UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the month of March 2017
Commission File Number: 000-53445
KB Financial Group Inc.
(Translation of registrant’s name into English)
84, Namdaemoon-ro, Jung-gu, Seoul 04534, Korea
(Address of principal executive office)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
Form 20-F ☒ Form 40-F ☐
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ☐
Note: Regulation S-T Rule 101(b)(1) only permits the submission in paper of a Form 6-K if submitted solely to provide an attached annual report to security holders.
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ☐
Note: Regulation S-T Rule 101(b)(7) only permits the submission in paper of a Form 6-K if submitted to furnish a report or other document that the registrant foreign private issuer must furnish and make public under the laws of the jurisdiction in which the registrant is incorporated, domiciled or legally organized (the registrant’s “home country”), or under the rules of the home country exchange on which the registrant’s securities are traded, as long as the report or other document is not a press release, is not required to be and has not been distributed to the registrant’s security holders, and, if discussing a material event, has already been the subject of a Form 6-K submission or other Commission filing on EDGAR.
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| 2.3. |
Other Information to Consider in Making an Investment Decision |
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| 4.2. |
Public Company Accounting Oversight Board (“PCAOB”) Audit Services |
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Summary of Business Report for Fiscal Year 2016
On March 31, 2017, KB Financial Group Inc. (“KB Financial Group”) filed its business report for the fiscal year ended December 31, 2016 (the “Business Report”) with the Financial Services Commission of Korea and the Korea Exchange. This is a summary of the Business Report translated into English.
Except where indicated otherwise, financial information contained in this summary have been prepared in accordance with the Korean equivalent of International Financial Reporting Standards (“K-IFRS”), which differ in certain important respects from generally accepted accounting principles in the United States.
All references to “KB Financial Group,” “we,” “us” or the “Company” are to KB Financial Group and, unless the context requires otherwise, its subsidiaries. In addition, all references to “Won” or “KRW” in this document are to the currency of the Republic of Korea.
| 1. | Introduction to the Company |
| 1.1. | Business Purpose |
KB Financial Group is a financial holding company that was established in September 2008. Its main business purpose is to hold shares in companies that are engaged in financial or related services, as well as govern and manage such companies. Its consolidated subsidiaries are primarily engaged in the banking business, as well as the credit card business, the financial investment business, the insurance business and other related businesses.
| 1.2. | History |
| • | September 26, 2008 |
Obtained final approval from the Financial Services Commission to establish a financial holding company
| • | September 29, 2008 |
Establishment of the Company through a comprehensive stock transfer and listing on the New York Stock Exchange
| • | October 10, 2008 |
Listing on the Korea Exchange
| • | October 20, 2008 |
The largest shareholder of the Company changed from the Korean National Pension Service to ING Bank N.V.
| • | October 31, 2008 |
The largest shareholder of the Company changed from ING Bank N.V. to the Korean National Pension Service
| • | May 4, 2009 |
Added Kookmin Bank Cambodia PLC as a second-tier subsidiary
| • | June 22, 2009 |
Added KB Life Insurance Co., Ltd., formerly a second-tier subsidiary, as a first-tier subsidiary
| • | September 28, 2009 |
Added Burrill-KB Life Sciences Fund as a second-tier subsidiary
| • | December 1, 2009 |
Added KB-Glenwood Private Equity Fund No.1 as a second-tier subsidiary
| • | January 22, 2010 |
The largest shareholder of the Company changed from the Korean National Pension Service to ING Bank N.V.
| • | July 6, 2010 |
Added KBIC No.3 PEF as a second-tier subsidiary
| • | December 13, 2010 |
Added KoFC KBIC Frontier Champ 2010-5 PEF as a second-tier subsidiary
| • | March 2, 2011 |
Added KB Kookmin Card Co., Ltd. as a first-tier subsidiary
| • | March 14, 2011 |
KB Futures Co., Ltd. was merged into KB Investment & Securities Co., Ltd.
| • | July 8, 2011 |
The largest shareholder of the Company changed from ING Bank N.V. to the Korean National Pension Service
| • | November 12, 2011 |
Closed KB Investment & Securities Hong Kong Ltd.
| • | January 13, 2012 |
Added KB Savings Bank Co., Ltd. as a first-tier subsidiary
| • | May 11, 2012 |
Added KoFC POSCO HANWHA KB Shared Growth No. 2. Private Equity Fund as a second-tier subsidiary
| • | June 8, 2012 |
Liquidated Burrill-KB Life Sciences Fund Ltd.
| • | July 2, 2012 |
Added KoFC Value-up Private Equity Fund as a second-tier subsidiary
| • | October 10, 2012 |
Added Kookmin Bank (China) Ltd. as a second-tier subsidiary
| • | June 20, 2013 |
Acquired the remaining shares of KB Life Insurance Co., Ltd., which increased the Company’s shareholding to 100%
| • | September 2, 2013 |
Added Yehansoul Savings Bank as a first-tier subsidiary
| • | January 13, 2014 |
Yehansoul Savings Bank was merged into KB Savings Bank Co., Ltd.
| • | March 20, 2014 |
Added KB Capital Co., Ltd. as a first-tier subsidiary
| • | July 2, 2014 |
Added Korea GCC Global Cooperation Private Equity Fund as a second-tier subsidiary
| • | June 24, 2015 |
Added KB Insurance Co., Ltd. (“KB Insurance”) as a non-consolidated first-tier subsidiary.
| • | November 23, 2015 |
Acquired additional shares of KB Insurance, which increased the Company’s shareholding from 19.47% to 33.29%.
| • | May 31, 2016 |
Added Hyundai Securities Co., Ltd. (“Hyundai Securities”) as a non-consolidated first-tier subsidiary.
| • | June 21, 2016 |
Disposed of LIG Investment & Securities, Co., Ltd., a second-tier subsidiary
| • | June 28, 2016 |
Acquired treasury shares of Hyundai Securities, which increased the Company’s equity ownership in Hyundai Securities from 22.56% to 29.62%
| • | September 9, 2016 |
Liquidated NPS-KBIC No. 1 Private Equity Fund
| • | November 29, 2016 |
Established KB Golden Life Care Co., Ltd. as a second-tier subsidiary
| • | December 22, 2016 |
Established KB Private Equity Fund III as a second-tier subsidiary
| • | December 30, 2016 |
Purchased new shares of KB Insurance in a rights offering, which increased the Company’s shareholding in KB Insurance from 33.29% to 39.81%
| • | December 30, 2016 |
Merged KB Investment & Securities with and into Hyundai Securities, with Hyundai Securities as the surviving entity, then changed its name to KB Securities Co., Ltd.
