UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 6-K/A
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 2018
Commission File Number: 000-53445
KB Financial Group Inc.
(Translation of registrants name into English)
26, Gukjegeumyung-ro 8-gil, Yeongdeungpo-gu, Seoul 07331, Korea
(Address of principal executive office)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
Form 20-F ☒ Form 40-F ☐
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ☐
Note: Regulation S-T Rule 101(b)(1) only permits the submission in paper of a Form 6-K if submitted solely to provide an attached annual report to security holders.
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ☐
Note: Regulation S-T Rule 101(b)(7) only permits the submission in paper of a Form 6-K if submitted to furnish a report or other document that the registrant foreign private issuer must furnish and make public under the laws of the jurisdiction in which the registrant is incorporated, domiciled or legally organized (the registrants home country), or under the rules of the home country exchange on which the registrants 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 registrants 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.
EXPLANATORY NOTE
This Report of Foreign Private Issuer on Form 6-K/A (this Amended Report) is furnished to amend the Report of Foreign Private Issuer on Form 6-K furnished to the Securities and Exchange Commission on March 13, 2018 under the title Audit Report of KB Financial Group Inc. for Fiscal Year 2017 (the Original Report). This Amended Report amends certain notes included in the English-language translation of the Consolidated Audit Report of KB Financial Group for fiscal year 2017 (the Consolidated Audit Report) attached as Exhibit 99.1 to the Original Report.
The amendments consist of: (i) the amount of the line item Mortgage loans and the total assets pledged as collateral for 2017 under Note 8 (Assets pledged as collateral) and (ii) the amounts of the line items Written-off, Recoveries from written-off loans, Sale and repurchase and Other changes for 2017 under Note 11 (Allowances for Loan Losses).
The English-language translation of the amended Consolidated Audit Report reflecting the above revisions is attached as Exhibit 99.1 to this Amended Report. The amended Notes 8 and 11 are set forth below.
8. Assets pledged as collateral
Details of assets pledged as collateral as of December 31, 2017 and 2016, are as follows:
(In millions of Korean won) | 2017 | |||||||
Assets pledged | Pledgee | Carrying amount | Reason of pledge | |||||
Due from financial institutions |
Korea Federation of Savings Banks and others |
Borrowings from Bank and others | ||||||
Financial assets held for trading |
Korea Securities Depository and others |
7,699,857 | Repurchase agreements | |||||
Korea Securities Depository and others |
4,941,912 | Securities borrowing transactions | ||||||
Samsung Futures Inc. and others |
1,047,758 | Derivatives transactions | ||||||
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|
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13,689,527 | ||||||||
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Available-for-sale financial assets |
Korea Securities Depository and others |
2,401,388 | Repurchase agreements | |||||
Korea Securities Depository and others |
838,149 | Securities borrowing transactions | ||||||
Bank of Korea |
651,284 | Borrowings from Bank of Korea | ||||||
Bank of Korea |
750,254 | Settlement risk of Bank of Korea | ||||||
Samsung Futures Inc. and others |
221,004 | Derivatives transactions | ||||||
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4,862,079 | ||||||||
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Held-to-maturity financial assets |
Korea Securities Depository and others |
35,026 | Repurchase agreements | |||||
Bank of Korea |
1,326,558 | Borrowings from Bank of Korea | ||||||
Bank of Korea |
1,204,990 | Settlement risk of Bank of Korea | ||||||
Samsung Futures Inc. and others |
330,316 | Derivatives transactions | ||||||
Others |
163,960 | Others | ||||||
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3,060,850 | ||||||||
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Mortgage loans |
Others |
4,950,490 | Covered bond | |||||
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Real estate |
Natixis Real Estate Capital, LLC and others |
778,789 | Borrowings from Bank and others | |||||
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11. Allowances for Loan Losses
Changes in the allowances for loan losses for the years ended December 31, 2017 and 2016, are as follows:
(In millions of Korean won) | 2017 | |||||||||||||||
Retail | Corporate | Credit card | Total | |||||||||||||
Beginning |
||||||||||||||||
Written-off |
(341,506 | ) | (395,272 | ) | (400,385 | ) | (1,137,163 | ) | ||||||||
Recoveries from written-off loans |
145,606 | 280,324 | 132,665 | 558,595 | ||||||||||||
Sale and repurchase |
(40,267 | ) | (26,105 | ) | | (66,372 | ) | |||||||||
Provision1 |
233,262 | 38,644 | 312,248 | 584,154 | ||||||||||||
Business combination |
9,679 | 50,227 | | 59,906 | ||||||||||||
Other changes |
(58,764 | ) | (98,324 | ) | (9,557 | ) | (166,645 | ) | ||||||||
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Ending |
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1 | Provision for credit losses in statements of comprehensive income also include provision for unused commitments and guarantees (Note 23.(2)), provision (reversal) for financial guarantees contracts (Note 23.(3)), and provision (reversal) for other financial assets (Note 18.(2)). |
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 21, 2018 |
By: /s/ Ki-Hwan Kim | |||
(Signature) | ||||
Name: Ki-Hwan Kim | ||||
Title: Senior Managing Director and Chief Financial Officer |
KB Financial Group Inc. and Subsidiaries
Consolidated Financial Statements
December 31, 2017 and 2016
KB Financial Group Inc. and Subsidiaries
Index
December 31, 2017 and 2016
Page(s) | ||||
1~2 | ||||
Consolidated Financial Statements |
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3 | ||||
4 | ||||
5 | ||||
6 | ||||
7~225 |
(English Translation of a Report Originally Issued in Korean)
To the Shareholders and Board of Directors of KB Financial Group Inc.
We have audited the accompanying consolidated financial statements of KB Financial Group Inc. and its subsidiaries (collectively referred to as the Group), which comprise the consolidated statements of financial position as of December 31, 2017 and 2016, and the consolidated statements of comprehensive income, consolidated statements of changes in equity and consolidated statements of cash flows for the years then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies and other explanatory information.
Managements Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with International Financial Reporting Standards as adopted by the Republic of Korea (Korean IFRS), and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditors Responsibility
Our responsibility is to express an opinion on the consolidated financial statements based on our audits. We conducted our audits in accordance with Korean Standards on Auditing. Those standards require that we comply with ethical requirements, and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the Groups preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Groups internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Opinion
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as of December 31, 2017 and 2016, and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with Korean IFRS.
Auditing standards and their application in practice vary among countries. The procedures and practices used in the Republic of Korea to audit such financial statements may differ from those generally accepted and applied in other countries.
/s/ Samil PricewaterhouseCoopers
Seoul, Korea
March 12, 2018
This report is effective as of March 12, 2018, the audit report date. Certain subsequent events or circumstances, which may occur between the audit report date and the time of reading this report, could have a material impact on the accompanying consolidated financial statements and notes thereto. Accordingly, the readers of the audit report should understand that there is a possibility that the above audit 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 Statements of Financial Position
December 31, 2017 and 2016
(in millions of Korean won) | Notes | 2017 | 2016 | |||||||||
Assets |
||||||||||||
Cash and due from financial institutions |
4,6,7,8,39 | |||||||||||
Financial assets at fair value through profit or loss |
4,6,8,12 | 32,227,345 | 27,858,364 | |||||||||
Derivative financial assets |
4,6,9 | 3,310,166 | 3,381,935 | |||||||||
Loans |
4,6,8,10,11 | 290,122,838 | 265,486,134 | |||||||||
Financial investments |
4,6,8,12 | 66,608,243 | 45,147,797 | |||||||||
Investments in associates and joint ventures |
13 | 335,070 | 1,770,673 | |||||||||
Property and equipment |
14 | 4,201,697 | 3,627,268 | |||||||||
Investment property |
14 | 848,481 | 755,011 | |||||||||
Intangible assets |
15 | 2,943,060 | 652,316 | |||||||||
Net defined benefit assets |
24 | 894 | | |||||||||
Current income tax assets |
33 | 6,324 | 65,738 | |||||||||
Deferred income tax assets |
16,33 | 3,991 | 133,624 | |||||||||
Assets held for sale |
17 | 155,506 | 52,148 | |||||||||
Other assets |
4,6,18 | 16,204,169 | 8,857,785 | |||||||||
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Total assets |
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Liabilities |
||||||||||||
Financial liabilities at fair value through profit or loss |
4,6,19 | |||||||||||
Derivative financial liabilities |
4,6,9 | 3,142,765 | 3,807,128 | |||||||||
Deposits |
4,6,20 | 255,800,048 | 239,729,695 | |||||||||
Debts |
4,6,21 | 28,820,928 | 26,251,486 | |||||||||
Debentures |
4,6,22 | 44,992,724 | 34,992,057 | |||||||||
Provisions |
23 | 568,033 | 537,717 | |||||||||
Net defined benefit liabilities |
24 | 154,702 | 96,299 | |||||||||
Current income tax liabilities |
33 | 433,870 | 441,812 | |||||||||
Deferred income tax liabilities |
37 | 533,069 | 103,482 | |||||||||
Insurance contract liabilities |
16,33 | 31,801,275 | 7,290,844 | |||||||||
Other liabilities |
4,6,25 | 24,470,308 | 19,038,897 | |||||||||
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Total liabilities |
402,740,780 | 344,412,253 | ||||||||||
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Equity |
||||||||||||
Share capital |
26 | 2,090,558 | 2,090,558 | |||||||||
Capital surplus |
26 | 17,122,228 | 16,994,902 | |||||||||
Accumulated other comprehensive income |
26,35 | 537,668 | 405,329 | |||||||||
Retained earnings |
26 | 15,044,204 | 12,229,228 | |||||||||
Treasury shares |
26 | (755,973 | ) | (721,973 | ) | |||||||
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Equity attributable to shareholders of the Parent Company |
34,038,685 | 30,998,044 | ||||||||||
Non-controlling interests |
6,144 | 263,359 | ||||||||||
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Total equity |
34,044,829 | 31,261,403 | ||||||||||
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Total liabilities and equity |
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3
KB Financial Group Inc. and Subsidiaries
Consolidated Statements of Comprehensive Income
Years Ended December 31, 2017 and 2016
(In millions of Korean won, except per share amounts) | Notes | 2017 | 2016 | |||||||||
Interest income |
||||||||||||
Interest expense |
(3,672,443 | ) | (3,619,353 | ) | ||||||||
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Net interest income |
5,27 | 7,710,009 | 6,402,529 | |||||||||
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|||||||||
Fee and commission income |
3,988,250 | 3,150,877 | ||||||||||
Fee and commission expense |
(1,938,226 | ) | (1,565,985 | ) | ||||||||
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Net fee and commission income |
5,28 | 2,050,024 | 1,584,892 | |||||||||
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Insurance income |
8,970,992 | 1,201,352 | ||||||||||
Insurance expense |
(8,377,282 | ) | (1,319,155 | ) | ||||||||
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Net insurance income(expense) |
5,37 | 593,710 | (117,803 | ) | ||||||||
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Net gains (losses) on financial assets/liabilities |
5,29 | 740,329 | (8,768 | ) | ||||||||
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Net other operating expenses |
5,30 | (901,890 | ) | (415,908 | ) | |||||||
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General and administrative expenses |
5,14,15,24,31 | (5,628,664 | ) | (5,228,711 | ) | |||||||
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Operating profit before provision for credit losses |
5 | 4,563,518 | 2,216,231 | |||||||||
Provision for credit losses |
5,11,18,23 | (548,244 | ) | (539,283 | ) | |||||||
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Net operating income |
5 | 4,015,274 | 1,676,948 | |||||||||
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Share of profit of associates and joint ventures |
5,13 | 84,274 | 280,838 | |||||||||
Net other non-operating income |
5,32 | 38,876 | 670,869 | |||||||||
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Net non-operating income |
123,150 | 951,707 | ||||||||||
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Profit before income tax |
5 | 4,138,424 | 2,628,655 | |||||||||
Income tax expense |
5,33 | (794,963 | ) | (438,475 | ) | |||||||
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Profit for the period |
5 | 3,343,461 | 2,190,180 | |||||||||
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Items that will not be reclassified to profit or loss: |
||||||||||||
Remeasurements of net defined benefit liabilities |
24 | 22,605 | 12,671 | |||||||||
Share of other comprehensive income of associates and joint ventures |
(145 | ) | 3,623 | |||||||||
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22,460 | 16,294 | |||||||||||
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Items that may be reclassified subsequently to profit or loss: |
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Exchange differences on translating foreign operations |
(110,037 | ) | 20,148 | |||||||||
Valuation losses on financial investments |
89,117 | (47,871 | ) | |||||||||
Share of other comprehensive gain(loss) of associates and joint ventures |
|
100,880 | (10,716 | ) | ||||||||
Cash flow hedges |
20,959 | 4,303 | ||||||||||
Losses on hedges of a net investment in a foreign operation |
26,614 | (7,095 | ) | |||||||||
Other comprehensive income of separate account |
(13,767 | ) | | |||||||||
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113,766 | (41,231 | ) | ||||||||||
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Other comprehensive income for the period, net of tax |
136,226 | (24,937 | ) | |||||||||
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Total comprehensive income for the period |
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Profit attributable to: |
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Shareholders of the Parent Company |
5 | |||||||||||
Non-controlling interests |
5 | 32,023 | 46,436 | |||||||||
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Total comprehensive income for the period attributable to: |
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Shareholders of the Parent Company |
3,445,285 | 2,118,829 | ||||||||||
Non-controlling interests |
34,402 | 46,414 | ||||||||||
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Earnings per share |
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Basic earnings per share |
36 | |||||||||||
Diluted earnings per share |
36 | 8,257 | 5,559 |
4
KB Financial Group Inc. and Subsidiaries
Consolidated Statements of Changes in Equity
Years Ended December 31, 2017 and 2016
Equity attributable to shareholders of the Parent Company | ||||||||||||||||||||||||||||
(in millions of Korean won) | Share Capital |
Capital Surplus |
Accumulated Other Comprehensive Income |
Retained Earnings |
Treasury Shares |
Non-controlling Interests |
Total Equity |
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Balance at January 1, 2016 |
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Comprehensive income |
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Profit for the period |
| | | 2,143,744 | | 46,436 | 2,190,180 | |||||||||||||||||||||
Remeasurements of net defined benefit liabilities |
| | 12,821 | | | (150 | ) | 12,671 | ||||||||||||||||||||
Exchange differences on translating foreign operations |
| | 20,148 | | | | 20,148 | |||||||||||||||||||||
Change in value of financial investments |
| | (47,794 | ) | | | (77 | ) | (47,871 | ) | ||||||||||||||||||
Share of other comprehensive income of associates |
| | (7,093 | ) | | | | (7,093 | ) | |||||||||||||||||||
Cash flow hedges |
| | 4,098 | | | 205 | 4,303 | |||||||||||||||||||||
Losses on hedges of a net investment in a foreign operation |
| | (7,095 | ) | | | | (7,095 | ) | |||||||||||||||||||
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Total comprehensive income |
| | (24,915 | ) | 2,143,744 | | 46,414 | 2,165,243 | ||||||||||||||||||||
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Transactions with shareholders |
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Dividends paid to shareholders of the Parent Company |
| | | (378,625 | ) | | (5,156 | ) | (383,781 | ) | ||||||||||||||||||
Acquisition of treasury shares |
| | | | (721,973 | ) | | (721,973 | ) | |||||||||||||||||||
Issue of ordinary shares related to business combination |
158,800 | 1,142,359 | | | | | 1,301,159 | |||||||||||||||||||||
Others |
| (1,967 | ) | | | | | (1,967 | ) | |||||||||||||||||||
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Total transactions with shareholders |
158,800 | 1,140,392 | | (378,625 | ) | (721,973 | ) | (5,156 | ) | 193,438 | ||||||||||||||||||
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Balance at December 31, 2016 |
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Balance at January 1, 2017 |
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Comprehensive income |
||||||||||||||||||||||||||||
Profit for the period |
| | | 3,311,438 | | 32,023 | 3,343,461 | |||||||||||||||||||||
Remeasurements of net defined benefit liabilities |
| | 22,685 | | | (80 | ) | 22,605 | ||||||||||||||||||||
Exchange differences on translating foreign operations |
| | (109,727 | ) | | | (310 | ) | (110,037 | ) | ||||||||||||||||||
Change in value of financial investments |
| | 86,176 | | | 2,941 | 89,117 | |||||||||||||||||||||
Shares of other comprehensive income of associates and joint ventures |
| | 100,735 | | | | 100,735 | |||||||||||||||||||||
Cash flow hedges |
| | 21,055 | | | (96 | ) | 20,959 | ||||||||||||||||||||
Losses on hedges of a net investment in a foreign operation |
| | 26,614 | | | | 26,614 | |||||||||||||||||||||
Other comprehensive income of separate account |
| | (13,692 | ) | | | (75 | ) | (13,767 | ) | ||||||||||||||||||
Transfer to other accounts |
| | (1,507 | ) | 1,507 | | | | ||||||||||||||||||||
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Total comprehensive income |
| | 132,339 | 3,312,945 | | 34,403 | 3,479,687 | |||||||||||||||||||||
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Transactions with shareholders |
||||||||||||||||||||||||||||
Dividends paid to shareholders of the Parent Company |
| | | (497,969 | ) | | (5,156 | ) | (503,125 | ) | ||||||||||||||||||
Acquisition of treasury shares |
| | | | (202,051 | ) | | (202,051 | ) | |||||||||||||||||||
Disposal of treasury shares |
| 87,212 | | | 168,051 | | 255,263 | |||||||||||||||||||||
Changes in interest in subsidiaries |
| 41,352 | | | | (288,802 | ) | (247,450 | ) | |||||||||||||||||||
Others |
| (1,238 | ) | | | | 2,340 | 1,102 | ||||||||||||||||||||
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Total transactions with shareholders |
| 127,326 | | (497,969 | ) | (34,000 | ) | (291,618 | ) | (696,261 | ) | |||||||||||||||||
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Balance at December 31, 2017 |
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5
KB Financial Group Inc. and Subsidiaries
Consolidated Statements of Cash Flows
Years Ended December 31, 2017 and 2016
(in millions of Korean won) | Note | 2017 | 2016 | |||||||||
Cash flows from operating activities |
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Profit for the period |
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Adjustment for non-cash items |
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Net loss(gain) on financial assets/liabilities at fair value through profit or loss |
(106,868 | ) | 401,556 | |||||||||
Net loss(gain) on derivative financial instruments for hedging purposes |
(135,363 | ) | 69,573 | |||||||||
Adjustment of fair value of derivative financial instruments |
(1,000 | ) | 338 | |||||||||
Provision for credit loss |
548,244 | 539,283 | ||||||||||
Net loss(gain) on financial investments |
110,156 | (139,800 | ) | |||||||||
Share of profit of associates and joint ventures |
(84,274 | ) | (280,838 | ) | ||||||||
Depreciation and amortization expense |
550,343 | 289,438 | ||||||||||
Other net losses on property and equipment/intangible assets |
30,893 | 5,259 | ||||||||||
Share-based payments |
73,370 | 38,190 | ||||||||||
Policy reserve appropriation |
1,644,389 | 366,145 | ||||||||||
Post-employment benefits |
233,501 | 197,696 | ||||||||||
Net interest expense |
363,803 | 421,679 | ||||||||||
Loss(Gain) on foreign currency translation |
(70,399 | ) | 15,931 | |||||||||
Gains on bargain purchase |
(122,986 | ) | (628,614 | ) | ||||||||
Net other expense |
204,122 | 65,412 | ||||||||||
|
|
|
|
|||||||||
3,237,931 | 1,361,248 | |||||||||||
|
|
|
|
|||||||||
Changes in operating assets and liabilities |
||||||||||||
Financial asset at fair value through profit or loss |
(3,946,805 | ) | (1,463,824 | ) | ||||||||
Derivative financial instruments |
(295,795 | ) | 147,137 | |||||||||
Loans |
(22,465,758 | ) | (16,423,939 | ) | ||||||||
Current income tax assets |
59,334 | (8,868 | ) | |||||||||
Deferred income tax assets |
3,186 | (87,701 | ) | |||||||||
Other assets |
(3,938,297 | ) | 1,393,689 | |||||||||
Financial liabilities at fair value through profit or loss |
66,222 | 356,880 | ||||||||||
Deposits |
18,858,210 | 12,042,422 | ||||||||||
Deferred income tax liabilities |
108,355 | (150,333 | ) | |||||||||
Other liabilities |
133,931 | 1,768,096 | ||||||||||
|
|
|
|
|||||||||
(11,417,417 | ) | (2,426,441 | ) | |||||||||
|
|
|
|
|||||||||
Net cash flow from operating activities |
|
(4,836,025 | ) | 1,124,987 | ||||||||
|
|
|
|
|||||||||
Cash flows from investing activities |
||||||||||||
Disposal of financial investments |
38,050,549 | 28,066,113 | ||||||||||
Acquisition of financial investments |
(46,538,295 | ) | (30,737,148 | ) | ||||||||
Disposal of investments in associates and joint ventures |
141,052 | 106,658 | ||||||||||
Acquisition of investments in associates and joint ventures |
(53,375 | ) | (1,558,731 | ) | ||||||||
Disposal of property and equipment |
31,167 | 809 | ||||||||||
Acquisition of property and equipment |
(298,368 | ) | (397,157 | ) | ||||||||
Disposal of investment property |
1,593 | | ||||||||||
Acquisition of investment property |
(262 | ) | (1,254 | ) | ||||||||
Disposal of intangible assets |
7,603 | 8,330 | ||||||||||
Acquisition of intangible assets |
(111,894 | ) | (111,603 | ) | ||||||||
Net cash flows from the change in subsidiaries |
(405,817 | ) | 95,304 | |||||||||
Others |
446,628 | 90,141 | ||||||||||
|
|
|
|
|||||||||
Net cash flow from investing activities |
|
(8,729,419 | ) | (4,438,538 | ) | |||||||
|
|
|
|
|||||||||
Cash flows from financing activities |
||||||||||||
Net cash flows from derivative financial instruments for hedging purposes |
63,827 | 11,035 | ||||||||||
Net increase in debts |
4,272,011 | 1,849,513 | ||||||||||
Increase in debentures |
139,700,967 | 99,305,813 | ||||||||||
Decrease in debentures |
(129,235,557 | ) | (98,484,764 | ) | ||||||||
Increase in other payables from trust accounts |
587,523 | 1,639,104 | ||||||||||
Dividends paid to shareholders of the Parent Company |
(497,969 | ) | (378,625 | ) | ||||||||
Disposal of treasury shares |
3,515 | | ||||||||||
Acquisition of treasury shares |
(185,532 | ) | (716,808 | ) | ||||||||
Dividends paid to non-controlling interests |
(5,156 | ) | (5,156 | ) | ||||||||
Increase in non-controlling interests |
(163,658 | ) | | |||||||||
Others |
148,775 | (38,786 | ) | |||||||||
|
|
|
|
|||||||||
Net cash flow from financing activities |
|
14,688,746 | 3,181,326 | |||||||||
|
|
|
|
|||||||||
Effect of exchange rate changes on cash and cash equivalents |
|
(133,240 | ) | 89,142 | ||||||||
|
|
|
|
|||||||||
Net increase(decrease) in cash and cash equivalents |
|
990,062 | (43,083 | ) | ||||||||
Cash and cash equivalents at the beginning of the period |
39 | 7,414,836 | 7,457,919 | |||||||||
|
|
|
|
|||||||||
Cash and cash equivalents at the end of the period |
39 | |||||||||||
|
|
|
|
6
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
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 Companys 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. KB Insurance Co., Ltd. became one of the subsidiaries through a tender offer in May 2017.
The Parent Companys share capital as of December 31, 2017, is W2,090,558 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 Group maintains its accounting records in Korean won and prepares statutory financial statements in the Korean language (Hangul) in accordance with International Financial Reporting Standards as adopted by the Republic of Korea (Korean IFRS). The accompanying consolidated financial statements have been condensed, restructured and translated into English from the Korean language financial statements.
Certain information attached to the Korean language financial statements, but not required for a fair presentation of the Groups financial position, financial performance or cash flows, is not presented in the accompanying consolidated financial statements.
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.
7
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
The preparation of consolidated financial statements requires the use of certain critical accounting estimates. Management also needs to exercise judgment in applying the Groups 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 has applied the following standards and amendments for the first time for their annual reporting period commencing January 1, 2017. The adoption of these amendments did not have any impact on the current period or any prior period and is not likely to affect future periods.
| Amendments to Korean IFRS 1007 Statement of Cash Flows |
Amendments to Korean IFRS 1007 Statement of Cash flows requires to provide disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities, including both changes arising from cash flows and non-cash flows.
| Amendments to Korean IFRS 1012 Income Tax |
Amendments to Korean IFRS 1012 clarify how to account for deferred tax assets related to debt instruments measured at fair value. Korean IFRS 1012 provides requirements on the recognition and measurement of current or deferred tax liabilities or assets. The amendments issued clarify the requirements on recognition of deferred tax assets for unrealized losses, to address diversity in practice.
| Amendments to Korean IFRS 1112 Disclosure of Interests in Other Entities |
Amendments to Korean IFRS 1112 clarify when an entitys interest in a subsidiary, a joint venture or an associate is classified as held for sales in accordance with Korean IFRS 1105, the entity is required to disclose other information except for summarized financial information in accordance with Korean IFRS 1112.
Certain new accounting standards and interpretations that have been published that are not mandatory for annual reporting period commencing January 1, 2017 and have not been early adopted by the Group are set out below.
| Amendments to Korean IFRS 1028 Investments in Associates and Joint Ventures |
When an investment in an associate or a joint venture is held by, or it held indirectly through, an entity that is a venture capital organization, or a mutual fund, unit trust and similar entities including investment-linked insurance funds, the entity may elect to measure that investment at fair value through profit or loss in accordance with Korean IFRS 1109. The amendments clarify that an entity shall make this election separately for each associate of joint venture, at initial recognition of the associate or joint venture. The Group will apply these amendments retrospectively for annual periods beginning on or after January 1, 2018, and early adoption is permitted. The Group does not expect the amendments to have a significant impact on the consolidated financial statements because the Group is not a venture capital organization.
8
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
| Amendments to Korean IFRS 1040 Transfers of Investment Property |
Paragraph 57 of Korean IFRS 1040 clarifies that a transfer to, or from, investment property, including Property under construction, can only be made if there has been a change in use that is supported by Evidence, and provides a list of circumstances as examples. The amendment will be effective for annual periods beginning on or after January 1, 2018. With early adoption permitted. The Group does not expect the amendment to have a significant impact on the financial statements.
| Amendments to Korean IFRS 1102 Share-based Payment |
Amendments to Korean IFRS 1102 clarify accounting for a modification to the terms and conditions of a share-based payment that changes the classification of the transaction from cash-settled to equity-settled. Amendments also clarify that the measurement approach should treat the terms and conditions of a cash-settled award in the same way as for an equity-settled award. The amendments will be effective for annual periods beginning on or after January 1, 2018, with early adoption. The Group does not expect the amendments to have a significant impact on the consolidated financial statements.
| Enactments to Interpretation 2122 Foreign Currency Transactions and Advance Consideration |
According to these enactments, the date of the transaction for the purpose of determining the exchange rate to use on initial recognition of the related asset, expense or income (or part of it) is the date on which an entity initially recognizes the non-monetary asset or non-monetary liability arising from the payment or receipt of advance consideration. If there are multiple payments or receipts in advance, the entity shall determine a date of the transaction for each payment or receipt of advance consideration. These enactments will be effective for annual periods beginning on or after January 1, 2018, with early adoption permitted. The Group does not expect the enactments to have a significant impact on the consolidated financial statements.
| Korean IFRS 1109 Financial Instruments |
The new standard for financial instruments issued on September 25, 2015 is effective for annual periods beginning on or after January 1, 2018 with early application permitted. This standard will replace Korean IFRS 1039 Financial Instruments: Recognition and Measurement. The Group will apply the standards for annual periods beginning on or after January 1, 2018.
The standard requires retrospective application with some exceptions. For example, an entity is not required to restate prior periods in relation to classification, measurement and impairment of financial instruments. The standard requires prospective application of its hedge accounting requirements for all hedging relationships except the accounting for time value of options and other exceptions.
Korean IFRS 1109 Financial Instruments requires all financial assets to be classified and measured on the basis of the entitys business model for managing financial assets and the contractual cash flow characteristics of the financial assets. A new impairment model, an expected credit loss model, is introduced and any subsequent changes in expected credit losses will be recognized in profit or loss. Also, hedge accounting rules amended to extend the hedging relationship, which consists only of eligible hedging instruments and hedged items, qualifies for hedge accounting.
9
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
An effective implementation of Korean IFRS 1109 requires preparation processes including financial impact assessment, accounting policy establishment, accounting system development and the system stabilization. The impact on the Groups financial statements due to the application of the standard is dependent on judgements made in applying the standard, financial instruments held by the Group and macroeconomic variables.
Within the Group, Korean IFRS 1109 Task Force Team (TFT) has been set up to prepare for implementation of Korean IFRS 1109 since October 2015. There are three stages for implementation of Korean IFRS, such as analysis, design and implementation, and preparation for application. The Group analyzed the financial impacts of Korean IFRS 1109 on its consolidated financial statements.
Stage |
Period |
Process | ||
1 | From Oct. to Dec. 2015 (for 3 months) | Analysis of GAAP differences and development of methodology | ||
2 | From Jan. to Dec. 2016 (for 12 months) | Development of methodology, definition of business requirement, and the system development and test. | ||
3 | From Jan. 2017 to Mar. 2018 (for 15 months) | Preparation for opening balances of the financial statements |
The Group performed an impact assessment to identify potential financial effects of applying Korean IFRS 1109. The assessment was performed based on available information as at December 31, 2017, and the results of the assessment are explained as below. The results of the assessment in the financial effects as at December 31, 2017 may change due to additional information and decisions that the Group may obtain in the future.
(a) Classification and Measurement of Financial Assets
When implementing Korean IFRS 1109, the classification of financial assets will be driven by the Groups business model for managing the financial assets and contractual terms of cash flow. The following table shows the classification of financial assets measured subsequently at amortized cost, at fair value through other comprehensive income and at fair value through profit or loss. For hybrid (combined) instruments, the Group does not measure an embedded derivative separately from its host contract, financial assets with embedded derivatives are classified in their entirety.
Business model | Contractual cash flows characteristics | |||
Solely represent payments of principal and interest |
All other | |||
Hold the financial asset for the collection of the contractual cash flows |
Measured at amortized cost1 | Recognized at fair value through profit or loss2 | ||
Hold the financial asset for the collection of the contractual cash flows and sale |
Measured at fair value through other comprehensive income1 | |||
Hold for sale and others |
Measured at fair value through profit or loss |
10
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
1 | A designation at fair value through profit or loss is allowed only if such designation mitigates an accounting mismatch (irrevocable). |
2 | A designation at fair value through other comprehensive income is allowed only if the financial instrument is the equity investment that is not held for trading (irrevocable). |
With the implementation of Korean IFRS 1109, the criteria to classify the financial assets at amortized cost or at fair value through other comprehensive income are more strictly applied than the criteria applied with Korean IFRS 1039. Accordingly, the financial assets at fair value through profit or loss may increase by implementing Korean IFRS 1109 and may result an extended fluctuation in profit or loss.
The following table presents the impact of the change in classification and measurement of financial instrument (excluding derivatives) held by the Group as at December 31, 2017, using the financial instrument accounting system developed by the Group with applying Korean IFRS 1109.
(In millions of Korean won) | ||||||||||
Classification in accordance with |
Amount in accordance with | |||||||||
Korean IFRS 1039 | Korean IFRS 1109 | Korean IFRS 10391 | Korean IFRS 11091 | |||||||
Cash and due from financial institutions |
Measured at amortized cost |
|||||||||
Recognized at fair value through profit or loss2 |
| 2,782,821 | ||||||||
|
|
|
|
|||||||
19,817,825 | 19,803,548 | |||||||||
|
|
|
|
|||||||
Financial assets at fair value through profit or loss |
||||||||||
Trading Securities-Debt |
Recognized at fair value through profit or loss |
25,168,338 | ||||||||
Trading Securities-Equity |
4,935,100 | |||||||||
Trading Securities-Others |
73,855 | 32,227,345 | ||||||||
Financial assets designated at fair value through profit and loss3 |
2,050,052 | |||||||||
|
|
|
|
|||||||
32,227,345 | 32,227,345 | |||||||||
|
|
|
|
|||||||
Loans |
Measured at amortized cost |
290,122,838 | 288,970,214 | |||||||
Recognized at fair value through profit or loss2 |
| 629,223 | ||||||||
|
|
|
|
|||||||
290,122,838 | 289,599,437 | |||||||||
|
|
|
|
11
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
Financial investments |
||||||||||
Available-for-sale Securities- Debt |
Recognized at fair value through other comprehensive income |
38,959,401 | 33,611,908 | |||||||
Recognized at fair value through profit or loss2 |
| 2,511,902 | ||||||||
Measured at amortized cost |
| 2,839,709 | ||||||||
Available-for-sale Securities- Equity |
Recognized at fair value through other comprehensive income |
9,156,862 | 2,367,245 | |||||||
Recognized at fair value through profit or loss2 |
| 6,801,132 | ||||||||
Financial assets held-to-maturity |
Measured at amortized cost |
18,491,980 | 18,222,076 | |||||||
Recognized at fair value through profit or loss2 |
| 269,661 | ||||||||
|
|
|
|
|||||||
66,608,243 | 66,623,633 | |||||||||
|
|
|
|
|||||||
Other assets |
Measured at amortized cost | 10,195,015 | 10,188,309 | |||||||
|
|
|
|
|||||||
|
|
|
|
1 | Loans and other financial assets are net of allowance. |
2 | In accordance with Korea IFRS 1104, the Group applied Overlay approach to the financial instruments related to insurance contracts (cash and due from financial
institutions |
3 | The financial assets amounting to |
With the implementation of Korean IFRS 1109, as at December 31, 2017, W2,782,821 million of cash and due from financial
institutions, W629,223 million of loans, W9,313,034 million of financial assets available-for-sales and
W269,661 million of assets held-to-maturity are classified to financial assets recognize at fair value through profit or loss. These
classifications will increase the financial assets recognized at fair value through profit or loss from 7.7% to 10.8% over the total financial assets (excluding derivatives) of W418,442,272 million and may result an extended
fluctuation in profit or loss.
(b) Classification and Measurement of Financial Liabilities
Korean IFRS 1109 requires that the amount of the change of fair value attributable to changes in the credit risk in the financial liabilities designated at fair value through profit or loss will be recognized in other comprehensive income, not in profit or loss, unless this treatment of the credit risk component creates or enlarges a measurement mismatch. Amounts presented in other comprehensive income are not subsequently transferred to profit or loss.
12
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
Under Korean IFRS 1039, all financial liabilities designated at fair value through profit or loss recognized
their fair value change in profit or loss. However, under Korean IFRS 1109, certain fair value change will be recognized in other comprehensive income and as a result, profit or loss from fair value change may decrease. Based on results from the
impact assessment, the amount of change in the fair value of the financial liabilities designated at fair value through profit or loss in applying Korean IFRS 1109 is W10,078,288 million and W10,438 million is
attributable to changes in the credit risk of that liability.
(c) Impairment: Financial Assets and Contract Assets
The new impairment model requires the recognition of impairment provisions based on expected credit losses (ECL) rather than only incurred credit losses as is the case under Korean IFRS 1039. It applies to financial assets classified at amortized cost, debt instruments measured at fair value through other comprehensive income, lease receivables, contract assets, loan commitments and certain financial guarantee contracts.
Under Korean IFRS 1109, a credit event (or impairment trigger) no longer has to occur before credit losses are recognized. The Group will always recognize (at a minimum) 12-month expected credit losses in profit or loss. Lifetime expected losses will be recognized on assets for which there is a significant increase in credit risk after initial recognition.
|
Stage |
Loss allowance | ||
1 | No significant increase in credit risk after initial recognition | 12-month expected credit losses: expected credit losses that result from those default events on the financial instrument that are possible within 12 months after the reporting date | ||
2 | Significant increase in credit risk after initial recognition | Lifetime expected credit losses: expected credit losses that result from all possible default events over the life of the financial instrument | ||
3 | Credit-impaired |
Under Korean IFRS 1109, the asset that is credit-impaired at initial recognition would recognize all changes in lifetime expected credit losses since the initial recognition as a loss allowance.
13
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
According to the financial assessment, the Group owns loss allowance set out below.
(In millions of Korean won) | ||||||||||||||
Classification in accordance with |
Loss allowance in accordance with | |||||||||||||
Korean IFRS 1039 | Korean IFRS 1109 | Korean IFRS 1039 (a) | Korean IFRS 1109 (b) | Difference (b)-(a) | ||||||||||
Loans and receivables |
| |||||||||||||
Due from financial institutions |
Measured at amortized cost |
|||||||||||||
Loans |
Measured at amortized cost |
2,064,469 | 2,608,937 | 544,468 | ||||||||||
Recognized at fair value through profit or loss |
45,763 | | (45,763 | ) | ||||||||||
Other assets |
Measured at amortized cost |
104,813 | 109,899 | 5,086 | ||||||||||
Available-for-sale Securities |
| |||||||||||||
Debt Securities |
Recognized at fair value through other comprehensive income |
| 4,433 | 4,433 | ||||||||||
Measured at amortized cost |
| 176 | 176 | |||||||||||
Financial assets held-to-maturity |
| |||||||||||||
Debt Securities |
Measured at amortized cost |
| 1,530 | 1,530 | ||||||||||
|
|
|
|
|
|
|||||||||
2,215,045 | 2,726,772 | 511,727 | ||||||||||||
|
|
|
|
|
|
|||||||||
Unused Commitment and Guarantee |
267,011 | 295,648 | 28,637 | |||||||||||
|
|
|
|
|
|
|||||||||
267,011 | 295,648 | 28,637 | ||||||||||||
|
|
|
|
|
|
|||||||||
Financial Guarantee Contract |
2,682 | 4,857 | 2,175 | |||||||||||
|
|
|
|
|
|
|||||||||
2,682 | 4,857 | 2,175 | ||||||||||||
|
|
|
|
|
|
|||||||||
|
|
|
|
|
|
(d) Hedge Accounting
Hedge accounting mechanics (fair value hedges, cash flow hedges and hedge of net investments in a foreign operations) required by Korean IFRS 1039 remains unchanged in Korean IFRS 1109, however, the new hedge accounting rules will align the accounting for hedging instruments more closely with the Groups risk management practices. As a general rule, more hedge relationships might be eligible for hedge accounting, as the standard introduces a more principles-based approach. Korean IFRS 1109 allows more hedging instruments and hedged items to qualify for hedge accounting, and relaxes the hedge accounting requirement by removing two hedge effectiveness tests that are a prospective test to ensure that the hedging relationship is expected to be highly effective and a quantitative retrospective test (within range of 80-125%) to ensure that the hedging relationship has been highly effective throughout the reporting period.
With implementation of Korean IFRS 1109, volatility in profit or loss may be reduced as some items that were not eligible as hedged items or hedging instruments under Korean IFRS 1039 are now eligible under Korean IFRS 1109.
14
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
Furthermore, when the Group first applies Korean IFRS 1109, it may choose as its accounting policy to continue to apply all of the hedge accounting requirements of Korean IFRS 1039 instead of the requirements of Korean IFRS 1109.
Meanwhile, as at December 31,2017, the Group has not applied hedge accounting more for the risk management practices which can be applied hedge accounting by Korean IFRS 1109 but cannot be satisfied with hedge accounting requirements by Korean IFRS 1039.
| Korean IFRS 1115, Revenue from Contracts with Customers |
Korean IFRS 1115 Revenue from Contracts with Customers issued on November 6, 2015 replaces Korean IFRS 1018 Revenue, Korean IFRS 1011 Construction Contracts, Interpretation 2031 Revenue-Barter Transactions Involving Advertising Services, Interpretation 2113 Customer Loyalty Programs, Interpretation 2115 Agreements for the Construction of Real Estate and Interpretation 2118 Transfers of assets from customers.
Korean IFRS 1018 and other, the current standard, provide revenue recognition criteria by type of transactions; such as, sales goods, the rendering of services, interest income, royalty income, dividend income, and construction contracts. However, Korean IFRS 1115, the new standard, is based on the principle that revenue is recognized when control of a good or service transfers to a customer so the notion of control replaces the existing notion of risks and rewards.
A new five-step process must be applied before revenue from contract with customer can be recognized:
| Identify contracts with customers |
| Identify the separate performance obligation |
| Determine the transaction price of the contract |
| Allocate the transaction price to each of the separate performance obligations, and |
| Recognize the revenue as each performance obligation is satisfied. |
The Group will apply new standard for annual reporting periods beginning on or after January 1, 2018 and early adoption is permitted. The Group performed a preliminary impact assessment on the employees of the accounting department based on the current situation and available information as at December 31, 2017 to identify potential financial effects of applying Korean IFRS 1115. As a result, the Group does not expect that enactment of this statement will not have a significant impact on the consolidated financial statements. The results of the assessment as at December 31, 2017, may change due to additional information that the Group may obtain after the assessment.
| Korean IFRS 1116 Leases |
Korean IFRS 1116 Leases issued on May 22, 2017 is effective for annual periods beginning on or after January 1, 2019, with early adoption permitted. This standard will replace Korean IFRS 1017 Leases, Interpretation 2104 Determining whether an Arrangement contains a Lease, Interpretation 2015 Operating Leases-Incentives, and Interpretation 2027 Evaluating the Substance of Transactions Involving the Legal Form of a Lease.
15
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
At inception of a contract, the entity shall assess whether the contract is, or contains, a lease. Also, at the date of initial application, the entity shall assess whether the contract is, or contains, a lease in accordance with the standard. However, the entity will not need to reassess all contracts with applying the practical expedient because the entity elected to apply the practical expedient only to contracts entered before the date of initial application.
For a contract that is, or contains, a lease, the entity shall account for each lease component within the contract as a lease separately from non-lease components of the contract. A lease is required to recognize a right-of-use asset representing its right to use the underlying leased asset and a lease liability representing its obligation to make lease payments. The lessee may elect not to apply the requirements to short-term lease (a lease term of 12 months or less at the commencement date) and low value assets (e.g. underlying assets below $5,000). In addition, as a practical expedient, the lessee may elect, by class of underlying asset, not to separate non-lease components from lease components, and instead account for each lease component and any associated non-lease components as a single lease component.
The classification criteria between a financial lease and an operating lease for a lessor under Korean IFRS 1116 are similar to Korean IFRS 1017.
The Group is currently in progress of analyzing the potential impact on its consolidated financial statements resulting from the application of Korean IFRS 1116.
2.2 Measurement Basis
The consolidated financial statements have been prepared under the historical cost convention unless otherwise specified.
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 Companys functional and presentation currency (Notes 3.2.1 and 3.2.2).
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). Managements estimates of outcomes may differ from actual outcomes if managements estimates and assumptions based on managements 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.
Uncertainty in estimates and assumptions with significant risk that may result in material adjustment to the consolidated financial statements are as follows:
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KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
2.4.1 Income taxes
The Group is operating in numerous countries and the income generated from these operations is subject to income taxes based on tax laws and interpretations of tax authorities in numerous jurisdictions. There are many transactions and calculations for which the ultimate tax determination is uncertain. If certain portion of the taxable income is not used for investments, increase in wages, or dividends in accordance with the Tax System for Recirculation of Corporate Income, the Group is liable to pay additional income tax calculated based on the tax laws. The new tax system is effective for three years from 2015. Accordingly, the measurement of current and deferred income tax is affected by the tax effects from the new system. As the Groups income tax is dependent on the investments, increase in wages and dividends, there exists uncertainty with regard to measuring the final tax effects.
2.4.2 Fair value of financial instruments
The fair value of financial instruments where no active market exists or where quoted prices are not otherwise available is determined by using valuation techniques. Financial instruments, which are not actively traded in the market and those with less transparent market prices, will have less objective fair values and require broad judgment on liquidity, concentration, uncertainty in market factors and assumptions in price determination and other risks.
As described in the significant accounting policies in Note 3.3, Recognition and Measurement of Financial Instruments, diverse valuation techniques are used to determine the fair value of financial instruments, from generally accepted market valuation models to internally developed valuation models that incorporate various types of assumptions and variables.
2.4.3 Provisions for credit losses (allowances for loan losses, provisions for acceptances and guarantees, and unused loan commitments)
The Group determines and recognizes allowances for losses on loans through impairment testing and recognizes provisions for guarantees, and unused loan commitments. The accuracy of provisions for credit losses is determined by the methodology and assumptions used for estimating expected cash flows of the borrower for individually assessed allowances of loans, collectively assessed allowances for groups of loans, guarantees and unused loan commitments.
2.4.4 Net defined benefit liability
The present value of net defined benefit liability depends on a number of factors that are determined on an actuarial basis using a number of assumptions (Note 24).
2.4.5 Impairment of goodwill
The recoverable amounts of cash-generating units have been determined based on value-in-use calculations to test whether goodwill has suffered any impairment (Note 15).
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KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
3. Significant Accounting Policies
The significant accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all periods presented, unless otherwise stated.
3.1 Consolidation
3.1.1 Subsidiaries
Subsidiaries are companies that are controlled by the Group. The Group controls an investee when it is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. The existence and effects of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. Subsidiaries are fully consolidated from the date when control is transferred to the Group and de-consolidated from the date when control is lost.
If a subsidiary uses accounting policies other than those adopted in the consolidated financial statements for like transactions and events in similar circumstances, appropriate adjustments are made to make the subsidiarys accounting policies conform to those of the Group when the subsidiarys financial statements are used by the Group in preparing the consolidated financial statements.
Profit or loss and each component of other comprehensive income are attributed to the owners of the parent and to the non-controlling interests, if any. Total comprehensive income is attributed to the owners of the parent and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance.
Transactions with non-controlling interests that do not result in loss of control are accounted for as equity transactions; that is, as transactions with the owners in their capacity as owners. The difference between fair value of any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling interests are also recorded in equity.
When the Group ceases to have control, any retained interest in the entity is re-measured to its fair value at the date when control is lost, with the change in carrying amount recognized in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognized in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognized in other comprehensive income are reclassified to profit or loss.
The Group applies the acquisition method to account for business combinations. The consideration transferred is measured at the fair values of the assets transferred, and identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are initially measured at their fair values at the acquisition date. The Group recognizes any non-controlling interest in the acquiree on an acquisition-by-acquisition basis in the event of liquidation, either at fair value or at the non-controlling interests proportionate share of the recognized amounts of acquirees identifiable net assets. Acquisition-related costs are expensed as incurred.
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KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
In a business combination achieved in stages, the Group shall remeasure its previously held equity interest in the acquiree at its acquisition-date fair value and recognize the resulting gain or loss, if any, in profit or loss or other comprehensive income, as appropriate. In prior reporting periods, the Group may have recognized changes in the value of its equity interest in the acquiree in other comprehensive income. If so, the amount that was recognised in other comprehensive income shall be recognised on the same basis as would be required if the Group had disposed directly of the previously held equity interest.
The Group applies the book amount method to account for business combinations of entities under a common control. Identifiable assets acquired and liabilities assumed in a business combination are measured at their book amounts on the consolidated financial statements of the Group. In addition, the difference between the sum of consolidated book amounts of the assets and liabilities transferred and accumulated other comprehensive income; and the consideration paid is recognized as capital surplus.
3.1.2 Associates and Joint ventures
Associates and joint ventures are entities over which the Group has significant influence in the financial and operating policy decisions. If the Group holds 20% or more of the voting power of the investee, it is presumed that the Group has significant influence.
Under the equity method, investments in associates and joint ventures are initially recognized at cost and the carrying amount is increased or decreased to recognize the Groups share of the profit or loss of the investee and changes in the investees equity after the date of acquisition. The Groups share of the profit or loss of the investee is recognized in the Groups profit or loss. Distributions received from an investee reduce the carrying amount of the investment. Profit and loss resulting from upstream and downstream transactions between the Group and associates are eliminated to the extent at the Groups interest in associates. Unrealized losses are eliminated in the same way as unrealized gains except that they are only eliminated to the extent that there is no evidence of impairment.
If associates and joint ventures use accounting policies other than those adopted in the consolidated financial statements for like transactions and events in similar circumstances, appropriate adjustments are made to make the associates accounting policies conform to those of the Group when the associates financial statements are used by the Group in applying equity method.
After the carrying amount of the investment is reduced to zero, additional losses are provided for, and a liability is recognized, only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the investee.
The Group determines at each reporting period whether there is any objective evidence that the investments in the associates and joint ventures are impaired. If this is the case, the Group calculates the amount of impairment as the difference between the recoverable amount of the associates and its carrying value and recognizes the amount as non-operating income (expense) in the statements of comprehensive income.
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KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
3.1.3 Structured entity
A structured entity is an entity that has been designed so that voting or similar rights are not the dominant factor in deciding who controls the entity. When the Group decides whether it has power to the structured entities in which the Group has interests, it considers factors such as the purpose, the form, the practical ability to direct the relevant activities of a structured entity, the nature of its relationship with a structured entity and the amount of exposure to variable returns.
3.1.4 Trusts and funds
The Group provides management services for trust assets, collective investment and other funds. These trusts and funds are not consolidated in the Groups consolidated financial statements, except for trusts and funds over which the Group has control.
3.1.5 Intra-group transactions
All intra-group balances and transactions, and any unrealized gains arising on intra-group transactions, are eliminated in preparing the consolidated financial statements. Unrealized losses are eliminated in the same way as unrealized gains except that they are only eliminated to the extent that there is no evidence of impairment.
3.2 Foreign Currency
3.2.1 Foreign currency transactions
A foreign currency transaction is recorded, on initial recognition in the functional currency, by applying the spot exchange rate between the functional currency and the foreign currency at the date of the transaction. At the end of each reporting period, foreign currency monetary items are translated using the closing rate which is the spot exchange rate at the end of the reporting period. Non-monetary items that are measured at fair value in a foreign currency are translated using the spot exchange rates at the date when the fair value was determined and non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the spot exchange rate at the date of the transaction.
Exchange differences arising on the settlement of monetary items or on translating monetary items at rates different from those at which they were translated on initial recognition during the period or in previous consolidated financial statements are recognized in profit or loss in the period in which they arise, except for exchange differences arising on net investments in a foreign operation and financial liability designated as a hedge of the net investment. When gains or losses on a non-monetary item are recognized in other comprehensive income, any exchange component of those gains or losses are also recognized in other comprehensive income. Conversely, when gains or losses on a non-monetary item are recognized in profit or loss, any exchange component of those gains or losses are also recognized in profit or loss.
3.2.2 Foreign operations
The financial performance and financial position of all foreign operations, whose functional currencies differ from the Groups presentation currency, are translated into the Groups presentation currency using the following procedures.
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KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
Assets and liabilities for each statement of financial position presented are translated at the closing rate at the end of the reporting period. Income and expenses in the statement of comprehensive income presented are translated at average exchange rates for the period. All resulting exchange differences are recognized in other comprehensive income.
Any goodwill arising from the acquisition of a foreign operation and any fair value adjustments to the carrying amounts of assets and liabilities arising from the acquisition of that foreign operation are treated as assets and liabilities of the foreign operation. Thus, they are expressed in the functional currency of the foreign operation and are translated into the presentation currency at the closing rate.
On the disposal of a foreign operation, the cumulative amount of the exchange differences relating to that foreign operation, recognized in other comprehensive income and accumulated in the separate component of equity, is reclassified from equity to profit or loss (as a reclassification adjustment) when the gains or losses on disposal are recognized. On the partial disposal of a subsidiary that includes a foreign operation, the Group redistributes the proportionate share of the cumulative amount of the exchange differences recognized in other comprehensive income to the non-controlling interests in that foreign operation. In any other partial disposal of a foreign operation, the Group reclassifies to profit or loss only the proportionate share of the cumulative amount of the exchange differences recognized in other comprehensive income.
3.3 Recognition and Measurement of Financial Instruments
3.3.1 Initial recognition
The Group recognizes a financial asset or a financial liability in its statement of financial position when the Group becomes a party to the contractual provisions of the instrument. A regular way purchase or sale of financial assets (a purchase or sale of a financial asset under a contract whose terms require delivery of the financial instruments within the time frame established generally by market regulation or practice) is recognized and derecognized using trade date accounting.
The Group classifies financial assets as financial assets at fair value through profit or loss, held-to-maturity financial assets, available-for-sale financial assets, or loans and receivables, or other financial assets. The Group classifies financial liabilities as financial liabilities at fair value through profit or loss, or other financial liabilities. The classification depends on the nature and holding purpose of the financial instrument at initial recognition in the consolidated financial statements.
At initial recognition, a financial asset or financial liability is measured at its fair value plus or minus, in the case of a financial asset or financial liability not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition or issue of the financial asset or financial liability. The fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. The fair value of a financial instrument on initial recognition is normally the transaction price (that is, the fair value of the consideration given or received) in an arms length transaction.
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KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
3.3.2 Subsequent measurement
After initial recognition, financial instruments are measured at amortized cost or fair value based on classification at initial recognition.
Amortized cost
The amortized cost of a financial asset or financial liability is the amount at which the financial asset or financial liability is measured at initial recognition and adjusted to reflect principal repayments, cumulative amortization using the effective interest method and any reduction (directly or through the use of an allowance account) for impairment or uncollectibility.
Fair value
Fair values, which the Group primarily uses for the measurement of financial instruments, are the published price quotations based on market prices or dealer price quotations of financial instruments traded in an active market where available. These are the best evidence of fair value. A financial instrument is regarded as quoted in an active market if quoted prices are readily and regularly available from an exchange, dealer, broker, an entity in the same industry, pricing service or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arms length basis.
If the market for a financial instrument is not active, fair value is determined either by using a valuation technique or independent third-party valuation service. Valuation techniques include using recent arms length market transactions between knowledgeable, willing parties, if available, referencing to the current fair value of another instrument that is substantially the same, discounted cash flow analysis and option pricing models.
The Group uses valuation models that are commonly used by market participants and customized for the Group to determine fair values of common over-the-counter (OTC) derivatives such as options, interest rate swaps and currency swaps which are based on the inputs observable in markets. For more complex instruments, the Group uses internally developed models, which are usually based on valuation methods and techniques generally used within the industry, or a value measured by an independent external valuation institution as the fair values if all or some of the inputs to the valuation models are not market observable and therefore it is necessary to estimate fair value based on certain assumptions.
The Groups Fair Value Evaluation Committee, which consists of the risk management department, trading department and accounting department, reviews the appropriateness of internally developed valuation models, and approves the selection and changing of the external valuation institution and other considerations related to fair value measurement. The review results on the fair valuation models are reported to the Market Risk Management subcommittee by the Fair Value Evaluation Committee on a regular basis.
If the valuation technique does not reflect all factors which market participants would consider in setting a price, the fair value is adjusted to reflect those factors. Those factors include counterparty credit risk, bid-ask spread, liquidity risk and others.
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KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
The chosen valuation technique makes maximum use of market inputs and relies as little as possible on entity-specific inputs. It incorporates all factors that market participants would consider in setting a price and is consistent with economic methodologies applied for pricing financial instruments. Periodically, the Group calibrates the valuation technique and tests its validity using prices of observable current market transactions of the same instrument or based on other relevant observable market data.
3.3.3 Derecognition
Derecognition is the removal of a previously recognized financial asset or financial liability from the statement of financial position. The Group derecognizes a financial asset or a financial liability when, and only when:
Derecognition of financial assets
Financial assets are derecognized when the contractual rights to the cash flows from the financial assets expire or the financial assets have been transferred and substantially all the risks and rewards of ownership of the financial assets are also transferred, or all the risks and rewards of ownership of the financial assets are neither substantially transferred nor retained and the Group has not retained control. If the Group neither transfers nor disposes of substantially all the risks and rewards of ownership of the financial assets, the Group continues to recognize the financial asset to the extent of its continuing involvement in the financial asset.
If the Group transfers the contractual rights to receive the cash flows of the financial asset, but retains substantially all the risks and rewards of ownership of the financial asset, the Group continues to recognize the transferred asset in its entirely and recognize a financial liability for the consideration received.
Derecognition of financial liabilities
Financial liabilities are derecognized from the statement of financial position when the obligation specified in the contract is discharged, cancelled or expires.
3.3.4 Offsetting
Financial assets and liabilities are offset and the net amount reported in the consolidated statements of financial position where there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis or realize the assets and settle the liability simultaneously. The legally enforceable right must not be contingent on future events and must be enforceable in the normal course of business and in the event of default, insolvency or bankruptcy of the Group or the counterparty.
3.4 Cash and Cash Equivalents
Cash and cash equivalents include cash on hand, foreign currency, and short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.
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KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
3.5 Non-derivative Financial Assets
3.5.1 Financial assets at fair value through profit or loss
This category comprises two sub-categories: financial assets classified as held for trading, and financial assets designated by the Group as at fair value through profit or loss upon initial recognition.
A non-derivative financial asset is classified as held for trading if either:
| It is acquired for the purpose of selling in the near term, or |
| It is part of a portfolio of identified financial instruments that are managed together and for which there is evidence of a recent actual pattern of short-term profit-taking. |
The Group may designate certain financial assets, other than held for trading, upon initial recognition as at fair value through profit or loss when one of the following conditions is met:
| It eliminates or significantly reduces a measurement or recognition inconsistency (sometimes referred to as an accounting mismatch) that would otherwise arise from measuring assets or liabilities or recognizing the gains and losses on them on different bases. |
| A group of financial assets is managed and its performance is evaluated on a fair value basis, in accordance with a documented risk management or investment strategy, and information about the group is provided internally on that basis to the Groups key management personnel. |
| A contract contains one or more embedded derivatives; the Group may designate the entire hybrid (combined) contract as a financial asset at fair value through profit or loss if allowed by Korean IFRS 1039 Financial Instruments: Recognition and measurement. |
After initial recognition, a financial asset at fair value through profit or loss is measured at fair value and gains or losses arising from a change in the fair value are recognized in profit or loss. Interest income, dividend income, and gains or losses from sale and repayment from financial assets at fair value through profit or loss are recognized in the statement of comprehensive income as net gains on financial instruments at fair value through profit or loss.
3.5.2 Financial Investments
Available-for-sale and held-to-maturity financial assets are presented as financial investments.
Available-for-sale financial assets
Profit or loss of financial assets classified as available for sale, except for impairment loss and foreign exchange gains and losses resulting from changes in amortized cost of debt securities, is recognized as other comprehensive income, and cumulative profit or loss is reclassified from equity to current profit or loss at the derecognition of the financial asset, and it is recognized as part of other operating profit or loss in the statement of comprehensive income.
However, interest income measured using the effective interest method is recognized in current profit or loss, and dividends of financial assets classified as available-for-sale are recognized when the right to receive payment is established.
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KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
Available-for-sale financial assets denominated in foreign currencies are translated at the closing rate. For available-for-sale debt securities denominated in foreign currency, exchange differences resulting from changes in amortized cost are recognized in profit or loss as part of other operating income and expenses. For available-for-sale equity securities denominated in foreign currency, the entire change in fair value including any exchange component is recognized in other comprehensive income.
Held-to-maturity financial assets
Held-to-maturity financial assets are non-derivative financial assets with fixed or determinable payments and fixed maturity that the Groups management has the positive intention and ability to hold to maturity. Held-to-maturity financial assets are subsequently measured at amortized cost using the effective interest method after initial recognition and interest income is recognized using the effective interest method.
3.5.3 Loans and receivables
Non-derivative financial assets which meet the following conditions are classified as loans and receivables:
| Those with fixed or determinable payments. |
| Those that are not quoted in an active market. |
| Those that the Group does not intend to sell immediately or in the near term. |
| Those that the Group, upon initial recognition, does not designate as available-for-sale or as at fair value through profit or loss. |
After initial recognition, these are subsequently measured at amortized cost using the effective interest method.
If the financial asset is purchased under an agreement to resale the asset at a fixed price or at a price that provides a lenders return on the purchase price, the consideration paid is recognized as loans and receivables.
3.6 Impairment of Financial Assets
The Group assesses at the end of each reporting period whether there is any objective evidence that a financial asset or group of financial assets except for financial assets at fair value through profit or loss is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred, if and only if, there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a loss event) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated. However, losses expected as a result of future events, no matter how likely, are not recognized.
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KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
Objective evidence that a financial asset or group of assets is impaired includes the following loss events:
| Significant financial difficulty of the issuer or obligor. |
| A breach of contract, such as a default or delinquency in interest or principal payments. |
| The lender, for economic or legal reasons relating to the borrowers financial difficulty, granting to the borrower a concession that the lender would not otherwise consider. |
| It becomes probable that the borrower will declare bankruptcy or undergo financial reorganization. |
| The disappearance of an active market for that financial asset because of financial difficulties. |
| Observable data indicating that there is a measurable decrease in the estimated future cash flows from a group of financial assets since the initial recognition of those assets, although the decrease cannot yet be identified with the individual financial assets in the portfolio. |
In addition to the types of events in the preceding paragraphs, objective evidence of impairment for an investment in an equity instrument classified as an available-for-sale financial asset includes a significant or prolonged decline in the fair value below its cost. The Group considers the decline in the fair value of over 30% against the original cost as a significant decline. A decline is considered as prolonged if the period, in which the fair value of the financial asset has been below its original cost at initial recognition, is same as or more than six months.
If there is objective evidence that an impairment loss has been incurred, the amount of the loss is measured and recognized in profit or loss as either provisions for credit loss or other operating income and expenses.
3.6.1 Loans and receivables
The amount of the loss on loans and receivables carried at amortized cost is measured as the difference between the assets carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial assets original effective interest rate.
The Group first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant (individual assessment of impairment).
Financial assets that are not individually significant assess objective evidence of impairment individually or collectively. If the Group determines that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment (collective assessment of impairment).
Individual assessment of impairment
Individual assessment of impairment losses are calculated by discounting the expected future cash flows of a loan at its original effective interest rate and comparing the resultant present value with the loans current carrying amount. This process normally encompasses managements best estimate, such as operating cash flow of the borrower and net realizable value of any collateral held.
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KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
Collective assessment of impairment
A methodology based on historical loss experience is used to estimate inherent incurred loss on groups of assets for collective assessment of impairment. Such methodology incorporates factors such as type of collateral, product and borrowers, credit rating, loss emergence period, recovery period and applies probability of default on a group of assets and loss given default by type of recovery method. Also, consistent assumptions are applied to form a formula-based model in estimating inherent loss and to determine factors on the basis of historical loss experience and current condition. The methodology and assumptions used for collective assessment of impairment are reviewed regularly to reduce any differences between loss estimates and actual loss experience.
Impairment loss on loans reduces the carrying amount of the asset through use of an allowance account, and when a loan becomes uncollectable, it is written off against the related allowance account. If, in a subsequent period, the amount of the impairment loss decreases and is objectively related to the subsequent event after recognition of impairment, the previously recognized impairment loss is reversed by adjusting the allowance account. The amount of the reversal is recognized in profit or loss.
3.6.2 Available-for-sale financial assets
When a decline in the fair value of an available-for-sale financial asset has been recognized in other comprehensive income and there is objective evidence that the asset is impaired, the cumulative loss (the difference between the acquisition cost and current fair value, less any impairment loss on that financial asset previously recognized in profit or loss) that had been recognized in other comprehensive income is reclassified from equity to profit or loss as part of other operating income and expenses. The impairment loss on available-for-sale financial assets is directly from the carryng amount.
If, in a subsequent period, the fair value of a debt instrument classified as available-for-sale increases and the increase can be objectively related to an event occurring after the impairment loss was recognized in profit or loss, a portion of the impairment loss is reversed up to but not exceeding the previously recorded impairment loss, with the amount of the reversal recognized in profit or loss as part of other operating income and expenses in the statement of comprehensive income. However, impairment losses recognized in profit or loss for an available-for-sale equity instrument classified as available for sale are not reversed through profit or loss.
3.6.3 Held-to-maturity financial assets
If there is objective evidence that an impairment loss on held-to-maturity financial assets carried at amortized cost has been incurred, the amount of the loss is measured as the difference between the assets carrying amount and the present value of estimated future cash flows discounted at the financial assets original effective interest rate. The amount of the loss is recognized in profit or loss as part of other operating income and expenses. The impairment loss on held-to-maturity financial assets is directly deducted from the carrying amount.
In the case of a financial asset classified as held to maturity, if, in a subsequent period, the amount of the impairment loss decreases and it is objectively related to an event occurring after the impairment is recognized, a portion of the previously recognized impairment loss is reversed up to but not exceeding the extent of amortized cost at the date of recovery. The amount of reversal is recognized in profit or loss as part of other operating income and expenses in the statement of comprehensive income.
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KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
3.7 Derivative Financial Instruments
The Group enters into numerous derivative financial instrument contracts such as currency forwards, interest rate swaps, currency swaps and others for trading purposes or to manage its exposures to fluctuations in interest rates and currency exchange, amongst others. These derivative financial instruments are presented as derivative financial instruments within the consolidated financial statements irrespective of transaction purpose and subsequent measurement requirement.
The Group designates certain derivatives as hedging instruments to hedge the risk of changes in fair value of a recognized asset or liability or of an unrecognized firm commitment (fair value hedge) and the risk of changes in cash flow (cash flow hedge). The Group designates non-derivatives as hedging instruments to hedge the risk of foreign exchange of a net investment in a foreign operation (hedge of net investment).
At the inception of the hedge, there is formal designation and documentation of the hedging relationship and the Groups risk management objective and strategy for undertaking the hedge. That documentation includes identification of the hedging instrument, the hedged item or transaction, the nature of the risk being hedged and how the entity will assess the hedging instruments effectiveness in offsetting the exposure to changes in the hedged items fair value attributable to the hedged risk.
3.7.1 Derivative financial instruments held for trading
All derivative financial instruments, except for derivatives that are designated and qualify for hedge accounting, are measured at fair value. Gains or losses arising from a change in fair value are recognized in profit or loss as part of net gains or losses on financial instruments at fair value through profit or loss.
