EX-99.1 2 d780897dex991.htm EX-99.1 EX-99.1

Exhibit 99.1

KB Financial Group Inc. and Subsidiaries

Consolidated Interim Financial Statements

June 30, 2019 and 2018


KB Financial Group Inc. and Subsidiaries

Index

June 30, 2019 and 2018

 

 

     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 - 180  


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 at June 30, 2019, and the related consolidated interim statements of comprehensive income for the three-month and six-month periods ended June 30, 2019 and 2018, and consolidated interim statements of changes in equity and cash flows for the six-month periods ended June 30, 2019 and 2018, 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 interim 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 or 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, and 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 at December 31, 2018, 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 12, 2019. The consolidated statement of financial position as at December 31, 2018, presented herein for comparative purposes, is consistent, in all material respects, with the above audited statement of financial position as at December 31, 2018.

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.

/s/ Samil PricewaterhouseCoopers

Seoul, Korea

August 14, 2019

 

This report is effective as of August 14, 2019, 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

June 30, 2019 and December 31, 2018

 

 

(in millions of Korean won)    Notes      June 30, 2019
(Unaudited)
    December 31, 2018  

Assets

       

Cash and due from financial institutions

     4,6,7,37      W 22,521,290     W 20,274,490  

Financial assets at fair value through profit or loss

     4,6,11        48,711,872       50,987,847  

Derivative financial assets

     4,6,8        2,891,518       2,025,962  

Loans at amortized cost

     4,6,9,10        324,900,461       319,201,603  

Financial investments

     4,6,11        64,290,715       61,665,094  

Investments in associates and joint ventures

     12        526,937       504,932  

Property and equipment

     13        4,907,014       4,272,127  

Investment property

     13        2,591,919       2,119,811  

Intangible assets

     14        2,713,678       2,755,783  

Current income tax assets

     32        19,310       10,004  

Deferred income tax assets

     15,32        4,338       4,158  

Assets held for sale

     16        13,084       16,952  

Other assets

     4,6,17        24,086,930       15,749,535  
     

 

 

   

 

 

 

Total assets

      W 498,179,066     W 479,588,298  
     

 

 

   

 

 

 

Liabilities

       

Financial liabilities at fair value through profit or loss

     4,6,18      W 17,282,640     W 15,326,859  

Derivative financial liabilities

     4,6,8        3,257,205       2,901,247  

Deposits

     4,6,19        288,423,297       276,770,449  

Debts

     4,6,20        30,219,021       33,004,834  

Debentures

     4,6,21        50,851,003       53,278,697  

Provisions

     22        536,814       525,859  

Net defined benefit liabilities

     23        338,239       262,213  

Current income tax liabilities

     32        326,248       698,634  

Deferred income tax liabilities

     15,32        836,954       492,534  

Insurance contract liabilities

     36        34,226,218       33,412,949  

Other liabilities

     4,6,24        34,679,117       27,200,996  
     

 

 

   

 

 

 

Total liabilities

        460,976,756       443,875,271  
     

 

 

   

 

 

 

Equity

       

Share capital

     25        2,090,558       2,090,558  

Hybrid securities

     25        399,085       —    

Capital surplus

     25        17,123,338       17,121,660  

Accumulated other comprehensive income

     25,34        476,423       177,806  

Retained earnings

     25        18,338,999       17,282,441  

Treasury shares

     25        (1,236,188     (968,549
     

 

 

   

 

 

 

Equity attributable to shareholders of the parent company

        37,192,215       35,703,916  

Non-controlling interests

        10,095       9,111  
     

 

 

   

 

 

 

Total equity

        37,202,310       35,713,027  
     

 

 

   

 

 

 

Total liabilities and equity

      W 498,179,066     W 479,588,298  
     

 

 

   

 

 

 

The above consolidated interim statements of financial position should be read in conjunction with the accompanying notes.

 

3


KB Financial Group Inc. and Subsidiaries

Consolidated Interim Statements of Comprehensive Income

Three-Month and Six-Month Periods Ended June 30, 2019 and 2018

 

 

            2019     2018  
(In millions of Korean won, except per share amounts)    Notes      (Unaudited)     (Unaudited)  
            Three months     Six months     Three months     Six months  

Interest income

      W 3,693,946     W 7,340,389     W 3,363,247     W 6,558,014  

Interest income from financial instruments at fair value through other comprehensive income and amortized cost

        3,509,863       6,973,537       3,181,988       6,211,858  

Interest income from financial instruments at fair value through profit or loss

        184,083       366,852       181,259       346,156  

Interest expense

        (1,396,845     (2,791,222     (1,166,878     (2,217,859
     

 

 

   

 

 

   

 

 

   

 

 

 

Net interest income

     5,26        2,297,101       4,549,167       2,196,369       4,340,155  
     

 

 

   

 

 

   

 

 

   

 

 

 

Fee and commission income

        965,765       1,877,476       959,389       1,928,887  

Fee and commission expense

        (380,734     (741,798     (363,602     (704,178
     

 

 

   

 

 

   

 

 

   

 

 

 

Net fee and commission income

     5,27        585,031       1,135,678       595,787       1,224,709  
     

 

 

   

 

 

   

 

 

   

 

 

 

Insurance income

        3,028,408       6,156,219       2,988,321       5,996,109  

Insurance expense

        (2,906,613     (5,925,641     (2,815,938     (5,675,090
     

 

 

   

 

 

   

 

 

   

 

 

 

Net Insurance Income

     5,36        121,795       230,578       172,383       321,019  
     

 

 

   

 

 

   

 

 

   

 

 

 

Net gains on financial instruments at fair value through profit or loss before applying overlay approach

        251,667       524,263       107,166       100,627  

Net overlay adjustments

        (122,254     (195,178     33,953       116,091  
     

 

 

   

 

 

   

 

 

   

 

 

 

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

     5,28        129,413       329,085       141,119       216,718  
     

 

 

   

 

 

   

 

 

   

 

 

 

Net other operating expenses

     5,29        (234,183     (480,511     (312,834     (526,385
     

 

 

   

 

 

   

 

 

   

 

 

 

General and administrative expenses

     5,23,30        (1,486,967     (3,000,845     (1,352,027     (2,743,731
     

 

 

   

 

 

   

 

 

   

 

 

 

Operating profit before provision for credit losses

     5        1,412,190       2,763,152       1,440,797       2,832,485  

Provision for credit losses

     5,7,10,11,17,22        (102,032     (293,745     (116,792     (281,329
     

 

 

   

 

 

   

 

 

   

 

 

 

Net operating income

     5        1,310,158       2,469,407       1,324,005       2,551,156  
     

 

 

   

 

 

   

 

 

   

 

 

 

Share of profit of associates and joint ventures

     5,12        578       4,782       4,452       12,722  

Net other non-operating income

     5,31        48,069       50,559       (25,351     82,646  
     

 

 

   

 

 

   

 

 

   

 

 

 

Net non-operating income/(loss)

        48,647       55,341       (20,899     95,368  
     

 

 

   

 

 

   

 

 

   

 

 

 

Profit before income tax

     5        1,358,805       2,524,748       1,303,106       2,646,524  

Income tax expense

     5,32        (367,338     (687,351     (356,309     (731,338
     

 

 

   

 

 

   

 

 

   

 

 

 

Profit for the period

     5        991,467       1,837,397       946,797       1,915,186  
     

 

 

   

 

 

   

 

 

   

 

 

 

Items that will not be reclassified to profit or loss:

           

Remeasurements of net defined benefit liabilities

     23        (1,703     (4,738     (3,895     (2,537

Revaluation gains/(losses) on equity instruments at fair value through other comprehensive income

        (63,683     (32,490     (37,049     1,359  

Fair value changes on financial liabilities designated at fair value due to own credit risk

        (9,940     (21,930     500       4,349  
     

 

 

   

 

 

   

 

 

   

 

 

 
        (75,326     (59,158     (40,444     3,171  
     

 

 

   

 

 

   

 

 

   

 

 

 

Items that may be subsequently reclassified subsequently to profit or loss:

           

Exchange differences on translating foreign operations

        21,627       55,306       58,521       73,442  

Net gains on debt instruments at fair value through other comprehensive income

        94,299       151,531       46,776       23,486  

Shares of other comprehensive income of associates

        2,697       5,935       (194     (2,173

Cash flow hedges

        (19,654     (38,358     (654     9,388  

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

        (4,679     (8,026     (32,230     (30,669

Other comprehensive income arising from separate account

        16,048       32,070       7,283       8,641  

Net overlay adjustments

     36        89,497       141,276       (24,474     (84,000
     

 

 

   

 

 

   

 

 

   

 

 

 
        199,835       339,734       55,028       (1,885
     

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive income for the period, net of tax

        124,509       280,576       14,584       1,286  
     

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income for the period

      W 1,115,976     W 2,117,973     W 961,381     W 1,916,472  
     

 

 

   

 

 

   

 

 

   

 

 

 

Profit attributable to:

           

Shareholders of the Parent Company

     5      W 991,192     W 1,836,844     W 946,751     W 1,914,983  

Non-controlling interests

     5        275       553       46       203  
     

 

 

   

 

 

   

 

 

   

 

 

 
     5      W 991,467     W 1,837,397     W 946,797     W 1,915,186  
     

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income for the period attributable to:

           

Shareholders of the Parent Company

      W 1,115,518     W 2,117,052     W 961,242     W 1,916,263  

Non-controlling interests

        458       921       139       209  
     

 

 

   

 

 

   

 

 

   

 

 

 
      W 1,115,976     W 2,117,973     W 961,381     W 1,916,472  
     

 

 

   

 

 

   

 

 

   

 

 

 

Earnings per share

     35           

Basic earnings per share

      W 2,534     W 4,678     W 2,389     W 4,826  

Diluted earnings per share

        2,518       4,647       2,376       4,796  

The above consolidated interim statements of comprehensive income should be read in conjunction with the accompanying notes.

