group    Not listed

2nd Tier Subsidiaries

   Kookmin Bank International Ltd.    Kookmin Bank    Not listed (Overseas)
   Kookmin Bank Cambodia PLC    Kookmin Bank   

Not listed

(Overseas)

   Kookmin Bank (China) Ltd.    Kookmin Bank   

Not listed

(Overseas)

   KB Microfinance Myanmar Co., Ltd.    Kookmin Bank   

Not listed

(Overseas)

   KBFG Securities America Inc.    KB Securities   

Not listed

(Overseas)

   KB Securities Hong Kong Ltd.    KB Securities   

Not listed

(Overseas)

   Hyundai-Tongyang Agrifood Private Equity Fund    KB Securities    Not listed
   Keystone-Hyundai Securities No. 1 Private Equity Fund    KB Securities    Not listed
   KB-IGen Private Equity Fund No.1    KB Securities    Not listed
   KB Private Equity Fund III    KB Securities    Not listed
   Maritime Securities Incorporation    KB Securities   

Not listed

(Overseas)

   KB Claims Survey & Adjusting Co., Ltd.    KB Insurance    Not listed
   KB Sonbo CNS    KB Insurance    Not listed
   Leading Insurance Services, Inc.    KB Insurance   

Not listed

(Overseas)

   LIG Insurance (China) Co., Ltd.    KB Insurance   

Not listed

(Overseas)

   PT. Kookmin Best Insurance Indonesia    KB Insurance   

Not listed

(Overseas)

   KB Golden Life Care Co., Ltd.    KB Insurance    Not listed
   KB Asset Management Singapore Pte. Ltd.    KB Asset Management   

Not listed

(Overseas)

   KB KOLAO LEASING Co., Ltd.    KB Capital   

Not listed

(Overseas)

   KoFC KBIC Frontier Champ 2010-5 PEF    KB Investment    Not listed
   KoFC POSCO HANWHA KB Shared Growth No. 2. Private Equity Fund    KB Investment    Not listed
   KoFC Value-up Private Equity Fund    KB Investment    Not listed


Table of Contents
1.4. Capital Structure

 

  1.4.1. Common Shares

Changes in Capital

 

(As of December 31, 2017)    (Unit: Won, shares)

 

Issue Date

   Type    Number of Shares      Par Value      Issue Price     

Remarks

September 29, 2008

   Common Stock      356,351,693        5,000        48,444      Establishment of the Company

September 2, 2009

   Common Stock      30,000,000        5,000        37,250      Rights offering to existing
shareholders; % increase in
number of common shares:
8.41865%

October 19, 2016

   Common Stock      31,759,844        5,000        35,474      Stock Swap; % increase in
number of common shares:
8.22045%

Number of Shares

 

(As of December 31, 2017)    (Unit: shares)  
     Type  
     Common Stock      Other Stock      Total  

Shares Authorized for Issuance

     1,000,000,000        —          1,000,000,000  

Shares Issued (A)

     418,111,537        —          418,111,537  

Treasury Stock (B) *

     18,773,954        —          18,773,954  

Shares Outstanding (A-B)

     399,337,583        —          399,337,583  

Note: The board of directors of the Company resolved to enter into a trust agreement to acquire treasury shares on February 4, 2016, August 2, 2016 and November 24, 2017. For more information, please refer to the Company’s reports on Form 6-K furnished to the Securities and Exchange Commission on each respective date.

 

* As of March 31, 2018, the Company held an aggregate of 21,877,863 shares of common stock as treasury shares which were acquired pursuant to trust agreements.

 

  1.4.2. Voting Rights

 

(As of December 31, 2017)                 

Items

        Number of Shares      Notes

Total number of issued shares

   Common shares      418,111,537      —  
   Preferred      —        —  

Shares without voting rights

   Common shares      18,773,954      Treasury shares
   Preferred      —        —  

Shares for which voting rights cannot be exercised pursuant to the Articles of Incorporation

   —        —        —  

Shares for which voting rights are restricted under relevant laws and regulations

   —        —        —  
   —        —        —  

Shares with restored voting rights

   —        —        —  

Total shares for which voting rights may be exercised

   Common shares      399,337,583      —  
   —        —        —  


Table of Contents
1.5. Dividends

 

        (Unit: in millions of Won, except per share amount)  

Items

  January 1, 2017 to
December 31, 2017
    January 1, 2016 to
December 31, 2016
    January 1, 2015 to
December 31, 2015
 

Par value per share (Won)

    5,000       5,000       5,000  

(Consolidated) Net income

    3,311,438       2,143,744       1,698,318  

(Consolidated) Earnings per share (Won)

    8,305       5,588       4,396  
   

 

 

   

 

 

   

 

 

 

Total cash dividends

    766,728       497,969       378,625  
   

 

 

   

 

 

   

 

 

 

Total stock dividends

    —         —         —    
   

 

 

   

 

 

   

 

 

 

(Consolidated) Cash dividend payout ratio (%)

    23.2       23.2       22.3  

Cash dividend yield (%)

  Common Shares     3.1       2.9       2.9  
  —       —         —         —    

Stock dividend yield (%)

  Common Shares     —         —         —    
  —       —         —         —    

Cash dividend per share (Won)

  Common Shares     1,920       1,250       980  
  —       —         —         —    

Stock dividend per share

  Common Shares     —         —         —    
  —       —         —         —    


Table of Contents
2. Business

 

2.1. Results of Operations

 

       (Unit: in millions of Won)  
     For the year ended      For the year ended      For the year ended  
     December 31, 2017      December 31, 2016      December 31, 2015  

Net interest income

     7,710,009        6,402,529        6,203,199  

Interest income

     11,382,452        10,021,882        10,375,823  

Interest expense

     (3,672,443      (3,619,353      (4,172,624

Net fee and commission income

     2,050,024        1,584,892        1,534,983  

Fee and commission income

     3,988,250        3,150,877        2,971,095  

Fee and commission expense

     (1,938,226      (1,565,985      (1,436,112

Net insurance income

     593,710        (117,803      (105,614

Insurance income

     8,970,992        1,201,352        1,373,373  

Insurance expense

     (8,377,282      (1,319,155      (1,478,987

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

     740,329        (8,768      359,727  

Net other operating expenses

     (901,890      (415,908      (610,346

General and administrative expenses

     (5,628,664      (5,228,711      (4,523,584

Operating profit before provision for credit losses

     4,563,518        2,216,231        2,858,365  

Provision for credit losses

     (548,244      (539,283      (1,037,231

Net operating profit

     4,015,274        1,676,948        1,821,134  

Note: Based on K-IFRS (on a consolidated basis).