3.7.2 Fair value hedges
If derivatives qualify for a fair value hedge, the change in fair value of the hedging instrument and the change in fair value of the hedged item attributable to the hedged risk are recognized in profit or loss as part of other operating income and expenses. Fair value hedge accounting is discontinued prospectively if the hedging instrument expires or is sold, terminated or exercised, or the hedge no longer meets the criteria for hedge accounting or the Group revokes the designation. Once fair value hedge accounting is discontinued, the adjustment to the carrying amount of a hedged item is fully amortized to profit or loss by the maturity of the financial instrument using the effective interest method.
3.7.3 Cash flow hedges
The portion of the gain or loss on the hedging instrument that is determined to be an effective hedge is recognized directly in other comprehensive income and the ineffective portion of the gain or loss on the hedging instrument is recognized in profit or loss. The associated gains or losses that were previously recognized in other comprehensive income are reclassified from equity to profit or loss as a reclassification adjustment in the same period or periods during which the hedged forecast cash flows affects profit or loss. Cash flow hedge accounting is discontinued prospectively if the hedging instrument expires or is sold, terminated or exercised, or the hedge no longer meets the criteria for hedge accounting or the Group revokes the designation. When the cash flow hedge accounting is discontinued, the cumulative gains or losses on the hedging instrument that have been recognized in
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KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
other comprehensive income are reclassified to profit or loss over the year in which the forecast transaction occurs. If the forecast transaction is no longer expected to occur, the cumulative gains or losses that had been recognized in other comprehensive income are immediately reclassified to profit or loss.
3.7.4 Hedge of net investment
If financial liabilities qualify for a net investment hedge, the effective portion of changes in fair value of hedging instrument is recognized in other comprehensive income and the ineffective portion is recognized in profit. The gain or loss on the hedging instrument relating to the effective portion of the hedge that has been recognized in other comprehensive income will be reclassified from other comprehensive income to profit or loss as a reclassification adjustment on the disposal or partial disposal of the foreign operation in accordance with Korean IFRS 1039, Financial Instruments: Recognition and Measurement.
3.7.5 Embedded derivatives
An embedded derivative is separated from the host contract and accounted for as a derivative if, and only if the economic characteristics and risks of the embedded derivative are not closely related to those of the host contract and a separate instrument with the same terms as the embedded derivative would meet the definition of a derivative and the hybrid (combined) instrument is not measured at fair value with changes in fair value recognized in profit or loss. Gains or losses arising from a change in the fair value of an embedded derivative separated from the host contract are recognized in profit or loss as part of net gains or losses on financial instruments at fair value through profit or loss.
3.7.6 Day one gain and loss
If the Group uses a valuation technique that incorporates data not obtained from observable markets for the fair value at initial recognition of the financial instrument, there may be a difference between the transaction price and the amount determined using that valuation technique. In these circumstances, the difference is deferred and not recognized in profit or loss, and is amortized by using the straight-line method over the life of the financial instrument. If the fair value of the financial instrument is subsequently determined using observable market inputs, the remaining deferred amount is recognized in profit or loss as part of net gains or losses on financial instruments at fair value through profit or loss or other operating income and expenses.
3.8 Property and Equipment
3.8.1 Recognition and measurement
All property and equipment that qualify for recognition as an asset are measured at cost and subsequently carried at cost less any accumulated depreciation and any accumulated impairment losses.
The cost of property and equipment includes any costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management and the initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located.
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KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
Subsequent expenditures are capitalized only when they prolong the useful life or enhance values of the assets but the costs of the day-to-day servicing of the assets such as repair and maintenance costs are recognized in profit or loss as incurred. When part of an item of an asset has a useful life different from that of the entire asset, it is recognized as a separate asset.
3.8.2 Depreciation
Land is not depreciated, whereas other property and equipment are depreciated using the method that reflects the pattern in which the assets future economic benefits are expected to be consumed by the Group. The depreciable amount of an asset is determined after deducting its residual value. As for leased assets, if there is no reasonable certainty that the Group will obtain ownership by the end of the lease term, the asset is fully depreciated over the shorter of the lease term and its useful life.
Each part of an item of property and equipment with a cost that is significant in relation to the total cost of the item is depreciated separately.
The depreciation method and estimated useful lives of the assets are as follows:
Property and equipment |
Depreciation method |
Estimated useful life | ||
Buildings and structures | Straight-line | 40 years | ||
Leasehold improvements | Declining-balance/ Straight-line | 4 years | ||
Equipment and vehicles | Declining-balance/ Straight-line | 3 ~ 8 years | ||
Finance leased assets | Declining-balance | 8 months ~ 5 years and 8 months |
The residual value, the useful life and the depreciation method applied to an asset are reviewed at least at each financial year end, if expectations differ from previous estimates, the changes are accounted for as a change in an accounting estimate.
3.9 Investment Properties
3.9.1 Recognition and Measurement
Properties held to earn rentals or for capital appreciation or both are classified as investment properties. Investment properties are measured initially at their cost and subsequently the cost model is used.
3.9.2 Depreciation
Land is not depreciated, whereas other investment properties are depreciated using the method that reflects the pattern in which the assets future economic benefits are expected to be consumed by the Group. The depreciable amount of an asset is determined after deducting its residual value.
The depreciation method and estimated useful lives of the assets are as follows:
Investment property |
Depreciation method |
Estimated useful life | ||
Buildings | Straight-line | 40 years |
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KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
The residual value, the useful life and the depreciation method applied to an asset are reviewed at least at each financial year end and, if expectations differ from previous estimates, the changes are accounted for as a change in an accounting estimate.
3.10 Intangible Assets
Intangible assets are measured initially at cost and subsequently carried at their cost less any accumulated amortization and any accumulated impairment losses.
Intangible assets, except for goodwill and membership rights, are amortized using the straight-line method or double declining balance method with no residual value over their estimated useful economic life since the asset is available for use.
Intangible assets |
Amortization method |
Estimated useful life | ||
Industrial property rights | Straight-line | 3~10 years | ||
Software | Straight-line | 3~5 years | ||
Finance leased assets | Straight-line | 8 months ~ 5 years and 8 months | ||
VOBA | Declining-Balance | 60 years | ||
Others | Straight-line | 2~30 years |
The amortization period and the amortization method for intangible assets with a finite useful life are reviewed at least at each financial year end. Where an intangible asset is not being amortized because its useful life is considered to be indefinite, the Group carries out a review in each accounting period to confirm whether or not events and circumstances still support the assumption of an indefinite useful life. If they do not, the change from the indefinite to finite useful life is accounted for as a change in an accounting estimate.
3.10.1 Value of Business Acquired (VOBA)
The Group recorded Value of business acquired (VOBA) as intangible assets, which are the differences between the fair value of insurance liabilities and book value calculated based on the accounting policy of the acquired company. VOBA is an estimated present value of future cash flow of long-term insurance contracts at the acquisition date. VOBA is amortized for above estimated useful life using declining balance method, the depreciation is recognized as insurance expense.
3.10.2 Goodwill
Recognition and measurement
Goodwill acquired from business combinations before January 1, 2010, is stated at its carrying amount which was recognized under the Groups previous accounting policy, prior to the transition to Korean IFRS.
Goodwill acquired from business combinations after January 1, 2010, is initially measured as the excess of the aggregate of the consideration transferred, fair value of non-controlling interest and the acquisition-date fair value of the acquirers previously held equity interest in the acquiree over the net identifiable assets acquired and liabilities assumed. If this consideration is lower than the fair value of the net assets of the business acquired, the difference is recognized in profit or loss.
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KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
For each business combination, the Group decides whether the non-controlling interest in the acquiree is initially measured at fair value or at the non-controlling interests proportionate share of the acquirees identifiable net assets at the acquisition date.
Acquisition-related costs incurred to effect a business combination are charged to expenses in the periods in which the costs are incurred and the services are received, except for the costs to issue debt or equity securities.
Additional acquisitions of non-controlling interest
Additional acquisitions of non-controlling interests are accounted for as equity transactions. Therefore, no additional goodwill is recognized.
Subsequent measurement
Goodwill is not amortized and is stated at cost less accumulated impairment losses. However, goodwill that forms part of the carrying amount of an investment in associates is not separately recognized and an impairment loss recognized is not allocated to any asset, including goodwill, which forms part of the carrying amount of the investment in the associates.
3.10.3 Subsequent expenditure
Subsequent expenditure is capitalized only when it enhances values of the assets. Internally generated intangible assets, such as goodwill and trade name, are not recognized as assets but expensed as incurred.
3.11 Leases
3.11.1 Finance lease
A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership. At the commencement of the lease term, the Group recognizes finance leases as assets and liabilities in its statements of financial position at amounts equal to the fair value of the leased property or, if lower, the present value of the minimum lease payments, each determined at the inception of the lease. Any initial direct costs of the lessee are added to the amount recognized as an asset.
Minimum lease payments are apportioned between the finance charge and the reduction of the outstanding liability. The finance charge is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability. Contingent rents are charged as expenses in the periods in which they are incurred.
The depreciable amount of a leased asset is allocated to each accounting period during the period of expected use on a systematic basis consistent with the depreciation policy the Group adopts for depreciable assets that are owned. If there is reasonable certainty that the lessee will obtain ownership by the end of the lease term, the period of expected use is the useful life of the asset; otherwise, the asset is fully depreciated over the shorter of the lease term and its useful life.
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KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
3.11.2 Operating lease
A lease is classified as an operating lease if it does not transfer substantially all the risks and rewards incidental to ownership.
Leases in the financial statements of lessors
Lease income from operating leases are recognized in income on a straight-line basis over the lease term, unless another systematic basis is more representative of the time pattern in which use benefit derived from the leased asset is diminished. Initial direct costs incurred by lessors in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognized as an expense over the lease term on the same basis as the lease income.
Leases in the financial statements of lessees
Lease payments under an operating lease (net of any incentives received from the lessor) are recognized as an expense on a straight-line basis over the lease term unless another systematic basis is more representative of the time pattern of the assets benefit.
3.12 Greenhouse Gas Emission Rights and Liabilities
The Group measured at zero the emission rights received free of charge from the government following the Enforcement of Allocation and Trading of Greenhouse Gas Emissions Allowances. Emission rights purchased are measured initially at cost and subsequently carried at their costs less any accumulated impairment losses. Emission liabilities are measured as the sum of the carrying amount of emission allowances held by the Group and best estimate of the expenditure required to settle the obligation for any excess emissions at the end of reporting period. The emission rights and liabilities are classified as intangible assets and provisions, respectively, in the consolidated statement of financial position.
The emission rights held for trading are measured at fair value and the changes in fair value are recognized in profit or loss. The changes in fair value and gain or loss on disposal are classified as non-operating income and expenses.
3.13 Impairment of Non-Financial Assets
The Group assesses at the end of each reporting period whether there is any indication that a non-financial asset, except for (i) deferred income tax assets, (ii) assets arising from employee benefits and (iii) non-current assets (or group of assets to be sold) classified as held for sale, may be impaired. If any such indication exists, the Group estimates the recoverable amount of the asset. However, irrespective of whether there is any indication of impairment, the Group tests (i) goodwill acquired in a business combination, (ii) intangible assets with an indefinite useful life and (iii) intangible assets not yet available for use for impairment annually by comparing their carrying amount with their recoverable amount.
The recoverable amount is estimated for the individual asset. If it is not possible to estimate the recoverable amount of the individual asset, the Group determines the recoverable amount of the cash-generating unit to which the asset belongs (the assets cash-generating unit). A cash-generating unit is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets. The recoverable amount of
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KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
an asset is the higher of its fair value less costs to sell and its value in use. Value in use is the present value of the future cash flows expected to be derived from an asset or cash-generating unit that are discounted by a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the future cash flow estimates have not been adjusted.
If the recoverable amount of an asset is less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. That reduction is an impairment loss and recognized immediately in profit or loss. For the purpose of impairment testing, goodwill acquired in a business combination is allocated to each of the cash-generating units that are expected to benefit from the synergies of the combination. The impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the cash-generating unit and then to the other assets of the unit pro rata on the basis of the carrying amount of each asset in the unit.
An impairment loss recognized for goodwill is not reversed in a subsequent period. The Group assesses at the end of each reporting period whether there is any indication that an impairment loss recognized in prior periods for an asset, other than goodwill, may no longer exist or may have decreased, and an impairment loss recognized in prior periods for an asset other than goodwill shall be reversed if, and only if, there has been a change in the estimates used to determine the assets recoverable amount since the last impairment loss was recognized. The increased carrying amount of an asset other than goodwill attributable to a reversal of an impairment loss cannot exceed the carrying amount that would have been determined (net of amortization or depreciation) had no impairment loss been recognized for the asset in prior years.
3.14 Non-Current Assets Held for Sale
A non-current asset or disposal group is classified as held for sale if its carrying amount will be recovered principally through a sale transaction rather than through continuing use. For this to be the case, the asset (or disposal group) must be available for immediate sale in its present condition and its sale must be highly probable. A non-current asset (or disposal group) classified as held for sale is measured at the lower of its carrying amount and fair value less costs to sell which is measured in accordance with the applicable Korean IFRS, immediately before the initial classification of the asset (or disposal group) as held for sale.
A non-current asset while it is classified as held for sale or while it is part of a disposal group classified as held for sale is not depreciated (or amortized).
Impairment loss is recognized for any initial or subsequent write-down of the asset (or disposal group) to fair value less costs to sell. Gains are recognized for any subsequent increase in fair value less costs to sell of an asset, but not in excess of the cumulative impairment loss that has been recognized.
3.15 Financial Liabilities at Fair Value through Profit or Loss
Financial liabilities at fair value through profit or loss are financial liabilities held for trading. After initial recognition, financial liabilities at fair value through profit or loss are measured at fair value and gains or losses arising from changes in the fair value, and gains or losses from sale and repayment of financial liabilities at fair value through profit or loss are recognized as net gains on financial instruments at fair value through profit or loss in the statement of comprehensive income.
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KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
3.16 Insurance Contracts
KB Life Insurance Co., Ltd., and KB Insurance Co., of the subsidiaries of the Group, issues insurance contracts.
Insurance contracts are defined as a contract under which one party (the insurer) accepts significant insurance risk from another party by agreeing to compensate the policyholder if a specified uncertain future event adversely affects the policyholder. A contract that qualifies as an insurance contract remains an insurance contract until all rights and obligations are extinguished or expire. Such a contract that does not contain significant insurance risk is classified as an investment contract and is within the scope of Korean IFRS 1039, Financial Instruments: Recognition and measurement to the extent that it gives rise to a financial asset or financial liability, except if the investment contract contains a Discretionary Participation Features (DPF). If the contract has a DPF, the contract is subject to Korean IFRS 1104, Insurance Contracts. The Group recognizes assets (liabilities) and gains (losses) relating to insurance contracts as other assets (liabilities) in the statements of financial position, and as other operating income (expenses) in the statements of comprehensive income, respectively.
3.16.1 Insurance premiums
The Group recognizes collected premiums as revenue on the due date of collection of premiums from insurance contracts and the collected premium which is unmatured at the end of the reporting period is recognized as unearned premium.
3.16.2 Insurance liabilities
The Group recognizes a liability for future claims, refunds, policyholders dividends and related expenses as follows:
Premium reserve
A premium reserve refers to an amount based on the net premium method for payment of future claims with respect to events covered by insurance policies which have not yet occurred as of the reporting period.
Reserve for outstanding claims
A reserve for outstanding claims refers to the amount not yet paid, out of an amount to be paid or expected to be paid with respect to the insured events which have arisen as of the end of each fiscal year.
Unearned premium reserve
Unearned premium refers to the portion of the premium that has been paid in advance for insurance that has not yet been provided. An unearned premium reserve refers to the amount maintained by the insurer to refund in the event of either party cancelling the contract.
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KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
Policyholders dividends reserve
Policyholders dividends reserve including an interest rate guarantee reserve, a mortality dividend reserve and an interest rate difference dividend reserve is recognized for the purpose of provisioning for policyholders dividends in the future in accordance with statutes or insurance terms and conditions.
3.16.3 Liability adequacy test
The Group assesses at each reporting period whether its insurance liabilities are adequate, using current estimates of all future contractual cash flows and related cash flow such as claims handling cost, as well as cash flows resulting from embedded options and guarantees under its insurance contracts in accordance with Korean IFRS 1104. If the assessment shows that the carrying amount of its insurance liabilities is inadequate in light of the estimated future cash flows, the entire deficiency is recognized in profit or loss and reserved as insurance liabilities. Future cash flows from long-term insurance are discounted at a future rate of return on operating assets, whereas future cash flows from general insurance are not discounted to present value. For liability adequacy tests of premium and unearned premium reserves, the Group considers all cash flow factors such as future insurance premium, deferred acquisition costs, operating expenses and operating premiums. In relation to the reserve for outstanding claims, the Group elects a model that best reflects the trend of paid claims among several statistical methods to perform the adequacy test.
3.16.4 Deferred acquisition costs
Acquisition cost is deferred in an amount actually spent for an insurance contract and equally amortized over the premium payment period or the period in which acquisition costs are charged for the relevant insurance contract. Acquisition costs are amortized over the shorter of seven years or premium payment period; if there is any unamortized acquisition costs remaining as of the date of surrender or lapse, such remainder shall be amortized in the period in which the contract is surrendered or lapsed.
3.17 Provisions
Provisions are recognized when the Group has a present obligation (legal or constructive) as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. The risks and uncertainties that inevitably surround many events and circumstances are taken into account in reaching the best estimate of provisions, and where the effect of the time value of money is material, the amount of provisions are the present value of the expenditures expected to be required to settle the obligation.
Provisions on confirmed and unconfirmed acceptances and guarantees, unfunded commitments of credit cards and unused credit lines of consumer and corporate loans are recognized using a valuation model that applies the credit conversion factor, probability of default, and loss given default.
Provisions are reviewed at the end of each reporting period and adjusted to reflect the current best estimate. If it is no longer probable that an outflow of resources embodying economic benefits will be required to settle the obligation, the provisions are reversed.
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KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
If the Group has a contract that is onerous, the present obligation under the contract is recognized and measured as provisions. An onerous contract is a contract in which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received under it. The unavoidable costs under a contract reflect the minimum net cost to exit from the contract, which is the lower of the cost of fulfilling it and any compensation or penalties arising from failure to fulfill it.
3.18 Financial Guarantee Contracts
A financial guarantee contract is a contract that requires the issuer (the Group) to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payments when due in accordance with the original or modified terms of a debt instrument.
Financial guarantee contracts are initially recognized at fair value. After initial recognition, financial guarantee contracts are measured at the higher of:
| The amount determined in accordance with Korean IFRS 1037, Provisions, Contingent Liabilities and Contingent Assets and |
| The initial amount recognized, less, when appropriate, cumulative amortization recognized in accordance with Korean IFRS 1018, Revenue. |
3.19 Equity Instruments issued by the Group
An equity instrument is any contract or agreement that evidences a residual interest in the assets of an entity after deducting all of its liabilities.
3.19.1 Ordinary shares
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares are deducted from the equity.
3.19.2 Treasury shares
If entities of the Group acquire the Parent Companys equity instruments, those instruments (treasury shares) are deducted from equity. No gains or losses are recognized in profit or loss on the purchase, sale, issue or cancellation of own equity instruments.
3.20 Revenue Recognition
3.20.1 Interest income and expense
Interest income and expense are recognized using the effective interest method. The effective interest method is a method of calculating the amortized cost of a financial asset or a financial liability (or groups of financial assets or financial liabilities) and of allocating the interest income or interest expense over the relevant period.
The effective interest rate is the rate that exactly discounts estimated future cash receipts or payments through the expected life of the financial instrument or, where appropriate, a shorter period, to the net carrying amount of the financial asset or financial liability. When calculating the effective interest rate, the Group estimates cash flows considering all contractual terms of the financial
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KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
instrument but does not consider future credit losses. The calculation includes all fees and points paid or received between parties to the contract that are an integral part of the effective interest rate, transaction costs, and all other premiums or discounts. In those rare cases when it is not possible to estimate reliably the cash flows or the expected life of a financial instrument (or group of financial instruments), the Group uses the contractual cash flows over the full contractual term of the financial instrument (or group of financial instruments).
Interest on impaired financial assets is recognized using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss.
3.20.2 Fee and commission income
The Group recognizes financial service fees in accordance with the accounting standard of the financial instrument related to the fees earned.
Fees that are an integral part of the effective interest of a financial instrument
Such fees are generally treated as adjustments of effective interest. Such fees may include compensation for activities such as evaluating the borrowers financial condition, evaluating and recording guarantees, collateral and other security arrangements, negotiating the terms of the instrument, preparing and processing documents and closing the transaction and origination fees received on issuing financial liabilities measured at amortized cost. However, fees relating to the creation or acquisition of a financial instrument at fair value through profit or loss are recognized as revenue immediately.
Fees earned as services are provided
Such fees are recognized as revenue as the services are provided. The fees include fees charged for servicing a financial instrument and charged for managing investments.
Fees that are earned on the execution of a significant act
Such fees are recognized as revenue when the significant act has been completed.
Commission on the allotment of shares to a client is recognized as revenue when the shares have been allotted and placement fees for arranging a loan between a borrower and an investor is recognized as revenue when the loan has been arranged.
A syndication fee received by the Group that arranges a loan and retains no part of the loan package for itself (or retains a part at the same effective interest rate for comparable risk as other participants) is compensation for the service of syndication. Such a fee is recognized as revenue when the syndication has been completed.
3.20.3 Dividend income
Dividend income is recognized in profit or loss when the right to receive payment is established. Dividend income from financial assets at fair value through profit or loss and financial investment is recognized in profit or loss as part of net gains on financial assets at fair value through profit or loss and other operating income and expenses, respectively.
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KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
3.21 Employee Compensation and Benefits
3.21.1 Post-employment benefits
Defined benefit plans
All post-employment benefits, other than defined contribution plans, are classified as defined benefit plans. The amount recognized as a defined benefit liability is the present value of the defined benefit obligation less the fair value of plan assets at the end of the reporting period.
The present value of the defined benefit obligation is calculated annually by independent actuaries using the Projected Unit Credit method. The rate used to discount post-employment benefit obligations is determined by reference to market yields at the end of the reporting period on high quality corporate bonds. The currency and term of the corporate bonds are consistent with the currency and estimated term of the post-employment benefit obligations. Actuarial gains and losses including experience adjustments and the effects of changes in actuarial assumptions are recognized in other comprehensive income.
When the total of the present value of the defined benefit obligation minus the fair value of plan assets results in an asset, it is recognized to the extent of the present value of any economic benefits available in the form of refunds from the plan or reductions in future contributions to the plan.
Past service cost is the change in the present value of the defined benefit obligation, which arises when the Group introduces a defined benefit plan or changes the benefits of an existing defined benefit plan. Such past service cost is immediately recognized as an expense for the year.
Defined contribution plans
The contributions are recognized as employee benefit expense when they are due.
3.21.2 Short-term employee benefits
Short-term employee benefits are employee benefits (other than termination benefits) that are due to be settled within 12 months after the end of the period in which the employees render the related service. The undiscounted amount of short-term employee benefits expected to be paid in exchange for that service is recognized as a liability (accrued expense), after deducting any amount already paid.
The expected cost of profit-sharing and bonus payments are recognized as liabilities when the Group has a present legal or constructive obligation to make such payments as a result of past events rendered by employees and a reliable estimate of the obligation can be made.
3.21.3 Share-based payment
The Group has share option and share grant programs to directors and employees of the Group. When the options are exercised, the Group can either select to issue new shares or distribute treasury shares, or compensate the difference in fair value of shares and exercise price.
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KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
For a share-based payment transaction in which the terms of the arrangement provide the Group with the choice of whether to settle in cash or by issuing equity instruments, the Group determines that it has a present obligation to settle in cash because the Group has a past practice and a stated policy of settling in cash. Therefore, the Group accounts for the transaction in accordance with the requirements of cash-settled share-based payment transactions.
The Group measures the services acquired and the liability incurred at fair value, and the fair value is recognized as expense and accrued expenses over the vesting period. Until the liability is settled, the Group remeasures the fair value of the liability at the end of each reporting period and at the date of settlement, with any changes in fair value recognized in profit or loss for the year.
3.21.4 Termination benefits
Termination benefits are payable when employment is terminated by the Group before the normal retirement date, or whenever an employee accepts voluntary redundancy in exchange for these benefits. The Group shall recognize a liability and expense for termination benefits at the earlier of the following dates: when the Group can no longer withdraw the offer of those benefits and when the Group recognizes costs for a restructuring that is within the scope of Korean IFRS 1037 and involves the payment of termination benefits. Termination benefits are measured by considering the number of employees expected to accept the offer in the case of a voluntary early retirement. Termination benefits over 12 months after the reporting period are discounted to present value.
3.22 Income Tax Expenses
Income tax expense comprises current tax expense and deferred income tax expense. Current and deferred income tax are recognized as income or expense for the period, except to the extent that the tax arises from (a) a transaction or an event which is recognized, in the same or a different period outside profit or loss, either in other comprehensive income or directly in equity and (b) a business combination.
3.22.1 Current income tax
Current income tax is the amount of income taxes payable in respect of the taxable profit (loss) for a period. A difference between the taxable profit and accounting profit may arise when income or expense is included in accounting profit in one period, but is included in taxable profit in a different period. Differences may also arise if there is revenue that is exempt from taxation, or expense that is not deductible in determining taxable profit (loss). Current income tax liabilities (assets) for the current and prior periods are measured at the amount expected to be paid to (recovered from) the taxation authorities, using the tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.
The Group offsets current income tax assets and current income tax liabilities if, and only if, the Group (a) has a legally enforceable right to offset the recognized amounts and (b) intends either to settle on a net basis, or to realize the asset and settle the liability simultaneously.
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KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
3.22.2 Deferred income tax
Deferred income tax is recognized, using the asset-liability method, on temporary differences arising between the tax based amount of assets and liabilities and their carrying amount in the financial statements. Deferred income tax liabilities are recognized for all taxable temporary differences and deferred income tax assets are recognized for all deductible temporary differences to the extent that it is probable that taxable profit will be available against which the deductible temporary difference can be utilized. However, deferred income tax liabilities are not recognized if they arise from the initial recognition of goodwill; deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss.
Deferred income tax is provided on temporary differences arising on investments in subsidiaries and associates, except for deferred income tax liabilities for which the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future.
The carrying amount of a deferred income tax asset is reviewed at the end of each reporting period. The Group reduces the carrying amount of a deferred income tax asset to the extent that it is no longer probable that sufficient taxable profit will be available to allow the benefit of part or all of that deferred income tax asset to be utilized.
Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred income tax liabilities and deferred income tax assets reflects the tax consequences that would follow from the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.
The Group offsets deferred income tax assets and deferred income tax liabilities when the Group has a legally enforceable right to offset current income tax assets against current income tax liabilities; and the deferred income tax assets and the deferred income tax liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity; or different taxable entities which intend either to settle current income tax liabilities and assets on a net basis, or to realize the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred income tax liabilities or assets are expected to be settled or recovered.
3.22.3 Uncertain tax positions
Uncertain tax positions arise from tax treatments applied by the Group which may be challenged by the tax authorities due to the complexity of the transaction or different interpretation of the tax laws, a claim for rectification brought by the Group, or an appeal for a refund claimed from the tax authorities related to additional assessments. The Group recognizes its uncertain tax positions in the consolidated financial statements based on the guidance in Korean IFRS 1012. The income tax asset is recognized if a tax refund is probable for taxes paid and levied by the tax authority. However, interest and penalties related to income tax are recognized in accordance with Korean IFRS 1037.
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KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
3.23 Earnings per Share
The Group calculates basic earnings per share amounts and diluted earnings per share amounts for profit or loss attributable to ordinary equity holders of the Parent Company and presents them in the statement of comprehensive income. Basic earnings per share is calculated by dividing profit or loss attributable to ordinary equity holders of the Parent Company by the weighted average number of ordinary shares outstanding during the period. For the purpose of calculating diluted earnings per share, the Group adjusts profit or loss attributable to ordinary equity holders of the Parent Company and the weighted average number of shares outstanding for the effects of all dilutive potential ordinary shares including convertible bonds and share options.
3.24 Operating Segments
Operating segments are components of the Group where separate financial information is available and is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance.
Segment information includes items which are directly attributable and reasonably allocated to the segment.
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 Groups 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 Groups long-term strategy and business decisions efficiently. Credit risk, market risk, liquidity risk, and operational risk have been recognized as the Groups 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 Groups 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 Groups risk management operations as an ultimate decision-making authority.
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KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
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 Groups risk management.
Risk Management Division
The Risk Management Division is responsible for monitoring and managing the Groups economic capital limit and managing detailed policies, procedures and working processes relating to the Groups 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 counterpartys default, breach of contract and deterioration in the credit quality of the counterparty. For risk management reporting purposes, the individual borrowers default risk, country risk, specific risks and other credit risk exposure components are considered as a whole.
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 Groups 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.
43
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
4.2.3 Maximum Exposure to Credit Risk
The Groups maximum exposures of financial instruments, excluding equity securities, to credit risk without consideration of collateral values as of December 31, 2017 and 2016, are as follows:
(In millions of Korean won) | 2017 | 2016 | ||||||
Financial assets |
||||||||
Due from financial institutions |
||||||||
Financial assets at fair value through profit or loss |
||||||||
Financial assets held for trading1 |
25,242,193 | 23,058,919 | ||||||
Financial assets designated at fair value through profit or loss |
1,982,224 | 1,693,255 | ||||||
Derivatives |
3,310,166 | 3,381,935 | ||||||
Loans2 |
290,122,838 | 265,486,134 | ||||||
Financial investments |
||||||||
Available-for-sale financial assets |
38,959,401 | 27,445,752 | ||||||
Held-to-maturity financial assets |
18,491,980 | 11,177,504 | ||||||
Other financial assets2 |
10,195,015 | 7,322,335 | ||||||
|
|
|
|
|||||
405,523,478 | 354,892,007 | |||||||
|
|
|
|
|||||
Off-balance sheet items |
||||||||
Acceptances and guarantees contracts |
6,977,468 | 7,822,124 | ||||||
Financial guarantee contracts |
3,683,875 | 4,746,292 | ||||||
Commitments |
102,183,167 | 97,005,556 | ||||||
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|
|
|
|||||
112,844,510 | 109,573,972 | |||||||
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|
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|
|
1 | Financial instruments indexed to the price of gold amounting to |
2 | Loans and other financial assets are net of allowance. |
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 recognizes an impairment loss on loan carried at amortized cost when there is any objective indication of impairment. Impairment loss is defined as incurred loss in accordance with Korean IFRS; therefore, a loss that might be occur due to a future event is not recognized in spite of its likelihood. The Group measures inherent incurred losses on loans and presents them in the consolidated financial statements through the use of an allowance account which is offset against the related loans.
44
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
Loans as of December 31, 2017 and 2016, are classified as follows:
(In millions of Korean won) | ||||||||||||||||||||||||||||||||
2017 | ||||||||||||||||||||||||||||||||
Loans |
Retail | Corporate | Credit card | Total | ||||||||||||||||||||||||||||
Amount | % | Amount | % | Amount | % | Amount | % | |||||||||||||||||||||||||
Neither past due nor impaired |
98.93 | 98.76 | 95.34 | 98.67 | ||||||||||||||||||||||||||||
Past due but not impaired |
1,069,813 | 0.73 | 206,925 | 0.16 | 359,468 | 2.36 | 1,636,206 | 0.56 | ||||||||||||||||||||||||
Impaired |
495,546 | 0.34 | 1,419,851 | 1.08 | 349,270 | 2.30 | 2,264,667 | 0.77 | ||||||||||||||||||||||||
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|||||||||||||||||
146,270,980 | 100.00 | 130,757,242 | 100.00 | 15,204,847 | 100.00 | 292,233,069 | 100.00 | |||||||||||||||||||||||||
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Less: Allowances1 |
(429,299 | ) | 0.29 | (1,231,666 | ) | 0.94 | (449,266 | ) | 2.95 | (2,110,231 | ) | 0.72 | ||||||||||||||||||||
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Carrying amount |
||||||||||||||||||||||||||||||||
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|
(In millions of Korean won) | ||||||||||||||||||||||||||||||||
2016 | ||||||||||||||||||||||||||||||||
Loans |
Retail | Corporate | Credit card | Total | ||||||||||||||||||||||||||||
Amount | % | Amount | % | Amount | % | Amount | % | |||||||||||||||||||||||||
Neither past due nor impaired |
98.86 | 98.44 | 96.09 | 98.53 | ||||||||||||||||||||||||||||
Past due but not impaired |
961,370 | 0.71 | 202,474 | 0.17 | 226,648 | 1.68 | 1,390,492 | 0.52 | ||||||||||||||||||||||||
Impaired |
575,711 | 0.43 | 1,656,387 | 1.39 | 302,122 | 2.23 | 2,534,220 | 0.95 | ||||||||||||||||||||||||
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|||||||||||||||||
135,028,333 | 100.00 | 119,205,314 | 100.00 | 13,530,243 | 100.00 | 267,763,890 | 100.00 | |||||||||||||||||||||||||
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|||||||||||||||||
Less: Allowances1 |
(481,289 | ) | 0.36 | (1,382,172 | ) | 1.16 | (414,295 | ) | 3.06 | (2,277,756 | ) | 0.85 | ||||||||||||||||||||
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Carrying amount |
||||||||||||||||||||||||||||||||
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|
1 | Collectively assessed allowances for loans are included as they are not impaired individually. |
Credit quality of loans that are neither past due nor impaired are as follows:
(In millions of Korean won) | ||||||||||||||||
2017 | ||||||||||||||||
Retail | Corporate | Credit card | Total | |||||||||||||
Grade 1 |
||||||||||||||||
Grade 2 |
16,790,644 | 53,842,610 | 4,920,767 | 75,554,021 | ||||||||||||
Grade 3 |
2,701,697 | 5,703,159 | 1,379,409 | 9,784,265 | ||||||||||||
Grade 4 |
851,446 | 1,390,131 | 71,207 | 2,312,784 | ||||||||||||
Grade 5 |
228,778 | 619,545 | 29,097 | 877,420 | ||||||||||||
|
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|||||||||
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|
|||||||||
(In millions of Korean won) | ||||||||||||||||
2016 | ||||||||||||||||
Retail | Corporate | Credit card | Total | |||||||||||||
Grade 1 |
||||||||||||||||
Grade 2 |
18,400,111 | 49,531,423 | 4,774,368 | 72,705,902 | ||||||||||||
Grade 3 |
3,188,861 | 7,722,663 | 1,147,814 | 12,059,338 | ||||||||||||
Grade 4 |
935,265 | 1,728,631 | 249,529 | 2,913,425 | ||||||||||||
Grade 5 |
246,752 | 608,854 | 24,999 | 880,605 | ||||||||||||
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|||||||||
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45
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
Credit quality of loans graded according to internal credit ratings are as follows:
Range of Probability of |
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 |
Loans that are past due but not impaired are as follows:
(In millions of Korean won) | ||||||||||||||||||||
2017 | ||||||||||||||||||||
1 ~ 29 days |
30 ~ 59 days |
60 ~ 89 days |
90 days or more |
Total | ||||||||||||||||
Retail |
||||||||||||||||||||
Corporate |
162,668 | 27,065 | 17,192 | | 206,925 | |||||||||||||||
Credit card |
302,871 | 35,774 | 20,823 | | 359,468 | |||||||||||||||
|
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|
|
|
|
|
|||||||||||
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|
|||||||||||
(In millions of Korean won) | ||||||||||||||||||||
2016 | ||||||||||||||||||||
1 ~ 29 days |
30 ~ 59 days |
60 ~ 89 days |
90 days or more |
Total | ||||||||||||||||
Retail |
||||||||||||||||||||
Corporate |
134,432 | 44,086 | 23,956 | | 202,474 | |||||||||||||||
Credit card |
176,390 | 31,880 | 18,378 | | 226,648 | |||||||||||||||
|
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|
|
|
|
|
|
|||||||||||
|
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|
|
|
|
|
|
|
Impaired loans are as follows:
(In millions of Korean won) | ||||||||||||||||
2017 | ||||||||||||||||
Retail | Corporate | Credit card | Total | |||||||||||||
Loans |
||||||||||||||||
Allowances under |
||||||||||||||||
Individual assessment |
(788 | ) | (791,205 | ) | | (791,993 | ) | |||||||||
Collective assessment |
(178,337 | ) | (90,771 | ) | (212,729 | ) | (481,837 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
(179,125 | ) | (881,976 | ) | (212,729 | ) | (1,273,830 | ) | |||||||||
|
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|||||||||
|
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46
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
(In millions of Korean won) | ||||||||||||||||
2016 | ||||||||||||||||
Retail | Corporate | Credit card | Total | |||||||||||||
Loans |
||||||||||||||||
Allowances under |
||||||||||||||||
Individual assessment |
(3 | ) | (860,829 | ) | | (860,832 | ) | |||||||||
Collective assessment |
(217,535 | ) | (133,507 | ) | (183,211 | ) | (534,253 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
(217,538 | ) | (994,336 | ) | (183,211 | ) | (1,395,085 | ) | |||||||||
|
|
|
|
|
|
|
|
|||||||||
|
|
|
|
|
|
|
|
The quantification of the extent to which collateral and other credit enhancements mitigate credit risk as of December 31, 2017 and 2016, are as follows:
(In millions of Korean won) | ||||||||||||||||||||
2017 | ||||||||||||||||||||
Impaired Loans | Non-impaired Loans | |||||||||||||||||||
Individual | Collective | Past due | Not past due | Total | ||||||||||||||||
Guarantees |
||||||||||||||||||||
Deposits and savings |
11,857 | 5,461 | 40,833 | 4,149,157 | 4,207,308 | |||||||||||||||
Property and equipment |
2,676 | 30,455 | 53,647 | 9,720,857 | 9,807,635 | |||||||||||||||
Real estate |
189,480 | 282,327 | 688,502 | 148,183,907 | 149,344,216 | |||||||||||||||
|
|
|
|
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|
|
|
|
|||||||||||
|
|
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|
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|
|
|
|
|||||||||||
(In millions of Korean won) | ||||||||||||||||||||
2016 | ||||||||||||||||||||
Impaired Loans | Non-impaired Loans | |||||||||||||||||||
Individual | Collective | Past due | Not past due | Total | ||||||||||||||||
Guarantees |
||||||||||||||||||||
Deposits and savings |
10,849 | 6,114 | 51,815 | 2,115,376 | 2,184,154 | |||||||||||||||
Property and equipment |
7,083 | 25,035 | 28,053 | 5,380,329 | 5,440,500 | |||||||||||||||
Real estate |
262,340 | 341,803 | 590,196 | 137,263,717 | 138,458,056 | |||||||||||||||
|
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|
|||||||||||
|
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|
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|
|
|
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 December 31, 2017 and 2016, are as follows:
(In millions of Korean won) | 2017 | 2016 | ||||||
Securities that are neither past due nor impaired |
||||||||
Impaired securities |
4,869 | 4,833 | ||||||
|
|
|
|
|||||
|
|
|
|
47
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
The credit quality of securities, excluding equity securities, that are neither past due nor impaired as of December 31, 2017 and 2016, are as follows:
(In millions of Korean won) | ||||||||||||||||||||||||
2017 | ||||||||||||||||||||||||
Grade 1 | Grade 2 | Grade 3 | Grade 4 | Grade 5 | Total | |||||||||||||||||||
Securities that are neither past due nor impaired |
||||||||||||||||||||||||
Financial assets held for trading |
||||||||||||||||||||||||
Financial assets designated at fair value through profit or loss |
1,550,617 | 200,633 | 63,856 | 60,332 | 106,786 | 1,982,224 | ||||||||||||||||||
Available-for-sale financial assets |
36,471,247 | 2,433,685 | 47,079 | 2,521 | | 38,954,532 | ||||||||||||||||||
Held-to-maturity financial assets |
18,466,624 | 21,113 | 4,243 | | | 18,491,980 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
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|
|||||||||||||
|
|
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|
|
|
|
|
|||||||||||||
(In millions of Korean won) | ||||||||||||||||||||||||
2016 | ||||||||||||||||||||||||
Grade 1 | Grade 2 | Grade 3 | Grade 4 | Grade 5 | Total | |||||||||||||||||||
Securities that are neither past due nor impaired |
||||||||||||||||||||||||
Financial assets held for trading |
||||||||||||||||||||||||
Financial assets designated at fair value through profit or loss |
1,563,152 | 120,925 | 8,176 | | 1,002 | 1,693,255 | ||||||||||||||||||
Available-for-sale financial assets |
26,082,139 | 1,310,782 | 47,998 | | | 27,440,919 | ||||||||||||||||||
Held-to-maturity financial assets |
11,177,504 | | | | | 11,177,504 | ||||||||||||||||||
|
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|
|
The credit qualities of securities, excluding equity securities, according to the credit ratings by external rating agencies are as follows:
Domestic |
Foreign | |||||||||||||
Credit quality | KIS | NICE P&I | KAP | FnPricing Inc. | S&P | Fitch-IBCA | Moodys | |||||||
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 debit 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.
48
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
4.2.6 Credit risk mitigation of derivative financial instruments
A quantification of the extent to which collateral and other credit enhancements mitigate credit risk of derivative financial instruments as of December 31, 2017 and 2016, are as follows:
(In millions of Korean won) | 2017 | 2016 | ||||||
Deposits and savings, securities and others |
||||||||
|
|
|
|
|||||
|
|
|
|
4.2.7 Credit Risk Concentration Analysis
Details of the Groups regional loans as of December 31, 2017 and 2016, are as follows:
(In millions of Korean won) | ||||||||||||||||||||||||||||
2017 | ||||||||||||||||||||||||||||
Retail | Corporate | Credit card | Total | % | Allowances | Carrying amount |
||||||||||||||||||||||
Korea |
98.77 | |||||||||||||||||||||||||||
Europe |
| 192,980 | 310 | 193,290 | 0.07 | (2,327 | ) | 190,963 | ||||||||||||||||||||
China |
| 1,879,030 | 1,458 | 1,880,488 | 0.64 | (31,017 | ) | 1,849,471 | ||||||||||||||||||||
Japan |
539 | 127,009 | 339 | 127,887 | 0.04 | (6,269 | ) | 121,618 | ||||||||||||||||||||
United States |
| 866,867 | 1,001 | 867,868 | 0.30 | (1,600 | ) | 866,268 | ||||||||||||||||||||
Others |
120,627 | 393,073 | 896 | 514,596 | 0.18 | (5,099 | ) | 509,497 | ||||||||||||||||||||
|
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|
|
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|
|||||||||||||||
100.00 | ||||||||||||||||||||||||||||
|
|
|
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|
|
|
|
|
|
|
|
|||||||||||||||
(In millions of Korean won) |
||||||||||||||||||||||||||||
2016 | ||||||||||||||||||||||||||||
Retail | Corporate | Credit card | Total | % | Allowances | Carrying amount |
||||||||||||||||||||||
Korea |
98.88 | |||||||||||||||||||||||||||
Europe |
1 | 206,580 | 245 | 206,826 | 0.08 | (1,719 | ) | 205,107 | ||||||||||||||||||||
China |
| 1,328,525 | 2,570 | 1,331,095 | 0.50 | (23,500 | ) | 1,307,595 | ||||||||||||||||||||
Japan |
1,352 | 90,977 | 205 | 92,534 | 0.03 | (10,385 | ) | 82,149 | ||||||||||||||||||||
United States |
| 984,472 | 566 | 985,038 | 0.37 | (2,032 | ) | 983,006 | ||||||||||||||||||||
Others |
70,976 | 323,584 | 631 | 395,191 | 0.14 | (5,149 | ) | 390,042 | ||||||||||||||||||||
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|||||||||||||||
100.00 | ||||||||||||||||||||||||||||
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49
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
Details of the Groups industrial corporate loans as of December 31, 2017 and 2016, are as follows:
(In millions of Korean won) | 2017 | |||||||||||||||
Loans | % | Allowances | Carrying amount | |||||||||||||
Financial institutions |
8.48 | |||||||||||||||
Manufacturing |
40,201,037 | 30.74 | (449,439 | ) | 39,751,598 | |||||||||||
Service |
54,268,271 | 41.50 | (288,521 | ) | 53,979,750 | |||||||||||
Wholesale & Retail |
15,061,632 | 11.52 | (90,390 | ) | 14,971,242 | |||||||||||
Construction |
3,021,889 | 2.31 | (269,535 | ) | 2,752,354 | |||||||||||
Public sector |
1,056,520 | 0.81 | (15,341 | ) | 1,041,179 | |||||||||||
Others |
6,054,211 | 4.64 | (70,909 | ) | 5,983,302 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
100.00 | ||||||||||||||||
|
|
|
|
|
|
|
|
(In millions of Korean won) | 2016 | |||||||||||||||
Loans | % | Allowances | Carrying amount | |||||||||||||
Financial institutions |
8.90 | |||||||||||||||
Manufacturing |
36,505,044 | 30.62 | (539,512 | ) | 35,965,532 | |||||||||||
Service |
48,529,236 | 40.71 | (307,132 | ) | 48,222,104 | |||||||||||
Wholesale & Retail |
14,246,756 | 11.95 | (116,233 | ) | 14,130,523 | |||||||||||
Construction |
3,381,470 | 2.84 | (357,439 | ) | 3,024,031 | |||||||||||
Public sector |
886,583 | 0.74 | (6,318 | ) | 880,265 | |||||||||||
Others |
5,052,751 | 4.24 | (34,668 | ) | 5,018,083 | |||||||||||
|
|
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|
|
|
|
|
|||||||||
100.00 | ||||||||||||||||
|
|
|
|
|
|
|
|
Types of the Groups retail and credit card loans as of December 31, 2017 and 2016, are as follows:
(In millions of Korean won) | 2017 | |||||||||||||||
Loans | % | Allowances | Carrying amount | |||||||||||||
Housing |
39.72 | |||||||||||||||
General |
82,130,039 | 50.86 | (410,653 | ) | 81,719,386 | |||||||||||
Credit card |
15,204,847 | 9.42 | (449,266 | ) | 14,755,581 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
100.00 | ||||||||||||||||
|
|
|
|
|
|
|
|
(In millions of Korean won) | 2016 | |||||||||||||||
Loans | % | Allowances | Carrying amount | |||||||||||||
Housing |
39.73 | |||||||||||||||
General |
76,012,881 | 51.17 | (458,502 | ) | 75,554,379 | |||||||||||
Credit card |
13,530,243 | 9.10 | (414,295 | ) | 13,115,948 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
100.00 | ||||||||||||||||
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|
50
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
Details of the Groups industrial securities, excluding equity securities, and derivative financial instruments as of December 31, 2017 and 2016, are as follows:
(In millions of Korean won) | 2017 | |||||||
Amount | % | |||||||
Financial assets held for trading |
||||||||
Government and government funded institutions |
33.16 | |||||||
Banking and insurance |
11,486,321 | 45.64 | ||||||
Others |
5,336,554 | 21.20 | ||||||
|
|
|
|
|||||
25,168,338 | 100.00 | |||||||
|
|
|
|
|||||
Financial assets designated at fair value through profit or loss |
||||||||
Banking and insurance and others |
1,982,224 | 100.00 | ||||||
|
|
|
|
|||||
1,982,224 | 100.00 | |||||||
|
|
|
|
|||||
Derivative financial assets |
||||||||
Government and government funded institutions |
12,099 | 0.37 | ||||||
Banking and insurance |
3,098,350 | 93.60 | ||||||
Others |
199,717 | 6.03 | ||||||
|
|
|
|
|||||
3,310,166 | 100.00 | |||||||
|
|
|
|
|||||
Available-for-sale financial assets |
||||||||
Government and government funded institutions |
9,498,819 | 24.38 | ||||||
Banking and insurance |
23,314,336 | 59.84 | ||||||
Others |
6,146,246 | 15.78 | ||||||
|
|
|
|
|||||
38,959,401 | 100.00 | |||||||
|
|
|
|
|||||
Held-to-maturity financial assets |
||||||||
Government and government funded institutions |
8,449,839 | 45.69 | ||||||
Banking and insurance |
6,765,593 | 36.59 | ||||||
Others |
3,276,548 | 17.72 | ||||||
|
|
|
|
|||||
18,491,980 | 100.00 | |||||||
|
|
|
|
|||||
|
|
51
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
(In millions of Korean won) | 2016 | |||||||
Amount | % | |||||||
Financial assets held for trading |
||||||||
Government and government funded institutions |
34.26 | |||||||
Banking and insurance |
11,408,503 | 49.63 | ||||||
Others |
3,702,961 | 16.11 | ||||||
|
|
|
|
|||||
22,986,570 | 100.00 | |||||||
|
|
|
|
|||||
Financial assets designated at fair value through profit or loss |
||||||||
Banking and insurance and others |
1,693,255 | 100.00 | ||||||
|
|
|
|
|||||
1,693,255 | 100.00 | |||||||
|
|
|
|
|||||
Derivative financial assets |
||||||||
Government and government funded institutions |
104,025 | 3.08 | ||||||
Banking and insurance |
2,998,412 | 88.66 | ||||||
Others |
279,498 | 8.26 | ||||||
|
|
|
|
|||||
3,381,935 | 100.00 | |||||||
|
|
|
|
|||||
Available-for-sale financial assets |
||||||||
Government and government funded institutions |
10,579,880 | 38.55 | ||||||
Banking and insurance |
13,901,908 | 50.65 | ||||||
Others |
2,963,964 | 10.80 | ||||||
|
|
|
|
|||||
27,445,752 | 100.00 | |||||||
|
|
|
|
|||||
Held-to-maturity financial assets |
||||||||
Government and government funded institutions |
5,373,994 | 48.08 | ||||||
Banking and insurance |
5,471,443 | 48.95 | ||||||
Others |
332,067 | 2.97 | ||||||
|
|
|
|
|||||
11,177,504 | 100.00 | |||||||
|
|
|
|
|||||
|
|
52
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
Details of the Groups regional securities, excluding equity securities, and derivative financial instruments by country, as of December 31, 2017 and 2016, are as follows:
(In millions of Korean won) | 2017 | |||||||
Amount | % | |||||||
Financial assets held for trading |
||||||||
Korea |
93.22 | |||||||
United States |
643,249 | 2.56 | ||||||
Others |
1,062,180 | 4.22 | ||||||
|
|
|
|
|||||
25,168,338 | 100.00 | |||||||
|
|
|
|
|||||
Financial assets designated at fair value through profit or loss |
||||||||
Korea |
1,178,197 | 59.44 | ||||||
United States |
120,000 | 6.05 | ||||||
Others |
684,027 | 34.51 | ||||||
|
|
|
|
|||||
1,982,224 | 100.00 | |||||||
|
|
|
|
|||||
Derivative financial assets |
||||||||
Korea |
1,743,201 | 52.66 | ||||||
United States |
325,909 | 9.85 | ||||||
Others |
1,241,056 | 37.49 | ||||||
|
|
|
|
|||||
3,310,166 | 100.00 | |||||||
|
|
|
|
|||||
Available-for-sale financial assets |
||||||||
Korea |
36,705,979 | 94.22 | ||||||
United States |
1,110,157 | 2.85 | ||||||
Others |
1,143,265 | 2.93 | ||||||
|
|
|
|
|||||
38,959,401 | 100.00 | |||||||
|
|
|
|
|||||
Held-to-maturity financial assets |
||||||||
Korea |
16,243,987 | 87.84 | ||||||
United States |
1,076,331 | 5.82 | ||||||
Others |
1,171,662 | 6.34 | ||||||
|
|
|
|
|||||
100.00 | ||||||||
|
|
|
|
|||||
|
|
53
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
(In millions of Korean won) | 2016 | |||||||
Amount | % | |||||||
Financial assets held for trading |
||||||||
Korea |
97.27 | |||||||
United States |
141,022 | 0.61 | ||||||
Others |
485,883 | 2.12 | ||||||
|
|
|
|
|||||
22,986,570 | 100.00 | |||||||
|
|
|
|
|||||
Financial assets designated at fair value through profit or loss |
||||||||
Korea |
1,232,226 | 72.77 | ||||||
United States |
72,837 | 4.30 | ||||||
Others |
388,192 | 22.93 | ||||||
|
|
|
|
|||||
1,693,255 | 100.00 | |||||||
|
|
|
|
|||||
Derivative financial assets |
||||||||
Korea |
2,323,198 | 68.69 | ||||||
United States |
291,160 | 8.61 | ||||||
Others |
767,577 | 22.70 | ||||||
|
|
|
|
|||||
3,381,935 | 100.00 | |||||||
|
|
|
|
|||||
Available-for-sale financial assets |
||||||||
Korea |
26,855,024 | 97.85 | ||||||
United States |
141,473 | 0.52 | ||||||
Others |
449,255 | 1.63 | ||||||
|
|
|
|
|||||
27,445,752 | 100.00 | |||||||
|
|
|
|
|||||
Held-to-maturity financial assets |
||||||||
Korea |
10,029,429 | 89.73 | ||||||
United States |
193,360 | 1.73 | ||||||
Others |
954,715 | 8.54 | ||||||
|
|
|
|
|||||
11,177,504 | 100.00 | |||||||
|
|
|
|
|||||
|
|
The counterparties to the financial assets under due from financial institutions and financial instruments indexed to the price of gold within financial assets held for trading and derivatives are in the financial and insurance industries which have high credit ratings.
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
54
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
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.
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.
55
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
The remaining contractual maturity of financial assets and liabilities, excluding derivatives held for cash flow hedging, as of December 31, 2017 and 2016, are as follows:
(In millions of Korean won) | 2017 | |||||||||||||||||||||||||||
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 |
||||||||||||||||||||||||||||
Financial assets held for trading2 |
30,177,293 | | | | | | 30,177,293 | |||||||||||||||||||||
Financial assets designated at fair value through profit or loss2 |
2,050,052 | | | | | | 2,050,052 | |||||||||||||||||||||
Derivatives held for trading2 |
2,980,462 | | | | | | 2,980,462 | |||||||||||||||||||||
Derivatives held for fair value hedging3 |
559 | 48,093 | 29,693 | 42,163 | (2,577 | ) | 52,698 | 170,629 | ||||||||||||||||||||
Loans |
3,437,020 | 22,062,457 | 30,802,580 | 103,782,624 | 75,345,756 | 96,863,329 | 332,293,766 | |||||||||||||||||||||
Available-for-sale financial assets4 |
10,063,251 | 1,580,946 | 2,311,652 | 11,655,746 | 20,322,800 | 7,567,341 | 53,501,736 | |||||||||||||||||||||
Held-to-maturity financial assets |
| 658,856 | 493,420 | 3,217,345 | 6,890,530 | 13,247,255 | 24,507,406 | |||||||||||||||||||||
Other financial assets |
8,416 | 7,934,856 | 52,757 | 1,305,410 | 43,433 | 16,532 | 9,361,404 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Financial liabilities |
||||||||||||||||||||||||||||
Financial liabilities held for trading2 |
||||||||||||||||||||||||||||
Financial liabilities designated at fair value through profit or loss2 |
10,078,288 | | | | | | 10,078,288 | |||||||||||||||||||||
Derivatives held for trading2 |
3,050,471 | | | | | | 3,050,471 | |||||||||||||||||||||
Derivatives held for fair value hedging3 |
404 | 3,740 | (4,715 | ) | (19,705 | ) | (7,143 | ) | 244 | (27,175 | ) | |||||||||||||||||
Deposits5 |
127,035,944 | 12,365,158 | 23,236,756 | 82,586,445 | 11,473,834 | 2,667,969 | 259,366,106 | |||||||||||||||||||||
Debts |
5,957,108 | 10,024,019 | 3,741,022 | 5,724,453 | 4,409,543 | 599,680 | 30,455,825 | |||||||||||||||||||||
Debentures |
40,655 | 1,015,298 | 3,020,683 | 9,644,135 | 29,611,835 | 3,245,342 | 46,577,948 | |||||||||||||||||||||
Other financial liabilities |
200,082 | 14,060,432 | 145,538 | 229,873 | 342,397 | 965,929 | 15,944,251 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Off- balance sheet items |
|
|||||||||||||||||||||||||||
Commitments6 |
||||||||||||||||||||||||||||
Financial guarantee contract7 |
3,683,875 | | | | | | 3,683,875 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
56
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
(In millions of Korean won) | 2016 | |||||||||||||||||||||||||||
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 |
||||||||||||||||||||||||||||
Financial assets held for trading2 |
26,099,518 | | | | | | 26,099,518 | |||||||||||||||||||||
Financial assets designated at fair value through profit or loss2 |
1,758,846 | | | | | | 1,758,846 | |||||||||||||||||||||
Derivatives held for trading2 |
3,263,115 | | | | | | 3,263,115 | |||||||||||||||||||||
Derivatives held for fair value hedging3 |
| 4,075 | 1,719 | 1,791 | (584 | ) | 53,185 | 60,186 | ||||||||||||||||||||
Loans |
25,333 | 24,246,878 | 27,731,932 | 88,710,331 | 73,969,738 | 90,290,586 | 304,974,798 | |||||||||||||||||||||
Available-for-sale financial assets4 |
6,444,890 | 617,457 | 1,734,077 | 6,027,364 | 17,804,826 | 3,916,630 | 36,545,244 | |||||||||||||||||||||
Held-to-maturity financial assets |
| 280,822 | 552,875 | 1,423,078 | 6,478,050 | 4,457,977 | 13,192,802 | |||||||||||||||||||||
Other financial assets |
138,840 | 5,316,491 | 34,215 | 1,188,493 | 42,957 | 10,408 | 6,731,404 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Financial liabilities |
||||||||||||||||||||||||||||
Financial liabilities held for trading2 |
||||||||||||||||||||||||||||
Financial liabilities designated at fair value through profit or loss2 |
10,979,326 | | | | | | 10,979,326 | |||||||||||||||||||||
Derivatives held for trading2 |
3,712,015 | | | | | | 3,712,015 | |||||||||||||||||||||
Derivatives held for fair value hedging3 |
(1,145 | ) | 3,462 | (5,114 | ) | 8,081 | (37,880 | ) | | (32,596 | ) | |||||||||||||||||
Deposits5 |
118,054,880 | 13,886,329 | 24,840,830 | 72,178,631 | 10,393,616 | 3,790,933 | 243,145,219 | |||||||||||||||||||||
Debts |
8,473,706 | 5,830,600 | 3,567,985 | 5,124,571 | 4,195,123 | 116,023 | 27,308,008 | |||||||||||||||||||||
Debentures |
52,188 | 2,078,866 | 2,403,874 | 7,493,938 | 20,673,639 | 3,273,158 | 35,975,663 | |||||||||||||||||||||
Other financial liabilities |
1,656,767 | 10,969,703 | 29,248 | 114,381 | 354,976 | 895,950 | 14,021,025 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Off- balance sheet items |
|
|||||||||||||||||||||||||||
Commitments6 |
||||||||||||||||||||||||||||
Financial guarantee contract7 |
4,746,292 | | | | | | 4,746,292 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 | The amounts of |
57
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
2 | Financial assets/liabilities held for trading, financial assets/liabilities 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. However, the cash flows of the embedded derivatives (e.g. conversion options and others) which are separated from their host contracts in accordance with the requirement of Korean IFRS 1039, are considered in the cash flows of the host contracts. |
3 | Cash flows of derivative instruments held for fair value hedging are shown at net cash flow by remaining contractual maturity. |
4 | Equity investments in financial assets classified as available-for-sale are generally included in the On demand category as most are available for sale at anytime. However, in the case of equity investments restricted for sale, they are shown in the period in which the restriction is expected to expire. |
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. |
58
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
The contractual cash flows of derivatives held for cash flow hedging as of December 31, 2017 and 2016, are as follows:
(In millions of Korean won) | ||||||||||||||||||||||||
2017 | ||||||||||||||||||||||||
Up to 1 month |
1-3 months |
3-12 months |
1-5 years |
Over 5 years |
Total | |||||||||||||||||||
Net cash flow of net settlement derivatives |
||||||||||||||||||||||||
Cash flow to be received of total settlement derivatives |
196,795 | 298,108 | 745,490 | 1,404,317 | | 2,644,710 | ||||||||||||||||||
Cash flow to be paid of total settlement derivatives |
(188,698 | ) | (285,397 | ) | (698,054 | ) | (1,324,504 | ) | | (2,496,653 | ) | |||||||||||||
(In millions of Korean won) | ||||||||||||||||||||||||
2016 | ||||||||||||||||||||||||
Up to 1 month |
1-3 months |
3-12 months |
1-5 years |
Over 5 years |
Total | |||||||||||||||||||
Net cash flow of net settlement derivatives |
||||||||||||||||||||||||
Cash flow to be received of total settlement derivatives |
302 | 948 | 245,909 | 121,152 | | 368,311 | ||||||||||||||||||
Cash flow to be paid of total settlement derivatives |
(522 | ) | (1,080 | ) | (224,600 | ) | (110,373 | ) | | (336,575 | ) |
4.4 Market Risk
4.4.1 Overview of Market Risk
Concept
Market risk is the risk of possible losses which arise from changes in market factors; such as, interest rate, stock price, foreign exchange rate and other market factors that affect the fair value or future cash flows of financial instruments; such as, securities and derivatives amongst others. The most significant risks associated with trading positions are 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.
59
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
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; such as, 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 Financial Planning 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; such as, 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 Financial Planning Department. Also, the Risk Management Department independently reports related information to the management.
4.4.2 Trading Position
Definition of a trading position
Trading positions subject to market risk management are defined under the Trading Policy and Guideline, and the basic requirements are as follows:
| The trading position is not restricted for sale, is measured daily at fair value, and its significant inherent risks are able to be hedged in the market. |
| The criteria for classification as a trading position are clearly defined in the Trading Policy and Guideline, and separately managed by the trading department. |
| The trading position is operated in accordance with the documented trading strategy and managed through position limits. |
| The operating department or professional dealers have an authority to enforce a deal on the trading position within predetermined limits without pre-approval. |
| The trading position is reported periodically to management for the purpose of the Groups risk management |
60
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
Observation method on market risk arising from trading positions
Subsidiaries of the Group calculate VaR to measure the market risk by using market risk management systems on the entire trading portfolio. Generally, the Group manages market risk on the trading portfolio. In addition, the Group controls and manages the risk of derivative trading based on the regulations and guidelines formulated by the Financial Supervisory Service.
VaR (Value at Risk)
i. VaR (Value at Risk)
Kookmin Bank, one of the subsidiaries, uses the value-at-risk methodology to measure the market risk of trading positions. Kookmin Bank uses the 10-day VaR, which estimates the maximum amount of loss that could occur in ten days under an historical simulation model which is considered to be a full valuation method. The distributions of portfolios value changes are estimated based on the data over the previous 250 business days, and ten-day VaR is calculated by subtracting net present market value from the value measured at a 99% confident level of portfolios value distribution results.
VaR is a commonly used market risk measurement technique. However, the method has some shortcomings. VaR estimates possible losses over a certain period at a particular confidence level using past market movement data. Past market movements are, however, not necessarily a good indicator of future events, as there may be conditions and circumstances in the future that the model does not anticipate. As a result, the timing and magnitude of the actual losses may vary depending on the assumptions made at the time of the calculation. In addition, the time periods used for the model, generally one or ten days, are assumed to be a sufficient holding period before liquidating the relevant underlying positions. If these holding periods are not sufficient, or too long, the VaR results may understate or overstate the potential loss.
A subsidiary which hold trading positions uses an internal model (VaR) to measure general risk, and a standard method to measure each individual risk. When the internal model is not permitted for certain market risk, the Group uses the standard method. Therefore, the market risk VaR may not reflect the market risk of each individual risk and some specific positions. And also, from this year, non-banking subsidiaries use the same standard method applied to measure regulatory capital for improvement of market risk VaR management utility (improvement of relation with regulatory capital).
ii. Back-Testing
Back-testing is conducted on a daily basis to validate the adequacy of the market risk model. In back-testing, the Group compares both the actual and hypothetical profit and loss with the VaR calculations.
iii. Stress Testing
Stress testing is carried out to analyze the impact of abnormal market situations on the trading and available-for-sale portfolio. It reflects changes in interest rates, stock prices, foreign exchange rates, implied volatilities of derivatives and other risk factors that have significant influence on the value of the portfolio. The Group uses historical scenarios and hypothetical scenarios for the analysis of abnormal market situations. Stress testing is performed at least once every year.
61
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
VaR at a 99% confidence level of interest rate, stock price and foreign exchange rate risk for trading positions with a ten-day holding period by a subsidiary as of December 31, 2017 and 2016, are as follows:
Kookmin Bank
(In millions of Korean won) | 2017 | |||||||||||||||
Average | Minimum | Maximum | Ending | |||||||||||||
Interest rate risk |
||||||||||||||||
Stock price risk |
1,002 | 757 | 1,345 | 1,255 | ||||||||||||
Foreign exchange rate risk |
32,709 | 12,405 | 44,322 | 24,315 | ||||||||||||
Deduction of diversification effect |
(29,727 | ) | ||||||||||||||
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Total VaR |
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(In millions of Korean won) | 2016 | |||||||||||||||
Average | Minimum | Maximum | Ending | |||||||||||||
Interest rate risk |
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Stock price risk |
1,757 | 726 | 2,269 | 1,201 | ||||||||||||
Foreign exchange rate risk |
16,493 | 10,123 | 22,206 | 10,123 | ||||||||||||
Deduction of diversification effect |
(6,477 | ) | ||||||||||||||
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Total VaR |
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Meanwhile, the required equity capital using the standardized method related to the positions which are not measured by VaR or the non-banking subsidiaries as of December 31, 2017 and 2016, are as follows:
Kookmin Bank
(In millions of Korean won) | 2017 | 2016 | ||||||
Interest rate risk |
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Stock price risk |
1,646 | 4,816 | ||||||
Foreign exchange rate risk |
810 | | ||||||
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KB Securities Co., Ltd.