 

4


KB Financial Group Inc. and Subsidiaries

Consolidated Interim Statements of Changes in Equity

Six-Month Periods Ended June 31, 2019 and 2018

 

 

    Equity attributable to the subsidiaries of the Parent Company              
(in millions of Korean won)   Share
Capital
    Hybrid
Securities
    Capital
Surplus
    Accumulated
Other
Comprehensive
Income
    Retained
Earnings
    Treasury
Shares
    Non-controlling
Interests
    Total Equity  

Balance at January 1, 2018

  W 2,090,558     W —       W 17,122,228     W 537,668     W 15,044,204     W (755,973   W 6,144     W 34,044,829  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

The effect of changing of accounting policy

    —         —         —         (349,476     (72,102     —         —         (421,578

Balance after reflecting the effect of accounting policy

    2,090,558       —         17,122,228       188,192       14,972,102       (755,973     6,144       33,623,251  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income

               

Profit for the period

    —         —         —         —         1,914,983       —         203       1,915,186  

Remeasurements of net defined benefit liabilities

    —         —         —         (2,537     —         —         —         (2,537

Exchange differences on translating foreign operations

    —         —         —         73,436       —         —         6       73,442  

Net gains on financial instruments at fair value through other comprehensive income

    —         —         —         24,845       —         —         —         24,845  

Shares of other comprehensive income (loss) of associates and joint ventures

    —         —         —         (2,173     —         —         —         (2,173

Cash flow hedges

    —         —         —         9,388       —         —         —         9,388  

Losses on hedges of
a net investment in a foreign operation

    —         —         —         (30,669     —         —         —         (30,669

Other comprehensive income(loss) arising from separate account

    —         —         —         8,641       —         —         —         8,641  

Fair value changes on financial liabilities designated at fair value due to own credit risk

    —         —         —         4,349       —         —         —         4,349  

Net overlay adjustments

    —         —         —         (84,000     —         —         —         (84,000
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income

    —         —         —         1,280       1,914,983       —         209       1,916,472  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Transactions with shareholders

               

Dividends paid to shareholders of the Parent Company

    —         —         —         —         (766,728     —         —         (766,728

Acquisition of treasury shares

    —         —         —         —         —         (180,221     —         (180,221

Others

    —         —         741       —         —         —         —         741  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total transactions with shareholders

    —         —         741       —         (766,728     (180,221     —         (946,208
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at June 30, 2018 (Unaudited)

  W 2,090,558     W —       W 17,122,969     W 189,472     W 16,120,357     W (936,194   W 6,353     W 34,593,515  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at January 1, 2019

  W 2,090,558     W —       W 17,121,660     W 177,806     W 17,282,441     W (968,549   W 9,111     W 35,713,027  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income

               

Profit for the period

    —         —         —         —         1,836,844       —         553       1,837,397  

Remeasurements of net defined benefit liabilities

    —         —         —         (4,738     —         —         —         (4,738

Exchange differences

    —         —         —         54,938       —         —         368       55,306  

Net gains on financial instruments at fair value through other comprehensive income and reclassification to retained earnings

    —         —         —         137,450       (18,409     —         —         119,041  

Shares of other comprehensive income of associates and joint ventures

    —         —         —         5,935       —         —         —         5,935  

Cash flow hedges

    —         —         —         (38,358     —         —         —         (38,358

Losses on hedges of a net investment in a foreign operation

    —         —         —         (8,026     —         —         —         (8,026

Other comprehensive income arising from separate account

    —         —         —         32,070       —         —         —         32,070  

Fair value changes on financial liabilities designated at fair value due to own credit risk

    —         —         —         (21,930     —         —         —         (21,930

Net overlay adjustments

    —         —         —         141,276       —         —         —         141,276  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income

    —         —         —         298,617       1,818,435       —         921       2,117,973  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Transactions with shareholders

               

Dividends paid to shareholders of the Parent Company

    —         —         —         —         (759,736     —         —         (759,736

Issuance of hybrid securities

    —         399,085       —         —         —         —         —         399,085  

Dividends on hybrid securities

    —         —         —         —         (2,141     —         —         (2,141

Acquisition of treasury shares

    —         —         —         —         —         (267,639     —         (267,639

Others

    —         —         1,678       —         —         —         63       1,741  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total transactions with shareholders

    —         399,085       1,678       —         (761,877     (267,639     63       (628,690
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at June 30, 2019 (Unaudited)

  W 2,090,558     W 399,085     W 17,123,338     W 476,423     W 18,338,999     W (1,236,188   W 10,095     W 37,202,310  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

The above consolidated interim statements of changes in equity should be read in conjunction with the accompanying notes.

 

5


KB Financial Group Inc. and Subsidiaries

Consolidated Interim Statements of Cash Flows

Six-Month Periods Ended June 30, 2019 and 2018

 

 

          2019     2018  
(in millions of Korean won)    Note    (Unaudited)     (Unaudited)  

Cash flows from operating activities

       

Profit for the period

      W 1,837,397     W 1,915,186  
     

 

 

   

 

 

 

Adjustment for non-cash items

       

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

        (104,778     24,769  

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

        (10,785     183,865  

Adjustment of fair value of derivative financial instruments

        (737     1,134  

Provision for credit losses

        293,745       281,329  

Net loss (gain) on financial investments

        (96,935     (26,554

Share of profit of associates and joint ventures

        (4,782     (12,722

Depreciation and amortization expense

        363,094       178,051  

Depreciation and amortization expense on VOBA

        98,808       109,877  

Other net losses (gains) on property and equipment/intangible assets

        (25,503     (146,123

Share-based payments

        13,327       1,816  

Policy reserve appropriation

        803,320       929,760  

Post-employment benefits

        114,629       109,671  

Net interest expense

        186,885       148,025  

Loss (gain) on foreign currency translation

        5,709       (147,721

Other non-cash items

        199,028       63,124  
     

 

 

   

 

 

 
        1,835,025       1,698,301  
     

 

 

   

 

 

 

Changes in operating assets and liabilities

       

Financial asset at fair value through profit or loss

        3,569,710       (7,444,814

Derivative financial instruments

        (282,903     103,657  

Loans at fair value through other comprehensive income

        8,806       —    

Loans at amortized cost

        (5,720,150     (14,876,364

Current income tax assets

        (9,306     (7,924

Deferred income tax assets

        174       2,449  

Other assets

        (11,506,425     (6,306,325

Financial liabilities at fair value through profit or loss

        1,474,193       2,368,488  

Deposits

        11,270,604       9,160,105  

Tax liabilities for current period

        (372,386     53,567  

Deferred income tax liabilities

        249,145       143,641  

Other liabilities

        6,976,272       4,328,863  
     

 

 

   

 

 

 
        5,657,734       (12,474,657
     

 

 

   

 

 

 

Net cash inflow (outflow) from operating activities

        9,330,156       (8,861,170
     

 

 

   

 

 

 
Cash flows from investing activities                  

Net cash flows from derivative financial instruments for hedging purposes

        (107,293     55,506  

Disposal of financial asset at fair value through profit or loss

        6,186,775       5,472,537  

Acquisition of financial asset at fair value through profit or loss

        (6,598,127     (3,293,235

Disposal of financial investments

        42,122,954       22,743,677  

Acquisition of financial investments

        (44,335,453     (25,872,100

Disposal in investments in associates and joint ventures

        9,670       18,668  

Acquisition of investments in associates and joint ventures

        (19,028     (32,273

Disposal of property and equipment

        19,756       313  

Acquisition of property and equipment

        (226,683     (101,542

Disposal of investment property

        69,053       142,044  

Acquisition of investment property

        (486,236     (899,330

Disposal of intangible assets

        851       8,084  

Acquisition of intangible assets

        (98,666     (64,540

Net cash flows from the change in subsidiaries

        (134,968     202,093  

Others

        58,011       232,907  
     

 