Table of Contents
2.2. Sources and Uses of Funds

2.2.1. Sources of Funds

 

(Unit: in millions of Won)  
        For the year ended
December 31, 2017
    For the year ended
December 31, 2016
    For the year ended
December 31, 2015
 
        Average
Balance
    Interest Rate
(%)
    Ratio
(%)
    Average
Balance
    Interest Rate
(%)
    Ratio
(%)
    Average
Balance
    Interest Rate
(%)
    Ratio
(%)
 

Won Currency

 

Deposits

    219,970,681       1.20       54.26       207,194,480       1.32       60.76       193,725,814       1.69       62.62  
 

Certificate of deposit

    2,862,817       1.57       0.71       3,386,647       1.65       0.99       3,645,078       1.92       1.18  
 

Borrowings

    9,306,125       1.41       2.30       6,803,292       1.54       2.00       5,709,025       1.88       1.85  
 

Call money

    2,165,151       1.26       0.53       1,414,780       1.35       0.41       2,009,387       1.66       0.65  
 

Debentures

    36,393,274       2.17       8.98       30,075,804       2.49       8.82       27,365,637       2.78       8.85  
 

Other

    13,735,978       1.41       3.38       7,700,215       1.45       2.26       4,763,806       2.03       1.53  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Subtotal

      284,434,026       1.35       70.16       256,575,218       1.47       75.24       237,218,747       1.83       76.68  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Foreign Currency

 

Deposits

    10,156,743       0.80       2.51       8,713,640       0.53       2.56       6,183,499       0.52       2.00  
 

Borrowings

    6,438,408       1.17       1.59       5,644,047       0.78       1.66       6,121,121       0.46       1.98  
 

Call money

    1,239,627       1.39       0.31       1,161,517       0.72       0.34       1,007,103       0.28       0.33  
 

Debentures

    3,374,998       2.71       0.83       4,139,036       2.55       1.21       3,520,324       3.00       1.14  
 

Other

    321,263       0.56       0.07       222,098       0.94       0.06       163,462       1.31       0.05  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Subtotal

      21,531,039       1.24       5.31       19,880,338       1.04       5.83       16,995,509       1.01       5.50  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other

 

Total shareholders’ equity

    34,785,839       —         8.58       30,308,008       —         8.89       28,252,594       —         9.13  
 

Allowances

    829,075       —         0.20       748,594       —         0.22       787,604       —         0.25  
 

Other

    63,855,888       —         15.75       33,476,080       —         9.82       26,126,546       —         8.44  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Subtotal

      99,470,802       —         24.53       64,532,682       —         18.93       55,166,744       —         17.82  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

      405,435,867       —         100.00       340,988,238       —         100.00       309,381,000       —         100.00  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Note:     Based on K-IFRS (on a consolidated basis).


Table of Contents

2.2.2. Uses of Funds

 

(Unit: in millions of Won)  
        For the year ended
December 31, 2017
    For the year ended
December 31, 2016
    For the year ended
December 31, 2015
 
        Average
Balance
    Interest Rate
(%)
    Ratio
(%)
    Average
Balance
    Interest Rate
(%)
    Ratio
(%)
    Average
Balance
    Interest Rate
(%)
    Ratio
(%)
 

Won Currency

  Due from banks     6,757,757       1.44       1.67       6,075,873       1.52       1.78       7,197,739       1.83       2.33  
  Securities     80,406,670       1.81       19.83       55,999,995       2.12       16.42       45,372,914       3.22       14.67  
  Loans     247,117,982       3.28       60.95       225,153,667       3.15       66.03       207,499,414       3.48       67.07  
  Guarantee payments under payment guarantee     17,008       0.66       —         28,005       1.16       0.01       32,644       1.19       0.01  
  Call loan     315,950       1.28       0.08       399,843       1.43       0.12       314,179       1.79       0.10  
  Private placement corporate bonds     1,801,681       4.00       0.44       1,081,692       3.99       0.32       830,676       3.81       0.27  
  Credit cards     14,877,741       8.32       3.67       12,823,200       8.66       3.76       11,904,279       9.03       3.85  
  Other     4,123,143       3.87       1.02       5,061,229       4.96       1.48       7,154,906       5.15       2.31  
  Allowance     (2,116,366     —         (0.52     (2,182,313     —         (0.64     (2,316,563     —         (0.75
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Subtotal

      353,301,566       3.15       87.14       304,441,191       3.21       89.28       277,990,188       3.70       89.86  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Foreign Currency

  Due from banks     2,862,165       1.06       0.71       2,553,722       0.75       0.75       1,782,048       1.12       0.58  
  Securities     10,013,637       3.19       2.47       3,792,545       2.61       1.11       1,285,058       2.06       0.42  
  Loans     7,136,381       2.29       1.76       8,125,102       1.76       2.38       9,009,829       1.52       2.91  
  Call loan     2,909,920       1.53       0.72       2,220,839       0.65       0.65       1,435,461       0.33       0.46  
  Bills bought     3,166,307       1.51       0.78       2,768,692       1.30       0.81       2,728,557       1.10       0.88  
  Allowance     (173,771     —         (0.04     (328,130     —         (0.10     (234,422     —         (0.08
  Other     72,297       —         0.01       24,789       —         0.02       3,143       —         —    
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Subtotal

      25,986,936       2.35       6.41       19,157,559       1.64       5.62       16,009,674       1.37       5.17  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other

  Cash     1,726,448       —         0.43       1,724,701       —         0.51       1,715,237       —         0.55  
  Fixed assets held for business     5,826,159       —         1.44       3,464,031       —         1.02       3,230,133       —         1.04  
  Other     18,594,758       —         4.58       12,200,756       —         3.57       10,435,768       —         3.38  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Subtotal

    26,147,365       —         6.45       17,389,488       —         5.10       15,381,138       —         4.97  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

    405,435,867       —         100.00       340,988,238       —         100.00       309,381,000       —         100.00  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Note:     Based on K-IFRS (on a consolidated basis).


Table of Contents
2.3. Other Information to Consider in Making an Investment Decision

2.3.1. Capital Adequacy

 

KB Financial Group – Capital Adequacy Ratio                (Unit: in billions of Won, %)  
     As of December 31, 2017     As of December 31, 2016     As of December 31, 2015  

Total Capital (A)

     32,402       31,103       29,140  

Risk-weighted assets (B)

     212,777       203,649       188,213  

BIS ratio (A/B)

     15.23     15.27     15.48

*Note: Calculated in accordance with Basel III

Kookmin Bank – Capital Adequacy Ratio

 

Kookmin Bank – Capital Adequacy Ratio                (Unit: in billions of Won, %)  
     As of December 31, 2017     As of December 31, 2016     As of December 31, 2015  

Total Capital (A)

     25,914       24,579       23,686  

Risk-weighted assets (B)

     161,825       150,649       147,973  

BIS ratio (A/B)

     16.01     16.32     16.01

*Note: Calculated in accordance with Basel III

 

KB Securities – Net Capital Ratio                (Unit: in billions of Won, %)  
     As of December 31, 2017     As of December 31, 2016     As of December 31, 2015  

Net Operating Capital (A)

     3,211       2,844       1,815  

Total amount at risk (B)

     1,048       866       686  

Maintenance equity margin (C)

     134       134       269  

Net capital ratio (A-B)/(C)

     1,609.03     1,471.73     419.94

Capital surplus (A-B)

     2,163       1,978       1,129  

*Note: Amended calculation standards went into effect in January 2015

 

KB Insurance – Risk-based Capital (“RBC”) Ratio                (Unit: in billions of Won, %)  
     As of December 31,  2017(1)     As of December 31,  2016(1)     As of December 31, 2015  

Available capital (A)

     3,080       2,774       2,379  

Required capital (B)

     1,618       1,644       1,398  

RBC ratio(2) (A/B)

     190.3     168.7     170.2

 

(1) Figures as of December 31, 2017 and December 31, 2016 are on a consolidated basis
(2) RBC ratio = available capital / required capital x 100%


