KB Financial Group confirmed on the 23rd that dividend reduction will proceed next year as planned and is considering linking return on equity (ROE) to its shareholder return framework. CFO Na Sang-rok stated during the earnings conference call that dividend reduction starts next year with distributable profits already secured. The shift follows the group's CET1 ratio reaching 13.74% and PBR approaching 1x, prompting evolution from capital ratio-focused policy to profitability-linked framework.
KB Financial CFO Confirms Dividend Reduction Timeline
CFO Na Sang-rok stated during the first-half earnings conference call on the 23rd that "dividend reduction will be implemented immediately starting next year" and "distributable profits have already been secured, so we will proceed as expected." Market observers had raised questions about potential delays in the shareholder return schedule considering insurance company dividends and holding company fund management timelines ahead of the dividend reduction introduction.
Na responded that "the funding schedule is not tangled" and emphasized that "the insurance company's interim dividend has been quantified this time, and we have various funding means including subordinated bonds and holding company bond issuances, so shareholder returns will proceed as expected."
Group Plans Flexible Deployment of 180 Billion Won Surplus Capital
As of the end of the first half, the group's CET1 ratio stood at 13.74%. Under the existing shareholder return framework, all surplus capital exceeding the 13.5% CET1 ratio threshold is utilized as shareholder return resources. Excluding the 700 billion won share buyback and cancellation announced this time, approximately 180 billion won in return resources remain.
Regarding this, CFO Na explained that "we plan to maintain flexibility in timing and methods" and "if the ongoing share buyback ends faster than expected, additional share buybacks within the year are possible, and we can also consider including it in the settlement dividend." He added that "especially since PBR has reached the 1x level, we believe there is a need to adjust the proportion between cash dividends and share buyback-cancellation" but "rather than changing this abruptly, we will determine the appropriate cash dividend payout ratio when the second-half profit scale becomes clearer."
KB Financial Explores ROE-Linked Shareholder Return Framework
The CFO also mentioned the possibility of changes to the shareholder return formula itself in the mid-to-long term. Na stated that "we plan to maintain the CET1-linked shareholder return logic already disclosed until next year" but "since we have entered a phase where ROE is leveling up, we are considering that an ROE-linked shareholder return system could also be helpful in the future."
This is interpreted as indicating that the value-up policy may evolve from the existing CET1-centered shareholder return framework focused on capital accumulation to a direction that reflects capital efficiency and profit generation. KB Financial projected that this year's group ROE will exceed 11%, and presented a mid-to-long-term target of 13%.
KB Financial Sets ROE Targets Across Subsidiaries
CFO Na explained that by subsidiary, the bank targets an ROE of 11% or higher, securities 14%, non-life insurance 13-14%, and card 10%. Regarding the two rounds of paid-in capital increases totaling 1.7 trillion won for KB Securities this year, KB Financial stated that "this is a case of reallocating capital generated by core subsidiaries such as banks to securities with high growth potential" and "we will enhance the group's capital efficiency and strengthen the mid-to-long-term profit base through expansion of bill issuance and venture capital supply."
FAQ
Q: When will KB Financial implement dividend reduction?
A: KB Financial will implement dividend reduction starting next year as planned. CFO Na Sang-rok confirmed on the 23rd that distributable profits have already been secured and the timeline will proceed as expected.
Q: Why is KB Financial considering linking ROE to its shareholder return framework?
A: KB Financial is exploring ROE linkage because the group's CET1 ratio reached 13.74% and PBR approached 1x, indicating a shift from capital accumulation focus to capital efficiency and profitability metrics as ROE enters a "level-up phase."