 

   

 

 

 

Net cash outflow from investing activities

        (3,539,384     (1,387,191
     

 

 

   

 

 

 
Cash flows from financing activities                  

Net cash flows from derivative financial instruments for hedging purposes

        (14,483     123,548  

Net increase (decrease) in debts

        (3,299,433     3,580,730  

Increase in debentures

        47,270,138       66,898,461  

Decrease in debentures

        (49,945,328     (62,518,143

Increase (decrease) in other payables from trust accounts

        (98,727     680,890  

Dividends paid to shareholders of the Parent Company

        (759,736     (766,728

Acquisition of treasury shares

        (269,219     (199,023

Issuance of hybrid securities

        399,085       —    

Principal elements of lease payments

        (116,569     —    

Others

        58,882       (151,288
     

 

 

   

 

 

 

Net cash inflow (outflow) from financing activities

        (6,775,390     7,648,447  
     

 

 

   

 

 

 

Effect of exchange rate changes on cash and cash equivalents

        95,553       24,278  
     

 

 

   

 

 

 

Net decrease in cash and cash equivalents

        (889,065     (2,575,636

Cash and cash equivalents at the beginning of the period

   37      6,642,816       8,404,898  
     

 

 

   

 

 

 

Cash and cash equivalents at the end of the period

   37    W 5,753,751     W 5,829,262  
     

 

 

   

 

 

 

The above consolidated interim statements of cash flows should be read in conjunction with the accompanying notes.

 

6


KB Financial Group Inc. and Subsidiaries

Notes to the Consolidated Interim Financial Statements

June 30, 2019 and 2018 (Unaudited), and December 31, 2018

 

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 June 30, 2019, 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 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.

The Group’s consolidated interim financial statements for the six-month period ended June 30, 2019 were prepared in accordance with Korean IFRS 1034 Interim Financial Reporting. These consolidated interim financial statements have been prepared in accordance with Korean IFRS which is effective or early adopted as at June 30, 2019.

The Group recognized an amount of services to customers as expenses in previous interim but recognized as the reduction of revenue in accordance with Korean IFRS 1115 Revenue from Contracts with Customers. Accordingly, certain accounts reported in the consolidated statements of comprehensive income for the six-month period ended June 30, 2018 have been reclassified to facilitate the comparison with the consolidated statements of comprehensive income for the six-month period ended June 30, 2019. The reclassification of the accounts does not have any effect on the net asset value or net income of the Group as reported in the six-month period ended June 30, 2018.

 

7


KB Financial Group Inc. and Subsidiaries

Notes to the Consolidated Interim Financial Statements

June 30, 2019 and 2018 (Unaudited), and December 31, 2018

 

 

2.1.1 New and amended standards and interpretations adopted by the Group

The Group has applied the following standards and amendments for the first time for their annual reporting period commencing January 1, 2019.

 

 

Enactment of Korean IFRS 1116 Leases

Korean IFRS 1116 Leases replaces Korean IFRS 1017 Leases. Under Korean IFRS 1116, with implementation of a single lease model, lessee is required to recognize assets and liabilities for all lease which lease term is over 12 months and underlying assets are not low value assets. A lessee is required to recognize a right-of-use asset and a lease liability representing its obligation to make lease payments.

With implementation of Korean IFRS 1116 Lease, the Group has changed accounting policy. The Group has adopted Korean IFRS 1116 retrospectively, as permitted under the specific transitional provisions in the standard, and recognized the cumulative impact of initially applying the standard as at January 1, 2019, the date of initial application. The Group has not restated comparatives for the 2018 reporting period. The impact of the adoption of the leasing standard and the new accounting policies are disclosed in Note 42.

 

 

Amendments to Korean IFRS 1109 Financial Instruments

The narrow-scope amendments made to Korean IFRS 1109 Financial Instruments enable entities to measure certain prepayable financial assets with negative compensation at amortized cost. When a modification of a financial liability measured at amortized cost that does not result in the derecognition, a modification gain or loss shall be recognized in profit or loss. The amendment does not have a significant impact on the financial statements.

 

 

Amendments to Korean IFRS 1019 Employee Benefits

The amendments require that an entity shall calculate current service cost and net interest for the remainder of the reporting period after a plan amendment, curtailment or settlement based on updated actuarial assumptions from the date of the change. The amendments also require that a reduction in a surplus must be recognized in profit or loss even if that surplus was not previously recognized because of the impact of the asset ceiling. The amendment does not have a significant impact on the financial statements.

 

 

Amendments to Korean IFRS 1028 Investments in Associates and Joint Ventures

The amendments clarify that an entity shall apply Korean IFRS 1109 to financial instruments in an associate or joint venture to which the equity method is not applied. These include long-term interests that, in substance, form part of the entity’s net investment in an associate or joint venture. The amendment does not have a significant impact on the financial statements.

 

8


KB Financial Group Inc. and Subsidiaries

Notes to the Consolidated Interim Financial Statements

June 30, 2019 and 2018 (Unaudited), and December 31, 2018

 

 

 

Enactment of Interpretation of Korean IFRS 2123 Uncertainty over Income Tax Treatments

The enactment clarifies the accounting for uncertainties in income taxes in the event that the decision of taxation authorities or courts can change tax treatment. The enactment presents calculating methods of disclosure amount based on the possibility of future recognition of the income tax treatment, and requires disclosure of the uncertainty of the amount. The enactment does not have a significant impact on the financial statements.

 

 

Annual Improvements to Korean IFRS 1103 Business Combination

The amendments clarify that when a party to a joint arrangement obtains control of a business that is a joint operation, and had rights to the assets and obligations for the liabilities relating to that joint operation immediately before the acquisition date, the transaction is a business combination achieved in stages. In such cases, the acquirer shall remeasure its entire previously held interest in the joint operation. The amendment does not have a significant impact on the financial statements.

 

 

Annual Improvements to Korean IFRS 1111 Joint Agreements

The amendments clarify that when a party that participates in, but does not have joint control of, a joint operation might obtain joint control of the joint operation in which the activity of the joint operation constitutes a business. In such cases, previously held interests in the joint operation are not remeasured. The amendment does not have a significant impact on the financial statements.

 

 

Annual Improvements to Paragraph 57A of Korean IFRS 1012 Income Tax

The amendment is applied to all the income tax consequences of dividends and requires an entity to recognize the income tax consequences of dividends in profit or loss, other comprehensive income or equity according to where the entity originally recognized those past transactions or events. The amendment does not have a significant impact on the financial statements.

 

 

Annual Improvements to Korean IFRS 1023 Borrowing Cost

The amendments clarify that if a specific borrowing remains outstanding after the related qualifying asset is ready for its intended use (or sale), it becomes part of general borrowings. The amendment does not have a significant impact on the financial statements.

2.1.2 New and amended standards and interpretations not yet adopted by the Group

There are no new accounting standards and interpretations that are effective for the annual reporting period commencing January 1, 2019 and have not been early adopted by the Group.

2.2 Measurement Basis

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

 

9


KB Financial Group Inc. and Subsidiaries

Notes to the Consolidated Interim Financial Statements

June 30, 2019 and 2018 (Unaudited), and December 31, 2018

 

 

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.

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 financial statements have been consistently applied to all periods presented, 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.

3.2 Hybrid securities

If the Group is an issuer of financial instruments, an amount of financial instruments can be classified as either financial liabilities or equity in accordance with the terms of the contract. The Group classifies hybrid securities as an equity if the Group has the unconditional right to avoid any contractual obligation to deliver financial assets such as cash in relation to the financial instruments.

 

10


KB Financial Group Inc. and Subsidiaries

Notes to the Consolidated Interim Financial Statements

June 30, 2019 and 2018 (Unaudited), and December 31, 2018

 

 

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 Economic Capital or VaR (Value at Risk) using a statistical method.

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 economic 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.

The Group uses definition of default as defined and applied in the calculation of Capital Adequacy Ratio (Basel III) in accordance with the new Basel Accord.

 

11


KB Financial Group Inc. and Subsidiaries

Notes to the Consolidated Interim Financial Statements

June 30, 2019 and 2018 (Unaudited), and December 31, 2018

 

 

4.2.2 Credit risk management

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

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 June 30, 2019 and December 31, 2018, are as follows:

 

(In millions of Korean won)    June 30, 2019      December 31, 2018  

Financial assets

     

Due from financial institutions at amortized cost 1

   W 20,090,802      W 17,216,288  

Financial assets at fair value through profit or loss

     

Due from financial institutions

     293,452        381,719  

Securities

     46,005,132        48,285,482  

Loans

     961,197        954,176  

Financial instruments indexed to the price of gold

     73,971        78,808  

Derivatives

     2,891,518        2,025,962  

Loans at amortized cost1

     324,900,461        319,201,603  

Financial investments

     

Securities measured at fair value through other comprehensive income

     37,645,314        35,243,634  

Securities at amortized cost1

     23,833,824        23,661,522  

Loans measured at fair value through other comprehensive income

     422,889        389,822  

Other financial assets1

     15,063,899        8,133,556  
  

 

 

    

 

 

 
     472,182,459        455,572,572  
  

 

 

    

 

 

 

Off-balance sheet items

     

Acceptances and guarantees contracts

     7,948,835        7,277,136  

Financial guarantee contracts

     3,373,235        3,626,532  

Commitments

     143,787,247        138,590,372  
  

 

 

    

 

 

 
     155,109,317        149,494,040  
  

 

 

    

 

 

 
     W627,291,776      W605,066,612  
  

 

 

    

 

 

 

 

1 

Due from financial institutions, loans at amortized cost, securities at amortized cost and other financial assets are net of allowance.