(In millions of Korean won) | 2017 | |||||||||||||||
Average | Minimum | Maximum | Ending | |||||||||||||
Interest rate risk |
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Stock price risk |
193,791 | 138,044 | 239,685 | 200,101 | ||||||||||||
Foreign exchange rate risk |
11,113 | 7,599 | 15,446 | 7,674 | ||||||||||||
Commodity risk |
5 | | 34 | 3 | ||||||||||||
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62
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
(In millions of Korean won) | 20161 | |||||||||||||||
Average | Minimum | Maximum | Ending | |||||||||||||
Interest rate risk |
||||||||||||||||
Stock price risk |
57,816 | 36,140 | 199,182 | 199,182 | ||||||||||||
Foreign exchange rate risk |
1,766 | 471 | 10,790 | 10,790 | ||||||||||||
Commodity risk |
80 | | 125 | | ||||||||||||
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1 | Including Hyundai Securities Co., Ltd.(included as a subsidiary in fourth quarter, 2016) |
KB Insurance Co., Ltd.
(In millions of Korean won) | 20171 | |||||||||||||||
Average | Minimum | Maximum | Ending | |||||||||||||
Interest rate risk |
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Stock price risk |
81 | | 133 | | ||||||||||||
Foreign exchange rate risk |
18,002 | 12,313 | 23,099 | 18,695 | ||||||||||||
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1 Including KB Insurance Co., Ltd.(included as a subsidiary in second quarter, 2017)
KB Life Insurance Co., Ltd.
(In millions of Korean won) | 2017 | |||||||||||||||
Average | Minimum | Maximum | Ending | |||||||||||||
Interest rate risk |
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(In millions of Korean won) | 2016 | |||||||||||||||
Average | Minimum | Maximum | Ending | |||||||||||||
Interest rate risk |
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KB Investment Co., Ltd.
(In millions of Korean won) | 2017 | |||||||||||||||
Average | Minimum | Maximum | Ending | |||||||||||||
Stock price risk |
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Foreign exchange rate risk |
1,053 | 746 | 1,797 | 1,797 | ||||||||||||
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63
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
(In millions of Korean won) | 2016 | |||||||||||||||
Average | Minimum | Maximum | Ending | |||||||||||||
Stock price risk |
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Foreign exchange rate risk |
592 | 357 | 792 | 792 | ||||||||||||
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KB Asset Management Co., Ltd.
(In millions of Korean won) | 2017 | |||||||||||||||
Average | Minimum | Maximum | Ending | |||||||||||||
Interest rate risk |
||||||||||||||||
Stock price risk |
241 | | 1,634 | 1,634 | ||||||||||||
Foreign exchange rate risk |
93 | | 1,049 | 1,049 | ||||||||||||
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Details of risk factors
i. Interest rate risk
Trading position interest rate risk usually arises from debt securities denominated in Korean won. The Groups trading strategy is to benefit from short-term movements in the prices of debt securities arising from changes in interest rates. The Group manages interest rate risk on trading positions using market value-based tools such as VaR and sensitivity analysis (Price Value of a Basis Point: PVBP).
ii. Stock price risk
Stock price risk only arises from trading securities denominated in Korean won as the Group does not have any trading exposure to shares denominated in foreign currencies. The trading securities portfolio in Korean won are composed of exchange-traded stocks and derivative instruments linked to stock with strict limits on diversification.
iii. Foreign exchange rate risk
Foreign exchange rate risk arises from holding assets and liabilities denominated in foreign currency and foreign currency derivatives. Net foreign currency exposure mostly occurs from the foreign assets and liabilities which are denominated in US dollars and Chinese Yuan. The Group sets both loss limits and net foreign currency exposure limits and manages comprehensive net foreign exchange exposures which consider both trading and non-trading portfolios.
4.4.3 Non-trading position
Definition of non-trading position
Managed interest rate risk in non-trading position includes on- or off-balance sheet assets, liabilities and derivatives that are sensitive to interest rate, except trading position for market risk. The interest rate sensitive assets and liabilities are interest-bearing assets and liabilities that create interest income and expenses.
64
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
Observation method on market risk arising from non-trading position
Interest rate risk occurs due to mismatches on maturities and interest rate reset periods between interest-bearing assets and liabilities. The Group manages the risk through measuring and managing interest rate VaR and EaR that are maximum expected decreases in net asset value (NPV) and net interest income (NII) for one year, respectively, arising from unfavorable changes in market interest rate.
Interest Rate VaR
Interest rate VaR is the maximum possible loss due to interest rate risk under a normal distribution at a 99.9% confidence level. The measurement results of risk as of December 31, 2017 and 2016, are as follows:
(In millions of Korean won) | 2017 | 2016 | ||||||
Kookmin Bank |
||||||||
KB Securities Co., Ltd.1 |
39,717 | 33,345 | ||||||
KB Insurance Co.,Ltd. 2 |
451,335 | | ||||||
KB Kookmin Card Co., Ltd. |
12,775 | 43,730 | ||||||
KB Life Insurance Co., Ltd. |
51,677 | 21,510 | ||||||
KB Savings Bank Co., Ltd. |
6,447 | 5,694 | ||||||
KB Capital Co., Ltd. |
10,912 | 4,794 |
1 Including Hyundai Securities Co., Ltd.(included as a subsidiary in fourth quarter, 2016)
2 Including KB Insurance Co., Ltd.(included as a subsidiary in second quarter, 2017)
65
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
4.4.4 Financial Instruments in Foreign Currencies
Details of financial instruments presented in foreign currencies translated into Korean won as of December 31, 2017 and 2016, are as follows:
(In millions of Korean won) | 2017 | |||||||||||||||||||||||||||
USD | JPY | EUR | GBP | CNY | Others | Total | ||||||||||||||||||||||
Financial Assets |
||||||||||||||||||||||||||||
Cash and due from financial institutions |
||||||||||||||||||||||||||||
Financial assets held for trading |
3,021,509 | 84,980 | 81,394 | 8,922 | 15,492 | 20,767 | 3,233,064 | |||||||||||||||||||||
Financial assets designated at fair value through profit or loss |
826,906 | | | | | | 826,906 | |||||||||||||||||||||
Derivatives held for trading |
124,434 | 446 | 10,172 | | 96 | 56,362 | 191,510 | |||||||||||||||||||||
Derivatives held for hedging |
29,489 | | | | | | 29,489 | |||||||||||||||||||||
Loans |
10,689,732 | 228,747 | 1,503,493 | 9,549 | 795,302 | 287,591 | 13,514,414 | |||||||||||||||||||||
Available-for-sale financial assets |
6,061,404 | 101,003 | 124,045 | | 38,606 | 21,123 | 6,346,181 | |||||||||||||||||||||
Held-to-maturity financial assets |
2,313,099 | | 44,267 | | 4,905 | 4,242 | 2,366,513 | |||||||||||||||||||||
Other financial assets |
1,615,795 | 453,029 | 406,793 | 13,382 | 226,301 | 708,965 | 3,424,265 | |||||||||||||||||||||
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Financial liabilities |
||||||||||||||||||||||||||||
Financial liabilities designated at fair value through profit or loss |
||||||||||||||||||||||||||||
Derivatives held for trading |
109,197 | 1,399 | 73,298 | | 3,563 | 183,461 | 370,918 | |||||||||||||||||||||
Derivatives held for hedging |
49,962 | | | | | | 49,962 | |||||||||||||||||||||
Deposits |
8,469,129 | 759,394 | 389,049 | 39,993 | 1,093,998 | 590,793 | 11,342,356 | |||||||||||||||||||||
Debts |
7,570,727 | 44,885 | 102,005 | 737 | | 24,185 | 7,742,539 | |||||||||||||||||||||
Debentures |
3,473,284 | | | | | 219,376 | 3,692,660 | |||||||||||||||||||||
Other financial liabilities |
2,361,161 | 44,137 | 887,561 | 3,339 | 224,675 | 302,596 | 3,823,469 | |||||||||||||||||||||
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Off-balance sheet items |
66
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
(In millions of Korean won) | 2016 | |||||||||||||||||||||||||||
USD | JPY | EUR | GBP | CNY | Others | Total | ||||||||||||||||||||||
Financial Assets |
||||||||||||||||||||||||||||
Cash and due from financial institutions |
||||||||||||||||||||||||||||
Financial assets held for trading |
1,078,304 | 123,733 | 2,927 | | 6,275 | | 1,211,239 | |||||||||||||||||||||
Financial assets designated at fair value through profit or loss |
458,422 | | | | | | 458,422 | |||||||||||||||||||||
Derivatives held for trading |
84,938 | 13 | 24,616 | | | 90,626 | 200,193 | |||||||||||||||||||||
Derivatives held for hedging |
5,917 | | | | | | 5,917 | |||||||||||||||||||||
Loans |
10,824,626 | 342,100 | 895,208 | 5,799 | 552,966 | 180,445 | 12,801,144 | |||||||||||||||||||||
Available-for-sale financial assets |
2,214,244 | 150,510 | | | 35,873 | 1,033 | 2,401,660 | |||||||||||||||||||||
Held-to-maturity financial assets |
1,148,075 | | | | | | 1,148,075 | |||||||||||||||||||||
Other financial assets |
930,606 | 245,827 | 35,981 | 30,793 | 176,833 | 648,089 | 2,068,129 | |||||||||||||||||||||
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Financial liabilities |
||||||||||||||||||||||||||||
Financial liabilities designated at fair value through profit or loss |
||||||||||||||||||||||||||||
Derivatives held for trading |
105,918 | | 129,349 | | | 315,403 | 550,670 | |||||||||||||||||||||
Derivatives held for hedging |
63,634 | | | | | | 63,634 | |||||||||||||||||||||
Deposits |
7,259,601 | 597,173 | 457,447 | 52,710 | 791,825 | 399,683 | 9,558,439 | |||||||||||||||||||||
Debts |
7,273,597 | 169,507 | 83,105 | 279 | 85,123 | 37,491 | 7,649,102 | |||||||||||||||||||||
Debentures |
3,830,709 | | | | | | 3,830,709 | |||||||||||||||||||||
Other financial liabilities |
1,453,669 | 52,275 | 534,224 | 1,429 | 176,382 | 294,933 | 2,512,912 | |||||||||||||||||||||
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Off-balance sheet items |
67
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
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.
4.6. Capital Adequacy
The Group complies with the capital adequacy standard established by the Financial Services Commission. The capital adequacy standard is based on Basel III published by Basel Committee on Banking Supervision in Bank of International Settlements in June 2011, and was implemented in Korea in December 2013. The Group is required to maintain a minimum Common Equity Tier 1 ratio of at least 6.25%(2016: 5.375%), a minimum Tier 1 ratio of 7.75%(2016: 6.875%) and a minimum Total Regulatory Capital of 9.75%(2016: 8.875%) as of December 31, 2017.
The Groups equity capital is classified into three categories in accordance with the Supervisory Regulations and Detailed Supervisory Regulations on Financial Holding Companies:
| Common Equity Tier 1 Capital: Common equity Tier 1 Capital represents the issued capital that takes the first and proportionately greatest share of any losses and represents the most subordinated claim in liquidation of the Group, and not repaid outside of liquidation. It includes common shares issued, capital surplus, retained earnings, non-controlling interests of consolidated subsidiaries, accumulated other comprehensive income, other capital surplus and others. |
| Additional Tier 1 Capital: Additional Tier 1 Capital includes (i) perpetual instruments issued by the Group that meet the criteria for inclusion in Additional Tier 1 capital, and (ii) stock surplus resulting from the issue of instruments included in Additional Tier 1 capital and others. |
| Tier 2 Capital: Tier 2 Capital represents the capital that takes the proportionate share of losses in the liquidation of the Group. Tier 2 Capital includes a fund raised by issuing subordinated debentures maturing in not less than five years that meet the criteria for inclusion in Additional Tier 2 capital, and the allowance for loan losses which are accumulated for assets classified as normal or precautionary as a result of classification of asset soundness in accordance with Regulation on Supervision of Financial Holding Companies and others. |
68
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
Risk weighted asset means the inherent risks in the total assets held by the Group. The Group calculates risk weighted asset by each risk (credit risk, market risk, and operational risk) based on the Supervisory Regulations and Detailed Supervisory Regulations on Financial Holding Companies and uses it for BIS ratio calculation.
The Group assesses and monitors its adequacy of capital by using the internal assessment and management policy of the capital adequacy. The assessment of the capital adequacy is conducted by comparing available capital (actual amount of available capital) and internal capital (amount of capital enough to cover all significant risks under target credit rate set by the Group). The Group monitors the soundness of finance and provides risk adjusted basis for performance review using the assessment of the capital adequacy.
Internal Capital is the amount of capital to prevent the inability of payment due to unexpected loss in the future. The Group measures, allocates and monitors internal capital by risk type and subsidiaries.
The Risk Management Council of the Group determines the Groups risk appetite and allocates internal capital by risk type and subsidiary. Each subsidiary efficiently operates its capital within a range of allocated internal capital. The Risk Management Department of the Group monitors the limit on internal capital and reports the results to management and the Risk Management Council. The Group maintains the adequacy of capital through proactive review and approval of the Risk Management Committee when the internal capital is expected to exceed the limits due to new business or business expansion.
Details of the Groups capital adequacy calculation in line with Basel III requirements as of December 31, 2017 and 2016, are as follows:
(In millions of Korean won) | 2017 | 2016 | ||||||
Equity Capital: |
||||||||
Tier 1 Capital |
31,059,475 | 29,264,494 | ||||||
Common Equity Tier 1 Capital |
31,059,475 | 29,013,954 | ||||||
Additional Tier 1 Capital |
| 250,540 | ||||||
Tier 2 Capital |
1,342,105 | 1,838,797 | ||||||
Risk-weighted assets: |
212,777,226 | 203,649,442 | ||||||
Equity Capital (%): |
15.23 | 15.27 | ||||||
Tier 1 Capital (%) |
14.60 | 14.37 | ||||||
Common Equity Tier 1 Capital (%) |
14.60 | 14.25 |
69
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
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 Groups management organization.
Banking Business |
Corporate Banking |
The activities within this segment include providing credit, deposit products and other related financial services to large, small and medium-sized enterprises and SOHOs. | ||
Retail Banking |
The activities within this segment include providing credit, deposit products and other related financial services to individuals and households. | |||
Other Banking Services |
The activities within this segment include trading activities in securities and derivatives, funding and other supporting activities. | |||
Securities Business |
The activities within this segment include 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 |
The activities within this segment include life insurance and other supporting activities. |
70
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
Financial information by business segment for the year ended December 31, 2017, 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 Adjustments |
Total | ||||||||||||||||||||||||||||||||||
Operating income from external customers |
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Intra-segment operating income(expenses) |
(18,447 | ) | | 203,310 | 184,863 | (1,157 | ) | 18,039 | (194,167 | ) | (20,515 | ) | 171,422 | (158,485 | ) | | ||||||||||||||||||||||||||||
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Net interest income |
2,555,780 | 2,647,768 | 190,767 | 5,394,315 | 251,967 | 465,016 | 1,083,665 | 215,743 | 296,920 | 2,383 | 7,710,009 | |||||||||||||||||||||||||||||||||
Interest income |
3,584,021 | 3,935,895 | 818,508 | 8,338,424 | 452,862 | 465,144 | 1,341,150 | 215,768 | 582,864 | (13,760 | ) | 11,382,452 | ||||||||||||||||||||||||||||||||
Interest expense |
(1,028,241 | ) | (1,288,127 | ) | (627,741 | ) | (2,944,109 | ) | (200,895 | ) | (128 | ) | (257,485 | ) | (25 | ) | (285,944 | ) | 16,143 | (3,672,443 | ) | |||||||||||||||||||||||
Net fee and commission income |
235,210 | 595,322 | 394,157 | 1,224,689 | 551,619 | (97,828 | ) | 132,686 | (3,612 | ) | 252,813 | (10,343 | ) | 2,050,024 | ||||||||||||||||||||||||||||||
Fee and commission income |
315,994 | 668,227 | 487,259 | 1,471,480 | 637,630 | 1,532 | 1,901,112 | 69 | 299,783 | (323,356 | ) | 3,988,250 | ||||||||||||||||||||||||||||||||
Fee and commission expense |
(80,784 | ) | (72,905 | ) | (93,102 | ) | (246,791 | ) | (86,011 | ) | (99,360 | ) | (1,768,426 | ) | (3,681 | ) | (46,970 | ) | 313,013 | (1,938,226 | ) | |||||||||||||||||||||||
Net insurance income |
| | | | | 699,873 | 19,948 | (141,421 | ) | | 15,310 | 593,710 | ||||||||||||||||||||||||||||||||
Insurance income |
| | | | | 7,947,262 | 33,579 | 1,008,329 | | (18,178 | ) | 8,970,992 | ||||||||||||||||||||||||||||||||
Insurance expenses |
| | | | | (7,247,389 | ) | (13,631 | ) | (1,149,750 | ) | | 33,488 | (8,377,282 | ) | |||||||||||||||||||||||||||||
Net gains (losses) on financial assets/ liabilities at fair value through profit or loss |
(1,750 | ) | | 101,012 | 99,262 | 526,023 | 41,079 | | 7,795 | 19,749 | 46,421 | 740,329 | ||||||||||||||||||||||||||||||||
Net other operating income (expense) |
(678,774 | ) | (532,292 | ) | 922,979 | (288,087 | ) | (256,401 | ) | 31,007 | (153,663 | ) | 30,493 | (52,983 | ) | (212,256 | ) | (901,890 | ) | |||||||||||||||||||||||||
General and administrative expenses |
(974,096 | ) | (1,946,640 | ) | (745,086 | ) | (3,665,822 | ) | (734,024 | ) | (629,469 | ) | (370,508 | ) | (72,423 | ) | (291,240 | ) | 134,822 | (5,628,664 | ) | |||||||||||||||||||||||
Operating profit before provision for credit losses |
1,136,370 | 764,158 | 863,829 | 2,764,357 | 339,184 | 509,678 | 712,128 | 36,575 | 225,259 | (23,663 | ) | 4,563,518 |
71
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
(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 Adjustments |
Total | ||||||||||||||||||||||||||||||||||
Provision (reversal) for credit losses |
6,918 | (122,107 | ) | 23 | (115,166 | ) | (23,080 | ) | (8,987 | ) | (336,884 | ) | (1,692 | ) | (62,894 | ) | 459 | (548,244 | ) | |||||||||||||||||||||||||
Net operating income |
1,143,288 | 642,051 | 863,852 | 2,649,191 | 316,104 | 500,691 | 375,244 | 34,883 | 162,365 | (23,204 | ) | 4,015,274 | ||||||||||||||||||||||||||||||||
Share of profit of associates and joint ventures |
| | 37,571 | 37,571 | 535 | | (462 | ) | | 6,076 | 40,554 | 84,274 | ||||||||||||||||||||||||||||||||
Net other non-operating income (expense) |
1,873 | | (75,340 | ) | (73,467 | ) | 1,794 | 11,167 | (6,882 | ) | (289 | ) | 6,582 | 99,971 | 38,876 | |||||||||||||||||||||||||||||
Segment profits before income tax |
1,145,161 | 642,051 | 826,083 | 2,613,295 | 318,433 | 511,858 | 367,900 | 34,594 | 175,023 | 117,321 | 4,138,424 | |||||||||||||||||||||||||||||||||
Income tax expense |
(181,936 | ) | (102,059 | ) | (154,595 | ) | (438,590 | ) | (46,732 | ) | (181,488 | ) | (71,069 | ) | (13,508 | ) | (61,610 | ) | 18,034 | (794,963 | ) | |||||||||||||||||||||||
Profit for the period |
963,225 | 539,992 | 671,488 | 2,174,705 | 271,701 | 330,370 | 296,831 | 21,086 | 113,413 | 135,355 | 3,343,461 | |||||||||||||||||||||||||||||||||
Profit attributable to shareholders of the Parent Company |
963,225 | 539,992 | 671,488 | 2,174,705 | 271,701 | 330,286 | 296,831 | 21,086 | 113,798 | 103,031 | 3,311,438 | |||||||||||||||||||||||||||||||||
Profit attributable to non-controlling interests |
| | | | | 84 | | | (385 | ) | 32,324 | 32,023 | ||||||||||||||||||||||||||||||||
Total assets1 |
117,904,269 | 129,438,168 | 82,423,490 | 329,765,927 | 37,351,680 | 32,351,778 | 17,658,310 | 9,125,741 | 37,439,753 | (26,907,580 | ) | 436,785,609 | ||||||||||||||||||||||||||||||||
Total liabilities1 |
102,224,405 | 147,870,309 | 54,347,779 | 304,442,493 | 32,936,024 | 29,128,747 | 13,616,481 | 8,586,328 | 15,137,421 | (1,106,714 | ) | 402,740,780 |
1 | Assets and liabilities of the reporting segments are amounts before intra-segment transaction adjustment. |
72
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
Financial information by business segment for the year ended December 31, 2016, is as follows:
(In millions of Korean won) | Banking business | |||||||||||||||||||||||||||||||||||||||
Corporate Banking |
Retail Banking |
Other Banking Services |
Sub-total | Securities | Credit Card | Life Insurance |
Others | Intra-group Adjustments |
Total | |||||||||||||||||||||||||||||||
Operating revenues from external customers |
||||||||||||||||||||||||||||||||||||||||
Intra-segment operating revenues(expenses) |
9,274 | | 249,235 | 258,509 | 3,268 | (261,747 | ) | (26,528 | ) | 159,944 | (133,446 | ) | | |||||||||||||||||||||||||||
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Net interest income |
2,286,347 | 2,353,232 | 189,331 | 4,828,910 | 73,205 | 981,342 | 233,742 | 283,158 | 2,172 | 6,402,529 | ||||||||||||||||||||||||||||||
Interest income |
3,297,791 | 3,740,601 | 855,764 | 7,894,156 | 142,960 | 1,261,787 | 233,764 | 501,675 | (12,460 | ) | 10,021,882 | |||||||||||||||||||||||||||||
Interest expense |
(1,011,444 | ) | (1,387,369 | ) | (666,433 | ) | (3,065,246 | ) | (69,755 | ) | (280,445 | ) | (22 | ) | (218,517 | ) | 14,632 | (3,619,353 | ) | |||||||||||||||||||||
Net fee and commission income |
231,182 | 504,259 | 352,410 | 1,087,851 | 193,384 | 92,070 | (927 | ) | 212,723 | (209 | ) | 1,584,892 | ||||||||||||||||||||||||||||
Fee and commission income |
293,336 | 583,048 | 433,998 | 1,310,382 | 220,938 | 1,658,034 | 85 | 252,031 | (290,593 | ) | 3,150,877 | |||||||||||||||||||||||||||||
Fee and commission expense |
(62,154 | ) | (78,789 | ) | (81,588 | ) | (222,531 | ) | (27,554 | ) | (1,565,964 | ) | (1,012 | ) | (39,308 | ) | 290,384 | (1,565,985 | ) | |||||||||||||||||||||
Net insurance income |
| | | | | 20,825 | (166,095 | ) | | 27,467 | (117,803 | ) | ||||||||||||||||||||||||||||
Insurance income |
| | | | | 33,874 | 1,167,478 | | | 1,201,352 | ||||||||||||||||||||||||||||||
Insurance expenses |
| | | | | (13,049 | ) | (1,333,573 | ) | | 27,467 | (1,319,155 | ) | |||||||||||||||||||||||||||
Net gains (losses) on financial assets/ liabilities at fair value through profit or loss |
(1,166 | ) | | 198,064 | 196,898 | (212,522 | ) | | 8,154 | 7,851 | (9,149 | ) | (8,768 | ) | ||||||||||||||||||||||||||
Net other operating income(expense) |
(703,885 | ) | (609,456 | ) | 912,291 | (401,050 | ) | 134,057 | (86,411 | ) | 38,445 | 52,778 | (153,727 | ) | (415,908 | ) | ||||||||||||||||||||||||
General and administrative expenses |
(950,038 | ) | (2,102,384 | ) | (1,216,527 | ) | (4,268,949 | ) | (316,958 | ) | (348,121 | ) | (94,753 | ) | (266,124 | ) | 66,194 | (5,228,711 | ) | |||||||||||||||||||||
Operating profit before provision for credit losses |
862,440 | 145,651 | 435,569 | 1,443,660 | (128,834 | ) | 659,705 | 18,566 | 290,386 | (67,252 | ) | 2,216,231 | ||||||||||||||||||||||||||||
Provision (reversal) for credit losses |
(278,277 | ) | (2,615 | ) | 26,563 | (254,329 | ) | 9,083 | (249,809 | ) | (1,663 | ) | (42,893 | ) | 328 | (539,283 | ) |
73
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
(In millions of Korean won) | Banking business | |||||||||||||||||||||||||||||||||||||||
Corporate Banking |
Retail Banking |
Other Banking Services |
Sub-total | Securities | Credit Card | Life Insurance |
Others | Intra-group Adjustments |
Total | |||||||||||||||||||||||||||||||
Net operating income (expense) |
584,163 | 143,036 | 462,132 | 1,189,331 | (119,751 | ) | 409,896 | 16,903 | 247,493 | (66,924 | ) | 1,676,948 | ||||||||||||||||||||||||||||
Share of profit of associates and joint ventures |
| | 17,615 | 17,615 | 106,423 | (20 | ) | | 156,820 | | 280,838 | |||||||||||||||||||||||||||||
Net other non-operating income (expense) |
(1,300 | ) | | 50,611 | 49,311 | 634,863 | 2,262 | (148 | ) | (440 | ) | (14,979 | ) | 670,869 | ||||||||||||||||||||||||||
Segment profits before income tax |
582,863 | 143,036 | 530,358 | 1,256,257 | 621,535 | 412,138 | 16,755 | 403,873 | (81,903 | ) | 2,628,655 | |||||||||||||||||||||||||||||
Income tax benefit (expense) |
(140,910 | ) | (34,614 | ) | (116,477 | ) | (292,001 | ) | 20,765 | (95,035 | ) | (4,041 | ) | (66,262 | ) | (1,901 | ) | (438,475 | ) | |||||||||||||||||||||
Profit (loss) for the year |
441,953 | 108,422 | 413,881 | 964,256 | 642,300 | 317,103 | 12,714 | 337,611 | (83,804 | ) | 2,190,180 | |||||||||||||||||||||||||||||
Profit (loss) attributable to shareholders of the parent company |
441,953 | 108,422 | 413,881 | 964,256 | 642,300 | 317,103 | 12,714 | 291,175 | (83,804 | ) | 2,143,744 | |||||||||||||||||||||||||||||
Profit attributable to non-controlling interests |
| | | | | | | 46,436 | | 46,436 | ||||||||||||||||||||||||||||||
Total assets1 |
109,500,342 | 122,806,490 | 74,759,538 | 307,066,370 | 32,382,795 | 15,772,036 | 8,887,413 | 36,646,767 | (25,081,725 | ) | 375,673,656 | |||||||||||||||||||||||||||||
Total liabilities1 |
91,685,643 | 140,082,958 | 51,972,767 | 283,741,368 | 28,198,439 | 11,807,038 | 8,337,849 | 12,468,290 | (140,731 | ) | 344,412,253 |
1 | Assets and liabilities of the reporting segments are amounts before intra-segment transaction adjustment. |
74
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
5.2 Services and Geographical Segments
5.2.1 Services information
Operating revenues from external customers for each service for the year ended December 31, 2017 and 2016, are as follows:
(In millions of Korean won) | 2017 | 2016 | ||||||
Banking service |
||||||||
Securities service |
1,074,365 | 184,856 | ||||||
Non-life insurance service |
1,121,108 | | ||||||
Credit card service |
1,276,803 | 1,269,573 | ||||||
Life insurance service |
129,513 | 139,847 | ||||||
Other service |
345,077 | 396,566 | ||||||
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5.2.2 Geographical information
Geographical operating revenues from external customers for the year ended December 31, 2017 and 2016, and major non-current assets as of December 31, 2017 and 2016, are as follows:
(In millions of Korean won) | ||||||||||||||||
2017 | 2016 | |||||||||||||||
Revenues from external customers |
Major non- current assets |
Revenues from external customers |
Major non- current assets |
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Domestic |
||||||||||||||||
United States |
17,596 | 363,330 | 10,522 | 299 | ||||||||||||
New Zealand |
5,855 | 57 | 5,422 | 128 | ||||||||||||
China |
44,531 | 4,585 | 47,360 | 5,038 | ||||||||||||
Cambodia |
7,475 | 1,753 | 6,109 | 1,216 | ||||||||||||
United Kingdom |
11,547 | 319 | 10,987 | 149 | ||||||||||||
Others |
26,925 | 78,142 | 9,844 | 2,242 | ||||||||||||
adjustment |
| 72,455 | | 72,971 | ||||||||||||
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75
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
6. Financial Assets and Financial Liabilities
6.1 Classification and Fair Value of Financial Instruments
Carrying amount and fair value of financial assets and liabilities as of December 31, 2017 and 2016, are as follows:
(In millions of Korean won) | 2017 | 2016 | ||||||||||||||
Carrying amount |
Fair value | Carrying amount |
Fair value | |||||||||||||
Financial assets |
||||||||||||||||
Cash and due from financial institutions |
||||||||||||||||
Financial assets held for trading |
30,177,293 | 30,177,293 | 26,099,518 | 26,099,518 | ||||||||||||
Debt securities |
25,168,338 | 25,168,338 | 22,986,570 | 22,986,570 | ||||||||||||
Equity securities |
4,935,100 | 4,935,100 | 3,040,599 | 3,040,599 | ||||||||||||
Others |
73,855 | 73,855 | 72,349 | 72,349 | ||||||||||||
Financial assets designated at fair value through profit or loss |
2,050,052 | 2,050,052 | 1,758,846 | 1,758,846 | ||||||||||||
Debt securities |
368,820 | 368,820 | 331,664 | 331,664 | ||||||||||||
Equity securities |
67,828 | 67,828 | 65,591 | 65,591 | ||||||||||||
Derivative-linked securities |
1,613,404 | 1,613,404 | 1,361,591 | 1,361,591 | ||||||||||||
Derivatives held for trading |
2,998,042 | 2,998,042 | 3,298,328 | 3,298,328 | ||||||||||||
Derivatives held for hedging |
312,124 | 312,124 | 83,607 | 83,607 | ||||||||||||
Loans |
290,122,838 | 289,807,038 | 265,486,134 | 265,144,250 | ||||||||||||
Available-for-sale financial assets |
48,116,263 | 48,116,263 | 33,970,293 | 33,970,293 | ||||||||||||
Debt securities |
38,959,401 | 38,959,401 | 27,445,752 | 27,445,752 | ||||||||||||
Equity securities |
9,156,862 | 9,156,862 | 6,524,541 | 6,524,541 | ||||||||||||
Held-to-maturity financial assets |
18,491,980 | 18,483,065 | 11,177,504 | 11,400,616 | ||||||||||||
Other financial assets |
10,195,015 | 10,195,015 | 7,322,335 | 7,322,335 | ||||||||||||
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Financial liabilities |
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Financial liabilities held for trading |
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Financial liabilities designated at fair value through profit or loss |
10,078,288 | 10,078,288 | 10,979,326 | 10,979,326 | ||||||||||||
Derivatives held for trading |
3,054,614 | 3,054,614 | 3,717,819 | 3,717,819 | ||||||||||||
Derivatives held for hedging |
88,151 | 88,151 | 89,309 | 89,309 | ||||||||||||
Deposits |
255,800,048 | 256,222,490 | 239,729,695 | 240,223,353 | ||||||||||||
Debts |
28,820,928 | 28,814,801 | 26,251,486 | 26,247,768 | ||||||||||||
Debentures |
44,992,724 | 44,400,325 | 34,992,057 | 35,443,751 | ||||||||||||
Other financial liabilities |
18,330,004 | 18,328,276 | 16,286,578 | 16,257,142 | ||||||||||||
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76
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
The fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. For each class of financial assets and financial liabilities, the Group discloses the fair value of that class of assets and liabilities in a way that permits it to be compared with its carrying amount at the end of each reporting period. The best evidence of fair value of financial instruments is a quoted price in an active market.
Methods of determining fair value for financial instruments are as follows:
Cash and due from financial institutions | The carrying amounts of cash and demand due from financial institutions and payment due from financial institutions are a reasonable approximation of fair values. These financial instruments do not have a fixed maturity and are receivable on demand. Fair value of ordinary due from financial institutions is measured using DCF model (Discounted Cash Flow Model). | |
Investment securities | The fair value of financial instruments that are quoted in active markets is determined using the quoted prices. Fair value is determined through the use of external professional valuation institution where quoted prices are not available. The institutions use one or more of the following valuation techniques including DCF Model, Free Cash Flow to Equity Model, Comparable Company Analysis, Dividend Discount Model, Risk Adjusted Discount Rate Method, and Net Asset Value Method. | |
Loans | DCF model is used to determine the fair value of loans. Fair value is determined by discounting the expected cash flows, which are contractual cash flows adjusted by the expected prepayment rate, at appropriate discount rate. | |
Derivatives and Financial assets at fair value through profit or loss | For exchange traded derivatives, quoted price in an active market is used to determine fair value and for OTC derivatives, fair value is determined using valuation techniques. The Group uses internally developed valuation models that are widely used by market participants to determine fair values of plain vanilla OTC derivatives including options, interest rate swaps, and currency swaps, based on observable market parameters. However, some complex financial instruments are valued using appropriate models developed from generally accepted market valuation models including the Finite Difference Method, the Monte Carlo Simulation, Black-Scholes Model, Hull and White Model, Closed Form and Tree Model or valuation results from independent external professional valuation institution. | |
Deposits | Carrying amount of demand deposits is regarded as representative of fair value because they do not have a fixed maturity and are payable on demand. Fair value of time deposits is determined using a DCF model. Fair value is determined by discounting the expected cash flows, which are contractual cash flows adjusted by the expected prepayment rate, at an appropriate discount rate. | |
Debts | Carrying amount of overdraft in foreign currency is regarded as representative of fair value because they do not have a fixed maturity and are payable on demand. Fair value of other debts is determined using a DCF model discounting contractual future cash flows at an appropriate discount rate. | |
Debentures | Fair value is determined by using the valuations of external professional valuation institution, which are calculated using market inputs. | |
Other financial assets and liabilities | The carrying amounts are reasonable approximation of fair values. These financial instruments are temporary accounts used for other various transactions and their maturities are relatively short or not defined. However, fair value of finance lease liabilities is measured using a DCF model. |
77
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
Fair value hierarchy
The Group believes that valuation methods used for measuring the fair values of financial instruments are reasonable and that the fair values recognized in the statements of financial position are appropriate. However, the fair values of the financial instruments recognized in the statements of financial position may be different if other valuation methods or assumptions are used. Additionally, as there is a variety of valuation techniques and assumptions used in measuring fair value, it may be difficult to reasonably compare the fair value with that of other financial institutions.
The Group classifies and discloses fair value of the financial instruments into the three-level hierarchy as follows:
Level 1: The fair values are based on quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date.
Level 2: The fair values are based on inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.
Level 3: The fair values are based on unobservable inputs for the asset or liability.
The level in the fair value hierarchy within which the fair value measurement is categorized in its entirety shall be determined on the basis of the lowest level input that is significant to the fair value measurement in its entirety. For this purpose, the significance of an input is assessed against the fair value measurement in its entirety. If a fair value measurement uses observable inputs that require significant adjustment based on unobservable inputs, that measurement is a Level 3 measurement.
78
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
Fair value hierarchy of financial assets and liabilities measured at fair value in the statements of financial position
The fair value hierarchy of financial assets and liabilities measured at fair value in the statements of financial position as of December 31, 2017 and 2016, is as follows:
(In millions of Korean won) | 2017 | |||||||||||||||
Fair value hierarchy | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Financial assets |
||||||||||||||||
Financial assets held for trading |
||||||||||||||||
Debt securities |
||||||||||||||||
Equity securities |
2,340,497 | 2,594,603 | | 4,935,100 | ||||||||||||
Others |
73,855 | | | 73,855 | ||||||||||||
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10,229,273 | 19,948,020 | | 30,177,293 | |||||||||||||
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Financial assets designated at fair value through profit or loss |
||||||||||||||||
Debt securities |
| 66,969 | 301,851 | 368,820 | ||||||||||||
Equity securities |
| | 67,828 | 67,828 | ||||||||||||
Derivative-linked securities |
| 668,739 | 944,665 | 1,613,404 | ||||||||||||
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| 735,708 | 1,314,344 | 2,050,052 | |||||||||||||
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Derivatives held for trading |
80,678 | 2,720,285 | 197,079 | 2,998,042 | ||||||||||||
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Derivatives held for hedging |
| 311,349 | 775 | 312,124 | ||||||||||||
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Available-for-sale financial assets1 |
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Debt securities |
10,446,001 | 28,464,019 | 49,381 | 38,959,401 | ||||||||||||
Equity securities |
1,550,766 | 1,789,501 | 5,816,595 | 9,156,862 | ||||||||||||
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11,996,767 | 30,253,520 | 5,865,976 | 48,116,263 | |||||||||||||
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Financial liabilities |
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Financial liabilities held for trading |
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Financial liabilities designated at fair value through profit or loss |
843 | 1,389,553 | 8,687,892 | 10,078,288 | ||||||||||||
Derivatives held for trading |
272,766 | 2,717,862 | 63,986 | 3,054,614 | ||||||||||||
Derivatives held for hedging |
| 88,081 | 70 | 88,151 | ||||||||||||
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79
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
(In millions of Korean won) | 2016 | |||||||||||||||
Fair value hierarchy | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Financial assets |
||||||||||||||||
Financial assets held for trading |
||||||||||||||||
Debt securities |
||||||||||||||||
Equity securities |
1,137,531 | 1,903,068 | | 3,040,599 | ||||||||||||
Others |
72,349 | | | 72,349 | ||||||||||||
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8,636,360 | 17,463,158 | | 26,099,518 | |||||||||||||
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Financial assets designated at fair value through profit or loss |
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Debt securities |
| 237,595 | 94,069 | 331,664 | ||||||||||||
Equity securities |
| | 65,591 | 65,591 | ||||||||||||
Derivative-linked securities |
| 757,979 | 603,612 | 1,361,591 | ||||||||||||
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| 995,574 | 763,272 | 1,758,846 | |||||||||||||
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Derivatives held for trading |
128,236 | 3,033,156 | 136,936 | 3,298,328 | ||||||||||||
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Derivatives held for hedging |
| 82,144 | 1,463 | 83,607 | ||||||||||||
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Available-for-sale financial assets1 |
||||||||||||||||
Debt securities |
10,456,882 | 16,978,619 | 10,251 | 27,445,752 | ||||||||||||
Equity securities |
1,112,502 | 2,349,998 | 3,062,041 | 6,524,541 | ||||||||||||
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11,569,384 | 19,328,617 | 3,072,292 | 33,970,293 | |||||||||||||
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Financial liabilities |
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Financial liabilities held for trading |
||||||||||||||||
Financial liabilities designated at fair value through profit or loss |
566 | 3,181,621 | 7,797,139 | 10,979,326 | ||||||||||||
Derivatives held for trading |
474,921 | 3,041,052 | 201,846 | 3,717,819 | ||||||||||||
Derivatives held for hedging |
| 89,123 | 186 | 89,309 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
|
|
|
|
|
|
|
|
1 | The amounts of equity securities carried at cost in Level 3, which do not have a quoted market price in an active market and cannot be measured reliably at fair value, are |
80
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
Valuation techniques and the inputs used in the fair value measurement classified as Level 2
Financial assets and liabilities measured at fair value classified as Level 2 in the statements of financial position as of December 31, 2017 and 2016, are as follows:
(In millions of Korean won) | ||||||||||||
Fair value | Valuation techniques | Inputs | ||||||||||
2017 | 2016 | |||||||||||
Financial assets |
||||||||||||
Financial assets held for trading |
||||||||||||
Debt securities |
DCF Model, option model | Underlying asset Index, Discount rate, Volatility | ||||||||||
Equity securities |
2,594,603 | 1,903,068 | DCF Model, Net Asset Value, Option Model | Underlying asset Index, Volatility, Discount rate, Fair value of underlying asset | ||||||||
|
|
|
|
|||||||||
19,948,020 | 17,463,158 | |||||||||||
|
|
|
|
|||||||||
Financial assets designated at fair value through profit or loss |
||||||||||||
Debt securities |
66,969 | 237,595 | DCF Model, Hull and White Model, | Discount rate, Volatility | ||||||||
Derivative-linked securities |
668,739 | 757,979 | DCF Model, Closed Form, Monte Carlo Simulation, Option Model | Underlying asset Index, Discount rate, Volatility | ||||||||
|
|
|
|
|||||||||
735,708 | 995,574 | |||||||||||
|
|
|
|
|||||||||
Derivatives held for trading |
2,720,285 | 3,033,156 | DCF Model, Closed Form, FDM, Monte Carlo Simulation, Black-Scholes Model, Hull and White Model and Others | Underlying asset Index, Discount rate, Volatility, Foreign exchange rate, Dividend rate and others | ||||||||
Derivatives held for hedging |
311,349 | 82,144 | DCF Model, Closed Form, FDM | Discount rate, Volatility, Foreign exchange rate and others | ||||||||
Available-for-sale financial assets |
||||||||||||
Debt securities |
28,464,019 | 16,978,619 | DCF Model, option model, Net Asset Value | Discount rate | ||||||||
Equity securities |
1,789,501 | 2,349,998 | DCF Model, Option Model, Net Asset Value | Discount rate, Fair value of underlying asset | ||||||||
|
|
|
|
|||||||||
30,253,520 | 19,328,617 | |||||||||||
|
|
|
|
|||||||||
|
|
|
|
|||||||||
Financial liabilities |
||||||||||||
Financial liabilities designated at fair value through profit or loss |
||||||||||||
Derivative-linked securities |
DCF Model, Closed Form, FDM, Monte Carlo Simulation, Black-Scholes Model, Hull and White Model and others | Price of Underlying asset, Discount rate, Dividend rate, Volatility | ||||||||||
|
|
|
|
|||||||||
1,389,553 | 3,181,621 | |||||||||||
|
|
|
|
|||||||||
Derivatives held for trading |
2,717,862 | 3,041,052 | DCF Model, Closed Form, FDM, Monte Carlo Simulation, Black-Scholes Model, Hull and White Model , Option Valuation Model and others | Discount rate, Price of Underlying asset , Volatility, Foreign exchange rate, Credit Spread, Stock price and others | ||||||||
Derivatives held for hedging |
88,081 | 89,123 | DCF Model, Closed Form, FDM | Discount rate, Volatility, Foreign exchange rate and others | ||||||||
|
|
|
|
|||||||||
|
|
|
|
81
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
Fair value hierarchy of financial assets and liabilities whose fair values are disclosed
The fair value hierarchy of financial assets and liabilities whose the fair values are disclosed as of December 31, 2017 and 2016, are as follows:
(In millions of Korean won) | 2017 | |||||||||||||||
Fair value hierarchy | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Financial assets |
||||||||||||||||
Cash and due from financial institutions1 |
||||||||||||||||
Loans |
| 569,625 | 289,237,413 | 289,807,038 | ||||||||||||
Held-to-maturity financial assets |
4,825,393 | 13,653,429 | 4,243 | 18,483,065 | ||||||||||||
Other financial assets2 |
| | 10,195,015 | 10,195,015 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
|
|
|
|
|
|
|
|
|||||||||
Financial liabilities |
||||||||||||||||
Deposits1 |
\131,068,206 | \256,222,490 | ||||||||||||||
Debts3 |
| 853,615 | 27,961,186 | 28,814,801 | ||||||||||||
Debentures |
| 41,058,076 | 3,342,249 | 44,400,325 | ||||||||||||
Other financial liabilities4 |
| | 18,328,276 | 18,328,276 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
|
|
|
|
|
|
|
|
(In millions of Korean won) | 2016 | |||||||||||||||
Fair value hierarchy | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Financial assets |
||||||||||||||||
Cash and due from financial institutions1 |
||||||||||||||||
Loans |
| | 265,144,250 | 265,144,250 | ||||||||||||
Held-to-maturity financial assets |
1,505,288 | 9,895,328 | | 11,400,616 | ||||||||||||
Other financial assets2 |
| | 7,322,335 | 7,322,335 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
|
|
|
|
|
|
|
|
|||||||||
Financial liabilities |
||||||||||||||||
Deposits1 |
||||||||||||||||
Debts3 |
| 1,444,983 | 24,802,785 | 26,247,768 | ||||||||||||
Debentures |
| 33,504,039 | 1,939,712 | 35,443,751 | ||||||||||||
Other financial liabilities4 |
| | 16,257,142 | 16,257,142 | ||||||||||||
|
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|
|
|
|
|||||||||
|
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|
|
|
|
1 | The amounts included in Level 2 are the carrying amounts which are reasonable approximations of the fair values. |
2 | Other financial assets of |
3 | Debts of |
4 | Other financial liabilities of |
82
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
Valuation techniques and the inputs used in the fair value measurement
Financial assets and liabilities whose carrying amount is a reasonable approximation of fair value are not subject to disclose valuation techniques and inputs.
Valuation techniques and inputs of financial assets and liabilities whose fair values are disclosed and classified as Level 2 as of December 31, 2017 and 2016, are as follows:
(In millions of Korean won) | Fair value | Valuation technique |
Inputs | |||||||||||||
2017 | 2016 | |||||||||||||||
Financial assets |
||||||||||||||||
Loans |
DCF Model | Discount rate | ||||||||||||||
Held-to-maturity financial assets |
13,653,429 | 9,895,328 | DCF Model | Discount rate | ||||||||||||
Financial liabilities |
||||||||||||||||
Debts |
833,795 | 1,374,359 | DCF Model | Discount rate | ||||||||||||
Debentures |
41,058,076 | 33,504,039 | DCF Model | Discount rate |
Valuation techniques and inputs of financial assets and liabilities whose fair values are disclosed and classified as Level 3 as of December 31, 2017 and 2016, are as follows:
(In millions of Korean won) | Fair value | Valuation technique |
Inputs | |||||||||||
2017 | 2016 | |||||||||||||
Financial assets |
||||||||||||||
Cash and due from financial institutions |
DCF Model | Credit spread, Other spread, Interest rates | ||||||||||||
Loans |
289,237,413 | 265,144,250 | DCF Model | Credit spread, Other spread, Prepayment rate, Interest rates | ||||||||||
Held-to-maturity financial assets |
4,243 | | DCF Model | Interest rates | ||||||||||
|
|
|
|
|||||||||||
|
|
|
|
|||||||||||
Financial liabilities |
||||||||||||||
Deposits |
DCF Model | Other spread, Prepayment rate, Interest rates | ||||||||||||
Debts |
27,961,186 | 24,802,785 | DCF Model | Other spread, Interest rates | ||||||||||
Debentures |
3,342,249 | 1,939,712 | DCF Model | Other spread, Implied default probability, Interest rates | ||||||||||
Other financial liabilities |
445,367 | 366,377 | DCF Model | Other spread, Interest rates | ||||||||||
|
|
|
|
|||||||||||
|
|
|
|
83
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
6.2 Level 3 of the Fair Value Hierarchy Disclosure
6.2.1 Valuation Policy and Process for Fair Value Measurement Categorized Within Level 3.
The Group uses external, independent and qualified professional valuers valuation to determine the fair value of the Groups assets at the end of every reporting period.
Where a reclassification between the levels of the fair value hierarchy occurs for a financial asset or liability, the Groups policy is to recognize such transfers as having occurred at the beginning of the reporting period.
6.2.2 Changes in Fair Value (Level 3) Measured Using Valuation Technique Based on Unobservable in Market
Details of changes in Level 3 of the fair value hierarchy for the years ended December 31, 2017 and 2016, are as follows:
(In millions of Korean won) | 2017 | |||||||||||||||||||
Financial assets at fair value through profit or loss |
Financial investments |
Financial liabilities at fair value through profit or loss |
Net derivatives financial instruments |
|||||||||||||||||
Designated at fair value through profit or loss |
Available-for- sale financial assets |
Designated at fair value through profit or loss |
Derivatives held for trading |
Derivatives held for hedging |
||||||||||||||||
Beginning balance |
||||||||||||||||||||
Total gains or losses |
||||||||||||||||||||
- Profit or loss |
52,936 | (20,827 | ) | (846,704 | ) | 504,627 | (408 | ) | ||||||||||||
- Other comprehensive income |
| 6,356 | | | | |||||||||||||||
Purchases |
1,315,500 | 1,713,098 | | 35,649 | | |||||||||||||||
Sales |
(1,076,928 | ) | (916,778 | ) | | (270,435 | ) | | ||||||||||||
Issues |
| | (11,528,433 | ) | (67,958 | ) | | |||||||||||||
Settlements |
(264,816 | ) | | 11,484,384 | (3,760 | ) | (164 | ) | ||||||||||||
Transfers into Level 31 |
| 14,168 | | | | |||||||||||||||
Transfers out of Level 31 |
| (922 | ) | | (642 | ) | | |||||||||||||
Business combination |
524,380 | 2,038,779 | | 522 | ||||||||||||||||
Changes from replacement of assets Of disposal group as held for sale |
| (40,190 | ) | | | | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Ending balance |
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
84
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
(In millions of Korean won) | 2016 | |||||||||||||||||||
Financial assets at fair value through profit or loss |
Financial investments |
Financial liabilities at fair value through profit or loss |
Net derivatives financial instruments |
|||||||||||||||||
Designated at fair value through profit or loss |
Available-for- sale financial assets |
Designated at fair value through profit or loss |
Derivatives held for trading |
Derivatives held for hedging |
||||||||||||||||
Beginning balance |
||||||||||||||||||||
Total gains or losses |
||||||||||||||||||||
- Profit or loss |
62,717 | (12,038 | ) | (382,798 | ) | 25,649 | 676 | |||||||||||||
- Other comprehensive income |
| 86,320 | | | | |||||||||||||||
Purchases |
278,743 | 744,221 | | 33,664 | | |||||||||||||||
Sales |
(345,846 | ) | (288,082 | ) | | (178,670 | ) | | ||||||||||||
Issues |
| | (4,085,714 | ) | (26,049 | ) | | |||||||||||||
Settlements |
(118,913 | ) | | 4,182,978 | 282,671 | (113 | ) | |||||||||||||
Transfers into Level 31 |
| | | 8,815 | | |||||||||||||||
Transfers out of Level 31 |
(337,217 | ) | (24,816 | ) | 2,388,485 | (72,571 | ) | | ||||||||||||
Business combination |
836,950 | 678,248 | (8,080,711 | ) | (49,377 | ) | | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Ending balance |
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
1 | The Changes in levels for the financial instruments occurred due to the change in the availability of observable market data. |
85
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
In relation to changes in Level 3 of the fair value hierarchy, total gains or losses recognized in profit or loss for the period, and total gains or losses for the period included in profit or loss for financial instruments held at the end of the reporting period in the statements of comprehensive income for the years ended December 31, 2017 and 2016, are as follows:
(In millions of Korean won) | 2017 | |||||||||||
Net income (loss) from financial investments at fair value through profit or loss |
Other operating income(loss) |
Net interest income |
||||||||||
Total gains or losses included in profit or loss for the period |
||||||||||||
Total gains or losses for the period included in profit or loss for financial instruments held at the end of the reporting period |
48,333 | (90,103 | ) | | ||||||||
(In millions of Korean won) | 2016 | |||||||||||
Net income(loss) from financial investments at fair value through profit or loss |
Other operating income(loss) |
Net interest income |
||||||||||
Total gains or losses included in profit or loss for the period |
||||||||||||
Total gains or losses for the period included in profit or loss for financial instruments held at the end of the reporting period |
(89,797 | ) | (15,306 | ) | |
86
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
6.2.3 Sensitivity Analysis of Changes in Unobservable Inputs
Information about fair value measurements using unobservable inputs as of December 31, 2017 and 2016, are as follows:
(In millions of Korean won) | 2017 | |||||||||||||
Fair value | Valuation technique | Unobservable inputs | Range of unobservable inputs(%) |
Relationship of unobservable inputs to fair value | ||||||||||
Financial assets |
||||||||||||||
Financial assets designated at fair value through profit or loss |
||||||||||||||
Debt securities |
Tree Model, DCF Model, Hull and White Model |
Volatility of the underlying asset |
9.96 ~ 29.53 | The higher the volatility, the higher the fair value fluctuation | ||||||||||
Equity securities |
67,828 | Tree Model |
Volatility of the underlying asset |
11.45 ~ 24.01 | The higher the volatility, the higher the fair value fluctuation | |||||||||
Derivative-linked securities |
944,665 | DCF Model, Closed Form, FDM, Monte Carlo Simulation, Hull and White Model, Black-Scholes Model, Option Model, Tree Model |
Volatility of the underlying asset |
10.00 ~ 30.07 | The higher the volatility, the higher the fair value fluctuation | |||||||||
Recovery rate |
40.00 | The higher the recovery rate, the higher the fair value | ||||||||||||
Correlation between underlying assets |
8.27 ~ 90.00 | The higher the correlation, the higher the fair value fluctuation | ||||||||||||
Derivatives held for trading |
||||||||||||||
Stock and index |
138,972 | DCF Model, FDM, Closed Form, Monte Carlo Simulation, Hull and White Model, Black-Scholes Model, Tree Model |
Volatility of the underlying asset |
1.00 ~ 39.00 | The higher the volatility, the higher the fair value fluctuation | |||||||||
Correlation between underlying assets |
3.00 ~ 67.00 | The higher the value of correlation, the higher the fair value fluctuation | ||||||||||||
Currency, Interest rate and others |
58,107 | DCF Model, Closed Form, Monte Carlo Simulation, Hull and White Model, Black-Scholes Model, Tree Model, Option Model |
Loss given default |
0.56 | The higher the loss given default, the lower the fair value | |||||||||
Volatility of the interest rate |
0.47 | The higher the volatility, the higher the fair value fluctuation | ||||||||||||
Volatility of the underlying asset |
3.00 ~ 51.00 | The higher the volatility, the higher the fair value fluctuation | ||||||||||||
Correlation between underlying assets |
-13.00 ~ 90.00 | The higher the absolute value of correlation, the higher the fair value fluctuation | ||||||||||||
Derivatives held for hedging |
||||||||||||||
Interest rate |
775 | DCF Model, Closed Form, FDM, Monte Carlo Simulation |
Volatility of the underlying asset |
3.02 | The higher the volatility, the higher the fair value fluctuation | |||||||||
Available-for-sale financial assets |
||||||||||||||
Debt securities |
49,381 | DCF Model, Option Model, Net asset value method, Market approach |
Discount rate |
2.57 ~ 11.08 | The lower the discount rate, the higher the fair value | |||||||||
Volatility |
15.26 ~ 30.07 | The Volatility is different for each item | ||||||||||||
Correlation between underlying assets |
48.82 ~ 82.16 | The coefficient of correlation is different for each item | ||||||||||||
Growth rate |
0.00 ~ 2.20 | The higher the growth rate, the higher the fair value |
87
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
Equity securities |
5,816,595 | DCF Model, Comparable Company Analysis, Adjusted discount rate method, Dividend Discount Model, Net asset value method, Discounted cash flows to equity, Income approach, Market approach, One Factor Hull-White Model, Usage of past transactions, Cost methods, Asset value approach, Tree Model, Net asset value Valuation and others |
Growth rate |
-1.00 ~ 1.00 | The higher the growth rate, the higher the fair value | |||||||||
Discount rate |
-1.00 ~ 52.68 | The lower the discount rate, the higher the fair value | ||||||||||||
Asset value |
-1.00 ~ 1.00 | The higher the asset value, the higher the fair value | ||||||||||||
Correlation between underlying assets |
48.82 ~ 82.16 | The coefficient of correlation is different for each item | ||||||||||||
Volatility |
15.26 ~ 30.07 | The Volatility is different for each item | ||||||||||||
|
|
|||||||||||||
|
|
|||||||||||||
Financial liabilities |
|
|||||||||||||
Financial liabilities designated at fair value through profit or loss |
||||||||||||||
Derivative-linked securities |
DCF Model, Closed Form, FDM, Monte Carlo Simulation, Hull and White Model, Black Scholes-Model |
Volatility of the underlying asset |
1.00 ~ 52.00 | The higher the volatility, the higher the fair value fluctuation | ||||||||||
Correlation between underlying assets |
-13.42 ~ 90.24 | The higher the absolute value of correlation, the higher the fair value fluctuation | ||||||||||||
Derivatives held for trading |
||||||||||||||
Stock and index |
14,796 | DCF Model, Closed Form, Monte Carlo Simulation, FDM |
Volatility of the underlying asset |
1.00 ~ 33.00 | The higher the volatility, the higher the fair value fluctuation | |||||||||
Correlation between underlying assets |
7.00 ~ 67.00 | The higher the correlation, the higher the fair value fluctuation | ||||||||||||
Others |
49,190 | DCF Model, Closed Form, Monte Carlo Simulation, Hull and White Model, Option Model |
Volatility of the stock price |
15.84 | The higher the volatility, the higher the fair value fluctuation | |||||||||
Volatility of the interest rate |
0.47 | The higher the volatility, the higher the fair value fluctuation | ||||||||||||
Discount rate |
2.57 ~ 2.69 | The lower the discount rate, the higher the fair value | ||||||||||||
Volatility of the underlying asset |
1.00 ~ 49.00 | The higher the volatility, the higher the fair value fluctuation | ||||||||||||
Correlation between underlying assets |
25.00 ~ 90.00 | The higher the correlation, the higher the fair value fluctuation | ||||||||||||
Derivatives held for hedging |
||||||||||||||
Interest rate |
70 | DCF Model, Closed Form, FDM, Monte Carlo Simulation, Tree Model |
Volatility of the underlying asset |
2.64 | The higher the volatility, the higher the fair value fluctuation | |||||||||
|
|
|||||||||||||
|
|
88
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
(In millions of Korean won) | 2016 | |||||||||||||
Fair value | Valuation technique | Unobservable inputs | Range of unobservable inputs(%) |
Relationship of unobservable inputs to fair value | ||||||||||
Financial assets |
||||||||||||||
Financial assets designated at fair value through profit or loss |
|
|||||||||||||
Debt securities |
Black-Scholes Model |
Volatility of the underlying asset |
10.51 ~ 27.70 | The higher the volatility, the higher the fair value fluctuation | ||||||||||
Equity securities |
65,591 | Black-Scholes Model |
Volatility of the underlying asset |
10.51 ~ 30.97 | The higher the volatility, the higher the fair value fluctuation | |||||||||
Derivative-linked securities |
603,612 | DCF Model, Closed Form, FDM, Monte Carlo Simulation, Hull and White Model ,Black-Scholes Model |
Volatility of the underlying asset |
15.00 ~ 49.00 | The higher the volatility, the higher the fair value fluctuation | |||||||||
Correlation between underlying assets |
4.00 ~ 73.07 | The higher the correlation, the higher the fair value fluctuation | ||||||||||||
Derivatives held for trading |
|
|||||||||||||
Stock and index |
124,888 | DCF Model, Closed Form, FDM, Monte Carlo Simulation, Hull and White Model, Black-Scholes Model, Tree Model |
Volatility of the underlying asset |
5.60 ~ 55.00 | The higher the volatility, the higher the fair value fluctuation | |||||||||
Correlation between underlying assets |
4.00 ~ 69.00 | The higher the correlation, the higher the fair value fluctuation | ||||||||||||
Currency, interest rate and others |
12,048 | DCF Model, Hull and White Model, Closed Form, Monte Carlo Simulation, Tree Model |
Loss given default |
0.80 ~ 0.84 | The higher the loss given default, the lower the fair value | |||||||||
Volatility of the stock price |
14.82 ~ 30.97 | The higher the volatility, the higher the fair value fluctuation | ||||||||||||
Volatility of the interest rate |
0.57 | The higher the volatility, the higher the fair value fluctuation | ||||||||||||
Volatility of the underlying asset |
18.00 ~ 59.00 | The higher the volatility, the higher the fair value fluctuation | ||||||||||||
Correlation between underlying assets |
-5.00 ~ 47.00 | The higher the absolute value of correlation, the higher the fair value fluctuation | ||||||||||||
Derivatives held for hedging |
|
|||||||||||||
Interest rate |
1,463 | DCF Model, Closed Form, FDM, Monte Carlo Simulation, Tree Model |
Volatility of the underlying asset |
5.04 | The higher the volatility, the higher the fair value fluctuation | |||||||||
Available-for-sale financial assets |
|
|||||||||||||
Debt securities |
10,251 | DCF Model |
Discount rate |
6.55 | The lower the discount rate, the higher the fair value | |||||||||
Equity securities |
3,062,041 | DCF Model, Comparable Company Analysis, Adjusted discount rate method, Net asset value method, Dividend discount model, Hull and White model, Discounted cash flows to equity, Income approach |
Growth rate |
0.00 ~ 1.00 | The higher the growth rate, the higher the fair value | |||||||||
Discount rate |
1.49 ~ 22.01 | The lower the discount rate, the higher the fair value | ||||||||||||
Liquidation value |
0.00 | The higher the liquidation value, the higher the fair value | ||||||||||||
Recovery rate of receivables acquisition cost |
155.83 | The higher the recovery rate of receivables acquisition cost, the higher the fair value | ||||||||||||
|
|
|||||||||||||
|
|
89
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
Financial liabilities |
||||||||||||||
Financial liabilities designated at fair value through profit or loss |
|
|||||||||||||
Derivative-linked securities |
DCF Model, Closed Form, FDM, Monte Carlo Simulation, Hull and White Model, Black Scholes-Model |
Volatility of the underlying asset |
1.00 ~ 49.00 | The higher the volatility, the higher the fair value fluctuation | ||||||||||
Correlation between underlying assets |
-5.00 ~ 77.00 | The higher the absolute value of correlation, the higher the fair value fluctuation | ||||||||||||
Derivatives held for trading |
|
|||||||||||||
Stock and index |
153,419 | DCF Model, Closed Form, FDM, Monte Carlo Simulation |
Volatility of the underlying asset |
17.00 ~ 43.00 | The higher the volatility, the higher the fair value fluctuation | |||||||||
Correlation between underlying assets |
4.00 ~ 59.00 | The higher the correlation, the higher the fair value fluctuation | ||||||||||||
Others |
48,427 | DCF Model, Closed Form, Monte Carlo Simulation, Hull and White Model, Tree Model |
Volatility of the stock price |
14.82 | The higher the volatility, the higher the fair value fluctuation | |||||||||
Volatility of the interest rate |
0.57 ~ 37.15 | The higher the volatility, the higher the fair value fluctuation | ||||||||||||
Discount rate |
2.09 | The lower the discount rate, the higher the fair value | ||||||||||||
Volatility of the underlying asset |
18.00 ~ 30.15 | The higher the volatility, the higher the fair value fluctuation | ||||||||||||
Correlation between underlying assets |
-5.00 ~ 47.00 | The higher the absolute value of correlation, the higher the fair value fluctuation | ||||||||||||
Derivatives held for hedging |
|
|||||||||||||
Interest rate |
186 | DCF Model, Closed Form, FDM, Monte Carlo Simulation, Tree Model |
Volatility of the underlying asset |
2.74 | The higher the volatility, the higher the fair value fluctuation | |||||||||
|
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|||||||||||||
|
|
90
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
Sensitivity analysis of changes in unobservable inputs
Sensitivity analysis of financial instruments is performed to measure favorable and unfavorable changes in the fair value of financial instruments which are affected by the unobservable parameters, using a statistical technique. When the fair value is affected by more than two input parameters, the amounts represent the most favorable or most unfavorable. Level 3 financial instruments subject to sensitivity analysis are equity-related derivatives, currency-related derivatives and interest rate-related derivatives whose fair value changes are recognized in profit or loss as well as debt securities and unlisted equity securities (including private equity funds) whose fair value changes are recognized in profit or loss or other comprehensive income.
The results of the sensitivity analysis from changes in inputs are as follows:
(In millions of Korean won) | 2017 | |||||||||||||||
Recognition in profit or loss |
Other comprehensive income |
|||||||||||||||
Favorable changes |
Unfavorable changes |
Favorable changes |
Unfavorable changes |
|||||||||||||
Financial assets |
||||||||||||||||
Financial assets designated at fair value through profit or loss1 |
||||||||||||||||
Debt securities |
||||||||||||||||
Equity securities |
654 | (626 | ) | | | |||||||||||
Derivative-linked securities |
6,906 | (6,820 | ) | | | |||||||||||
Derivatives held for trading2 |
25,616 | (28,488 | ) | | | |||||||||||
Derivatives held for hedging2 |
| | | | ||||||||||||
Available-for-sale financial assets |
||||||||||||||||
Debt securities3 |
| | 205 | (51 | ) | |||||||||||
Equity securities4 |
| | 126,916 | (71,396 | ) | |||||||||||
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Financial liabilities |
||||||||||||||||
Financial liabilities designated at fair value through profit or loss1 |
||||||||||||||||
Derivatives held for trading2 |
11,091 | (10,827 | ) | | | |||||||||||
Derivatives held for hedging2 |
2 | (2 | ) | | | |||||||||||
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91
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
(In millions of Korean won) | 2016 | |||||||||||||||
Recognition in profit or loss |
Other comprehensive income |
|||||||||||||||
Favorable changes |
Unfavorable changes |
Favorable changes |
Unfavorable changes |
|||||||||||||
Financial assets |
||||||||||||||||
Financial assets designated at fair value through profit or loss1 |
||||||||||||||||
Debt securities |
||||||||||||||||
Equity securities |
840 | (521 | ) | | | |||||||||||
Derivative-linked securities |
5,666 | (5,463 | ) | | | |||||||||||
Derivatives held for trading2 |
28,334 | (29,486 | ) | | | |||||||||||
Derivatives held for hedging2 |
9 | (6 | ) | | | |||||||||||
Available-for-sale financial assets |
||||||||||||||||
Debt securities3 |
| | 69 | (45 | ) | |||||||||||
Equity securities4 |
| | 168,225 | (87,529 | ) | |||||||||||
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Financial liabilities |
||||||||||||||||
Financial liabilities designated at fair value through profit or loss1 |
||||||||||||||||
Derivatives held for trading2 |
31,759 | (33,715 | ) | | | |||||||||||
Derivatives held for hedging2 |
3 | (3 | ) | | | |||||||||||
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1 | For financial assets designated at fair value through profit or loss, the changes in fair value are calculated by shifting principal unobservable input parameters such Volatility of the underlying asset or Correlation between underlying asset by ± 10%. |
2 | For stock and index-related derivatives, the changes in fair value are calculated by shifting principal unobservable input parameters such as the correlation of rates of return on stocks and the volatility of the underlying asset by ± 10%. For currency-related derivatives, the changes in fair value are calculated by shifting the unobservable input parameters, such as the loss given default ratio by ± 1%. For interest rate-related derivatives, the correlation of the interest rates or the volatility of the underlying asset is shifted by ± 10% to calculate the fair value changes. |
3 | For debt securities, the changes in fair value are calculated by shifting principal unobservable input parameters; such as, discount rate by ± 1%. |
4 | For equity securities, the changes in fair value are calculated by shifting principal unobservable input parameters such as correlation between growth rate (0~0.5%) and discount rate, liquidation value (-1~1%) and discount rate, or recovery rate of receivables acquisition cost (-1~1%). Sensitivity of fair values to unobservable parameters of private equity fund is practically impossible, but in the case of equity fund composed of real estates, the changes in fair value are calculated by shifting correlation between discount rate (-1~1%) and volatilities of real estate price (-1~1%). |
92
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
6.2.4 Day One Gain or Loss
If the Group uses a valuation technique that incorporates data not obtained from observable markets for the fair value at initial recognition of financial instruments, there could be a difference between the transaction price and the amount determined using that valuation technique. In these circumstances, the fair value of financial instruments is recognized as the transaction price, and the difference is deferred and not recognized in profit or loss, and is amortized by using the straight-line method over the life of the financial instrument. When the fair value of the financial instruments is subsequently determined using observable market inputs, the remaining deferred amount is recognized in profit or loss.
