UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the month of March 2019
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.
Audit Report of KB Financial Group Inc. for Fiscal Year 2018
On March 12, 2019, KB Financial Group Inc. (KB Financial Group) disclosed audit reports for fiscal year 2018 based on the International Financial Reporting Standards as adopted by the Republic of Korea (including the consolidated and separate financial statements of KB Financial Group as of and for the years ended December 31, 2018 and 2017 and related notes) received from Samil PricewaterhouseCoopers, its independent auditor. The financial statements in such reports have not been approved by the shareholders of KB Financial Group and remain subject to change.
KB Financial Group is furnishing the following documents as exhibits to this Form 6-K filing:
Exhibit 99.1: An English-language translation of the Consolidated Audit Report of KB Financial Group for FY 2018.
Exhibit 99.2: An English-language translation of the Separate Audit Report of KB Financial Group for FY 2018.
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 12, 2019 | By: /s/ Ki-Hwan Kim | |||||||
(Signature) | ||||||||
Name: | Ki-Hwan Kim | |||||||
Title: | Deputy President and Chief Finance Officer |
(English Translation of a Report Originally Issued in Korean)
To the Shareholders and Board of Directors of KB Financial Group Inc.
Opinion
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 at December 31, 2018 and 2017, 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.
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as at December 31, 2018 and 2017, and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with International Financial Reporting Standards as adopted by the Republic of Korea (Korean IFRS).
Basis for Opinion
We conducted our audits in accordance with Korean Standards on Auditing. Our responsibilities under those standards are further described in the Auditors Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Group in accordance with the ethical requirements of the Republic of Korea that are relevant to our audit of the consolidated financial statements and we have fulfilled our other ethical responsibilities in accordance with the ethical requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
1. Expected Credit Losses on Loans Measured at Amortized Cost
Why it is determined to be a key audit matter :
Korean IFRS 1109 Financial Instruments, which has been applied on January 1, 2018 by the Group, is a more complex accounting standard which requires considerable amount of judgment and interpretation in its implementation than Korean IFRS 1039 Financial Instruments: Recognition and Measurement, in relation to impairment. This new standard especially requires determination of significant increases in credit risk and measurement of expected credit losses using forward-looking information. Accordingly the Group developed a new measurement model utilizing various types of information.
2
The Group measures expected credit losses on loans measured at amortized cost, on an individual or collective basis. The identification of loans that are deteriorating and the assessment of the present value of expected future cash flows in determining expected credit losses are inherently uncertain, involving various assumptions and judgments. In measuring expected losses on a collective basis, a wide range of complex inputs and assumptions are used. Given the extent of judgment involved, we considered expected credit losses to be a key audit matter.
The balances of loans measured at amortized cost subject to individual or collective assessment and loss allowance are W
321,811,284 million and W 2,609,681 million, respectively(See Note 4-2, 10, 11). Significantly affected subsidiaries include Kookmin Bank, KB Kookmin Card and others.
How our audit addressed the key audit matter :
(1) Assessment of expected credit losses on an individual basis
We obtained an understanding and evaluated procedures and controls relating to the assessment of expected credit losses on an individual basis. In particular, we focused our effort on the assumptions used in estimating future cash flows. We evaluated whether managements estimation was reasonable and sufficiently reviewed over key assumptions in cash flow projection including growth rate of entities subject to individual assessment and valuation of collateral. As part of these procedures, we assessed whether sales growth rate, operating income ratio, and assumptions on investment activities were consistent with historical performance and current market conditions. Furthermore, we challenged appropriateness of collateral valuation by conducting our own research on most recent property prices and engaging independent appraisal specialists in verifying appraisal reports, models and methodologies employed by management.
(2) Assessment of expected credit losses on a collective basis
We obtained an understanding and evaluated the processes and controls relating to the assessment of expected credit losses on a collective basis in accordance with impairment requirements under Korean IFRS 1109 Financial Instruments. As explained in Note 2, management assesses credit rating to recognize lifetime expected credit losses on loans with significant increase in credit risk and impaired loans. Other than these cases, management recognizes 12 month expected credit losses. To calculate expected credit losses, management has applied forward-looking information, probability of default, and loss given default estimated through predetermined internal procedures and controls implemented for various assumptions.