Table of Contents

2.3.2. Credit Ratings

 

 

(As of December 31, 2017)

Date of Rating

  

Type

  

Credit Rating

  

Rating Company

(Rating Range)

6/5/2015    Debentures    AAA   

Korea Ratings (AAA ~ D) / KIS Ratings (AAA ~ D) /

NICE Investors Service (AAA ~ D)

9/16/2015    Debentures    AAA   

Korea Ratings (AAA ~ D) / KIS Ratings (AAA ~ D) /

NICE Investors Service (AAA ~ D)

11/18/2015    Commercial Paper    A1   

Korea Ratings (A1 ~ D) / KIS Ratings (A1 ~ D) /

NICE Investors Service (A1 ~ D)

11/25/2015    Debentures    AAA   

Korea Ratings (AAA ~ D) / KIS Ratings (AAA ~ D) /

NICE Investors Service (AAA ~ D)

5/11/2016    Debentures    AAA   

Korea Ratings (AAA ~ D) / KIS Ratings (AAA ~ D) /

NICE Investors Service (AAA ~ D)

6/24/2016    Debentures    AAA   

Korea Ratings (AAA ~ D) / KIS Ratings (AAA ~ D) /

NICE Investors Service (AAA ~ D)

6/30/2016    Commercial Paper    A1   

Korea Ratings (A1 ~ D) / KIS Ratings (A1 ~ D) /

NICE Investors Service (A1 ~ D)

7/22/2016    Debentures    AAA   

Korea Ratings (AAA ~ D) / KIS Ratings (AAA ~ D) /

NICE Investors Service (AAA ~ D)

8/24/2016    Debentures    AAA   

Korea Ratings (AAA ~ D) / KIS Ratings (AAA ~ D) /

NICE Investors Service (AAA ~ D)

11/25/2016    Debentures    AAA   

Korea Ratings (AAA ~ D) / KIS Ratings (AAA ~ D) /

NICE Investors Service (AAA ~ D)

1/24/2017    Debentures    AAA   

Korea Ratings (AAA ~ D) / KIS Ratings (AAA ~ D) /

NICE Investors Service (AAA ~ D)

2/24/2017    Debentures    AAA   

Korea Ratings (AAA ~ D) / KIS Ratings (AAA ~ D) /

NICE Investors Service (AAA ~ D)

4/5/2017    Debentures    AAA   

Korea Ratings (AAA ~ D) / KIS Ratings (AAA ~ D) /

NICE Investors Service (AAA ~ D)

5/23/2017    Debentures    AAA   

Korea Ratings (AAA ~ D) / KIS Ratings (AAA ~ D) /

NICE Investors Service (AAA ~ D)

6/23/2017    Debentures    AAA   

Korea Ratings (AAA ~ D) / KIS Ratings (AAA ~ D) /

NICE Investors Service (AAA ~ D)

6/23/2017    Commercial Paper    A1   

Korea Ratings (A1 ~ D) / KIS Ratings (A1 ~ D) /

NICE Investors Service (A1 ~ D)

8/28/2017    Debentures    AAA   

Korea Ratings (AAA ~ D) / KIS Ratings (AAA ~ D) /

NICE Investors Service (AAA ~ D)

2.3.3. Early Retirement Program

To enhance productivity by improving its labor structure, Kookmin Bank implemented a voluntary early retirement program following negotiations with its labor union.

 

Date of retirement

  

Number of retired persons

January 23, 2017    2,795
January 19, 2018    407


Table of Contents

2.3.4. Material Events Following the End of the Reporting Period

On March 20, 2018, Kookmin Bank changed its headquarters’ address from 84, Namdaemoon-ro, Jung-gu, Seoul 04534, Korea to 26, Gukjegeumyung-ro 8-gil, Yeongdeunpo-gu, Seoul 07331, Korea.


Table of Contents
3. Financial Information

 

3.1. Consolidated Condensed Financial Information

3.1.1. Consolidated Statements of Financial Position

 

          (Unit: in millions of Won)  
    As of December 31, 2017     As of December 31, 2016     As of December 31, 2015  

Cash and due from financial institutions

    19,817,825       17,884,863       16,316,066  

Financial assets at fair value through profit or loss

    32,227,345       27,858,364       11,174,064  

Derivative financial assets

    3,310,166       3,381,935       2,278,112  

Loans

    290,122,838       265,486,134       245,005,370  

Financial investments

    66,608,243       45,147,797       39,136,759  

Investments in associates

    335,070       1,770,673       1,737,840  

Property and equipment

    4,201,697       3,627,268       3,287,383  

Investment property

    848,481       755,011       211,815  

Intangible assets

    2,943,060       652,316       466,828  

Net defined benefit assets

    894       —         —    

Current income tax assets

    6,324       65,738       18,525  

Deferred income tax assets

    3,991       133,624       8,373  

Assets held for sale

    155,506       52,148       48,628  

Other assets

    16,204,169       8,857,785       9,375,704  
 

 

 

   

 

 

   

 

 

 

Total assets

    436,785,609       375,673,656       329,065,467  
 

 

 

   

 

 

   

 

 

 

Financial liabilities at fair value through profit or loss

    12,023,058       12,122,836       2,974,604  

Derivative financial liabilities

    3,142,765       3,807,128       2,325,756  

Deposits

    255,800,048       239,729,695       224,268,185  

Debts

    28,820,928       26,251,486       16,240,743  

Debentures

    44,992,724       34,992,057       32,600,603  

Provisions

    568,033       537,717       607,860  

Net defined benefit liabilities

    154,702       96,299       73,197  

Current income tax liabilities

    433,870       441,812       30,920  

Deferred income tax liabilities

    533,069       103,482       179,243  

Insurance contract liabilities

    31,801,275       7,290,844       6,924,699  

Other liabilities

    24,470,308       19,038,897       13,936,935  
 

 

 

   

 

 

   

 

 

 

Total liabilities

    402,740,780       344,412,253       300,162,745  
 

 

 

   

 

 

   

 

 

 

Equity attributable to shareholders of the parent company

    34,038,685       30,998,044       28,680,621  

Share capital

    2,090,558       2,090,558       1,931,758  

Capital surplus

    17,122,228       16,994,902       15,854,510  

Accumulated other comprehensive income

    537,668       405,329       430,244  

Retained earnings

    15,044,204       12,229,228       10,464,109  

Treasury shares

    (755,973     (721,973     —    

Non-controlling interests

    6,144       263,359       222,101  
 

 

 

   

 

 

   

 

 

 

Total equity

    34,044,829       31,261,403       28,902,722  
 

 

 

   

 

 

   

 

 

 

Total liabilities and equity

    436,785,609       375,673,656       329,065,467  
 

 

 

   

 

 

   

 

 

 

Number of consolidated companies

    221       196       83  


Table of Contents

3.1.2. Consolidated Statements of Comprehensive Income

 

    (Unit: in millions of Won, except per share amounts)  
    For the year ended
December 31, 2017
    For the year ended
December 31, 2016
    For the year ended
December 31, 2015
 