 

12


KB Financial Group Inc. and Subsidiaries

Notes to the Consolidated Interim Financial Statements

June 30, 2019 and 2018 (Unaudited), and December 31, 2018

 

 

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 assesses expected credit loss on financial asset at amortized cost and financial asset at fair value through other comprehensive income other than financial asset at fair value through profit or loss and recognizes loss allowance. Expected credit losses are a probability-weighted estimate of possible credit losses in within certain range by reflecting reasonable and supportable information that which is reasonably available at the reporting date without undue cost or effort, including information about past events, current conditions and forecasts of future economic conditions. The Group assesses the expected credit losses for loans categorized in financial assets at amortized cost, and presents it with the name of account ‘allowance for loan losses provision for allowance’ netting from the related carrying amounts. For the expected credit losses for loans categorized in financial assets at fair value through other comprehensive income, the Group presents it at other comprehensive income.

Loans as of June 30, 2019 and December 31, 2018, are classified as follows:

(In millions of Korean won)

 

     June 30, 2019  
     The financial
instruments
applying 12-month
expected credit
losses
     The financial instruments
applying lifetime expected
credit losses
     Financial
instruments
not applying
expected
credit losses
     Total  
     Non-impaired      Impaired  

Loans at amortized cost1

 

Corporate

 

Grade 1

   W 79,559,029      W 2,497,920      W 1,118      W —        W 82,058,067  

Grade 2

     55,018,681        4,292,916        2,029        —          59,313,626  

Grade 3

     2,864,801        1,921,267        5,476        —          4,791,544  

Grade 4

     568,726        956,989        49,613        —          1,575,328  

Grade 5

     359,738        361,222        949,926        —          1,670,886  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     138,370,975        10,030,314        1,008,162        —          149,409,451  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Retail

 

Grade 1

     135,621,505        4,663,487        5,025        —          140,290,017  

Grade 2

     7,892,215        7,663,737        20,789        —          15,576,741  

Grade 3

     2,019,566        1,084,764        5,051        —          3,109,381  

Grade 4

     579,263        363,207        14,208        —          956,678  

Grade 5

     7,755        514,609        556,038        —          1,078,402  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     146,120,304        14,289,804        601,111        —          161,011,219  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Credit card

 

Grade 1

     8,042,061        185,102        —          —          8,227,163  

Grade 2

     4,499,728        613,337        —          —          5,113,065  

Grade 3

     1,470,267        1,112,140        —          —          2,582,407  

Grade 4

     35,800        397,590        —          —          433,390  

Grade 5

     783        149,099        445,045        —          594,927  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     14,048,639        2,457,268        445,045        —          16,950,952  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     298,539,918        26,777,386        2,054,318               327,371,622  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Loans at fair value through other comprehensive income

 

Corporate

 

Grade 1

     251,648        —          —          —          251,648  

Grade 2

     114,574        27,750        —          —          142,324  

Grade 3

     —          28,917        —          —          28,917  

Grade 4

     —          —          —          —          —    

Grade 5

     —          —          —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     366,222        56,667        —          —          422,889  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     366,222        56,667        —          —          422,889  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 298,906,140      W 26,834,053      W 2,054,318      W —        W 327,794,511  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

1

Before netting of allowance.

 

13


KB Financial Group Inc. and Subsidiaries

Notes to the Consolidated Interim Financial Statements

June 30, 2019 and 2018 (Unaudited), and December 31, 2018

 

 

 

(In millions of Korean won)    December 31, 2018  
     The financial
instruments
applying 12-month
expected credit
losses
     The financial instruments
applying lifetime expected credit
losses
     Financial
instruments
not applying
expected
credit losses
     Total  
     Non-impaired      Impaired  

Loans at amortized cost1

 

Corporate

 

Grade 1

   W 75,785,147      W 2,144,175      W 1,638      W —        W 77,930,960  

Grade 2

     55,292,251        4,227,041        2,016        —          59,521,308  

Grade 3

     2,957,463        1,757,607        6,579        —          4,721,649  

Grade 4

     484,248        965,094        68,271        —          1,517,613  

Grade 5

     244,593        378,588        1,063,646        —          1,686,827  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     134,763,702        9,472,505        1,142,150        —          145,378,357  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Retail

 

Grade 1

     133,946,705        4,411,122        9,180        —          138,367,007  

Grade 2

     7,819,152        7,497,880        17,767        —          15,334,799  

Grade 3

     1,718,104        1,559,980        6,694        —          3,284,778  

Grade 4

     706,797        421,800        13,318        —          1,141,915  

Grade 5

     14,110        447,064        489,196        —          950,370  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     144,204,868        14,337,846        536,155        —          159,078,869  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Credit card

 

Grade 1

     8,411,723        176,312        —          —          8,588,035  

Grade 2

     4,449,617        587,254        —          —          5,036,871  

Grade 3

     1,460,344        1,228,087        —          —          2,688,431  

Grade 4

     6,004        467,012        —          —          473,016  

Grade 5

     112        148,149        419,444        —          567,705  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     14,327,800        2,606,814        419,444        —          17,354,058  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     293,296,370        26,417,165        2,097,749        —          321,811,284  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Loans at fair value through other comprehensive income

 

Corporate

 

Grade 1

     189,501        25,731        —          —          215,232  

Grade 2

     128,712        45,878        —          —          174,590  

Grade 3

     —          —          —          —          —    

Grade 4

     —          —          —          —          —    

Grade 5

     —          —          —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     318,213        71,609        —          —          389,822  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     318,213        71,609        —          —          389,822  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 293,614,583      W 26,488,774      W 2,097,749      W —        W 322,201,106  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

1

Before netting of allowance.

 

14


KB Financial Group Inc. and Subsidiaries

Notes to the Consolidated Interim Financial Statements

June 30, 2019 and 2018 (Unaudited), and December 31, 2018

 

 

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

The quantification of the extent to which collateral and other credit enhancements mitigate credit risk as of June 30, 2019 and December 31, 2018, are as follows:

 

(In millions of Korean won)    June 30, 2019  
     The financial
instruments
applying 12-month
expected credit
losses
     The financial instruments applying
lifetime expected credit losses
     Total  
     Non-impaired      Impaired  

Guarantees

   W 63,554,144      W 6,224,190      W 164,857      W 69,943,191  

Deposits and savings

     4,320,018        84,264        6,349        4,410,631  

Property and equipment

     9,366,613        536,335        64,410        9,967,358  

Real estate

     147,969,255        13,328,012        467,827        161,765,094  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 225,210,030      W 20,172,801      W 703,443      W 246,086,274  
  

 

 

    

 

 

    

 

 

    

 

 

 
(In millions of Korean won)    December 31, 2018  
     The financial
instruments
applying 12-month
expected credit
losses
     The financial instruments
applying lifetime expected credit
losses
     Total  
     Non-impaired      Impaired  

Guarantees

   W 60,473,663      W 5,871,980      W 151,180      W 66,496,823  

Deposits and savings

     4,200,448        77,024        6,485        4,283,957  

Property and equipment

     8,644,719        616,318        54,492        9,315,529  

Real estate

     147,682,808        12,828,076        442,287        160,953,171  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 221,001,638      W 19,393,398      W 654,444      W 241,049,480  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

15


KB Financial Group Inc. and Subsidiaries

Notes to the Consolidated Interim Financial Statements

June 30, 2019 and 2018 (Unaudited), and December 31, 2018

 

 

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 June 30, 2019 and December 31, 2018, are as follows:

 

 

(In millions of Korean won)    June 30, 2019  
     The financial
instruments
applying
12-month
expected credit
losses
     The financial instruments
applying lifetime expected
credit losses
     Financial
instruments
not applying
expected
credit losses
     Total  
     Non-impaired      Impaired  

Securities at amortized cost1

 

Grade 1

   W 23,659,246      W —        W —        W —        W 23,659,246  

Grade 2

     133,064        —          —          —          133,064  

Grade 3

     43,302        —          —          —          43,302  

Grade 4

     —          —          —          —          —    

Grade 5

     —          —          —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     23,835,612        —          —          —          23,835,612  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Securities measured at fair value through other comprehensive income