We assessed design and tested operating effectiveness of controls relating to credit ratings that appropriately capture both qualitative and quantitative information. Our substantive test over accuracy and reliability of the information included agreeing qualitative and quantitative information with relevant evidence.
We assessed appropriateness of management accounting policy determining significant increase in credit risk. We confirmed management reasonably performed allocation of Stage 1, 2 and 3 depending on how significantly credit risk was increased and used different models for each stage. We verified that these procedures were performed in accordance with the policy and examined appropriateness of the results.
We involved our own risk specialist to statistically analyze correlation between forward-looking information and probability of defaults and loss given default. We assessed appropriateness of methodologies for adjusting probability of defaults and loss given default to reflect forward-looking information on estimation of expected credit losses. We further tested reasonableness and mathematical accuracy of the information through recalculation and inspection of supporting data.
3
We challenged methodologies used by management to verify that probability of default and loss given default were calibrated using sufficient and reasonable historical data. We determined that the default and loss data used were appropriately gathered and applied in accordance with internal control procedures. In addition, we verified reasonableness and accuracy of probability of defaults and losses through procedures including recalculation, and evaluated managements default and loss data.
2. Valuation of over-the-counter derivatives
Why it is determined to be a key audit matter :
Fair value of large portion of over-the-counter
derivatives in the consolidated financial statements is calculated through in-house valuation system. Judgment is required in estimating the fair value of these derivatives held by KB Securities in determining
appropriate models, assumptions and inputs. Given the extent of judgment involved in valuing these over-the-counter derivatives, we considered this to be a key audit
matter. Over-the-counter derivatives of KB securities subject to fair value measurement amount to W 14,551,811 million including financial
liabilities designated as at fair value through profit or loss relevant to structured securities and financial assets at fair value through profit or loss(See Note 6,12,19).
How our audit addressed the key audit matter :
We obtained an understanding and evaluated process and relevant controls in relation to fair value measurement. Our focus was particularly on the accuracy of underlying transaction data used and mathematical calculation in accordance with managements in-house valuation methodologies.
We assessed design and tested operating effectiveness of controls over accuracy and completeness of key inputs such as underlying transaction data(notional amount, interest rate, maturity etc.) employed in managements in-house valuation system. We substantively tested transaction data used in valuation by examining supporting evidence including contracts and trade confirmations.
We also evaluated design and tested operating effectiveness of controls over periodic verification of in-house valuation system to ensure the valuation methodologies configured in the system were accurately operating as intended. We involved our own derivative valuation specialist to independently estimate fair values utilizing independent valuation models and variables to see if managements valuation is outside our ranges.
Other Matter
Auditing standards and their application in practice vary among countries. The procedures and practices used in the Republic of Korea to audit such consolidated financial statements may differ from those generally accepted and applied in other countries.
Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with Korean IFRS, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
4
In preparing the consolidated financial statements, management is responsible for assessing the Groups ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations.
Those charged with governance are responsible for overseeing the Groups financial reporting process.
Auditors Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Korean Standards on Auditing will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.
As part of an audit in accordance with Korean Standards on Auditing, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
| Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. |
| Obtain an understanding of internal control relevant to the audit 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 entitys internal control. |
| Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. |
| Conclude on the appropriateness of managements use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Groups ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors report. However, future events or conditions may cause the Group to cease to continue as a going concern. |
| Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation. |
| Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the Group audit. We remain solely responsible for our audit opinion. |
5
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditors report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
The engagement partner on the audit resulting in this independent auditors report is Yeob Yu, Certified Public Accountant.