| 1.3. | Overview of the Business Group |
| (As of December 31, 2016) | ||||||
| Type |
Name of Company |
Controlling Company |
Remarks | |||
| Holding Company |
KB Financial Group | - | Listed | |||
| 1st Tier Subsidiaries |
Kookmin Bank | KB Financial Group | Not listed | |||
| KB Securities Co., Ltd.(1) | KB Financial Group | Not listed | ||||
| KB Insurance Co., Ltd.(2) | KB Financial Group | Listed | ||||
| KB Kookmin Card Co., Ltd. | KB Financial Group | Not listed | ||||
| KB Life Insurance Co., Ltd. | KB Financial Group | Not listed | ||||
| KB Asset Management Co., Ltd. | KB Financial Group | Not listed | ||||
| KB Capital Co., Ltd. | KB Financial Group | Listed | ||||
| KB Savings Bank Co., Ltd. | KB Financial Group | Not listed | ||||
| KB Real Estate Trust Co., Ltd. | KB Financial Group | Not listed | ||||
| KB Investment Co., Ltd. | KB Financial Group | Not listed | ||||
| KB Credit Information Co., Ltd. | KB Financial Group | Not listed | ||||
| KB Data Systems Co., Ltd. | KB Financial Group | Not listed | ||||
| 2nd Tier Subsidiaries |
Kookmin Bank Hong Kong Ltd. | Kookmin Bank | Not listed (Overseas) | |||
| Kookmin Bank International Ltd. | Kookmin Bank | Not listed (Overseas) | ||||
| Kookmin Bank Cambodia PLC | Kookmin Bank | Not listed (Overseas) | ||||
| Kookmin Bank (China) Ltd. | Kookmin Bank | Not listed (Overseas) | ||||
| Hyundai Savings Bank Co., Ltd. | KB Securities | Not listed | ||||
| Hyundai Asset Management Co., Ltd. | KB Securities | Not listed | ||||
| KBFG Securities America Inc. | KB Securities | Not listed (Overseas) | ||||
| KB Securities Hong Kong Ltd. | KB Securities | Not listed (Overseas) | ||||
| Hyundai-Tongyang Agrifood Private Equity Fund | KB Securities | Not listed | ||||
| Keystone-Hyundai Securities No. 1 Private Equity Fund | KB Securities | Not listed | ||||
| KB-Glenwood Private Equity Fund No.1 | KB Securities | Not listed | ||||
| KB Private Equity Fund III | KB Securities | Not listed | ||||
| KB Claims Survey & Adjusting Co., Ltd. | KB Insurance | Not listed | ||||
| KB Sonbo CNS | KB Insurance | Not listed | ||||
| Leading Insurance Services, Inc. | KB Insurance | Not listed (Overseas) | ||||
| LIG Insurance (China) Co., Ltd. | KB Insurance | Not listed (Overseas) | ||||
| PT. Kookmin Best Insurance Indonesia | KB Insurance | Not listed (Overseas) | ||||
| KB Golden Life Care Co., Ltd. | KB Insurance | Not listed | ||||
| KBIC No.3 PEF | KB Investment | Not listed | ||||
| KoFC KBIC Frontier Champ 2010-5 PEF | KB Investment | Not listed | ||||
| KoFC POSCO HANWHA KB Shared Growth No. 2. Private Equity Fund | KB Investment | Not listed | ||||
| KoFC Value-up Private Equity Fund | KB Investment | Not listed | ||||
| Korea GCC Global Cooperation PEF | KB Investment | Not listed | ||||
| (1) | On August 2, 2016, the Company entered into a stock swap agreement with Hyundai Securities to effect a comprehensive stock swap (the “Stock Swap”) pursuant to which Hyundai Securities would become a wholly-owned subsidiary of the Company. On October 4, 2016, the board of directors of the Company approved the Stock Swap. On October 19, 2016 (the date of the Stock Swap), 166,516,250 common shares of Hyundai Securities were exchanged for 31,759,844 newly issued common shares of the Company, and Hyundai Securities became a wholly-owned subsidiary of the Company. On November 1, 2016, Hyundai Securities was delisted. On December 30, 2016, KB Investment & Securities was merged with and into Hyundai Securities with Hyundai Securities as the surviving entity, and KB Securities was launched. |
| (2) | A non-consolidated first-tier subsidiary. |
| 1.4. | Capital Structure |
| 1.4.1. | Common Shares |
Capital Increase
| (As of December 31, 2016) | (Unit: Won, shares) |
| Issue Date |
Type | Number of shares | Par Value | Issue Price | Remarks | |||||||||||
| September 29, 2008 |
Common Stock | 356,351,693 | 5,000 | 48,444 | Establishment of the Company | |||||||||||
| September 2, 2009 |
Common Stock | 30,000,000 | 5,000 | 37,250 | Rights offering to existing shareholders; % increase in number of common shares: 8.41865% | |||||||||||
| October 19, 2016 |
Common Stock | 31,759,844 | 5,000 | 35,474 | Stock Swap; % increase in number of common shares: 8.22045% | |||||||||||
Number of Shares
| (As of December 31, 2016) | (Unit: shares) | |||||||||||
| Type | ||||||||||||
| Common Stock | Other Stock | Total | ||||||||||
| Shares Authorized for Issuance |
1,000,000,000 | — | 1,000,000,000 | |||||||||
| Shares Issued (A) (1) |
418,111,537 | — | 418,111,537 | |||||||||
| Treasury Stock (B) (2) |
19,700,883 | — | 19,700,883 | |||||||||
| Shares Outstanding (A-B) |
398,410,654 | — | 398,410,654 | |||||||||
| (1) | On October 19, 2016, the Company issued 31,759,844 shares of common stock in connection with the Stock Swap, and the total number of shares issued by the Company increased to 418,111,537. |
| (2) | As of March 24, 2017, the Company held an aggregate of 21,546,313 shares of common stock as treasury shares, which were acquired pursuant to a trust agreement. The Company has not made any decision on the future use of its treasury shares. |
| 1.4.2. | Voting Rights |
| (As of December 31, 2016) | ||||||||
| Items |
Number of Shares | Notes | ||||||
| Total number of issued shares |
Common shares | 418,111,537 | — | |||||
| — | — | — | ||||||
| Shares without voting rights |
Common shares | 19,700,883 | Treasury shares | |||||
| — | — | — | ||||||
| Shares for which voting rights cannot be exercised pursuant to the Articles of Incorporation |
— | — | — | |||||
| Shares for which voting rights are restricted under relevant laws and regulations |
— | |||||||
| Shares with restored voting rights |
— | — | — | |||||
| Total shares for which voting rights may be exercised |
Common shares | 398,410,654 | — | |||||
| 1.5. | Dividends |
| Items |
January 1, 2016 to December 31, 2016 |
January 1, 2015 to December 31, 2015 |
January 1, 2014 to December 31, 2014 |
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| Par value per share (Won) |
5,000 | 5,000 | 5,000 | |||||||||||
| (Consolidated) Net income (Won in Millions) |
2,143,744 | 1,698,318 | 1,400,722 | |||||||||||
| Earnings per share (Won) |
5,588 | 4,396 | 3,626 | |||||||||||
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| Total cash dividends (Won in Millions) |
497,969 | 378,625 | 301,354 | |||||||||||
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| Total stock dividends (Won in Millions) |
— | — | — | |||||||||||
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| (Consolidated) Cash dividend payout ratio (%) |
23.2 | 22.3 | 21.5 | |||||||||||
| Cash dividend yield (%) |
Common Shares | 2.9 | 2.9 | 2.0 | ||||||||||
| — | — | — | — | |||||||||||
| Stock dividend yield (%) |
Common Shares | — | — | — | ||||||||||
| — | — | — | — | |||||||||||
| Cash dividend per share (Won) |
Common Shares | 1,250 | 980 | 780 | ||||||||||
| — | — | — | — | |||||||||||
| Stock dividend per share (Shares) |
Common Shares | — | — | — | ||||||||||
| — | — | — | — | |||||||||||
| 2. | Business |
| 2.1. | Results of Operations |
| (Unit: in millions of Won) | ||||||||||||
| For the year ended | For the year ended | For the year ended | ||||||||||
| December 31, 2016 | December 31, 2015 | December 31, 2014 | ||||||||||
| Net interest income |
6,402,529 | 6,203,199 | 6,415,775 | |||||||||
| Interest income |
10,021,882 | 10,375,823 | 11,635,296 | |||||||||
| Interest expense |
(3,619,353 | ) | (4,172,624 | ) | (5,219,521 | ) | ||||||
| Net fee and commission income |
1,584,892 | 1,534,983 | 1,382,729 | |||||||||
| Fee and commission income |
3,150,877 | 2,971,095 | 2,666,185 | |||||||||
| Fee and commission expense |
(1,565,985 | ) | (1,436,112 | ) | (1,283,456 | ) | ||||||
| Net gains(losses) on financial assets/liabilities at fair value through profit or loss |
(8,768 | ) | 359,727 | 439,198 | ||||||||
| Net other operating expenses |
(533,711 | ) | (715,960 | ) | (1,040,909 | ) | ||||||
| General and administrative expenses |
(5,228,711 | ) | (4,523,584 | ) | (4,009,694 | ) | ||||||
| Operating profit before provision for credit losses |
2,216,231 | 2,858,365 | 3,187,099 | |||||||||
| Provision for credit losses |
(539,283 | ) | (1,037,231 | ) | (1,227,976 | ) | ||||||
| Net operating profit |
1,676,948 | 1,821,134 | 1,959,123 | |||||||||
| 2.2. | Sources and Uses of Funds |
2.2.1. Sources of Funds
| (Unit: in millions of Won) | ||||||||||||||||||||||||||||||||||||||
| For the year ended December 31, 2016 |
For the year ended December 31, 2015 |
For the year ended December 31, 2014 |
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| Average Balance |
Interest Rate (%) |
Ratio (%) |
Average Balance |
Interest Rate (%) |
Ratio (%) |
Average Balance |
Interest Rate (%) |
Ratio (%) |
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| Won Currency |
Deposits |
207,194,480 | 1.32 | 60.76 | 193,725,814 | 1.69 | 62.62 | 186,833,286 | 2.20 | 63.76 | ||||||||||||||||||||||||||||
| Certificate of deposit |
3,386,647 | 1.65 | 0.99 | 3,645,078 | 1.92 | 1.18 | 1,689,157 | 2.71 | 0.58 | |||||||||||||||||||||||||||||
| Borrowings |
6,803,292 | 1.54 | 2.00 | 5,709,025 | 1.88 | 1.85 | 5,456,405 | 2.52 | 1.86 | |||||||||||||||||||||||||||||
| Call money |
1,414,780 | 1.35 | 0.41 | 2,009,387 | 1.66 | 0.65 | 3,177,907 | 2.36 | 1.08 | |||||||||||||||||||||||||||||
| Debentures |
30,075,804 | 2.49 | 8.82 | 27,365,637 | 2.78 | 8.85 | 24,966,578 | 3.80 | 8.52 | |||||||||||||||||||||||||||||
| Other |
7,700,215 | 1.45 | 2.26 | 4,763,806 | 2.03 | 1.53 | 3,298,600 | 2.80 | 1.13 | |||||||||||||||||||||||||||||
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| Subtotal |
256,575,218 | 1.47 | 75.24 | 237,218,747 | 1.83 | 76.68 | 225,421,933 | 2.40 | 76.93 | |||||||||||||||||||||||||||||
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| Foreign Currency |
Deposits |
8,713,640 | 0.53 | 2.56 | 6,183,499 | 0.52 | 2.00 | 5,087,884 | 0.52 | 1.74 | ||||||||||||||||||||||||||||
| Borrowings |
5,644,047 | 0.78 | 1.66 | 6,121,121 | 0.46 | 1.98 | 6,071,393 | 0.52 | 2.07 | |||||||||||||||||||||||||||||
| Call money |
1,161,517 | 0.72 | 0.34 | 1,007,103 | 0.28 | 0.33 | 985,695 | 0.30 | 0.34 | |||||||||||||||||||||||||||||
| Debentures |
4,139,036 | 2.55 | 1.21 | 3,520,324 | 3.00 | 1.14 | 3,082,838 | 2.74 | 1.05 | |||||||||||||||||||||||||||||
| Other |
222,098 | 0.94 | 0.06 | 163,462 | 1.31 | 0.05 | 212,797 | 1.14 | 0.07 | |||||||||||||||||||||||||||||
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| Subtotal |
19,880,338 | 1.04 | 5.83 | 16,995,509 | 1.01 | 5.50 | 15,440,607 | 0.96 | 5.27 | |||||||||||||||||||||||||||||
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| Other |
Total shareholders’ equity |
30,308,008 | — | 8.89 | 28,252,594 | — | 9.13 | 26,872,801 | — | 9.17 | ||||||||||||||||||||||||||||
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| Allowances |
748,594 | — | 0.22 | 787,604 | — | 0.25 | 765,895 | — | 0.26 | |||||||||||||||||||||||||||||
| Other |
33,476,080 | — | 9.82 | 26,126,546 | — | 8.44 | 24,543,634 | — | 8.37 | |||||||||||||||||||||||||||||
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| Subtotal |
64,532,682 | — | 18.93 | 55,166,744 | — | 17.82 | 52,182,330 | — | 17.80 | |||||||||||||||||||||||||||||
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| Total |
340,988,238 | — | 100.00 | 309,381,000 | — | 100.00 | 293,044,870 | — | 100.00 | |||||||||||||||||||||||||||||
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Note: Based on K-IFRS (on a consolidated basis).
