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“Too Early to Consider Any Merger and Acquisition”
KB Financial Group expects over 2 trillion won in net profit this year
“Too Early to Consider Any Merger and Acquisition”
  • By matthew
  • June 10, 2011, 13:21
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“We are expecting more than 2 trillion won in net profit this year and are in the course of normalizing KB Financial Group’s performance (net profit),”said KB Financial Holdings’ President Lim Young-rok to journalists on May 5 (local time) in Hanoi, Vietnam whilst attending the Annual General Meeting of the Asian Development Bank (ADB).

President Lim went on to say, “We believe that one-time profits, such as profit from selling Hyundai Engineering and Construction, will increase in the second quarter. If our target is a 1% return on assets (ROA), it means profits should stand at around 3 trillion won.” KB Financial Holdings was in the red in the fourth quarter of last year, but returned to surplus in the first quarter of this year after gaining 750 billion won in net profit, KB Financial Holdings’ best ever performance.

President Lim added, “KB Financial Group’s performance will be completely normalized this year. We will regain our reputation as a leading bank in the shortest possible time and will join the ranks of Asia’s most outstanding banks.”

In response to a question asking how easy it will be for the Group to achieve 3 trillion won in net profit, he answered, “Do not make a hasty conclusion. We always have to pay keen attention to variables. Look at the recent earthquake in Japan. Speaking from a corporate asset perspective, however, we need to gain nearly 3 trillion won in profit if our target is a 1% ROA. It is hard to achieve, but we will try our best to meet this goal. Factors such as how much project financing (PF) loans are returned and how healthy local construction businesses are, etc, are regarded as variables for this year.”

President Lim also hinted that he will increase the portion of the Group’s non-banking sector business to produce a brilliant performance, adding, “KB Financial Group’s profit ratio of banking and non-banking sectors stands at approximately 9.5:1. We need to pay more attention to the non-banking sector in order to achieve a more balanced growth.”

President Lim went on to say, “It is still too early to consider mergers and acquisitions (M&A). Even if we develop some kind of interest in M&A, we will remain interested in non-banking sector M&A for balanced growth.”

In addition, he mentioned that it was unfair to blame the recent excessive competition among banks on the KB Financial Group. “We had a lower market share (than other financial holdings firm) until the first half of last year because of CEO risks. Our rivals’ market share grew relatively fast due to the fact that our credit card market share, which was 14.2%, dropped 0.1 percentage points.”

Regarding the issue of entering the Southeast Asia market, which has recently gained popularity, he answered, “The possibility of developing our business in this region is high as we are planning to steadily step into the market. If we engage in excessive competition without preparation, we could experience big problems. Therefore, we will work on the basics first and then grow our business.”

President Lim mentioned that localization is his strategy to win in the Vietnamese market, a market that KB Financial Group entered later than other Korean banks. He explained, “We have so far nurtured Vietnamese experts. We will steadily expand our localization strategy by fostering our local employees and well-experienced managers and placing them in charge of our local business operations.”

“We will also expand business relations with Japanese companies based on our cooperative relationship with the Sumitomo Mitsui Banking Corporation (SMBC) which entered the Vietnam market earlier than others”, added President Lim.

He went on to say, “KB Financial Group’s performance will be completely normalized this year. We will regain our reputation as a leading bank in the shortest possible time and join the ranks of Asia’s most prominent banks.”

Meanwhile, KB Financial Group’s Chairman Euh Yoon-dae said on May 12 that the Group will support the financial independence of Koreans through economic and financial education, whilst also launching “The KB Financial Public Good Foundation”in order to spread a culture of sharing and service across the nation.

All of KB Financial Group’s subsidiaries, including KB Financial Holdings, KB Bank, KB Card, and KB Investment & Securities, will jointly share the cost of establishing the KB Financial Public Good Foundation, with the initial investment totaling 20 billion won. KB Financial Group plans to grow this into a 100 billion won foundation by collecting less than 1% of profits from all subsidiaries every year.