/s/ Samil PricewaterhouseCoopers
Seoul, Korea
March 12, 2019
6
KB Financial Group Inc. and Subsidiaries
Consolidated Statements of Financial Position
December 31, 2018 and 2017
(in millions of Korean won) | Notes | 2018 | 2017 | |||||||
Assets |
||||||||||
Cash and due from financial institutions |
4,6,7,39 | |||||||||
Financial assets at fair value through profit or loss |
4,6,12 | 50,987,847 | | |||||||
Financial assets at fair value through profit or loss (under Korean IFRS 1039) |
4,6,12 | | 32,227,345 | |||||||
Derivative financial assets |
4,6,9 | 2,025,962 | 3,310,166 | |||||||
Loans at amortized cost |
4,6,10,11 | 319,201,603 | 290,122,838 | |||||||
Financial investments |
4,6,12 | 61,665,094 | 66,608,243 | |||||||
Investments in associates and joint ventures |
13 | 504,932 | 335,070 | |||||||
Property and equipment |
14 | 4,272,127 | 4,201,697 | |||||||
Investment property |
14 | 2,119,811 | 848,481 | |||||||
Intangible assets |
15 | 2,755,783 | 2,943,060 | |||||||
Net defined benefit assets |
24 | | 894 | |||||||
Current income tax assets |
10,004 | 6,324 | ||||||||
Deferred income tax assets |
16,33 | 4,158 | 3,991 | |||||||
Assets held for sale |
17 | 16,952 | 155,506 | |||||||
Other assets |
4,6,18 | 15,749,535 | 16,204,169 | |||||||
|
|
|
|
|||||||
Total assets |
||||||||||
|
|
|
|
|||||||
Liabilities |
||||||||||
Financial liabilities at fair value through profit or loss |
4,6,19 | |||||||||
Financial liabilities at fair value through profit or loss (under Korean IFRS 1039) |
4,6,19 | | 12,023,058 | |||||||
Derivative financial liabilities |
4,6,9 | 2,901,247 | 3,142,765 | |||||||
Deposits |
4,6,20 | 276,770,449 | 255,800,048 | |||||||
Debts |
4,6,21 | 33,004,834 | 28,820,928 | |||||||
Debentures |
4,6,22 | 53,278,697 | 44,992,724 | |||||||
Provisions |
23 | 525,859 | 568,033 | |||||||
Net defined benefit liabilities |
24 | 262,213 | 154,702 | |||||||
Current income tax liabilities |
698,634 | 433,870 | ||||||||
Deferred income tax liabilities |
16,33 | 492,534 | 533,069 | |||||||
Insurance contract liabilities |
37 | 33,412,949 | 31,801,275 | |||||||
Other liabilities |
4,6,25 | 27,200,996 | 24,470,308 | |||||||
|
|
|
|
|||||||
Total liabilities |
443,875,271 | 402,740,780 | ||||||||
|
|
|
|
|||||||
Equity |
||||||||||
Share capital |
2,090,558 | 2,090,558 | ||||||||
Capital surplus |
17,121,660 | 17,122,228 | ||||||||
Accumulated other comprehensive income |
35 | 177,806 | 537,668 | |||||||
Retained earnings |
17,282,441 | 15,044,204 | ||||||||
Treasury shares |
(968,549 | ) | (755,973 | ) | ||||||
|
|
|
|
|||||||
Equity attributable to shareholders of the Parent Company |
26 | 35,703,916 | 34,038,685 | |||||||
Non-controlling interests |
9,111 | 6,144 | ||||||||
|
|
|
|
|||||||
Total equity |
35,713,027 | 34,044,829 | ||||||||
|
|
|
|
|||||||
Total liabilities and equity |
||||||||||
|
|
|
|
1 | The consolidated statement of financial position as of December 31, 2018 is prepared in accordance with Korean IFRS 1109 and Korean IFRS 1115, and the comparatives as of December 31, 2017 has not been restated. |
The accompanying notes are an integral part of these consolidated financial statements.