2.2.2. Uses of Funds
| (Unit: in millions of Won) | ||||||||||||||||||||||||||||||||||||||
| For the year ended December 31, 2016 |
For the year ended December 31, 2015 |
For the year ended December 31, 2014 |
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| Average Balance |
Interest Rate (%) |
Ratio (%) | Average Balance |
Interest Rate (%) |
Ratio (%) | Average Balance |
Interest Rate (%) |
Ratio (%) | ||||||||||||||||||||||||||||||
| Won Currency |
Due from banks | 6,075,873 | 1.52 | 1.78 | 7,197,739 | 1.83 | 2.33 | 6,534,133 | 2.56 | 2.23 | ||||||||||||||||||||||||||||
| Securities | 55,999,995 | 2.12 | 16.42 | 45,372,914 | 3.22 | 14.67 | 43,889,573 | 3.81 | 14.98 | |||||||||||||||||||||||||||||
| Loans | 225,153,667 | 3.15 | 66.03 | 207,499,414 | 3.48 | 67.07 | 195,609,187 | 4.16 | 66.75 | |||||||||||||||||||||||||||||
| Guarantee payments under payment guarantee | 28,005 | 1.16 | 0.01 | 32,644 | 1.19 | 0.01 | 51,156 | 0.76 | 0.02 | |||||||||||||||||||||||||||||
| Call loan | 399,843 | 1.43 | 0.12 | 314,179 | 1.79 | 0.10 | 642,821 | 2.35 | 0.22 | |||||||||||||||||||||||||||||
| Private placement corporate bonds | 1,081,692 | 3.99 | 0.32 | 830,676 | 3.81 | 0.27 | 692,993 | 4.83 | 0.24 | |||||||||||||||||||||||||||||
| Credit cards | 12,823,200 | 8.66 | 3.76 | 11,904,279 | 9.03 | 3.85 | 11,309,156 | 9.86 | 3.86 | |||||||||||||||||||||||||||||
| Other | 5,061,229 | 4.96 | 1.48 | 7,154,906 | 5.15 | 2.31 | 8,231,500 | 5.47 | 2.81 | |||||||||||||||||||||||||||||
| Allowance | (2,182,313 | ) | — | (0.64 | ) | (2,316,563 | ) | — | (0.75 | ) | (2,844,954 | ) | — | (0.97 | ) | |||||||||||||||||||||||
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| Subtotal |
304,441,191 | 3.21 | 89.28 | 277,990,188 | 3.70 | 89.86 | 264,115,565 | 4.39 | 90.14 | |||||||||||||||||||||||||||||
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| Foreign Currency |
Due from banks | 2,553,722 | 0.75 | 0.75 | 1,782,048 | 1.12 | 0.58 | 1,277,335 | 1.81 | 0.43 | ||||||||||||||||||||||||||||
| Securities | 3,792,545 | 2.61 | 1.11 | 1,285,058 | 2.06 | 0.42 | 815,219 | 3.17 | 0.28 | |||||||||||||||||||||||||||||
| Loans | 8,125,102 | 1.76 | 2.38 | 9,009,829 | 1.52 | 2.91 | 8,347,507 | 1.81 | 2.85 | |||||||||||||||||||||||||||||
| Call loan | 2,220,839 | 0.65 | 0.65 | 1,435,461 | 0.33 | 0.46 | 1,869,308 | 0.81 | 0.64 | |||||||||||||||||||||||||||||
| Bills bought | 2,768,692 | 1.30 | 0.81 | 2,728,557 | 1.10 | 0.88 | 2,232,263 | 1.30 | 0.76 | |||||||||||||||||||||||||||||
| Allowance | (328,130 | ) | — | (0.10 | ) | (234,422 | ) | — | (0.08 | ) | (197,375 | ) | — | (0.07 | ) | |||||||||||||||||||||||
| Other | 24,789 | — | 0.02 | 3,143 | — | — | 2,470 | — | — | |||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
| Subtotal |
19,157,559 | 1.64 | 5.62 | 16,009,674 | 1.37 | 5.17 | 14,346,727 | 1.70 | 4.89 | |||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
| Other |
Cash | 1,724,701 | — | 0.51 | 1,715,237 | — | 0.55 | 1,659,230 | — | 0.57 | ||||||||||||||||||||||||||||
| Fixed assets held for business | 3,464,031 | — | 1.02 | 3,230,133 | — | 1.04 | 3,196,710 | — | 1.09 | |||||||||||||||||||||||||||||
| Other | 12,200,756 | — | 3.57 | 10,435,768 | — | 3.38 | 9,726,638 | — | 3.31 | |||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
| Subtotal |
17,389,488 | — | 5.10 | 15,381,138 | — | 4.97 | 14,582,578 | — | 4.97 | |||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
| Total |
340,988,238 | — | 100.00 | 309,381,000 | — | 100.00 | 293,044,870 | — | 100.00 | |||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Note: Based on K-IFRS (on a consolidated basis).
| 2.3. | Other Information to Consider in Making an Investment Decision |
2.3.1. Capital Adequacy
| KB Financial Group | (Unit: in billions of Won, %) | |||||||||||
| As of December 31, 2016(1) | As of December 31, 2015 | As of December 31, 2014 | ||||||||||
| Total Capital (A) |
31,103 | 29,140 | 28,348 | |||||||||
| Risk-weighted assets (B) |
203,649 | 188,213 | 182,486 | |||||||||
| BIS ratio (A/B) |
15.27 | 15.48 | 15.53 | |||||||||
*Note: Calculated in accordance with Basel III
| Kookmin Bank | (Unit: in billions of Won, %) | |||||||||||
| As of December 31, 2016 | As of December 31, 2015 | As of December 31, 2014 | ||||||||||
| Total Capital (A) |
24,579 | 23,686 | 23,422 | |||||||||
| Risk-weighted assets (B) |
150,649 | 147,973 | 146,690 | |||||||||
| BIS ratio (A/B) |
16.32 | 16.01 | 15.97 | |||||||||
*Note: Calculated in accordance with Basel III
2.3.2. Credit Ratings
| (As of December 31, 2016) | ||||||
| Date of Rating |
Type |
Credit Rating |
Rating Company (Rating Range) | |||
| 2/23/2015 | Debentures | AAA | Korea Ratings (AAA ~ D) / KIS Ratings (AAA ~ D) / NICE Investors Service (AAA ~ D) | |||
| 6/5/2015 | Debentures | AAA | Korea Ratings (AAA ~ D) / KIS Ratings (AAA ~ D) / NICE Investors Service (AAA ~ D) | |||
| 9/16/2015 | Debentures | AAA | Korea Ratings (AAA ~ D) / KIS Ratings (AAA ~ D) / NICE Investors Service (AAA ~ D) | |||
| 11/18/2015 | Commercial Paper | A1 | Korea Ratings (A1 ~ D) / KIS Ratings (A1 ~ D) / NICE Investors Service (A1 ~ D) | |||
| 11/25/2015 | Debentures | AAA | Korea Ratings (AAA ~ D) / KIS Ratings (AAA ~ D) / NICE Investors Service (AAA ~ D) | |||
| 5/11/2016 | Debentures | AAA | Korea Ratings (AAA ~ D) / KIS Ratings (AAA ~ D) / NICE Investors Service (AAA ~ D) | |||
| 6/24/2016 | Debentures | AAA | Korea Ratings (AAA ~ D) / KIS Ratings (AAA ~ D) / NICE Investors Service (AAA ~ D) | |||
| 6/30/2016 | Commercial Paper | A1 | Korea Ratings (A1 ~ D) / KIS Ratings (A1 ~ D) / NICE Investors Service (A1 ~ D) | |||
| 7/22/2016 | Debentures | AAA | Korea Ratings (AAA ~ D) / KIS Ratings (AAA ~ D) / NICE Investors Service (AAA ~ D) | |||
| 8/24/2016 | Debentures | AAA | Korea Ratings (AAA ~ D) / KIS Ratings (AAA ~ D) / NICE Investors Service (AAA ~ D) | |||
| 11/25/2016 | Debentures | AAA | Korea Ratings (AAA ~ D) / KIS Ratings (AAA ~ D) / NICE Investors Service (AAA ~ D) | |||
2.3.3. Early Retirement Program
To enhance productivity by improving its labor structure, Kookmin Bank implemented a voluntary early retirement program following negotiations with its labor union.