 

Grade 1

     35,102,086        —          —          —          35,102,086  

Grade 2

     2,494,891        —          —          —          2,494,891  

Grade 3

     42,744        —          —          —          42,744  

Grade 4

     2,590        —          —          —          2,590  

Grade 5

     —          —          3,003        —          3,003  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     37,642,311        —          3,003        —          37,645,314  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 61,477,923      W —        W 3,003      W —        W 61,480,926  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

 

(In millions of Korean won)    December 31, 2018  
     The financial
instruments
applying
12-month
expected credit
losses
     The financial instruments
applying lifetime expected
credit losses
     Financial
instruments
not applying
expected
credit losses
     Total  
     Non-impaired      Impaired  

Securities at amortized cost1

 

Grade 1

   W 23,524,120      W —        W —        W —        W 23,524,120  

Grade 2

     120,546        —          —          —          120,546  

Grade 3

     18,572        —          —          —          18,572  

Grade 4

     —          —          —          —          —    

Grade 5

     —          —          —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     23,663,238        —          —          —          23,663,238  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Securities measured at fair value through other comprehensive income

 

Grade 1

     32,498,155        —          —          —          32,498,155  

Grade 2

     2,740,053        —          —          —          2,740,053  

Grade 3

     —          —          —          —          —    

Grade 4

     2,510        —          —          —          2,510  

Grade 5

     —          —          2,916        —          2,916  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     35,240,718        —          2,916        —          35,243,634  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 58,903,956      W —        W 2,916      W —        W 58,906,872  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

1

Before netting of allowance

 

16


KB Financial Group Inc. and Subsidiaries

Notes to the Consolidated Interim Financial Statements

June 30, 2019 and 2018 (Unaudited), and December 31, 2018

 

 

The credit qualities of securities, excluding equity securities according to the credit ratings by external rating agencies as of June 30, 2019, and December 31, 2018, are as follows:

 

Credit quality    Domestic    Foreign
  

 

  

 

     KIS    NICE P&I    KAP    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 debt 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.

4.2.6 Credit risk of due from financial institutions

The credit quality of due from financial institutions as of June 30, 2019 and December 31, 2018, are classified as follows:

 

(In millions of Korean won)      June 30, 2019  
     The financial
instruments
applying
12-month
expected credit
losses
     The financial instruments
applying lifetime expected
credit losses
     Financial
instruments
not applying
expected credit
losses
     Total  
   Non-impaired      Impaired  

Due from financial institutions at amortized cost1

 

Grade 1

   W 19,274,608      W —        W —        W —        W 19,274,608  

Grade 2

     159,352        —          —          —          159,352  

Grade 3

     537,525        —          —          —          537,525  

Grade 4

     117,656        —          —          —          117,656  

Grade 5

     3,825        —          —          —          3,825  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 20,092,966      W —        W —        W —        W 20,092,966  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

1

Before netting of allowance

 

17


KB Financial Group Inc. and Subsidiaries

Notes to the Consolidated Interim Financial Statements

June 30, 2019 and 2018 (Unaudited), and December 31, 2018

 

 

 

(In millions of Korean won)    December 31, 2018  
     The financial
instruments
applying
12-month
expected credit
losses
     The financial instruments
applying lifetime expected
credit losses
     Financial
instruments
not applying
expected credit
losses
     Total  
   Non-impaired      Impaired  

Due from financial institutions at amortized cost1

 

Grade 1

   W 16,374,868      W —        W —        W —        W 16,374,868  

Grade 2

     213,903        —          —          —          213,903  

Grade 3

     608,314        —          —          —          608,314  

Grade 4

     19,531        —          —          —          19,531  

Grade 5

     1,691        —          —          —          1,691  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 17,218,307      W —        W —        W —        W 17,218,307  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

1

Before netting of allowance

The credit qualities of due from financial institutions according to the credit ratings by external rating agencies as of June 30, 2019 and December 31, 2018, are same as the credit qualities of securities, excluding equity securities.

4.2.7 Credit risk concentration analysis

Details of the Group’s loans by jurisdiction as of June 30, 2019 and December 31, 2018, are as follows:

 

 

(In millions of Korean won)    June 30, 2019  
     Retail      Corporate      Credit card      Total      %      Allowances    

Carrying

amount

 

Korea

   W 160,588,169      W 144,802,274      W 16,948,485      W 322,338,928        98.05      W (2,432,181   W 319,906,747  

Europe

     —          734,601        —          734,601        0.22        (765     733,836  

China

     —          2,692,951        357        2,693,308        0.82        (20,933     2,672,375  

Japan

     105        531,342        40        531,487        0.16        (552     530,935  

United States

     —          1,216,655        —          1,216,655        0.37        (8,284     1,208,371  

Others

     422,945        815,714        2,070        1,240,729        0.38        (8,446     1,232,283  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 
   W 161,011,219      W 150,793,537      W 16,950,952      W 328,755,708        100.00      W (2,471,161   W 326,284,547  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

 

18


KB Financial Group Inc. and Subsidiaries

Notes to the Consolidated Interim Financial Statements

June 30, 2019 and 2018 (Unaudited), and December 31, 2018

 

 

 

(In millions of Korean won)    December 31, 2018  
     Retail      Corporate      Credit card      Total      %      Allowances    

Carrying

amount

 

Korea

   W 158,760,865      W 141,864,644      W 17,346,224      W 317,971,733        98.40      W (2,574,236   W 315,397,497  

Europe

     —          649,281        —          649,281        0.20        (512     648,769  

China

     —          2,259,202        807        2,260,009        0.70        (20,570     2,239,439  

Japan

     106        354,181        60        354,347        0.11        (1,900     352,447  

United States

     —          997,321        6,967        1,004,288        0.31        (5,706     998,582  

Others

     317,898        597,726        —          915,624        0.28        (6,757     908,867  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 
   W 159,078,869      W 146,722,355      W 17,354,058      W 323,155,282        100.00      W (2,609,681   W 320,545,601  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

 

1 

The above is the Group’s loans at fair value through profit and loss, fair value through other comprehensive income and amortized cost.

Details of the Group’s corporate loans by industry as of June 30, 2019 and December 31, 2018, are as follows:

 

(In millions of Korean won)    June 30, 2019  
     Loans      %      Allowances      Carrying amount  

Financial institutions

   W 16,628,311        11.03      W (44,353    W 16,583,958  

Manufacturing

     43,661,511        28.95        (410,586      43,250,925  

Service

     60,203,433        39.92        (232,525      59,970,908  

Wholesale & Retail

     17,953,835        11.91        (110,732      17,843,103  

Construction

     3,588,429        2.38        (189,948      3,398,481  

Public sector

     893,528        0.59        (1,980      891,548  

Others

     7,864,490        5.22        (96,945      7,767,545  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 150,793,537        100.00      W (1,087,069    W 149,706,468  
  

 

 

    

 

 

    

 

 

    

 

 

 
(In millions of Korean won)    December 31, 2018  
     Loans      %      Allowances      Carrying amount  

Financial institutions

   W 14,193,442        9.67      W (45,473    W 14,147,969  

Manufacturing

     42,672,986        29.08        (449,406      42,223,580  

Service

     61,467,174        41.89        (270,846      61,196,328  

Wholesale & Retail

     16,739,852        11.41        (102,197      16,637,655  

Construction

     3,282,508        2.24        (291,211      2,991,297  

Public sector

     873,281        0.60        (3,301      869,980  

Others

     7,493,112        5.11        (93,409      7,399,703  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 146,722,355        100.00      W (1,255,843    W 145,466,512  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

19


KB Financial Group Inc. and Subsidiaries

Notes to the Consolidated Interim Financial Statements

June 30, 2019 and 2018 (Unaudited), and December 31, 2018

 

 

Types of the Group’s retail and credit card loans as of June 30, 2019 and December 31, 2018, are as follows:

 

(In millions of Korean won)    June 30, 2019  
     Loans      %      Allowances      Carrying amount  

Housing

   W 72,781,115        40.90      W (30,882    W 72,750,233  

General

     88,230,104        49.58        (643,642      87,586,462  

Credit card

     16,950,952        9.52        (709,568      16,241,384  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 177,962,171        100.00      W (1,384,092    W 176,578,079  
  

 

 

    

 

 

    

 

 

    

 

 

 
(In millions of Korean won)    December 31, 2018  
     Loans      %      Allowances      Carrying amount  

Housing

   W 70,916,004        40.19      W (29,369    W 70,886,635  

General

     88,162,865        49.97        (613,528      87,549,337  

Credit card

     17,354,058        9.84        (710,941      16,643,117  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 176,432,927        100.00      W (1,353,838    W 175,079,089  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

20


KB Financial Group Inc. and Subsidiaries

Notes to the Consolidated Interim Financial Statements

June 30, 2019 and 2018 (Unaudited), and December 31, 2018

 