7
KB Financial Group Inc. and Subsidiaries
Consolidated Statements of Comprehensive Income
Years Ended December 31, 2018 and 2017
(In millions of Korean won, except per share amounts) | Notes | 2018 | 2017 | |||||||
Interest income |
||||||||||
Interest income from financial instruments at fair value through other comprehensive income and amortized cost |
12,986,209 | | ||||||||
Interest income from financial instruments at fair value through profit or loss |
748,360 | | ||||||||
Interest income from loans and receivables and investments |
| 11,382,452 | ||||||||
Interest income from financial instruments at fair value through profit or loss (under Korean IFRS 1039) |
| 536,605 | ||||||||
Interest expense |
(4,829,641 | ) | (3,672,443 | ) | ||||||
|
|
|
|
|||||||
Net interest income |
5,27 | 8,904,928 | 8,246,614 | |||||||
|
|
|
|
|||||||
Fee and commission income |
3,717,720 | 3,988,250 | ||||||||
Fee and commission expense |
(1,474,344 | ) | (1,938,226 | ) | ||||||
|
|
|
|
|||||||
Net fee and commission income |
5,28 | 2,243,376 | 2,050,024 | |||||||
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|
|
|
|||||||
Insurance income |
11,975,070 | 8,970,992 | ||||||||
Insurance expense |
(11,484,954 | ) | (8,377,282 | ) | ||||||
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|
|
|
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Net Insurance income |
5,37 | 490,116 | 593,710 | |||||||
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|
|||||||
Net gains on financial instruments at fair value through profit or loss before applying overlay approach |
350,490 | | ||||||||
Net gains on overlay adjustment |
813 | | ||||||||
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|
|||||||
Net gains on financial assets/liabilities at fair value through profit or loss |
5,29 | 351,303 | | |||||||
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|
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|
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Net gains on financial assets/liabilities at fair value through profit or loss (under Korean IFRS 1039) |
| 203,724 | ||||||||
|
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|
|
|||||||
Net other operating expenses |
5,30 | (1,130,036 | ) | (901,890 | ) | |||||
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|
|
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General and administrative expenses |
5,31 | (5,918,512 | ) | (5,628,664 | ) | |||||
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|
|
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Operating profit before provision for credit losses |
5 | 4,941,175 | 4,563,518 | |||||||
Provision for credit losses |
5,7,11,12,18,23 | (673,694 | ) | (548,244 | ) | |||||
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|
|
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Net operating income |
4,267,481 | 4,015,274 | ||||||||
|
|
|
|
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Share of profit of associates and joint ventures |
13 | 24,260 | 84,274 | |||||||
Net other non-operating income |
32 | 9,791 | 38,876 | |||||||
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|
|
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Net non-operating income |
34,051 | 123,150 | ||||||||
|
|
|
|
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Profit before income tax |
4,301,532 | 4,138,424 | ||||||||
Income tax expense |
33 | (1,239,586 | ) | (794,963 | ) | |||||
|
|
|
|
|||||||
Profit for the year |
5 | 3,061,946 | 3,343,461 | |||||||
|
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|
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Items that will not be reclassified to profit or loss: |
||||||||||
Remeasurements of net defined benefit liabilities |
24 | (138,016 | ) | 22,605 | ||||||
Share of other comprehensive income of associates and joint ventures |
(74 | ) | (145 | ) | ||||||
Revaluation gains on equity instruments at fair value through other comprehensive income |
(31,169 | ) | | |||||||
Fair value changes on financial liabilities designated at fair value due to own credit risk |
1,484 | | ||||||||
|
|
|
|
|||||||
(167,775 | ) | 22,460 | ||||||||
|
|
|
|
|||||||
Items that may be reclassified subsequently to profit or loss: |
||||||||||
Exchange differences on translating foreign operations |
48,820 | (110,037 | ) | |||||||
Net gains on financial instruments at fair value through other comprehensive income |
119,182 | | ||||||||
Valuation gains on financial investments |
| 89,117 | ||||||||
Shares of other comprehensive income of associates and joint ventures |
(3,659 | ) | 100,880 | |||||||
Cash flow hedges |
(9,038 | ) | 20,959 | |||||||
Gains/(losses) on hedges of a net investment in a foreign operation |
(27,134 | ) | 26,614 | |||||||
Other comprehensive income arising from separate account |
28,709 | (13,767 | ) | |||||||
Net gains on overlay adjustment |
37 | 413 | | |||||||
|
|
|
|
|||||||
157,293 | 113,766 | |||||||||
|
|
|
|
|||||||
Other comprehensive income for the year, net of tax |
(10,482 | ) | 136,226 | |||||||
|
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|
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Total comprehensive income for the year |
||||||||||
|
|
|
|
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Profit attributable to: |
5 | |||||||||
Shareholders of the Parent Company |
||||||||||
Non-controlling interests |
755 | 32,023 | ||||||||
|
|
|
|
|||||||
|
|
|
|
|||||||
Total comprehensive income for the year attributable to: |
||||||||||
Shareholders of the Parent Company |
||||||||||
Non-controlling interests |
659 | 34,402 | ||||||||
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|
|||||||
|
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|
|
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Earnings per share |
36 | |||||||||
Basic earnings per share |
||||||||||
Diluted earnings per share |
7,676 | 8,257 |
1 | The consolidated statement of comprehensive income for the year ended December 31, 2018 is prepared in accordance with Korean IFRS 1109 and Korean IFRS 1115, and the comparatives for the year ended December 31, 2017 has not been restated. |
The accompanying notes are an integral part of these consolidated financial statements.