The aggregate difference yet to be recognized in profit or loss at the beginning and end of the period and a reconciliation of changes in the balance of this difference for the years ended December 31, 2017 and 2016, are as follows:
(In millions of Korean won) | 2017 | 2016 | ||||||
Balance at the beginning of the period |
||||||||
New transactions and others |
58,445 | 37,819 | ||||||
Changes during the period |
(74,664 | ) | (2,841 | ) | ||||
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|
|||||
Balance at the end of the year |
||||||||
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|
|
6.3 Carrying Amounts of Financial Instruments by Category
Financial assets and liabilities are measured at fair value or amortized cost. Measurement policies for each class of financial assets and liabilities are disclosed in Note 3, Significant accounting policies.
The carrying amounts of financial assets and liabilities by category as of December 31, 2017 and 2016, are as follows:
(In millions of Korean won) | 2017 | |||||||||||||||||||||||||||
Financial assets at fair value through profit or loss |
||||||||||||||||||||||||||||
Held for trading |
Designated at fair value profit or loss |
Loans and receivables |
Available-for- sale financial |
Held-to- Maturity assets |
Derivatives held for hedging |
Total | ||||||||||||||||||||||
Financial assets |
||||||||||||||||||||||||||||
Cash and due from financial institutions |
||||||||||||||||||||||||||||
Financial assets at fair value through profit or loss |
30,177,293 | 2,050,052 | | | | | 32,227,345 | |||||||||||||||||||||
Derivatives |
2,998,042 | | | | | 312,124 | 3,310,166 | |||||||||||||||||||||
Loans |
| | 290,122,838 | | | | 290,122,838 | |||||||||||||||||||||
Financial investments |
| | | 48,116,263 | 18,491,980 | | 66,608,243 | |||||||||||||||||||||
Other financial assets |
| | 10,195,015 | | | | 10,195,015 | |||||||||||||||||||||
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93
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
(In millions of Korean won) | 2017 | |||||||||||||||||||
Financial liabilities at fair value through profit or loss |
||||||||||||||||||||
Held for trading |
Designated at fair profit or loss |
Financial liabilities at |
Derivatives held for hedging |
Total | ||||||||||||||||
Financial liabilities |
||||||||||||||||||||
Financial liabilities at fair value through profit or loss |
||||||||||||||||||||
Derivatives |
3,054,614 | | | 88,151 | 3,142,765 | |||||||||||||||
Deposits |
| | 255,800,048 | | 255,800,048 | |||||||||||||||
Debts |
| | 28,820,928 | | 28,820,928 | |||||||||||||||
Debentures |
| | 44,992,724 | | 44,992,724 | |||||||||||||||
Other financial liabilities |
| | 18,330,004 | | 18,330,004 | |||||||||||||||
|
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|
(In millions of Korean won) | 2016 | |||||||||||||||||||||||||||
Financial assets at fair value through profit or loss |
||||||||||||||||||||||||||||
Held for trading |
Designated at profit or loss |
Loans and receivables |
Available-for- sale financial assets |
Held-to- Maturity assets |
Derivatives held for hedging |
Total | ||||||||||||||||||||||
Financial assets |
||||||||||||||||||||||||||||
Cash and due from financial institutions |
||||||||||||||||||||||||||||
Financial assets at fair value through profit or loss |
26,099,518 | 1,758,846 | | | | | 27,858,364 | |||||||||||||||||||||
Derivatives |
3,298,328 | | | | | 83,607 | 3,381,935 | |||||||||||||||||||||
Loans |
| | 265,486,134 | | | | 265,486,134 | |||||||||||||||||||||
Financial investments |
| | | 33,970,293 | 11,177,504 | | 45,147,797 | |||||||||||||||||||||
Other financial assets |
| | 7,322,335 | | | | 7,322,335 | |||||||||||||||||||||
|
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|
(In millions of Korean won) | 2016 | |||||||||||||||||||
Financial liabilities at fair value through profit or loss |
||||||||||||||||||||
Held for trading |
Designated at fair value through profit or loss |
Financial liabilities at amortized cost |
Derivatives held for hedging |
Total | ||||||||||||||||
Financial liabilities |
||||||||||||||||||||
Financial liabilities at fair value through profit or loss |
||||||||||||||||||||
Derivatives |
3,717,819 | | | 89,309 | 3,807,128 | |||||||||||||||
Deposits |
| | 239,729,695 | | 239,729,695 | |||||||||||||||
Debts |
| | 26,251,486 | | 26,251,486 | |||||||||||||||
Debentures |
| | 34,992,057 | | 34,992,057 | |||||||||||||||
Other financial liabilities |
| | 16,286,578 | | 16,286,578 | |||||||||||||||
|
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94
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
6.4 Transfer of Financial Assets
Transferred financial assets that are derecognized in their entirety.
The Group transferred loans and other financial assets that are derecognized in their entirety to SPEs, while the maximum exposure to loss(carrying amount) from its continuing involvement in the derecognized financial assets as of December 31, 2017 and 2016, are as follows:
(In millions of Korean won) | 2017 | |||||||||||||
Type of continuing |
Classification of financial instruments |
Carrying amount of financial position |
Fair value of continuing involvement |
|||||||||||
Discovery ABS Second Co., Ltd. |
Subordinate debt | Available-for-sale financial assets |
||||||||||||
EAK ABS Second Co., Ltd. |
Subordinate debt | Available-for-sale financial assets |
5,339 | 5,339 | ||||||||||
FK1411 Co., Ltd. |
Subordinate debt | Available-for-sale financial assets |
9,601 | 9,601 | ||||||||||
AP 3B ABS Ltd. |
Subordinate debt | Available-for-sale financial assets |
9,902 | 9,902 | ||||||||||
AP 4D ABS Ltd. |
Senior debt | Loans and receivables |
2,248 | 2,251 | ||||||||||
Subordinated debt | Available-for-sale financial assets |
14,160 | 14,160 | |||||||||||
|
|
|
|
|||||||||||
|
|
|
|
1 | In addition to the above, the recovered portion in excess of the consideration paid attributable to adjustments based on the agreement with the National Happiness Fund for non-performing loans amounts to 2,989 million as of December 31, 2017. |
(In millions of Korean won) | 2016 | |||||||||||||
Type of continuing |
Classification of financial instruments |
Carrying amount of continuing involvement Instatement of financial position |
Fair value of continuing involvement |
|||||||||||
EAK ABS Co., Ltd. |
Subordinate debt |
Available-for-sale financial assets |
||||||||||||
AP ABS First Co., Ltd. |
Subordinate debt |
Available-for-sale financial assets |
1,393 | 1,393 | ||||||||||
Discovery ABS First Co., Ltd. |
Subordinate debt |
Available-for-sale financial assets |
6,876 | 6,876 | ||||||||||
EAK ABS Second Co., Ltd. |
Subordinate debt |
Available-for-sale financial assets |
12,302 | 12,302 | ||||||||||
FK1411 Co., Ltd. |
Subordinate debt |
Available-for-sale financial assets |
15,212 | 15,212 | ||||||||||
AP 3B ABS Ltd. |
Subordinate debt |
Available-for-sale financial assets |
14,374 | 14,374 | ||||||||||
AP 4D ABS Ltd. |
Senior debt | Loans and receivables |
13,626 | 13,689 | ||||||||||
Subordinated debt |
Available-for-sale financial assets |
14,450 | 14,450 | |||||||||||
|
|
|
|
|||||||||||
|
|
|
|
1 | Recognized net gain from transferring loans to the SPEs amounts to |
2 | In addition to the above, the recovered portion in excess of the consideration paid attributable to adjustments based on the agreement with the National Happiness Fund for
non-performing loans amounts to |
95
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
Transferred financial assets that are not derecognized in their entirety
The Group securitized the loans and issued the asset-backed debentures. The senior debentures and related securitized assets as of December 31, 2017 and 2016, are as follows:
(In millions of Korean won) | 2017 | 2016 | ||||||||||||||
Carrying amount of underlying assets |
Carrying amount of senior debentures |
Carrying amount of underlying assets |
Carrying amount of senior debentures |
|||||||||||||
KB Kookmin Card Second Securitization Co., Ltd.1 |
||||||||||||||||
KB Kookmin Card Third Securitization Co., Ltd.1 |
600,813 | 324,425 | | | ||||||||||||
KB Kookmin Card Fourth Securitization Co., Ltd. 1 |
561,495 | 320,892 | | | ||||||||||||
Wise Mobile Eighth Securitization Specialty 2 |
| | 11,209 | | ||||||||||||
Wise Mobile Ninth Securitization Specialty 2 |
| | 6,027 | | ||||||||||||
Wise Mobile Tenth Securitization Specialty 2 |
| | 17,485 | 9,999 | ||||||||||||
Wise Mobile Eleventh Securitization Specialty 2 |
| | 16,830 | 9,998 | ||||||||||||
Wise Mobile Twelfth Securitization Specialty 2 |
| | 27,107 | 19,995 | ||||||||||||
Wise Mobile Thirteenth Securitization Specialty 2 |
7,284 | | 31,873 | 24,996 | ||||||||||||
Wise Mobile Fourteenth Securitization Specialty 2 |
8,504 | | 52,583 | 44,991 | ||||||||||||
Wise Mobile Fifteenth Securitization Specialty 2 |
4,105 | | 68,270 | 64,983 | ||||||||||||
Wise Mobile Sixteenth Securitization Specialty 2 |
5,500 | | 114,213 | 109,966 | ||||||||||||
Wise Mobile Seventeenth Securitization Specialty 2 |
10,407 | 4,999 | 118,767 | 114,955 | ||||||||||||
Wise Mobile Eighteenth Securitization Specialty 2 |
9,340 | 4,999 | 97,910 | 94,950 | ||||||||||||
|
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|||||||||
1 | The Company has an obligation to early redeem the asset-backed debentures upon occurrence of an event specified in the agreement such as when the outstanding balance of the eligible asset-backed securitization (ABS), a trust-type ABS, is below the solvency margin ratio(minimum rate: 104.5%) of the beneficiary interest in the trust. In addition, the Company can entrust additional eligible card transaction accounts and deposits. To avoid such early redemption, the Company entrusts accounts and deposits in addition to the previously entrusted card accounts. Accordingly, as asset-backed debenture holders recourse is not limited to the underlying assets, the fair value is not disclosed. |
2 | According to the liquidity facility agreement entered between the Special Purpose Companies (SPC) and Woori Bank and NH Bank, if the senior debentures cannot be redeemed by the underlying assets, the senior debentures should be redeemed by borrowings from the liquidity facilities. Accordingly, as senior debenture holders recourse is not limited to the underlying assets, the fair value is not disclosed. |
96
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
Securities under repurchase agreements and loaned securities
The Group continues to recognize the financial assets related to repurchase agreements and securities lending transactions on the statements of financial position since those transactions are not qualified for derecognition even though the Group transfers the financial assets. A financial asset is sold under a repurchase agreement to repurchase the same asset at a fixed price, or loaned under a securities lending agreement to be returned as the same asset. Thus, the Group retains substantially all the risks and rewards of ownership of the financial asset. The amounts of transferred assets and related liabilities as of December 31, 2017 and 2016, are as follows:
(In millions of Korean won) | 2017 | |||||||
Carrying amount of transferred assets |
Carrying amount of related liabilities |
|||||||
Repurchase agreements |
||||||||
Loaned securities |
||||||||
Government bond |
418,966 | | ||||||
Stock |
729,702 | | ||||||
Others |
| | ||||||
|
|
|
|
|||||
|
|
|
|
(In millions of Korean won) | 2016 | |||||||
Carrying amount of transferred assets |
Carrying amount of related liabilities |
|||||||
Repurchase agreements |
||||||||
Loaned securities |
||||||||
Government bond |
108,062 | | ||||||
Stock |
552,872 | | ||||||
Others |
16,250 | | ||||||
|
|
|
|
|||||
|
|
|
|
97
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
6.5 Offsetting Financial Assets and Financial Liabilities
The Group enters into International Swaps and Derivatives Association (ISDA) master netting agreements and other similar arrangements with the Groups derivative and spot exchange counterparties. Similar netting agreements are also entered into with the Groups reverse repurchase, securities and others. Pursuant to these agreements, in the event of default by one party, contracts are to be terminated and receivables and payables are to be offset. Further, as the law allows for the right to offset, domestic uncollected receivables balances and domestic accrued liabilities balances are shown in its net settlement balance in the consolidated statement of financial position.
Details of financial assets subject to offsetting, enforceable master netting arrangements or similar agreement as of December 31, 2017 and 2016, are as follows:
(In millions of Korean won) | 2017 | |||||||||||||||||||||||
Non-offsetting amount | ||||||||||||||||||||||||
Gross assets | Gross asset offset |
Net amounts the statement of
financial |
Financial instruments |
Cash collateral |
Net amount | |||||||||||||||||||
Derivatives held for trading and Derivatives linked securities |
||||||||||||||||||||||||
Derivatives held for hedging |
312,124 | | 312,124 | (21,990 | ) | (21,830 | ) | 268,304 | ||||||||||||||||
Payable spot exchange |
3,443,674 | | 3,443,674 | (3,443,298 | ) | | 376 | |||||||||||||||||
Repurchase agreements |
2,617,700 | | 2,617,700 | (2,617,700 | ) | | | |||||||||||||||||
Domestic exchange settlement credits |
30,904,611 | (29,959,914 | ) | 944,697 | | | 944,697 | |||||||||||||||||
Other financial instruments |
1,542,035 | (1,531,622 | ) | 10,413 | (9,525 | ) | | 888 | ||||||||||||||||
|
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|
|
(In millions of Korean won) | 2016 | |||||||||||||||||||||||
Non-offsetting amount | ||||||||||||||||||||||||
Gross assets | Gross asset offset |
Net amounts the statement of
financial |
Financial instruments |
Cash collateral |
Net amount | |||||||||||||||||||
Derivatives held for trading and Derivatives linked securities |
||||||||||||||||||||||||
Derivatives held for hedging |
80,718 | | 80,718 | (10,980 | ) | | 69,738 | |||||||||||||||||
Payable spot exchange |
2,557,424 | | 2,557,424 | (2,555,485 | ) | | 1,939 | |||||||||||||||||
Repurchase agreements |
2,926,515 | | 2,926,515 | (2,926,515 | ) | | | |||||||||||||||||
Domestic exchange settlement credits |
19,854,611 | (19,323,418 | ) | 531,193 | | | 531,193 | |||||||||||||||||
Other financial instruments |
1,055,379 | (829,137 | ) | 226,242 | (7,222 | ) | | 219,020 | ||||||||||||||||
|
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98
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
Details of financial liabilities subject to offsetting, enforceable master netting arrangements or similar agreement as of December 31, 2017 and 2016, are as follows:
(In millions of Korean won) | 2017 | |||||||||||||||||||||||
Non-offsetting amount | ||||||||||||||||||||||||
Gross liabilities |
Gross asset offset |
Net amounts the statement of
financial |
Financial instruments |
Cash collateral |
Net amount |
|||||||||||||||||||
Derivatives held for trading and Derivatives linked securities |
||||||||||||||||||||||||
Derivatives held for hedging |
88,151 | | 88,151 | (11,770 | ) | (9,139 | ) | 67,242 | ||||||||||||||||
Payable spot exchange |
3,445,098 | | 3,445,098 | (3,443,298 | ) | | 1,800 | |||||||||||||||||
Repurchase agreements1 |
10,666,315 | | 10,666,315 | (10,666,315 | ) | | | |||||||||||||||||
Securities borrowing agreements |
1,870,579 | | 1,870,579 | (1,870,579 | ) | | | |||||||||||||||||
Domestic exchange settlement credits |
29,999,359 | (29,959,914 | ) | 39,445 | (39,445 | ) | | | ||||||||||||||||
Other financial instruments |
1,721,862 | (1,530,488 | ) | 191,374 | (194 | ) | | 191,180 | ||||||||||||||||
|
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|
|||||||||||||
|
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|
|
|
(In millions of Korean won) | 2016 | |||||||||||||||||||||||
Non-offsetting amount | ||||||||||||||||||||||||
Gross liabilities |
Gross asset offset |
Net amounts the statement of
financial |
Financial instruments |
Cash collateral |
Net amount |
|||||||||||||||||||
Derivatives held for trading and Derivatives linked securities |
||||||||||||||||||||||||
Derivatives held for hedging |
88,506 | | 88,506 | (22,795 | ) | (11,922 | ) | 53,789 | ||||||||||||||||
Payable spot exchange |
2,556,009 | | 2,556,009 | (2,555,485 | ) | | 524 | |||||||||||||||||
Repurchase agreements1 |
8,815,027 | | 8,815,027 | (8,815,027 | ) | | | |||||||||||||||||
Securities borrowing agreements |
1,063,056 | | 1,063,056 | (1,063,056 | ) | | | |||||||||||||||||
Domestic exchange settlement credits |
20,655,999 | (19,323,418 | ) | 1,332,581 | (1,332,503 | ) | | 78 | ||||||||||||||||
Other financial instruments |
953,137 | (829,137 | ) | 124,000 | (7,252 | ) | | 116,748 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
1 | Includes repurchase agreements sold to customers. |
99
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
7. Due from Financial Institutions
Details of due from financial institutions as of December 31, 2017 and 2016, are as follows:
(In millions of Korean won) | Financial institutions | Interest rate(%) |
2017 | 2016 | ||||||||||||
Due from financial institutions in Korean won |
Due from Bank of Korea |
Bank of Korea |
0.00 ~ 1.53 | |||||||||||||
Due from banks |
KEB Hana Bank and others |
0.00 ~ 1.86 | 2,267,778 | 1,233,368 | ||||||||||||
Due from others |
Kyobo Securities Co., Ltd. and others |
0.00 ~ 1.64 | 3,377,102 | 3,276,913 | ||||||||||||
|
|
|
|
|||||||||||||
14,156,175 | 11,769,545 | |||||||||||||||
|
|
|
|
|||||||||||||
Due from financial institutions in foreign currencies |
Due from banks in foreign currencies |
Bank of Korea and others |
| 1,670,935 | 2,025,373 | |||||||||||
Time deposits in foreign currencies |
AOZORA BANK and others |
0.11 ~6.40 | 775,917 | 808,253 | ||||||||||||
Due from others |
Societe Generale and others |
0.00 ~5.02 | 616,634 | 723,002 | ||||||||||||
|
|
|
|
|||||||||||||
3,063,486 | 3,556,628 | |||||||||||||||
|
|
|
|
|||||||||||||
|
|
|
|
Restricted cash from financial institutions as of December 31, 2017 and 2016, are as follows:
(In millions of Korean won) | Financial Institutions | 2017 | 2016 | Reason for restriction | ||||||||||
Due from financial institutions in Korean won |
Due from Bank of Korea |
Bank of Korea |
Bank of Korea Act | |||||||||||
Due from banks |
Citibank Korea Inc. and others |
572,132 | 209,676 | Deposits related to securitization and others | ||||||||||
Due from others |
NH Investment Securities and others |
371,398 | 580,655 | Derivatives margin account and others | ||||||||||
|
|
|
|
|||||||||||
9,454,825 | 8,049,595 | |||||||||||||
|
|
|
|
|||||||||||
Due from financial institutions in foreign currencies |
Due from banks in foreign currencies |
Bank of Korea and others |
619,130 | 564,099 | Bank of Korea Act and others | |||||||||
Time deposits in foreign currencies |
China Construction Bank NY Branch and others |
29,650 | 24,170 | Bank Act of the State of New York and others | ||||||||||
Due from others |
Societe Generale and others |
509,484 | 664,082 | Derivatives margin account and others | ||||||||||
|
|
|
|
|||||||||||
1,158,264 | 1,252,351 | |||||||||||||
|
|
|
|
|||||||||||
|
|
|
|
100
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
8. Assets pledged as collateral
Details of assets pledged as collateral as of December 31, 2017 and 2016, are as follows:
(In millions of Korean won) | 2017 | |||||||
Assets pledged | Pledgee | Carrying amount | Reason of pledge | |||||
Due from financial institutions |
Korea Federation of Savings Banks and others |
Borrowings from Bank and others | ||||||
Financial assets held for trading |
Korea Securities Depository and others |
7,699,857 | Repurchase agreements | |||||
Korea Securities Depository and others |
4,941,912 | Securities borrowing transactions | ||||||
Samsung Futures Inc. and others |
1,047,758 | Derivatives transactions | ||||||
|
|
|||||||
13,689,527 | ||||||||
|
|
|||||||
Available-for-sale financial assets |
Korea Securities Depository and others |
2,401,388 | Repurchase agreements | |||||
Korea Securities Depository and others |
838,149 | Securities borrowing transactions | ||||||
Bank of Korea |
651,284 | Borrowings from Bank of Korea | ||||||
Bank of Korea |
750,254 | Settlement risk of Bank of Korea | ||||||
Samsung Futures Inc. and others |
221,004 | Derivatives transactions | ||||||
|
|
|||||||
4,862,079 | ||||||||
|
|
|||||||
Held-to-maturity financial assets |
Korea Securities Depository and others |
35,026 | Repurchase agreements | |||||
Bank of Korea |
1,326,558 | Borrowings from Bank of Korea | ||||||
Bank of Korea |
1,204,990 | Settlement risk of Bank of Korea | ||||||
Samsung Futures Inc. and others |
330,316 | Derivatives transactions | ||||||
Others |
163,960 | Others | ||||||
|
|
|||||||
3,060,850 | ||||||||
|
|
|||||||
Mortgage loans |
Others |
4,950,490 | Covered bond | |||||
|
|
|||||||
Real estate |
Natixis Real Estate Capital, LLC and others |
778,789 | Borrowings from Bank and others | |||||
|
|
|||||||
|
|
The Group provides W 3,185,601 million of its borrowing securities and securities held as collateral
with KSFC and others as at December 31, 2017
101
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
(In millions of Korean won) | 2016 | |||||||
Assets pledged | Pledgee | Carrying amount | Reason of pledge | |||||
Due from financial institutions |
Korea Federation of Savings Banks and others |
Borrowings from Bank and others | ||||||
Financial assets held for trading |
Korea Securities Depository and others |
5,977,536 | Repurchase agreements | |||||
Korea Securities Depository and others |
2,392,945 | Securities borrowing transactions | ||||||
Samsung Futures Inc. and others |
2,170,588 | Derivatives transactions | ||||||
|
|
|||||||
10,541,069 | ||||||||
|
|
|||||||
Available-for-sale financial assets |
Korea Securities Depository and others |
3,314,106 | Repurchase agreements | |||||
Korea Securities Depository and others |
193,028 | Securities borrowing transactions | ||||||
Bank of Korea |
490,297 | Borrowings from Bank of Korea | ||||||
Bank of Korea |
493,896 | Settlement risk of Bank of Korea | ||||||
KEB Hana bank and other |
1,084,500 | Derivatives transactions | ||||||
Others |
19,956 | Others | ||||||
|
|
|||||||
5,595,783 | ||||||||
|
|
|||||||
Held-to-maturity financial assets |
Korea Securities Depository and others |
44,988 | Repurchase agreements | |||||
Bank of Korea |
1,251,011 | Borrowings from Bank of Korea | ||||||
Bank of Korea |
1,185,267 | Settlement risk of Bank of Korea | ||||||
Samsung Futures Inc. and others |
209,022 | Derivatives transactions | ||||||
Others |
296,632 | Others | ||||||
|
|
|||||||
2,986,920 | ||||||||
|
|
|||||||
Mortgage loans |
Others |
2,252,315 | Covered bond | |||||
|
|
|||||||
Real estate |
Natixis Real Estate Capital, LLC and others |
791,873 | Borrowings from Bank and others | |||||
|
|
|||||||
|
|
102
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
The fair values of collateral available to sell or repledge, and collateral sold or repledged, regardless of debtors default, as of December 31, 2017 and 2016, are as follows:
(In millions of Korean won)
2017 | ||||||||||||
Fair value of collateral held |
Fair value of collateral sold or repledged |
Total | ||||||||||
Securities |
||||||||||||
(In millions of Korean won) | 2016 | |||||||||||
Fair value of collateral held |
Fair value of collateral sold or repledged |
Total | ||||||||||
Securities |
9. Derivative Financial Instruments and Hedge Accounting
The Groups derivative operations focus on addressing the needs of the Groups corporate clients to hedge their risk exposure and to hedge the Groups risk exposure that results from such client contracts. The Group also engages in derivative trading activities to hedge the interest rate and foreign currency risk exposures that arise from the Groups own assets and liabilities. In addition, the Group engages in proprietary trading of derivatives within the Groups regulated open position limits.
The Group provides and trades a range of derivatives products, including:
| Interest rate swaps, relating to interest rate risks in Korean won |
| Cross-currency swaps, forwards and options relating to foreign exchange rate risks, |
| Stock price index options linked with the KOSPI index. |
In particular, the Group applies fair value hedge accounting using interest rate swaps, currency forwards and others to hedge the risk of changes in fair values due to the changes in interest rates and foreign exchange rates of structured debentures in Korean won, financial debentures in foreign currencies, structured deposits in foreign currencies and others. And the Group applies cash flow hedge using interest rate swaps, cross currency swaps and others to hedge the risk of changes in cash flows of floating rate notes in Korean won, borrowings in foreign currencies and others. In addition, the Group applies net investment hedge accounting using currency forwards and designating financial debentures in foreign currencies as hedging instruments to hedge foreign exchange risks on net investments in foreign operations.
103
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
Details of derivative financial instruments held for trading as of December 31, 2017 and 2016, are as follows:
(In millions of Korean won) | 2017 | |||||||||||
Notional amount | Assets | Liabilities | ||||||||||
Interest rate |
||||||||||||
Futures1 |
||||||||||||
Swaps |
190,186,189 | 434,316 | 399,674 | |||||||||
Options |
13,560,861 | 137,958 | 234,474 | |||||||||
|
|
|
|
|
|
|||||||
208,517,618 | 577,226 | 634,676 | ||||||||||
|
|
|
|
|
|
|||||||
Currency |
||||||||||||
Forwards |
64,308,472 | 1,261,491 | 1,233,633 | |||||||||
Futures1 |
622,711 | 52 | 1,163 | |||||||||
Swaps |
29,769,290 | 847,506 | 759,757 | |||||||||
Options |
695,617 | 4,099 | 6,994 | |||||||||
|
|
|
|
|
|
|||||||
95,396,090 | 2,113,148 | 2,001,547 | ||||||||||
|
|
|
|
|
|
|||||||
Stock and index |
||||||||||||
Futures1 |
1,013,846 | 3,599 | 1,132 | |||||||||
Swaps |
5,623,391 | 112,929 | 96,894 | |||||||||
Options |
6,408,019 | 116,215 | 274,544 | |||||||||
|
|
|
|
|
|
|||||||
13,045,256 | 232,743 | 372,570 | ||||||||||
|
|
|
|
|
|
|||||||
Credit |
||||||||||||
Swaps |
5,799,606 | 42,000 | 36,963 | |||||||||
|
|
|
|
|
|
|||||||
5,799,606 | 42,000 | 36,963 | ||||||||||
|
|
|
|
|
|
|||||||
Commodity |
||||||||||||
Futures1 |
4,791 | 112 | 19 | |||||||||
Swaps |
67,008 | 4,221 | 118 | |||||||||
Options |
245 | 1 | | |||||||||
|
|
|
|
|
|
|||||||
72,044 | 4,334 | 137 | ||||||||||
|
|
|
|
|
|
|||||||
Other |
1,955,581 | 28,591 | 8,721 | |||||||||
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
104
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
(In millions of Korean won) | 2016 | |||||||||||
Notional amount | Assets | Liabilities | ||||||||||
Interest rate |
||||||||||||
Futures1 |
||||||||||||
Swaps |
138,697,962 | 695,474 | 676,887 | |||||||||
Options |
6,376,707 | 48,323 | 161,747 | |||||||||
|
|
|
|
|
|
|||||||
149,426,885 | 743,927 | 839,254 | ||||||||||
|
|
|
|
|
|
|||||||
Currency |
||||||||||||
Forwards |
58,662,586 | 1,343,953 | 1,206,539 | |||||||||
Futures1 |
482,323 | 1,210 | | |||||||||
Swaps |
30,929,704 | 756,936 | 919,549 | |||||||||
Options |
487,937 | 4,955 | 4,557 | |||||||||
|
|
|
|
|
|
|||||||
90,562,550 | 2,107,054 | 2,130,645 | ||||||||||
|
|
|
|
|
|
|||||||
Stock and index |
||||||||||||
Futures1 |
823,202 | 9,438 | 170 | |||||||||
Swaps |
6,276,026 | 105,437 | 175,679 | |||||||||
Options |
10,641,997 | 259,896 | 511,218 | |||||||||
|
|
|
|
|
|
|||||||
17,741,225 | 374,771 | 687,067 | ||||||||||
|
|
|
|
|
|
|||||||
Credit |
||||||||||||
Swaps |
5,219,740 | 55,207 | 49,653 | |||||||||
|
|
|
|
|
|
|||||||
5,219,740 | 55,207 | 49,653 | ||||||||||
|
|
|
|
|
|
|||||||
Commodity |
||||||||||||
Futures1 |
320 | | 7 | |||||||||
Swaps |
12,240 | 766 | 4,765 | |||||||||
Options |
2,168 | 20 | | |||||||||
|
|
|
|
|
|
|||||||
14,728 | 786 | 4,772 | ||||||||||
|
|
|
|
|
|
|||||||
Other |
1,145,195 | 16,583 | 6,428 | |||||||||
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
1 | A gain or loss from daily mark-to-market futures is reflected in the margin accounts. |
105
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
Fair Value Hedge
Details of derivative instruments designated as fair value hedge as of December 31, 2017 and 2016, are as follows:
(In millions of Korean won) | 2017 | |||||||||||
Notional amount | Assets | Liabilities | ||||||||||
Interest rate |
||||||||||||
Swaps |
||||||||||||
Currency |
||||||||||||
Forwards |
2,818,527 | 108,144 | 872 | |||||||||
Other |
50,000 | 775 | 70 | |||||||||
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
(In millions of Korean won) | 2016 | |||||||||||
Notional amount | Assets | Liabilities | ||||||||||
Interest rate |
||||||||||||
Swaps |
||||||||||||
Currency |
||||||||||||
Forwards |
433,831 | 1,912 | 17,454 | |||||||||
Other |
140,000 | 1,463 | 186 | |||||||||
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
The fair value of non-derivative financial instruments designated as hedging instruments is as follows:
(In millions of Korean won) | 2017 | 2016 | ||||||
Deposits in foreign currencies |
Gains and losses from fair value hedging instruments and hedged items attributable to the hedged risk for the years ended December 31, 2017 and 2016, are as follows:
(In millions of Korean won) | 2017 | 2016 | ||||||
Gains(losses) on hedging instruments |
||||||||
Gains(losses) on the hedged items attributable to the hedged risk |
(56,461 | ) | 91,167 | |||||
|
|
|
|
|||||
|
|
|
|
106
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
Cash Flow Hedge
Details of derivative instruments designated as cash flow hedge as of December 31, 2017 and 2016, are as follows:
(In millions of Korean won) | 2017 | |||||||||||
Notional amount | Assets | Liabilities | ||||||||||
Interest rate |
||||||||||||
Swaps |
||||||||||||
Currency |
||||||||||||
Swaps |
2,396,957 | 117,597 | 33,342 | |||||||||
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
(In millions of Korean won) | 2016 | |||||||||||
Notional amount | Assets | Liabilities | ||||||||||
Interest rate |
||||||||||||
Swaps |
||||||||||||
Currency |
||||||||||||
Swaps |
362,550 | 29,888 | | |||||||||
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
Gains and losses from hedging instruments and hedged items attributable to the hedged risk for the years ended December 31, 2017 and 2016, are as follows:
(In millions of Korean won) | 2017 | 2016 | ||||||
Gains(losses) on hedging instruments |
||||||||
Effective gains(losses) from cash flow hedging instruments |
(100,949 | ) | 16,238 | |||||
|
|
|
|
|||||
Ineffective gains(losses) from cash flow hedging instruments |
||||||||
|
|
|
|
Amounts recognized in other comprehensive income and reclassified from equity to profit or loss for the years ended December 31, 2017 and 2016, are as follows:
(In millions of Korean won) | 2017 | 2016 | ||||||
Amount recognized in other comprehensive income |
||||||||
Amount reclassified from equity to profit or loss |
126,239 | (10,447 | ) | |||||
Tax effect |
(4,331 | ) | (1,488 | ) | ||||
|
|
|
|
|||||
|
|
|
|
107
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
Hedge on Net Investments in Foreign Operations
Details of derivative instruments designated as foreign operations net investments hedge as of December 31, 2017 and 2016, are as follows:
(In millions of Korean won) | 2017 | |||||||||||
Notional amount | Assets | Liabilities | ||||||||||
Currency |
||||||||||||
Forwards |
(In millions of Korean won) | 2016 | |||||||||||
Notional amount | Assets | Liabilities | ||||||||||
Currency |
||||||||||||
Forwards |
Gain or loss from hedging instruments in hedge of net investments in foreign operations and hedged items attributable to the hedged risk for the years ended December 31, 2017 and 2016, are as follows:
(In millions of Korean won) | 2017 | 2016 | ||||||
Effective portion of gain(loss) on hedges of net investments in foreign operations |
||||||||
Ineffective portion of gain on hedges of net investments in foreign operations |
1,129 | | ||||||
|
|
|
|
|||||
Gains(losses) on hedging instruments |
||||||||
|
|
|
|
The effective portion of gain (loss) on hedging instruments recognized in other comprehensive income for the years ended December 31, 2017 and 2016, are as follows:
(In millions of Korean won) | 2017 | 2016 | ||||||
Amount recognized in other comprehensive income |
||||||||
Tax effect |
(8,186 | ) | 2,265 | |||||
|
|
|
|
|||||
Amount recognized in other comprehensive income, net of tax |
||||||||
|
|
|
|
The fair value of non-derivative financial instruments designated as hedging instruments is as follows:
(In millions of Korean won) | 2017 | 2016 | ||||||
Financial debentures in foreign currencies |
108
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
10. Loans
Details of loans as of December 31, 2017 and 2016, are as follows:
(In millions of Korean won) | 2017 | 2016 | ||||||
Loans |
||||||||
Deferred loan origination fees and costs |
719,816 | 718,625 | ||||||
Less: Allowances for loan losses |
(2,110,231 | ) | (2,277,756 | ) | ||||
|
|
|
|
|||||
Carrying amount |
||||||||
|
|
|
|
Details of loans for other banks as of December 31, 2017 and 2016, are as follows:
(In millions of Korean won) | 2017 | 2016 | ||||||
Loans |
||||||||
Less: Allowances for loan losses |
(77 | ) | (66 | ) | ||||
|
|
|
|
|||||
Carrying amount |
||||||||
|
|
|
|
Details of loan types and customer types of loans to customers, other than banks, as of December 31, 2017 and 2016, are as follows:
(In millions of Korean won) | 2017 | |||||||||||||||
Retail | Corporate | Credit card | Total | |||||||||||||
Loans in Korean won |
||||||||||||||||
Loans in foreign currencies |
121,166 | 3,078,907 | | 3,200,073 | ||||||||||||
Domestic import usance bills |
| 2,128,868 | | 2,128,868 | ||||||||||||
Off-shore funding loans |
| 730,817 | | 730,817 | ||||||||||||
Call loans |
| 335,200 | | 335,200 | ||||||||||||
Bills bought in Korean won |
| 4,168 | | 4,168 | ||||||||||||
Bills bought in foreign currencies |
| 3,875,550 | | 3,875,550 | ||||||||||||
Guarantee payments under payment guarantee |
105 | 6,373 | | 6,478 | ||||||||||||
Credit card receivables in Korean won |
| | 15,200,843 | 15,200,843 | ||||||||||||
Credit card receivables in foreign currencies |
| | 4,004 | 4,004 | ||||||||||||
Reverse repurchase agreements |
| 1,197,700 | | 1,197,700 | ||||||||||||
Privately placed bonds |
| 1,994,932 | | 1,994,932 | ||||||||||||
Factored receivables |
51,401 | 1,419 | | 52,820 | ||||||||||||
Lease receivables |
1,773,901 | 60,527 | | 1,834,428 | ||||||||||||
Loans for installment credit |
3,693,672 | 13,535 | | 3,707,207 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
146,270,980 | 125,442,665 | 15,204,847 | 286,918,492 | |||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Proportion (%) |
50.98 | 43.72 | 5.30 | 100.00 | ||||||||||||
Less: Allowances |
(429,299 | ) | (1,231,589 | ) | (449,266 | ) | (2,110,154 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
|
|
|
|
|
|
|
|
109
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
(In millions of Korean won) | 2016 | |||||||||||||||
Retail | Corporate | Credit card | Total | |||||||||||||
Loans in Korean won |
||||||||||||||||
Loans in foreign currencies |
72,329 | 2,685,932 | | 2,758,261 | ||||||||||||
Domestic import usance bills |
| 2,962,676 | | 2,962,676 | ||||||||||||
Off-shore funding loans |
| 559,915 | | 559,915 | ||||||||||||
Call loans |
| 263,831 | | 263,831 | ||||||||||||
Bills bought in Korean won |
| 5,568 | | 5,568 | ||||||||||||
Bills bought in foreign currencies |
| 2,834,171 | | 2,834,171 | ||||||||||||
Guarantee payments under payment guarantee |
172 | 11,327 | | 11,499 | ||||||||||||
Credit card receivables in Korean won |
| | 13,525,992 | 13,525,992 | ||||||||||||
Credit card receivables in foreign currencies |
| | 4,251 | 4,251 | ||||||||||||
Reverse repurchase agreements |
| 1,244,200 | | 1,244,200 | ||||||||||||
Privately placed bonds |
| 1,468,179 | | 1,468,179 | ||||||||||||
Factored receivables |
810,582 | 17,898 | | 828,480 | ||||||||||||
Lease receivables |
1,470,503 | 66,764 | | 1,537,267 | ||||||||||||
Loans for installment credit |
2,293,150 | | | 2,293,150 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
135,028,333 | 113,662,325 | 13,530,243 | 262,220,901 | |||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Proportion (%) |
51.49 | 43.35 | 5.16 | 100.00 | ||||||||||||
Less: Allowances |
(481,289 | ) | (1,382,106 | ) | (414,295 | ) | (2,277,690 | ) | ||||||||
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110
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
The changes in deferred loan origination fees and costs for the years ended December 31, 2017 and 2016, are as follows:
(In millions of Korean won) | 2017 | |||||||||||||||||||||||
Beginning | Increase | Decrease | Business combination |
Others | Ending | |||||||||||||||||||
Deferred loan origination costs |
||||||||||||||||||||||||
Loans in Korean won |
||||||||||||||||||||||||
Other origination costs |
99,878 | 101,656 | (75,267 | ) | | (2 | ) | 126,265 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
762,919 | 436,094 | (433,988 | ) | 12,532 | (18,612 | ) | 758,945 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Deferred loan origination fees |
||||||||||||||||||||||||
Loans in Korean won |
19,845 | 7,904 | (16,188 | ) | | | 11,561 | |||||||||||||||||
Other origination fees |
24,449 | 19,356 | (16,228 | ) | | (9 | ) | 27,568 | ||||||||||||||||
|
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|
|
|
|
|
|
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|
|||||||||||||
44,294 | 27,260 | (32,416 | ) | | (9 | ) | 39,129 | |||||||||||||||||
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|
(In millions of Korean won) | 2016 | |||||||||||||||||||||||
Beginning | Increase | Decrease | Business combination |
Others | Ending | |||||||||||||||||||
Deferred loan origination costs |
||||||||||||||||||||||||
Loans in Korean won |
||||||||||||||||||||||||
Other origination costs |
77,908 | 80,535 | 58,565 | | | 99,878 | ||||||||||||||||||
|
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|
|||||||||||||
737,461 | 449,086 | 442,491 | 18,863 | | 762,919 | |||||||||||||||||||
|
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|
|
|
|
|
|
|
|
|
|
|||||||||||||
Deferred loan origination fees |
||||||||||||||||||||||||
Loans in Korean won |
43,720 | 13,204 | 37,442 | 363 | | 19,845 | ||||||||||||||||||
Other origination fees |
17,465 | 23,371 | 16,389 | | 2 | 24,449 | ||||||||||||||||||
|
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|
|||||||||||||
61,185 | 36,575 | 53,831 | 363 | 2 | 44,294 | |||||||||||||||||||
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111
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
11. Allowances for Loan Losses
Changes in the allowances for loan losses for the years ended December 31, 2017 and 2016, are as follows:
(In millions of Korean won) | 2017 | |||||||||||||||
Retail | Corporate | Credit card | Total | |||||||||||||
Beginning |
||||||||||||||||
Written-off |
(341,506 | ) | (395,272 | ) | (400,385 | ) | (1,137,163 | ) | ||||||||
Recoveries from written-off loans |
145,606 | 280,324 | 132,665 | 558,595 | ||||||||||||
Sale and repurchase |
(40,267 | ) | (26,105 | ) | | (66,372 | ) | |||||||||
Provision1 |
233,262 | 38,644 | 312,248 | 584,154 | ||||||||||||
Business combination |
9,679 | 50,227 | | 59,906 | ||||||||||||
Other changes |
(58,764 | ) | (98,324 | ) | (9,557 | ) | (166,645 | ) | ||||||||
|
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|
|||||||||
Ending |
||||||||||||||||
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|
(In millions of Korean won) | 2016 | |||||||||||||||
Retail | Corporate | Credit card | Total | |||||||||||||
Beginning |
||||||||||||||||
Written-off |
(295,459 | ) | (747,151 | ) | (356,705 | ) | (1,399,315 | ) | ||||||||
Recoveries from written-off loans |
167,033 | 214,915 | 133,456 | 515,404 | ||||||||||||
Sale and repurchase |
(23,046 | ) | (55,151 | ) | | (78,197 | ) | |||||||||
Provision1 |
82,035 | 252,195 | 244,569 | 578,799 | ||||||||||||
Business combination |
59,615 | 76,755 | | 136,370 | ||||||||||||
Other changes |
(241 | ) | (51,743 | ) | (5,375 | ) | (57,359 | ) | ||||||||
|
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|||||||||
Ending |
||||||||||||||||
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|
1 | Provision for credit losses in statements of comprehensive income also include provision for unused commitments and guarantees (Note 23.(2)), provision (reversal) for financial guarantees contracts (Note 23.(3)), and provision (reversal) for other financial assets (Note 18.(2)). |
112
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
12. Financial Assets at Fair Value through Profit or Loss and Financial Investments
Details of financial assets at fair value through profit or loss and financial investments as of December 31, 2017 and 2016, are as follows:
(In millions of Korean won) | 2017 | 2016 | ||||||
Financial assets held for trading |
||||||||
Debt securities: |
||||||||
Government and public bonds |
||||||||
Financial bonds |
11,324,330 | 11,186,427 | ||||||
Corporate bonds |
5,133,226 | 4,594,741 | ||||||
Asset-backed securities |
161,991 | 222,076 | ||||||
Others |
2,316,277 | 1,593,569 | ||||||
Equity securities: |
||||||||
Stocks and others |
1,009,190 | 424,637 | ||||||
Beneficiary certificates |
3,925,910 | 2,615,962 | ||||||
Others |
73,855 | 72,349 | ||||||
|
|
|
|
|||||
30,177,293 | 26,099,518 | |||||||
|
|
|
|
|||||
Financial assets designated at fair value through profit or loss |
||||||||
Debt securities: |
||||||||
Corporate bonds |
66,969 | 237,595 | ||||||
Equity securities: |
||||||||
Stocks and others |
67,828 | 65,591 | ||||||
Derivative-linked securities |
1,613,404 | 1,361,591 | ||||||
Privately placed bonds |
301,851 | 94,069 | ||||||
|
|
|
|
|||||
2,050,052 | 1,758,846 | |||||||
|
|
|
|
|||||
Total financial assets at fair value through profit or loss |
||||||||
|
|
|
|
|||||
Available-for-sale financial assets |
||||||||
Debt securities: |
||||||||
Government and public bonds |
||||||||
Financial bonds |
20,946,100 | 11,172,159 | ||||||
Corporate bonds |
10,570,501 | 5,904,414 | ||||||
Asset-backed securities |
2,402,437 | 2,729,749 | ||||||
Others |
1,410,884 | 528,531 | ||||||
Equity securities: |
||||||||
Stocks |
3,077,748 | 2,590,989 | ||||||
Equity investments and others |
459,808 | 402,659 | ||||||
Beneficiary certificates |
5,619,306 | 3,530,893 | ||||||
|
|
|
|
|||||
48,116,263 | 33,970,293 | |||||||
|
|
|
|
|||||
Held-to-maturity financial assets |
||||||||
Debts securities: |
||||||||
Government and public bonds |
5,448,471 | 2,218,274 | ||||||
Financial bonds |
2,474,841 | 1,868,928 | ||||||
Corporate bonds |
6,218,723 | 3,487,787 | ||||||
Asset-backed securities |
4,305,678 | 3,602,515 | ||||||
Others |
44,267 | | ||||||
|
|
|
|
|||||
18,491,980 | 11,177,504 | |||||||
|
|
|
|
|||||
Total financial investments |
||||||||
|
|
|
|
113
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
The impairment losses and the reversal of impairment losses in financial investments for the years ended December 31, 2017 and 2016, are as follows:
(In millions of Korean won) |
2017 | |||||||||||
Impairment | Reversal | Net | ||||||||||
Available-for-sale financial assets |
||||||||||||
(In millions of Korean won) | 2016 | |||||||||||
Impairment | Reversal | Net | ||||||||||
Available-for-sale financial assets |
114
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
13. Investments in Associates and Joint Ventures
Investments in associates and joint ventures as of December 31, 2017 and 2016, are as follows:
(in millions of Korean won) | December 31, 2017 | |||||||||||||||||||
Ownership (%) |
Acquisition cost |
Share of net asset amount |
Carrying amount |
Industry | Location | |||||||||||||||
Associates and Joint ventures |
||||||||||||||||||||
KB Pre IPO Secondary Venture Fund 1st 2 |
15.19 | Investment finance | Korea | |||||||||||||||||
KB GwS Private Securities Investment Trust |
26.74 | 113,880 | 134,891 | 131,420 | Investment finance | Korea | ||||||||||||||
KB-KDBC New Technology Business Fund 12 |
66.66 | 5,000 | 4,972 | 4,972 | Investment finance | Korea | ||||||||||||||
KB Star office Private real estate Investment Trust No.1 |
21.05 | 20,000 | 20,122 | 19,709 | Investment finance | Korea | ||||||||||||||
Sun Surgery Center Inc. |
28.00 | 2,682 | 2,682 | 2,682 | Hospital | United States of America | ||||||||||||||
Dae-A Leisure Co.,Ltd. 7 |
49.36 | | 1,017 | | Earth works | Korea | ||||||||||||||
Doosung Metal Co., Ltd. 7 |
26.52 | | (20 | ) | | Manufacture of metal products | Korea | |||||||||||||
RAND Bio Science Co., Ltd. |
24.24 | 2,000 | 2,000 | 2,000 | Research and experimental development on medical sciences and pharmacy | Korea | ||||||||||||||
Balhae Infrastructure Company2 |
12.61 | 101,794 | 105,190 | 105,190 | Investment finance | Korea | ||||||||||||||
Bungaejangter Inc. |
22.69 | 3,484 | 3,484 | 3,484 | Portals and other internet information media service activities | |||||||||||||||
Aju Good Technology Venture Fund |
38.46 | 8,230 | 7,856 | 8,230 | Investment finance | Korea | ||||||||||||||
Acts Co.,Ltd. |
27.78 | 500 | 500 | 500 | Manufacture of optical lens and elements | Korea | ||||||||||||||
SY Auto Capital Co., Ltd. |
49.00 | 9,800 | 14,099 | 8,070 | Installment loan | Korea | ||||||||||||||
Wise Asset Management Co., Ltd.9 |
33.00 | | | | Asset management | Korea | ||||||||||||||
Incheon Bridge Co., Ltd.2 |
14.99 | 9,158 | (16,202 | ) | | Operation of highways and related facilities | Korea | |||||||||||||
Jungdong Steel Co., Ltd. 7 |
42.88 | | (436 | ) | | Wholesale of primary metal | Korea | |||||||||||||
Kendae Co., Ltd. 7 |
41.01 | | (223 | ) | 127 | Screen printing | Korea | |||||||||||||
Daesang Techlon Co.,Ltd.7 |
47.73 | | 97 | | Manufacture of plastic wires, bars, pipes, tubes and hoses | Korea | ||||||||||||||
Dongjo Co.,Ltd.7 |
29.29 | | 691 | | Wholesale of agricultural and forestry machinery and equipment | Korea | ||||||||||||||
Dpaps Co., Ltd. 7 |
38.62 | | 155 | | Wholesale of paper products | Korea | ||||||||||||||
Big Dipper Co., Ltd. |
29.33 | 440 | 325 | 440 | Big data consulting | |||||||||||||||
Builton Co., Ltd. |
22.22 | 800 | 800 | 800 | Software development and supply | Korea | ||||||||||||||
Shinla Construction Co., Ltd. 7 |
20.24 | | (553 | ) | | Specialty construction | Korea | |||||||||||||
Shinhwa Underwear Co., Ltd. 7 |
26.24 | | (103 | ) | 138 | Manufacture of underwears and sleepwears | Korea | |||||||||||||
A-PRO Co., Ltd. 2 |
12.61 | 1,500 | 1,500 | 1,500 | Manufacture of electric power storage system |
115
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
MJT&I Co., Ltd. 7 |
22.89 | | (601 | ) | 127 | Wholesale of other goods | Korea | |||||||||||||||
Inno Lending Co.,Ltd.2 |
19.90 | 398 | 230 | 230 | Credit rating model development | Korea | ||||||||||||||||
Jaeyang Industry Co., Ltd. 7 |
20.86 | | (522 | ) | | Manufacture of luggage and other protective cases | Korea | |||||||||||||||
Jungdo Co.,Ltd.7 |
25.53 | | 1,664 | | Office, commercial and institutional building construction | Korea | ||||||||||||||||
Jinseung Tech Co.,Ltd.7 |
30.04 | | (173 | ) | | Manufacture of other general-purpose machinery n.e.c. | Korea | |||||||||||||||
Terra Co., Ltd. 7 |
24.06 | | 36 | 20 | Manufacture of hand-operated kitchen appliances and metal ware | Korea | ||||||||||||||||
Paycoms Co.,Ltd. |
24.06 | 800 | 800 | 800 | System software publishing | Korea | ||||||||||||||||
Food Factory Co., Ltd. |
30.00 | 1,000 | 1,000 | 1,000 | Farm product distribution industry | Korea | ||||||||||||||||
Korea NM Tech Co.,Ltd.7 |
22.41 | | 580 | | Manufacture of motor vehicles, trailers and semitrailers | Korea | ||||||||||||||||
KB IGen Private Equity Fund No.12,11 |
0.03 | 3 | 3 | 3 | Investment finance | Korea | ||||||||||||||||
KB No.8 Special Purpose Acquisition Company2 3 |
0.10 | 10 | 20 | 20 | SPAC | Korea | ||||||||||||||||
KB No.9 Special Purpose Acquisition Company2,4 |
0.11 | 24 | 31 | 31 | SPAC | Korea | ||||||||||||||||
KB No.10 Special Purpose Acquisition Company2,5 |
0.19 | 10 | 20 | 20 | SPAC | Korea | ||||||||||||||||
KB No.11 Special Purpose Acquisition Company2,6 |
0.31 | 10 | 19 | 19 | SPAC | Korea | ||||||||||||||||
KB Private Equity FundIII2 |
15.68 | 8,000 | 7,899 | 7,899 | Investment finance | Korea | ||||||||||||||||
Korea Credit Bureau Co., Ltd.2 |
9.00 | 4,500 | 5,056 | 5,056 | Credit information | Korea | ||||||||||||||||
KoFC KBIC Frontier Champ 2010-5(PEF) |
50.00 | 6,485 | 7,506 | 7,120 | Investment finance | Korea | ||||||||||||||||
KoFC POSCO HANHWA KB shared growth Private Equity Fund No.2 |
25.00 | 12,970 | 17,213 | 17,213 | Investment finance | Korea | ||||||||||||||||
Keystone-Hyundai Securities No. 1 Private Equity Fund2 |
5.64 | 1,842 | 1,761 | 1,761 | Investment finance | Korea | ||||||||||||||||
POSCO-KB Shipbuilding Fund |
31.25 | 2,500 | 2,345 | 2,345 | Investment finance | Korea | ||||||||||||||||
Hyundai-Tongyang Agrifood Private Equity Fund |
25.47 | 82 | 543 | 543 | Investment finance | Korea | ||||||||||||||||
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|
116
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
(in millions of Korean won) | December 31, 2016 | |||||||||||||||||||||
Ownership (%) |
Acquisition cost |
Share of net asset amount |
Carrying amount |
Industry | Location | |||||||||||||||||
Associates |
||||||||||||||||||||||
JSC Bank CenterCredit |
||||||||||||||||||||||
Ordinary share10 |
29.56 | |||||||||||||||||||||
Preference share10 |
93.15 | Banking | Kazakhstan | |||||||||||||||||||
KB GwS Private Securities Investment Trust |
26.74 | 113,880 | 133,150 | 129,678 | Investment finance | Korea | ||||||||||||||||
KB-Glenwood Private Equity Fund2,11 |
0.03 | 10 | 10 | 10 | Investment finance | Korea | ||||||||||||||||
KB Star office Private real estate Investment Trust No.1 |
21.05 | 20,000 | 20,220 | 19,807 | Investment finance | Korea | ||||||||||||||||
Doosung Metal Co., Ltd.7 |
26.52 | | (51 | ) | | Manufacture of metal products | Korea | |||||||||||||||
RAND Bio Science Co., Ltd. |
24.24 | 2,000 | 2,000 | 2,000 | Research and experimental development on medical sciences and pharmacy | Korea | ||||||||||||||||
Balhae Infrastructure Company2 |
12.61 | 130,189 | 133,200 | 133,200 | Investment finance | Korea | ||||||||||||||||
IMM Investment 5th PRIVATE EQUITY FUND8 |
98.88 | 10,000 | 9,999 | 9,999 | Private equity fund | Korea | ||||||||||||||||
Aju Good Technology Venture Fund |
38.46 | 1,998 | 1,949 | 1,998 | Investment finance | Korea | ||||||||||||||||
SY Auto Capital Co., Ltd. |
49.00 | 9,800 | 26,311 | 5,693 | Installment loan | Korea | ||||||||||||||||
Wise Asset Management Co., Ltd.9 |
33.00 | | | | Asset management | Korea | ||||||||||||||||
isMedia Co., Ltd. |
22.87 | 3,978 | 3,978 | 3,978 | Semiconductor instrument manufacture | Korea | ||||||||||||||||
Incheon Bridge Co., Ltd.2 |
14.99 | 24,677 | 728 | 728 | Operation of highways and related facilities | Korea | ||||||||||||||||
Jungdong Steel Co., Ltd.7 |
42.88 | | (423 | ) | | Wholesale of primary metal | Korea | |||||||||||||||
KB Insurance Co., Ltd. 1 |
39.81 | 1,052,759 | 1,393,320 | 1,392,194 | Non-life insurance | Korea | ||||||||||||||||
Kendae Co., Ltd.7 |
41.01 | | (351 | ) | | Screen printing | Korea | |||||||||||||||
Dpaps Co., Ltd.7 |
38.62 | | 151 | | Wholesale of paper products | Korea | ||||||||||||||||
Shinla Construction Co., Ltd.7 |
20.24 | | (545 | ) | | Specialty construction | Korea | |||||||||||||||
Shinhwa Underwear Co., Ltd.7 |
26.24 | | (138 | ) | 103 | Manufacture of underwears and sleepwears | Korea | |||||||||||||||
MJT&I Co., Ltd.7 |
22.89 | | (542 | ) | 232 | Wholesale of other goods | Korea | |||||||||||||||
Inno Lending Co.,Ltd.2 |
19.90 | 398 | 378 | 378 | Credit rating model development | Korea | ||||||||||||||||
Ejade Co., Ltd.7 |
25.81 | | (523 | ) | | Wholesale of underwears | Korea | |||||||||||||||
Jaeyang Industry Co., Ltd.7 |
20.86 | | (522 | ) | | Manufacture of luggage and other protective cases | Korea | |||||||||||||||
Terra Co., Ltd.7 |
24.06 | | 44 | 28 | Manufacture of hand-operated kitchen appliances and metal ware | Korea | ||||||||||||||||
KBIC Private Equity Fund No. 32 |
2.00 | 2,050 | 2,396 | 2,396 | Investment finance | Korea | ||||||||||||||||
KB No.8 Special Purpose Acquisition Company2,3 |
0.10 | 10 | 19 | 19 | SPAC | Korea | ||||||||||||||||
KB No.9 Special Purpose Acquisition Company2,4 |
0.11 | 24 | 31 | 31 | SPAC | Korea | ||||||||||||||||
KB No.10 Special Purpose Acquisition Company2,5 |
0.19 | 10 | 20 | 20 | SPAC | Korea | ||||||||||||||||
KB No.11 Special Purpose Acquisition Company2 |
4.76 | 10 | 13 | 13 | SPAC | Korea | ||||||||||||||||
KB Private Equity FundIII2 |
15.68 | 8,000 | 8,000 | 8,000 | Investment finance | Korea | ||||||||||||||||
Korea Credit Bureau Co., Ltd.2 |
9.00 | 4,500 | 4,853 | 4,853 | Credit information | Korea |
117
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
KoFC KBIC Frontier Champ 2010-5(PEF) |
50.00 | 23,985 | 25,105 | 24,719 | Investment finance | Korea | ||||||||||||||||
KoFC POSCO HANHWA KB shared growth Private Equity Fund No. 2 |
25.00 | 22,701 | 24,789 | 24,789 | Investment finance | Korea | ||||||||||||||||
Keystone-Hyundai Securities No. 1 Private Equity Fund2 |
5.64 | 1,842 | 1,850 | 1,850 | Investment finance | Korea | ||||||||||||||||
Hyundai-Tongyang Agrifood Private Equity Fund |
25.47 | 4,645 | 3,957 | 3,957 | Investment finance | Korea | ||||||||||||||||
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|||||||||||||||||
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|
1 | The market value of KB Insurance Co., Ltd., reflecting the quoted market price, as of December 31, 2016, amounts to |
2 | As of December 31, 2017 and 2016, the Group is represented in the governing bodies of its associates. Therefore, the Group has a significant influence over the decision-making process relating to their financial and business policies. |
3 | The market value of KB No.8 Special Purpose Acquisition Company, reflecting the quoted market price as of December 31, 2017, and 2016 amounts to
|
4 | The market value of KB No.9 Special Purpose Acquisition Company, reflecting the quoted market price as of December 31, 2017 and 2016, amounts to
|
5 | The market value of KB No.10 Special Purpose Acquisition Company, reflecting the quoted market price as of December 31, 2017 and 2016, amounts to
|
6 | The market value of KB No.11 Special Purpose Acquisition Company, reflecting the quoted market price as of December 31, 2017, amounts to |
7 | The investment in associates was reclassified from available-for-sale financial assets due to termination of rehabilitation procedures. |
8 | Although the Group holds a majority of the investees voting rights, other limited partners have a right to replace general partners. Therefore, the Group has been classified the entity as investment in associates. |
9 | Carrying amount of the investment has been recognized as a loss from the date Hyundai Securities Co., Ltd. was included in the consolidation scope. |
10 | Market values of ordinary shares of JSC Bank CenterCredit, reflecting the published market price, as of December 31, 2016, are |
11 | KB-Glenwood Private Equity Fund changed the name to KB IGen Private Equity Fund No. 1. |
12 | In order to take control over the related operations, the agreement from two operative members are required. As such, the group cannot control the investee alone, and the equity method is applied. |
118
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
Summarized financial information on major associates, adjustments to carrying amount of investment in associates and joint ventures and dividends received from the associates and joint ventures are as follows:
(In millions of Korean won) | 20171 | |||||||||||||||||||||||||||
Total assets |
Total liabilities |
Share capital |
Equity | Share of net asset amount |
Unrealized gains (losses) |
Consolidated carrying amount |
||||||||||||||||||||||
Associates and Joint ventures |