 

Credit risk concentration of due from financial institutions, securities, excluding equity securities and derivative financial instruments

Details of the Group’s Credit risk concentration of due from financial institutions, securities, excluding equity securities, and derivative financial instruments as of June 30, 2019 and December 31, 2018, are as follows:

 

(In millions of Korean won)    June 30, 2019  
     Amount      %      Allowances      Carrying amount  

Due from financial institutions at amortized cost

 

Banking and insurance

   W 20,092,966        100.00      W (2,164    W 20,090,802  
  

 

 

    

 

 

    

 

 

    

 

 

 
     20,092,966        100.00        (2,164      20,090,802  
  

 

 

    

 

 

    

 

 

    

 

 

 

Due from financial institutions at fair value through profit or loss

 

Banking and insurance

     293,452        100.00        —          293,452  
  

 

 

    

 

 

    

 

 

    

 

 

 
     293,452        100.00        —          293,452  
  

 

 

    

 

 

    

 

 

    

 

 

 

Securities measured at fair value through profit or loss

 

Government and government funded institutions

     12,922,321        28.09        —          12,922,321  

Banking and insurance

     27,724,033        60.26        —          27,724,033  

Others

     5,358,778        11.65        —          5,358,778  
  

 

 

    

 

 

    

 

 

    

 

 

 
     46,005,132        100.00        —          46,005,132  
  

 

 

    

 

 

    

 

 

    

 

 

 

Derivatives

 

Government and government funded institutions

     35,337        1.22        —          35,337  

Banking and insurance

     2,679,079        92.66        —          2,679,079  

Others

     177,102        6.12        —          177,102  
  

 

 

    

 

 

    

 

 

    

 

 

 
     2,891,518        100.00        —          2,891,518  
  

 

 

    

 

 

    

 

 

    

 

 

 

Securities measured at fair value through other comprehensive income

 

Government and government funded institutions

     12,595,921        33.46        —          12,595,921  

Banking and insurance

     19,729,463        52.41        —          19,729,463  

Others

     5,319,930        14.13        —          5,319,930  
  

 

 

    

 

 

    

 

 

    

 

 

 
     37,645,314        100.00        —          37,645,314  
  

 

 

    

 

 

    

 

 

    

 

 

 

Securities at amortized cost

 

Government and government funded institutions

     10,608,382        44.51        (28      10,608,354  

Banking and insurance

     11,269,529        47.28        (1,427      11,268,102  

Others

     1,957,701        8.21        (333      1,957,368  
  

 

 

    

 

 

    

 

 

    

 

 

 
     23,835,612        100.00        (1,788      23,833,824  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 130,763,994         W (3,952    W 130,760,042  
  

 

 

       

 

 

    

 

 

 

 

21


KB Financial Group Inc. and Subsidiaries

Notes to the Consolidated Interim Financial Statements

June 30, 2019 and 2018 (Unaudited), and December 31, 2018

 

 

(In millions of Korean won)    December 31, 2018  
     Amount      %      Allowances      Carrying amount  

Due from financial institutions at amortized cost

 

Banking and insurance

   W 17,218,307        100.00      W (2,019    W 17,216,288  
  

 

 

    

 

 

    

 

 

    

 

 

 
     17,218,307        100.00        (2,019      17,216,288  
  

 

 

    

 

 

    

 

 

    

 

 

 

Due from financial institutions at fair value through profit or loss

 

Banking and insurance

     381,719        100.00        —          381,719  
  

 

 

    

 

 

    

 

 

    

 

 

 
     381,719        100.00        —          381,719  
  

 

 

    

 

 

    

 

 

    

 

 

 

Securities measured at fair value through profit or loss

 

Government and government funded institutions

     14,354,157        29.73        —          14,354,157  

Banking and insurance

     27,273,372        56.48        —          27,273,372  

Others

     6,657,953        13.79        —          6,657,953  
  

 

 

    

 

 

    

 

 

    

 

 

 
     48,285,482        100.00        —          48,285,482  
  

 

 

    

 

 

    

 

 

    

 

 

 

Derivatives

 

Government and government funded institutions

     39,290        1.94        —          39,290  

Banking and insurance

     1,849,078        91.27        —          1,849,078  

Others

     137,594        6.79        —          137,594  
  

 

 

    

 

 

    

 

 

    

 

 

 
     2,025,962        100.00        —          2,025,962  
  

 

 

    

 

 

    

 

 

    

 

 

 

Securities measured at fair value through other comprehensive income

 

Government and government funded institutions

     9,504,156        26.97        —          9,504,156  

Banking and insurance

     21,210,983        60.18        —          21,210,983  

Others

     4,528,495        12.85        —          4,528,495  
  

 

 

    

 

 

    

 

 

    

 

 

 
     35,243,634        100.00        —          35,243,634  
  

 

 

    

 

 

    

 

 

    

 

 

 

Securities at amortized cost

 

Government and government funded institutions

     10,321,667        43.62        (25      10,321,642  

Banking and insurance

     11,424,418        48.28        (1,399      11,423,019  

Others

     1,917,153        8.10        (292      1,916,861  
  

 

 

    

 

 

    

 

 

    

 

 

 
     23,663,238        100.00        (1,716      23,661,522  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 126,818,342         W (3,735    W 126,814,607  
  

 

 

       

 

 

    

 

 

 

 

22


KB Financial Group Inc. and Subsidiaries

Notes to the Consolidated Interim Financial Statements

June 30, 2019 and 2018 (Unaudited), and December 31, 2018

 

 

Credit risk concentrations of due from financial institutions, securities, excluding equity securities, and derivative financial instruments by country

Details of the Group’s credit risk concentration of due from financial institutions, securities, excluding equity securities, and derivative financial instruments by country, as of June 30, 2019 and December 31, 2018, are as follows:

 

(In millions of Korean won)    June 30, 2019  
     Amount      %      Allowances      Carrying amount  

Due from financial institutions at amortized cost

 

Korea

   W 15,855,196        78.91      W (576    W 15,854,620  

United States

     1,116,611        5.56        (13      1,116,598  

Others

     3,121,159        15.53        (1,575      3,119,584  
  

 

 

    

 

 

    

 

 

    

 

 

 
     20,092,966        100.00        (2,164      20,090,802  
  

 

 

    

 

 

    

 

 

    

 

 

 

Due from financial institutions at fair value through profit or loss

 

Korea

     293,452        100.00        —          293,452  
  

 

 

    

 

 

    

 

 

    

 

 

 
     293,452        100.00        —          293,452  
  

 

 

    

 

 

    

 

 

    

 

 

 

Securities measured at fair value through profit or loss

 

Korea

     41,631,928        90.49        —          41,631,928  

United States

     1,644,248        3.57        —          1,644,248  

Others

     2,728,956        5.94        —          2,728,956  
  

 

 

    

 

 

    

 

 

    

 

 

 
     46,005,132        100.00        —          46,005,132  
  

 

 

    

 

 

    

 

 

    

 

 

 

Derivatives

 

Korea

     1,700,457        58.81        —          1,700,457  

United States

     396,150        13.70        —          396,150  

France

     311,240        10.76        —          311,240  

Others

     483,671        16.73        —          483,671  
  

 

 

    

 

 

    

 

 

    

 

 

 
     2,891,518        100.00        —          2,891,518  
  

 

 

    

 

 

    

 

 

    

 

 

 

Securities measured at fair value through other comprehensive income

 

Korea

     35,437,434        94.14        —          35,437,434  

United States

     708,604        1.88        —          708,604  

Others

     1,499,276        3.98        —          1,499,276  
  

 

 

    

 

 

    

 

 

    

 

 

 
     37,645,314        100.00        —          37,645,314  
  

 

 

    

 

 

    

 

 

    

 

 

 

Securities at amortized cost

 

Korea

     21,185,820        88.88        (1,097      21,184,723  

United States

     1,296,392        5.44        (225      1,296,167  

Others

     1,353,400        5.68        (466      1,352,934  
  

 

 

    

 

 

    

 

 

    

 

 

 
     23,835,612        100.00        (1,788      23,833,824  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 130,763,994         W (3,952    W 130,760,042  
  

 

 

       

 

 

    

 

 

 

 

23


KB Financial Group Inc. and Subsidiaries

Notes to the Consolidated Interim Financial Statements

June 30, 2019 and 2018 (Unaudited), and December 31, 2018

 

 

(In millions of Korean won)    December 31, 2018  
     Amount      %      Allowances     

Carrying

amount

 

Due from financial institutions at amortized cost

 

Korea

   W 13,497,329        78.39      W (338    W 13,496,991  

United States

     826,660        4.80        (16      826,644  

Others

     2,894,318        16.81        (1,665      2,892,653  
  

 

 

    

 

 

    

 

 

    

 

 

 
     17,218,307        100.00        (2,019      17,216,288  
  

 

 

    

 

 

    

 

 

    