8
KB Financial Group Inc. and Subsidiaries
Consolidated Statements of Changes in Equity
Years Ended December 31, 2018 and 2017
Equity attributable to shareholders of the Parent Company | ||||||||||||||||||||||||||||||||
Accumulated | ||||||||||||||||||||||||||||||||
Other | ||||||||||||||||||||||||||||||||
(in millions of Korean won) | Share | Capital | Comprehensive | Retained | Treasury | Non-controlling | Total | |||||||||||||||||||||||||
Capital | Surplus | Income | Earnings | Shares | Interests | Equity | ||||||||||||||||||||||||||
Notes | ||||||||||||||||||||||||||||||||
Balance at January 1, 2017 |
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Comprehensive income | ||||||||||||||||||||||||||||||||
Profit for the year |
| | | 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 | ) | ||||||||||||||||||||||
Valuation gains/(losses) on 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 | ||||||||||||||||||||||||
Gain on hedges of a net investment in a foreign operation |
| | 26,614 | | | | 26,614 | |||||||||||||||||||||||||
Other comprehensive income arising from 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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Balance at January 1, 2018 |
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|||||||||||||||||||
The effect of changing of accounting policy |
46 | | | (349,476 | ) | (71,724 | ) | | | (421,200 | ) | |||||||||||||||||||||
Balance after reflecting the effect of accounting policy |
2,090,558 | 17,122,228 | 188,192 | 14,972,480 | (755,973 | ) | 6,144 | 33,623,629 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Comprehensive income | ||||||||||||||||||||||||||||||||
Profit for the year |
| | | 3,061,191 | | 755 | 3,061,946 | |||||||||||||||||||||||||
Remeasurements of net defined benefit liabilities |
| | (138,016 | ) | | | | (138,016 | ) | |||||||||||||||||||||||
Exchange differences on translating foreign operations |
| | 48,916 | | | (96 | ) | 48,820 | ||||||||||||||||||||||||
Net gains on financial instruments at fair value through other comprehensive income |
| | 88,013 | 15,498 | | | 103,511 | |||||||||||||||||||||||||
Shares of other comprehensive income of associates and joint ventures |
|
| | (3,733 | ) | | | | (3,733 | ) | ||||||||||||||||||||||
Cash flow hedges |
| | (9,038 | ) | | | | (9,038 | ) | |||||||||||||||||||||||
Losses on hedges of a net investment in a foreign operation |
| | (27,134 | ) | | | | (27,134 | ) | |||||||||||||||||||||||
Other comprehensive income arising from separate account |
| | 28,709 | | | | 28,709 | |||||||||||||||||||||||||
Fair value changes on financial liabilities designated |
||||||||||||||||||||||||||||||||
at fair value due to own credit risk |
| | 1,484 | | | | 1,484 | |||||||||||||||||||||||||
Net gains on overlay adjustment |
| | 413 | | | | 413 | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Total comprehensive income/(loss) |
| | (10,386 | ) | 3,076,689 | | 659 | 3,066,962 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Transactions with shareholders | ||||||||||||||||||||||||||||||||
Dividends paid to shareholders of the Parent Company |
| | | (766,728 | ) | | | (766,728 | ) | |||||||||||||||||||||||
Acquisition of treasury shares |
| | | | (212,576 | ) | | (212,576 | ) | |||||||||||||||||||||||
Non-controlling interests changes in business combination |
45 | | | | | | 2,238 | 2,238 | ||||||||||||||||||||||||
Others |
| (568 | ) | | | | 70 | (498 | ) | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Total transactions with shareholders |
| (568 | ) | | (766,728 | ) | (212,576 | ) | 2,308 | (977,564 | ) | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Balance at December 31, 2018 |
||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 | The consolidated statement of changes in equity for the year ended December 31, 2018 is prepared in accordance with Korean IFRS 1109 and Korean IFRS 1115, and the comparatives for the year ended December 31, 2017 has not been restated. |
The accompanying notes are an integral part of these consolidated financial statements.