| Date of retirement |
Number of retired persons | |
| January 14, 2016 | 171 | |
| July 9, 2016 | 210 | |
| January 23, 2017 | 2,795 |
2.3.4. Purchase of Land for New Headquarters
In March 2016, Kookmin Bank entered into a land purchase agreement to purchase a site of approximately 4,727 square meters located in Yeoido, Seoul, on which it plans to construct its new headquarters (with a floor space of approximately 56,000 square meters) by 2020. By centralizing its headquarters functions, Kookmin Bank seeks to reduce rental costs and other intangible losses while achieving synergy among business units located in close proximity.
| 3. | Financial Information |
| 3.1. | Consolidated Condensed Financial Information |
3.1.1. Consolidated Statements of Financial Position
| (Unit: in millions of Won) | ||||||||||||
| As of December 31, 2016 | As of December 31, 2015 | As of December 31, 2014 | ||||||||||
| Cash and due from financial institutions |
17,884,863 | 16,316,066 | 15,423,847 | |||||||||
| Financial assets at fair value through profit or loss |
27,858,364 | 11,174,064 | 10,757,910 | |||||||||
| Derivative financial assets |
3,381,935 | 2,278,112 | 1,968,190 | |||||||||
| Loans |
265,486,134 | 245,005,370 | 231,449,653 | |||||||||
| Financial investments |
45,147,797 | 39,136,759 | 34,960,620 | |||||||||
| Investments in associates |
1,770,673 | 1,737,840 | 670,332 | |||||||||
| Property and equipment |
3,627,268 | 3,287,383 | 3,082,985 | |||||||||
| Investment property |
755,011 | 211,815 | 377,544 | |||||||||
| Intangible assets |
652,316 | 466,828 | 488,922 | |||||||||
| Current income tax assets |
65,738 | 18,525 | 306,313 | |||||||||
| Deferred income tax assets |
133,624 | 8,373 | 15,562 | |||||||||
| Assets held for sale |
52,148 | 48,628 | 70,357 | |||||||||
| Other assets |
8,857,785 | 9,375,704 | 8,783,473 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total assets |
375,673,656 | 329,065,467 | 308,355,708 | |||||||||
|
|
|
|
|
|
|
|||||||
| Financial liabilities at fair value through profit or loss |
12,122,836 | 2,974,604 | 1,818,968 | |||||||||
| Derivative financial liabilities |
3,807,128 | 2,325,756 | 1,797,390 | |||||||||
| Deposits |
239,729,695 | 224,268,185 | 211,549,121 | |||||||||
| Debts |
26,251,486 | 16,240,743 | 15,864,500 | |||||||||
| Debentures |
34,992,057 | 32,600,603 | 29,200,706 | |||||||||
| Provisions |
537,717 | 607,860 | 614,347 | |||||||||
| Net defined benefit liabilities |
96,299 | 73,197 | 75,684 | |||||||||
| Current income tax liabilities |
441,812 | 30,920 | 231,907 | |||||||||
| Deferred income tax liabilities |
103,482 | 179,243 | 93,211 | |||||||||
| Other liabilities |
26,329,741 | 20,861,634 | 19,597,202 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total liabilities |
344,412,253 | 300,162,745 | 280,843,036 | |||||||||
|
|
|
|
|
|
|
|||||||
| Equity attributable to shareholders of the parent company |
30,998,044 | 28,680,621 | 27,315,092 | |||||||||
| Share capital |
2,090,558 | 1,931,758 | 1,931,758 | |||||||||
| Capital surplus |
16,994,902 | 15,854,510 | 15,854,510 | |||||||||
| Accumulated other comprehensive income |
405,329 | 430,244 | 461,679 | |||||||||
| Retained earnings |
12,229,228 | 10,464,109 | 9,067,145 | |||||||||
| Treasury shares |
(721,973 | ) | — | — | ||||||||
| Non-controlling interests |
263,359 | 222,101 | 197,580 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total equity |
31,261,403 | 28,902,722 | 27,512,672 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total liabilities and equity |
375,673,656 | 329,065,467 | 308,355,708 | |||||||||
|
|
|
|
|
|
|
|||||||
| Number of consolidated companies |
196 | 83 | 112 | |||||||||
3.1.2. Consolidated Statements of Comprehensive Income
| (Unit: in millions of Won, except per share amounts) | ||||||||||||
| For the year ended December 31, 2016 |
For the year ended December 31, 2015 |
For the year ended December 31, 2014 |
||||||||||
| Net interest income |
6,402,529 | 6,203,199 | 6,415,775 | |||||||||
| Net fee and commission income |
1,584,892 | 1,534,983 | 1,382,729 | |||||||||
| Net gains(losses) on financial assets/liabilities at fair value through profit or loss |
(8,768 | ) | 359,727 | 439,198 | ||||||||
| Net other operating expenses |
(533,711 | ) | (715,960 | ) | (1,040,909 | ) | ||||||
| General and administrative expenses |
(5,228,711 | ) | (4,523,584 | ) | (4,009,694 | ) | ||||||
| Operating profit before provision for credit losses |
2,216,231 | 2,858,365 | 3,187,099 | |||||||||
| Provision for credit losses |
(539,283 | ) | (1,037,231 | ) | (1,227,976 | ) | ||||||
| Net operating income |
1,676,948 | 1,821,134 | 1,959,123 | |||||||||
| Net non-operating income(loss) |
951,707 | 343,561 | (57,698 | ) | ||||||||
| Profit before income tax |
2,628,655 | 2,164,695 | 1,901,425 | |||||||||
| Income tax expense |
(438,475 | ) | (437,389 | ) | (486,314 | ) | ||||||
| Profit for the period |
2,190,180 | 1,727,306 | 1,415,111 | |||||||||
| Other comprehensive income (loss) for the period, net of tax |
(24,937 | ) | (31,262 | ) | 123,863 | |||||||
|
|
|
|
|
|
|
|||||||
| Total comprehensive income for the period |
2,165,243 | 1,696,044 | 1,538,974 | |||||||||
|
|
|
|
|
|
|
|||||||
| Profit attributable to: |
2,190,180 | 1,727,306 | 1,415,111 | |||||||||
| Shareholders of the parent company |
2,143,744 | 1,698,318 | 1,400,722 | |||||||||
| Non-controlling interests |
46,436 | 28,988 | 14,389 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total comprehensive income for the period attributable to: |
2,165,243 | 1,696,044 | 1,538,974 | |||||||||
|
|
|
|
|
|
|
|||||||
| Shareholders of the parent company |
2,118,829 | 1,666,883 | 1,526,089 | |||||||||
| Non-controlling interests |
46,414 | 29,161 | 12,885 | |||||||||
| Earnings per share |
||||||||||||
| Basic earnings per share (Won) |
5,588 | 4,396 | 3,626 | |||||||||
| Diluted earnings per share (Won) |
5,559 | 4,376 | 3,611 | |||||||||
| 3.2. | Separate Condensed Financial Information |
3.2.1. Separate Statements of Financial Position
| (Unit: in millions of Won) | ||||||||||||
| As of December 31, 2016 | As of December 31, 2015 | As of December 31, 2014 | ||||||||||
| Cash and due from financial institutions |
115,065 | 324,947 | 30,739 | |||||||||
| Financial assets at fair value through profit or loss |
246,656 | 99,118 | — | |||||||||
| Loans |
29,415 | — | 10,000 | |||||||||
| Investments in subsidiaries |
21,392,745 | 18,557,566 | 18,557,566 | |||||||||
| Investments in associates |
1,053,690 | 883,065 | — | |||||||||
| Property and equipment |
469 | 578 | 514 | |||||||||
| Intangible assets |
8,092 | 8,428 | 8,684 | |||||||||
| Deferred income tax assets |
4,604 | 4,515 | 4,089 | |||||||||
| Other assets |
519,223 | 137,954 | 598,929 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total assets |
23,369,959 | 20,016,171 | 19,210,521 | |||||||||
|
|
|
|
|
|
|
|||||||
| Debts |
350,000 | — | — | |||||||||
| Debentures |
3,474,200 | 1,647,117 | 628,837 | |||||||||
| Net defined benefit liabilities |
(193 | ) | 591 | 803 | ||||||||
| Current income tax liabilities |
419,607 | 17,178 | 222,639 | |||||||||
| Other liabilities |
104,528 | 123,281 | 71,568 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total liabilities |