 

 

 

Due from financial institutions at fair value through profit or loss

 

Korea

     381,719        100.00        —          381,719  
  

 

 

    

 

 

    

 

 

    

 

 

 
     381,719        100.00        —          381,719  
  

 

 

    

 

 

    

 

 

    

 

 

 

Securities measured at fair value through profit or loss

 

Korea

     43,697,736        90.50        —          43,697,736  

United States

     1,813,902        3.76        —          1,813,902  

Others

     2,773,844        5.74        —          2,773,844  
  

 

 

    

 

 

    

 

 

    

 

 

 
     48,285,482        100.00        —          48,285,482  
  

 

 

    

 

 

    

 

 

    

 

 

 

Derivatives

 

Korea

     1,024,392        50.56        —          1,024,392  

United States

     316,482        15.62        —          316,482  

France

     237,080        11.70        —          237,080  

Singapore

     109,101        5.39        —          109,101  

Japan

     97,351        4.81        —          97,351  

Others

     241,556        11.92        —          241,556  
  

 

 

    

 

 

    

 

 

    

 

 

 
     2,025,962        100.00        —          2,025,962  
  

 

 

    

 

 

    

 

 

    

 

 

 

Securities measured at fair value through other comprehensive income

 

Korea

     33,156,041        94.08        —          33,156,041  

United States

     1,100,199        3.12        —          1,100,199  

Others

     987,394        2.80        —          987,394  
  

 

 

    

 

 

    

 

 

    

 

 

 
     35,243,634        100.00        —          35,243,634  
  

 

 

    

 

 

    

 

 

    

 

 

 

Securities at amortized cost

 

Korea

     21,175,749        89.49        (1,136      21,174,613  

United States

     1,252,426        5.29        (216      1,252,210  

Others

     1,235,063        5.22        (364      1,234,699  
  

 

 

    

 

 

    

 

 

    

 

 

 
     23,663,238        100.00        (1,716      23,661,522  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 126,818,342         W (3,735    W 126,814,607  
  

 

 

       

 

 

    

 

 

 

Due from financial institutions, financial assets at fair value through profit or loss and derivatives that are linked to gold price are mostly relevant to financial and insurance industry with high credit ratings.

 

24


KB Financial Group Inc. and Subsidiaries

Notes to the Consolidated Interim Financial Statements

June 30, 2019 and 2018 (Unaudited), and December 31, 2018

 

 

4.3 Liquidity Risk

4.3.1 Overview of liquidity risk

Liquidity risk is a risk that the Group becomes insolvency 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.

 

25


KB Financial Group Inc. and Subsidiaries

Notes to the Consolidated Interim Financial Statements

June 30, 2019 and 2018 (Unaudited), and December 31, 2018

 

 

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.

The remaining contractual maturity of financial assets and liabilities, excluding derivatives held for cash flow hedging, as of June 30, 2019 and December 31, 2018, are as follows:

 

(In millions of Korean won)   June 30, 2019  
   

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 4,823,470     W 1,398,710     W 287,330     W 1,082,232     W 34,456     W —       W 7,626,198  

Financial assets at fair value through profit or loss

    47,241,202       646,871       115,167       432,785       200,533       1,054,978       49,691,536  

Derivatives held for trading2

    2,751,793       —         —         —         —         —         2,751,793  

Derivatives held for fair value hedging3

    —         (2,357     26,895       16,098       18,623       51,229       110,488  

Loans at amortized cost

    3,398,027       32,373,540       33,894,565       113,001,402       88,554,351       101,025,053       372,246,938  

Financial investments4

             

Financial assets measured at fair value through other comprehensive income

    2,102,969       1,911,815       3,163,851       8,388,305       22,973,204       3,483,455       42,023,599  

Securities at amortized cost

    —         1,118,320       1,558,586       5,047,025       7,445,105       15,387,266       30,556,302  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other financial assets

    67,807       12,393,183       183,938       1,397,771       36,025       41,949       14,120,673  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  W 60,385,268     W 49,840,082     W 39,230,332     W 129,365,618     W 119,262,297     W 121,043,930     W 519,127,527  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

26


KB Financial Group Inc. and Subsidiaries

Notes to the Consolidated Interim Financial Statements

June 30, 2019 and 2018 (Unaudited), and December 31, 2018

 

 

(In millions of Korean won)   June 30, 2019  
   

On

demand

   

Up to

1 month

   

1-3

months

   

3-12

months

   

1-5

years

   

Over 5

years

    Total  

Financial liabilities

             

Financial liabilities at fair value through profit or loss2

  W 3,151,727     W —       W —       W —       W —       W —       W 3,151,727  

Financial liabilities designated at fair value through profit or loss2

    14,130,913       —         —         —         —         —         14,130,913  

Derivatives held for trading2

    3,053,623       —         —         —         —         —         3,053,623  

Derivatives held for fair value hedging3

    —         6,293       (8,265     (19,209     6,946       (63     (14,298

Deposits5

    132,739,887       19,807,271       28,933,074       99,063,018       9,607,002       2,660,544       292,810,796  

Debts

    5,892,222       7,892,979       3,913,466       6,528,508       4,890,958       1,324,444       30,442,577  

Debentures

    24,364       1,920,731       6,242,688       9,967,796       32,343,639       3,561,941       54,061,159  

Other financial liabilities

    86,884       22,697,977       300,807       511,510       931,560       191,706       24,720,444  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  W 159,079,620     W 52,325,251     W 39,381,770     W 116,051,623     W 47,780,105     W 7,738,572     W 422,356,941  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Off- balance sheet items

             

Commitments6

  W 143,787,247     W —       W —       W —       W —       W —       W 143,787,247  

Financial guarantee contract7

    3,373,235       —         —         —         —         —         3,373,235  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  W 147,160,482     W —       W —       W —       W —       W —       W 147,160,482  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

1

The amounts of W 14,919,460 million, which is restricted due from the financial institutions as of June 30, 2019, is excluded.

2 

Financial liabilities measured or 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.

3

Cash flows of derivative instruments held for hedging are shown at net cash flow by remaining contractual maturity.

4

The equity securities designated as financial assets measured at fair value through other comprehensive income are included under the ‘On demand’ category as they can be disposed without difficulty. However, the equity securities restricted from disposal are included on the category that the releasing date of restriction is belonged to.

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.

 

27


KB Financial Group Inc. and Subsidiaries

Notes to the Consolidated Interim Financial Statements

June 30, 2019 and 2018 (Unaudited), and December 31, 2018

 

 

(In millions of Korean won)   December 31, 2018  
   

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 5,636,123     W 1,481,598     W 242,353     W 538,579     W 81,646     W —       W 7,980,299  

Financial assets at fair value through profit or loss

    50,139,812       672,326       162,459       254,632       215,436       1,113,694       52,558,359  

Derivatives held for trading2

    1,915,532       —         —         —         —         —         1,915,532  

Derivatives held for fair value hedging3

    —         4,344       1,724       17,948       21,367       40,830       86,213  

Loans at amortized cost

    3,180,412       27,520,126       32,374,297       116,479,553       84,600,284       102,789,366       366,944,038  

Financial investments4

             

Financial assets measured at fair value through other comprehensive income

    2,117,560       1,812,270       2,694,083       11,210,903       18,626,405       2,728,392       39,189,613  

Securities at amortized cost

    —         1,245,353       1,483,667       4,412,816       8,932,468       14,380,433       30,454,737  

Other financial assets

    89,890       5,454,381       160,182       1,488,164       53,425       37,841       7,283,883  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  W 63,079,329     W 38,190,398     W 37,118,765     W 134,402,595     W 112,531,031     W 121,090,556     W 506,412,674  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

28


KB Financial Group Inc. and Subsidiaries

Notes to the Consolidated Interim Financial Statements

June 30, 2019 and 2018 (Unaudited), and December 31, 2018

 

 

(In millions of Korean won)   December 31, 2018  
   

On

demand

   

Up to

1 month

   

1-3

months

   

3-12

months

   

1-5

years

   

Over 5

years

    Total  

Financial liabilities

             

Financial liabilities at fair value through profit or loss2

  W 2,823,820     W —       W —       W —       W —       W —       W 2,823,820  

Financial liabilities designated at fair value through profit or loss2

    12,503,039       —         —         —         —         —         12,503,039  

Derivatives held for trading2

    2,724,994       —         —         —         —         —         2,724,994  

Derivatives held for fair value hedging3

    —         (2,403     (8,231     (37,851     13,831       31       (34,623

Deposits5

    126,781,682       16,852,129       28,053,517       95,568,339       11,284,243       2,608,630       281,148,540  

Debts

    5,909,297       10,355,022       3,975,372       7,205,116       4,714,743       1,249,785       33,409,335  

Debentures

    30,160       1,699,165       5,875,093       13,471,021       32,474,579       2,489,146       56,039,164  

Other financial liabilities

    91,381       15,943,018       170,851       275,135       581,537       65,721       17,127,643  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  W 150,864,373     W 44,846,931     W 38,066,602     W 116,481,760     W 49,068,933     W 6,413,313     W 405,741,912  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Off- balance sheet items

             

Commitments6

  W 138,590,372     W —       W —       W —       W —       W —       W 138,590,372  

Financial guarantee contract7

    3,626,532       —         —         —         —         —         3,626,532  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  W 142,216,904     W —       W —       W —       W —       W —       W 142,216,904  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

1

The amounts of W 12,394,461 million, which is restricted due from the financial institutions as of December 31, 2018, is excluded.