Net interest income

    7,710,009       6,402,529       6,203,199  

Net fee and commission income

    2,050,024       1,584,892       1,534,983  

Insurance income

    593,710       (117,803     (105,614

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

    740,329       (8,768     359,727  

Net other operating expenses

    (901,890     (415,908     (610,346

General and administrative expenses

    (5,628,664     (5,228,711     (4,523,584

Operating profit before provision for credit losses

    4,563,518       2,216,231       2,858,365  

Provision for credit losses

    (548,244     (539,283     (1,037,231

Net operating income

    4,015,274       1,676,948       1,821,134  

Net non-operating income(loss)

    123,150       951,707       343,561  

Profit before income tax

    4,138,424       2,628,655       2,164,695  

Income tax expense

    (794,963     (438,475     (437,389

Profit for the period

    3,343,461       2,190,180       1,727,306  

Other comprehensive income (loss) for the period, net of tax

    136,226       (24,937     (31,262
 

 

 

   

 

 

   

 

 

 

Total comprehensive income for the period

    3,479,687       2,165,243       1,696,044  
 

 

 

   

 

 

   

 

 

 

Profit attributable to:

    3,343,461       2,190,180       1,727,306  

Shareholders of the parent company

    3,311,438       2,143,744       1,698,318  

Non-controlling interests

    32,023       46,436       28,988  
 

 

 

   

 

 

   

 

 

 

Total comprehensive income for the period attributable to:

    3,479,687       2,165,243       1,696,044  
 

 

 

   

 

 

   

 

 

 

Shareholders of the parent company

    3,445,285       2,118,829       1,666,883  

Non-controlling interests

    34,402       46,414       29,161  

Earnings per share

     

Basic earnings per share (Won)

    8,305       5,588       4,396  

Diluted earnings per share (Won)

    8,257       5,559       4,376  


Table of Contents

3.2. Separate Condensed Financial Information

3.2.1. Separate Statements of Financial Position

 

            (Unit: in millions of Won)  
     As of December 31, 2017      As of December 31, 2016      As of December 31, 2015  

Cash and due from financial institutions

     245,400        115,065        324,947  

Financial assets at fair value through profit or loss

     284,485        246,656        99,118  

Loans

     10,000        29,415        —    

Investments in subsidiaries

     24,062,116        21,392,745        18,557,566  

Investments in associates

     —          1,053,690        883,065  

Property and equipment

     697        469        578  

Intangible assets

     8,864        8,092        8,428  

Net defined benefit assets

     201        193        —    

Deferred income tax assets

     10,282        4,604        4,515  

Other assets

     480,789        519,223        137,954  
  

 

 

    

 

 

    

 

 

 

Total assets

     25,102,834        23,370,152        20,016,171  
  

 

 

    

 

 

    

 

 

 

Debts

     300,000        350,000        —    

Debentures

     5,162,600        3,474,200        1,647,117  

Net defined benefit liabilities

     —          —          591  

Current income tax liabilities

     308,854        419,607        17,178  

Other liabilities

     204,835        104,528        123,281  
  

 

 

    

 

 

    

 

 

 

Total liabilities

     5,976,289        4,348,335        1,788,167  
  

 

 

    

 

 

    

 

 

 

Share capital

     2,090,558        2,090,558        1,931,758  

Capital surplus

     14,742,814        14,656,168        13,513,809  

Accumulated other comprehensive loss

     (5,233      (4,742      (4,979

Retained earnings

     3,054,379        2,998,923        2,787,416  

Treasury Shares

     (755,973      (719,090      —    
  

 

 

    

 

 

    

 

 

 

Total equity

     19,126,545        19,021,817        18,228,004  
  

 

 

    

 

 

    

 

 

 

Total liabilities and equity

     25,102,834        23,370,152        20,016,171  
  

 

 

    

 

 

    

 

 

 

Evaluation method for investment securities in subsidiaries, affiliates and joint ventures

     Cost-method        Cost-method        Cost-method  


Table of Contents

3.2.2. Separate Statements of Comprehensive Income

 

     (Unit: in millions of Won, except per share amounts)  
     For the year ended
December 31, 2017
     For the year ended
December 31, 2016
     For the year ended
December 31, 2015
 

Net interest expense

     (97,218      (55,924      (25,744

Net fee and commission expense

     (7,808      (7,214      (8,228

Net gains on financial assets at fair value through profit or loss

     745        5,272        1,658  

Net other operating income

     709,544        694,908        315,527  

General and administrative expenses

     (57,485      (46,734      (39,916

Operating profit before provision for credit losses

     547,778        590,308        243,297  

Provision for credit losses

     —          —          —    

Operating profit

     547,778        590,308        243,297  

Net non-operating expense

     125        (340      (62

Profit before income tax

     547,903        589,968        243,235  

Income tax benefit (expense)

     5,522        164        190  

Profit for the period

     553,425        590,132        243,425  

Other comprehensive income (loss) for the period, net of tax

     (491      237        (741
  

 

 

    

 

 

    

 

 

 

Total comprehensive income for the period

     552,934        590,369        242,684  
  

 

 

    

 

 

    

 

 

 

Earnings per share

        

Basic earnings per share (Won)

     1,388        1,538        630  

Diluted earnings per share (Won)

     1,380        1,530        627  


Table of Contents
3.3. Other Selected Financial Data

3.3.1. Won-denominated Liquidity Ratio

 

     (Unit: in millions of Won, %)  

Category

   As of December 31, 2017      As of December 31, 2016      As of December 31, 2015  

Current assets in Won (A)

     47,253        59,429        325,124  

Current liabilities in Won (B)

     6,792        5,554        4,565  

Liquidity ratio (A/B)

     695.72        1,070.02        7,122.10  

Notes:

 

  Based on K-IFRS (on a separate basis).

 

  Calculated based on Won-denominated assets and liabilities due within one month.

3.3.2. Profitability Ratios

 

            (Unit: %)  

Category

   For the year ended
December 31, 2017
     For the year ended
December 31, 2016
     For the year ended
December 31, 2015
 

Net income as a percentage of average total assets (ROA)

     0.82        0.63        0.54  

Net income as a percentage of average shareholders’ equity (ROE)

     10.18        7.26        6.06  

Note: Based on K-IFRS (on a consolidated basis).


Table of Contents

3.3.3. 20 Largest Exposures of Kookmin Bank by Borrower

 

    (As of December 31, 2017)  

Company

  Credit extended  
    (Unit: in billions of Won)  

Samsung Electronics Co., Ltd.

    1,703  

Kia Motors Corporation

    788  

Hyundai Motor Company

    668  

Hyundai Capital Services, Inc.

    596  

LG Electronics Inc.

    587  

Hyundai Steel Co., Ltd.

    558  

GS Caltex Corporation

    553  

AGRICULTURAL BANK

    541  

S-Oil Corporation

    529  

BANK OF COMMUNICATION

    498  

Samsung Display Co., Ltd..

    491  

Korea Securities Finance Corp.

    455  

LG Display Co., Ltd..

    454  

Shinhan Financial Group Co., Ltd.

    427  

CHINA CONSTRUCTION

    391  

SK Energy Co., Ltd

    361  

Shinsegae Inc.

    356  

Hankook Tire Co., Ltd.