4,348,142 | 1,788,167 | 923,847 | |||||||||
|
|
|
|
|
|
|
|||||||
| Share capital |
2,090,558 | 1,931,758 | 1,931,758 | |||||||||
| Capital surplus |
14,656,168 | 13,513,809 | 13,513,809 | |||||||||
| Accumulated other comprehensive loss |
(4,742 | ) | (4,979 | ) | (4,238 | ) | ||||||
| Retained earnings |
2,998,923 | 2,787,416 | 2,845,345 | |||||||||
| Treasury Shares |
(719,090 | ) | — | — | ||||||||
|
|
|
|
|
|
|
|||||||
| Total equity |
19,021,817 | 18,228,004 | 18,286,674 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total liabilities and equity |
23,369,959 | 20,016,171 | 19,210,521 | |||||||||
|
|
|
|
|
|
|
|||||||
| Evaluation method for investment securities in subsidiaries, affiliates and joint ventures |
Cost-method | Cost-method | Cost-method | |||||||||
3.2.2. Separate Statements of Comprehensive Income
| (Unit: in millions of Won, except per share amounts) | ||||||||||||
| For the year ended December 31, 2016 |
For the year ended December 31, 2015 |
For the year ended December 31, 2014 |
||||||||||
| Net interest expense |
(55,924 | ) | (25,744 | ) | (16,758 | ) | ||||||
| Net fee and commission expense |
(7,214 | ) | (8,228 | ) | (6,658 | ) | ||||||
| Net gains on financial assets at fair value through profit or loss |
5,272 | 1,658 | — | |||||||||
| Net other operating income |
694,908 | 315,527 | 493,782 | |||||||||
| General and administrative expenses |
(46,734 | ) | (39,916 | ) | (36,342 | ) | ||||||
| Operating profit before provision for credit losses |
590,308 | 243,297 | 434,024 | |||||||||
| Provision for credit losses |
— | — | — | |||||||||
| Operating profit |
590,308 | 243,297 | 434,024 | |||||||||
| Net non-operating expense |
(340 | ) | (62 | ) | (473 | ) | ||||||
| Profit before income tax |
589,968 | 243,235 | 433,551 | |||||||||
| Income tax benefit (expense) |
164 | 190 | (600 | ) | ||||||||
| Profit for the period |
590,132 | 243,425 | 432,951 | |||||||||
| Other comprehensive income (loss) for the period, net of tax |
237 | (741 | ) | (1,523 | ) | |||||||
|
|
|
|
|
|
|
|||||||
| Total comprehensive income for the period |
590,369 | 242,684 | 431,428 | |||||||||
|
|
|
|
|
|
|
|||||||
| Earnings per share |
||||||||||||
| Basic earnings per share (Won) |
1,538 | 630 | 1,121 | |||||||||
| Diluted earnings per share (Won) |
1,530 | 627 | 1,116 | |||||||||
| 3.3. | Other Selected Financial Data |
3.3.1. Won-denominated Liquidity Ratio
| (Unit: in millions of Won, %) | ||||||||||||
| Category |
As of December 31, 2016 | As of December 31, 2015 | As of December 31, 2014 | |||||||||
| Current assets in Won (A) |
59,429 | 325,124 | 30,767 | |||||||||
| Current liabilities in Won (B) |
5,554 | 4,565 | 2,170 | |||||||||
| Liquidity ratio (A/B) |
1,070.02 | 7,122.10 | 1,417.54 | |||||||||
Notes:
| • | Based on K-IFRS (on a separate basis). |
| • | Calculated based on Won-denominated assets and liabilities due within one month. |
3.3.2. Selected ratios
| (Unit: %) | ||||||||||||
| Category |
For the year ended December 31, 2016 |
For the year ended December 31, 2015 |
For the year ended December 31, 2014 |
|||||||||
| Net income as a percentage of average total assets (ROA) |
0.63 | 0.54 | 0.47 | |||||||||
| Net income as a percentage of average shareholders’ equity (ROE) |
7.26 | 6.06 | 5.26 | |||||||||
Note: Based on K-IFRS (on a consolidated basis).
3.3.3. 20 Largest Exposures of Kookmin Bank by Borrower
| (As of December 31, 2016) | ||||
| Company |
Credit extended | |||
| (Unit: in billions of Won) | ||||
| Samsung Electronics Co., Ltd. |
1,314 | |||
| LG Electronics Inc. |
652 | |||
| Samsung Display Co., Ltd. |
641 | |||
| Hyundai Heavy Industries Co., Ltd. |
603 | |||
| Hyundai Steel Co., Ltd. |
569 | |||
| Korea Securities Finance Corp. |
538 | |||
| Hyundai Capital Services, Inc. |
527 | |||
| Samsung Heavy Industries Co., Ltd. |
507 | |||
| S-Oil Corporation |
478 | |||
| Kia Motors Corporation |
468 | |||
| Hyundai Motor Company |
459 | |||
| Posco Daewoo Corporation |
437 | |||
| Airport Railroad Co., Ltd. |
435 | |||
| KT Corporation |
419 | |||
| Shinhan Financial Group Co., Ltd. |
402 | |||
| Hankook Tire Co., Ltd. |
395 | |||
| Daewoo Shipbuilding & Marine Engineering Co., Ltd. |
393 | |||
| CJ CheilJedang Corporation |
391 | |||
| Shinsegae Inc. |
378 | |||
| LS Nikko Copper Inc. |
365 | |||
|
|
|
|||
| Total |
10,370 | |||
|
|
|
|||
3.3.4. 10 Largest Exposures of Kookmin Bank by Chaebol Group
| (As of December 31, 2016) | ||||
| Group |
Credit extended | |||
| (Unit: in billions of Won) | ||||
| Hyundai Motor |
3,841 | |||
| Samsung |
3,396 | |||
| SK |
1,875 | |||
| Lotte |
1,370 | |||
| Hanwha |
1,346 | |||
| LG |
1,335 | |||
| POSCO |
1,181 | |||
| Hyundai Heavy |
960 | |||
| GS |
871 | |||
| LS |
835 | |||
|
|
|
|||
| Total |
17,011 | |||
|
|
|
|||
3.3.5. Kookmin Bank’s Loan Concentration by Industry
| (As of December 31, 2016) | ||||||||
| Industry |
Total Credit | Percentage of Total Credit |
||||||
| (Unit: in billions of Won, %) | ||||||||
| Manufacturing |
38,709 | 34.67 | ||||||
| Real estate |
22,741 | 20.37 | ||||||
| Retail and wholesale |
15,691 | 14.05 | ||||||
| Hotel, lodging and food service |
7,196 | 6.45 | ||||||
| Construction |
3,458 | 3.10 | ||||||
| Financial institutions |
1,795 | 1.61 | ||||||
| Other |
22,054 | 19.75 | ||||||
|
|
|
|
|
|||||
| Total |
111,645 | 100.00 | ||||||
|
|
|
|
|
|||||
3.3.6. Top 20 Non-Performing Loans of Kookmin Bank
| (As of December 31, 2016) | ||||||||||
| Industry |
Total Credit | Allowance for Loan Losses |
||||||||
| (Unit: in billions of Won) | ||||||||||
| Borrower A |
Construction |
99 | 97 | |||||||
| Borrower B |
Construction |
67 | 69 | |||||||
| Borrower C |
Manufacturing |
61 | 61 | |||||||
| Borrower D |
Publishing, Media, Broadcasting and Information Services |
55 | 49 | |||||||
| Borrower E |
Shipbuilding |
52 | 37 | |||||||
| Borrower F |
Real estate and leasing |
42 | 42 | |||||||
| Borrower G |
Construction |
41 | 40 | |||||||
| Borrower H |
Shipping |
24 | 24 | |||||||
| Borrower I |
Manufacturing |
18 | 6 | |||||||
| Borrower J |
Arts, sports and recreation related services |
17 | 17 | |||||||
| Borrower K |
Publishing, Media, Broadcasting and Information Services |
15 | 13 | |||||||
| Borrower L |
Manufacturing |
14 | 1 | |||||||
| Borrower M |
Construction |
14 | 13 | |||||||
| Borrower N |
Manufacturing |
14 | 14 | |||||||
| Borrower O |
Hotel, lodging and food services |
13 | 3 | |||||||
| Borrower P |
Retail and wholesale |
12 | 9 | |||||||
| Borrower Q |
Manufacturing |
12 | 12 | |||||||
| Borrower R |
Retail and wholesale |
12 | 11 | |||||||
| Borrower S |
Manufacturing |
11 | 10 | |||||||
| Borrower T |
Manufacturing |
10 | 1 | |||||||
|
|
|
|
|
|||||||
| Total |
601 | 528 | ||||||||
|
|
|
|
|
|||||||
| 3.4. | Other Financial Information |
See the Company’s Form 6-K furnished to the Securities and Exchange Commission on March 14, 2017 (available on www.sec.gov), which contains the Company’s audited consolidated and separate financial statements as of and for the years ended December 31, 2016 and 2015 and related notes, which have been prepared in accordance with K-IFRS. The Company’s audited consolidated and separate financial statements are also available on its website, www.kbfg.com.