||||||||||||||||||||||||||||
KB Pre IPO Secondary Venture Fund 1st |
||||||||||||||||||||||||||||
KB GwS Private Securities Investment Trust |
505,115 | 741 | 425,814 | 504,374 | 134,891 | (3,471 | ) | 131,420 | ||||||||||||||||||||
KB-KDBC New Technology Business Investment Fund |
7,503 | 45 | 7,500 | 7,458 | 4,972 | | 4,972 | |||||||||||||||||||||
KB Star office Private real estate Investment Trust No.1 |
216,041 | 120,462 | 95,000 | 95,579 | 20,122 | (413 | ) | 19,709 | ||||||||||||||||||||
Sun Surgery Center Inc |
9,579 | | 43 | 9,579 | 2,682 | | 2,682 | |||||||||||||||||||||
RAND Bio Science Co., Ltd. |
1,876 | 7 | 71 | 1,869 | 2,000 | | 2,000 | |||||||||||||||||||||
Balhae Infrastructure Company |
836,309 | 1,800 | 807,567 | 834,509 | 105,190 | | 105,190 | |||||||||||||||||||||
Bungaejangter Inc. |
5,592 | 3,450 | 43 | 2,142 | 3,484 | | 3,484 | |||||||||||||||||||||
Aju Good Technology Venture Fund |
20,676 | 250 | 21,400 | 20,426 | 7,856 | 374 | 8,230 | |||||||||||||||||||||
Acts Co., Ltd. |
6,741 | 6,894 | 117 | (153 | ) | 500 | | 500 | ||||||||||||||||||||
SY Auto Capital Co., Ltd. |
79,845 | 51,071 | 20,000 | 28,774 | 14,099 | (6,029 | ) | 8,070 | ||||||||||||||||||||
Incheon Bridge Co., Ltd. |
646,811 | 754,900 | 61,096 | (108,089 | ) | (16,202 | ) | 16,202 | | |||||||||||||||||||
Big Dipper Co., Ltd. |
1,138 | 30 | 1,500 | 1,108 | 325 | 115 | 440 | |||||||||||||||||||||
Builton Co., Ltd. |
1,418 | 808 | 321 | 610 | 800 | | 800 | |||||||||||||||||||||
A-PRO Co., Ltd. |
8,692 | 5,681 | 43 | 3,011 | 1,500 | | 1,500 | |||||||||||||||||||||
Inno Lending Co.,Ltd. |
1,184 | 28 | 2,000 | 1,156 | 230 | | 230 | |||||||||||||||||||||
Paycoms Co.,Ltd. |
1,898 | 1,374 | 810 | 524 | 800 | | 800 | |||||||||||||||||||||
Food Factory Co., Ltd. |
3,501 | 3,552 | | (51 | ) | 1,000 | | 1,000 | ||||||||||||||||||||
KB IGen Private Equity Fund No. 1 |
7,666 | 9 | 11,230 | 7,657 | 3 | | 3 | |||||||||||||||||||||
KB No.8 Special Purpose Acquisition Company |
22,920 | 2,369 | 1,031 | 20,551 | 20 | | 20 | |||||||||||||||||||||
KB No.9 Special Purpose Acquisition Company |
29,963 | 2,566 | 1,382 | 27,397 | 31 | | 31 | |||||||||||||||||||||
KB No.10 Special Purpose Acquisition Company |
11,858 | 1,675 | 521 | 10,183 | 20 | | 20 | |||||||||||||||||||||
KB No.11 Special Purpose Acquisition Company |
6,730 | 717 | 321 | 6,013 | 19 | | 19 | |||||||||||||||||||||
KB Private Equity FundIII |
50,357 | | 51,000 | 50,357 | 7,899 | | 7,899 | |||||||||||||||||||||
Korea Credit Bureau Co., Ltd. |
75,504 | 19,323 | 10,000 | 56,181 | 5,056 | | 5,056 | |||||||||||||||||||||
KoFC KBIC Frontier Champ 2010-5(PEF) |
15,017 | 3 | 12,970 | 15,014 | 7,506 | (386 | ) | 7,120 | ||||||||||||||||||||
KoFC POSCO HANHWA KB shared growth Private Equity Fund No. 2 |
70,166 | 1,315 | 51,880 | 68,851 | 17,213 | | 17,213 | |||||||||||||||||||||
Keystone-Hyundai Securities No. 1 Private Equity Fund |
170,155 | 133,034 | 34,114 | 37,121 | 1,761 | | 1,761 | |||||||||||||||||||||
POSCO-KB Shipbuilding Fund |
7,752 | 247 | 8,000 | 7,505 | 2,345 | | 2,345 | |||||||||||||||||||||
Hyundai-Tongyang Agrifood Private Equity Fund |
2,466 | 339 | 320 | 2,127 | 543 | | 543 |
119
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
(In millions of Korean won) | 2017 | |||||||||||||||||||
Operating income | Profit (loss) | Other comprehensive income |
Total comprehensive income |
Dividends | ||||||||||||||||
Associates and Joint ventures |
||||||||||||||||||||
KB Pre IPO Secondary Venture Fund 1st |
||||||||||||||||||||
KB GwS Private Securities Investment Trust |
35,002 | 34,004 | | 34,004 | 7,350 | |||||||||||||||
KB-KDBC New Technology Business Investment Fund |
3 | (42 | ) | | (42 | ) | | |||||||||||||
KB Star office Private real estate Investment Trust No.1 |
13,071 | 5,684 | | 5,684 | 1,295 | |||||||||||||||
Sun Surgery Center Inc. |
| | | | | |||||||||||||||
RAND Bio Science Co., Ltd. |
| (607 | ) | | (607 | ) | | |||||||||||||
Balhae Infrastructure Company |
113,441 | 104,942 | | 104,942 | 12,842 | |||||||||||||||
Bungaejangter Inc. |
406 | 48 | | 48 | | |||||||||||||||
Aju Good Technology Venture Fund |
660 | (841 | ) | | (841 | ) | | |||||||||||||
Acts Co.,Ltd. |
3,537 | (578 | ) | | (578 | ) | | |||||||||||||
SY Auto Capital Co., Ltd. |
15,783 | 2,490 | (27 | ) | 2,463 | | ||||||||||||||
Incheon Bridge Co., Ltd. |
90,691 | (8,719 | ) | | (8,719 | ) | | |||||||||||||
Big Dipper Co., Ltd. |
140 | (392 | ) | | (392 | ) | | |||||||||||||
Builton Co., Ltd. |
1,433 | 58 | | 58 | | |||||||||||||||
A-PRO Co., Ltd. |
12,226 | 661 | | 661 | | |||||||||||||||
Inno Lending Co., Ltd. |
( 751 | ) | (749 | ) | | (749 | ) | | ||||||||||||
Paycoms Co.,Ltd. |
303 | (170 | ) | | (170 | ) | | |||||||||||||
Food Factory Co., Ltd. |
3,324 | (1,036 | ) | | (1,036 | ) | | |||||||||||||
KB IGen Private Equity Fund No. 1 |
| 172 | | 172 | | |||||||||||||||
KB No.8 Special Purpose Acquisition Company |
| 73 | | 73 | | |||||||||||||||
KB No.9 Special Purpose Acquisition Company |
| 223 | | 223 | | |||||||||||||||
KB No.10 Special Purpose Acquisition Company |
| 29 | | 29 | | |||||||||||||||
KB No.11 Special Purpose Acquisition Company |
| (262 | ) | | (262 | ) | | |||||||||||||
KB Private Equity FundIII |
| (545 | ) | | (545 | ) | | |||||||||||||
Korea Credit Bureau Co., Ltd. |
68,750 | 3,580 | | 3,580 | 149 | |||||||||||||||
KoFC KBIC Frontier Champ 2010-5(PEF) |
2,728 | (294 | ) | 142 | (152 | ) | | |||||||||||||
KoFC POSCO HANHWA KB shared growth Private Equity Fund No. 2 |
21,916 | 8,624 | 129 | 8,753 | | |||||||||||||||
Keystone-Hyundai Securities No. 1 Private Equity Fund |
5,391 | (1,507 | ) | | (1,507 | ) | | |||||||||||||
POSCO-KB Shipbuilding Fund |
23 | (495 | ) | | (495 | ) | | |||||||||||||
Hyundai-Tongyang Agrifood Private Equity Fund |
4,159 | 3,231 | | 3,231 | 407 |
1 | The amounts included in the financial statements of the associates and joint ventures are adjusted to reflect adjustments made by the entity; such as, fair value adjustments made at the time of acquisition and adjustments for differences in accounting policies. |
120
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
(In millions of Korean won) | 20161 | |||||||||||||||||||||||||||
Total assets | Total liabilities |
Share capital |
Equity | Share of net asset amount |
Unrealized gains (losses) |
Consolidated carrying amount |
||||||||||||||||||||||
Associates |
||||||||||||||||||||||||||||
JSC Bank CenterCredit |
||||||||||||||||||||||||||||
KB GwS Private Securities Investment Trust |
498,606 | 741 | 425,814 | 497,865 | 133,150 | (3,472 | ) | 129,678 | ||||||||||||||||||||
KB-Glenwood Private Equity Fund |
30,558 | 3,204 | 31,100 | 27,354 | 10 | | 10 | |||||||||||||||||||||
KB Star office Private real estate Investment Trust No.1 |
216,988 | 120,943 | 95,000 | 96,045 | 20,220 | (413 | ) | 19,807 | ||||||||||||||||||||
RAND Bio Science Co., Ltd. |
2,720 | 5 | 83 | 2,715 | 2,000 | | 2,000 | |||||||||||||||||||||
Balhae Infrastructure Fund |
1,059,008 | 2,288 | 1,061,216 | 1,056,720 | 133,200 | | 133,200 | |||||||||||||||||||||
IMM Investment 5th PRIVATE EQUITY FUND |
10,114 | 1 | 10,114 | 10,113 | 9,999 | | 9,999 | |||||||||||||||||||||
Aju Good Technology Venture Fund |
5,249 | 181 | 5,200 | 5,068 | 1,949 | 49 | 1,998 | |||||||||||||||||||||
SY Auto Capital Co., Ltd. |
65,292 | 38,981 | 20,000 | 26,311 | 26,311 | (20,618 | ) | 5,693 | ||||||||||||||||||||
isMedia Co., Ltd.2 |
41,192 | 20,925 | 2,520 | 20,267 | 3,978 | | 3,978 | |||||||||||||||||||||
Incheon Bridge Co., Ltd. |
660,858 | 656,000 | 164,621 | 4,858 | 728 | | 728 | |||||||||||||||||||||
KB Insurance Co., Ltd. (initial acquisition 22.59%) |
30,949,859 | 27,357,084 | 33,250 | 3,592,775 | 810,704 | |||||||||||||||||||||||
(additional acquisition 10.70%) |
31,071,846 | 27,386,605 | 33,250 | 3,685,241 | 393,678 | (1,126 | ) | 1,392,194 | ||||||||||||||||||||
(additional acquisition 6.52%)3 |
30,038,426 | 27,136,518 | 33,250 | 2,901,908 | 188,938 | |||||||||||||||||||||||
Inno Lending Co., Ltd. |
1,903 | 1 | 2,000 | 1,902 | 378 | | 378 | |||||||||||||||||||||
KBIC Private Equity Fund No. 3 |
119,885 | 76 | 102,500 | 119,809 | 2,396 | | 2,396 | |||||||||||||||||||||
KB No.8 Special Purpose Acquisition Company |
22,743 | 2,265 | 1,031 | 20,478 | 19 | | 19 | |||||||||||||||||||||
KB No.9 Special Purpose Acquisition Company |
29,677 | 2,503 | 1,382 | 27,174 | 31 | | 31 | |||||||||||||||||||||
KB No.10 Special Purpose Acquisition Company |
11,795 | 1,628 | 521 | 10,167 | 20 | | 20 | |||||||||||||||||||||
KB No.11 Special Purpose Acquisition Company |
991 | 714 | 21 | 277 | 13 | | 13 | |||||||||||||||||||||
KB Private Equity FundIII2 |
51,000 | | 51,000 | 51,000 | 8,000 | | 8,000 | |||||||||||||||||||||
Korea Credit Bureau Co., Ltd. |
71,245 | 17,322 | 10,000 | 53,923 | 4,853 | | 4,853 | |||||||||||||||||||||
KoFC KBIC Frontier Champ 2010-5(PEF) |
50,213 | 2 | 47,970 | 50,211 | 25,105 | (386 | ) | 24,719 | ||||||||||||||||||||
KoFC POSCO HANHWA KB shared growth Private Equity Fund No. 2 |
100,252 | 1,094 | 90,800 | 99,158 | 24,789 | | 24,789 | |||||||||||||||||||||
Keystone-Hyundai Securities No. 1 Private Equity Fund |
112,865 | 73,429 | 34,114 | 39,436 | 1,850 | | 1,850 | |||||||||||||||||||||
Hyundai-Tongyang Agrifood Private Equity Fund |
15,910 | 375 | 15,360 | 15,535 | 3,957 | | 3,957 |
121
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
(In millions of Korean won) | 20161 | |||||||||||||||||||
Operating income | Profit (loss) | Other comprehensive income |
Total comprehensive income |
Dividends | ||||||||||||||||
Associates |
||||||||||||||||||||
JSC Bank CenterCredit |
||||||||||||||||||||
KB GwS Private Securities Investment Trust |
36,502 | 35,513 | | 35,513 | 7,355 | |||||||||||||||
KB-Glenwood Private Equity Fund |
| (542 | ) | | (542 | ) | | |||||||||||||
KB Star office Private real estate Investment Trust No.1 |
16,314 | 7,460 | | 7,460 | 1,679 | |||||||||||||||
RAND Bio Science Co., Ltd. |
| (112 | ) | | (112 | ) | | |||||||||||||
Balhae Infrastructure Fund |
55,541 | 46,428 | | 46,428 | 5,654 | |||||||||||||||
IMM Investment 5th PRIVATE EQUITY FUND |
| (1 | ) | | (1 | ) | | |||||||||||||
Aju Good Technology Venture Fund |
50 | (128 | ) | | (128 | ) | | |||||||||||||
SY Auto Capital Co., Ltd. |
20,340 | 6,962 | | 6,962 | | |||||||||||||||
Incheon Bridge Co., Ltd. |
98,341 | 17,449 | | 17,449 | | |||||||||||||||
KB Insurance Co., Ltd. |
||||||||||||||||||||
(initial acquisition 22.59%) |
11,229,942 | 253,362 | (19,150 | ) | 234,212 | 7,989 | ||||||||||||||
(additional acquisition 10.70%) |
11,247,685 | 274,678 | (39,203 | ) | 235,475 | |||||||||||||||
Inno Lending Co., Ltd. |
| (98 | ) | | (98 | ) | | |||||||||||||
KBIC Private Equity Fund No. 3 |
2,641 | 2,361 | | 2,361 | | |||||||||||||||
KB No.8 Special Purpose Acquisition Company |
| 317 | 276 | 593 | | |||||||||||||||
KB No.9 Special Purpose Acquisition Company |
| 129 | 25,392 | 25,521 | | |||||||||||||||
KB No.10 Special Purpose Acquisition Company |
| (22 | ) | | (22 | ) | | |||||||||||||
KB No.11 Special Purpose Acquisition Company |
| (12 | ) | | (12 | ) | | |||||||||||||
Korea Credit Bureau Co., Ltd. |
59,868 | 3,517 | | 3,517 | 135 | |||||||||||||||
KoFC KBIC Frontier Champ 2010-5(PEF) |
3,045 | 2,001 | 2,390 | 4,391 | | |||||||||||||||
KoFC POSCO HANHWA KB shared growth Private Equity Fund No. 2 |
22,411 | 15,002 | 872 | 15,874 | | |||||||||||||||
Keystone-Hyundai Securities No. 1 Private Equity Fund |
197 | (626 | ) | | (626 | ) | | |||||||||||||
Hyundai-Tongyang Agrifood Private Equity Fund |
519 | (5,258 | ) | | (5,258 | ) | |
1 | The amounts included in the financial statements of the associates are adjusted to reflect adjustments made by the entity, such as fair value adjustments made at the time of acquisition and adjustments for differences in accounting policies. |
2 | Details of profit or loss are not disclosed as the entity is classified as an associate during the fourth quarter. |
3 | Details of profit or loss are not disclosed as the 3rd share acquisition of KB Insurance Co., Ltd. occurred on December 29, 2016. |
122
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
Changes in investments in associates and joint ventures for the years ended December 31, 2017 and 2016, are as follows:
(In millions of Korean won) | 2017 | |||||||||||||||||||||||||||||||
Beginning | Acquisition and others |
Disposal and others |
Dividends | Gains (losses) on equity method accounting |
Other comprehensive income |
Others | Ending | |||||||||||||||||||||||||
Associates and Joint ventures |
||||||||||||||||||||||||||||||||
KB Pre IPO Secondary Venture Fund 1st |
||||||||||||||||||||||||||||||||
KB GwS Private Securities Investment Trust |
129,678 | | | (7,350 | ) | 9,092 | | | 131,420 | |||||||||||||||||||||||
KB-KDBC New Technology Business Investment Fund |
| 5,000 | | | (28 | ) | | | 4,972 | |||||||||||||||||||||||
KB Star office Private real estate Investment Trust No.1 |
19,807 | | | (1,295 | ) | 1,197 | | | 19,709 | |||||||||||||||||||||||
Sun Surgery Center Inc. |
| 2,682 | | | | | | 2,682 | ||||||||||||||||||||||||
Kyobo 7 Special Purpose Acquisition Co., Ltd. |
| 10 | (10 | ) | | | | | | |||||||||||||||||||||||
RAND Bio Science Co., Ltd. |
2,000 | | | | | | | 2,000 | ||||||||||||||||||||||||
Balhae Infrastructure Company |
133,200 | 806 | (29,202 | ) | (12,842 | ) | 13,228 | | | 105,190 | ||||||||||||||||||||||
Bungaejanter Inc. |
| 3,484 | | | | | | 3,484 | ||||||||||||||||||||||||
IMM Investment 5th PRIVATE EQUITY FUND |
9,999 | 25,200 | (35,185 | ) | | (14 | ) | | | | ||||||||||||||||||||||
Aju Good Technology Venture Fund |
1,998 | 6,232 | | | | | | 8,230 | ||||||||||||||||||||||||
Acts Co.,Ltd. |
| 500 | | | | | | 500 | ||||||||||||||||||||||||
SY Auto Capital Co., Ltd. |
5,693 | | | | 2,390 | (13 | ) | | 8,070 | |||||||||||||||||||||||
isMedia Co. Ltd |
3,978 | | (5,409 | ) | | 1,431 | | | | |||||||||||||||||||||||
Incheon Bridge Co., Ltd. |
728 | | (728 | ) | | | | | | |||||||||||||||||||||||
KB Insurance Co., Ltd.1 |
1,392,194 | | (1,417,397 | ) | (15,884 | ) | 38,873 | 2,214 | | | ||||||||||||||||||||||
Kendae Co., Ltd. |
| | | | 127 | | | 127 | ||||||||||||||||||||||||
Big Dipper Co.Ltd. |
| 440 | | | | | | 440 | ||||||||||||||||||||||||
Builton Co., Ltd. |
| 800 | | | | | | 800 | ||||||||||||||||||||||||
Shinhwa Underwear Co., Ltd. |
103 | | | | 35 | | | 138 | ||||||||||||||||||||||||
A-PRO Co., Ltd. |
| 1,500 | | | | | | 1,500 | ||||||||||||||||||||||||
MJT&I Co., Ltd. |
232 | | | | (105 | ) | | | 127 | |||||||||||||||||||||||
Inno Lending Co.,Ltd |
378 | | | | (148 | ) | | | 230 | |||||||||||||||||||||||
Korbi Co., Ltd. |
| 750 | (750 | ) | | | | | | |||||||||||||||||||||||
Terra Co., Ltd. |
28 | | | | (8 | ) | | | 20 | |||||||||||||||||||||||
Paycoms Co., Ltd. |
| 800 | | | | | | 800 | ||||||||||||||||||||||||
Food Factory Co., Ltd. |
| 1,000 | | | | | | 1,000 | ||||||||||||||||||||||||
KBIC Private Equity Fund No. 3 |
2,396 | | (2,763 | ) | | 367 | | | |
123
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
KB IGen Private Equity Fund No. 1 |
10 | | (7 | ) | | | | | 3 | |||||||||||||||||||||||
KB No.8 Special Purpose Acquisition Company |
19 | | | | 1 | | | 20 | ||||||||||||||||||||||||
KB No.9 Special Purpose Acquisition Company |
31 | | | | | | | 31 | ||||||||||||||||||||||||
KB No.10 Special Purpose Acquisition Company |
20 | | | | | | | 20 | ||||||||||||||||||||||||
KB No.11 Special Purpose Acquisition Company2 |
13 | | | | (2 | ) | (3 | ) | 11 | 19 | ||||||||||||||||||||||
KB Private Equity FundIII |
8,000 | | | | (101 | ) | | | 7,899 | |||||||||||||||||||||||
Korea Credit Bureau Co., Ltd. |
4,853 | | | (149 | ) | 352 | | | 5,056 | |||||||||||||||||||||||
KoFC KBIC Frontier Champ 2010-5(PEF) |
24,719 | | (17,500 | ) | | (170 | ) | 71 | | 7,120 | ||||||||||||||||||||||
KoFC POSCO HANHWA KB shared growth Private Equity Fund No. 2 |
24,789 | | (9,730 | ) | | 2,121 | 33 | | 17,213 | |||||||||||||||||||||||
Keystone-Hyundai Securities No. 1 Private Equity Fund |
1,850 | | | | (85 | ) | (4 | ) | | 1,761 | ||||||||||||||||||||||
POSCO-KB Shipbuilding Fund |
| 2,500 | | | (155 | ) | | | 2,345 | |||||||||||||||||||||||
Hyundai-Tongyang Agrifood Private Equity Fund |
3,957 | | (3,830 | ) | (407 | ) | 823 | | | 543 | ||||||||||||||||||||||
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1 | KB Insurance Co., Ltd. is included as a subsidiary in 2nd quarter of 2017. |
2 | Other gain of KB No.11 Special Purpose Acquisition Company amounting to |
3 | Gain on disposal of investments in associates and joint ventures for year ended December 31, 2017, amounts to |
124
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
(In millions of Korean won) | 2016 | |||||||||||||||||||||||||||||||
Beginning | Acquisition and others |
Disposal and others |
Dividends | Gains (losses) method |
Other compre hensive |
Others | Ending | |||||||||||||||||||||||||
Associates |
||||||||||||||||||||||||||||||||
JSC Bank CenterCredit |
||||||||||||||||||||||||||||||||
KB GwS Private Securities Investment Trust |
127,539 | | | (7,355 | ) | 9,494 | | | 129,678 | |||||||||||||||||||||||
KB-Glenwood Private Equity Fund |
10 | | | | | | | 10 | ||||||||||||||||||||||||
KB Star office Private real estate Investment Trust No.1 |
19,915 | | | (1,679 | ) | 1,571 | | | 19,807 | |||||||||||||||||||||||
RAND Bio Science Co., Ltd. |
| 2,000 | | | | | | 2,000 | ||||||||||||||||||||||||
Balhae Infrastructure Fund |
128,275 | 4,727 | | (5,654 | ) | 5,852 | | | 133,200 | |||||||||||||||||||||||
IMM Investment 5th PRIVATE EQUITY FUND |
| 10,000 | | | (1 | ) | | | 9,999 | |||||||||||||||||||||||
Aju Good Technology Venture Fund |
| 2,000 | (2 | ) | | | | | 1,998 | |||||||||||||||||||||||
SY Auto Capital Co., Ltd. |
9,481 | | | | (3,788 | ) | | | 5,693 | |||||||||||||||||||||||
UAMCO., Ltd. |
129,707 | | (101,740 | ) | (26,961 | ) | (1,006 | ) | | | | |||||||||||||||||||||
United PF 1st Recovery Private Equity Fund |
183,117 | | (190,863 | ) | | 7,746 | | | | |||||||||||||||||||||||
isMedia Co. Ltd |
| 3,978 | | | | | | 3,978 | ||||||||||||||||||||||||
Incheon Bridge Co., Ltd. |
| | | | 728 | | | 728 | ||||||||||||||||||||||||
Jungdong Steel Co., Ltd. |
33 | | | | (33 | ) | | | | |||||||||||||||||||||||
KB Insurance Co., Ltd. |
1,077,014 | 170,625 | | (7,989 | ) | 160,954 | (8,410 | ) | | 1,392,194 | ||||||||||||||||||||||
Shinhwa Underwear Co., Ltd. |
56 | | | | 47 | | | 103 | ||||||||||||||||||||||||
Sawnics Co., Ltd. |
1,397 | | (1,223 | ) | | (174 | ) | | | | ||||||||||||||||||||||
MJT&I Co., Ltd. |
149 | | | | 83 | | | 232 | ||||||||||||||||||||||||
Inno Lending Co.,Ltd. |
| 398 | | | (20 | ) | | | 378 | |||||||||||||||||||||||
Terra Co., Ltd. |
21 | | | | 7 | | | 28 | ||||||||||||||||||||||||
KBIC Private Equity Fund No. 3 |
2,348 | | | | 48 | | | 2,396 | ||||||||||||||||||||||||
KB No.5 Special Purpose Acquisition Company |
20 | | (20 | ) | | | | | | |||||||||||||||||||||||
KB No.6 Special Purpose Acquisition Company |
78 | | (78 | ) | | | | | | |||||||||||||||||||||||
KB No.7 Special Purpose Acquisition Company |
88 | | (88 | ) | | | | | | |||||||||||||||||||||||
KB No.8 Special Purpose Acquisition Company |
19 | | | | | | | 19 | ||||||||||||||||||||||||
KB No.9 Special Purpose Acquisition Company 2 |
15 | 4,082 | (4,074 | ) | | | | 8 | 31 | |||||||||||||||||||||||
KB No.10 Special Purpose Acquisition Company 3 |
| 10 | | | | | 10 | 20 | ||||||||||||||||||||||||
KB No.11 Special Purpose Acquisition Company |
| 10 | | | (1 | ) | 4 | | 13 | |||||||||||||||||||||||
KB Private Equity FundIII |
| 8,000 | | | | | | 8,000 | ||||||||||||||||||||||||
Korea Credit Bureau Co., Ltd. |
4,580 | | | (135 | ) | 408 | | | 4,853 |
125
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
KoFC KBIC Frontier Champ 2010-5(PEF) |
25,508 | | (2,900 | ) | | 916 | 1,195 | | 24,719 | |||||||||||||||||||||||
KoFC POSCO HANHWA KB shared growth Private Equity Fund No. 2 |
28,470 | 3,751 | (12,000 | ) | | 4,578 | (10 | ) | | 24,789 | ||||||||||||||||||||||
Keystone-Hyundai Securities No. 1 Private Equity Fund 4 |
| | | | (3 | ) | 11 | 1,842 | 1,850 | |||||||||||||||||||||||
Hyundai-Tongyang Agrifood Private Equity Fund5 |
| | | | (688 | ) | | 4,645 | 3,957 | |||||||||||||||||||||||
Hyundai Securities Co., Ltd.6 |
| 1,349,150 | (1,459,604 | ) | | 112,931 | (2,477 | ) | | | ||||||||||||||||||||||
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1 | Among the gain on valuation of equity method investments, |
2 | Other gain of KB No.9 Special Purpose Acquisition Company amounting to |
3 | Other gain of KB No.10 Special Purpose Acquisition Company amounting to |
4 | Other gain of Keystone-Hyundai Securities No. 1 Private Equity Fund amounting |
5 | Other gain of Hyundai-Tongyang Agrifood Private Equity Fund amounting |
6 | Hyundai Securities Co., Ltd. is included as a subsidiary in fourth quarter, 2016. |
7 | Loss on disposal of investments in associates for the year ended December 31, 2016, amounts to |
126
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
Accumulated unrecognized share of losses in investments in associates and joint ventures due to discontinuation of applying the equity method for the years ended December 31, 2017 and 2016, are as follows:
2017 | 2016 | |||||||||||||||
Unrecognized loss |
Accumulated unrecognized loss |
Unrecognized loss |
Accumulated unrecognized loss |
|||||||||||||
Doosung Metal Co., Ltd |
||||||||||||||||
Incheon Bridge Co., Ltd. |
16,202 | 16,202 | (1,879 | ) | | |||||||||||
Jungdong Steel Co., Ltd. |
13 | 489 | 476 | 476 | ||||||||||||
Dpaps Co., Ltd. |
(4 | ) | 184 | 188 | 188 | |||||||||||
Shinla Construction Co., Ltd. |
7 | 183 | 27 | 175 | ||||||||||||
Ejade Co., Ltd. |
(1,118 | ) | | 1,112 | 1,112 | |||||||||||
JSC Bank CenterCredit |
(108,761 | ) | | 5,308 | 108,761 | |||||||||||
Myeongwon Tech Co., Ltd |
| | (43 | ) | |
14. Property and Equipment, and Investment Properties
Details of property and equipment as of December 31, 2017 and 2016, are as follows:
2017 | ||||||||||||||||
(In millions of Korean won) | Acquisition cost |
Accumulated depreciation |
Accumulated impairment losses |
Carrying amount |
||||||||||||
Land |
||||||||||||||||
Buildings |
2,061,717 | (684,705 | ) | (5,859 | ) | 1,371,153 | ||||||||||
Leasehold improvements |
783,446 | (693,717 | ) | | 89,729 | |||||||||||
Equipment and vehicles |
1,699,563 | (1,456,358 | ) | | 243,205 | |||||||||||
Construction in progress |
14,808 | | | 14,808 | ||||||||||||
Financial lease assets |
34,789 | (26,341 | ) | | 8,448 | |||||||||||
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2016 | ||||||||||||||||
(In millions of Korean won) | Acquisition cost |
Accumulated depreciation |
Accumulated impairment losses |
Carrying amount |
||||||||||||
Land |
||||||||||||||||
Buildings |
1,469,894 | (482,319 | ) | (5,859 | ) | 981,716 | ||||||||||
Leasehold improvements |
711,316 | (637,588 | ) | | 73,728 | |||||||||||
Equipment and vehicles |
1,591,143 | (1,353,935 | ) | (6,938 | ) | 230,270 | ||||||||||
Construction in progress |
4,205 | | | 4,205 | ||||||||||||
Financial lease assets |
34,111 | (21,312 | ) | | 12,799 | |||||||||||
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127
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
The changes in property and equipment for the years ended December 31, 2017 and 2016, are as follows:
(In millions of Korean won) | 2017 | |||||||||||||||||||||||||||||||
Beginning | Acquisition | Transfers1 | Disposal | Depreciation2 |
Business combination |
Others | Ending | |||||||||||||||||||||||||
Land |
||||||||||||||||||||||||||||||||
Buildings |
981,716 | 14,611 | 31,608 | (12,314 | ) | (48,280 | ) | 403,816 | (4 | ) | 1,371,153 | |||||||||||||||||||||
Leasehold improvement |
73,728 | 10,973 | 57,663 | (858 | ) | (66,279 | ) | 497 | 14,005 | 89,729 | ||||||||||||||||||||||
Equipment and vehicles |
230,270 | 124,702 | (16,695 | ) | (452 | ) | (138,317 | ) | 42,703 | 994 | 243,205 | |||||||||||||||||||||
Construction in-progress |
4,205 | 112,840 | (102,352 | ) | | | 127 | (12 | ) | 14,808 | ||||||||||||||||||||||
Financial lease assets |
12,799 | 679 | | | (5,030 | ) | | | 8,448 | |||||||||||||||||||||||
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(In millions of Korean won) | 2016 | |||||||||||||||||||||||||||||||
Beginning | Acquisition | Transfers1 | Disposal | Depreciation2 | Business combination |
Others | Ending | |||||||||||||||||||||||||
Land |
||||||||||||||||||||||||||||||||
Buildings |
936,813 | 4,008 | 34,811 | (545 | ) | (33,385 | ) | 39,950 | 64 | 981,716 | ||||||||||||||||||||||
Leasehold improvement |
54,844 | 7,843 | 48,504 | (1,033 | ) | (50,200 | ) | 3,431 | 10,339 | 73,728 | ||||||||||||||||||||||
Equipment and vehicles |
194,492 | 141,546 | | (1,553 | ) | (131,926 | ) | 21,196 | 6,515 | 230,270 | ||||||||||||||||||||||
Construction in-progress |
635 | 144,589 | (141,020 | ) | | | | 1 | 4,205 | |||||||||||||||||||||||
Financial lease assets |
19,913 | 605 | | | (7,719 | ) | | | 12,799 | |||||||||||||||||||||||
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1 | Including transfers with investment property and assets held for sale. |
2 | Including depreciation cost and others |
128
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
The changes in accumulated impairment losses of property and equipment for the years ended December 31, 2017 and 2016, are as follows:
(In millions of Korean won)
2017 | ||||||||||||||||||||||
Beginning | Impairment | Reversal | Business combination |
Disposal and Others |
Ending | |||||||||||||||||
2016 | ||||||||||||
Beginning | Impairment | Reversal | Business combination |
Others | Ending | |||||||
Details of investment property as of December 31, 2017 and 2016, are as follows:
(In millions of Korean won) | 2017 | |||||||||||||||
Acquisition cost |
Accumulated depreciation |
Accumulated impairment losses |
Carrying amount |
|||||||||||||
Land |
||||||||||||||||
Buildings |
719,920 | (122,935 | ) | | 596,985 | |||||||||||
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(In millions of Korean won) | 2016 | |||||||||||||||
Acquisition cost |
Accumulated depreciation |
Accumulated impairment losses |
Carrying amount |
|||||||||||||
Land |
||||||||||||||||
Buildings |
616,085 | (63,465 | ) | | 552,620 | |||||||||||
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The valuation technique and input variables that are used to measure the fair value of investment property as of December 31, 2017, are as follows:
(In millions of Korean won) | 2017 | |||||||
Fair value | Valuation technique | Inputs | ||||||
Land and buildings |
Cost Approach Method | - Price per square meter - Replacement cost | ||||||
178,083 | Market comparison method | - Price per square meter | ||||||
679,614 | Income approach | - Discount rate - Capitalization rate - Vacancy rate |
129
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
As of December 31, 2017 and 2016, fair values of the investment properties amount to W
893,583 million and W 786,506 million, respectively. The investment properties were measured by qualified independent appraisers with experience in valuing similar properties in the same area. In addition, per the fair
value hierarchy on Note 6.1, the fair value hierarchy of all investment properties has been categorized and classified as Level 3.
Rental income
from the above investment properties for the years ended December 31, 2017 and 2016, amounts to W 59,259 million and W 12,884 million, respectively.
The changes in investment property for the years ended December 31, 2017 and 2016, are as follows:
(In millions of Korean won) | 2017 | |||||||||||||||||||||||||||||||
Beginning | Acquisition | Transfers | Disposal | Depreciation | Business combination |
Others | Ending | |||||||||||||||||||||||||
Land |
||||||||||||||||||||||||||||||||
Buildings |
552,620 | 262 | (33,737 | ) | (1,263 | ) | (20,096 | ) | 141,106 | (41,907 | ) | 596,985 | ||||||||||||||||||||
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(In millions of Korean won) | 2016 | |||||||||||||||||||||||||||
Beginning | Acquisition | Transfers | Depreciation | Business combination |
Others | Ending | ||||||||||||||||||||||
Land |
||||||||||||||||||||||||||||
Buildings |
87,262 | 1,254 | (8,108 | ) | (2,531 | ) | 441,905 | 32,838 | 552,620 | |||||||||||||||||||
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15. Intangible Assets
Details of intangible assets as of December 31, 2017 and 2016, are as follows:
(In millions of Korean won) | 2017 | |||||||||||||||||||
Acquisition cost |
Accumulated amortization |
Accumulated impairment losses |
Other | Carrying Amount |
||||||||||||||||
Goodwill |
||||||||||||||||||||
Other intangible assets |
4,012,563 | (1,299,879 | ) | (43,074 | ) | | 2,669,610 | |||||||||||||
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|||||||||||
(In millions of Korean won) | 2016 | |||||||||||||||||||
Acquisition cost |
Accumulated amortization |
Accumulated impairment losses |
Carrying Amount |
|||||||||||||||||
Goodwill |
||||||||||||||||||||
Other intangible assets |
1,312,732 | (877,881 | ) | (44,927 | ) | 389,924 | ||||||||||||||
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130
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
Details of goodwill as of December 31, 2017 and 2016, are as follows:
(In millions of Korean won) | 2017 | 2016 | ||||||||||||||
Acquisition cost |
Carrying amount |
Acquisition cost |
Carrying amount |
|||||||||||||
Housing & Commercial Bank |
||||||||||||||||
KB Cambodia Bank |
1,202 | | 1,202 | 1,202 | ||||||||||||
KB Securities Co., Ltd.1 |
70,265 | 58,889 | 70,265 | 58,889 | ||||||||||||
KB Capital Co., Ltd. |
79,609 | 79,609 | 79,609 | 79,609 | ||||||||||||
KB Savings Bank Co., Ltd. |
115,343 | 57,404 | 115,343 | 57,404 | ||||||||||||
KB Securites Vietnam joint stock company2 |
13,092 | 12,260 | | | ||||||||||||
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1 | The amount occurred from formerly known as KB Investment&Securities Co., Ltd. |
2 | MARITIME SECURITIES INCORPORATION changed the name to KB Securites Vietnam joint stock company |
The changes in accumulated impairment losses of goodwill for the years ended December 31, 2017 and 2016, are as follows:
(In millions of Korean won)
2017 | ||||||||||||||
Beginning | Impairment | Others | Ending | |||||||||||
(In millions of Korean won)
2016 | ||||||||||||||
Beginning | Impairment | Others | Ending | |||||||||||
The details of allocating goodwill to cash-generating units and related information for impairment testing as of December 31, 2017, are as follows:
(In millions of Korean won) | Housing & Commercial Bank |
KB Cambodia Bank |
KB Securities Co., Ltd.1 |
KB Capital Co., Ltd. |
KB Savings Bank Co., Ltd. and Yehansoul Savings Bank Co., Ltd. |
Total | ||||||||||||||||||||||
Retail Banking |
Corporate Banking |
|||||||||||||||||||||||||||
Carrying amounts |
||||||||||||||||||||||||||||
Recoverable amount exceeded carrying amount |
8,957,260 | 3,448,191 | | 145,177 | 623,381 | 51,402 | 13,225,411 | |||||||||||||||||||||
Discount rate (%) |
20.47 | 20.81 | 27.57 | 25.71 | 13.00 | 14.91 | ||||||||||||||||||||||
Permanent growth rate (%) |
1.00 | 1.00 | 1.00 | 1.00 | 1.00 | 1.00 |
1 | The amount occurred from formerly known as KB Investment&Securities Co., Ltd. |
2 | Goodwill occurred from a business combination during 2017 has not been tested for impairment. |
131
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
Goodwill is allocated to cash-generating units, based on managements analysis, that are expected to
benefit from the synergies of the combination for impairment testing, and cash-generating units consist of an operating segment or units which are not larger than an operating segment. The Group recognized the amount of W
65,288 million related to goodwill acquired in the merger of Housing & Commercial Bank. Of those respective amounts, the amounts of W 49,315 million and W 15,973 million were allocated to the
Retail Banking and Corporate Banking, respectively. Cash-generating units to which goodwill has been allocated is tested for impairment annually, and whenever there is an indication that the unit may be impaired, by comparing the carrying amount of
the unit, including the goodwill, with the recoverable amount of the unit.
The recoverable amount of a cash-generating unit is measured at the higher of its fair value less costs to sell and its value in use. The fair value less costs to sell is the amount obtainable from the sale in an arms length transaction between knowledgeable, willing parties, less the costs of disposal. If it is difficult to measure the amount obtainable from the sale, the Group measures the fair value less costs to sell by reflecting the characteristics of the measured cash-generating unit. If it is not possible to obtain reliable information to measure the fair value less costs to sell, the Group uses the assets value in use as its recoverable amount. Value in use is the present value of the future cash flows expected to be derived from an asset or cash-generating unit. The projections of the future cash flows are based on the most recent financial budget approved by management and generally cover a period of five years. The future cash flows after projection period are estimated on the assumption that the future cash flows will increase by 1.0% for all other cash-generating units. The key assumptions used for the estimation of the future cash flows are the market size and the Groups market share. The discount rate is a pre-tax rate that reflects assumptions regarding risk-free interest rate, market risk premium and the risks specific to the asset for which the future cash flow estimates have not been adjusted.
Details of intangible assets, excluding goodwill, as of December 31, 2017 and 2016, are as follows:
(In millions of Korean won) | 2017 | |||||||||||||||
Acquisition cost |
Accumulated amortization |
Accumulated impairment losses |
Carrying amount |
|||||||||||||
Industrial property rights |
||||||||||||||||
Software |
1,062,699 | (885,133 | ) | | 177,566 | |||||||||||
Other intangible assets |
501,874 | (211,321 | ) | (43,074 | ) | 247,479 | ||||||||||
Value of Business Aquired (VOBA) |
2,395,291 | (179,193 | ) | | 2,216,098 | |||||||||||
Finance leases assets |
43,202 | (21,833 | ) | | 21,369 | |||||||||||
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(In millions of Korean won) | 2016 | |||||||||||||||
Acquisition cost |
Accumulated amortization |
Accumulated impairment losses |
Carrying amount |
|||||||||||||
Industrial property rights |
||||||||||||||||
Software |
887,098 | (749,997 | ) | | 137,101 | |||||||||||
Other intangible assets |
378,608 | (111,814 | ) | (44,927 | ) | 221,867 | ||||||||||
Finance leases assets |
42,409 | (14,458 | ) | | 27,951 | |||||||||||
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132
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
The changes in intangible assets, excluding goodwill, for the years ended December 31, 2017 and 2016, are as follows:
(In millions of Korean won) | 2017 | |||||||||||||||||||||||||||||||
Beginning | Acquisition | Disposal | Transfer | Amortization1 |
Business combination |
Others | Ending | |||||||||||||||||||||||||
Industrial property rights |
||||||||||||||||||||||||||||||||
Software |
137,101 | 86,768 | (48 | ) | 1,404 | (66,655 | ) | 20,396 | (1,400 | ) | 177,566 | |||||||||||||||||||||
Other intangible assets2 |
221,867 | 20,354 | (7,054 | ) | 14,401 | (18,437 | ) | 18,362 | (2,014 | ) | 247,479 | |||||||||||||||||||||
Value of Business Aquired (VOBA) |
| | | | (179,193 | ) | 2,395,291 | | 2,216,098 | |||||||||||||||||||||||
Finance leases assets |
27,951 | 792 | | | (7,374 | ) | | | 21,369 | |||||||||||||||||||||||
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(In millions of Korean won) | 2016 | |||||||||||||||||||||||||||||||
Beginning | Acquisition | Disposal | Transfer | Amortization1 |
Business combination |
Others | Ending | |||||||||||||||||||||||||
Industrial property rights |
||||||||||||||||||||||||||||||||
Software |
75,009 | 91,631 | | | (41,540 | ) | 11,998 | 3 | 137,101 | |||||||||||||||||||||||
Other intangible assets2 |
94,816 | 16,900 | (7,234 | ) | 1,926 | (14,701 | ) | 132,461 | (2,301 | ) | 221,867 | |||||||||||||||||||||
Finance leases assets |
34,291 | 708 | | | (7,048 | ) | | | 27,951 | |||||||||||||||||||||||
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1 | Including |
2 | Impairment loss for membership right of other intangible asset with indefinite useful life was recognized when its recoverable amount is lower than its carrying amount, and reversal of impairment loss was recognized when its recoverable amount is higher than its carrying amount. |
133
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
The changes in accumulated impairment losses on intangible assets for the years ended December 31, 2017 and 2016, are as follows:
(In millions of Korean won) | 2017 | |||||||||||||||||||
Beginning | Impairment | Reversal | Disposal and others |
Ending | ||||||||||||||||
Accumulated impairment losses on intangible assets |
(In millions of Korean won) | 2016 | |||||||||||||||||||
Beginning | Impairment | Reversal | Disposal and others |
Ending | ||||||||||||||||
Accumulated impairment losses on intangible assets |
The changes in emissions rights for year ended December 31, 2017 and 2016, are as follows:
(KAU, in millions of Korean won)
Applicable under 2016 |
Applicable under 2017 |
Total | ||||||||||||||||||||||
Quantity | Carrying amount |
Quantity | Carrying amount |
Quantity | Carrying amount |
|||||||||||||||||||
Beginning |
99,283 | 104,920 | 204,203 | |||||||||||||||||||||
Additional Allocation |
578 | | 17,046 | | 17,624 | | ||||||||||||||||||
Borrowing |
18,306 | | (18,306 | ) | | | | |||||||||||||||||
Surrendered to government |
(117,484 | ) | | | | (117,484 | ) | | ||||||||||||||||
Cancel |
(683 | ) | | (398 | ) | | (1,081 | ) | | |||||||||||||||
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Ending |
| 103,262 | 103,262 | |||||||||||||||||||||
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(KAU, in millions of Korean won)
Applicable under 2015 |
Applicable under 2016 |
Applicable under 2017 |
Total | |||||||||||||||||||||||||||||
Quantity | Carrying amount |
Quantity | Carrying amount |
Quantity | Carrying amount |
Quantity | Carrying amount |
|||||||||||||||||||||||||
Beginning |
116,799 | 112,137 | 109,140 | 338,076 | ||||||||||||||||||||||||||||
Borrowing |
8,518 | | (8,518 | ) | | | | | | |||||||||||||||||||||||
Surrendered to government |
(121,261 | ) | | | | | | (121,261 | ) | | ||||||||||||||||||||||
Cancel |
(4,056 | ) | | (4,336 | ) | | (4,220 | ) | | (12,612 | ) | | ||||||||||||||||||||
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Ending |
| 99,283 | 104,920 | 204,203 | ||||||||||||||||||||||||||||
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134
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
16. Deferred Income Tax Assets and Liabilities
Details of deferred income tax assets and liabilities as of December 31, 2017 and 2016, are as follows:
(In millions of Korean won) | 2017 | |||||||||||
Assets | Liabilities | Net amount | ||||||||||
Other provisions |
||||||||||||
Allowances for loan losses |
1,142 | | 1,142 | |||||||||
Impairment losses on property and equipment |
36,598 | (407 | ) | 36,191 | ||||||||
Interest on equity index-linked deposits |
43 | | 43 | |||||||||
Share-based payments |
23,238 | | 23,238 | |||||||||
Provisions for guarantees |
24,341 | | 24,341 | |||||||||
Losses(gains) from valuation on derivative financial instruments |
6,258 | (17,479 | ) | (11,221 | ) | |||||||
Present value discount |
25,332 | (4,498 | ) | 20,834 | ||||||||
Losses(gains) from fair value hedged item |
| (15,698 | ) | (15,698 | ) | |||||||
Accrued interest |
243 | (111,514 | ) | (111,271 | ) | |||||||
Deferred loan origination fees and costs |
332 | (180,401 | ) | (180,069 | ) | |||||||
Advanced depreciation provision |
| (1,703 | ) | (1,703 | ) | |||||||
Gains from revaluation |
648 | (350,801 | ) | (350,153 | ) | |||||||
Investments in subsidiaries and others |
24,834 | (103,268 | ) | (78,434 | ) | |||||||
Gains on valuation of security investment |
86,290 | (225,158 | ) | (138,868 | ) | |||||||
Defined benefit liabilities |
436,706 | | 436,706 | |||||||||
Accrued expenses |
194,399 | | 194,399 | |||||||||
Retirement insurance expense |
| (369,300 | ) | (369,300 | ) | |||||||
Adjustments to the prepaid contributions |
| (16,236 | ) | (16,236 | ) | |||||||
Derivative-linked securities |
27,992 | (5,679 | ) | 22,313 | ||||||||
Others |
321,453 | (452,303 | ) | (130,850 | ) | |||||||
|
|
|
|
|
|
|||||||
1,325,367 | (1,854,445 | ) | (529,078 | ) | ||||||||
|
|
|
|
|
|
|||||||
Offsetting of deferred income tax assets and liabilities |
(1,321,376 | ) | 1,321,376 | | ||||||||
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
135
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
(In millions of Korean won) | 2016 | |||||||||||
Assets | Liabilities | Net amount | ||||||||||
Other provisions |
||||||||||||
Allowances for loan losses |
7,297 | | 7,297 | |||||||||
Impairment losses on property and equipment |
7,920 | (359 | ) | 7,561 | ||||||||
Interest on equity index-linked deposits |
41 | | 41 | |||||||||
Share-based payments |
13,709 | | 13,709 | |||||||||
Provisions for guarantees |
30,569 | | 30,569 | |||||||||
Losses(gains) from valuation on derivative financial instruments |
9,761 | (46,765 | ) | (37,004 | ) | |||||||
Present value discount |
11,358 | (6,160 | ) | 5,198 | ||||||||
Losses(gains) from fair value hedged item |
| (14,335 | ) | (14,335 | ) | |||||||
Accrued interest |
| (84,676 | ) | (84,676 | ) | |||||||
Deferred loan origination fees and costs |
1,247 | (158,914 | ) | (157,667 | ) | |||||||
Gains from revaluation |
803 | (286,119 | ) | (285,316 | ) | |||||||
Investments in subsidiaries and others |
12,014 | (109,925 | ) | (97,911 | ) | |||||||
Gains on valuation of security investment |
109,071 | (8,279 | ) | 100,792 | ||||||||
Defined benefit liabilities |
319,467 | | 319,467 | |||||||||
Accrued expenses |
273,092 | | 273,092 | |||||||||
Retirement insurance expense |
| (283,771 | ) | (283,771 | ) | |||||||
Adjustments to the prepaid contributions |
| (15,142 | ) | (15,142 | ) | |||||||
Derivative-linked securities |
30,102 | (42,825 | ) | (12,723 | ) | |||||||
Others |
365,616 | (195,856 | ) | 169,760 | ||||||||
|
|
|
|
|
|
|||||||
1,283,268 | (1,253,126 | ) | 30,142 | |||||||||
|
|
|
|
|
|
|||||||
Offsetting of deferred income tax assets and liabilities |
(1,149,644 | ) | 1,149,644 | | ||||||||
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
Unrecognized deferred income tax assets
No deferred income tax assets have been recognized for the deductible temporary difference of W 49,179 million associated with
investments in subsidiaries and others as of December 31, 2017, because it is not probable that the temporary differences will be reversed in the foreseeable future.
No deferred income tax assets have been recognized for deductible temporary differences of W 80,204 million and W
112,030 million associated with SPE repurchase and others, respectively, as of December 31, 2017, due to the uncertainty that these will be realized in the future.
Unrecognized deferred income tax liabilities
No deferred
income tax liabilities have been recognized for the taxable temporary difference of W 28,407 million associated with investment in subsidiaries and associates as of December 31, 2017, due to the following reasons:
| The Group is able to control the timing of the reversal of the temporary difference. |
| It is probable that the temporary difference will not be reversed in the foreseeable future. |
136
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
No deferred income tax liabilities have been recognized as of December 31, 2017, for the taxable
temporary difference of W 65,288 million arising from the initial recognition of goodwill from the merger of Housing and Commercial Bank in 2001.
The changes in cumulative temporary differences for the years ended December 31, 2017 and 2016, are as follows:
(In millions of Korean won) | 2017 | |||||||||||||||||||
Beginning | Business Combination |
Decrease | Increase | Ending | ||||||||||||||||
Deductible temporary differences |
||||||||||||||||||||
Other provisions |
||||||||||||||||||||
Allowances for loan losses |
30,154 | | 26,134 | 202 | 4,222 | |||||||||||||||
Impairment losses on property and equipment |
32,726 | 107,755 | 139,743 | 132,346 | 133,084 | |||||||||||||||
Deferred loan origination fees and costs |
5,154 | | 5,154 | 1,207 | 1,207 | |||||||||||||||
Interest on equity index-linked deposits |
168 | | 168 | 155 | 155 | |||||||||||||||
Share-based payments |
56,650 | | 49,333 | 77,185 | 84,502 | |||||||||||||||
Provisions for guarantees |
126,319 | | 126,319 | 88,512 | 88,512 | |||||||||||||||
Gains(losses) from valuation on derivative financial instruments |
40,334 | | 40,334 | 22,758 | 22,758 | |||||||||||||||
Present value discount |
46,961 | | 18,417 | 63,573 | 92,117 | |||||||||||||||
Loss on SPE repurchase |
80,204 | | | | 80,204 | |||||||||||||||
Investments in subsidiaries and others |
810,719 | | 753,918 | 76,902 | 133,703 | |||||||||||||||
Gains on valuation of security investment |
447,388 | | 447,388 | 299,082 | 299,082 | |||||||||||||||
Defined benefit liabilities |
1,320,135 | 255,375 | 256,580 | 271,857 | 1,590,787 | |||||||||||||||
Accrued expenses |
1,128,492 | | 1,123,713 | 701,756 | 706,535 | |||||||||||||||
Derivative linked securities |
124,388 | | 124,388 | 101,789 | 101,789 | |||||||||||||||
Others |
1,402,646 | | 629,002 | 501,901 | 1,275,545 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
6,033,301 | 393,310 | 5,038,030 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Unrecognized deferred income tax assets: |
||||||||||||||||||||
Other provisions |
| | 2,879 | |||||||||||||||||
Loss on SPE repurchase |
80,204 | | 80,204 | |||||||||||||||||
Investments in subsidiaries and others |
774,259 | | 49,179 | |||||||||||||||||
Others |
119,334 | | 112,030 | |||||||||||||||||
|
|
|
|
|
|
|||||||||||||||
5,059,504 | 393,310 | 4,793,738 | ||||||||||||||||||
Tax rate (%)1 |
24.2 | 24.2 | 27.5 | |||||||||||||||||
|
|
|
|
|
|
|||||||||||||||
Total deferred income tax assets from deductible temporary differences |
||||||||||||||||||||
|
|
|
|
|
|
|||||||||||||||
Taxable temporary differences |
||||||||||||||||||||
Losses(gains) from fair value hedged item |
||||||||||||||||||||
Accrued interest |
(349,899 | ) | (72,117 | ) | (377,010 | ) | (360,536 | ) | (405,542 | ) | ||||||||||
Impairment losses on property and equipment |
(1,481 | ) | | | | (1,481 | ) | |||||||||||||
Deferred loan origination fees and costs |
(660,945 | ) | (15,846 | ) | (665,209 | ) | (657,081 | ) | (668,663 | ) | ||||||||||
advanced depreciation provision |
| (6,192 | ) | | | (6,192 | ) | |||||||||||||
Gains(losses) from valuation on derivative financial instruments |
(193,243 | ) | | (192,491 | ) | (61,077 | ) | (61,829 | ) | |||||||||||
Present value discount |
(25,454 | ) | (8,766 | ) | (34,220 | ) | (16,357 | ) | (16,357 | ) | ||||||||||
Goodwill |
(65,288 | ) | | | | (65,288 | ) | |||||||||||||
Gains on revaluation |
(1,182,310 | ) | (99,244 | ) | (59,030 | ) | (53,117 | ) | (1,275,641 | ) | ||||||||||
Investments in subsidiaries and others |
(387,267 | ) | | (72,284 | ) | (72,484 | ) | (387,467 | ) | |||||||||||
Gains on valuation of security investment |
(37,252 | ) | (236,137 | ) | (273,171 | ) | (764,891 | ) | (765,109 | ) | ||||||||||
Retirement insurance expense |
(1,170,514 | ) | (168,714 | ) | (200,722 | ) | (203,506 | ) | (1,342,012 | ) | ||||||||||
Adjustments to the prepaid contributions |
(62,569 | ) | | (61,034 | ) | (57,505 | ) | (59,040 | ) |
137
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
Derivative linked securities |
(176,962 | ) | | (176,962 | ) | (20,650 | ) | (20,650 | ) | |||||||||||
Others |
(794,141 | ) | (1,215,733 | ) | (429,645 | ) | (95,568 | ) | (1,675,797 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
(5,166,560 | ) | (1,822,749 | ) | (6,808,151 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Unrecognized deferred income tax assets: |
||||||||||||||||||||
Goodwill |
(65,288 | ) | | (65,288 | ) | |||||||||||||||
Investments in subsidiaries and others |
(17,205 | ) | (4,546 | ) | (28,407 | ) | ||||||||||||||
Others |
(906 | ) | | (677 | ) | |||||||||||||||
|
|
|
|
|
|
|||||||||||||||
(5,083,161 | ) | (1,818,203 | ) | (6,713,779 | ) | |||||||||||||||
Tax rate (%)1 |
24.2 | 24.2 | 27.5 | |||||||||||||||||
|
|
|
|
|
|
|||||||||||||||
Total deferred income tax assets from deductible temporary differences |
||||||||||||||||||||
|
|
|
|
|
|
1 | The corporate tax rate was changed due to the amendment of corporate tax law in 2017. Accordingly, the rate of 27.5% has been applied for the deferred tax assets and liabilities expected to be utilized in periods after December 31, 2017. |
(In millions of Korean won) | 2016 | |||||||||||||||
Beginning | Decrease | Increase | Ending | |||||||||||||
Deductible temporary differences |
||||||||||||||||
Losses(gains) from fair value hedged item |
||||||||||||||||
Other provisions |
449,239 | 466,913 | 398,537 | 380,863 | ||||||||||||
Allowances for loan losses |
5,079 | 26,492 | 51,567 | 30,154 | ||||||||||||
Impairment losses on property and equipment |
21,476 | 31,914 | 43,164 | 32,726 | ||||||||||||
Deferred loan origination fees and costs |
23,491 | 24,937 | 6,600 | 5,154 | ||||||||||||
Interest on equity index-linked deposits |
287 | 287 | 168 | 168 | ||||||||||||
Share-based payments |
44,922 | 39,600 | 51,328 | 56,650 | ||||||||||||
Provisions for guarantees |
157,954 | 157,954 | 126,319 | 126,319 | ||||||||||||
Gains(losses) from valuation on derivative financial instruments |
118,745 | 180,332 | 101,921 | 40,334 | ||||||||||||
Present value discount |
42,288 | 14,693 | 19,366 | 46,961 | ||||||||||||
Loss on SPE repurchase |
80,204 | | | 80,204 | ||||||||||||
Investments in subsidiaries and others |
821,059 | 59,354 | 49,014 | 810,719 | ||||||||||||
Gains on valuation of security investment |
298,796 | 394,580 | 543,172 | 447,388 | ||||||||||||
Defined benefit liabilities |
1,153,686 | 75,269 | 241,718 | 1,320,135 | ||||||||||||
Accrued expenses |
271,463 | 358,583 | 1,215,612 | 1,128,492 | ||||||||||||
Derivative linked securities |
3,090,264 | 3,098,449 | 132,573 | 124,388 | ||||||||||||
Others |
1,220,133 | 557,068 | 739,581 | 1,402,646 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
7,810,968 | 6,033,301 | |||||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Unrecognized deferred income tax assets: |
||||||||||||||||
Other provisions |
67 | | ||||||||||||||
Loss on SPE repurchase |
80,204 | 80,204 | ||||||||||||||
Investments in subsidiaries and others |
797,862 | 774,259 | ||||||||||||||
Others |
170,214 | 119,334 | ||||||||||||||
|
|
|
|
|||||||||||||
6,762,621 | 5,059,504 | |||||||||||||||
Tax rate (%)1 |
24.2 | 24.2 | ||||||||||||||
|
|
|
|
|||||||||||||
Total deferred income tax assets from deductible temporary differences |
||||||||||||||||
|
|
|
|
|||||||||||||
Taxable temporary differences |
||||||||||||||||
Losses(gains) from fair value hedged item |
||||||||||||||||
Accrued interest |
(338,402 | ) | (333,121 | ) | (344,618 | ) | (349,899 | ) | ||||||||
Impairment losses on property and equipment |
(1,481 | ) | | | (1,481 | ) | ||||||||||
Deferred loan origination fees and costs |
(629,161 | ) | (649,107 | ) | (680,891 | ) | (660,945 | ) |
138
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
Gains(losses) from valuation on derivative financial instruments |
(128,985 | ) | (457,371 | ) | (521,629 | ) | (193,243 | ) | ||||||||
Present value discount |
(37,741 | ) | (38,009 | ) | (25,722 | ) | (25,454 | ) | ||||||||
Goodwill |
(65,288 | ) | | | (65,288 | ) | ||||||||||
Gains on revaluation |
(1,136,143 | ) | (61,094 | ) | (107,261 | ) | (1,182,310 | ) | ||||||||
Investments in subsidiaries and others |
(408,490 | ) | (68,158 | ) | (46,935 | ) | (387,267 | ) | ||||||||
Gains on valuation of security investment |
(93,510 | ) | (114,227 | ) | (57,969 | ) | (37,252 | ) | ||||||||
Retirement insurance expense |
(996,448 | ) | (63,979 | ) | (238,045 | ) | (1,170,514 | ) | ||||||||
Adjustments to the prepaid contributions |
(90,653 | ) | (90,653 | ) | (62,569 | ) | (62,569 | ) | ||||||||
Derivative linked securities |
(3,222,110 | ) | (3,401,273 | ) | (356,125 | ) | (176,962 | ) | ||||||||
Others |
(426,328 | ) | (663,284 | ) | (1,031,097 | ) | (794,141 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
(7,574,740 | ) | (5,166,560 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Unrecognized deferred income tax assets: |
||||||||||||||||
Goodwill |
(65,288 | ) | (65,288 | ) | ||||||||||||
Investments in subsidiaries and others |
(66,345 | ) | (17,205 | ) | ||||||||||||
Others |
(1,914 | ) | (906 | ) | ||||||||||||
|
|
|
|
|||||||||||||
(7,441,193 | ) | (5,083,161 | ) | |||||||||||||
Tax rate (%)1 |
24.2 | 24.2 | ||||||||||||||
|
|
|
|
|||||||||||||
Total deferred income tax assets from deductible temporary differences |
||||||||||||||||
|
|
|
|
1 | The rate of 24.2% has been applied for the deferred tax assets and liabilities expected to be utilized. |
17. Assets Held for Sale
Details of assets held for sale as of December 31, 2017 and 2016, are as follows:
(In millions of Korean won) | 2017 | |||||||||||||||
Acquisition cost1 |
Accumulated impairment |
Carrying amount |
Fair value less costs to sell |
|||||||||||||
Land held for sale |
||||||||||||||||
Buildings held for sale |
34,862 | (11,309 | ) | 23,553 | 24,548 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
|
|
|
|
|
|
|
|
(In millions of Korean won) | 2016 | |||||||||||||||
Acquisition cost1 |
Accumulated impairment |
Carrying amount |
Fair value less costs to sell |
|||||||||||||
Land held for sale |
||||||||||||||||
Buildings held for sale |
50,086 | (21,069 | ) | 29,017 | 29,300 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
|
|
|
|
|
|
|
|
1 | Acquisition cost of buildings held for sale is net of accumulated depreciation. |
139
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
The valuation technique and input variables that are used to measure the fair value of assets held for sale as of December 31, 2017, are as follows:
(In millions of Korean won) | 2017 | |||||||||||
Fair value | Valuation technique1 | Unobservable input2 | Range of unobservable inputs (%) |
Relationship of unobservable inputs to fair value | ||||||||
Land and buildings |
Market comparison approach model and others | Adjustment index | 0.20~1.10 | Fair value increases as the adjustment index rises. | ||||||||
Adjustment ratio | -20.00~0.00 | Fair value decreases as the absolute value of adjustment index rises. |
1 | The Group adjusted the appraisal value by the adjustment ratio in the event the public sale is unsuccessful. |
2 | Adjustment index is calculated using the real estate index or the producer price index, or land price volatility. |
The fair values of assets held for sale were measured by qualified independent appraisers with experience in valuing similar properties in the same area. In addition, per the fair value hierarchy on Note 6.1, the fair value hierarchy of all investment properties has been categorized and classified as Level 3.
The changes in accumulated impairment losses of assets held for sale for the years ended December 31, 2017 and 2016, are as follows:
(In millions of Korean won)
2017 | ||||||||||||||||||
Beginning | Provision1 | Reversal | Disposal and others1 |
Ending | ||||||||||||||
1 | Including the amount of assets of disposal group as held for sale sold during 2017 |
(In millions of Korean won)
2016 | ||||||||||||||||||
Beginning | Provision | Reversal | Others | Ending | ||||||||||||||
As of December 31, 2017, assets held for sale consist of Kookmin bank Myeongdong head office and ten real estates of closed offices, which the management of the Group was committed to sell, were not yet sold by December 31, 2017. As of the reporting date, the Group will complete its sale of the Myeongdong head office building during 2018, three out of the above assets held for sale are under sale negotiations and the remaining assets are also being actively marketed.