    348  

Hanwha Corporation

    346  

LS Nikko Copper Inc

    340  
 

 

 

 

Total

    10,990  
 

 

 

 


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3.3.4. 10 Largest Exposures of Kookmin Bank by Chaebol Group

 

     (As of December 31, 2017)  

Group

   Credit extended  
     (Unit: in billions of Won)  

Hyundai Motor

     4,146  

Samsung

     3,481  

SK

     1,769  

LG

     1,573  

Lotte

     1,512  

Hanwha

     1,251  

LS

     832  

GS

     831  

CJ

     721  

Hyundai Heavy

     682  
  

 

 

 

Total

     16,798  
  

 

 

 

3.3.5. Kookmin Bank’s Loan Concentration by Industry

 

     (As of December 31, 2017)  

Industry

   Total Credit      Percentage of
Total Credit
 
     (Unit: in billions of Won, %)  

Manufacturing

     40,901        34.27  

Real estate

     25,246        21.15  

Retail and wholesale

     16,035        13.43  

Hotel, lodging and food service

     7,842        6.57  

Construction

     2,949        2.47  

Financial institutions

     2,289        1.92  

Other

     24,094        20.19  
  

 

 

    

 

 

 

Total

     119,356        100.00  
  

 

 

    

 

 

 


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3.3.6. Top 20 Non-Performing Loans of Kookmin Bank

 

        (As of December 31, 2017)  

Borrower

 

Industry

  Total Credit     Allowance
for Loan Losses
 
              (Unit: in billions of Won)  

Borrower A

 

Construction

    99.1       97.2  

Borrower B

 

Construction

    67.6       67.3  

Borrower C

 

Manufacturing

    66.9       59.9  

Borrower D

 

Publishing, Media, Broadcasting and Information Services

    55.3       51.5  

Borrower E

 

Shipbuilding

    51.4       37.0  

Borrower F

 

Real estate and leasing

    42.3       41.7  

Borrower G

 

Construction

    40.6       39.8  

Borrower H

 

Transportation

    39.1       17.0  

Borrower I

 

Shipping

    23.8       23.5  

Borrower J

 

Manufacturing

    15.8       4.1  

Borrower K

 

Publishing, Media, Broadcasting and Information Services

    14.3       13.1  

Borrower L

 

Retail and wholesale

    14.3       8.3  

Borrower M

 

Retail and wholesale

    10.4       7.6  

Borrower N

 

Manufacturing

    9.4       9.1  

Borrower O

 

Construction

    9.1       7.7  

Borrower P

 

Manufacturing

    9.1       0.2  

Borrower Q

 

Construction

    9.0       8.3  

Borrower R

 

Manufacturing

    7.8       3.7  

Borrower S

 

Manufacturing

    6.3       4.3  

Borrower T

 

Professional, Scientific, and Technical

    6.0       0.4  
   

 

 

   

 

 

 

Total

      597.6       501.7  
   

 

 

   

 

 

 

 

3.4. Other Financial Information

See the Company’s Form 6-K furnished to the Securities and Exchange Commission on March 13, 2018 (available on www.sec.gov), which contains the Company’s audited consolidated and separate financial statements as of and for the years ended December 31, 2017 and 2016 and related notes, which have been prepared in accordance with K-IFRS. The Company’s audited consolidated and separate financial statements are also available on its website, www.kbfg.com.


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4. Independent Public Accountants

 

4.1. Audit / Review Services

 

Period

  

Auditor

  

Activity

   Compensation(1)
(in millions of Won)
     Accrued Time
(hours)
 

January 1 to December 31, 2017

   Samil PricewaterhouseCoopers    Quarterly / first half and annual review & audit, review of internal accounting management system (including audit of internal control over financial reporting)      856        11,080  

January 1 to December 31, 2016

   Samil PricewaterhouseCoopers    Quarterly / first half and annual review & audit, review of internal accounting management system (including audit of internal control over financial reporting)      760        10,505  

January 1 to December 31, 2015

   Samil PricewaterhouseCoopers    Quarterly / first half and annual review & audit, review of internal accounting management system (including audit of internal control over financial reporting)      760        9,947  

 

(1) Excluding value-added taxes.

 

4.2. Public Company Accounting Oversight Board (“PCAOB”) Audit Services

 

Period

 

Auditor

 

Activity

 

Service Period

  Compensation(1)
(in millions of Won)
 

January 1 to December 31, 2017

  Samil PricewaterhouseCoopers   PCAOB audit of consolidated financial statements and internal control over financial reporting  

May 1, 2017 to

April 30, 2018

    540  

January 1 to December 31, 2016

  Samil PricewaterhouseCoopers   PCAOB audit of consolidated financial statements and internal control over financial reporting  

May 1, 2016 to

April 30, 2017

    459  

January 1 to December 31, 2015

  Samil PricewaterhouseCoopers   PCAOB audit of consolidated financial statements and internal control over financial reporting  

May 1, 2015 to

April 30, 2016

    459  

 

(1) Excluding value-added taxes.


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5. Corporate Governance and Affiliated Companies

 

5.1. Board of Directors & Committees under the Board

As of December 31, 2017, our board of directors consisted of nine directors, comprising one executive director, one non-standing director and seven non-executive directors. The following committees currently serve under our board of directors:

 

    Audit Committee;

 

    Risk Management Committee;

 

    Evaluation & Compensation Committee;

 

    Non-Executive Director Nominating Committee;

 

    Corporate Governance Committee; and

 

    Audit Committee Member Nominating Committee.

For the list of our directors, see 6. Directors, Senior Management and Employees — 6.1. Executive Directors, — 6.2. Non-standing Directors and — 6.3. Non-executive Directors below.

 

5.2. Audit Committee

The audit committee oversees our financial reporting and approves the appointment of our independent auditors and internal compliance officers. The committee also reviews our financial information, auditor’s examinations, key financial statement issues, the plans and evaluation of internal controls and the administration of our financial affairs by the board of directors. In connection with the general meetings of shareholders, the committee examines the agenda for, and financial statements and other reports to be submitted by, the board of directors to each general meeting of shareholders. The committee holds regular meetings every quarter and on an as-needed basis.


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5.3. Compensation to Directors

5.3.1. Total Amount Approved at the Meeting of Shareholders

 

(Unit: in millions of Won)  
     Total number of persons(1)      Total amount approved at shareholders’ meeting(2)      Notes  

Registered Directors
(Non-executive directors)

     9 (7)        2,500        —    

 

(1) Represents the total number of applicable persons as of December 31, 2017.
(2) Represents the aggregate amount for all directors (including non-executive directors). Excludes compensation in the form of long-term performance-based stock grants.

5.3.2. Total Amount Paid as of December 31, 2017

 

               (Unit: in millions of Won)

Total number of persons(1)

   Total payment(2)    Average payment per person(3)    Notes

9

   1,507    172    —  

 

(1) Represents the total number of applicable persons as of December 31, 2017.
(2) Represents the total amount paid (rounded to the nearest million) for the year ended December 31, 2017.
(3) Represents (i) the total amount paid (rounded to the nearest million) for the year ended December 31, 2017, divided by (ii) the annualized number of applicable persons for the applicable reporting period.

*Stuart B. Solomon was newly appointed as a non-executive director on March 24, 2017.

*Hong Lee, a non-standing director, resigned on November 20, 2017.

*Yin Hur was newly appointed as a non-standing director on November 20, 2017.