| 4. | Independent Public Accountants |
| 4.1. | Audit / Review Services |
| Period |
Auditor |
Activity |
Compensation(1) (in millions of Won) |
Accrued Time (hours) |
||||||||
| January 1 to December 31, 2016 |
Samil PricewaterhouseCoopers |
Quarterly / first half and annual review & audit, review of internal accounting management system (including audit of internal control over financial reporting) | 760 | 10,505 | ||||||||
| January 1 to December 31, 2015 |
Samil PricewaterhouseCoopers |
Quarterly / first half and annual review & audit, review of internal accounting management system (including audit of internal control over financial reporting) | 760 | 9,947 | ||||||||
| January 1 to December 31, 2014 |
Samil PricewaterhouseCoopers |
Quarterly / first half and annual review & audit, review of internal accounting management system (including audit of internal control over financial reporting) | 732 | 9,869 | ||||||||
| (1) | Excluding value-added taxes. |
| 4.2. | Public Company Accounting Oversight Board (“PCAOB”) Audit Services |
| Period |
Auditor |
Activity |
Service Period |
Compensation(1) (in millions of Won) |
||||||
| January 1 to December 31, 2016 |
Samil PricewaterhouseCoopers | PCAOB audit of consolidated financial statements and internal control over financial reporting | May 1, 2016 to April 30, 2017 |
459 | ||||||
| January 1 to December 31, 2015 |
Samil PricewaterhouseCoopers | PCAOB audit of consolidated financial statements and internal control over financial reporting | May 1, 2015 to April 30, 2016 |
459 | ||||||
| January 1 to December 31, 2014 |
Samil PricewaterhouseCoopers | PCAOB audit of consolidated financial statements and internal control over financial reporting | May 1, 2014 to April 30, 2015 |
487 | ||||||
| (1) | Excluding value-added taxes. |
| 5. | Corporate Governance and Affiliated Companies |
| 5.1. | Board of Directors & Committees under the Board |
As of December 31, 2016, our board of directors consisted of eight directors, comprising one executive director, one non-standing director and six non-executive directors. The following committees currently serve under our board of directors:
| • | Audit Committee; |
| • | Risk Management Committee; |
| • | Evaluation & Compensation Committee; |
| • | Non-Executive Director Nominating Committee; |
| • | Corporate Governance Committee; and |
| • | Audit Committee Member Nominating Committee. |
For the list of our directors, see 6. Directors, Senior Management and Employees — 6.1. Executive Directors, — 6.2. Non-standing Directors and — 6.3. Non-executive Directors below.
| 5.2. | Audit Committee |
The audit committee oversees our financial reporting and approves the appointment of our independent auditors and internal compliance officers. The committee also reviews our financial information, auditor’s examinations, key financial statement issues, the plans and evaluation of internal controls and the administration of our financial affairs by the board of directors. In connection with the general meetings of shareholders, the committee examines the agenda for, and financial statements and other reports to be submitted by, the board of directors to each general meeting of shareholders. The committee holds regular meetings every quarter and on an as-needed basis.
| 5.3. | Compensation to Directors |
5.3.1. Total Amount Approved at the Meeting of Shareholders
| (Unit: in millions of Won) | ||||||||||||
| Total number of persons(1) | Total amount approved at shareholders’ meeting(2) | Notes | ||||||||||
| Registered Directors (Non-executive directors) |
8 (6 | ) | 2,500 | — | ||||||||
| (1) | Represents the total number of applicable persons as of December 31, 2016. |
| (2) | Represents the aggregate amount for all directors (including non-executive directors). Excludes compensation in the form of long-term incentive performance share grants. |
5.3.2. Total Amount Paid as of December 31, 2016
| (Unit: in millions of Won) | ||||||
| Total number of persons(1) |
Total payment(2) | Average payment per person(3) | Notes | |||
| 8 |
1,047 | 127 | — |
| (1) | Represents the total number of applicable persons as of December 31, 2016. |
| (2) | Represents the total amount paid (rounded to the nearest million) for the year ended December 31, 2016 (including the amount paid to Mr. Woon Youl Choi, a former non-executive director, who resigned on March 25, 2016). |
| (3) | Represents (i) the total amount paid (rounded to the nearest million) for the year ended December 31, 2016, divided by (ii) the annualized number of applicable persons for the applicable reporting period. |
| (Unit: in millions of Won) | ||||||||||||||||
| Total number of persons(1) |
Total payment (2)(4)(5) | Average payment per person (3) |
Notes | |||||||||||||
| Registered Directors (excluding non-executive directors and audit committee members) |
2 | 554 | 277 | — | ||||||||||||
| Non-executive Directors (excluding audit committee members) |
3 | 236 | 79 | — | ||||||||||||
| Audit committee members |
3 | 257 | 80 | — | ||||||||||||
| Internal auditor |
— | — | — | — | ||||||||||||
| (1) | Represents the total number of applicable persons as of December 31, 2016. |
| (2) | Represents the total amount paid (rounded to the nearest million) for the year ended December 31, 2016 (including the amount paid to Mr. Woon Youl Choi, a former non-executive director, who resigned on March 25, 2016). |
| (3) | Represents (i) the total amount paid (rounded to the nearest million) for the year ended December 31, 2016, divided by (ii) the annualized number of applicable persons for the applicable reporting period. |
| (4) | Payment subject to the Company’s internal policies on compensation to directors. |
| (5) | The total amount paid (rounded to the nearest million) to our registered director for the year ended December 31, 2016 (including the amount paid by Kookmin Bank to our registered director who concurrently serves as the president of Kookmin Bank) is Won 1,024 million (Won 554 million by KB Financial Group and Won 470 million by Kookmin Bank). Such amount includes 2016 annual salary of Won 683 million (Won 372 million by KB Financial Group and Won 311 million by Kookmin Bank) and short-term performance-based incentive payments of Won 341 million (Won 182 million by KB Financial Group and Won 159 million by Kookmin Bank), which were based on performance in 2015 and paid in the first quarter of 2016. Such amount does not include performance-based stock grants of 60,841 shares of KB Financial Group (32,449 shares granted by KB Financial Group and 28,392 shares by Kookmin Bank). |
5.3.3. Compensation exceeding Won 500 million – Individual basis
Compensation exceeding Won 500 million – Individual Basis
(Unit: in millions of Won)
| Name |
Position |
Total Compensation(1)(2) |
Additional Compensation | |||
| Jong Kyoo Yoon |
Chairman & CEO | 554 | - 32,449 shares were granted as a long-term performance-based stock grant. The actual payment amount will be determined in the future based on (i) a performance evaluation over a three-year period from November 21, 2014 to November 20, 2017 and (ii) the market price of our shares. |
| (1) | Consists of 2016 annual salary of Won 372 million (including allowances for business expenses of Won 168 million) and a short-term incentive payment of Won 182 million, which was based on performance in 2015 and paid in the first quarter of 2016. |
| (2) | The total amount paid (rounded to the nearest million) for the year ended December 31, 2016 (including the amount paid by Kookmin Bank to Mr. Jong Kyoo Yoon, who concurrently serves as the president of Kookmin Bank) is Won 1,024 million (Won 554 million by KB Financial Group and Won 470 million by Kookmin Bank). Such amount includes 2016 annual salary of Won 683 million (Won 372 million by KB Financial Group and Won 311 million by Kookmin Bank) and short-term performance-based incentive payments of Won 341 million (Won 182 million by KB Financial Group and Won 159 million by Kookmin Bank), which were based on performance in 2015 and paid in the first quarter of 2016. Such amount does not include performance-based stock grants of 60,841 shares of KB Financial Group (32,449 shares granted by KB Financial Group and 28,392 shares by Kookmin Bank). |
Criteria and method of calculating compensation
| Name |
Compensation |
Classification |
Total Compensation |
Calculation criteria and method | ||||
| Jong Kyoo Yoon | Earned income | Salary | 372 | - A monthly salary of Won 31 million is paid, which is derived by dividing (i) the amount of annual salary determined by resolution of the Evaluation & Compensation Committee within the limit of the total amount of compensation approved at the shareholders’ meeting by (ii) 12 months. (This amount includes allowances for business expenses) |
| Bonus | 182 | - The bonus payment was a short-term performance-based incentive payment paid in the first quarter of 2016 based on the final performance evaluation and resolution by the Evaluation & Compensation Committee, in accordance with the “Proposal on Long- and Short-Term Performance Evaluation and Compensation Scheme for the CEO,” which was approved at a meeting of the Evaluation & Compensation Committee held in the first quarter of 2015.