140
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
18. Other Assets
Details of other assets as of December 31, 2017 and 2016, are as follows:
(In millions of Korean won) | 2017 | 2016 | ||||||
Other financial assets |
||||||||
Other receivables |
||||||||
Accrued income |
1,594,455 | 1,305,680 | ||||||
Guarantee deposits |
1,211,841 | 1,230,400 | ||||||
Domestic exchange settlement debits |
949,897 | 535,237 | ||||||
Others |
101,909 | 25,226 | ||||||
Less: Allowances for loan losses |
(104,813 | ) | (95,629 | ) | ||||
Less: Present value discount |
(5,679 | ) | (4,762 | ) | ||||
|
|
|
|
|||||
10,195,015 | 7,322,335 | |||||||
|
|
|
|
|||||
Other non-financial assets |
||||||||
Other receivables |
3,640 | 17,727 | ||||||
Prepaid expenses |
153,650 | 188,135 | ||||||
Guarantee deposits |
4,904 | 3,934 | ||||||
Insurance assets |
1,180,980 | 128,146 | ||||||
Separate account assets |
4,119,203 | 866,310 | ||||||
Others |
578,795 | 356,380 | ||||||
Less: Allowances on other asset |
(32,018 | ) | (25,182 | ) | ||||
|
|
|
|
|||||
6,009,154 | 1,535,450 | |||||||
|
|
|
|
|||||
|
|
|
|
Changes in allowances for loan losses on other assets for the years ended December 31, 2017 and 2016, are as follows:
(In millions of Korean won) | 2017 | |||||||||||
Other financial assets |
Other non- financial assets |
Total | ||||||||||
Beginning |
||||||||||||
Written-off |
(14,546 | ) | (1,970 | ) | (16,516 | ) | ||||||
Provision |
9,840 | 1,410 | 11,250 | |||||||||
Business combination |
21,293 | | 21,293 | |||||||||
Others |
(7,403) | 7,396 | (7) | |||||||||
Ending |
(In millions of Korean won) | 2016 | |||||||||||
Other financial assets |
Other non- financial assets |
Total | ||||||||||
Beginning |
||||||||||||
Written-off |
(271,522 | ) | (540 | ) | (272,062 | ) | ||||||
Provision |
2,445 | 1,745 | 4,190 | |||||||||
Business combination |
13,537 | | 13,537 | |||||||||
Others |
42,470 | | 42,470 | |||||||||
|
|
|
|
|
|
|||||||
Ending |
||||||||||||
|
|
|
|
|
|
141
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
19. Financial Liabilities at Fair Value through Profit or Loss
Details of financial liabilities at fair value through profit or loss as of December 31, 2017 and 2016, are as follows:
(In millions of Korean won) | 2017 | 2016 | ||||||
Financial liabilities held for trading |
||||||||
Securities sold |
||||||||
Other |
74,191 | 73,238 | ||||||
|
|
|
|
|||||
1,944,770 | 1,143,510 | |||||||
|
|
|
|
|||||
Financial liabilities designated at fair value through profit or loss |
||||||||
Derivative-linked securities |
10,078,288 | 10,979,326 | ||||||
|
|
|
|
|||||
Total financial liabilities at fair value through profit or loss |
||||||||
|
|
|
|
The details of credit risk of financial liabilities designated at fair value through profit or loss as of December 31, 2017 and 2016, are as follows:
(In millions of Korean won) | 2017 | 2016 | ||||||
Financial liabilities designated at fair value through profit or loss |
||||||||
Changes in fair value resulting from changes in the credit risk |
12,236 | 12,131 | ||||||
Accumulated changes in fair value resulting from changes in the credit risk |
(5,745 | ) | (17,981 | ) |
20. Deposits
Details of deposits as of December 31, 2017 and 2016, are as follows:
(In millions of Korean won) | 2017 | 2016 | ||||||
Demand deposits |
||||||||
Demand deposits in Korean won |
||||||||
Demand deposits in foreign currencies |
6,911,782 | 5,305,313 | ||||||
|
|
|
|
|||||
120,588,781 | 110,063,535 | |||||||
|
|
|
|
|||||
Time deposits |
||||||||
Time deposits in Korean won |
127,562,153 | 122,532,476 | ||||||
|
|
|
|
|||||
Time deposits in foreign currencies |
4,481,607 | 4,314,783 | ||||||
Fair value adjustments on valuation of fair value hedged items |
(51,033 | ) | (61,657 | ) | ||||
|
|
|
|
|||||
4,430,574 | 4,253,126 | |||||||
|
|
|
|
|||||
131,992,727 | 126,785,602 | |||||||
|
|
|
|
|||||
Certificates of deposits |
3,218,540 | 2,880,558 | ||||||
|
|
|
|
|||||
Total deposits |
||||||||
|
|
|
|
142
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
21. Debts
Details of debts as of December 31, 2017 and 2016, consist of:
(In millions of Korean won) | 2017 | 2016 | ||||||
Borrowings |
||||||||
Repurchase agreements and others | 10,676,219 | 8,825,564 | ||||||
Call money |
1,298,637 | 2,940,133 | ||||||
|
|
|
|
|||||
|
|
|
|
Details of borrowings as of December 31, 2017 and 2016, are as follows:
(In millions of Korean won) | Lender | Annual interest rate (%) |
2017 | 2016 | ||||||||||
Borrowings in Korean won |
Borrowings from the Bank of Korea |
Bank of Korea |
0.50 ~ 0.75 | |||||||||||
Borrowings from the government |
SEMAS and others |
0.00 ~ 3.00 | 1,726,543 | 1,331,688 | ||||||||||
Borrowings from banks |
Industrial & Commercial Bank of China and others |
2.56 ~ 3.11 | 36,806 | | ||||||||||
Borrowings from non-banking financial institutions |
The Korea Development Bank and others |
0.20 ~ 2.70 | 1,631,376 | 889,433 | ||||||||||
Other borrowings |
The Korea Development Bank and others |
0.00 ~ 3.90 | 4,409,261 | 4,284,108 | ||||||||||
|
|
|
|
|||||||||||
9,692,866 | 8,149,489 | |||||||||||||
|
|
|
|
|||||||||||
Borrowings in foreign currencies |
Due to banks |
Commerzbank AG and Others |
| 19,820 | 70,624 | |||||||||
Borrowings from banks |
Central Bank of Uzbekistan and Others |
0.15 ~ 2.30 | 5,470,569 | 3,949,376 | ||||||||||
Borrowings from other financial institutions |
The Export-Import Bank of Korea and others |
1.90 ~ 2.83 | 76,134 | 121,104 | ||||||||||
Other borrowings |
Standard Chartered Bank and others |
0.00 ~ 7.00 | 1,586,683 | 2,195,196 | ||||||||||
|
|
|
|
|||||||||||
7,153,206 | 6,336,300 | |||||||||||||
|
|
|
|
|||||||||||
|
|
|
|
The details of repurchase agreements and others as of December 31, 2017 and 2016, are as follows:
(In millions of Korean won) | Lenders | Annual interest rate (%) |
2017 | 2016 | ||||||||
Repurchase agreements |
Individuals, Groups and Corporations | 1.19 ~ 2.22 | ||||||||||
Bills sold |
Counter sale | 0.40 ~ 1.00 | 9,904 | 10,537 | ||||||||
|
|
|
|
|||||||||
|
|
|
|
143
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
The details of call money as of December 31, 2017 and 2016, are as follows:
(In millions of Korean won) | Lenders | Annual interest rate (%) |
2017 | 2016 | ||||||||||
Call money in Korean won |
Deutsche Bank AG, Seoul and others | 1.33 ~ 1.75 | ||||||||||||
Call money in foreign currencies |
Central Bank of Uzbekistan and others | 1.20 ~ 2.20 | 408,637 | 1,184,933 | ||||||||||
|
|
|
|
|||||||||||
|
|
|
|
22. Debentures
Details of debentures as of December 31, 2017 and 2016, are as follows:
(In millions of Korean won) | Annual interest rate (%) |
2017 | 2016 | |||||||||
Debentures in Korean won |
||||||||||||
Structured debentures |
0.29~6.00 | |||||||||||
Subordinated fixed rate debentures in Korean won |
3.08~5.70 | 2,913,411 | 3,271,693 | |||||||||
Fixed rate debentures in Korean won |
1.29~3.79 | 36,823,365 | 25,627,695 | |||||||||
Floating rate debentures in Korean won |
1.74~2.37 | 728,000 | 1,108,000 | |||||||||
|
|
|
|
|||||||||
41,334,070 | 31,153,688 | |||||||||||
|
|
|
|
|||||||||
Fair value adjustments on fair value hedged financial debentures in Korean won |
19,891 | 26,724 | ||||||||||
Less: Discount on debentures in Korean won |
(53,897 | ) | (19,064 | ) | ||||||||
|
|
|
|
|||||||||
41,300,064 | 31,161,348 | |||||||||||
|
|
|
|
|||||||||
Debentures in foreign currencies |
||||||||||||
Floating rate debentures |
1.79 ~ 2.49 | 1,371,392 | 1,063,480 | |||||||||
Fixed rate debentures |
1.63 ~ 2.88 | 2,363,486 | 2,803,720 | |||||||||
|
|
|
|
|||||||||
3,734,878 | 3,867,200 | |||||||||||
|
|
|
|
|||||||||
Fair value adjustments on fair value hedged debentures in foreign currencies |
(25,941 | ) | (24,302 | ) | ||||||||
Less: Discount on debentures in foreign currencies |
(16,277 | ) | (12,189 | ) | ||||||||
|
|
|
|
|||||||||
3,692,660 | 3,830,709 | |||||||||||
|
|
|
|
|||||||||
|
|
|
|
144
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
Changes in debentures based on face value for the years ended December 31, 2017 and 2016, are as follows:
(In millions of Korean won) | 2017 | |||||||||||||||||||
Beginning | Issues | Repayments | Others | Ending | ||||||||||||||||
Debentures in Korean won |
||||||||||||||||||||
Structured debentures |
||||||||||||||||||||
Subordinated fixed rate debentures in Korean won |
3,271,693 | | (358,282 | ) | | 2,913,411 | ||||||||||||||
Fixed rate debentures in Korean won |
25,627,695 | 133,283,400 | (122,087,730 | ) | | 36,823,365 | ||||||||||||||
Floating rate debentures in Korean won |
1,108,000 | 410,000 | (790,000 | ) | | 728,000 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
31,153,688 | 137,569,480 | (127,389,098 | ) | | 41,334,070 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Debentures in foreign currencies |
||||||||||||||||||||
Floating rate debentures |
1,063,480 | 1,338,239 | (911,936 | ) | (118,391 | ) | 1,371,392 | |||||||||||||
Fixed rate debentures |
2,803,720 | 795,150 | (945,394 | ) | (289,990 | ) | 2,363,486 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
3,867,200 | 2,133,389 | (1,857,330 | ) | (408,381 | ) | 3,734,878 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
(In millions of Korean won) | 2016 | |||||||||||||||||||||||
Beginning | Issues | Repayments | Business combination |
Others | Ending | |||||||||||||||||||
Debentures in Korean won |
||||||||||||||||||||||||
Structured debentures |
||||||||||||||||||||||||
Subordinated fixed rate debentures in Korean won |
4,586,829 | | (1,314,836 | ) | | (300 | ) | 3,271,693 | ||||||||||||||||
Fixed rate debentures in Korean won |
22,500,223 | 96,455,800 | (93,898,928 | ) | 570,600 | | 25,627,695 | |||||||||||||||||
Floating rate debentures in Korean won |
448,000 | 760,000 | (100,000 | ) | | | 1,108,000 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
28,444,840 | 98,107,900 | (96,854,252 | ) | 1,455,500 | (300 | ) | 31,153,688 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Debentures in foreign currencies |
||||||||||||||||||||||||
Floating rate debentures |
1,829,124 | 35,595 | (806,459 | ) | | 5,220 | 1,063,480 | |||||||||||||||||
Fixed rate debentures |
2,325,537 | 1,185,480 | (817,096 | ) | | 109,799 | 2,803,720 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
4,154,661 | 1,221,075 | (1,623,555 | ) | | 115,019 | 3,867,200 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
145
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
23. Provisions
Details of provisions as of December 31, 2017 and 2016, are as follows:
(In millions of Korean won) | 2017 | 2016 | ||||||
Provisions for unused loan commitments |
||||||||
Provisions for payment guarantees |
88,809 | 126,428 | ||||||
Provisions for financial guarantee contracts |
2,682 | 4,333 | ||||||
Provisions for restoration cost |
95,194 | 84,854 | ||||||
Others |
203,146 | 132,753 | ||||||
|
|
|
|
|||||
|
|
|
|
Changes in provisions for unused loan commitments, payment guarantees for the years ended December 31, 2017 and 2016, are as follows:
(In millions of Korean won) | 2017 | |||||||||||
Provisions for unused loan commitments |
Provisions for payment guarantees |
Total | ||||||||||
Beginning |
||||||||||||
Effects of changes in foreign exchange rate |
(1,316 | ) | (3,369 | ) | (4,685 | ) | ||||||
Provision(reversal) |
(9,850 | ) | (34,250 | ) | (44,100 | ) | ||||||
|
|
|
|
|
|
|||||||
Business combination |
19 | | 19 | |||||||||
|
|
|
|
|
|
|||||||
Ending |
||||||||||||
|
|
|
|
|
|
(In millions of Korean won) | 2016 | |||||||||||
Provisions for unused loan commitments |
Provisions for payment guarantees |
Total | ||||||||||
Beginning |
||||||||||||
Effects of changes in foreign exchange rate |
204 | 737 | 941 | |||||||||
Provision(reversal) |
(6,240 | ) | (32,763 | ) | (39,003 | ) | ||||||
|
|
|
|
|
|
|||||||
Ending |
||||||||||||
|
|
|
|
|
|
Changes in provisions for financial guarantee contracts for the years ended December 31, 2017 and 2016, are as follows:
(In millions of Korean won) | 2017 | 2016 | ||||||
Beginning |
||||||||
Provision (Reversal) |
(1,651 | ) | (2,958 | ) | ||||
Business combination |
| 3,482 | ||||||
|
|
|
|
|||||
Ending |
||||||||
|
|
|
|
146
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
Changes in provisions for restoration cost for the years ended December 31, 2017 and 2016, are as follows:
(In millions of Korean won) | 2017 | 2016 | ||||||
Beginning |
||||||||
Provision |
5,150 | 3,886 | ||||||
Reversal |
(1,211 | ) | (967 | ) | ||||
Used |
(7,049 | ) | (5,940 | ) | ||||
Unwinding of discount |
2,078 | 1,890 | ||||||
Effects of changes in discount rate |
10,510 | 6,941 | ||||||
Business combination |
862 | 3,693 | ||||||
|
|
|
|
|||||
Ending |
||||||||
|
|
|
|
Provisions for restoration cost are the present value of estimated costs to be incurred for the restoration of the leased properties. Actual expenses are expected to be incurred at the end of each lease contract. Three-year historical data of expired leases were used to estimate the average lease period. Also, the average restoration expense based on actual three-year historical data and the three-year historical average inflation rate were used to estimate the present value of estimated costs.
Changes in other provisions for the years ended December 31, 2017 and 2016, are as follows:
(In millions of Korean won) | 2017 | |||||||||||||||||||||||
Membership rewards program |
Dormant accounts |
Litigations | Greenhouse gas emission liabilities1 |
Others2 | Total | |||||||||||||||||||
Beginning |
||||||||||||||||||||||||
Increase |
81,171 | 5,133 | 6,046 | | 45,164 | 137,514 | ||||||||||||||||||
Decrease |
(74,849 | ) | (50,479 | ) | (2,906 | ) | (181 | ) | (10,469 | ) | (138,884 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Business Combination |
| | | | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Ending |
||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of Korean won) | 2016 | |||||||||||||||||||||||
Membership rewards program |
Dormant accounts |
Litigations | Greenhouse gas emission liabilities1 |
Others | Total | |||||||||||||||||||
Beginning |
||||||||||||||||||||||||
Increase |
26,336 | 32,464 | 1,589 | 434 | 9,007 | 69,830 | ||||||||||||||||||
Decrease |
(26,176 | ) | (23,159 | ) | (52,206 | ) | (145 | ) | (10,252 | ) | (111,938 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Ending |
||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
1 | As of December 31, 2017 and 2016, the estimated greenhouse gas emission is 112,121 tons 117,831 tons, respectively. |
2 | As of December 31, 2017, the groups provision on incomplete sales on cardssurance are |
147
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
24. Net Defined Benefit Liabilities (Assets)
Defined benefit plan
The Group operates defined benefit plans which have the following characteristics:
| The Group has the obligation to pay the agreed benefits to all its current and former employees. |
| Actuarial risk (that benefits will cost more than expected) and investment risk fall, in substance, on the Group. |
The defined benefit liability recognized in the statements of financial position is calculated by independent actuaries in accordance with actuarial valuation methods.
The net defined benefit obligation is calculated using the Projected Unit Credit method (the PUC). Data used in the PUC such as interest rates, future salary increase rate, mortality rate and consumer price index are based on observable market data and historical data which are updated annually.
Actuarial assumptions may differ from actual results, due to changes in the market, economic trends and mortality trends which may impact defined benefit liabilities and future payments. Actuarial gains and losses arising from changes in actuarial assumptions are recognized in the period incurred through other comprehensive income.
Changes in the net defined benefit liabilities for the years ended December 31, 2017 and 2016, are as follows:
(In millions of Korean won) | 2017 | |||||||||||
Present value of defined benefit obligation |
Fair value of plan assets |
Net defined benefit liabilities |
||||||||||
Beginning |
||||||||||||
Current service cost |
208,037 | | 208,037 | |||||||||
Past service cost |
21,356 | | 21,356 | |||||||||
Interest cost (income) |
40,351 | (36,243 | ) | 4,108 | ||||||||
Remeasurements: |
||||||||||||
Actuarial gains and losses by changes in demographic assumptions |
22,878 | | 22,878 | |||||||||
Actuarial gains and losses by changes in financial assumptions |
(86,459 | ) | | (86,459 | ) | |||||||
Actuarial gains and losses by experience adjustments |
17,541 | | 17,541 | |||||||||
Return on plan assets (excluding amounts included in interest income) |
| 16,220 | 16,220 | |||||||||
Contributions: |
||||||||||||
The Group |
| (230,785 | ) | (230,785 | ) | |||||||
Payments from plans (benefit payments) |
(216,817 | ) | 216,698 | (119 | ) | |||||||
Payments from the Group |
(23,779 | ) | | (23,779 | ) | |||||||
Transfer in |
8,604 | (8,383 | ) | 221 | ||||||||
Transfer out |
(8,712 | ) | 8,672 | (40 | ) | |||||||
Effect of exchange rate changes |
(25 | ) | | (25 | ) | |||||||
Effect of business combination and disposal of business |
282,988 | (177,832 | ) | 105,156 | ||||||||
Others |
25 | 3,174 | 3,199 | |||||||||
|
|
|
|
|
|
|||||||
Ending1 |
||||||||||||
|
|
|
|
|
|
1 | The net defined benefit liabilities of |
148
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
(In millions of Korean won) | 2016 | |||||||||||
Present value of defined benefit obligation |
Fair value of plan assets |
Net defined benefit liabilities |
||||||||||
Beginning |
||||||||||||
Current service cost |
192,010 | | 192,010 | |||||||||
Past service cost |
4,408 | | 4,408 | |||||||||
Gain or loss on settlement |
(396 | ) | | (396 | ) | |||||||
Interest cost (income) |
34,885 | (33,211 | ) | 1,674 | ||||||||
Remeasurements: |
||||||||||||
Actuarial gains and losses by changes in demographic assumptions |
2,281 | | 2,281 | |||||||||
Actuarial gains and losses by changes in financial assumptions |
(37,085 | ) | | (37,085 | ) | |||||||
Actuarial gains and losses by experience adjustments |
7,017 | | 7,017 | |||||||||
Return on plan assets (excluding amounts included in interest income) |
| 11,071 | 11,071 | |||||||||
Contributions: |
||||||||||||
The Group |
| (162,547 | ) | (162,547 | ) | |||||||
Employees |
| (3,106 | ) | (3,106 | ) | |||||||
Payments from plans (benefit payments) |
(52,508 | ) | 52,508 | | ||||||||
Payments from the Group |
(9,837 | ) | | (9,837 | ) | |||||||
Transfer in |
4,408 | (4,325 | ) | 83 | ||||||||
Transfer out |
(4,897 | ) | 4,880 | (17 | ) | |||||||
Effect of exchange rate changes |
18 | | 18 | |||||||||
Effect of business combination and disposal of business |
22,099 | (4,571 | ) | 17,528 | ||||||||
|
|
|
|
|
|
|||||||
Ending |
||||||||||||
|
|
|
|
|
|
149
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
Details of the net defined benefit liabilities as of December 31, 2017 and 2016, are as follows:
(In millions of Korean won) | 2017 | 2016 | ||||||
Present value of defined benefit obligation |
||||||||
Fair value of plan assets |
(1,688,183 | ) | (1,479,704 | ) | ||||
|
|
|
|
|||||
Net defined benefit liabilities |
||||||||
|
|
|
|
Details of post-employment benefits recognized in profit or loss as employee compensation and benefits for the years ended December 31, 2017 and 2016, are as follows:
(In millions of Korean won) | 2017 | 2016 | ||||||
Current service cost |
||||||||
Past service cost |
21,356 | 4,408 | ||||||
Net interest expenses of net defined benefit liabilities |
4,108 | 1,674 | ||||||
Gain or loss on settlement |
| (396 | ) | |||||
|
|
|
|
|||||
Post-employment benefits1 |
||||||||
|
|
|
|
1 | Post-employment benefits amounting to |
Remeasurements of the net defined benefit liabilities recognized as other comprehensive income for the years ended December 31, 2017 and 2016, are as follows:
(In millions of Korean won) | 2017 | 2016 | ||||||
Remeasurements: |
||||||||
Return on plan assets (excluding amounts included in interest income) |
||||||||
Actuarial gains and losses |
46,040 | 27,787 | ||||||
Income tax effects |
(7,216 | ) | (4,045 | ) | ||||
|
|
|
|
|||||
Remeasurements after income tax |
||||||||
|
|
|
|
The details of fair value of plan assets as of December 31, 2017 and 2016, are as follows:
(In millions of Korean won) | 2017 | |||||||||||
Assets quoted in an active market |
Assets not quoted in an active market |
Total | ||||||||||
Cash and due from financial institutions |
||||||||||||
Investment fund |
| 2,171 | 2,171 | |||||||||
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
150
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
(In millions of Korean won) | 2016 | |||||||||||
Assets quoted in an active market |
Assets not quoted in an active market |
Total | ||||||||||
Cash and due from financial institutions |
||||||||||||
Investment fund |
| 285 | 285 | |||||||||
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
Key actuarial assumptions used as of December 31, 2017 and 2016, are as follows:
2017 | 2016 | |||
Discount rate (%) |
2.10~2.90 | 1.80 ~ 3.46 | ||
Salary increase rate (%) |
0.00~7.50 | 0.00 ~ 7.50 | ||
Turnover (%) |
0.00~50.00 | 0.00 ~ 29.00 |
Mortality assumptions are based on the experience-based mortality table of Korea Insurance Development Institute of 2015.
The sensitivity of the defined benefit obligation to changes in the weighted principal assumptions as of December 31, 2017, are as follows:
Changes in principal assumption |
Effect on net defined benefit obligation | |||||
| ||||||
Increase in principal assumption |
Decrease in principal assumption | |||||
Discount rate (%) |
0.5 p. | 3.96 decrease | 4.19 increase | |||
Salary increase rate (%) |
0.5 p. | 3.00 increase | 4.58 decrease | |||
Turnover (%) |
0.5 p. | 0.46 decrease | 0.43 increase |
The above sensitivity analyses are based on a change in an assumption while holding all other assumptions constant. In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated. The sensitivity of the defined benefit obligation to changes in principal actuarial assumptions is calculated using the projected unit credit method, the same method applied when calculating the defined benefit obligations recognized on the statement of financial position.
Expected maturity analysis of undiscounted pension benefits (including expected future benefit) as of December 31, 2017, is as follows:
(In millions of Korean won) | Up to 1 year | 1~2 years | 2~5 years | 5~10 years | Over 10 years | Total | ||||||||||||||||||
Pension benefits1 |
1 | Excluded payments settled according to pension equity plan. |
The weighted average duration of the defined benefit obligation is 1.0 ~ 11.1 years.
Expected contribution to plan assets for periods after December 31, 2017, is estimated to be W 202,738 million.
151
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
25. Other Liabilities
Details of other liabilities as of December 31, 2017 and 2016, are as follows:
(In millions of Korean won) | 2017 | 2016 | ||||||
Other financial liabilities |
||||||||
Other payables |
||||||||
Prepaid card and debit card |
21,767 | 19,076 | ||||||
Accrued expenses |
2,654,345 | 2,613,445 | ||||||
Financial guarantee liabilities |
34,114 | 26,449 | ||||||
Deposits for letter of guarantees and others |
798,207 | 561,664 | ||||||
Domestic exchange settlement credits |
48,133 | 1,338,103 | ||||||
Foreign exchanges settlement credits |
124,728 | 116,226 | ||||||
Borrowings from other business accounts |
5,408 | 5,204 | ||||||
Other payables from trust accounts |
5,018,031 | 4,430,508 | ||||||
Liability incurred from agency relationships |
518,955 | 386,670 | ||||||
Account for agency businesses |
257,761 | 248,257 | ||||||
Dividend payables |
474 | 475 | ||||||
Other payables from factored receivables |
| | ||||||
Others |
41,114 | 14,171 | ||||||
|
|
|
|
|||||
18,330,004 | 16,286,578 | |||||||
|
|
|
|
|||||
Other non-financial liabilities |
||||||||
Other payables |
196,142 | 842,902 | ||||||
Unearned revenue |
271,787 | 226,096 | ||||||
Accrued expenses |
634,236 | 395,933 | ||||||
Deferred revenue on credit card points |
176,840 | 145,457 | ||||||
Withholding taxes |
179,903 | 140,258 | ||||||
Separate account liabilities |
4,463,687 | 875,015 | ||||||
Others |
217,709 | 126,658 | ||||||
|
|
|
|
|||||
6,140,304 | 2,752,319 | |||||||
|
|
|
|
|||||
|
|
|
|
26. Equity
26.1 Share Capital
Details of outstanding shares of the Parent Company as of December 31, 2017 and 2016, are as follows:
2017 | 2016 | |||||||
Type of share | Ordinary share | Ordinary share | ||||||
Number of authorized shares |
1,000,000,000 | 1,000,000,000 | ||||||
Par value per share |
||||||||
Number of issued shares |
418,111,537 | 418,111,537 | ||||||
Share capital1 |
1 | In millions of Korean won. |
152
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
Changes in outstanding shares for the years ended December 31, 2017 and 2016, are as follows:
(In number of shares) | 2017 | 2016 | ||||||
Beginning |
398,285,437 | 386,351,693 | ||||||
Increase |
4,513,969 | 31,759,844 | ||||||
Decrease |
(3,761,823 | ) | (19,826,100 | ) | ||||
Ending |
399,037,583 | 398,285,437 |
26.2 Capital Surplus
Details of capital surplus as of December 31, 2017 and 2016, are as follows:
(In millions of Korean won) | 2017 | 2016 | ||||||
Share premium |
||||||||
Loss on sales of treasury shares |
(481,332 | ) | (568,544 | ) | ||||
Other capital surplus |
4,413,286 | 4,373,172 | ||||||
|
|
|
|
|||||
|
|
|
|
26.3 Accumulated Other Comprehensive Income
Details of accumulated other comprehensive income as of December 31, 2017 and 2016, are as follows:
(In millions of Korean won) | 2017 | 2016 | ||||||
Remeasurements of net defined benefit liabilities |
||||||||
Exchange differences on translating foreign operations |
(56,589 | ) | 53,138 | |||||
Change in value of available-for-sale financial assets |
694,321 | 601,620 | ||||||
Change in value of held-to-maturity financial assets |
(78 | ) | 6,447 | |||||
Shares of other comprehensive income of associates and joint ventures |
1,069 | (96,174 | ) | |||||
Cash flow hedges |
14,980 | (6,075 | ) | |||||
Hedges of net investments in foreign operations |
(5,958 | ) | (32,572 | ) | ||||
Other comprehensive income of separate account |
(13,692 | ) | | |||||
|
|
|
|
|||||
|
|
|
|
26.4 Retained Earnings
Details of retained earnings as of December 31, 2017 and 2016, are as follows:
(In millions of Korean won) | 2017 | 2016 | ||||||
Legal reserves1 |
||||||||
Voluntary reserves |
982,000 | 982,000 | ||||||
Unappropriated retained earnings |
13,727,331 | 10,971,368 | ||||||
|
|
|
|
|||||
|
|
|
|
1 | With respect to the allocation of net profit earned in a fiscal term, the Parent Company must set aside in its legal reserve an amount equal to at least 10% of its net income after tax as reported in the separate statement of comprehensive income each time it pays dividends on its net profits earned until its legal reserve reaches at least the aggregate amount of its share capital in accordance with Article 53 of the Financial Holding Company Act. The reserve is not available for the payment of cash dividends, but may be transferred to share capital, or used to reduce accumulated deficit. |
153
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
Regulatory reserve for credit losses
Measurement and disclosure of regulatory reserve for credit losses are required in accordance with Articles 26 through 28 of Supervisory Regulations on Financial Holding Companies.
Details of the regulatory reserve for credit losses as of December 31, 2017 and 2016, are as follows:
(In millions of Korean won) | 2017 | 2016 | ||||||
Regulatory reserve for credit losses attributable to: |
||||||||
Shareholders of the Parent Company |
||||||||
Non-controlling interests |
2,536 | 34,650 | ||||||
|
|
|
|
|||||
|
|
|
|
The adjustments to the regulatory reserve for credit losses for the years ended December 31, 2017 and 2016, are as follows:
(In millions of Korean won, except earnings per share) | 2017 | 2016 | ||||||
Provision of regulatory reserve for credit losses1 |
||||||||
Adjusted profit after provision of regulatory reserve for credit losses2 |
2,926,374 | 1,947,854 | ||||||
Adjusted basic earnings per share after provision of regulatory reserve for credit losses2 |
7,339 | 5,078 | ||||||
Adjusted diluted earnings per share after provision of regulatory reserve for credit losses2 |
7,297 | 5,051 |
1 | The |
2 | Adjusted profit after provision of regulatory reserve for credit losses is not in accordance with Korean IFRS, and calculated with the assumption that provision (reversal) of regulatory reserve for credit losses before income tax is adjusted to the profit. |
154
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
26.5 Treasury Shares
Changes in treasury shares outstanding for the year ended December 31, 2017 and 2016, are as follows:
(In number of shares and millions of Korean won) | 2017 | |||||||||||||||
Beginning | Acquisition | Disposal | Ending | |||||||||||||
Number of treasury shares1 |
19,826,100 | 3,761,823 | (4,513,969 | ) | 19,073,954 | |||||||||||
Carrying amount1 |
1 | During the 2nd quarter, the Group terminated the treasury share trust agreement with Samsung Securities Co., Ltd., and reentered into trust agreement in the 4th quarter. |
(In number of shares and millions of Korean won) | 2016 | |||||||||||||||
Beginning | Acquisition | Disposal | Ending | |||||||||||||
Number of treasury shares1 |
| 19,826,100 | | 19,826,100 | ||||||||||||
Carrying amount1 |
1 | For the year ended December 31, 2017, the treasury stock trust agreement of |
27. Net Interest Income
Details of interest income and interest expense for the years ended December 31, 2017 and 2016, are as follows:
(In millions of Korean won) | 2017 | 2016 | ||||||
Interest income |
||||||||
Due from financial institutions |
||||||||
Loans |
9,990,792 | 8,905,769 | ||||||
Financial investments |
||||||||
Available-for-sale financial assets |
678,716 | 426,762 | ||||||
Held-to-maturity financial assets |
480,595 | 463,200 | ||||||
Others |
104,915 | 114,718 | ||||||
|
|
|
|
|||||
11,382,452 | 10,021,882 | |||||||
|
|
|
|
|||||
Interest expenses |
||||||||
Deposits |
2,345,885 | 2,476,579 | ||||||
Debts |
367,587 | 229,475 | ||||||
Debentures |
880,709 | 853,430 | ||||||
Others |
78,262 | 59,869 | ||||||
|
|
|
|
|||||
3,672,443 | 3,619,353 | |||||||
|
|
|
|
|||||
Net interest income |
||||||||
|
|
|
|
155
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
Interest income recognized on impaired loans is W 54,235 million (2016:
W 60,212 million) for the year ended December 31, 2017. Interest income recognized on impaired financial investments does not exist for the year ended December 31, 2017 (2016: W 226 million)
28. Net Fee and Commission Income
Details of fee and commission income, and fee and commission expense for the years ended December 31, 2017 and 2016, are as follows:
(In millions of Korean won) | 2017 | 2016 | ||||||
Fee and commission income |
||||||||
Banking activity fees |
||||||||
Lending activity fees |
74,858 | 79,287 | ||||||
Credit card related fees and commissions |
1,447,560 | 1,258,704 | ||||||
Debit card related fees and commissions |
400,183 | 369,329 | ||||||
Agent activity fees |
152,028 | 172,220 | ||||||
Trust and other fiduciary fees |
353,903 | 219,215 | ||||||
Fund management related fees |
132,889 | 119,745 | ||||||
Guarantee fees |
49,546 | 40,710 | ||||||
Foreign currency related fees |
106,038 | 99,022 | ||||||
Commissions from transfer agent services |
195,556 | 166,371 | ||||||
Other business account commission on consignment |
33,793 | 33,707 | ||||||
Commissions received on securities business |
450,199 | 154,966 | ||||||
Lease fees |
144,221 | 75,737 | ||||||
Others |
259,071 | 184,896 | ||||||
|
|
|
|
|||||
3,988,250 | 3,150,877 | |||||||
|
|
|
|
|||||
Fee and commission expense |
||||||||
Trading activity related fees1 |
29,547 | 15,555 | ||||||
Lending activity fees |
23,253 | 15,010 | ||||||
Credit card related fees and commissions |
1,482,221 | 1,209,553 | ||||||
Outsourcing related fees |
127,542 | 91,700 | ||||||
Foreign currency related fees |
27,394 | 17,205 | ||||||
Management fees of written-off loans |
4,176 | 4,456 | ||||||
Others |
244,093 | 212,506 | ||||||
|
|
|
|
|||||
1,938,226 | 1,565,985 | |||||||
|
|
|
|
|||||
Net fee and commission income |
||||||||
|
|
|
|
1 | The fees from financial assets/liabilities at fair value through profit or loss. |
156
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
29. Net Gains or Losses on Financial Assets/Liabilities at Fair Value Through Profit or Loss
29.1 Net Gains or Losses on Financial Instruments Held for Trading
Net gain or loss from financial instruments held for trading includes interest income, dividend income and gains or losses arising from changes in the fair values, sales and redemptions. Details of net gain or loss from financial instruments held for trading for the years ended December 31, 2017 and 2016, are as follows:
(In millions of Korean won) | 2017 | 2016 | ||||||
Gains related to financial instruments held for trading |
||||||||
Financial assets held for trading |
||||||||
Debt securities |
||||||||
Equity securities |
546,169 | 120,289 | ||||||
|
|
|
|
|||||
1,263,175 | 577,859 | |||||||
|
|
|
|
|||||
Derivatives held for trading |
||||||||
Interest rate |
1,753,449 | 1,162,058 | ||||||
Currency |
5,777,818 | 3,751,706 | ||||||
Stock or stock index |
2,094,667 | 899,185 | ||||||
Credit |
76,700 | 52,988 | ||||||
Commodity |
17,278 | 4,284 | ||||||
Others |
23,397 | 4,808 | ||||||
|
|
|
|
|||||
9,743,309 | 5,875,029 | |||||||
|
|
|
|
|||||
Financial liabilities held for trading |
29,726 | 100,246 | ||||||
|
|
|
|
|||||
Other financial instruments |
109 | 238 | ||||||
|
|
|
|
|||||
|
|
|
|
|||||
Losses related to financial instruments held for trading |
||||||||
Financial assets held for trading |
||||||||
Debt securities |
||||||||
Equity securities |
353,864 | 114,052 | ||||||
|
|
|
|
|||||
669,370 | 379,812 | |||||||
|
|
|
|
|||||
Derivatives held for trading |
||||||||
Interest rate |
1,625,541 | 1,164,423 | ||||||
Currency |
5,661,323 | 3,827,928 | ||||||
Stock or stock index |
1,445,714 | 658,832 | ||||||
Credit |
76,483 | 46,251 | ||||||
Commodity |
8,481 | 3,545 | ||||||
Others |
20,053 | 1,291 | ||||||
|
|
|
|
|||||
8,837,595 | 5,702,270 | |||||||
|
|
|
|
|||||
Financial liabilities held for trading |
58,267 | 99,024 | ||||||
|
|
|
|
|||||
Other financial instruments |
117 | 173 | ||||||
|
|
|
|
|||||
9,565,349 | 6,181,279 | |||||||
|
|
|
|
|||||
Net gains or losses on financial instruments held for trading |
||||||||
|
|
|
|
157
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
29.2 Net Gains or Losses on Financial Instruments Designated at Fair Value Through Profit or Loss
Net gain or loss from financial instruments designated at fair value through profit or loss includes interest income, dividend income and gains or losses arising from changes in the fair values, sales and redemptions. Details of net gain or loss from financial instruments designated at fair value through profit or loss for the years ended December 31, 2017 and 2016, are as follows:
(In millions of Korean won) | 2017 | 2016 | ||||||
Gains related to financial instruments designated at fair value through profit or loss |
||||||||
Financial assets designated at fair value through profit or loss |
||||||||
Financial liabilities designated at fair value through profit or loss |
474,736 | 91,357 | ||||||
|
|
|
|
|||||
614,251 | 210,078 | |||||||
|
|
|
|
|||||
Losses related to financial instruments designated at fair value through profit or loss |
||||||||
Financial assets designated at fair value through profit or loss |
78,113 | 8,447 | ||||||
Financial liabilities designated at fair value through profit or loss |
1,266,779 | 582,492 | ||||||
|
|
|
|
|||||
1,344,892 | 590,939 | |||||||
|
|
|
|
|||||
Net gains or losses on financial instruments designated at fair value through profit or loss |
||||||||
|
|
|
|
30. Other Operating Income and Expenses
Details of other operating income and expenses for the years ended December 31, 2017 and 2016, are as follows:
(In millions of Korean won) | 2017 | 2016 | ||||||
Other operating income |
||||||||
Revenue related to available-for-sale financial assets |
||||||||
Gain on redemption of available-for-sale financial assets |
||||||||
Gain on sale of available-for-sale financial assets |
113,001 | 236,344 | ||||||
Reversal for impairment on available-for-sale financial assets |
| 328 | ||||||
|
|
|
|
|||||
113,885 | 236,898 | |||||||
|
|
|
|
|||||
Revenue related to held-to-maturity financial assets Gain on redemption of held-to-maturity financial assets |
374 | | ||||||
|
|
|
|
|||||
374 | | |||||||
|
|
|
|
|||||
Gain on foreign exchange transactions |
2,520,168 | 3,567,560 | ||||||
Dividend income |
276,829 | 134,989 | ||||||
Others |
325,745 | 278,827 | ||||||
|
|
|
|
|||||
3,237,001 | 4,218,274 | |||||||
|
|
|
|
158
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
Other operating expenses |
||||||||
Expense related to available-for-sale financial assets |
||||||||
Loss on redemption of available-for-sale financial assets |
1,403 | | ||||||
Loss on sale of available-for-sale financial assets |
174,543 | 44,360 | ||||||
Impairment on available-for-sale financial assets |
47,917 | 35,216 | ||||||
|
|
|
|
|||||
223,863 | 79,576 | |||||||
|
|
|
|
|||||
Loss on foreign exchanges transactions |
2,472,657 | 3,303,205 | ||||||
Others |
1,442,371 | 1,251,401 | ||||||
|
|
|
|
|||||
4,138,891 | 4,634,182 | |||||||
|
|
|
|
|||||
Net other operating expenses |
||||||||
|
|
|
|
31. General and Administrative Expenses
31.1 General and Administrative Expenses
Details of general and administrative expenses for the years ended December 31, 2017 and 2016, are as follows:
(In millions of Korean won) | 2017 | 2016 | ||||||
Employee Benefits |
||||||||
Salaries and short-term employee benefitssalaries |
||||||||
Salaries and short-term employee benefitsothers |
822,536 | 734,119 | ||||||
Post-employment benefitsdefined benefit plans |
231,704 | 196,119 | ||||||
Post-employment benefitsdefined contribution plans |
15,046 | 9,361 | ||||||
Termination benefits |
160,798 | 903,435 | ||||||
Share-based payments |
73,370 | 38,190 | ||||||
|
|
|
|
|||||
3,768,586 | 3,755,620 | |||||||
|
|
|
|
|||||
Depreciation and amortization |
370,378 | 288,620 | ||||||
|
|
|
|
|||||
Other general and administrative expenses |
||||||||
Rental expense |
320,920 | 280,888 | ||||||
Tax and dues |
195,965 | 134,892 | ||||||
Communication |
44,516 | 37,114 | ||||||
Electricity and utilities |
31,158 | 29,921 | ||||||
Publication |
17,383 | 17,300 | ||||||
Repairs and maintenance |
20,524 | 15,722 | ||||||
Vehicle |
11,587 | 9,624 | ||||||
Travel |
17,407 | 8,059 | ||||||
Training |
26,664 | 23,426 | ||||||
Service fees |
179,311 | 129,032 | ||||||
Electronic data processing expenses |
172,007 | 160,863 | ||||||
Advertising |
199,676 | 142,186 | ||||||
Others |
252,582 | 195,444 | ||||||
|
|
|
|
|||||
1,489,700 | 1,184,471 | |||||||
|
|
|
|
|||||
|
|
|
|
159
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
31.2 Share-based Payments
31.2.1 Stock grants
The Group changed the scheme of share-based payment from stock options to stock grants in November 2007. The stock grant award program is an incentive plan that sets, on grant date, the maximum amount of shares that can be awarded. Actual stock granted at the end of the vesting period is determined in accordance with achievement of pre-specified targets over the vesting period.
Details of stock grants linked to long-term performance as of December 31, 2017, are as follows:
(In number of shares) | Grant date | Number of granted shares1 |
Vesting conditions | |||||||
KB Financial Group Inc. |
|
|||||||||
Series 14 |
July 17, 2015 | 11,363 | Services fulfillment, Achievement of targets on the basis of market and non-market performance 2,6 | |||||||
Series 15 |
Jan. 01, 2016 | 72,843 | Services fulfillment, Achievement of targets on the basis of market and non-market performance 2,7 | |||||||
Series 17 |
Jan. 01, 2017 | 42,032 | Services fulfillment, Achievement of targets on the basis of market and non-market performance 2,7 | |||||||
Series 18 |
July. 17, 2017 | 7,444 | Services fulfillment, Achievement of targets on the basis of market and non-market performance 2,7 | |||||||
Deferred grant in 2012 |
| 5,415 | Satisfied | |||||||
Deferred grant in 2013 |
| 588 | Satisfied | |||||||
Deferred grant in 2014 |
| 3,769 | Satisfied | |||||||
Deferred grant in 2015 |
| 21,780 | Satisfied | |||||||
Deferred grant in 2016 |
| 15,338 | Satisfied | |||||||
Deferred grant in 2017 |
| 36,054 | Satisfied | |||||||
|
|
|||||||||
216,626 | ||||||||||
|
|
|||||||||
Kookmin Bank |
||||||||||
Series 64 |
July 24, 2015 | 11,133 | Services fulfillment, Achievement of targets on the basis of market and non-market performance 2,3 | |||||||
Series 65 |
Aug. 26, 2015 | 11,587 | Services fulfillment, Achievement of targets on the basis of market and non-market performance 2,3 | |||||||
Series 67 |
Jan. 01, 2016 | 135,934 | Services fulfillment, Achievement of targets on the basis of market and non-market performance 2,4 | |||||||
Series 68 |
July 05, 2016 | 9,621 | Services fulfillment, Achievement of targets on the basis of market and non-market performance 2,4 | |||||||
Series 69 |
Jan. 01, 2017 | 323,777 | Services fulfillment, Achievement of targets on the basis of market and non-market performance 2,5 | |||||||
Series 70 |
July 24, 2017 | 1,449 | Services fulfillment, Achievement of targets on the basis of market and non-market performance 2,5 | |||||||
Series 71 |
Aug. 26, 2017 | 4,372 | Services fulfillment, Achievement of targets on the basis of market and non-market performance 2,5 | |||||||
Series 72 |
Aug. 28, 2017 | 5,601 | Services fulfillment, Achievement of targets on the basis of market and non-market performance 2,5 | |||||||
Deferred grant in 2014 |
| 35,312 | Satisfied | |||||||
Deferred grant in 2015 |
| 61,328 | Satisfied | |||||||
Deferred grant in 2016 |
| 155,407 | Satisfied | |||||||
Deferred grant in 2017 |
| 31,547 | Satisfied | |||||||
|
|
|||||||||
787,068 | ||||||||||
|
|
160
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
Other subsidiaries |
|
|||||||||
Stock granted in 2010 |
| 2,096 | Services fulfillment, Achievement of targets on the basis of market and non-market performance 8,9 | |||||||
Stock granted in 2011 |
| 2,633 | Services fulfillment, Achievement of targets on the basis of market and non-market performance 8,9 | |||||||
Stock granted in 2012 |
| 7,788 | Services fulfillment, Achievement of targets on the basis of market and non-market performance 8,9 | |||||||
Stock granted in 2013 |
| 21,289 | Services fulfillment, Achievement of targets on the basis of market and non-market performance 8,9 | |||||||
Stock granted in 2014 |
| 45,426 | Services fulfillment, Achievement of targets on the basis of market and non-market performance 8,9 | |||||||
Stock granted in 2015 |
| 197,689 | Services fulfillment, Achievement of targets on the basis of market and non-market performance 8,9 | |||||||
Stock granted in 2016 |
| 187,066 | Services fulfillment, Achievement of targets on the basis of market and non-market performance 8,9 | |||||||
Stock granted in 2017 |
| 289,348 | Services fulfillment, Achievement of targets on the basis of market and non-market performance 8,9 | |||||||
|
|
|||||||||
753,335 | ||||||||||
|
|
|||||||||
1,757,029 | ||||||||||
|
|
1 | Granted shares represent the total number of shares initially granted to directors and employees that have residual shares at the end of reporting period (Deferred grants are residual shares as of December 31, 2017). |
2 | During the year, executives and employees were given the option of deferring payment of the granted shares (after the date of retirement), payment ratio, and payment period. Accordingly, a certain percentage of the granted amount is deferred for up to five years after the date of retirement when the deferred grant has been confirmed. |
3 | 30%, 40% and 30% of the number of granted shares to be compensated are determined upon the accomplishment of relative TSR, Performance Results and financial results of Kookmin Bank, respectively. 50% of the number of certain granted shares to be compensated is determined upon the accomplishment of relative TSR, while 50% is determined upon the accomplishment of Performance Results. |
4 | 30%, 40% and 30% of the number of granted shares to be compensated are determined upon the accomplishment of relative TSR, Performance Results and Evaluation of the Bank presidents performance, respectively. 50% of the number of certain granted shares to be compensated is determined upon the accomplishment of relative TSR, while 50% is determined upon the accomplishment of Performance Results. |
5 | 30%, 40% and 30% of the number of granted shares to be compensated are determined upon the accomplishment of relative TSR, Performance Results and Evaluation of the Bank presidents performance, respectively. 30% of the number of certain granted shares to be compensated is determined upon the accomplishment of relative TSR, while 70% is determined upon the accomplishment of Performance Results. |
6 | 40%, 30% and 30% of the number of granted shares to be compensated are determined upon the accomplishment of Performance Results, financial results of the Group and relative TSR, respectively. 50% of the number of certain granted shares to be compensated is determined upon the accomplishment of Performance Results, while 50% is determined upon the accomplishment of relative TSR. |
161
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
7 | 40%, 30% and 30% of the number of granted shares to be compensated are determined upon the accomplishment of Performance Results, financial results of the Group and relative TSR, respectively. 50% of the number of certain granted shares to be compensated is determined upon the accomplishment of Performance Results, while 50% is determined upon the accomplishment of relative TSR. |
8 | 30%, 30% and 40% of the number of granted shares to be compensated are determined upon the accomplishment of Performance Results, subsidiaries performance and relative TSR, respectively. 60% of the number of certain granted shares to be compensated is determined upon the accomplishment of subsidiaries performance, while 40% is determined upon the accomplishment of relative TSR. 40%, 30% and 30% of the number of certain granted shares to be compensated are determined upon accomplishment of Performance Results, subsidiaries performance and relative TSR, respectively. 50% of the number of certain granted shares to be compensated is determined upon the accomplishment of subsidiaries performance, while 50% is determined upon the accomplishment of relative TSR. 70% of the number of certain granted shares to be compensated is determined upon the accomplishment of subsidiaries performance, while 30% is determined upon the accomplishment of relative TSR. |
9 | 50%, 30% and 20% of the number of granted shares to be compensated are determined upon the accomplishment of Performance Results, subsidiaries performance and relative TSR, respectively. 80% of the number of certain granted shares to be compensated is determined upon the accomplishment of subsidiaries performance, while 20% is determined upon the accomplishment of relative TSR. 80% of the number of certain granted shares to be compensated is determined upon the accomplishment of Performance Results, while 20% is determined upon the accomplishment of relative TSR. 60%, 30% and 10% of the number of granted shares to be compensated are determined upon the accomplishment of Performance Results, subsidiaries performance and relative TSR, respectively. 90% of the number of certain granted shares to be compensated is determined upon the accomplishment of subsidiaries performance, while 10% is determined upon the accomplishment of relative TSR. 90% of the number of certain granted shares to be compensated is determined upon the accomplishment of Performance Results, while 10% is determined upon the accomplishment of relative TSR. |
162
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
Details of stock grants linked to short-term performance as of December 31, 2017, are as follows:
Grant date | Estimated number of vested shares1 |
Vesting conditions |
||||||||||
KB Financial Group Inc. |
||||||||||||
Stock granted in 2010 |
Jan. 01, 2010 | 322 | Satisfied | |||||||||
Stock granted in 2011 |
Jan. 01, 2011 | 1,728 | Satisfied | |||||||||
Stock granted in 2012 |
Jan. 01, 2012 | 2,642 | Satisfied | |||||||||
Stock granted in 2013 |
Jan. 01, 2013 | 448 | Satisfied | |||||||||
Stock granted in 2014 |
Jan. 01, 2014 | 7,079 | Satisfied | |||||||||
Stock granted in 2015 |
Jan. 01, 2015 | 16,730 | Satisfied | |||||||||
Stock granted in 2016 |
Jan. 01, 2016 | 20,523 | Satisfied | |||||||||
Stock granted in 2017 |
Jan. 01, 2017 | 17,470 | |
Proportional to service period |
| |||||||
Kookmin Bank |
||||||||||||
Stock granted in 2014 |
Jan. 01, 2014 | 53,771 | Satisfied | |||||||||
Stock granted in 2015 |
Jan. 01, 2015 | 100,548 | Satisfied | |||||||||
Stock granted in 2016 |
Jan. 01, 2016 | 141,707 | Satisfied | |||||||||
Stock granted in 2017 |
Jan. 01, 2017 | 99,185 | |
Proportional to service period |
| |||||||
Other subsidiaries |
|
|||||||||||
Stock granted in 2014 |
| 24,976 | Satisfied | |||||||||
Stock granted in 2015 |
| 117,127 | Satisfied | |||||||||
Stock granted in 2016 |
| 204,978 | Satisfied | |||||||||
Stock granted in 2017 |
| 194,927 | |
Proportional to service period |
|
1 | During the year, executives and employees were given the option of deferred payment of the granted shares (after the date of retirement), payment ratio, and payment period. Accordingly, a certain percentage of the granted amount is deferred for up to five years after the date of retirement after the deferred grant has been confirmed. |
163
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
Share grants are measured at fair value using the Monte Carlo Simulation Model and assumptions used in determining the fair value as of December 31, 2017, are as follows:
Expected exercise period (Years) |
Risk free rate (%) |
Fair value (Market performance condition) |
Fair value (Non-market |
|||||||||||
Linked to long term performance |
||||||||||||||
(KB Financial Group Inc.) |
||||||||||||||
Series 14 |
0.00 ~ 7.00 | 1.87 ~ 2.39 | 61,139 | 52,873 ~ 61,139 | ||||||||||
Series 15 |
0.00 ~ 3.00 | 1.87 ~ 2.14 | 61,139 | 58,516 ~ 61,791 | ||||||||||
Series 17 |
1.00 ~ 6.00 | 1.87 ~ 2.37 | 61,607 | 54,116 ~ 61,791 | ||||||||||
Series 18 |
1.54 ~ 7.00 | 1.94 ~ 2.39 | 60,517 | 52,873 ~ 62,419 | ||||||||||
Deferred grant in 2012 |
| | | 34,180 ~ 40,662 | ||||||||||
Deferred grant in 2013 |
| | | 34,180 ~ 42,824 | ||||||||||
Deferred grant in 2014 |
| 1.87 | | 61,294 | ||||||||||
Deferred grant in 2015 |
0.00 ~ 5.00 | 1.87 ~ 2.34 | | 55,745 ~ 61,791 | ||||||||||
Deferred grant in 2016 |
0.00 ~ 6.00 | 1.87 ~ 2.37 | | 54,116 ~ 61,791 | ||||||||||
Deferred grant in 2017 |
0.00 ~ 3.00 | 1.87 ~ 2.14 | | 58,516 ~ 61,791 | ||||||||||
(Kookmin Bank) |
||||||||||||||
Series 64 |
0.00 ~ 3.00 | 1.87 ~ 2.14 | 57,602 | 58,516 ~ 61,791 | ||||||||||
Series 65 |
0.00 ~ 3.00 | 1.87 ~ 2.14 | 57,625 | 58,516 ~ 61,791 | ||||||||||
Series 67 |
0.00 ~ 5.00 | 1.87 ~ 2.34 | 61,139 | 55,745 ~ 61,791 | ||||||||||
Series 68 |
0.51 ~ 4.00 | 1.87 ~ 2.24 | 61,570 | 57,009 ~ 61,791 | ||||||||||
Series 69 |
0.00 ~ 6.00 | 1.87 ~ 2.37 | 61,607 | 54,116 ~ 61,791 | ||||||||||
Series 70 |
0.00 ~ 3.00 | 1.87 ~ 2.14 | 59,783 | 58,516 ~ 61,791 | ||||||||||
Series 71 |
2.00 ~ 5.00 | 2.00 ~ 2.34 | 60,107 | 55,745 ~ 60,194 | ||||||||||
Series 72 |
2.00 ~ 5.00 | 2.00 ~ 2.34 | 60,112 | 55,745 ~ 60,194 | ||||||||||
Grant deferred in 2014 |
| 1.87 | | 61,294 | ||||||||||
Grant deferred in 2015 |
0.00 ~ 4.00 | 1.87 ~ 2.24 | | 57,009 ~ 61,791 | ||||||||||
Grant deferred in 2016 |
0.00 ~ 6.00 | 1.87 ~ 2.37 | | 54,116 ~ 61,791 | ||||||||||
Grant deferred in 2017 |
0.00 ~ 2.89 | 1.87 ~ 2.14 | | 57,581 ~ 62,053 | ||||||||||
(Other subsidiaries) |
||||||||||||||
Share granted in 2010 |
| 1.87 | | 61,294 | ||||||||||
Share granted in 2011 |
| 1.87 | | 61,294 | ||||||||||
Share granted in 2012 |
| 1.87 | 40,544 | 40,831 ~ 61,294 | ||||||||||
Share granted in 2013 |
0.00 ~ 1.00 | 1.87 | 35,710 | 35,710 ~ 61,791 | ||||||||||
Share granted in 2014 |
0.00 ~ 5.00 | 1.87~2.34 | 43,672 ~ 57,388 | 43,672 ~ 61,791 | ||||||||||
Share granted in 2015 |
0.00 ~ 6.00 | 1.87~2.37 | 42,824 ~ 63,009 | 42,824 ~ 63,033 | ||||||||||
Share granted in 2016 |
0.00 ~ 6.00 | 1.87~2.37 | 42,824 ~ 61,811 | 42,824 ~ 62,738 | ||||||||||
Share granted in 2017 |
0.00 ~ 6.00 | 1.87~2.37 | 57,625 ~ 61,607 | 54,116 ~ 61,791 | ||||||||||
Linked to short-term performance |
||||||||||||||
(KB Financial Group Inc.) |
||||||||||||||
Share granted in 2010 |
| 1.87 | | 40,662 | ||||||||||
Share granted in 2011 |
| 1.87 | | 38,111 ~ 40,662 | ||||||||||
Share granted in 2012 |
| 1.87 | | 34,180 ~ 40,662 | ||||||||||
Share granted in 2013 |
| 1.87 | | 34,180 ~ 40,662 | ||||||||||
Share granted in 2014 |
| 1.87 | | 61,294 | ||||||||||
Share granted in 2015 |
0.00 ~ 7.01 | 1.87 ~ 2.39 | | 52,873 ~ 61,791 |
164
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
Share granted in 2016 |
0.00 ~ 7.01 | 1.87 ~ 2.39 | | 52,873 ~ 61,791 | ||||
Share granted in 2017 |
1.00 ~ 7.01 | 1.87 ~ 2.39 | | 52,873 ~ 61,791 | ||||
(Kookmin Bank) |
||||||||
Share granted in 2014 |
| 1.87 | | 61,294 | ||||
Share granted in 2015 |
0.00 ~ 5.00 | 1.87 ~ 2.34 | | 55,745 ~ 61,791 | ||||
Share granted in 2016 |
0.00 ~ 6.00 | 1.87 ~ 2.37 | | 54,116 ~ 61,791 | ||||
Share granted in 2017 |
1.00 ~ 6.00 | 1.87 ~ 2.37 | 54,116 ~ 61,791 | |||||
(Other subsidiaries) |
||||||||
Share granted in 2014 |
| 1.87 | | 61,294 | ||||
Share granted in 2015 |
0.00 ~ 5.00 | 1.87 ~ 2.34 | | 55,745 ~ 61,791 | ||||
Share granted in 2016 |
0.00 ~ 6.00 | 1.87 ~ 2.37 | | 54,116 ~ 61,791 | ||||
Share granted in 2017 |
0.00 ~ 6.00 | 1.87 ~ 2.37 | | 54,116 ~ 61,791 |
Expected volatility is based on the historical volatility of the share price over the most recent period that is generally commensurate the expected term of the grant. And the current stock price of December 31, 2017 was used for the underlying asset price. Additionally the average three year historical dividend rate was used as the expected dividend rate.
As of December 31, 2017 and 2016, the accrued expenses related to share-based payments including share grants amounted to W
133,496million and W 79,742 million, respectively, and the compensation costs from share grants amounting to W 73,370million and W 38,190 million were incurred during the 2017 and 2016,
respectively.
Details of Mileage stock as of December 31, 2017, are as follows:
(in number of shares) | Grant date | Number of granted shares1 |
Expected exercise period (years)1 |
Remaining shares2 |
||||||||
Stock granted in 2016 |
Jan. 23, 2016 | 33,829 | 0.00~1.06 | 18,196 | ||||||||
Apr. 29, 2016 | 60 | 0.00~1.33 | 39 | |||||||||
July 07, 2016 | 280 | 0.00~1.52 | 125 | |||||||||
July 18, 2016 | 767 | 0.00~1.55 | | |||||||||
Aug. 03, 2016 | 107 | 0.00~1.59 | 53 | |||||||||
Aug. 17, 2016 | 51 | 0.00~1.63 | 44 | |||||||||
Aug. 30, 2016 | 256 | 0.00~1.66 | 219 | |||||||||
Sept. 06, 2016 | 206 | 0.00~1.68 | 120 | |||||||||
Oct. 07, 2016 | 105 | 0.00~1.77 | 97 | |||||||||
Nov. 01, 2016 | 118 | 0.00~1.84 | 95 | |||||||||
Dec. 07, 2016 | 211 | 0.00~1.93 | 150 | |||||||||
Dec. 08, 2016 | 43 | 0.00~1.94 | 43 | |||||||||
Dec. 15, 2016 | 12 | 0.00~1.96 | 12 | |||||||||
Dec. 20, 2016 | 309 | 0.00~1.97 | 307 | |||||||||
Dec. 28, 2016 | 76 | 0.00~1.99 | 64 | |||||||||
Dec. 30, 2016 | 210 | 0.00~2.00 | 159 | |||||||||
Stock granted in 2017 |
Jan. 09, 2017 | 28,925 | 0.00~2.02 | 25,521 | ||||||||
Feb. 03, 2017 | 43 | 0.00~2.09 | 43 | |||||||||
Apr. 03, 2017 | 82 | 0.00~2.25 | 82 | |||||||||
May. 22, 2017 | 20 | 0.00~2.39 | 20 | |||||||||
July. 03, 2017 | 52 | 0.00~2.50 | 52 |
165
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
Aug. 16, 2017 |
204 | 0.00~2.62 | 204 | |||||||||
Aug. 17, 2017 |
40 | 0.00~2.63 | 40 | |||||||||
Aug. 22, 2017 |
33 | 0.00~2.64 | 33 | |||||||||
Aug. 25, 2017 |
387 | 0.00~2.65 | 387 | |||||||||
Sept. 14, 2017 |
82 | 0.00~2.70 | 82 | |||||||||
Oct. 20, 2017 |
9 | 0.00~2.80 | 9 | |||||||||
Nov. 01, 2017 |
120 | 0.00~2.84 | 120 | |||||||||
Nov. 06, 2017 |
106 | 0.00~2.85 | 106 | |||||||||
Dec. 06, 2017 |
77 | 0.00~2.93 | 77 | |||||||||
Dec. 08, 2017 |
28 | 0.00~2.94 | 28 | |||||||||
Dec. 26, 2017 |
254 | 0.00~2.99 | 254 | |||||||||
Dec. 29, 2017 |
114 | 0.00~2.99 | 114 | |||||||||
|
|
|
|
|||||||||
67,216 | 46,895 |
1 | Mileage stock is exercisable for two years after one year from the grant date. When the mileage stock is exercised, the closing price of prior month is applied. However, in case of transfer or retirement during the vesting period, mileage stock is exercisable at the closing price of the last month prior to transfer or retirement. |
2 | The remaining shares are assessed based on the stock price as of December 31, 2017. These shares are vested immediately at grant date. |
As of December 31, 2017 and 2016, the accrued expenses for share-based payments in regards to mileage stock amounted to W
2,973 million and W 1,533 million, respectively, and the compensation costs amounting to W 2,378 million and W 1,563 million were incurred during the 2017 and 2016, respectively.
166
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
32. Net Other Non-operating Income and Expenses
Details of other non-operating income and expenses for the years ended December 31, 2017 and 2016, are as follows:
(In millions of Korean won) | 2017 | 2016 | ||||||
Other non-operating income |
||||||||
Gain on disposal in property and equipment |
||||||||
Rent received |
32,254 | 15,847 | ||||||
Gain on bargain purchase |
122,986 | 628,614 | ||||||
Gain on sales of disposal group held for sale |
22,371 | | ||||||
Others |
72,248 | 100,409 | ||||||
|
|
|
|
|||||
260,726 | 745,539 | |||||||
|
|
|
|
|||||
Other non-operating expenses |
||||||||
Loss on disposal in property and equipment |
2,500 | 1,835 | ||||||
Donation |
54,419 | 37,705 | ||||||
Restoration cost |
3,465 | 2,255 | ||||||
Management cost for special bonds |
3,279 | 2,024 | ||||||
Loss on sales of disposal group held for sale |
45,764 | | ||||||
Impairment loss on disposition of disposal group held for sale |
7,198 | | ||||||
Impairment loss for goodwill |
1,202 | | ||||||
Others |
104,023 | 30,851 | ||||||
|
|
|
|
|||||
221,850 | 74,670 | |||||||
|
|
|
|
|||||
Net other non-operating income |
||||||||
|
|
|
|
167
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
33. Income Tax Expense
Income tax expense for the years ended December 31, 2017 and 2016, are as follows:
(In millions of Korean won) | 2017 | 2016 | ||||||
Tax payable |
||||||||
Current tax expense |
||||||||
Adjustments recognized in the period for current tax of prior years |
(39,445 | ) | 27,217 | |||||
|
|
|
|
|||||
661,152 | 634,392 | |||||||
|
|
|
|
|||||
Changes in deferred income tax assets (liabilities) |
212,195 | (201,012 | ) | |||||
|
|
|
|
|||||
Income tax recognized directly in equity1 |
||||||||
Exchange difference in foreign operation |
25,674 | (11,338 | ) | |||||
Remeasurements of net defined benefit liabilities |
(7,240 | ) | (4,093 | ) | ||||
Change in value of available-for-sale financial assets |
(84,781 | ) | 20,754 | |||||
Change in value of held-to-maturity financial assets |
(3,789 | ) | (1,186 | ) | ||||
Share of other comprehensive loss of associates |
20,975 | 116 | ||||||
Cash flow hedges |
(4,368 | ) | (1,423 | ) | ||||
Hedges of a net investment in a foreign operation |
(8,186 | ) | 2,265 | |||||
Other comprehensive income for assets held for sale |
(21,498) | | ||||||
Other comprehensive income for separate accounts |
4,829 | | ||||||
|
|
|
|
|||||
(78,384 | ) | 5,095 | ||||||
|
|
|
|
|||||
Tax expense |
||||||||
|
|
|
|
1 | The corporate tax rate was changed due to the amendment of corporate tax law in 2017. Accordingly, the expected rate has been applied for the deferred tax assets and
liabilities that are expected to be utilized in periods after 2018. Amended income tax rate for |
An analysis of the net profit before income tax and income tax expense for the years ended December 31, 2017 and 2016, follows:
(In millions of Korean won) | 2017 | 2016 | ||||||||||||||
Tax rate (%) | Amount | Tax rate (%) | Amount | |||||||||||||
Net profit before income tax |
||||||||||||||||
|
|
|
|
|||||||||||||
Tax at the applicable tax rate1 |
24.19 | 1,001,037 | 24.18 | 635,673 | ||||||||||||
Non-taxable income |
(5.02 | ) | (207,777 | ) | (7.15 | ) | (188,062 | ) | ||||||||
Non-deductible expense |
0.26 | 10,706 | 0.64 | 16,711 | ||||||||||||
Tax credit and tax exemption |
(0.04 | ) | (1,658 | ) | (0.04 | ) | (1,079 | ) | ||||||||
Temporary difference for which no deferred tax is recognized |
(0.16 | ) | (6,484 | ) | 0.10 | 2,749 | ||||||||||
Deferred tax relating to changes in recognition and measurement |
(0.12 | ) | (4,894 | ) | (0.03 | ) | (828 | ) | ||||||||
Income tax refund for tax of prior years |
(0.12 | ) | (4,854 | ) | (0.48 | ) | (12,612 | ) | ||||||||
Income tax expense of overseas branch |
0.04 | 1,549 | 0.13 | 3,447 | ||||||||||||
Effects from change in tax rate |
0.42 | 17,367 | (0.03 | ) | (739 | ) | ||||||||||
Others |
(0.24 | ) | (10,029 | ) | (0.64 | ) | (16,785 | ) | ||||||||
|
|
|
|
|||||||||||||
Average effective tax rate and tax expense |
19.21 | 16.68 | ||||||||||||||
|
|
|
|
168
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
1 | Applicable income tax rate for |
Details of current tax assets (income tax refund receivables) and current tax liabilities (income tax payables), as of December 31, 2017 and 2016, are as follows:
(In millions of Korean won) | 2017 | |||||||||||
Tax payables (receivables) before offsetting |
Offsetting | Tax payables (receivables) after offsetting |
||||||||||
Income tax refund receivables1 |
||||||||||||
Income tax payables |
218,168 | 215,702 | 433,870 |
(In millions of Korean won) | 2016 | |||||||||||
Tax payables (receivables) before offsetting |
Offsetting | Tax payables (receivables) after offsetting |
||||||||||
Income tax refund receivables1 |
||||||||||||
Income tax payables |
668,372 | (226,560 | ) | 441,812 |
1 | Excludes current tax assets of |
34. Dividends
The dividends paid to the shareholders of
the Parent Company in 2017 and 2016 were W 497,969 million (W 1,250 per share) and W 378,625 million (W 980 per share), respectively. The dividend to the shareholders in
respect of the year ended December 31, 2017, of W 1,920 per share, amounting to total dividends of W 766,728 is to be proposed at the annual general meeting on March 23, 2018. The Companys financial
statements as of December 31, 2017, do not reflect this dividend payable.
169
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
35. Accumulated Other Comprehensive Income
Details of accumulated other comprehensive income for the years ended December 31, 2017 and 2016, are as follows:
(In millions of Korean won) | 2017 | |||||||||||||||||||||||||||||||
Beginning | Changes except for reclassification |
Reclassification to profit or loss |
Tax effect | Replaced by retained earnings |
Replaced by for sale |
Replaced by disposal group held for sale |
Ending | |||||||||||||||||||||||||
Remeasurements of net defined benefit liabilities |
||||||||||||||||||||||||||||||||
Exchange differences on translating foreign operations |
53,138 | (135,401 | ) | | 25,674 | | | | (56,589 | ) | ||||||||||||||||||||||
Change in the fair value of available-for-sale financial assets |
601,620 | 200,700 | (22,357 | ) | (84,781 | ) | | | (861 | ) | 694,321 | |||||||||||||||||||||
Change in value of held-to-maturity financial assets |
6,447 | (2,868 | ) | 132 | (3,789 | ) | | | | (78 | ) | |||||||||||||||||||||
Shares of other comprehensive income of associates and joint ventures |
(96,174 | ) | 2,288 | 10,135 | 20,975 | (3,492 | ) | 67,337 | | 1,069 | ||||||||||||||||||||||
Cash flow hedges |
(6,075 | ) | (100,816 | ) | 126,239 | (4,368 | ) | | | | 14,980 | |||||||||||||||||||||
Hedges of net investments in foreign operations |
(32,572 | ) | 34,800 | | (8,186 | ) | | | | (5,958 | ) | |||||||||||||||||||||
Other comprehensive income of separate account |
| (97,001 | ) | 78,480 | 4,829 | | | | (13,692 | ) | ||||||||||||||||||||||
Other comprehensive income of disposal group held for sale |
| | (861 | ) | | 1,985 | | (1,124 | ) | | ||||||||||||||||||||||
Other comprehensive income of assets held for sale |
| | 88,835 | (21,498 | ) | | (67,337 | ) | | | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of Korean won) | 2016 | |||||||||||||||||||
Beginning | Changes except for reclassification |
Reclassification to profit or loss |
Tax effect | Ending | ||||||||||||||||
Remeasurements of net defined benefit liabilities |
||||||||||||||||||||
Exchange differences on translating foreign operations |
32,990 | 31,486 | | (11,338 | ) | 53,138 | ||||||||||||||
Change in value of available-for-sale financial assets |
653,130 | 30,877 | (103,141 | ) | 20,754 | 601,620 | ||||||||||||||
Change in value of held-to-maturity financial assets |
2,731 | (1,448 | ) | 6,350 | (1,186 | ) | 6,447 | |||||||||||||
Shares of other comprehensive income of associates |
(89,081 | ) | (7,209 | ) | | 116 | (96,174 | ) | ||||||||||||
Cash flow hedges |
(10,173 | ) | 16,238 | (10,717 | ) | (1,423 | ) | (6,075 | ) | |||||||||||
Hedges of a net investment in a foreign operation |
(25,477 | ) | (9,360 | ) | | 2,265 | (32,572 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
170
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
36. Earnings per Share
36.1 Basic Earnings per Share
Basic earnings per share is calculated by dividing profit and loss attributable to ordinary equity holders of the Parent Company by the weighted average number of ordinary shares outstanding, excluding the treasury shares, during the years ended December 31, 2017 and 2016.