 

     (Unit: in millions of Won)  
     Total number of
persons(1)
     Total payment (2)(4)      Average payment
per person (3)
     Notes  

Registered Directors (excluding non-executive directors and Audit Committee members)

     2        926        463        —    

Non-executive Directors (excluding Audit Committee members)

     3        236        85        —    

Audit Committee members

     4        345        86        —    

Internal Auditor

     —          —          —          —    

 

(1) Represents the total number of applicable persons as of December 31, 2017.
(2) Represents the total amount paid (rounded to the nearest million) for the year ended December 31, 2017.
(3) Represents (i) the total amount paid (rounded to the nearest million) for the year ended December 31, 2017, divided by (ii) the annualized number of applicable persons for the applicable reporting period.
(4) Payment subject to the Company’s internal policies on compensation to directors.


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5.3.3. Compensation exceeding Won 500 million – Individual basis

Compensation exceeding Won 500 million – Individual Basis

(Unit: in millions of Won)

Name

 

Position

 

Total Compensation(1)(2)

 

Additional Compensation(3)

Jong Kyoo Yoon

  Chairman & CEO   926  

12,018 shares in November 2018, 12,018 shares in November 2019, and 12,018 shares in November 2020 are expected to be granted as a long-term performance-based stock grant, pursuant to a performance evaluation over a three-year period from November 21, 2014 to November 20, 2017. The actual payment amount will be determined in the future based on the fair market price of our shares.

 

In addition to the above compensation, a maximum amount of 46,890 shares over three years (15,630 shares per year) are expected to be granted as a long-term performance-based stock grant. The actual share amount will be determined in the future based on a performance evaluation over a three-year period from November 21, 2017 to November 20, 2020.

 

(1) Consists of 2017 annual salary of Won 473 million (including allowances for business expenses of Won 210 million) and a short-term incentive payment of Won 453 million, of which Won 240 million was based on performance in 2016 and paid in the first quarter of 2017 and Won 213 million was based on performance from January 1, 2017 to November 20, 2017 before reappointment and paid in the fourth quarter of 2017.
(2) In addition to such total compensation, Won 776 million was paid by Kookmin Bank to Mr. Jong Kyoo Yoon, who concurrently served as the president of Kookmin Bank. Such amount includes 2017 annual salary of Won 327 million (including allowances for business expenses of Won 140 million), a short-term incentive payment of Won 396 million (of which Won 210 million was based on performance in 2016 and paid in the first quarter of 2017 and Won 186 million was based on performance from January 1, 2017 to November 20, 2017 before reappointment and paid in the fourth quarter of 2017), and a retirement payment of Won 53 million paid upon his retirement from Kookmin Bank on November 20, 2017.
(3) In addition to such additional compensation, Kookmin Bank will grant a performance-based stock grant of our shares. 10,515 shares in November 2018, 10,515 shares in November 2019, and 10,517 shares in November 2020 are expected to be granted as a long-term performance-based stock grant, pursuant to a performance evaluation over a three-year period from November 21, 2014 to November 20, 2017. The actual payment amount will be determined in the future based on the fair market price of our shares.


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Criteria and method of calculating compensation

 

Name

  

Compensation

Type

  

Classification

  

Total

Compensation (in

millions of Won)

  

Calculation criteria and method

Jong Kyoo Yoon    Earned income    Salary    473    A monthly salary is paid, which is derived by dividing (i) the amount of annual salary determined by resolution of the Evaluation & Compensation Committee within the limit of the total amount of compensation approved at the shareholders’ meeting by (ii) 12 months. (This amount includes allowances for business expenses.)
      Bonus    453   

The bonus payment of Won 453 million, of which Won 240 million was based on performance in 2016 and paid in the first quarter of 2017 and Won 213 million was based on performance from January 1, 2017 to November 20, 2017 and paid in the fourth quarter of 2017.

 

The short-term performance-based incentive payment based on performance in 2016 was approved at the second meeting of the Evaluation & Compensation Committee held in 2017 based on the final performance evaluation and resolution by the Evaluation & Compensation Committee, in accordance with the “Proposal on Long- and Short-Term Performance Evaluation and Compensation Scheme for the CEO,” which was approved at the second meeting of the Evaluation & Compensation Committee held in 2016.

 

The short-term performance evaluation index for 2016 comprises financial results (e.g., ROE, RAROC, CIR, real NPL ratio, Tier 1 ratio) and results related to strategic initiatives (e.g., laying the foundation for becoming the leading financial group by securing a competitive edge or enhancing the Company’s business portfolio and optimizing synergy.) The amount of the short-term incentive payment is determined based on the aggregate score of the index items above and is within the range of 0%-100% of the base salary.

 

With respect to financial results, the major achievements reflected in the performance evaluation included the attainment of key financial indicators that exceeded the


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target for that year, such as a 26.23% YoY increase in the Company’s net income to Won 2,143.7 billion in 2016 and enhancement in NPL ratio and Tier 1 ratio.

 

With respect to results related to strategic initiatives, the major achievements reflected in the performance evaluation included strengthening of business competitiveness by enhancing customer-centric sales channels, solidifying market power by securing a competitive edge in core businesses and laying the foundation for future growth, all of which helped the Company to become the leading financial group.

 

Other achievements that were considered included the diversification of the business portfolio through the acquisition of Hyundai Securities and the successful post-merger-integration, as well as the continuous growth of intra-group synergies and cross-business customers through strengthening WM/CIB cooperation and intra-group collaboration.

 

Due to the termination of his term in November 20, 2017, the evaluation for 2017 was based on performance from January 1, 2017 to November 20, 2017. The short-term performance-based incentive payment based on performance in 2017 was approved at the seventh meeting of the Evaluation & Compensation Committee held in 2017 based on the final performance evaluation and resolution by the Evaluation & Compensation Committee, in accordance with the “Proposal on Long- and Short-Term Performance Evaluation and Compensation Scheme for the CEO,” which was approved at the second meeting of the Evaluation & Compensation Committee held in 2017.

 

The short-term performance evaluation index for 2017 comprises financial results (e.g., ROE, RAROC, CIR, real NPL ratio, Tier 1 ratio, net increase in the group’s active cross-business customers) and non-financial results (e.g., solidifying the position of the Company as the leading financial group by improving the Company’s competitive edge and enhancing customer value by establishing


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a “One-Firm KB.”) The amount of the short-term incentive payment is determined based on the aggregate score of the index items above and is within the range of 0%-100% of the base salary.

 

With respect to financial results, the achievements considered included the enhancement of the Company’s business portfolio by successfully adding wholly owned subsidiaries, KB Insurance and KB Capital, which helped the group to exceed its goals for financial performance in 2017.

 

With respect to non-financial results, the major achievements considered included solidifying the position of the Company as the leading financial group through strengthening market power by securing the competency and competitive edge of the subsidiaries’ core businesses, proactively adapting to changes in the fintech industry and promoting the adoption of digital systems within the Company, as well as establishing customer-centric sales channels and strengthening non-personal sales channels, which enhanced the overall customer experience.

5.4. Affiliated Companies

5.4.1. List of Affiliated Companies

Affiliated companies of KB Financial Group that are first-tier subsidiaries and KB Financial Group’s ownership of such companies as of December 31, 2017 are as follows.