-The short-term performance evaluation index for 2015 comprises financial results (e.g., ROE, RAROC, CIR, real NPL ratio, innovation index) and results related to strategic initiatives (e.g., laying a foundation to become a leading financial group by securing competitive edge or executing inorganic growth strategies). The amount of the short-term incentive payment is determined based on the aggregate score for the index items above as well as the applicable year’s net income, within the range of 0%-100% of the base salary.
- With respect to financial results, the major achievements reflected in the performance evaluation included the attainment of key financial indicators that exceeded the target for that year, such as a 22.1% YoY increase in the Company’s net income to Won 1,727.3 billion in 2015 and a decrease in real NPL ratio from 2.65% in 2014 to 1.95% to 2015.
- With respect to results related to strategic initiatives, the major achievements reflected in the performance evaluation included contribution to organizational stabilization through management based on communication with front-line workers and development of the management team and structure; strengthening of business competitiveness by enhancing customer-centric sales channels and increasing marketing efforts; generating synergy by promoting cross-selling and enhancing collaboration among affiliates; and pursuit of business portfolio enhancement by acquiring LIG Insurance. |
| 5.4. | Affiliated Companies |
5.4.1. List of Affiliated Companies
Affiliated companies of KB Financial Group that are first-tier subsidiaries and KB Financial Group’s ownership of such companies as of December 31, 2016 are as follows.
| • | Kookmin Bank (100.00%) |
| • | KB Securities Co., Ltd. (100.00%) |
| • | KB Insurance Co., Ltd. (39.81%) |
| • | KB Kookmin Card Co., Ltd. (100.00%) |
| • | KB Life Insurance Co., Ltd. (100.00%) |
| • | KB Asset Management Co., Ltd. (100.00%) |
| • | KB Capital Co., Ltd. (52.02%) |
| • | KB Savings Bank Co., Ltd. (100.00%) |
| • | KB Real Estate Trust Co., Ltd. (100.00%) |
| • | KB Investment Co., Ltd. (100.00%) |
| • | KB Credit Information Co., Ltd. (100.00%) |
| • | KB Data Systems Co., Ltd. (100.00%) |
| 6. | Directors, Senior Management and Employees |
| 6.1. | Executive Directors |
As of December 31, 2016 and March 29, 2017, we had one executive director. The name, position and the end of the term of our executive director and the number of shares of KB Financial Group’s common stock he owned as of March 29, 2017 are set forth below.
| Name |
Date of Birth |
Position |
Common Shares |
End of Term | ||||||
| Jong Kyoo Yoon |
October 1955 | Chairman & Chief Executive Officer | 10,000 | November 20, 2017 | ||||||
| 6.2. | Non-standing Directors |
As of December 31, 2016 and March 29, 2017, we had one non-standing director. The name, position and the end of the term of our non-standing director and the number of shares of KB Financial Group’s common stock he owned as of March 29, 2017 are set forth below.
| Name |
Date of Birth |
Position |
Common Shares Owned |
End of Term | ||||||
| Hong Lee |
April 1958 | Non-standing Director | 459 | 2018 Annual General Shareholders’ Meeting (“AGM”) | ||||||
| 6.3. | Non-executive Directors |
Our non-executive directors, the end of their terms and the number of shares of KB Financial Group’s common stock they respectively owned as of March 29, 2017 are as follows.
| Name |
Date of Birth |
Position |
Common Shares Owned |
End of Term |
||||||||
| Young Hwi Choi |
October 1945 | Non-executive Director | — | March 23, 2018 | ||||||||
| Stuart B. Solomon |
July 1949 | Non-Executive Director | — | March 23, 2019 | ||||||||
| Suk Ryul Yoo |
April 1950 | Non-executive Director | — | March 23, 2018 | ||||||||
| Michael Byungnam Lee |
September 1954 | Non-executive Director | 1,020 | March 23, 2018 | ||||||||
| Jae Ha Park |
November 1957 | Non-executive Director | — | March 23, 2018 | ||||||||
| Eunice Kyonghee Kim |
March 1959 | Non-executive Director | — | March 23, 2018 | ||||||||
| Jongsoo Han |
October 1960 | Non-executive Director | — | March 23, 2018 | ||||||||
| 6.4. | Senior Management |
In addition to our executive director who is also our executive officer, we currently have the following sixteen executive officers as of March 29, 2017.
| Name |
Date of Birth |
Position |
Common Shares |
End of Term |
||||||||
| Ok Chan Kim |
July 1956 | President & Chief Operating Officer | 5,174 | November 20, 2017 | ||||||||
| Ki Heon Kim |
October 1955 | Deputy President and Chief Information Technology Officer | — | December 31, 2017 | ||||||||
| Dong Cheol Lee |
October 1961 | Deputy President and Chief Strategy Officer | 600 | December 31, 2017 | ||||||||
| Jeong Rim Park |
November 1963 | Deputy President; Wealth Management Planning Department | 540 | December 31, 2017 | ||||||||
| Kwi Sang Jun |
July 1960 | Deputy President; Corporate and Investment Banking Planning Department | 167 | December 31, 2017 | ||||||||
| Ki Hwan Kim |
March 1963 | Senior Managing Director and Chief Risk Management Officer | 321 | December 31, 2017 | ||||||
| Young-Tae Park |
December 1961 | Senior Managing Director and Chief Data Officer | 450 | December 31, 2017 | ||||||
| Jae Hong Park |
April 1967 | Senior Managing Director and Chief Global Strategy Officer | — | December 31, 2017 | ||||||
| Hong Seob Shin |
September 1962 | Senior Managing Director and Chief Public Relation Officer | 580 | December 31, 2017 | ||||||
| Kyung Yup Cho |
September 1961 | Senior Managing Director; KB Research | 800 | December 31, 2017 | ||||||
| Jae Keun Lee |
May 1966 | Managing Director and Chief Financial Officer | 119 | December 31, 2018 | ||||||
| Chang Kwon Lee |
November 1965 | Managing Director; Strategic Planning Department | — | December 31, 2018 | ||||||
| Dong Whan Han |
January 1965 | Managing Director and Chief Future Innovation Officer | 100 | December 31, 2018 | ||||||
| Chai Hyun Sung |
September 1965 | Managing Director and Chief Human Resources Officer | 450 | December 31, 2018 | ||||||
| Pil Kyu Im |
March 1964 | Managing Director and Chief Compliance Officer | 445 | January 10, 2018 | ||||||
| Young Hyuk Jo |
April 1963 | Managing Director and enforcement officer of the Internal Audit; Audit Department | 461 | December 31, 2017 |
As of March 29, 2017, the following management also serves as senior management at our subsidiaries.
| Name |
Subsidiary |
Position |
Appointment date | |||
| Jong Kyoo Yoon |
Kookmin Bank | President and Chief Executive Officer | November 2014 | |||
| Hong Lee |
Kookmin Bank | Senior Executive Vice President; Shared Service Group | January 2017 | |||
| Ki Heon Kim |
Kookmin Bank | Senior Executive Vice President, Head of IT Group | January 2015 | |||
| Jeong Rim Park |
Kookmin Bank | Senior Executive Vice President; Wealth Management Group | January 2017 | |||
| KB Securities | Deputy President; Wealth Management Division | January 2017 | ||||
| Kwi Sang Jun |
Kookmin Bank | Senior Executive Vice President, Corporate Investment Banking Group | January 2016 | |||
| KB Securities | Deputy President; Investment Banking Division | January 2017 | ||||
| Jae Hong Park |
Kookmin Bank | Senior Managing Director; Global Business Division | January 2016 | |||
| Ki Hwan Kim |
Kookmin Bank | Managing Director; Risk Management Group | January 2016 | |||
| Hong Seob Shin |
Kookmin Bank | Managing Director; Consumer Brand Strategy Group | January 2016 | |||
| Dong Whan Han |
Kookmin Bank | Managing Director; Future Channel Group | January 2017 | |||
| Dong Cheol Lee |
KB Securities | Non-standing Director | December 2016 | |||
| Jae Keun Lee |
KB Insurance | Non-standing Director | March 2017 | |||
| Kookmin Card | Non-standing Director | February 2017 |
As of December 31, 2016, following non-executive director also served as a director at another company.
| Name |
Company |
Position |
Appointment date |
|||||
| Suk Ryul Yoo |
Jungmok | CEO | December 2013 | |||||
| 6.5. | Employees |
The following table shows information regarding our employees as of December 31, 2016.
| (Unit: in millions of Won) | ||||||||||||||||
| Number of Employees |
Average Tenure of Employees (months) |
Total Amount of Annual Salaries | Average Annual Salary per Person (1) |
|||||||||||||
| Total |
159 | 36 | 17,486 | 110 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| (1) | Represents (i) the total amount paid for the year ended December 31, 2016 divided by (ii) the total number of employees as of December 31, 2016. |
| 7. | Major Shareholders and Related Party Transactions |
| 7.1. | Major Shareholders |
The following table presents information regarding holders of 5% or more of our total issued shares as of December 31, 2016.