Weighted average number of ordinary shares outstanding:
(In number of shares) | 2017 | 2016 | ||||||
Beginning (A) |
418,111,537 | 386,351,693 | ||||||
Issue of ordinary shares related to business combination (B) |
| 6,421,389 | ||||||
Acquisition of treasury shares (C) |
(21,618,520 | ) | (9,153,437 | ) | ||||
|
|
|
|
|||||
Sales of treasury shares (D) |
2,231,945 | | ||||||
|
|
|
|
|||||
Weighted average number of ordinary shares outstanding (E=A+B+C+D) |
398,724,962 | 383,619,645 | ||||||
|
|
|
|
Basic earnings per share:
(In Korean won and in number of shares) | 2017 | 2016 | ||||||
Profit attributable to ordinary shares (D) |
||||||||
Weighted average number of ordinary shares outstanding (E) |
398,724,962 | 383,619,645 | ||||||
Basic earnings per share (F = D / E) |
36.2 Diluted Earnings per Share
Diluted earnings per share is calculated using the weighted average number of ordinary shares outstanding which is adjusted by the weighted average number of additional ordinary shares that would have been outstanding assuming the conversion of all dilutive potential ordinary shares. The Groups dilutive potential ordinary shares include stock grants.
A calculation is done to determine the number of shares that could have been acquired at fair value (determined as the average market share price of the Groups outstanding shares for the period) based on the monetary value of the subscription rights attached to the share options. The number of shares calculated above is compared with the number of shares that would have been issued assuming the exercise of stock grants.
Adjusted profit for diluted earnings per share for the years ended December 31, 2017 and 2016, are as follows:
(In Korean won) | 2017 | 2016 | ||||||
Profit attributable to ordinary shares |
||||||||
Adjustment |
| | ||||||
|
|
|
|
|||||
Adjusted profit for diluted earnings |
||||||||
|
|
|
|
171
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
Adjusted weighted average number of ordinary shares outstanding to calculate diluted earnings per share for the years ended December 31, 2017 and 2016, are as follows:
(In number of shares) | 2017 | 2016 | ||||||
Weighted average number of ordinary shares outstanding |
398,724,962 | 383,619,645 | ||||||
Adjustment: |
||||||||
Stock grants |
2,319,533 | 2,013,044 | ||||||
Adjusted weighted average number of ordinary shares outstanding for diluted earnings per share |
401,044,495 | 385,632,689 |
Diluted earnings per share for the years ended December 31, 2017 and 2016, are as follows:
(in Korean won and in number of shares) | 2017 | 2016 | ||||||
Adjusted profit for diluted earnings per share |
||||||||
Adjusted weighted average number of ordinary shares outstanding for diluted earnings per share |
401,044,495 | 385,632,689 | ||||||
Diluted earnings per share |
37. Insurance Contracts
37.1 Insurance Assets
Details of deferred acquisition costs included in other assets as of December 31, 2017 and 2016, are as follows:
(In millions of Korean won) | 2017 | 2016 | ||||||
Non-life insurance |
||||||||
Life insurance |
130,393 | 122,151 | ||||||
|
|
|
|
|||||
|
|
|
|
Changes in the deferred acquisition costs for the years ended December 31, 2017 and 2016, are as follows
2017 | ||||||||||||||||
(In millions of Korean won) | Beginning | Increase | Decrease | Ending | ||||||||||||
Non-life insurance |
||||||||||||||||
Life insurance |
122,151 | 116,826 | (108,584 | ) | 130,393 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
|
|
|
|
|
|
|
|
2016 | ||||||||||||||||
(In millions of Korean won) | Beginning | Increase | Decrease | Ending | ||||||||||||
Life insurance |
||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||
|
|
|
|
|
|
|
|
172
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
Details of reinsurance assets included in other assets as of December 31, 2017 and 2016, are as follows:
(In millions of Korean won) | 2017 | 2016 | ||||||||
Non-life insurance |
Reserve for outstanding claims | |||||||||
General insurance |
||||||||||
Automobile insurance |
13,320 | | ||||||||
Long-term insurance |
89,317 | | ||||||||
Unearned premium reserve | ||||||||||
General insurance |
178,586 | | ||||||||
Automobile insurance |
14,986 | | ||||||||
|
|
|
|
|||||||
776,969 | | |||||||||
|
|
|
|
|||||||
Life insurance |
Reserve for outstanding claims | 1,410 | 1,301 | |||||||
Unearned premium reserve | 490 | 473 | ||||||||
|
|
|
|
|||||||
1,900 | 1,774 | |||||||||
|
|
|
|
|||||||
Others |
Reserve for outstanding claims | 3,670 | 3,041 | |||||||
Unearned premium reserve | 1,075 | 1,180 | ||||||||
|
|
|
|
|||||||
4,745 | 4,221 | |||||||||
|
|
|
|
|||||||
Total reinsurance assets |
783,614 | 5,995 | ||||||||
Allowance for impairment |
629 | | ||||||||
|
|
|
|
|||||||
Total reinsurance assets, net |
||||||||||
|
|
|
|
The changes in reinsurance assets included in other assets as of December 31, 2017 and 2016, are as follows:
(In millions of Korean won) | 2017 | |||||||||||||||||
Beginning | Business combination |
Net increase (decrease) |
Ending | |||||||||||||||
Non-life insurance |
Reserve for outstanding claims | |||||||||||||||||
General insurance |
||||||||||||||||||
Automobile insurance |
| 15,943 | (2,623 | ) | 13,320 | |||||||||||||
Long-term insurance |
| 87,887 | 1,430 | 89,317 | ||||||||||||||
Unearned premium reserve | ||||||||||||||||||
General insurance |
| 218,479 | (39,893 | ) | 178,586 | |||||||||||||
Automobile insurance |
| 17,373 | (2,387 | ) | 14,986 | |||||||||||||
Long-term insurance |
| 2 | (2 | ) | | |||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
| 730,989 | 45,980 | 776,969 | |||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Life insurance |
Reserve for outstanding claims | 1,301 | | 109 | 1,410 | |||||||||||||
Unearned premium reserve | 473 | | 17 | 490 | ||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
1,774 | 126 | 1,900 | ||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Others |
Reserve for outstanding claims | 3,041 | | 629 | 3,670 | |||||||||||||
Unearned premium reserve | 1,180 | | (105 | ) | 1,075 | |||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
4,221 | | 524 | 4,745 | |||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Total reinsurance assets |
5,995 | 730,989 | 46,630 | 783,614 | ||||||||||||||
Allowance for impairment |
| 738 | (109 | ) | 629 | |||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Total reinsurance assets, net |
||||||||||||||||||
|
|
|
|
|
|
|
|
173
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
(In millions of Korean won) | 2016 | |||||||||||||
Beginning | Net increase (decrease) |
Ending | ||||||||||||
Life insurance |
Reserve for outstanding claims | |||||||||||||
Unearned premium reserve | 492 | (19 | ) | 473 | ||||||||||
|
|
|
|
|
|
|||||||||
2,003 | (229 | ) | 1,774 | |||||||||||
|
|
|
|
|
|
|||||||||
Others |
Reserve for outstanding claims | 2,114 | 927 | 3,041 | ||||||||||
Unearned premium reserve | 1,727 | (547 | ) | 1,180 | ||||||||||
|
|
|
|
|
|
|||||||||
3,841 | 380 | 4,221 | ||||||||||||
|
|
|
|
|
|
|||||||||
Total reinsurance assets |
5,884 | 151 | 5,995 | |||||||||||
Allowance for impairment |
| | | |||||||||||
|
|
|
|
|
|
|||||||||
Total reinsurance assets, net |
||||||||||||||
|
|
|
|
|
|
37.2 Insurance Liabilities
Details of insurance liabilities as of 2017 and December 31, 2016, are as follows:
2017 | ||||||||||||||||
(In millions of Korean won) | Non-life insurance |
Life insurance | Others | Total | ||||||||||||
Long-term insurance premium reserve |
||||||||||||||||
Reserve for outstanding claims |
2,148,923 | 78,423 | 3,670 | 2,231,016 | ||||||||||||
Unearned premium reserve |
1,392,211 | 1,511 | 1,075 | 1,394,797 | ||||||||||||
Reserve for participating policyholders dividends on long-term insurance |
94,005 | 29,150 | | 110,040 | ||||||||||||
Unallocated Divisible Surplus to Future Policyholders |
24,304 | 6,264 | | 43,683 | ||||||||||||
Reserve for compensation for losses on dividend-paying insurance contracts |
25,730 | 7,920 | | 33,650 | ||||||||||||
Guarantee reserve |
| 12,687 | | 12,687 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
|
|
|
|
|
|
|
|
2016 | ||||||||||||
(In millions of Korean won) | Life insurance | Others | Total | |||||||||
Long-term insurance premium reserve |
||||||||||||
Reserve for outstanding claims |
69,659 | 3,041 | 72,700 | |||||||||
Unearned premium reserve |
869 | 1,180 | 2,049 | |||||||||
Reserve for participating policyholders dividends on long-term insurance |
25,923 | | 25,923 | |||||||||
Unallocated Divisible Surplus to Future Policyholders |
9,273 | | 9,273 | |||||||||
Reserve for compensation for losses on dividend-paying insurance contracts |
8,544 | | 8,544 | |||||||||
Guarantee reserve |
10,657 | | 10,657 | |||||||||
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
174
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
The changes in insurance liability as of December 31, 2017 and 2016, are as follows:
(In millions of Korean won) | 2017 | |||||||||||||||||
Beginning | Business combination |
Net increase (decrease) 2 |
Ending | |||||||||||||||
Non-life insurance |
General insurance | |||||||||||||||||
Automobile insurance | | 1,448,313 | 29,256 | 1,477,569 | ||||||||||||||
Long-term insurance | | 20,166,857 | 1,431,268 | 21,598,125 | ||||||||||||||
Long-term investment contract | | 113,210 | (701 | ) | 112,509 | |||||||||||||
Life insurance |
Pure endowment insurance | 5,150,946 | | 98,681 | 5,249,627 | |||||||||||||
Death insurance | 243,008 | | 123,295 | 366,303 | ||||||||||||||
Joint insurance | 1,872,706 | | (89,821 | ) | 1,782,885 | |||||||||||||
Group insurance | 2,147 | | (1,078 | ) | 1,069 | |||||||||||||
Other | 17,816 | | (3,633 | ) | 14,183 | |||||||||||||
Others1 |
4,221 | | 524 | 4,745 | ||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Total |
||||||||||||||||||
|
|
|
|
|
|
|
|
(In millions of Korean won) | 2016 | |||||||||||||
Beginning | Net increase (decrease) 2 |
Ending | ||||||||||||
Life insurance |
Pure endowment insurance | |||||||||||||
Death insurance | 156,179 | 86,829 | 243,008 | |||||||||||
Joint insurance | 1,906,777 | (34,071 | ) | 1,872,706 | ||||||||||
Group insurance | 1,895 | 252 | 2,147 | |||||||||||
Other | 15,452 | 2,364 | 17,816 | |||||||||||
Others1 |
3,841 | 380 | 4,221 | |||||||||||
|
|
|
|
|
|
|||||||||
Total |
||||||||||||||
|
|
|
|
|
|
1 | Consists of contractors profit dividend reserve and loss on dividend insurance reserve |
2 | Including currency translation effect and decrease in liability related to investment contract |
175
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
37.3 Liability adequacy test
37.3.1 Non-life insurance
(a) Assumptions and basis for the insurance liability adequacy test as of December 31, 2017, is as follows:
Assumptions (%) |
Basis | |||||
Long-term insurance |
||||||
Discount rate |
2.57 ~ 8.59 | Applied regulators scenario requiring use of liquidity premium over risk-free rate | ||||
Expense ratio |
6.51 | Reflected parents future expense cost based on last one-year data | ||||
Lapse ratio |
1.30 ~ 34.80 | Based on recent 5 year data | ||||
Mortality |
12.00 ~ 633.00 | Rate of risk to the anticipated risk premium of the insurer for the last 5 years | ||||
General insurance |
||||||
Expense ratio |
13.21 | Expense ratio divided by most last 1 year accrued insurance premium | ||||
Appraisal cost ratio |
4.73 | Appraisal cost divided by most last 3 year accrued insurance premium | ||||
Claim settlement ratio |
67.23 | Claim payment divided by most last 5 year accrued insurance premium | ||||
Automobile insurance |
||||||
Expense ratio |
11.00 | Expense ratio divided by most last 1 year accrued insurance premium | ||||
Appraisal cost ratio |
9.33 | Appraisal cost divided by most last 3 year accrued insurance premium | ||||
Claim settlement ratio |
77.02 | Claim payment divided by most last 5 year accrued insurance premium |
The results of liability adequacy test as of December 31, 2017 and 2016, are as follows:
2017 | ||||||||||||
(In millions of Korean won) | Recognized liabilities 1 |
Estimated adequate liabilities |
Shortfall (surplus) |
|||||||||
Long-term insurance |
||||||||||||
General insurance |
424,800 | 376,305 | (48,495 | ) | ||||||||
Automobile insurance |
1,050,576 | 1,004,551 | (46,025 | ) | ||||||||
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
1 | For long-term insurance, it is an amount after deduction of the deferred acquisition costs from insurance premium reserve. For general insurance and automobile insurance, it is an amount including the unearned premium based on original insurance. |
On the other hand, as a result of adequacy test, the Group did not set additional reserve as the surplus exceeds the deficit amount. As such, there was no amount recorded as a result of liability adequacy test.
176
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
37.3.2 Life insurance
Assumptions and basis for the insurance liability adequacy test as of December 31, 2017 and 2016, are as follows:
Assumptions(%) | Basis | |||||
2017 | 2016 | |||||
Rate of surrender value |
0.44 ~ 60.30 | 0.48 ~ 85.55 | Rate of surrender value for the last 5 years | |||
Rate of claim |
6~118 | 6 ~ 140 | Rate of claim payment for the last 7 years | |||
Discount rate |
-1.76~14.37 | -2.74~16.14 | Estimated investment assets profit ratio based on the interest rate scenario provided by the Financial Supervisory Service |
Indirect costs included in commission and operating expenses were calculated based on unit cost of the expense allocation standards of the last year in accordance with the Regulation on Insurance Supervision. Direct costs included in commission and operating expenses were calculated based on estimates of future expense according to the Groups regulations.
The results of liability adequacy test as of December 31, 2017 and 2016, are as follows:
(In millions of Korean won) | 2017 | |||||||||||||
Recognized liabilities |
Estimated adequate liabilities |
Shortfall (surplus) |
||||||||||||
Fixed interest type |
Participating | |||||||||||||
Non-participating | 97,093 | 11,372 | (85,721 | ) | ||||||||||
|
|
|
|
|
|
|||||||||
Variable interest type |
Participating | 1,136,444 | 1,116,410 | (20,035 | ) | |||||||||
Non-participating | 5,581,698 | 4,896,433 | (685,264 | ) | ||||||||||
|
|
|
|
|
|
|||||||||
Variable type |
(28,699 | ) | (106,835 | ) | (78,136 | ) | ||||||||
|
|
|
|
|
|
|||||||||
Total |
||||||||||||||
|
|
|
|
|
|
2016 | ||||||||||||||
(In millions of Korean won) | Recognized liabilities |
Estimated adequate liabilities |
Shortfall (surplus) |
|||||||||||
Fixed interest type |
Participating | |||||||||||||
Non-participating | 60,860 | 14,121 | (46,739 | ) | ||||||||||
|
|
|
|
|
|
|||||||||
Variable interest type |
Participating | 1,136,049 | 1,115,129 | (20,920 | ) | |||||||||
Non-participating | 5,514,847 | 5,032,493 | (482,354 | ) | ||||||||||
|
|
|
|
|
|
|||||||||
Variable type |
(29,025 | ) | (84,881 | ) | (55,856 | ) | ||||||||
|
|
|
|
|
|
|||||||||
Total |
||||||||||||||
|
|
|
|
|
|
On the other hand, as a result of adequacy test, the group did not set additional reserve as the surplus exceeds the deficit amount. As such, there was no amount recorded as a result of liability adequacy test.
177
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
37.4 Insurance Income and Expenses
(In millions of Korean won) | 2017 | 2016 | ||||||||
Insurance income |
Premium income | |||||||||
Reinsurance income | 564,894 | 10,930 | ||||||||
Separate account income | 118,080 | | ||||||||
Income of change in reinsurance assets | 49,466 | | ||||||||
Other insurance income | 3,821 | | ||||||||
|
|
|
|
|||||||
8,970,992 | 1,201,352 | |||||||||
|
|
|
|
|||||||
Insurance expenses |
Insurance claims paid | 2,945,158 | 158,789 | |||||||
Dividend expenses | 6,233 | 910 | ||||||||
Refunds of surrender value | 2,193,843 | 690,207 | ||||||||
Reinsurance expenses | 652,910 | 12,286 | ||||||||
Provision of policy reserves | 1,644,389 | 366,145 | ||||||||
Separate account expenses | 65,773 | (207 | ) | |||||||
Insurance operating expenses | 293,591 | (9,903 | ) | |||||||
Deferred acquisition costs | 361,909 | 100,928 | ||||||||
Expenses of change in reinsurance assets | (126 | ) | | |||||||
Claim survey expenses paid | 20,564 | | ||||||||
Other insurance expenses | 193,038 | | ||||||||
|
|
|
|
|||||||
8,377,282 | 1,319,155 | |||||||||
|
|
|
|
|||||||
Net insurance income(expenses) |
||||||||||
|
|
|
|
37.5 Insurance Premiums and Reinsurance
37.5.1 Overview
Insurance risk is the risk that arises from a primary operation of insurance companies that is associated with acceptance of insurance contract and payment of claims, and is classified as the insurance price risk and the reserves risk. The insurance price risk is the risk of loss that might occur when the actual risk exceeds the expected risk rate or expected insurance operating expenses ratios in calculation of premiums. It is the risk of loss that arises from differences between actual payment of claims and premiums received from policyholders. The reserves risk is the risk that arises due to a deficit in reserves at the date of assessment, making the Group unable to cover the actual claims payment in the future.
37.5.2 Purposes, policies and procedures to manage risk arising from insurance contracts
The risks associated with insurance contract that the Group faces are the insurance actuarial risk and the acceptance risk. Each risk occurs due to insurance contracts pricing and conditions of acceptance. In order to minimize acceptance risk, the Group establishes guidelines and procedure for acceptance and out lines specific conditions for acceptance by product. In addition, expected risk level at the date of pricing is compared with actual risk of contracts after acceptance and the interest rate is adjusted accordingly, conditions of sale is changed, sale of goods is interrupted and other measures are taken in order to reduce insurance actuarial risk. The Group has a committee to discuss status of product acceptance risk and interest rate policy. The committee decides important matters to set the processes that allow minimizing the insurance actuarial risk, the acceptance risk and other business related risk.
178
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
In addition, according to reinsurance operating standards, the Group establishes an operating strategy of reinsurance for large claims expense due to unexpected catastrophic events. The Group supports so that policyholders are safe and the Groups stable profit can be achieved. For the long-term goal, the Group manages risk at a comprehensive level to keep its value at the maximum.
The Groups entire risk is calculated by using RBC method. The Group sets the risk appetite limits in order that the calculated risk level is maintained at an appropriate level compared to available capital. Portfolio of assets and products are monitored to improve profit compared to risk.
37.5.3 Exposure to insurance price risk
According to RBC standard, exposure to insurance price risk is defined as net written premiums for prior 1 year that is calculated by adding and subtracting original insurance premium, assumed reinsurance premium and ceded reinsurance premium.
The Groups exposure to insurance price risk as of December 31, 2017 as follows:
2017 | ||||||||||||||||
(In millions of Korean won) | Direct insurance |
Inward reinsurance |
Outward reinsurance |
Total | ||||||||||||
General |
||||||||||||||||
Automobile |
2,000,232 | | (34,579 | ) | 1,965,653 | |||||||||||
Long-term |
2,020,782 | | (276,325 | ) | 1,744,457 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
|
|
|
|
|
|
|
|
37.5.4 Concentration of Insurance risk
The Group is selling general non-life insurances (fire, maritime, injury, technology, liability, package, title, guarantee and special type insurances), automobile insurances (for private use, for hire, for business, bicycle and other), long-term insurances (long-term non-life, property damage, injury, driver, savings, illness, nursing and pension) and various other insurances. The Groups risk is distributed through reinsurance, joint acceptance and diversified selling. In addition, insurances that cover serious damage of risk, although with rare possibility of the occurrence of disaster, such as storm and flood insurance are limited, and the Group controls the risk through joint acquisition.
Loss development tables
The Group uses claim development of payments and the estimated ultimate claims for the accident years in order to maintain overall reserve adequacy in respect of general, automobile and long-term insurance. When the estimated ultimate claims are greater than claim payments, the Group establishes additional reserves. Loss development tables as of December 31, 2017, are as follows:
179
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
General Insurance
(In millions of Korean won) | Payment year | |||||||||||||||||||
Accident year | After 1 year | After 2 years | After 3 years | After 4 years | After 5 years | |||||||||||||||
Estimate of gross ultimate claims (A) |
||||||||||||||||||||
2013.1.1 ~ 2013.12.31 |
||||||||||||||||||||
2014.1.1 ~ 2014.12.31 |
127,903 | 144,915 | 146,430 | 146,533 | | |||||||||||||||
2015.1.1 ~ 2015.12.31 |
125,170 | 145,637 | 148,165 | | | |||||||||||||||
2016.1.1 ~ 2016.12.31 |
145,618 | 168,127 | | | | |||||||||||||||
2017.1.1 ~ 2017.12.31 |
168,409 | | | | | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
737,687 | 661,929 | 502,695 | 353,862 | 206,450 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Gross cumulative claim payments (B) |
||||||||||||||||||||
2013.1.1 ~ 2013.12.31 |
133,479 | 184,209 | 198,286 | 200,931 | 202,093 | |||||||||||||||
2014.1.1 ~ 2014.12.31 |
94,901 | 129,652 | 136,689 | 141,170 | | |||||||||||||||
2015.1.1 ~ 2015.12.31 |
93,443 | 130,430 | 137,854 | | | |||||||||||||||
2016.1.1 ~ 2016.12.31 |
108,098 | 151,583 | | | | |||||||||||||||
2017.1.1 ~ 2017.12.31 |
132,430 | | | | | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
562,351 | 595,874 | 472,829 | 342,101 | 202,093 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Difference (A-B) |
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
Automobile Insurance
(In millions of Korean won) | Payment year | |||||||||||||||||||||||||||
Accident year | After 1 year | After 2 years | After 3 years | After 4 years | After 5 years | After 6 years | After 7 years | |||||||||||||||||||||
Estimate of gross ultimate claims (A) |
||||||||||||||||||||||||||||
2011.1.1 ~ 2011.12.31 |
||||||||||||||||||||||||||||
2012.1.1 ~ 2012.12.31 |
1,117,650 | 1,146,779 | 1,155,529 | 1,162,075 | 1,164,774 | 1,166,470 | | |||||||||||||||||||||
2013.1.1 ~ 2013.12.31 |
1,131,945 | 1,156,535 | 1,170,968 | 1,179,458 | 1,179,323 | | | |||||||||||||||||||||
2014.1.1 ~ 2014.12.31 |
1,174,611 | 1,193,832 | 1,205,524 | 1,212,025 | | | | |||||||||||||||||||||
2015.1.1 ~ 2015.12.31 |
1,227,106 | 1,245,780 | 1,256,058 | | | | | |||||||||||||||||||||
2016.1.1 ~ 2016.12.31 |
1,276,939 | 1,281,381 | | | | | | |||||||||||||||||||||
2017.1.1 ~ 2017.12.31 |
1,342,998 | | | | | | | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
8,360,050 | 7,129,808 | 5,903,360 | 4,673,430 | 3,466,734 | 2,290,515 | 1,125,203 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Gross cumulative claim payments(B) |
||||||||||||||||||||||||||||
2011.1.1 ~ 2011.12.31 |
929,491 | 1,066,885 | 1,093,589 | 1,109,202 | 1,117,381 | 1,119,765 | 1,120,687 | |||||||||||||||||||||
2012.1.1 ~ 2012.12.31 |
939,239 | 1,105,672 | 1,135,064 | 1,149,585 | 1,156,150 | 1,159,614 | | |||||||||||||||||||||
2013.1.1 ~ 2013.12.31 |
939,569 | 1,114,063 | 1,145,110 | 1,161,624 | 1,168,617 | | | |||||||||||||||||||||
2014.1.1 ~ 2014.12.31 |
969,211 | 1,150,462 | 1,180,953 | 1,196,387 | | | | |||||||||||||||||||||
2015.1.1 ~ 2015.12.31 |
1,020,975 | 1,198,241 | 1,228,357 | | | | | |||||||||||||||||||||
2016.1.1 ~ 2016.12.31 |
1,052,830 | 1,235,656 | | | | | | |||||||||||||||||||||
2017.1.1 ~ 2017.12.31 |
1,104,158 | | | | | | | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
6,955,473 | 6,870,979 | 5,783,073 | 4,616,798 | 3,442,148 | 2,279,379 | 1,120,687 | ||||||||||||||||||||||
|
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|
|||||||||||||||
Difference (A-B) |
||||||||||||||||||||||||||||
|
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|
|
180
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
Long-term Insurance
(In millions of Korean won) | Payment year | |||||||||||||||||||
Accident year | After 1 year | After 2 years | After 3 years | After 4 years | After 5 years | |||||||||||||||
Estimate of ultimate claims (A) |
||||||||||||||||||||
2013.1.1 ~ 2013.12.31 |
||||||||||||||||||||
2014.1.1 ~ 2014.12.31 |
789,087 | 1,083,048 | 1,114,821 | 1,119,206 | | |||||||||||||||
2015.1.1 ~ 2015.12.31 |
885,476 | 1,219,393 | 1,256,051 | | | |||||||||||||||
2016.1.1 ~ 2016.12.31 |
1,064,744 | 1,437,573 | | | | |||||||||||||||
2017.1.1 ~ 2017.12.31 |
1,184,224 | | | | | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
4,633,133 | 4,705,601 | 3,368,479 | 2,122,852 | 1,006,025 | ||||||||||||||||
Gross cumulative claim payments (B) |
||||||||||||||||||||
2013.1.1 ~ 2013.12.31 |
671,500 | 953,494 | 989,957 | 999,944 | 1,003,715 | |||||||||||||||
2014.1.1 ~ 2014.12.31 |
744,944 | 1,065,792 | 1,104,468 | 1,114,341 | | |||||||||||||||
2015.1.1 ~ 2015.12.31 |
836,471 | 1,205,130 | 1,248,475 | | | |||||||||||||||
2016.1.1 ~ 2016.12.31 |
1,017,243 | 1,424,948 | | | | |||||||||||||||
2017.1.1 ~ 2017.12.31 |
1,130,868 | | | | | |||||||||||||||
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|
|||||||||||
4,401,026 | 4,649,364 | 3,342,900 | 2,114,285 | 1,003,715 | ||||||||||||||||
|
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|
|||||||||||
Difference (A-B) |
||||||||||||||||||||
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|
|
37.5.5 Sensitivity analysis of insurance risk
The Group manages insurance risk by performing sensitivity analysis based on discount rate, loss ratio and insurance operating expenses ratio which are considered to have significant influence on future cash flow, timing and uncertainty. According to result of sensitivity analysis there is no material influence on the equity and net profit before tax.
(In millions of Korean won) | ||||||||
Assumption | 2017 | |||||||
change | Effect on LAT | |||||||
Surrenders and termination rates |
10 | % | ||||||
-10 | % | (334,351 | ) | |||||
Loss ratio |
10 | % | 3,146,419 | |||||
-10 | % | (3,146,419 | ) | |||||
Insurance operating expenses ratio |
10 | % | 276,741 | |||||
-10 | % | (276,741 | ) | |||||
Discount rate |
+0.5 | % | (1,087,451 | ) | ||||
-0.5 | % | 1,367,045 |
181
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
37.5.6 Liquidity risk of insurance contracts
Liquidity risk arising from insurance contracts is the increase in refunds at maturity caused by concentrations of maturity, the increase in surrender values caused by unexpected amounts in cancellation and the increase in payments of claims caused by catastrophic events. The Group manages payment of refunds payable at maturity by analyzing maturity of insurance.
Premium reserves maturity structure as of December 31, 2017 as follows:
20171 | ||||||||||||||||||||||||
(In millions of Korean won) | Within 1 year |
1~5 years |
5~10 years |
10~20 years |
More 20 years |
Total | ||||||||||||||||||
Long-term insurance non participating |
||||||||||||||||||||||||
Non-linked |
||||||||||||||||||||||||
Linked |
458,340 | 2,723,485 | 2,135,336 | 926,591 | 10,269,931 | 16,513,683 | ||||||||||||||||||
|
|
|
|
|
|
|
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|
|
|
|||||||||||||
484,579 | 3,020,681 | 2,252,946 | 966,820 | 10,364,408 | 17,089,434 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Annuity |
||||||||||||||||||||||||
Non-linked |
19 | 92 | 2,117 | 3,956 | 1,401 | 7,585 | ||||||||||||||||||
Linked |
153 | 46,987 | 307,455 | 1,089,983 | 2,141,589 | 3,586,167 | ||||||||||||||||||
|
|
|
|
|
|
|
|
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|
|||||||||||||
172 | 47,079 | 309,572 | 1,093,939 | 2,142,990 | 3,593,752 | |||||||||||||||||||
|
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|
|
|||||||||||||
Asset-linked |
||||||||||||||||||||||||
Linked |
| 27,499 | | | | 27,499 | ||||||||||||||||||
Total |
||||||||||||||||||||||||
Non-linked |
26,258 | 297,288 | 119,727 | 44,185 | 95,878 | 583,336 | ||||||||||||||||||
Linked |
458,493 | 2,797,971 | 2,442,791 | 2,016,574 | 12,411,520 | 20,127,349 | ||||||||||||||||||
|
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1 | Includes long-term investment contract amounting to |
37.5.7 Credit risk of insurance contract
Credit risk of insurance contract is the economic loss arising from non-performing contractual obligations due to decline in credit ratings or default. Through strict internal review, the Group cedes insurance contracts to the insurers rated above BBB- of S&P rating.
As of December 31, 2017, there are 219 reinsurance companies that deal with the Group, and the top three reinsurance companies concentration and credit ratings are as follows:
Reinsurance company | Ratio | Credit rating | ||||||
KOREAN RE |
65.45 | % | AA | |||||
SWISSRE |
4.61 | % | AAA | |||||
HDIgerling |
3.69 | % | AA+ |
182
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
Exposures to credit risk related to reinsurance as of December 31, 2017 as follows:
(In millions of Korean won) | 2017 | |||
Reinsurance assets1 |
||||
Net receivables from reinsurers2 |
237,750 | |||
|
|
|||
|
|
1 | Net carrying amounts after impairment loss |
2 | Net carrying amounts of each reinsurance company that offsets reinsurance accounts receivable and reinsurance accounts payable and after allowance for loan losses |
37.5.8 Interest risk of insurance contract
The interest rate risk exposure from the Groups insurance contracts is the risk of unexpected losses in net interest income or net assets arising from changes in interest rates and it is managed to minimize the loss experienced. For long-term, non-life insurance contracts, the Group calculates exposure of interest-bearing assets and interest-bearing liabilities. Liabilities exposure is premium reserves after subtracting costs of termination deductions. Asset exposure is interest-bearing assets. Assets that receive only fees without interest are excluded from interest bearing assets. Exposures to interest rate risk as of December 31, 2017 are as follows:
i) | Exposure to interest rate risk |
(In millions of Korean won) | 2017 | |||
Liabilities |
||||
Fixed interest rate |
||||
Variable interest rate |
18,548,946 | |||
|
|
|||
19,131,291 | ||||
|
|
|||
Assets |
||||
Due from banks |
167,312 | |||
Financial assets at fair value through profit or loss |
325,844 | |||
Available-for-sale financial assets |
6,066,290 | |||
Held-to-maturity financial assets |
6,501,529 | |||
Loans |
6,338,470 | |||
|
|
|||
|
|
ii) Measurement and recognition method
Duration is used to measure interest rate risk within risk based solvency test. ALM system for risk based solvency test is utilized to manage interest rate risk internally. In addition, Risk Management Committee sets ALM strategy every year to manage interest rate risk.
iii) Sensitivity to changes in interest rates
Generally, when interest rates rise, the value and duration of assets and liabilities fall, when interest rates fall, value and duration of assets and liabilities increase. When duration of assets is shorter than duration of liabilities, the interest risk is increased if the interest rates fall since increased asset value is smaller than liabilities increase.
iv) Negative spread risk control
To control interest expenses from other liabilities and investment incomes from assets, the Group publicizes its interest rate considering market interest rate and return on invested insurance assets of the Group.
183
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
37.6 Risk management of life insurance
37.6.1 Overview
Insurance risk is the risk of loss arising from the actual risk at the time of claims exceeding the estimated risk at the time of underwriting. Insurance risk is classified by insurance price risk and policy reserve risk.
Insurance price risk is the risk of loss arising from differences between premiums from policyholders and actual claims paid.
Policy reserve risk is the risk of loss arising from differences between policy reserves the Group holds and actual claims to be paid.
The Group measures only insurance price risk under RBC requirement because life insurance claim payout is mainly in a fixed amount with less volatility in policy reserve and shorter waiting period before payment
37.6.2 Concentration of insurance risk and reinsurance policy
The Group uses reinsurance to mitigate concentration of insurance risk seeking an enhanced capital management.
The Group categorized reinsurance into group and individual contracts, and reinsurance is ceded through the following process:
The Groups reinsurance is ceded through the following process:
i. | In the decision-making process of launching a new product, the Group makes a decision on ceding reinsurance. Subsequently, a reinsurer is selected through bidding, agreements with the relevant departments and final approval by the executive management. |
ii. | The reinsurance department analyzes the object of reinsurance, the maximum limit of reinsurance and the loss ratio with the relevant departments. |
37.6.3 The characteristic and exposure of insurance price risk
The Group measures the exposure of insurance price risk as the shortfall of the risk premiums received compared to the claims paid on all insurance contracts for the last one year preceding the reporting date.
The insurance risk of a life insurance company is measured by insurance price risk. As the life insurance coverage is in the form of a fixed payment, the fluctuation of policy reserve is small and the period from insured event to claims payment is not long. The policy reserve risk is managed by assessments of adequacy of the policy reserve.
The insurance price risk is managed through insurance risk management regulation established by Risk Management Committee.
184
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
The maximum exposures to insurance price risk as of December 31, 2017 and 2016, are as follows:
(In millions of Korean won) | 2017 | |||||||
Before reinsurance mitigation |
After reinsurance mitigation |
|||||||
Death |
||||||||
Disability |
1,331 | 899 | ||||||
Hospitalization |
1,233 | 747 | ||||||
Operation and diagnosis |
3,326 | 1,977 | ||||||
Actual losses for medical expense |
817 | 403 | ||||||
Others |
753 | 376 | ||||||
|
|
|
|
|||||
|
|
|
|
(In millions of Korean won) | 2016 | |||||||
Before reinsurance mitigation |
After reinsurance mitigation |
|||||||
Death |
||||||||
Disability |
1,341 | 947 | ||||||
Hospitalization |
1,022 | 777 | ||||||
Operation and diagnosis |
2,341 | 1,856 | ||||||
Actual losses for medical expense |
468 | 299 | ||||||
Others |
581 | 544 | ||||||
|
|
|
|
|||||
|
|
|
|
Average ratios of claims paid per risk premium received on the basis of exposure before mitigation for the past three years as of December 31, 2017 and 2016, were 65.9% and 68.9%, respectively.
The exposure of market risk arising from embedded derivatives included in host insurance contracts as of December 31, 2017 and 2016, are as follows:
(In millions of Korean won) | ||||||||||||||||
2017 | 2016 | |||||||||||||||
Policyholders reserve1 |
Guarantee reserve |
Policyholders reserve1 |
Guarantee reserve |
|||||||||||||
Variable annuity |
||||||||||||||||
Variable universal |
97,893 | 3,572 | 105,218 | 4,855 | ||||||||||||
Variable saving |
429,985 | 316 | 256,262 | 179 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
|
|
|
|
|
|
|
|
1 | Excluding the amount of the lapsed reserve |
37.6.4 Assumptions used in measuring insurance liabilities
The Group applies assumed rates defined in the premium and liability reserve calculation manual under regulation on supervision of insurance business when measuring insurance liabilities at every reporting period. For interest sensitive insurance, credit rate stated in the premium and liabilities reserve calculation manual, which is calculated based on adjusted external base rate and return rate of asset management according to Article 6-12 of the Regulation on Supervision of Insurance Business.
Reserve amount should exceed the standard reserve which is calculated using the standard interest rate and standard risk rate under regulation on supervision of insurance business.
185
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
37.6.5 Premium reserves and unearned premium reserves residual maturity
Premium reserves and unearned premium reserves classified based on each residual maturity as of December 31, 2017 and 2016, are as follows:
(In millions of Korean won)
2017 | ||||||||||||||||||||||||||||
Less than 3 years |
3-5 years | 5-10 years | 10-15 years | 15-20 years | 20 years or more |
Total | ||||||||||||||||||||||
Premium reserves |
||||||||||||||||||||||||||||
Unearned premium reserves |
161 | | 2 | 1 | | 1347 | 1511 |
(In millions of Korean won)
2016 | ||||||||||||||||||||||||||||
Less than 3 years |
3-5 years | 5-10 years | 10-15 years | 15-20 years | 20 years or more |
Total | ||||||||||||||||||||||
Premium reserves |
||||||||||||||||||||||||||||
Unearned premium reserves |
803 | | 1 | 1 | | 64 | 869 |
38. Trust Accounts
Financial information of the trust accounts that Kookmin Bank manages as of December 31, 2017 and 2016, are as follows:
(In millions of Korean won) | 2017 | 2016 | ||||||||||||||
Total assets |
Operating revenues |
Total assets |
Operating revenues |
|||||||||||||
Consolidated |
||||||||||||||||
Unconsolidated |
43,256,371 | 2,590,728 | 43,653,701 | 1,132,375 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
|
|
|
|
|
|
|
|
1 | Financial information of the trust accounts has been prepared in accordance with the Statement of Korea Accounting Standard 5004, Trust Accounts, and enforcement regulations of Financial Investment Services under the Financial Investment Services and Capital Markets Act. |
186
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
Significant transactions between the Group and the trust accounts for the years ended December 31, 2017 and 2016, are as follows:
(In millions of Korean won) | 2017 | 2016 | ||||||
Revenues |
||||||||
Fees and commissions from trust accounts |
||||||||
Interest income from loans on trust accounts |
1,447 | 1,083 | ||||||
Commissions from early termination in trust accounts |
92 | 65 | ||||||
|
|
|
|
|||||
|
|
|
|
|||||
Expenses |
||||||||
Interest expenses due to trust accounts |
||||||||
|
|
|
|
|||||
Receivables |
||||||||
Accrued trust fees |
||||||||
Due from trust accounts |
37,973 | 9,351 | ||||||
|
|
|
|
|||||
|
|
|
|
|||||
Payables |
||||||||
Due to trust accounts |
||||||||
Accrued interest on due to trust accounts |
7,632 | 6,767 | ||||||
|
|
|
|
|||||
|
|
|
|
39. Supplemental Cash Flow Information
Cash and cash equivalents as of December 31, 2017 and 2016, are as follows:
(In millions of Korean won) | 2017 | 2016 | ||||||
Cash |
||||||||
Checks with other banks |
430,253 | 400,422 | ||||||
Due from Bank of Korea |
8,981,665 | 7,676,491 | ||||||
Due from other financial institutions |
8,237,996 | 7,649,682 | ||||||
|
|
|
|
|||||
19,817,825 | 17,884,863 | |||||||
|
|
|
|
|||||
Restricted cash from financial institutions |
(10,613,089 | ) | (9,301,946 | ) | ||||
Due from financial institutions with original maturities over three months |
(799,838 | ) | (1,168,081 | ) | ||||
|
|
|
|
|||||
(11,412,927 | ) | (10,470,072 | ) | |||||
|
|
|
|
|||||
|
|
|
|
187
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
Significant non-cash transactions for the years ended December 31, 2017 and 2016, are as follows:
(In millions of Korean won) | 2017 | 2016 | ||||||
Decrease in loans due to the write-offs |
||||||||
Changes in accumulated other comprehensive income due to valuation of financial investments |
89,117 | (47,871 | ) | |||||
Decrease in accumulated other comprehensive income from measurement of investment securities in associates |
100,735 | (7,093 | ) | |||||
Change in shares of investment in associate due to KB Insurance Co., Ltd.s inclusion of the consolidation scope |
(1,417,397 | ) | | |||||
Change in shares of investment in associate due to Hyundai Securities Co., Ltd.s inclusion of the consolidation scope |
| (1,459,604 | ) |
Cash inflows and outflows from income tax, interests and dividends for the year December 31, 2017 and 2016, are as follows:
(In millions of Korean won) | Activity | 2017 | 2016 | |||||||||
Income tax paid |
Operating | |||||||||||
Interest received |
Operating | 11,243,363 | 10,208,678 | |||||||||
Interest paid |
Operating | 3,444,715 | 3,707,653 | |||||||||
Dividends received |
Operating | 229,289 | 132,654 | |||||||||
Dividends paid |
Financing | 497,969 | 378,625 |
Changes in liabilities arising from financing activities
Changes in liabilities and assets that hedge liabilities arising from financing activities for the year ended December 31, 2017 are as follows:
(In millions of Korean won)
2017 | ||||||||||||||||||||||||||||||||
Non-cash changes | ||||||||||||||||||||||||||||||||
Beginning | Net cash flows | Acquisition (Disposal) |
Changes in foreign exchange rates |
Changes in fair value |
Business Combination |
Other changes |
Ending | |||||||||||||||||||||||||
Derivatives held for hedging1 |
||||||||||||||||||||||||||||||||
Debts |
26,251,486 | 4,272,011 | | (996,029 | ) | (34,800 | ) | (584,245 | ) | (87,495 | ) | 28,820,928 | ||||||||||||||||||||
Debentures |
34,992,057 | 10,465,410 | | (429,880 | ) | (11,931 | ) | (34,600 | ) | 11,668 | 44,992,724 | |||||||||||||||||||||
Other payables from trust accounts |
4,430,508 | 587,523 | | | | | | 5,018,031 | ||||||||||||||||||||||||
Others |
147,946 | 150,012 | 678 | 12 | | 24,061 | 2,728 | 325,437 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1. | Derivatives held for hedging purposes are the net amount after offsetting liabilities from assets |
The
net cash outflow associated with the change of the subsidiaries for the year ended December 31, 2017 was W 405,817 million. The net cash outflow related to the KB Insurance Co. Ltd business combination was
W 647,953 million.
188
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
40. Contingent Liabilities and Commitments
Details of payment guarantees as of December 31, 2017 and 2016, are as follows:
(In millions of Korean won) | 2017 | 2016 | ||||||
Confirmed payment guarantees |
||||||||
Confirmed payment guarantees in Korean won |
||||||||
Payment guarantees for KB purchasing loan |
||||||||
Other payment guarantees |
530,272 | 858,951 | ||||||
|
|
|
|
|||||
783,089 | 1,188,002 | |||||||
|
|
|
|
|||||
Confirmed payment guarantees in foreign currency |
||||||||
Acceptances of letter of credit |
147,987 | 234,125 | ||||||
Letter of guarantees |
60,853 | 64,189 | ||||||
Bid bond |
46,984 | 64,242 | ||||||
Performance bond |
563,506 | 703,076 | ||||||
Refund guarantees |
778,779 | 1,689,343 | ||||||
Other payment guarantees in foreign currency |
1,960,769 | 1,593,770 | ||||||
|
|
|
|
|||||
3,558,878 | 4,348,745 | |||||||
|
|
|
|
|||||
Financial guarantees |
||||||||
Guarantees for Debenture-Issuing |
| 31,000 | ||||||
Payment guarantees for mortgage |
57,446 | 25,994 | ||||||
Overseas debt guarantees |
285,576 | 272,255 | ||||||
International financing guarantees in foreign currencies |
46,953 | 52,961 | ||||||
Other financing payment guarantees |
270,029 | 334 | ||||||
|
|
|
|
|||||
660,004 | 382,544 | |||||||
|
|
|
|
|||||
5,001,971 | 5,919,291 | |||||||
|
|
|
|
|||||
Unconfirmed acceptances and guarantees |
||||||||
Guarantees of letter of credit |
2,250,542 | 2,068,105 | ||||||
Refund guarantees |
384,959 | 217,272 | ||||||
|
|
|
|
|||||
2,635,501 | 2,285,377 | |||||||
|
|
|
|
|||||
|
|
|
|
189
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
Acceptances and guarantees by counterparty as of December 31, 2017 and 2016, are as follows:
(In millions of Korean won) | 2017 | |||||||||||||||
Confirmed guarantees |
Unconfirmed guarantees |
Total | Proportion (%) |
|||||||||||||
Corporations |
79.86 | |||||||||||||||
Small companies |
621,834 | 492,369 | 1,114,203 | 14.59 | ||||||||||||
Public and others |
194,162 | 230,018 | 424,180 | 5.55 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
100.00 | ||||||||||||||||
|
|
|
|
|
|
|
|
(In millions of Korean won) | 2016 | |||||||||||||||
Confirmed guarantees |
Unconfirmed guarantees |
Total | Proportion (%) |
|||||||||||||
Corporations |
82.56 | |||||||||||||||
Small companies |
623,424 | 479,514 | 1,102,938 | 13.44 | ||||||||||||
Public and others |
166,474 | 161,307 | 327,781 | 4.00 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
100.00 | ||||||||||||||||
|
|
|
|
|
|
|
|
Acceptances and guarantees by industry as of December 31, 2017 and 2016, are as follows:
(In millions of Korean won) | 2017 | |||||||||||||||
Confirmed guarantees |
Unconfirmed guarantees |
Total | Proportion (%) |
|||||||||||||
Financial institutions |
0.40 | |||||||||||||||
Manufacturing |
2,799,593 | 1,270,721 | 4,070,314 | 53.29 | ||||||||||||
Service |
655,057 | 100,004 | 755,061 | 9.89 | ||||||||||||
Whole sale & Retail |
935,647 | 837,230 | 1,772,877 | 23.21 | ||||||||||||
Construction |
335,156 | 198,996 | 534,152 | 6.99 | ||||||||||||
Public sector |
165,249 | 129,944 | 295,193 | 3.87 | ||||||||||||
Others |
87,952 | 91,253 | 179,205 | 2.35 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
100.00 | ||||||||||||||||
|
|
|
|
|
|
|
|
(In millions of Korean won) | 2016 | |||||||||||||||
Confirmed guarantees |
Unconfirmed guarantees |
Total | Proportion (%) |
|||||||||||||
Financial institutions |
0.95 | |||||||||||||||
Manufacturing |
3,315,257 | 1,141,571 | 4,456,828 | 54.32 | ||||||||||||
Service |
765,051 | 63,847 | 828,898 | 10.10 | ||||||||||||
Whole sale & Retail |
1,171,151 | 779,163 | 1,950,314 | 23.77 | ||||||||||||
Construction |
509,329 | 129,111 | 638,440 | 7.78 | ||||||||||||
Public sector |
82,646 | 92,445 | 175,091 | 2.13 | ||||||||||||
Others |
1,575 | 75,530 | 77,105 | 0.95 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
100.00 | ||||||||||||||||
|
|
|
|
|
|
|
|
190
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
Commitments as of December 31, 2017 and 2016, are as follows:
(In millions of Korean won) | 2017 | 2016 | ||||||
Commitments |
||||||||
Corporate loan commitments |
||||||||
Retail loan commitments |
16,074,323 | 15,789,809 | ||||||
Credit line on credit cards |
49,299,924 | 43,937,899 | ||||||
Purchase of other security investment and others |
3,951,304 | 1,554,221 | ||||||
|
|
|
|
|||||
102,183,167 | 97,005,556 | |||||||
|
|
|
|
|||||
Financial Guarantees |
||||||||
Credit line |
2,669,071 | 3,334,648 | ||||||
Purchase of security investment |
354,800 | 1,029,100 | ||||||
|
|
|
|
|||||
3,023,871 | 4,363,748 | |||||||
|
|
|
|
|||||
|
|
|
|
Other Matters (including litigation)
a) The Group has filed 121 lawsuits (excluding minor lawsuits in relation to the collection or management of loans), involving aggregate claims of
W 510,954 million, and faces 288 lawsuits (as the defendant) (excluding minor lawsuits in relation to the collection or management of loans) involving aggregate damages of W 220,957 million, which arose in
the normal course of the business and are still pending as of December 31, 2017.
b) During 2017, Kookmin Bank has entered into construction
contracts amounting to W 150,051 million and W 105,175 million related to the construction of integrated headquarter building and integrated IT center, respectively, and no expenditures were made during
the year ended December 31, 2017.
c) The face value of the securities which Kookmin Bank sold to general customers through the bank tellers amounts
to W 372 million and W 5,731 million as of December 31, 2017 and 2016, respectively.
d) While setting up
a fraud detection system, a computer contractor employed by the personal credit ratings firm Korea Credit Bureau caused a widespread data breach in June 2013, resulting in the theft of cardholders personal information. As a result of the
leakage of customer personal information, the KB Kookmin Card received a notification from the Financial Services Commission that the KB Kookmin Card is subject to a temporary three-month operating suspension as of February 16, 2014. In respect
of the incident, the Group faces 120 legal claims filed as the defendant, with an aggregate claim of W 10,291 million as of December 31, 2017. A provision liability of W 11,078 million has been recognized
for these pending lawsuits. In addition, the additional lawsuits may be filed against the Group. Meanwhile, the final outcome of the cases cannot be reasonably ascertained.
191
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
41. Subsidiaries
Details of subsidiaries as of December 31, 2017, are as follows:
Investor | Investee | Ownership interests (%) |
Location | Date of financial statements |
Industry | |||||||
KB Financial Group Inc. |
Kookmin Bank |
100.00 | Korea | Dec. 31 | Banking and foreign exchange transaction | |||||||
KB Securities Co., Ltd. |
100.00 | Korea | Dec. 31 | Financial investment | ||||||||
KB Insurance Co., Ltd.5 |
100.00 | Korea | Dec. 31 | Non-life insurance | ||||||||
KB Kookmin Card Co., Ltd. |
100.00 | Korea | Dec. 31 | Credit card and installment finance | ||||||||
KB Life Insurance Co., Ltd. |
100.00 | Korea | Dec. 31 | Life insurance | ||||||||
KB Asset Management Co., Ltd. |
100.00 | Korea | Dec. 31 | Security investment trust management and advisory | ||||||||
KB Capital Co., Ltd.5 |
100.00 | Korea | Dec. 31 | Financial Leasing | ||||||||
KB Savings Bank Co., Ltd. |
100.00 | Korea | Dec. 31 | Savings banking | ||||||||
KB Real Estate Trust Co., Ltd. |
100.00 | Korea | Dec. 31 | Real estate trust management | ||||||||
KB Investment Co., Ltd. |
100.00 | Korea | Dec. 31 | Capital investment | ||||||||
KB Credit Information Co., Ltd. |
100.00 | Korea | Dec. 31 | Collection of receivables or credit investigation | ||||||||
KB Data System Co., Ltd. |
100.00 | Korea | Dec. 31 | Software advisory, development, and supply | ||||||||
Kookmin Bank |
Kookmin Bank Intl Ltd.(London) |
100.00 | United Kingdom | Dec. 31 | Banking and foreign exchange transaction | |||||||
Kookmin Bank Hong Kong Ltd. |
100.00 | China | Dec. 31 | Banking and foreign exchange transaction | ||||||||
Kookmin Bank Cambodia PLC. |
100.00 | Cambodia | Dec. 31 | Banking and foreign exchange transaction | ||||||||
Kookmin Bank (China) Ltd. |
100.00 | China | Dec. 31 | Banking and foreign exchange transaction | ||||||||
KB Microfinance Myanmer Co., Ltd. |
100.00 | Myanmer | Dec. 31 | Other credit granting n.e.c. | ||||||||
KB Securities Co., Ltd. |
KBFG Securities America Inc. |
100.00 | United States of America | Dec. 31 | Investment advisory and securities dealing activities | |||||||
KBFG Securities Hong Kong Ltd. |
100.00 | China | Dec. 31 | Investment advisory and securities dealing activities | ||||||||
KB SECURITEIS VIETNAM JOINT STOCK COMPANY |
99.40 | Vietnam | Dec. 31 | Investment advisory and securities dealing activities | ||||||||
KB Insurance Co., Ltd. |
KB Claims Survey & Adjusting |
100.00 | Korea | Dec. 31 | Claim service | |||||||
KB Sonbo CNS |
100.00 | Korea | Dec. 31 | Management service | ||||||||
Leading Insurance Services, Inc. |
100.00 | United States of America | Dec. 31 | Management service | ||||||||
LIG Insurance (China) Co., Ltd. |
100.00 | China | Dec. 31 | Non-life insurance | ||||||||
PT. KB Insurance Indonesia |
70.00 | Indonesia | Dec. 31 | Non-life insurance | ||||||||
KB Golden Life Care Co., Ltd. |
100.00 | Korea | Dec. 31 | Service | ||||||||
KB Capital Co., Ltd., KB Kookmin Card Co., Ltd. |
KB KOLAO LEASING Co., Ltd. |
80.00 | Laos | Dec. 31 | Financial Leasing |
192
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
Kookmin Bank |
KL 1st Inc. and 27 others2 |
| Korea | Dec. 31 | Asset-backed securitization and others | |||||||
KB Kookmin Card Co., Ltd. |
KB Kookmin Card Third Securitization Co., Ltd., and 9 others2 |
0.50 | Korea | Dec. 31 | Asset-backed securitization | |||||||
KB Securities Co., Ltd |
MS Sejong 4th Co., Ltd. and 43 others2 |
| Korea | Dec. 31 | Asset-backed securitization | |||||||
Kookmin Bank, KB Investment Co., Ltd. |
KB12-1 Venture Investment |
100.00 | Korea | Dec. 31 | Capital investment | |||||||
KB Start-up Creation Fund |
62.50 | Korea | Dec. 31 | Capital investment | ||||||||
KB Investment Co., Ltd. |
09-5 KB Venture Fund4 |
33.33 | Korea | Dec. 31 | Capital investment | |||||||
KoFC-KB Pioneer Champ No.2010-8 Investment Partnership4 |
50.00 | Korea | Dec. 31 | Capital investment | ||||||||
2011 KIF-KB IT Venture Fund4 |
43.33 | Korea | Dec. 31 | Capital investment | ||||||||
KoFC-KB Young Pioneer 1st Fund4 |
33.33 | Korea | Dec. 31 | Capital investment | ||||||||
Kookmin Bank, KB Investment Co., Ltd. |
KB Intellectual Property Fund4 |
34.00 | Korea | Dec. 31 | Capital investment | |||||||
Kookmin Bank, KB Insurance Co., Ltd., KB life Insurance, KB Investment Co., Ltd. |
KB High-tech Company Investment Fund |
100.00 | Korea | Dec. 31 | Capital investment | |||||||
KB Securities Co., Ltd., KB Investment Co., Ltd. |
KB KONEX Market Vitalization Fund 4 |
46.88 | Korea | Dec. 31 | Capital investment | |||||||
KB Neo Paradigm Agriculture Venture Fund4 |
50.00 | Korea | Dec. 31 | Capital investment | ||||||||
KB Investment Co., Ltd. |
KB NEW CONTENTS Venture Fund4 |
20.00 | Korea | Dec. 31 | Capital investment | |||||||
KB Young Pioneer 3.0 Venture Fund4 |
40.00 | Korea | Dec. 31 | Capital investment | ||||||||
KB Life Insurance Co., Ltd. |
KB Haeoreum Private Securities Investment Trust 1st and 3 others |
100.00 | Korea | Dec. 31 | Investment trust | |||||||
Kookmin Bank |
KB Multi-Asset Private Securities Fund (Bond Mixed-ETF) |
99.27 | Korea | Dec. 31 | Investment trust | |||||||
KB Multi-Asset Private Securities Fund (Bond Mixed-ETF) |
Global Diversified Multi-Asset Sub-Trust Class IA |
100.00 | United Kingdom | Dec. 31 | Investment trust | |||||||
Kookmin Bank |
KB Multi-Asset Private Securities Fund S-1(Bond Mixed) |
96.00 | Korea | Dec. 31 | Investment trust | |||||||
KB Multi-Asset Private Securities Fund P-1(Bond Mixed) |
99.96 | Korea | Dec. 31 | Investment trust | ||||||||
KB Multi-Asset Private Securities Fund P-1(Bond Mixed) |
KB Multi-Asset Private Securities Master Fund P-1(Bond Mixed) |
100.00 | Korea | Dec. 31 | Investment trust | |||||||
Kookmin Bank, KB Securities Co., Ltd., KB life Insurance Co., Ltd., KB Real Estate Trust Co., Ltd. |
KB Wise Star Private Real Estate Feeder Fund 1st. |
100.00 | Korea | Dec. 31 | Investment trust |
193
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
KB Wise Star Private Real Estate Feeder Fund 1st. |
KB Star Retail Private Master Real Estate3 |
48.98 | Korea | Dec. 31 | Investment trust | |||||||
KB Star Office Private Real Estate Investment Trust 2nd3 |
44.44 | Korea | Dec. 31 | Investment trust | ||||||||
Kookmin Bank, KB Insurance Co., Ltd. |
Hanbando BTL Private Special Asset Fund 1st3 |
46.36 | Korea | Dec. 31 | Investment trust | |||||||
Kookmin Bank, KB Insurance Co., Ltd., KB life Insurance Co., Ltd. |
KB Hope Sharing BTL Private Special Asset3 |
46.00 | Korea | Dec. 31 | Investment trust | |||||||
Kookmin Bank, KB life Insurance Co., Ltd. |
KB Mezzanine Private Securities Fund 2nd.(Mixed)3 |
40.74 | Korea | Dec. 31 | Investment trust | |||||||
Kookmin Bank, KB Insurance Co., Ltd., KB life Insurance Co., Ltd. |
KB Senior Loan Private Fund3 |
37.39 | Korea | Dec. 31 | Capital investment | |||||||
KB Securities Co., Ltd. |
KB Vintage 16 Private Securities Investment Trust 1st 3 |
50.00 | Korea | Dec. 31 | Investment trust | |||||||
KB Kookmin Card Co., Ltd. |
Heungkuk Life Insurance Money Market Trust |
100.00 | Korea | Dec. 31 | Trust asset management | |||||||
Kookmin Bank |
KB Haeoreum private securities investment trust 70(Bond)3 |
33.35 | Korea | Dec. 31 | Investment trust | |||||||
KB Insurance Co., Ltd. |
KB AMP Infra Private Special Asset Fund 1(FoFs)3 |
41.67 | Korea | Dec. 31 | Investment trust | |||||||
KB Insurance Co., Ltd. KB life Insurance Co., Ltd. KB Investment Co., Ltd. |
KB-Solidus Global Healthcare Fund4 |
43.33 | Korea | Dec. 31 | Capital investment | |||||||
Kookmin Bank, KB Insurance Co., Ltd. |
KB KBSTAR Short Term KTB Active ETF |
77.72 | Korea | Dec. 31 | Investment trust | |||||||
KB KBSTAR Mid-Long Term KTB Active ETF |
94.79 | Korea | Dec. 31 | Investment trust | ||||||||
Kookmin Bank |
Samsung KODEX 10Y F-LKTB Inverse ETF(Bond-Derivatives) |
97.15 | Korea | Dec. 31 | Investment trust | |||||||
KB Haeoreum private securities investment trust 83(Bond) |
96.14 | Korea | Dec. 31 | Investment trust | ||||||||
KB KBSTAR KTB 3Y Futures Inverse ETF |
95.65 | Korea | Dec. 31 | Investment trust | ||||||||
KB Insurance Co., Ltd. |
KB Muni bond Private Securities Fund 1(USD)(bond)3 |
33.33 | Korea | Dec. 31 | Investment trust | |||||||
KB Securities Co., Ltd. |
Jueun Power Middle 7 and 7 others |
100.00 | Korea | Dec. 31 | Investment trust | |||||||
Hyundai You First Private Real Estate Investment Trust No. 1 |
60.00 | Korea | Dec. 31 | Investment trust |
194
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
Hyundai Smart Index Alpha Securities Feeder Investment Trust No.1 |
98.37 | Korea | Dec. 31 | Investment trust | ||||||||
Hyundai Strong Korea Equity Trust No.1 |
99.73 | Korea | Dec. 31 | Investment trust | ||||||||
Hyundai Kidzania Equity Feeder Trust No.1 |
78.44 | Korea | Dec. 31 | Investment trust | ||||||||
Hyundai Value Plus Equity Feeder Trust No.1 |
99.84 | Korea | Dec. 31 | Investment trust | ||||||||
Hyundai Strong-small Corporate Trust No.1 |
89.59 | Korea | Dec. 31 | Investment trust | ||||||||
Hyundai You First Private Real Estate Investment Trust No. 153 |
35.00 | Korea | Dec. 31 | Investment trust | ||||||||
JB New Jersey Private Real Estate Investment Trust No. 1 |
98.15 | Korea | Dec. 31 | Investment trust | ||||||||
Hyundai Dynamic Mix Secruticies Feeder Investment Trust No.1 |
99.94 | Korea | Dec. 31 | Investment trust | ||||||||
Hyudai China Index Plus Securities Investment Trust No.1 |
79.95 | Korea | Dec. 31 | Investment trust | ||||||||
KB Securities Co., Ltd. |
Hyundai Kon-tiki Specialized Privately Placed Fund No.1 |
98.12 | Korea | Dec. 31 | Investment trust | |||||||
DGB Private real estate Investment Trust No.8 |
98.77 | Korea | Dec. 31 | Investment trust | ||||||||
LIME GLOBALEYE ALP PRIVATE EQUITY FUND 2 |
68.03 | Korea | Dec. 31 | Investment trust | ||||||||
LIME ORANGE PRIVATE EQUITY FUND 6 |
98.04 | Korea | Dec. 31 | Investment trust | ||||||||
DAEDUCK PARC1 PRIVATE EQUITY FUND 1 |
96.00 | Korea | Dec. 31 | Investment trust | ||||||||
LIME PLUTO FI PRIVATE EQUITY FUND D-1 |
99.84 | Korea | Dec. 31 | Investment trust | ||||||||
KB Securities Co., Ltd., KB Insurance Co., Ltd., KB Asset Management Co., Ltd. |
KB Star Fund_KB Value Focus Korea Equity |
97.51 | Luxembourg | Dec. 31 | Capital investment | |||||||
KB Securities Co., Ltd. |
Aquila Global Real Assets Fund No.1 LP |
99.96 | Cayman islands | Dec. 31 | Capital investment | |||||||
Able Quant Asia Pacific Feeder Fund(T.E.) Limited |
100.00 | Cayman islands | Dec. 31 | Capital investment | ||||||||
Able Quant Asia Pacific Feeder Fund(T.E.) Limited |
Able Quant Asia Pacific Master Fund Limited |
100.00 | Cayman islands | Dec. 31 | Capital investment | |||||||
KBFG Securities America Inc. |
Global Investment Opportunity Limited |
100.00 | Malaysia | Dec. 31 | Finance and Real Estate Activities | |||||||
Hyundai Smart Index Alpha Securities Feeder Inv Trust 1 |
Hyundai Smart Index Alpha Securities Master Investment Trust |
99.53 | Korea | Dec. 31 | Investment trust |
195
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
Hyundai Trust Securities Feeder Investment Trust No.1- Bond |
Hyundai Trust Securities Master Investment Trust - Bond |
94.29 | Korea | Dec. 31 | Investment trust | |||||||
Hyundai Value Plus Securities Feeder Investment Trust 1 and others |
Hyundai Value Plus Securities Master Investment Trust |
100.00 | Korea | Dec. 31 | Investment trust | |||||||
Hyundai Dynamic Mix Securities Feeder Investment Trust |
Hyundai Dynamic Mix Securities Master Investment Trust |
98.75 | Korea | Dec. 31 | Investment trust | |||||||
Hyundai Quant Long Short Securities Feeder Investment Trust |
Hyundai Quant Long Short Securities Master Investment Trust |
100.00 | Korea | Dec. 31 | Investment trust | |||||||
Aquila Global Real Assets Fund No.1 LP |
AGRAF Real Estate No.1, Senningerberg |
100.00 | Luxembourg | Dec. 31 | Asset-backed securitization | |||||||
AGRAF Real Estate No.1, Senningerberg |
AGRAF Real Estate Holding No.1, Senningerberg |
100.00 | Luxembourg | Dec. 31 | Asset-backed securitization | |||||||
AGRAF Real Estate Holding No.1, Senningerberg |
Vierte CasaLog GmbH & Co. KG and 2 others |
94.90 | Germany | Dec. 31 | Real Estate Activities | |||||||
KB Asset Management Co., Ltd. |
KB Asset Management Singapore Pte, Ltd. |
100.00 | Singapore | Dec. 31 | Collective investment and others | |||||||
JB New Jersey Private Real Estate Investment Trust No. 1 |
ABLE NJ DSM INVESTMENT REIT |
99.18 | United States of America | Dec. 31 | Real Estate Activities | |||||||
ABLE NJ DSM INVESTMENT REIT |
ABLE NJ DSM, LLC |
100.00 | United States of America | Dec. 31 | Real Estate Activities | |||||||
Heungkuk Global Highclass Private Real Estate Trust 23 |
HYUNDAI ABLE INVESTMENT REIT |
99.90 | United States of America | Dec. 31 | Real Estate Activities | |||||||
HYUNDAI ABLE INVESTMENT REIT |
HYUNDAI ABLE PATRIOTS PARK, LLC |
100.00 | United States of America | Dec. 31 | Real Estate Activities | |||||||
KB Insurance Co., Ltd. |
Dongbu Private Fund 16th |
89.52 | Korea | Dec. 31 | Investment trust | |||||||
Hana Landchip Real estate Private Fund 58th |
99.99 | Korea | Dec. 31 | Investment trust | ||||||||
Hyundai Aviation Private Fund 3rd |
99.96 | Korea | Dec. 31 | Investment trust | ||||||||
Hyundai Power Private Fund 3rd |
99.90 | Korea | Dec. 31 | Investment trust | ||||||||
Hyundai Power Professional Investment Type Private Investment Fund No.4 |
99.78 | Korea | Dec. 31 | Investment trust | ||||||||
KB U.S. LongShort Private Securities Fund 1 |
99.44 | Korea | Dec. 31 | Investment trust | ||||||||
KB Insurance Co., Ltd. |
Hyundai Infra Professional Investment Type Private Investment Trust No.5 |
99.79 | Korea | Dec. 31 | Investment trust | |||||||
KB SAUDI Private Special Asset Fund |
80.00 | Korea | Dec. 31 | Investment trust | ||||||||
Meritz Private Real Estate Fund 8 |
99.36 | Korea | Dec. 31 | Investment trust |
196
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
KB Asset Management Co., Ltd. |
KB Global Equity Solution Securities Feeder Fund(Equity-FoFs) |
74.47 | Korea | Dec. 31 | Investment trust | |||||||
KB Global Multiasset Income Securities Feeder Fund(Bond Mixed-FoFs) |
95.26 | Korea | Dec. 31 | Investment trust | ||||||||
Kookmin Bank, KB Securities Co., Ltd., KB Asset Management Co., Ltd. |
KB Everyone TDF 2020 Securities Investment Trust - Bond Balanced-Fund of Funds |
52.28 | Korea | Dec. 31 | Investment trust | |||||||
KB Everyone TDF 2025 Securities Investment Trust - Bond Balanced-Fund of Funds3 |
45.08 | Korea | Dec. 31 | Investment trust | ||||||||
KB Everyone TDF 2030 Securities Investment Trust - Equity Balanced-Fund of Funds3 |
48.62 | Korea | Dec. 31 | Investment trust | ||||||||
KB Everyone TDF 2035 Securities Investment Trust - Equity Balanced-Fund of Funds |
60.74 | Korea | Dec. 31 | Investment trust | ||||||||
KB Everyone TDF 2040 Securities Investment Trust - Equity Balanced-Fund of Funds |
67.04 | Korea | Dec. 31 | Investment trust | ||||||||
KB Everyone TDF 2045 Securities Investment Trust - Equity Balanced-Fund of Funds |
76.84 | Korea | Dec. 31 | Investment trust | ||||||||
KB Everyone TDF 2050 Securities Investment Trust - Equity Balanced-Fund of Funds |
52.95 | Korea | Dec. 31 | Investment trust | ||||||||
Kookmin Bank |
Personal pension trusts and 10 other trusts1 |
| Korea | Dec. 31 | Trust |
1 | The Group controls the trust because it has power that determines the management performance over the trust and is exposed to variable returns to absorb losses through the guarantees of payment of principal, or payment of principal and fixed rate of return. |
2 | Although the Group holds less than a majority of the investees voting rights, the Group controls these investees as it has power over relevant activities in case of default; is significantly exposed to variable returns by providing lines of credit or ABCP purchase commitments or due to acquisition of subordinated debt; and has ability to affect those returns through its power. |
3 | Although the Group holds less than a majority of the investees voting rights, the Group controls the investee as it has power over relevant activities by managing the fund; has significant percentage of ownership; is significantly exposed to variable returns which is affected by the performance of the investees; and has ability to affect the performance through its power. |
197
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
4 | Although the Group holds less than a majority of the investees voting rights, the Group controls the investee as it has power over relevant activities by taking the role of an operating manager and it is significantly exposed to variable returns which is affected by the performance of the investees, and has ability to affect the performance through its power. |
5 | Became wholly owned subsidiaries by acquiring additional non-controlling interest in the 3rd quarter. |
198
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
The condensed financial information of major subsidiaries as of December 31, 2017 and 2016, is as follows:
(In millions of Korean won)
2017 | ||||||||||||||||||||||||
Assets | Liabilities | Equity | Operating income |
Profit(loss) for the period4 |
Total compre- the period4 |
|||||||||||||||||||
Kookmin Bank1 |
||||||||||||||||||||||||
KB Securities Co., Ltd.1,2 |
37,351,680 | 32,936,024 | 4,415,656 | 5,974,054 | 271,701 | 236,587 | ||||||||||||||||||
KB Insurance Co., Ltd.1,2 |
32,351,778 | 29,128,747 | 3,223,031 | 8,740,682 | 330,286 | 320,756 | ||||||||||||||||||
KB Kookmin Card Co., Ltd.1 |
17,658,310 | 13,616,481 | 4,041,829 | 3,326,048 | 296,831 | 326,887 | ||||||||||||||||||
KB Life Insurance Co., Ltd.1 |
9,125,741 | 8,586,328 | 539,413 | 1,331,105 | 21,086 | (10,151 | ) | |||||||||||||||||
KB Asset Management Co., Ltd.1 |
201,481 | 44,860 | 156,621 | 117,746 | 52,022 | 52,176 | ||||||||||||||||||
KB Capital Co.,Ltd.1,2 |
8,743,672 | 7,803,920 | 939,752 | 588,253 | 120,797 | 120,628 | ||||||||||||||||||
KB Savings Bank Co., Ltd. |
1,158,829 | 960,812 | 198,017 | 79,428 | 21,150 | 21,329 | ||||||||||||||||||
KB Real Estate Trust Co., Ltd. |
246,685 | 47,355 | 199,330 | 76,700 | 36,408 | 36,356 | ||||||||||||||||||
KB Investment Co., Ltd.1 |
355,763 | 218,671 | 137,092 | 41,150 | (4,954 | ) | (7,295 | ) | ||||||||||||||||
KB Credit Information Co., Ltd. |
26,121 | 10,979 | 15,142 | 31,737 | (5,316 | ) | (5,185 | ) | ||||||||||||||||
KB Data System Co., Ltd. |
41,945 | 27,240 | 14,705 | 117,946 | 945 | 323 |
199
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
(In millions of Korean won)
2016 | ||||||||||||||||||||||||
Assets | Liabilities | Equity | Operating income |
Profit(loss) for the period4 |
Total compre- hensive income for the period4 |
|||||||||||||||||||
Kookmin Bank1 |
||||||||||||||||||||||||
KB Securities Co., Ltd. 1,2,3 |
32,382,795 | 28,198,439 | 4,184,356 | 2,444,185 | (93,428 | ) | (65,689 | ) | ||||||||||||||||
KB Kookmin Card Co., Ltd.1 |
15,772,036 | 11,807,038 | 3,964,998 | 3,017,568 | 317,103 | 331,023 | ||||||||||||||||||
KB Life Insurance Co., Ltd.1 |
8,887,413 | 8,337,849 | 549,564 | 1,480,979 | 12,714 | (33,269 | ) | |||||||||||||||||
KB Asset Management Co., Ltd.1 |
170,781 | 16,605 | 154,176 | 127,435 | 58,756 | 57,503 | ||||||||||||||||||
KB Capital Co.,Ltd.2 |
7,428,372 | 6,640,305 | 788,067 | 473,253 | 96,785 | 96,740 | ||||||||||||||||||
KB Savings Bank Co., Ltd. |
1,078,130 | 895,921 | 182,209 | 65,938 | 10,319 | 9,897 | ||||||||||||||||||
KB Real Estate Trust Co., Ltd. |
216,687 | 33,713 | 182,974 | 65,230 | 29,270 | 29,636 | ||||||||||||||||||
KB Investment Co., Ltd.1 |
315,878 | 168,491 | 147,387 | 49,425 | 6,170 | 2,388 | ||||||||||||||||||
KB Credit Information Co., Ltd. |
27,973 | 7,647 | 20,326 | 37,271 | 43 | 126 | ||||||||||||||||||
KB Data System Co., Ltd. |
27,037 | 12,655 | 14,382 | 76,394 | 613 | 722 |
1 | Financial information is based on its consolidated financial statements. |
2 | The amount includes the fair value adjustments due to the merger. |
3 | Profit(loss) is based on the amount of Hyundai Securities Co., Ltd. after it is included in the consolidation scope (October 2016) and the amount of KB Investment & Securities Co., Ltd. for the period |
4 | Attributable to shareholders of the parent company |
200
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
Nature of the risks associated with interests in consolidated structured entities
The terms of contractual arrangements to provide financial support to a consolidated structured entity
- The Group has provided payment guarantees of W1,904,344 million to KL 1st Inc. and other subsidiaries.