1) Kookmin Bank (100.00%)

2) KB Securities Co., Ltd. (100.00%)

3) KB Insurance Co., Ltd. (100.00%)

4) KB Kookmin Card Co., Ltd. (100.00%)

5) KB Life Insurance Co., Ltd. (100.00%)

6) KB Asset Management Co., Ltd. (100.00%)

7) KB Capital Co., Ltd. (100.00%)


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8) KB Savings Bank Co., Ltd. (100.00%)

9) KB Real Estate Trust Co., Ltd. (100.00%)

10) KB Investment Co., Ltd. (100.00%)

11) KB Credit Information Co., Ltd. (100.00%)

12) KB Data Systems Co., Ltd. (100.00%)


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6. Directors, Senior Management and Employees

 

6.1. Executive Directors

As of December 31, 2017 and March 31, 2018, we had one executive director. The name, position and the end of the term of our executive director and the number of shares of KB Financial Group’s common stock he owned as of March 31, 2018 are set forth below.

 

Name

  

Date of Birth

  

Position

   Common Shares
Owned*
    

End of Term

Jong Kyoo Yoon

   October 1955    Chairman & Chief Executive Officer      14,000      November 20, 2020

 

* Represents the number of common shares owned as of December 31, 2017.

 

6.2. Non-standing Directors

As of December 31, 2017 and March 31, 2018, we had one non-standing director. The name, position and the end of the term of our non-standing director and the number of shares of KB Financial Group’s common stock he owned as of March 31, 2018 are set forth below.

 

Name

  

Date of Birth

  

Position

  

Common Shares Owned*

    

End of Term

Yin Hur

   December 1961    Non-standing Director      1,000      March 23, 2020

 

* Represents the number of common shares owned as of December 31, 2017.

 

6.3. Non-executive Directors

Our non-executive directors, the end of their terms and the number of shares of KB Financial Group’s common stock they respectively owned as of March 31, 2018 are as follows.

 

Name

  

Date of Birth

  

Position

  

Common Shares Owned*

    

End of Term

 

Stuart B. Solomon

   July 1949    Non-executive Director      —          March 22, 2019  

Suk Ryul Yoo

   April 1950    Non-executive Director      —          March 22, 2019  

Suk Ho Sonu

   September 1951    Non-executive Director      —          March 22, 2020  

Myung Hee Choi

   February 1952    Non-executive Director      —          March 22, 2020  

Kouwhan Jeong

   September 1953    Non-executive Director      —          March 22, 2020  

Jae Ha Park

   November 1957    Non-executive Director      —          March 22, 2019  

Jongsoo Han

   October 1960    Non-executive Director      —          March 22, 2019  

 

* Represents the number of common shares owned as of December 31, 2017.

 

6.4. Senior Management

In addition to our executive director who is also our executive officer, we currently have the following fifteen executive officers as of March 31, 2018.


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Name

  

Date of Birth

 

Position

   Common Shares
Owned*
   

End of Term

Ki Heon Kim

   October 1955   Deputy President and Chief Information Technology Officer      —       December 31, 2018

Kyung Eun Yoon

   May 1962   Deputy President and Head of the Capital Markets Business Units      3,814     December 31, 2018

Jeong Rim Park

   November 1963   Deputy President; Wealth Management Planning Department      540     December 31, 2018

Ki-Hwan Kim

   March 1963   Senior Managing Director and Chief Financial Officer      321     December 31, 2018

Young-Tae Park

   December 1961   Senior Managing Director and Chief Data Officer      450     December 31, 2018

Pil Kyu Im

   March 1964   Senior Managing Director and Chief Compliance Officer      445     January 10, 2020

Kyung Yup Cho

   September 1961   Senior Managing Director; KB Research      800     December 31, 2018

Bo Youl Oh

   January 1962   Senior Managing Director; Corporate and Investment Banking Planning Department      —       December 31, 2018

Young Hyuk Jo

   April 1963   Senior Managing Director and Head of the Audit Department      461     December 31, 2018

Chang Kwon Lee

   November 1965   Managing Director and Chief Strategy Officer      —       December 31, 2018

Hyun Jin Shin

   February 1965   Managing Director and Chief Risk Management Officer      —       December 31, 2019

Dong Whan Han

   January 1965   Managing Director and Chief Digital Innovation Officer      100     December 31, 2018

Nam Hoon Cho

   June 1968   Managing Director and Chief Global Strategy Officer      —       December 31, 2018

Soon Bum Kwon

   October 1966   Managing Director and Chief Human Resources Officer      1,255     December 31, 2019

Chai Hyun Sung

   September 1965   Managing Director and Chief Public Relations Officer      652     December 31, 2018

 

* Represents the number of common shares owned as of December 31, 2017.

As of March 31, 2018, the following management also serves as senior management at our subsidiaries.

 

Name

  

Subsidiary

  

Position

  

Appointment Date

Yin Hur

   Kookmin Bank    President and Chief Executive Officer    November 2017

Kyung Eun Yoon

   KB Securities    Chief Executive Officer    December 2016

Ki Heon Kim

   KB Data Systems    Chief Executive Officer    January 2018

Jeong Rim Park

   Kookmin Bank    Senior Executive Vice President; Wealth Management Group    January 2017
   KB Securities    Deputy President; Wealth Management Division    January 2017

Young-Tae Park

   Kookmin Bank    Senior Managing Director; Data Strategy Division    January 2018
   KB Kookmin Card    Senior Managing Director; Data Strategy Division    January 2018

Bo Youl Oh

   Kookmin Bank    Senior Managing Director Corporate and Investment Banking Customer Group    January 2018
   KB Securities    Deputy President; Investment Banking Division    January 2018

Dong Whan Han

   Kookmin Bank    Managing Director; Digital Business Group    January 2017

Chai Hyun Sung

   Kookmin Bank    Managing Director; Consumer Brand Strategy Group    January 2018

Chang Kwon Lee

   KB Securities    Non-standing Director    February 2018

Ki-Hwan Kim

   KB Insurance    Non-standing Director    February 2018
   KB Kookmin Card    Non-standing Director    February 2018


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As of March 31, 2018, the following non-executive directors also served as a director at another company.

 

Name

  

Company

  

Position

  

Appointment Date

Suk Ryul Yoo

   Jungmok    CEO    December 2013

Kouwhan Jeong

   Nambujeil Law and
Notary Office Inc.
   President Attorney at Law    May 2016


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6.5. Employees

The following table shows information regarding our employees as of December 31, 2017.

 

                   (Unit: in millions of Won)  
     Number of
Employees
     Average Tenure of
Employees (months)
     Total Amount of Annual Salaries      Average Annual Salary
per Person (1)
 
     164        38        20,906        127  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(1) Represents (i) the total amount paid for the year ended December 31, 2017 divided by (ii) the total number of employees as of December 31, 2017.


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7. Major Shareholders and Related Party Transactions

 

7.1. Major Shareholders

The following table presents information regarding holders of 5% or more of our total issued shares as of December 31, 2017.

 

            (Unit: shares, %)  

Name

   Number of Shares of Common Stock      Percentage of Total Issued Shares(1)  

Korean National Pension Service

     40,204,583        9.62  

JP Morgan Chase Bank, N.A.(2)

     25,755,140        6.16  

 

(1) Based on 418,111,537 shares of our common stock issued and outstanding as of December 31, 2017.
(2) Depositary under the Company’s ADR program. The voting rights are held by ADR holders.