2 

Financial liabilities measured or 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.

3

Cash flows of derivative instruments held for hedging are shown at net cash flow by remaining contractual maturity.

4

The equity securities designated as financial assets measured at fair value through other comprehensive income are are included under the ‘On demand’ category as they can be disposed without difficulty. However, the equity securities restricted from disposal are included on the category that the releasing date of restriction is belonged to.

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.

 

29


KB Financial Group Inc. and Subsidiaries

Notes to the Consolidated Interim Financial Statements

June 30, 2019 and 2018 (Unaudited), and December 31, 2018

 

 

The contractual cash flows of derivatives held for cash flow hedging as of June 30, 2019 and December 31, 2018, are as follows:

 

(In millions of Korean won)    June 30, 2019  
    

Up to

1 month

    1-3 months    

3-12

months

   

1-5

years

   

Over

5 years

     Total  

Net cash flow of net-settled derivatives

   W 24     W (4,823   W (14,514   W (44,563   W  —        W (63,876

Cash flow to be received of gross-settlement derivatives

     265,775       358,513       1,582,641       1,076,200       —          3,283,129  

Cash flow to be paid of gross-settlement derivatives

     (270,723     (363,076     (1,627,049     (610,390     —          (2,871,238

 

(In millions of Korean won)    December 31, 2018  
    

Up to

1 month

    1-3 months    

3-12

months

   

1-5

years

   

Over

5 years

    Total  

Net cash flow of net-settled derivatives

   W (172   W 1,999     W 2,743     W 1,949     W (66   W 6,453  

Cash flow to be received of gross-settled derivatives

     47,526       129,826       286,219       2,116,253       —         2,579,824  

Cash flow to be paid of gross-settled derivatives

     (50,281     (137,834     (286,165     (2,151,808     —         (2,626,088

4.4 Market Risk

4.4.1 Concept

Market risk represents possible losses which arise from changes in market factors including interest rate, stock price, foreign exchange rate and other market factors that affect the fair value or future cash flows of financial instruments including securities and derivatives amongst others. The most significant risk associated with trading positions 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.

 

30


KB Financial Group Inc. and Subsidiaries

Notes to the Consolidated Interim Financial Statements

June 30, 2019 and 2018 (Unaudited), and December 31, 2018

 

 

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 including 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.

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 ALM Department and Risk Management Department measures and monitors the interest risk status and limits on a regular basis. The status and limits of interest rate risks including interest gap, 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 ALM 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.

 

31


KB Financial Group Inc. and Subsidiaries

Notes to the Consolidated Interim Financial Statements

June 30, 2019 and 2018 (Unaudited), and December 31, 2018

 

 

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

  

Loans, deposit products and other related financial services to large, small and medium-sized enterprises and SOHOs.

  

Retail Banking

  

Loans, deposit products and other related financial services to individuals and households.

  

Other Banking Services

  

Trading activities in securities and derivatives, funding and other supporting activities.

Securities Business

  

Investment banking, brokerage services and other supporting activities.

Non-life Insurance Business

  

The activities within this segment include property 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

  

Life insurance and other supporting activities.

 

32


KB Financial Group Inc. and Subsidiaries

Notes to the Consolidated Interim Financial Statements

June 30, 2019 and 2018 (Unaudited), and December 31, 2018

 

 

Financial information by business segment for the six-month period ended June 30, 2019, 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
adjustment
    Total  

Operating revenues from external customers

  W 1,151,486     W 1,551,491     W 723,965     W 3,426,942     W 594,923     W 683,409     W 719,848     W 71,401     W 267,474     W —       W 5,763,997  

Intra-segment operating revenues (expenses)

    131,462       —         82,955       214,417       (28,025     (47,211     (109,510     (15,333     87,095       (101,433     —    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  W 1,282,948     W 1,551,491     W 806,920     W 3,641,359     W 566,898     W 636,198     W 610,338     W 56,068     W 354,569     W (101,433   W 5,763,997  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net interest income

  W 1,410,222     W 1,582,951     W 146,512     W 3,139,685     W 266,882     W 308,554     W 603,774     W 84,511     W 145,388     W 373     W 4,549,167  

Interest income

    2,318,643       2,465,625       637,314       5,421,582       424,182       309,313       776,420       84,484       340,714       (16,306     7,340,389  

Interest expense

    (908,421     (882,674     (490,802     (2,281,897     (157,300     (759     (172,646     27       (195,326     16,679       (2,791,222

Net fee and commission income (expenses)

    173,309       253,524       151,030       577,863       283,524       (76,730     104,851       (8,531     253,403       1,298       1,135,678  

Fee and commission income

    221,852       298,842       216,281       736,975       331,943       3,610       673,462       70       288,882       (157,466     1,877,476  

Fee and commission expense

    (48,543     (45,318     (65,251     (159,112     (48,419     (80,340     (568,611     (8,601     (35,479     158,764       (741,798

Net insurance income (expenses)

    —         —         —         —         —         279,744       8,012       (53,222     —         (3,956     230,578  

Insurance income

    —         —         —         —         —         5,684,091       15,197       470,494       —         (13,563     6,156,219  

Insurance expenses

    —         —         —         —         —         (5,404,347     (7,185     (523,716     —         9,607       (5,925,641

Net gains (losses) on financial instruments at fair value through profit or loss

    (3,339     —         245,729       242,390       (53,585     140,096       239       33,595       57,419       (91,069     329,085  

Net other operating income (expense)

    (297,244     (284,984     263,649       (318,579     70,077       (15,466     (106,538     (285     (101,641     (8,079     (480,511

General and administrative expenses

    (581,315     (937,799     (340,657     (1,859,771     (363,314     (420,008     (204,378     (33,372     (166,034     46,032       (3,000,845

Operating profit before Provision for credit losses

    701,633       613,692       466,263       1,781,588       203,584       216,190       405,960       22,696       188,535       (55,401     2,763,152  

Provision (reversal) for credit losses

    85,457       (105,055     (4,575     (24,173     (5,077     3,044       (209,061     2,198       (60,703     27       (293,745

Net operating income

    787,090       508,637       461,688       1,757,415       198,507       219,234       196,899       24,894       127,832       (55,374     2,469,407  

Share of profit of associates and joint ventures

    —         —         4,422       4,422       622       (4     408       1       1,963       (2,630     4,782  

Net other non-operating income (expense)

    (65     —         3,982       3,917       33,638       9,777       (1,257     (145     18,796       (14,167     50,559  

Segment profits before income tax

    787,025       508,637       470,092       1,765,754       232,767       229,007       196,050       24,750       148,591       (72,171     2,524,748  

Income tax expense

    (217,210     (139,876     (103,559     (460,645     (63,870     (62,628     (49,950     (8,226     (48,266     6,234       (687,351

Profit for the period

    569,815       368,761       366,533       1,305,109       168,897       166,379       146,100       16,524       100,325       (65,937     1,837,397  

Profit attributable to shareholders of the Parent Company

    569,815       368,761       366,533       1,305,109       168,890       166,153       146,099       16,524       99,544       (65,475     1,836,844  

Profit attributable to non-controlling interests

    —         —         —         —         7       226       1       —         781       (462     553  

Total assets1

    133,526,108       142,108,454       98,326,748       373,961,310       44,731,565       36,087,142       20,713,386       10,001,142       40,776,955       (28,092,434     498,179,066  

Total liabilities1

    131,176,590       154,080,277       61,356,283       346,613,150       40,129,450       32,225,046       16,821,351       9,384,111       17,430,512       (1,626,864     460,976,756  

 

1 

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

 

33


KB Financial Group Inc. and Subsidiaries

Notes to the Consolidated Interim Financial Statements

June 30, 2019 and 2018 (Unaudited), and December 31, 2018

 

 

Financial information by business segment for the six-month period ended June 30, 2018, 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
adjustment
    Total  

Operating revenues from external customers

  W 1,106,122     W 1,551,985     W 579,878     W 3,237,985     W 578,701     W 697,234     W 771,462     W 63,144     W 227,690     W —       W 5,576,216  

Intra-segment operating revenues (expenses)

    66,370       —         87,281       153,651       (14,099     (28,679     (106,261     (16,607     93,433       (81,438     —    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  W 1,172,492     W 1,551,985     W 667,159     W 3,391,636