- The Group provides capital commitment to KB Wise Star Private Real Estate Feeder Fund 1st. and 8 other subsidiaries. The unexecuted amount of the investment
agreement is W316,966 million. Based on the capital commitment, the Group is subject to increase its investment upon the request of the asset management company or the additional agreement among investors.
- The Group provides the guarantees of payment of principal, or principal and fixed rate of return in case the operating results of the trusts are less than the guaranteed principal, or principal and fixed rate of return.
Changes in subsidiaries
The subsidiaries newly included in consolidation during the year ended December 31, 2017, are as follows:
Company |
Description | |
KB Insurance Co., Ltd. and 45 others | Holds over than a majority of the ownership interests | |
Able Jungdong Co.,Ltd. and 42 others | Holds the power in the case of default and exposed to variable returns by providing lines of credit, ABCP purchase commitments or acquiring subordinated debt | |
KB Haeoreum private securities investment trust 70(Bond) and 3 others | Holds the power to determine the operation of the trust and exposed to variable returns by holding significant amount of ownership interests | |
KB KONEX Market Vitalization Fund and 3 other | Holds the power by taking the role of an operating manager and exposed to variable returns by holding significant amounts of ownership interests. |
The subsidiaries excluded from consolidation during the year ended December 31, 2017, are as follows:
Company |
Description | |
2014ABLEOPO 2ND Co., Ltd. and 44 others | Lost right for variable returns due to the release of debt | |
Wise Mobile Eighth Securitization Specialty Co., Ltd and 5 others | Liquidation | |
Hyundai Asset Management Co.,Ltd. and 17 others |
Disposal | |
KB Evergreen bond fund No.98 (Bond) and 1 other | Decrease of the interest to less than a majority | |
Hyundai Trust Securities Feeder Investment Trust No.1- Bond | Lost the power from sale of Hyundai Asset Management Co.,Ltd. |
201
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
Set out below is summarized financial information for each subsidiary that has non-controlling interests that are material to the Group. The amounts disclosed for each subsidiary are before inter-company eliminations.
(In millions of Korean won) | 2017 | 2016 | ||||||
Non-controlling interests percentage |
| 47.98 | % | |||||
Non-controlling interests |
||||||||
Assets of subsidiaries |
||||||||
Liabilities of subsidiaries |
| 6,640,305 | ||||||
Equity of subsidiaries |
| 788,067 | ||||||
Non-controlling interests |
| 263,359 | ||||||
Profit attributable to non-controlling interests |
||||||||
Operating profit of subsidiaries |
| 127,550 | ||||||
Profit of subsidiaries |
| 96,785 | ||||||
Profit attributable to non-controlling interests |
| 46,436 | ||||||
Cash flows of subsidiaries |
||||||||
Cash flows from operating activities |
| (1,783,799 | ) | |||||
Cash flows from investing activities |
| (7,023 | ) | |||||
Cash flows from financing activities |
| 1,671,199 | ||||||
|
|
|
|
|||||
Net increase(decrease) in cash and cash equivalents |
||||||||
|
|
|
|
1 | As the Group acquired the entire non-controlling interests of KB Capital during 2017, there are no subsidiaries with material non-controlling interests as of December 31, 2017. |
202
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
42. Unconsolidated Structured Entity
The nature, purpose and activities of the unconsolidated structured entities and how the structured entities are financed, are as follows:
Nature | Purpose | Activity | Method of Financing | |||
Asset-backed securitization |
Early cash generation through transfer of securitization assets
Fees earned as services to SPC, such as providing lines of credit and ABCP purchase commitments |
Fulfillment of Asset-backed securitization plan
Purchase and transfer of securitization assets
Issuance and repayment of ABS and ABCP |
Issuance of ABS and ABCP based on securitization assets | |||
Project Financing |
Granting PF loans to SOC and real estate
Granting loans to ships/aircrafts SPC |
Construction of SOC and real estate
Building ships/ construction and purchase of aircrafts |
Loan commitments through credit line, providing lines of credit and investment agreements | |||
Trust |
Management of financial trusts; -Development trust -Mortgage trust -Management trust -Disposal trust -Distribution and management trust -Other trusts |
Development, management and disposal of trusted real estate assets Payment of trust fees and allocation of trust profits. |
Distribution of trusted real estate assets and financing of trust company Public auction of trusted real estate assets and financing of trust company | |||
Fund |
Investment in beneficiary certificates |
Management of fund assets |
Sales of beneficiary certificate instruments | |||
Investment in PEF and partnerships |
Payment of fund fees and allocation of fund profits |
Investment of managing partners and limited partners |
203
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
Details of scale of unconsolidated structured entities and nature of the risks associated with the Groups interests in unconsolidated structured entities as of December 31, 2017 and 2016, are as follows:
(In millions of Korean won) | 2017 | |||||||||||||||||||||||
Asset-backed securitization |
Project financing |
Trusts | Funds | Others | Total | |||||||||||||||||||
Total assets of unconsolidated structured entity |
||||||||||||||||||||||||
Carrying amount on financial statements |
||||||||||||||||||||||||
Assets |
||||||||||||||||||||||||
Financial assets at fair value through profit or loss |
2,277,080 | 73,157 | | 547,258 | | 2,897,495 | ||||||||||||||||||
Derivative financial assets |
1,136 | | | 118 | | 1,254 | ||||||||||||||||||
Loans |
833,380 | 3,366,675 | 54,500 | 266,653 | 393,664 | 4,914,872 | ||||||||||||||||||
Financial investments |
6,826,097 | 13,104 | 300 | 5,788,925 | 20,619 | 12,649,045 | ||||||||||||||||||
Investment in associates and joint ventures |
| | | 202,816 | | 202,816 | ||||||||||||||||||
Other assets |
11,699 | 5,874 | 37,972 | 962 | 307 | 56,814 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Liabilities |
||||||||||||||||||||||||
Deposits |
||||||||||||||||||||||||
Derivative financial liabilities |
1,487 | | | 2,792 | | 4,279 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Other liabilities |
11,292 | 44 | | 48 | | 11,384 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Maximum exposure to loss1 |
||||||||||||||||||||||||
Holding assets |
20,722,296 | |||||||||||||||||||||||
Purchase and investment commitments |
964,106 | | | 1,301,784 | | 2,265,890 | ||||||||||||||||||
Unused credit |
2,299,236 | 10,000 | | 1,203,917 | 16,000 | 3,529,153 | ||||||||||||||||||
Payment guarantee and loan commitments |
382,300 | 1,385,722 | | | | 1,768,022 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Methods of determining the maximum exposure to loss |
|
Providing lines of credit and purchase commitments |
|
|
Loan commitments /investment agreements / purchase commitments and acceptances and guarantees |
|
|
Dividends by results trust: Total amount of trust exposure |
|
|
Investments / loans and capital commitments |
|
Loan commitments |
|
204
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
(In millions of Korean won) | 2016 | |||||||||||||||||||||||
Asset-backed securitization |
Project financing |
Trusts | Funds | Others | Total | |||||||||||||||||||
Total assets of unconsolidated structured entity |
||||||||||||||||||||||||
Carrying amount on financial statements |
||||||||||||||||||||||||
Assets |
||||||||||||||||||||||||
Financial assets at fair value through profit or loss |
677,658 | 75,477 | | 25,253 | | 778,388 | ||||||||||||||||||
Derivative financial assets |
110 | | | | | 110 | ||||||||||||||||||
Loans |
610,623 | 2,860,776 | 54,500 | 26,897 | 173,989 | 3,726,785 | ||||||||||||||||||
Financial investments |
6,406,641 | 8,595 | 305 | 3,621,376 | 19,612 | 10,056,529 | ||||||||||||||||||
Investment in associates |
| 728 | | 227,203 | | 227,931 | ||||||||||||||||||
Other assets |
6,945 | 3,002 | 9,350 | 859 | 57 | 20,213 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Liabilities |
||||||||||||||||||||||||
Deposits |
||||||||||||||||||||||||
Other liabilities |
658 | | | | | 658 | ||||||||||||||||||
|
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|
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|
|
|||||||||||||
|
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|
|
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|
|
|
|||||||||||||
Maximum exposure to loss1 |
||||||||||||||||||||||||
Holding assets |
||||||||||||||||||||||||
Purchase and investment commitments |
726,375 | | | 1,607,542 | | 2,333,917 | ||||||||||||||||||
Unused credit |
2,701,254 | | | | 33,500 | 2,734,754 | ||||||||||||||||||
Payment guarantee and loan commitments |
290,100 | 1,475,760 | | | | 1,765,860 | ||||||||||||||||||
|
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|
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|
|||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Methods of determining the maximum exposure to loss |
|
Providing lines of credit and purchase commitments |
|
|
Loan commitments /investment agreements / purchase commitments and acceptances and guarantees |
|
|
Dividends by results trust: Total amount of trust exposure |
|
|
Investments / loans and capital commitments |
|
Loan commitments |
|
1 | Maximum exposure to loss includes the asset amounts, after deducting loss (provision for assets, impairment losses and others), recognized in the financial statements of the Group. |
205
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
43. Finance and Operating Lease
43.1 Finance lease
43.1.1 The Group as finance lessee
The future minimum lease payments arising as of December 31, 2017 and 2016, are as follows:
(In millions of Korean won) | 2017 | 2016 | ||||||
Net carrying amount of finance lease assets |
||||||||
|
|
|
|
|||||
Minimum lease payment |
||||||||
Within 1 year |
2,555 | 2,424 | ||||||
1-5 years |
2,150 | 3,099 | ||||||
|
|
|
|
|||||
4,705 | 5,523 | |||||||
|
|
|
|
|||||
Present value of minimum lease payment |
||||||||
Within 1 year |
2,510 | 2,392 | ||||||
1-5 years |
2,059 | 2,907 | ||||||
|
|
|
|
|||||
4,569 | 5,299 | |||||||
|
|
|
|
43.1.2 The Group as finance lessor
Total lease investment and the present value of minimum lease payments as of December 31, 2017 and 2016, are as follows:
(In millions of Korean won) | 2017 | 2016 | ||||||||||||||
Total lease investment |
Present value of minimum lease payment |
Total lease investment |
Present value of minimum lease payment |
|||||||||||||
Within 1 year |
||||||||||||||||
1-5 years |
1,330,610 | 1,215,476 | 1,096,614 | 1,004,512 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
|
|
|
|
|
|
|
|
Unearned interest income of finance lease as of December 31, 2017 and 2016, is as follows:
(In millions of Korean won) | 2017 | 2016 | ||||||
Total lease investment |
||||||||
Net lease investment |
||||||||
Present value of minimum lease payment |
1,772,664 | 1,482,824 | ||||||
|
|
|
|
|||||
Unearned interest income |
||||||||
|
|
|
|
206
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
43.2 Operating lease
43.2.1 The Group as operating lessee
The future minimum lease payments arising from the non-cancellable lease contracts as of December 31, 2017 and 2016, are as follows:
(In millions of Korean won) | 2017 | 2016 | ||||||
Minimum lease payment |
||||||||
Within 1 year |
||||||||
1-5 years |
196,050 | 174,232 | ||||||
Over 5 years |
34,128 | 34,488 | ||||||
|
|
|
|
|||||
|
|
|
|
|||||
Minimum sublease payment |
The lease payment reflected in profit or loss for the years ended December 31, 2017 and 2016, are as follows:
(In millions of Korean won) | 2017 | 2016 | ||||||
Lease payment reflected in profit or loss |
||||||||
Minimum lease payment |
||||||||
Sublease payment |
(2,441 | ) | (1,026 | ) | ||||
|
|
|
|
|||||
|
|
|
|
43.2.2 The Group as operating lessor
The future minimum lease receipts arising from the non-cancellable lease contracts as of December 31, 2017 and 2016, are as follows:
(In millions of Korean won) | 2017 | 2016 | ||||||
Minimum lease receipts |
||||||||
Within 1 year |
||||||||
1-5 years |
375,344 | 277,377 | ||||||
Over 5 years |
282,470 | 313,282 | ||||||
|
|
|
|
|||||
|
|
|
|
207
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
44. Related Party Transactions
Profit and loss arising from transactions with related parties for the years ended December 31, 2017 and 2016, are as follows:
(In millions of Korean won) | 2017 | 2016 | ||||||||
Associates and Joint Ventures |
||||||||||
KB Insurance Co., Ltd.1 |
Interest income | |||||||||
Interest expense | 202 | 1,057 | ||||||||
Fee and commission income | 8,994 | 20,321 | ||||||||
Fee and commission expense | 1,021 | 508 | ||||||||
Gains on financial assets/liabilities at fair value through profit or loss | 796 | 4,822 | ||||||||
Losses on financial assets/liabilities at fair value through profit or loss | 18,717 | 3,701 | ||||||||
Other operating income | 16,743 | 12,972 | ||||||||
Other operating expense | 633 | 6,406 | ||||||||
General and administrative expenses | 5,601 | 14,244 | ||||||||
Reversal for credit loss | | 119 | ||||||||
Provision for credit loss | 12 | | ||||||||
Other non-operating income | 51 | 110 | ||||||||
Other non-operating expense | | 74 | ||||||||
Balhae Infrastructure Company |
Fee and commission income | 7,162 | 8,440 | |||||||
Korea Credit Bureau Co., Ltd. |
Interest expense | 132 | 92 | |||||||
Fee and commission income | 1,374 | 1,648 | ||||||||
Fee and commission expense | 1,206 | 1,948 | ||||||||
General and administrative expenses | 2,202 | 1,968 | ||||||||
Provision for credit loss | 1 | | ||||||||
UAMCO., Ltd. 1 |
Interest expense | | 1 | |||||||
Fee and commission income | | 5 | ||||||||
KoFC KBIC Frontier Champ 2010-5(PEF) |
Fee and commission income | 216 | 457 | |||||||
United PF 1st Recovery Private Equity Fund1 |
Interest expense | | 1 | |||||||
KB GwS Private Securities Investment Trust |
Fee and commission income | 851 | 896 | |||||||
IMM Investment 5th PRIVATE EQUITY FUND1 |
Other non-operating expense | | 1 | |||||||
Incheon Bridge Co., Ltd. |
Interest income | 25,511 | 14,534 | |||||||
Interest expense | 292 | 369 | ||||||||
Insurance income | 162 | | ||||||||
Reversal for credit loss | 43 | | ||||||||
Provision for credit loss | | 31 | ||||||||
Jaeyang Industry Co., Ltd. |
Interest income | 98 | | |||||||
Reversal for credit loss | 6 | 37 | ||||||||
HIMS Co., Ltd.1 |
Interest income | | 51 | |||||||
KoFC POSCO HANHWA KB Shared Growth Private Equity Fund No. 2 |
Fee and commission income | 481 | 212 | |||||||
Interest expense | | 10 | ||||||||
Aju Good Technology Venture Fund |
Interest expense | 14 | 4 | |||||||
KB Star Office Private Real Estate Investment Trust No. 1 |
Interest income | 370 | 371 | |||||||
Interest expense | 63 | 87 | ||||||||
Fee and commission income | 435 | 436 | ||||||||
Provision for credit loss | 3 | | ||||||||
RAND Bio Science Co., Ltd. |
Interest expense | 16 | 14 | |||||||
Inno Lending Co., Ltd |
Fee and commission income | 3 | | |||||||
Interest expense | 1 | | ||||||||
Other non-operating expense | | 20 |
208
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
KBIC Private Equity Fund No. 3 1 |
Interest expense | | 12 | |||||||
Fee and commission income | 38 | 260 | ||||||||
SY Auto Capital Co., Ltd. |
Interest income | 828 | 718 | |||||||
Interest expense | 22 | 19 | ||||||||
Fee and commission income | 47 | | ||||||||
Fee and commission expense | 2,956 | | ||||||||
Insurance income | 29 | | ||||||||
Other operating income | 731 | 1,606 | ||||||||
Other operating expense | 128 | 153 | ||||||||
Reversal for credit losses | 32 | | ||||||||
Provision for credit losses | | 61 | ||||||||
Other non-operating income | 51 | 250 | ||||||||
Kyobo 7 Special Purpose Acquisition Co., Ltd. 1 |
Interest expense | 1 | | |||||||
Food Factory Co., Ltd. |
Interest income | 24 | | |||||||
Insurance income | 3 | | ||||||||
Provision for credit losses | 44 | | ||||||||
KB Pre IPO Secondary Venture Fund 1st |
Fee and commission income | 83 | | |||||||
Builton Co., Ltd |
Insurance income | 1 | | |||||||
KB Private Equity Fund III |
Fee and commission income | 457 | | |||||||
Wise Asset Management Co., Ltd. |
Interest expense | 5 | | |||||||
Acts Co.,Ltd. |
Interest income | 249 | | |||||||
Insurance income | 2 | | ||||||||
Losses on financial assets/liabilities at fair value through profit or loss | 220 | | ||||||||
Provision for credit losses | 66 | | ||||||||
General and administrative expenses | 150 | | ||||||||
Korbi Co., Ltd. 1 |
Interest income | 183 | | |||||||
Provision for credit losses | 89 | | ||||||||
Dongjo Co., Ltd. |
Reversal for credit losses | 2 | | |||||||
POSCO-KB Shipbuilding Fund |
Fee and commission income | 257 | | |||||||
Interest expense | 3 | | ||||||||
Dae-A Leisure Co., Ltd. |
Interest expense | 1 | | |||||||
Paycoms Co., Ltd. |
Interest income | 61 | | |||||||
Provision for credit losses | 32 | | ||||||||
Bungaejanter. Inc. |
Interest income | 31 | | |||||||
Provision for credit losses | 44 | | ||||||||
Faromancorporation Co., Ltd. 1 |
Reverse for credit losses | 345 | | |||||||
Daesang Techlon Co., Ltd. |
Insurance income | 1 | | |||||||
Big Dipper Co., Ltd. |
Provision for credit losses | 2 | | |||||||
KB-KDBC New Technology Business Investment Fund |
Interest expense | 4 | | |||||||
KB No.5 Special Purpose Acquisition Company1 |
Interest income | | 68 | |||||||
Interest expense | | 19 | ||||||||
Gains on financial assets/liabilities at fair value through profit or loss | | 216 | ||||||||
Reversal for credit loss | | 29 | ||||||||
Other non-operating income | | 2 | ||||||||
KB No. 6 Special Purpose Acquisition Company1 |
Interest income | | 55 | |||||||
Interest expense | | 14 | ||||||||
Losses on financial assets/liabilities at fair value through profit or loss | | 65 | ||||||||
Other non-operating expense | | 4 |
209
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
KB No. 7 Special Purpose Acquisition Company1 |
Interest income | | 37 | |||||||
Interest expense | | 18 | ||||||||
Gains on financial assets/liabilities at fair value through profit or loss | | 861 | ||||||||
Other non-operating income | | 40 | ||||||||
KB No. 8 Special Purpose Acquisition Company |
Interest income | 75 | 74 | |||||||
Interest expense | 36 | 35 | ||||||||
Losses on financial assets/liabilities at fair value through profit or loss | 170 | 41 | ||||||||
Reversal for credit loss | | 50 | ||||||||
KB No. 9 Special Purpose Acquisition Company |
Interest income | 76 | 73 | |||||||
Interest expense | 33 | 40 | ||||||||
Fee and commission income | | 473 | ||||||||
Losses on financial assets/liabilities at fair value through profit or loss | 200 | 392 | ||||||||
Gains on financial assets/liabilities at fair value through profit or loss | | 1,665 | ||||||||
Reversal for credit loss | | 49 | ||||||||
KB No. 10 Special Purpose Acquisition Company |
Interest income | 48 | 17 | |||||||
Interest expense | 24 | 8 | ||||||||
Fee and commission income | | 175 | ||||||||
Losses on financial assets/liabilities at fair value through profit or loss | 103 | | ||||||||
Gains on financial assets/liabilities at fair value through profit or loss | | 1,497 | ||||||||
Other non-operating income | | 5 | ||||||||
KB No. 11 Special Purpose Acquisition Company |
Interest income | 22 | 3 | |||||||
Fee and commission income | 150 | | ||||||||
Gains on financial assets/liabilities at fair value through profit or loss | 711 | 16 | ||||||||
Hyundai-Tongyang Agrifood Private Equity Fund |
Fee and commission income | 187 | | |||||||
KB IGen Private Equity Fund No. 1 |
Fee and commission income | 1,266 | | |||||||
Keystone-Hyundai Securities No. 1 Private Equity Fund |
Fee and commission income | 94 | 22 | |||||||
MJT&I Co., Ltd. |
Interest income | | 2 | |||||||
Doosung Metal Co., Ltd. |
Interest income | | 1 | |||||||
Insurance income | 1 | | ||||||||
Other |
||||||||||
Retirement pension |
Fee and commission income | 795 | 717 | |||||||
Interest expense | 3 | 749 |
1 | Excluded from the Groups related party as of December 31, 2017. |
210
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
Details of receivables and payables, and related allowances for loans losses arising from the related party transactions as of December 31, 2017 and 2016, are as follows:
2017 | 2016 | |||||||||
Associates and Joint Ventures |
||||||||||
KB Insurance Co., Ltd.1 |
Derivative financial assets | |||||||||
Loans and receivables (Gross amount) | | 6,791 | ||||||||
Allowances for loan losses | | 9 | ||||||||
Other assets | | 23,341 | ||||||||
Derivative financial liabilities | | 13,545 | ||||||||
Deposits | | 9,883 | ||||||||
Debts | | 20,000 | ||||||||
Provisions | | 8 | ||||||||
Other liabilities | | 6,384 | ||||||||
Balhae Infrastructure Company |
Other assets | 1,669 | 2,123 | |||||||
Korea Credit Bureau Co., Ltd. |
Loans and receivables (Gross amount) | 22 | 14 | |||||||
Deposits | 25,513 | 26,827 | ||||||||
Provisions | 1 | | ||||||||
Other liabilities | 469 | 255 | ||||||||
JSC Bank CenterCredit1 |
Cash and due from financial institutions | | 8 | |||||||
KB GwS Private Securities Investment Trust |
Other assets | 641 | 673 | |||||||
Incheon Bridge Co., Ltd. |
Loans and receivables (Gross amount) | 200,414 | 209,105 | |||||||
Allowances for loan losses | 288 | 331 | ||||||||
Other assets | 710 | 821 | ||||||||
Deposits | 48,795 | 38,556 | ||||||||
Provisions | 3 | 3 | ||||||||
Insurance contract liabilities | 189 | | ||||||||
Other liabilities | 29 | 166 | ||||||||
KoFC POSCO HANHWA KB Shared Growth Private Equity Fund No. 2 |
Other assets | 176 | 98 | |||||||
Terra Co., Ltd. |
Deposits | 10 | | |||||||
Jaeyang Industry Co., Ltd. |
Loans and receivables (Gross amount) | | 303 | |||||||
Allowances for loan losses | | 6 | ||||||||
Other assets | | 7 | ||||||||
Jungdo Co., Ltd. |
Deposits | 4 | | |||||||
Dongjo Co., Ltd. |
Loans and receivables (Gross amount) | 116 | | |||||||
Allowances for loan losses | 1 | | ||||||||
Dae-A Leisure Co., Ltd. |
Deposits | 466 | | |||||||
Other liabilities | 14 | | ||||||||
Aju Good Technology Venture Fund |
Deposits | 2,771 | 1,201 | |||||||
Other liabilities | 1 | 1 | ||||||||
Ejade Co., Ltd.1 |
Deposits | | 2 | |||||||
Jungdong Steel Co., Ltd. |
Deposits | 3 | 3 | |||||||
Doosung Metal Co., Ltd. |
Insurance contract liabilities | 1 | | |||||||
KB Star Office Private Real Estate Investment Trust No. 1 |
Loans and receivables (Gross amount) | 10,000 | 10,000 | |||||||
Allowances for loan losses | 3 | | ||||||||
Other assets | 136 | 136 | ||||||||
Deposits | 6,962 | 6,682 | ||||||||
Other liabilities | 45 | 50 | ||||||||
RAND Bio Science Co., Ltd. |
Deposits | 1,032 | 2,356 | |||||||
Loans and receivables (Gross amount) | 1 | 1 | ||||||||
Other liabilities | 4 | 12 | ||||||||
Inno Lending Co., Ltd |
Loans and receivables (Gross amount) | 2 | | |||||||
Deposits | 41 | 1,902 |
211
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
isMedia Co., Ltd1 |
Provisions | | 4 | |||||||
KBIC Private Equity Fund No. 31 |
Other assets | | 64 | |||||||
Deposits | | 700 | ||||||||
Other liabilities | | 1 | ||||||||
SY Auto Capital Co., Ltd. |
Loans and receivables (Gross amount) | 40,057 | 30,049 | |||||||
Allowances for loan losses | | 32 | ||||||||
Other assets | 51 | 108 | ||||||||
Deposits | 6 | 3,997 | ||||||||
Provisions | 29 | 29 | ||||||||
Insurance contract liabilities | 8 | | ||||||||
Other liabilities | 349 | 70 | ||||||||
Food Factory Co., Ltd. |
Loans and receivables (Gross amount) | 679 | | |||||||
Allowances for loan losses | 44 | | ||||||||
Other assets | 1 | | ||||||||
Deposits | 1 | | ||||||||
Insurance contract liabilities | 3 | | ||||||||
KB Pre IPO Secondary Venture Fund 1st |
Other assets | 28 | | |||||||
Builton Co., Ltd. |
Loans and receivables (Gross amount) | 1 | | |||||||
Deposits | 26 | | ||||||||
Insurance contract liabilities | 1 | | ||||||||
Wise Asset Management Co., Ltd. |
Deposits | 340 | | |||||||
Other liabilities | 1 | | ||||||||
Acts Co., Ltd. |
Loans and receivables (Gross amount) | 1,927 | | |||||||
Allowances for loan losses | 161 | | ||||||||
Intangible assets | 1,275 | | ||||||||
Deposits | 4 | | ||||||||
Insurance contract liabilities | 1 | | ||||||||
POSCO-KB Shipbuilding Fund |
Other assets | 123 | | |||||||
Bungaejanter. Inc. |
Loans and receivables (Gross amount) | 425 | | |||||||
Allowances for loan losses | 36 | | ||||||||
Paycoms Co.,Ltd. |
Loans and receivables (Gross amount) | 1,066 | | |||||||
Allowances for loan losses | 89 | | ||||||||
Daesang Techlon Co., Ltd. |
Deposits | 2 | | |||||||
Big Dipper Co., Ltd. |
Loans and receivables (Gross amount) | 6 | | |||||||
Provisions | 2 | | ||||||||
KB-KDBC New Technology Business Investment Fund |
Deposits | 7,500 | | |||||||
Other liabilities | 4 | | ||||||||
KB No.8 Special Purpose Acquisition Company |
Derivative financial assets | 2,122 | 2,235 | |||||||
Loans and receivables (Gross amount) | 2,296 | 2,490 | ||||||||
Deposits | 2,339 | 2,342 | ||||||||
Other liabilities | 19 | 3 | ||||||||
KB No.9 Special Purpose Acquisition Company |
Derivative financial assets | 2,241 | 2,441 | |||||||
Loans and receivables (Gross amount) | 2,356 | 2,584 | ||||||||
Deposits | 2,309 | 2,399 | ||||||||
Other liabilities | 38 | 6 | ||||||||
KB No.10 Special Purpose Acquisition Company |
Derivative financial assets | 1,930 | 1,698 | |||||||
Loans and receivables (Gross amount) | 1,603 | 1,495 | ||||||||
Deposits | 1,698 | 1,754 | ||||||||
Other liabilities | 10 | 8 | ||||||||
KB No.11 Special Purpose Acquisition Company |
Derivative financial assets | 846 | 135 | |||||||
Loans and receivables (Gross amount) | 697 | 790 |
212
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
Key management |
Loans and receivables (Gross amount) | 1,665 | 1,982 | |||||||
Other assets | 2 | 2 | ||||||||
Deposits | 8,707 | 8,217 | ||||||||
Insurance contract liabilities | 809 | 413 | ||||||||
Other liabilities | 124 | 139 | ||||||||
Other |
||||||||||
Retirement pension |
Other assets | 348 | 304 | |||||||
Deposits | | 1,464 | ||||||||
Other liabilities | 4,286 | 16,497 |
1 | The amounts are not disclosed as these are excluded from the Groups related party as of December 31, 2017. |
According to Korean IFRS 1024, the Group includes associates, key management (including family members), and post-employment benefit plans of the Group and its related party companies in the scope of related parties. Additionally, the Group discloses balances (receivables and payables) and other amounts arising from the related party transactions in the notes to the consolidated financial statements. See Note 13 for details on investments in associates.
Key management includes the directors of the Parent Company, and the directors of Kookmin Bank and companies where the directors and/or their close family members have control or joint control.
Significant loan transactions with related parties for the years ended December 31, 2017 and 2016, are as follows:
(In millions of Korean won) | 20171 | |||||||||||||||||||
Beginning | Loans | Repayments | Others | Ending | ||||||||||||||||
Associates |
||||||||||||||||||||
KB Insurance Co., Ltd.2 |
| | ||||||||||||||||||
Korea Credit Bureau Co., Ltd. |
14 | 8 | | | 22 | |||||||||||||||
Incheon Bridge Co., Ltd. |
209,105 | 202,503 | (211,194 | ) | | 200,414 | ||||||||||||||
Jaeyang Industry Co., Ltd. |
303 | | | (303 | ) | | ||||||||||||||
KB Star Office Private Real Estate Investment Trust No.1 |
10,000 | | | | 10,000 | |||||||||||||||
RAND Bio Science Co., Ltd. |
1 | | | | 1 | |||||||||||||||
Inno Lending Co., Ltd |
| 2 | | | 2 | |||||||||||||||
SY Auto Capital Co., Ltd. |
30,049 | 44,039 | (34,031 | ) | | 40,057 | ||||||||||||||
Food Factory Co., Ltd. |
| 700 | | (21 | ) | 679 | ||||||||||||||
Builton Co., Ltd. |
| 1 | | | 1 | |||||||||||||||
Bungaejanter. Inc. |
| 400 | | 25 | 425 | |||||||||||||||
Big Dipper Co., Ltd. |
| 6 | | | 6 | |||||||||||||||
KB No. 8 Special Purpose Acquisition Company |
2,490 | | | (194 | ) | 2,296 | ||||||||||||||
KB No. 9 Special Purpose Acquisition Company |
2,584 | | | (228 | ) | 2,356 | ||||||||||||||
KB No. 10 Special Purpose Acquisition Company |
1,495 | 295 | | (187 | ) | 1,603 | ||||||||||||||
KB No. 11 Special Purpose Acquisition Company |
790 | | | (93 | ) | 697 |
213
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
(In millions of Korean won) | 20161 | |||||||||||||||||||
Beginning | Loans | Repayments | Others | Ending | ||||||||||||||||
Associates |
||||||||||||||||||||
KB Insurance Co., Ltd. 2 |
||||||||||||||||||||
Korea Credit Bureau Co., Ltd. |
19 | | (5 | ) | | 14 | ||||||||||||||
UAMCO., Ltd. 2 |
5 | | (5 | ) | | | ||||||||||||||
Incheon Bridge Co., Ltd. |
231,674 | 4,000 | (26,569 | ) | | 209,105 | ||||||||||||||
Jaeyang Industry Co., Ltd. |
| | | 303 | 303 | |||||||||||||||
HIMS Co., Ltd.2 |
| 3,500 | (3,500 | ) | | | ||||||||||||||
KB Star Office Private Real Estate Investment Trust No.1 |
10,000 | | | | 10,000 | |||||||||||||||
RAND Bio Science Co., Ltd. |
| 1 | | | 1 | |||||||||||||||
SY Auto Capital Co., Ltd. |
34 | 30,067 | (52 | ) | | 30,049 | ||||||||||||||
KB No. 5 Special Purpose Acquisition Company2 |
2,180 | | | (2,180 | ) | | ||||||||||||||
KB No. 6 Special Purpose Acquisition Company2 |
1,710 | | | (1,710 | ) | | ||||||||||||||
KB No. 7 Special Purpose Acquisition Company2 |
1,250 | | | (1,250 | ) | | ||||||||||||||
KB No. 8 Special Purpose Acquisition Company |
2,490 | | | | 2,490 | |||||||||||||||
KB No. 9 Special Purpose Acquisition Company |
2,584 | | | | 2,584 | |||||||||||||||
KB No. 10 Special Purpose Acquisition Company |
| 1,495 | | | 1,495 | |||||||||||||||
KB No. 11 Special Purpose Acquisition Company |
| 790 | | | 790 |
1 | Transactions and balances arising from operating activities between related parties; such as, payments, are excluded. |
2 | Excluded from the Groups related party as of December 31, 2017. |
214
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
Unused commitments to related parties as of December 31, 2017 and December 31, 2016, are as follows:
(In millions of Korean won) | 2017 | 2016 | ||||||||
Associates and Joint Ventures |
|
|||||||||
KB Insurance Co., Ltd.1 |
Commitments of derivative financial instruments | |||||||||
Unused commitments of credit card | | 20,859 | ||||||||
Balhae Infrastructure Company |
Purchase of security investment | 12,564 | 13,371 | |||||||
Korea Credit Bureau Co., Ltd. |
Unused commitments of credit card | 108 | 116 | |||||||
KoFC KBIC Frontier Champ 2010-5(PEF) |
Purchase of security investment | 2,150 | 2,150 | |||||||
KB GwS Private Securities Investment Trust |
Purchase of security investment | 876 | 876 | |||||||
Aju Good Technology Venture Fund |
Purchase of security investment | 11,768 | 18,000 | |||||||
Incheon Bridge Co., Ltd. |
Loan commitments in Korean won | 20,000 | 50,000 | |||||||
Unused commitments of credit card | 86 | 89 | ||||||||
KoFC POSCO HANHWA KB Shared Growth Private Equity Fund No. 2 |
Purchase of security investment | 12,550 | 12,550 | |||||||
SY Auto Capital Co., Ltd. |
Loan commitments in Korean won | 10,000 | 20,000 | |||||||
Unused commitments of credit card | 92 | 101 | ||||||||
isMedia Co.,Ltd1 |
Loan commitments in Korean won | | 1,260 | |||||||
KB No.9 Special Purpose Acquisition Company |
Unused commitments of credit card | 1 | 1 | |||||||
KB No.10 Special Purpose Acquisition Company |
Unused commitments of credit card | 5 | 4 | |||||||
RAND Bio Science Co., Ltd. |
Unused commitments of credit card | 24 | 24 | |||||||
Builton Co., Ltd. |
Unused commitments of credit card | 4 | | |||||||
Food Factory Co., Ltd. |
Unused commitments of credit card | 11 | | |||||||
Inno Lending Co.,Ltd |
Unused commitments of credit card | 13 | | |||||||
Big Dipper Co.,Ltd. |
Unused commitments of credit card | 94 | | |||||||
KB-KDBC New Technology Business Investment Fund |
Purchase of security investment | 15,000 | | |||||||
Key management |
Loan commitments in Korean won | 984 | 898 |
1 | The amounts are not disclosed as these are excluded from the Groups related party as of December 31, 2017. |
215
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
Compensation to key management for the years ended December 31, 2017 and 2016, consists of:
(In millions of Korean won) | 2017 | |||||||||||||||||||
Short-term employee benefits |
Post- employment benefits |
Termination benefits |
Share-based payments |
Total | ||||||||||||||||
Registered directors (executive) |
||||||||||||||||||||
Registered directors (non-executive) |
896 | | | | 896 | |||||||||||||||
Non-registered directors |
8,420 | 338 | | 14,610 | 23,368 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
(In millions of Korean won) | 2016 | |||||||||||||||||||
Short-term employee benefits |
Post- employment benefits |
Termination benefits |
Share-based payments |
Total | ||||||||||||||||
Registered directors (executive) |
||||||||||||||||||||
Registered directors (non-executive) |
796 | | | | 796 | |||||||||||||||
Non-registered directors |
6,637 | 208 | | 8,776 | 15,621 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
Details of assets pledged as collateral to related parties as of December 31, 2017 and 2016, are as follows:
(In millions of Korean won) | 2017 | 2016 | ||||||||||||||||
Associates | Carrying amount |
Collateralized amount |
Carrying amount |
Collateralized amount |
||||||||||||||
KB Insurance Co., Ltd. 1 |
Land and buildings | |||||||||||||||||
Investment securities | | | 50,000 | 50,000 |
1 | The amounts are not disclosed as these are excluded from the Groups related party as of December 31, 2017. |
Collateral received from related parties as of December 31, 2017 and December 31, 2016, is as follows:
(In millions of Korean won) | 2017 | 2016 | ||||||||
Associates |
||||||||||
KB Insurance Co., Ltd.1 |
Investment securities | |||||||||
KB Star Office Private Real Estate Investment Trust No.1 |
Real estate | 13,000 | 13,000 | |||||||
Key management |
Time deposits and others | 388 | 251 | |||||||
Real estate | 2,287 | 2,759 |
1 | The amounts are not disclosed as these are excluded from the Groups related party as of December 31, 2017. |
216
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
As of December 31, 2017, Incheon Bridge Co., Ltd., a related party, provides fund management account,
civil engineering completed risk insurance, and management rights as senior collateral amounting to W 611,000 million to a financial syndicate that consists of the Group and five other institutions, and as subordinated
collateral amounting to W 384,800 million to subordinated debt holders that consist of the Group and two other institutions. Also, it provides certificate of credit guarantee amounting to W 400,000 million
as collateral to a financial syndicate consisting of the Group and five other institutions.
45. Business Combination
45.1 The Acquisition of shares of KB Insurance Co., Ltd.
On May 19, 2017, the Group acquired 36,237,649 shares out of all outstanding shares of KB Insurance Co., Ltd., and this share acquisition increased the Groups ownership of KB Insurance Co., Ltd. from 39.81% to 94.30%. Therefore, KB Insurance Co., Ltd. became a subsidiary to the Group. The main purpose of the business combination is to improve competitiveness of non-banking business by maximizing the operational synergy with subsidiaries in non-banking businesses.
(In millions of Korean won) | 2017 | |||
Consideration |
||||
Fair value of existing holdings at the time of stock exchange |
||||
Equity securities(=36,237,649 shares X |
1,195,842 | |||
|
|
|||
Total consideration transferred |
||||
|
|
|||
Recognized amounts of identifiable assets acquired and liabilities assumed |
||||
Cash and cash equivalents |
||||
Financial assets at fair value through profit or loss |
1,095,668 | |||
Available-for-sale financial assets |
9,186,062 | |||
Held-to-maturity financial assets |
4,616,377 | |||
Loans |
6,604,530 | |||
Other receivables |
767,458 | |||
Property plant and equipment(included Investment property) |
895,141 | |||
Intangible assets |
2,434,049 | |||
Other assets |
4,187,919 | |||
|
|
|||
Total Assets |
30,335,093 | |||
|
|
|||
Insurance contract liabilities |
22,889,439 | |||
Financial liabilities |
625,850 | |||
Other liabilities |
3,905,189 | |||
|
|
|||
Total liabilities |
27,420,478 | |||
|
|
|||
Total identifiable net assets |
||||
|
|
|||
Non-controlling interests1 |
170,044 | |||
Gains on bargain purchase |
122,986 |
1 | Measured at the proportionate share of KB Insurance Co., Ltd.s net assets applies only to instruments that represent present ownership interests. |
217
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
As a result of the business combination, there was a gain on the bargain purchase and the Group recognized it as other non-operating income in the consolidated statement of comprehensive income.
Details of loans acquired are as follows:
(In millions of Korean won) | 2017 | |||
Fair value of loans |
||||
Contractual total amount of loan receivables |
6,651,314 | |||
Contractual cash flows that are not expected to be recovered |
(59,906 | ) |
Details of intangible assets recognized as a result of business combinations are as follows:
(In millions of Korean won) | 2017 | |||
Value of business acquired (VOBA)1 |
||||
Others2 |
38,758 | |||
|
|
|||
|
|
1 | In accordance with Korean IFRS 1104, an indirect method of intrinsic value is applied to the measurement of VOBA. The valuation of the liabilities to identify the intrinsic value of the financial statements, in the case of business combination or pre-contract, is separated from insurance liability, and is classified and presented as intangible asset. VOBA is a similar concept to Present value of in force business (PVIF) and Present value of future profits (PVFP or PVP). The intangible assets from intrinsic values is calculated through the Actuarial model and Cash flow that were originally used to calculate the Embedded Value. |
2 | Memberships and other intangible assets were previously held by KB Insurance Co., Ltd. |
In 2017, the Group measured 39.81% of KB Insurance Co., Ltd.s equity interest held before the business combination at fair value and recognized
W 1,806 million as a loss on investment in the consolidated statements of income.
After the acquisition date, operating income and
net income of KB Insurance Co., Ltd. Were W 500,691million and W 330,286million, respectively.
If KB Insurance Co.,
Ltd. was consolidated from the beginning of the current period, the operating profit and profit for the period of the Group would be W 622,123million and W 430,190million, respectively, in the consolidated statement
of comprehensive income
218
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
45.2 The Results of VOBA Sensitivity Analysis
The results of the sensitivity analysis from changes in assumption applied to calculate the value (VOBA) of acquired business recognized by business combination are as follows:
(In millions of Korean won) | 2017 | |||||||||||
Assumption change |
VOBA outputs |
Gain or losses from evaluation |
||||||||||
Standard amount |
2,395,291 | | ||||||||||
Loss ratio |
10 | % | 1,020,243 | (1,375,048 | ) | |||||||
-10 | % | 3,770,338 | 1,375,047 | |||||||||
Surrenders and termination rates |
10 | % | 2,425,348 | 30,057 | ||||||||
-10 | % | 2,360,035 | (35,256 | ) | ||||||||
Insurance operating expenses ratio |
10 | % | 2,256,197 | (139,094 | ) | |||||||
-10 | % | 2,534,384 | 139,093 | |||||||||
Return on investment |
+0.5 | %p | 3,153,368 | 758,077 | ||||||||
-0.5 | %p | 1,576,618 | (818,673 | ) | ||||||||
Discount rate |
+0.5 | %p | 2,250,386 | (144,905 | ) | |||||||
-0.5 | %p | 2,551,657 | 156,366 |
45.3 Insurance Risk at the Time of Business Combination
45.3.1 Overview
Insurance risk is the risk that arises from a primary operation of insurance companies that is associated with acceptance of insurance contract and payment of claims, and is classified as the insurance price risk and the reserves risk. The insurance price risk is the risk of loss that might occur when the actual risk exceeds the expected risk rate or expected insurance operating expenses ratios in calculation of premiums. It is the risk of loss that arises from differences between actual payment of claims and premiums received from policyholders. The reserves risk is the risk that arises due to a deficit in reserves at the date of assessment, making KB Insurance Co., Ltd. unable to cover the actual claims payment in the future.
45.3.2 Purposes, policies and procedures to manage risk arising from insurance contracts
The risks associated with insurance contract that KB Insurance Co., Ltd. faces are the insurance actuarial risk and the acceptance risk. Each risk occurs due to insurance contracts pricing and conditions of acceptance. In order to minimize acceptance risk, KB Insurance Co., Ltd. establishes guidelines and procedure for acceptance and out lines specific conditions for acceptance by product. In addition, expected risk level at the date of pricing is compared with actual risk of contracts after acceptance and the interest rate is adjusted accordingly, conditions of sale is changed, sale of goods is interrupted and other measures are taken in order to reduce insurance actuarial risk. KB Insurance Co., Ltd. has a committee to discuss status of product acceptance risk and interest rate policy. The committee decides important matters to set the processes that allow minimizing the insurance actuarial risk, the acceptance risk and other business related risk.
219
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
In addition, according to reinsurance operating standards, KB Insurance Co., Ltd. establishes an operating strategy of reinsurance for large claims expense due to unexpected catastrophic events. KB Insurance Co., Ltd. supports so that policyholders are safe and KB Insurance Co., Ltd.s stable profit can be achieved. For the long-term goal, KB Insurance Co., Ltd. manages risk at a comprehensive level to keep its value at the maximum.
KB Insurance Co., Ltd.s entire risk is calculated by using RBC method. KB Insurance Co., Ltd. sets the risk appetite limits in order that the calculated risk level is maintained at an appropriate level compared to available capital. Portfolio of assets and products are monitored to improve profit compared to risk.
45.3.3 Exposure to insurance price risk
According to RBC standard, exposure to insurance price risk is defined as net written premiums for prior 1 year that is calculated by adding and subtracting original insurance premium, assumed reinsurance premium and ceded reinsurance premium.
(In millions of Koean won) | 2017 | |||||||||||||||
Direct insurance |
Inward reinsurance |
Outward reinsurance |
Total | |||||||||||||
General |
||||||||||||||||
Automobile |
1,984,178 | | 40,486 | 1,943,692 | ||||||||||||
Long-term |
1,845,647 | | 250,459 | 1,595,188 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
|
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|
|
|
|
|
|
45.3.4 Concentration of Insurance risk
KB Insurance Co., Ltd. is selling general non-life insurances (fire, maritime, injury, technology, liability, package, title, guarantee and special type insurances), automobile insurances (for private use, for hire, for business, bicycle and other), long-term insurances (long-term non-life, property damage, injury, driver, savings, illness, nursing and pension) and various other insurances. KB Insurance Co., Ltd.s risk is distributed through reinsurance, joint acceptance and diversified selling. In addition, insurances that cover serious damage of risk, although with rare possibility of the occurrence of disaster, such as storm and flood insurance are limited, and KB Insurance Co., Ltd. controls the risk through joint acquisition.
220
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
45.3.5 Loss development tables
General Insurance
(In millions of won) | Payment year | |||||||||||||||||||
Accident year | After 1 year | After 2 years | After 3 years | After 4 years | After 5 years | |||||||||||||||
Estimate of gross ultimate claims (A) |
||||||||||||||||||||
2012.4.1 ~ 2013.3.31 |
||||||||||||||||||||
2013.4.1 ~ 2014.3.31 |
168,274 | 196,711 | 198,849 | 198,251 | | |||||||||||||||
2014.4.1 ~ 2015.3.31 |
121,300 | 141,807 | 143,129 | | | |||||||||||||||
2015.4.1 ~ 2016.3.31 |
126,747 | 150,115 | | | | |||||||||||||||
2016.4.1 ~ 2017.3.31 |
148,162 | | | | | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
720,329 | 677,127 | 536,175 | 396,825 | 197,475 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Gross cumulative claim payments (B) |
||||||||||||||||||||
2012.4.1 ~ 2013.3.31 |
118,748 | 172,826 | 185,043 | 190,131 | 191,849 | |||||||||||||||
2013.4.1 ~ 2014.3.31 |
129,198 | 175,994 | 189,194 | 191,700 | | |||||||||||||||
2014.4.1 ~ 2015.3.31 |
88,311 | 126,826 | 135,437 | | | |||||||||||||||
2015.4.1 ~ 2016.3.31 |
93,964 | 136,169 | | | | |||||||||||||||
2016.4.1 ~ 2017.3.31 |
107,770 | | | | | |||||||||||||||
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537,991 | 611,815 | 509,674 | 381,831 | 191,849 | ||||||||||||||||
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Difference (A-B) |
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Automobile Insurance
(In millions of won) | Payment year | |||||||||||||||||||||||||||
Accident year | After 1 year | After 2 years | After 3 years | After 4 years | After 5 years | After 6 years | After 7 years | |||||||||||||||||||||
Estimate of gross ultimate claims (A) |
||||||||||||||||||||||||||||
2010.4.1 ~ 2011.3.31 |
||||||||||||||||||||||||||||
2011.4.1 ~ 2012.3.31 |
1,103,363 | 1,118,764 | 1,125,789 | 1,130,637 | 1,132,811 | 1,134,588 | | |||||||||||||||||||||
2012.4.1 ~ 2013.3.31 |
1,129,311 | 1,151,262 | 1,160,820 | 1,166,840 | 1,169,692 | | | |||||||||||||||||||||
2013.4.1 ~ 2014.3.31 |
1,124,402 | 1,154,322 | 1,164,003 | 1,174,204 | | | | |||||||||||||||||||||
2014.4.1 ~ 2015.3.31 |
1,205,298 | 1,224,037 | 1,236,693 | | | | | |||||||||||||||||||||
2015.4.1 ~ 2016.3.31 |
1,242,591 | 1,257,538 | | | | | | |||||||||||||||||||||
2016.4.1 ~ 2017.3.31 |
1,292,711 | | | | | | | |||||||||||||||||||||
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|
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8,122,824 | 6,947,666 | 5,737,064 | 4,524,960 | 3,356,177 | 2,189,070 | 1,055,616 | ||||||||||||||||||||||
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Gross cumulative claim payments(B) |
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2010.4.1 ~ 2011.3.31 |
898,401 | 1,010,255 | 1,033,873 | 1,043,730 | 1,048,664 | 1,050,860 | 1,051,681 | |||||||||||||||||||||
2011.4.1 ~ 2012.3.31 |
954,486 | 1,079,455 | 1,106,620 | 1,120,852 | 1,128,085 | 1,130,188 | | |||||||||||||||||||||
2012.4.1 ~ 2013.3.31 |
963,250 | 1,112,141 | 1,140,658 | 1,154,668 | 1,160,801 | | | |||||||||||||||||||||
2013.4.1 ~ 2014.3.31 |
948,421 | 1,105,324 | 1,137,731 | 1,155,656 | | | | |||||||||||||||||||||
2014.4.1 ~ 2015.3.31 |
1,007,236 | 1,180,056 | 1,210,707 | | | | | |||||||||||||||||||||
2015.4.1 ~ 2016.3.31 |
1,042,046 | 1,208,525 | | | | | | |||||||||||||||||||||
2016.4.1 ~ 2017.3.31 |
1,079,668 | | | | | | | |||||||||||||||||||||
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6,893,508 | 6,695,756 | 5,629,589 | 4,474,906 | 3,337,550 | 2,181,048 | 1,051,681 | ||||||||||||||||||||||
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Difference (A-B) |
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221
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
Long-term Insurance
(In millions of won) | Payment year | |||||||||||||||||||
Accident year | After 1 year | After 2 years | After 3 years | After 4 years | After 5 years | |||||||||||||||
Estimate of gross ultimate claims (A) |
||||||||||||||||||||
2012.4.1 ~ 2013.3.31 |
||||||||||||||||||||
2013.4.1 ~ 2014.3.31 |
737,540 | 999,838 | 1,029,937 | 1,035,705 | | |||||||||||||||
2014.4.1 ~ 2015.3.31 |
822,235 | 1,106,997 | 1,138,537 | | | |||||||||||||||
2015.4.1 ~ 2016.3.31 |
945,954 | 1,286,361 | | | | |||||||||||||||
2016.4.1 ~ 2017.3.31 |
1,102,183 | | | | | |||||||||||||||
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4,256,606 | 4,265,185 | 3,066,124 | 1,938,603 | 904,400 | ||||||||||||||||
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Gross cumulative claim payments (B) |
||||||||||||||||||||
2012.4.1 ~ 2013.3.31 |
606,551 | 859,742 | 889,948 | 898,142 | 901,629 | |||||||||||||||
2013.4.1 ~ 2014.3.31 |
696,685 | 984,891 | 1,021,364 | 1,032,301 | | |||||||||||||||
2014.4.1 ~ 2015.3.31 |
770,283 | 1,090,501 | 1,130,781 | | | |||||||||||||||
2015.4.1 ~ 2016.3.31 |
892,901 | 1,271,183 | | | | |||||||||||||||
2016.4.1 ~ 2017.3.31 |
1,051,471 | | | | | |||||||||||||||
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4,017,891 | 4,206,317 | 3,042,093 | 1,930,443 | 901,629 | ||||||||||||||||
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Difference (A-B) |
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45.3.6 Liquidity risk of insurance contracts
Liquidity risk arising from insurance contracts is the increase in refunds at maturity caused by concentrations of maturity, the increase in surrender values caused by unexpected amounts in cancellation and the increase in payments of claims caused by catastrophic events. KB Insurance Co., Ltd. manages payment of refunds payable at maturity by analysing maturity of insurance.
Premium reserves maturity structure as of the business combination date is as follows:
2017 | ||||||||||||||||||||||||
(In millions of won) | Within 1 year |
1~5 years |
5~10 years |
10~20 years |
More 20 years |
Total | ||||||||||||||||||
Long-term insurance non participating |
||||||||||||||||||||||||
Non-linked |
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Linked |
457,494 | 2,311,040 | 2,256,942 | 1,240,524 | 8,991,508 | 15,257,508 | ||||||||||||||||||
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|
|||||||||||||
511,795 | 2,513,799 | 2,442,633 | 1,316,573 | 9,089,478 | 15,874,278 | |||||||||||||||||||
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Annuity |
||||||||||||||||||||||||
Non-linked |
10 | 143 | 1,775 | 4,109 | 1,490 | 7,527 | ||||||||||||||||||
Linked |
183 | 44,147 | 276,785 | 1,025,511 | 2,066,527 | 3,413,153 | ||||||||||||||||||
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|
|
|
|||||||||||||
193 | 44,290 | 278,560 | 1,029,620 | 2,068,017 | 3,420,680 | |||||||||||||||||||
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|
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Asset-linked |
||||||||||||||||||||||||
Linked |
| 27,059 | | | | 27,059 | ||||||||||||||||||
Total |
||||||||||||||||||||||||
Non-linked |
54,311 | 202,902 | 187,466 | 80,158 | 99,460 | 624,297 | ||||||||||||||||||
Linked |
457,677 | 2,382,246 | 2,533,727 | 2,266,035 | 11,058,035 | 18,697,720 | ||||||||||||||||||
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222
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
45.3.7 Credit risk of insurance contract
Credit risk of insurance contract is the economic loss arising from non-performing contractual obligations due to decline in credit ratings or default. Through strict internal review, KB Insurance Co., Ltd. cedes insurance contracts to the insurers rated above BBB- of S&P rating.
As of business combination date, there are 219 reinsurance companies that deal with KB Insurance Co., Ltd., and the top three insurance companies concentration and credit ratings are as follows:
Reinsurance company | Ratio | Credit rating | ||||||
KOREANRE |
66.60 | % | AA | |||||
STARR INTERNATIONAL |
3.41 | % | AA+ | |||||
SWISSREINSURANCE |
3.22 | % | AAA |
Exposures to credit risk related to reinsurance as of business combination date were as follows:
(In millions of won) | 2017 | |||
Reinsurance assets1 |
||||
Net receivables from reinsurers2 |
44,443 | |||
|
|
|||
|
|
1 | Net carrying amounts that deduct impairment loss |
2 | Net carrying amounts of each reinsurance company that offsets reinsurance accounts receivable and reinsurance accounts payable and deduct allowance for loan losses |
45.3.8 Interest risk of insurance contract
The interest rate risk exposure from KB Insurance Co., Ltd.s insurance contracts is the risk of unexpected losses in net interest income or net assets arising from changes in interest rates and it is managed to minimize the loss experienced. For long-term, non-life insurance contracts, KB Insurance Co., Ltd. calculates exposure of interest-bearing assets and interest-bearing liabilities. Liabilities exposure is premium reserves after subtracting costs of termination deductions. Asset exposure is interest-bearing assets. Assets that receive only fees without interest are excluded from interest bearing assets.
223
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
Exposure to interest rate risk
(In millions of won) | 2017 | |||
Liabilities |
||||
Fixed interest rate |
||||
Variable interest rate |
18,268,800 | |||
|
|
|||
18,891,370 | ||||
|
|
|||
Assets |
||||
Due from banks |
319,960 | |||
Financial assets at fair value through profit or loss |
386,040 | |||
Available-for-sale financial assets |
6,660,182 | |||
Held-to-maturity financial assets |
4,143,851 | |||
Loans |
6,465,291 | |||
|
|
|||
|
|
Measurement and recognition method
Duration is used to measure interest rate risk within risk based solvency test. ALM system for risk based solvency test is utilized to manage interest rate risk internally. In addition, Risk Management Committee sets ALM strategy every year to manage interest rate risk.
Sensitivity to changes in interest rates
Generally, when interest rates rise, the value and duration of assets and liabilities fall, when interest rates fall, value and duration of assets and liabilities increase. When duration of assets is shorter than duration of liabilities, the interest risk is increased if the interest rates fall since increased asset value is smaller than liabilities increase.
Negative spread risk control
To control interest expenses from other liabilities and investment incomes from assets, KB Insurance Co., Ltd. publicizes its interest rate considering market interest rate and return on invested insurance assets of KB Insurance Co., Ltd.
(2) Acquisition of MARITIME SECURITIES INCORPORATION
In
October 9, 2017 the Group acquired 99.40% shares of MARITIME SECURITIES INCORPORATION, which operates in Vietnam securities industry. The transfer price paid by the group was W 38,479 million, and recognized goodwill of
W 13,092 million by recognizing the net asset and non-controlling interest of W 25,539 million and W 152 million, respectively. There are no
operating income or profit for the period incurred and recognized in the consolidated statement of profit or loss after the acquisition date.
The name has changed to KB SECURITIES VIETNAM JOINT STOCK COMPANY in January 2018.
224
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2017 and 2016
46. Approval of Issuance of the Financial Statements
The issuance of the Groups consolidated financial statements as of and for the year ended December 31, 2017, was approved by the Board of Directors on February 8, 2018.
225