 

7.2. Changes in the Largest Shareholder

 

(As of December 31, 2017)               (Unit: shares, %)  

Name of Largest Shareholder

  Date of Change in Largest
Shareholder/
Date of Change in Ownership
Level
    Number of Shares of Common
Stock
    Percentage of Total
Issued Shares(1)
 

Korean National Pension Service

    December 31, 2011       26,510,171       6.86  

Korean National Pension Service

    March 14, 2012       27,894,880       7.22  

Korean National Pension Service

    August 1, 2012       31,817,770       8.24  

Korean National Pension Service

    December 31, 2012       33,158,257       8.58  

Korean National Pension Service

    June 12, 2013       34,479,641       8.92  

Korean National Pension Service

    July 23, 2013       35,699,841       9.24  

Korean National Pension Service

    December 31, 2013       38,476,974       9.96  

Korean National Pension Service

    October 14, 2014       36,750,987       9.51  

Korean National Pension Service

    December 31, 2014       36,383,211       9.42  

Korean National Pension Service

    December 31, 2015       35,534,667       9.20  

Korean National Pension Service

    August 12, 2016       36,826,207       9.53  

Korean National Pension Service

    December 31, 2016       41,190,896       9.85  

Korean National Pension Service

    April 24, 2017       40,950,453       9.79  

Korean National Pension Service

    October 16, 2017       40,479,793       9.68  

Korean National Pension Service

    December 31, 2017       40,204,583       9.62  

 

(1) Based on 418,111,537 total issued shares of common stock for dates on or after October 19, 2016, and 386,351,693 total issued shares of common stock for dates prior to October 19, 2016.


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7.3. Employee Stock Ownership Association

 

(As of December 31, 2017)    (Unit: shares)  

Company Name

   Number of Shares of
Common Stock
 

KB Financial Group Inc.

     14,472  

Kookmin Bank

     1,825,345  

KB Securities Co., Ltd.

     11,245  

KB Insurance Co., Ltd.

     15,500  

KB Kookmin Card Co., Ltd.

     101,827  

KB Life Insurance Co., Ltd.

     7,282  

KB Asset Management Co., Ltd.

     3,930  

KB Capital Co., Ltd.

     747  

KB Savings Bank Co., Ltd.

     838  

KB Real Estate Trust Co., Ltd.

     4,096  

KB Investment Co., Ltd.

     595  

KB Credit Information Co., Ltd.

     5,737  

KB Data Systems Co., Ltd.

     6,424  
  

 

 

 

Total

     1,998,038  
  

 

 

 

 

7.4. Investments in Affiliated Companies

 

(As of December 31, 2017)      (Units: shares, millions of Won, %)  

Company Name

   Ending Balance      Total Assets      Net Income (loss)  
   Number of
shares
     Ownership      Book value        

Kookmin Bank

     404,379,116        100        14,821,721        323,419,161        2,262,916  

KB Securities Co., Ltd.

     298,620,424        100        3,342,391        36,079,842        271,534  

KB Insurance Co., Ltd.

     66,500,000        100        2,375,430        31,538,102        360,489  

KB Kookmin Card Co., Ltd.

     92,000,000        100        1,953,175        17,659,957        302,106  

KB Life Insurance Co., Ltd.

     91,200,000        100        485,314        9,125,712        18,955  

KB Asset Management Co., Ltd.

     7,667,550        100        96,312        197,641        52,279  

KB Capital Co., Ltd.

     21,492,128        100        573,811        8,736,903        120,109  

KB Savings Bank Co., Ltd.

     8,001,912        100        157,544        1,158,829        21,150  

KB Real Estate Trust Co., Ltd.

     16,000,000        100        121,553        246,685        36,407  

KB Investment Co., Ltd.

     8,951,797        100        104,910        146,555        (2,602

KB Credit Information Co., Ltd.

     1,252,400        100        23,621        26,121        (5,316

KB Data Systems Co., Ltd.

     800,000        100        6,334        41,945        945  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     —          —          24,062,116        —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 


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7.5. Related Party Transactions

7.5.1. Purchase of capital securities issued by KB Capital Co., Ltd.

(Unit: in billions of Won)

Issuer

   Relationship   

Type

   Issue Amount      Issue Date    Interest Rate     Maturity Date   Use of
Proceeds

KB Capital Co., Ltd.

   Subsidiary   

No. 299 Private

Placement of Capital Securities in Won

     50      March 27,
2015
     5.011   March 27,
2045 (may
be extended)
  Working
capital
                                 (Unit: in billions of Won)

Issuer

   Relationship   

Type

   Issue Amount      Issue Date    Interest Rate     Maturity Date   Use of
Proceeds

KB Capital Co., Ltd.

   Subsidiary    No. 320 Private Placement of Capital Securities in Won      50      September 24,
2015
     4.606   September 24,
2045 (may
be extended)
  Working
capital
                                 (Unit: in billions of Won)

Issuer

   Relationship   

Type

   Issue Amount      Issue Date    Interest Rate     Maturity Date   Use of
Proceeds

KB Capital Co., Ltd.

   Subsidiary    No. 343 Private Placement of Capital Securities in Won      50      March 29,
2016
     4.396   March 29,
2046 (may
be extended)
  Working
capital


Table of Contents
                                 (Unit: in billions of Won)

Issuer

   Relationship   

Type

   Issue Amount      Issue Date    Interest Rate     Maturity Date   Use of
Proceeds

KB Capital Co., Ltd.

   Subsidiary    No. 352 Private Placement of Capital Securities in Won      50      June 28, 2016      4.064   June 28,
2046 (may
be extended)
  Working
capital
                                 (Unit: in billions of Won)

Issuer

   Relationship   

Type

   Issue Amount      Issue Date    Interest Rate     Maturity Date   Use of
Proceeds

KB Capital Co., Ltd.

   Subsidiary    No. 367 Private Placement of Capital Securities in Won      50      November 28,
2016
     4.744   November 28,
2046 (may
be extended)
  Working
capital
                                 (Unit: in billions of Won)

Issuer

   Relationship   

Type

   Issue Amount      Issue Date    Interest Rate     Maturity Date   Use of
Proceeds

KB Capital Co., Ltd.

   Subsidiary    No. 378 Private Placement of Capital Securities in Won      50      April 27,
2017
     4.431   April 27,
2047 (may
be extended)
  Working
capital

7.5.2. Prepayments and Loans to Subsidiaries

 

                                 (Unit: in billions of Won)

Name

   Relationship    Account   Loan Amount      Current
Balance
     Credit
Offering
Date
   Interest Rate     Maturity Date

KB Investment Co., Ltd.

   Subsidiary    Loans*     10        10      July 14,
2017
     2.042   July 13, 2018

(may be extended)

 

* Unsecured credit loans


Table of Contents

7.5.3. Purchase of Liiv trademark from Kookmin Bank

 

Counterparty    Kookmin Bank
Transaction Type    Purchase of an asset
Transaction Date    April 13, 2017
Transaction Object    Domestic and overseas trademark of “Liiv,” a mobile brand
Purpose    To generate synergy by promoting mobile brands at the group level
Transaction Price    Won 146 million (excluding value-added taxes)
Others    The Transaction Price was calculated based on the actual levels of expenditure made by Kookmin Bank in connection with the trademark and reflects the opinion of an external accounting firm.


Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

     

KB Financial Group Inc.

      (Registrant)

Date: April 3, 2018

     

By: /s/ Ki-Hwan Kim

      (Signature)
      Name:   Ki-Hwan Kim
      Title:   Senior Managing Director and Chief Financial Officer