| (Unit: shares, %) | ||||||||
| Name |
Number of Shares of Common Stock | Percentage of Total Issued Shares(1) | ||||||
| Korean National Pension Service |
41,190,896 | 9.85 | ||||||
| JP Morgan Chase Bank, N.A.(2) |
29,069,705 | 6.95 | ||||||
| (1) | Calculated based on 418,111,537 shares of our common stock issued and outstanding as of December 31, 2016. |
| (2) | Depositary under the Company’s ADR program. The voting rights are held by ADR holders. |
| 7.2. | Changes in the Largest Shareholder |
| (As of December 31, 2016) | (Unit: shares, %) | |||||||||||
| Name of Largest Shareholder |
Date of Change in Largest Shareholder/ Date of Change in Ownership Level |
Number of Shares of Common Stock |
Percentage of Total Issued Shares(1) |
|||||||||
| Korean National Pension Service |
December 31, 2011 | 26,510,171 | 6.86 | |||||||||
| Korean National Pension Service |
March 14, 2012 | 27,894,880 | 7.22 | |||||||||
| Korean National Pension Service |
August 1, 2012 | 31,817,770 | 8.24 | |||||||||
| Korean National Pension Service |
December 31, 2012 | 33,158,257 | 8.58 | |||||||||
| Korean National Pension Service |
June 12, 2013 | 34,479,641 | 8.92 | |||||||||
| Korean National Pension Service |
July 23, 2013 | 35,699,841 | 9.24 | |||||||||
| Korean National Pension Service |
December 31, 2013 | 38,476,974 | 9.96 | |||||||||
| Korean National Pension Service |
October 14, 2014 | 36,750,987 | 9.51 | |||||||||
| Korean National Pension Service |
December 31, 2014 | 36,383,211 | 9.42 | |||||||||
| Korean National Pension Service |
December 31, 2015 | 35,534,667 | 9.20 | |||||||||
| Korean National Pension Service |
August 12, 2016 | 36,826,207 | 9.53 | |||||||||
| Korean National Pension Service |
December 31, 2016 | 41,190,896 | 9.85 | |||||||||
| (1) | Based on 418,111,537 total issued shares of common stock for dates on or after October 19, 2016, and 386,351,693 total issued shares of common stock for dates prior to October 19, 2016. |
| 7.3. | Employee Stock Ownership Association |
| (As of December 31, 2016) | (Unit: shares) | |||||
| Company Name |
Number of shares | Type of shares | ||||
| KB Financial Group Inc. |
12,625 | Common Stock | ||||
| Kookmin Bank |
1,869,880 | Common Stock | ||||
| KB Securities Co., Ltd. |
8,806 | Common Stock | ||||
| KB Insurance Co., Ltd. |
— | — | ||||
| KB Kookmin Card Co., Ltd. |
92,197 | Common Stock | ||||
| KB Life Insurance Co., Ltd. |
9,967 | Common Stock | ||||||
| KB Asset Management Co., Ltd. |
3,862 | Common Stock | ||||||
| KB Capital Co., Ltd. |
— | — | ||||||
| KB Savings Bank Co., Ltd. |
448 | Common Stock | ||||||
| KB Real Estate Trust Co., Ltd. |
4,782 | Common Stock | ||||||
| KB Investment Co., Ltd. |
1,318 | Common Stock | ||||||
| KB Credit Information Co., Ltd. |
5,867 | Common Stock | ||||||
| KB Data Systems Co., Ltd. |
8,749 | Common Stock | ||||||
|
|
|
|||||||
| Total |
2,018,501 | Common Stock | ||||||
|
|
|
| 7.4. | Investments in Certain Affiliated Companies |
| (As of December 31, 2016) | (Units: shares, millions of Won, %) | |||||||||||||||||||
| Name |
Ending Balance | Total Assets as of the latest fiscal year(1) |
Net Income (loss) for the latest fiscal year(1) |
|||||||||||||||||
| Number of shares |
Shareholding percentage |
Book value | ||||||||||||||||||
| Kookmin Bank |
404,379,116 | 100 | 14,821,721 | 301,205,007 | 967,766 | |||||||||||||||
| KB Securities Co., Ltd. (2) |
298,620,424 | 100 | 3,342,391 | 29,463,149 | (344 | ) | ||||||||||||||
| KB Insurance Co., Ltd. (3) |
26,472,759 | 39.81 | 1,053,690 | 29,352,211 | 295,780 | |||||||||||||||
| KB Kookmin Card Co., Ltd. |
92,000,000 | 100 | 1,953,175 | 15,739,739 | 318,627 | |||||||||||||||
| KB Life Insurance Co., Ltd. |
91,200,000 | 100 | 485,314 | 8,887,383 | 12,748 | |||||||||||||||
| KB Asset Management Co., Ltd. |
7,667,550 | 100 | 96,312 | 170,781 | 58,756 | |||||||||||||||
| KB Capital Co., Ltd. |
11,180,630 | 52.02 | 279,870 | 7,452,823 | 96,696 | |||||||||||||||
| KB Savings Bank Co., Ltd. |
8,001,912 | 100 | 157,544 | 1,078,130 | 10,319 | |||||||||||||||
| KB Real Estate Trust Co., Ltd. |
16,000,000 | 100 | 121,553 | 216,687 | 29,270 | |||||||||||||||
| KB Investment Co., Ltd. |
8,951,797 | 100 | 104,910 | 146,372 | 4,513 | |||||||||||||||
| KB Credit Information Co., Ltd. |
1,252,400 | 100 | 23,621 | 27,973 | 43 | |||||||||||||||
| KB Data Systems Co., Ltd. |
800,000 | 100 | 6,334 | 27,037 | 613 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total |
— | — | 22,446,435 | — | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| (1) | Based on K-IFRS (on a separate basis) |
| (2) | KB Securities was added as a non-consolidated first-tier subsidiary on May 31, 2016. On August 2, 2016, the Company entered into a stock swap agreement with Hyundai Securities to effect a comprehensive stock swap (the “Stock Swap”), pursuant to a resolution of its directors. On October 4, 2016, the Stock Swap was approved at the extraordinary shareholders’ meeting of Hyundai Securities. On October 19, 2016, the Stock Swap was effected, as a result of which Hyundai Securities became a wholly-owned subsidiary of the Company. On November 1, 2016, Hyundai Securities was delisted. On December 30, 2016, KB Investment & Securities was merged with and into Hyundai Securities, with Hyundai Securities as the surviving entity, and KB Securities was launched. |
| (3) | KB Insurance was added as a non-consolidated first-tier subsidiary on June 24, 2015. |
| 7.5. | Related Party Transactions |
7.5.1. Purchase of capital securities issued by KB Capital Co., Ltd.
| (Unit: billions of Won) | ||||||||||||||||||
| Issuer |
Relationship | Type |
Issue Amount | Issue Date | Interest Rate | Maturity Date | Use of Proceeds | |||||||||||
| KB Capital Co., Ltd. |
Subsidiary | No. 299 Private Placement of Capital Securities in Won | 50 | March 27, 2015 |
5.011 | % | March 27, 2045 (may be extended) |
Working capital | ||||||||||
| (Unit: billions of Won) | ||||||||||||||||||
| Issuer |
Relationship | Type |
Issue Amount | Issue Date | Interest Rate | Maturity Date | Use of Proceeds | |||||||||||
| KB Capital Co., Ltd. |
Subsidiary | No. 320 Private Placement of Capital Securities in Won | 50 | September 24, 2015 |
4.606 | % | September 24, 2045 (may be extended) |
Working capital | ||||||||||
| (Unit: billions of Won) | ||||||||||||||||||
| Issuer |
Relationship | Type |
Issue Amount | Issue Date | Interest Rate | Maturity Date | Use of Proceeds | |||||||||||
| KB Capital Co., Ltd. |
Subsidiary | No. 343 Private Placement of Capital Securities in Won | 50 | March 29, 2016 |
4.396 | % | March 29, 2046 (may be extended) |
Working capital | ||||||||||
| (Unit: billions of Won) | ||||||||||||||||||
| Issuer |
Relationship | Type |
Issue Amount | Issue Date | Interest Rate | Maturity Date | Use of Proceeds | |||||||||||
| KB Capital Co., Ltd. |
Subsidiary | No. 352 Private Placement of Capital Securities in Won | 50 | June 28, 2016 |
4.064 | % | June 28, 2046 (may be extended) |
Working capital | ||||||||||
| (Unit: billions of Won) | ||||||||||||||||||
| Issuer |
Relationship | Type |
Issue Amount | Issue Date | Interest Rate | Maturity Date | Use of Proceeds | |||||||||||
| KB Capital Co., Ltd. |
Subsidiary | No. 367 Private Placement of Capital Securities in Won | 50 | November 28, 2016 |
4.744 | % | November 28, 2046 (may be extended) |
Working capital | ||||||||||
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| KB Financial Group Inc. | ||||||||
| (Registrant) | ||||||||
| Date: March 31, 2017 |
By: /s/ Jae Keun Lee | |||||||
| (Signature) | ||||||||
| Name: | Jae Keun Lee | |||||||
| Title: | Managing Director and Chief Financial Officer | |||||||