9
KB Financial Group Inc. and Subsidiaries
Consolidated Statements of Cash Flows
Years Ended December 31, 2018 and 2017
(in millions of Korean won) | 2018 | 2017 | ||||||
Cash flows from operating activities |
||||||||
Profit for the year |
||||||||
|
|
|
|
|||||
Adjustment for non-cash items |
||||||||
Net gain on financial assets/liabilities at fair value through profit or loss |
(104,755 | ) | | |||||
Net loss on financial assets/liabilities at fair value through profit or loss (under Korean IFRS 1039) |
| (106,868 | ) | |||||
Net loss on derivative financial instruments for hedging purposes |
186,029 | (135,363 | ) | |||||
Adjustment of fair value of derivative financial instruments |
410 | (1,000 | ) | |||||
Provision for credit loss |
673,694 | 548,244 | ||||||
Net loss (gain) on financial investments |
(99,253 | ) | 110,156 | |||||
Share of profit of associates and joint ventures |
(24,260 | ) | (84,274 | ) | ||||
Depreciation and amortization expense |
409,481 | 371,150 | ||||||
Depreciation and amortization expense on VOBA |
214,153 | 179,193 | ||||||
Other net losses (gains) on property and equipment/intangible assets |
(138,553 | ) | 30,893 | |||||
Share-based payments |
10,930 | 73,370 | ||||||
Policy reserve appropriation |
1,608,175 | 1,644,389 | ||||||
Post-employment benefits |
220,215 | 233,501 | ||||||
Net interest expense |
277,152 | 363,803 | ||||||
Gain on foreign currency translation |
(142,586 | ) | (70,399 | ) | ||||
Gains on bargain purchase |
| (122,986 | ) | |||||
Net other expense |
207,025 | 204,122 | ||||||
|
|
|
|
|||||
3,297,857 | 3,237,931 | |||||||
|
|
|
|
|||||
Changes in operating assets and liabilities |
||||||||
Financial asset at fair value through profit or loss |
(8,446,927 | ) | | |||||
Financial asset at fair value through profit or loss (under Korean IFRS 1039) |
| (3,946,805 | ) | |||||
Derivative financial instruments |
151,297 | (295,795 | ) | |||||
Loans at fair value through other comprehensive income |
(40,413 | ) | | |||||
Loans at amortized cost |
(31,334,606 | ) | (22,465,758 | ) | ||||
Current income tax assets |
(3,668 | ) | 59,334 | |||||
Deferred income tax assets |
(557 | ) | 3,186 | |||||
Other assets |
(2,292,160 | ) | (3,938,297 | ) | ||||
Financial liabilities at fair value through profit or loss |
3,690,005 | | ||||||
Financial liabilities at fair value through profit or loss (under Korean IFRS 1039) |
| 66,222 | ||||||
Deposits |
20,679,844 | 18,858,210 | ||||||
Current income tax liabilities |
264,765 | | ||||||
Deferred income tax liabilities |
115,208 | 108,355 | ||||||
Other liabilities |
1,899,791 | 133,931 | ||||||
|
|
|
|
|||||
(15,317,421 | ) | (11,417,417 | ) | |||||
|
|
|
|
|||||
Net cash outflow from operating activities |
(8,957,618 | ) | (4,836,025 | ) | ||||
|
|
|
|
|||||
Cash flows from investing activities |
||||||||
Net cash flows from derivative financial instruments for hedging purposes |
42,305 | | ||||||
Disposal of financial asset at fair value through profit or loss |
9,582,940 | | ||||||
Acquisition of financial asset at fair value through profit or loss |
(8,707,420 | ) | | |||||
Disposal of financial investments |
60,773,660 | 38,050,549 | ||||||
Acquisition of financial investments |
(64,729,380 | ) | (46,538,295 | ) | ||||
Disposal in investments in associates and joint ventures |
34,717 | 141,052 | ||||||
Acquisition of investments in associates and joint ventures |
(187,077 | ) | (53,375 | ) | ||||
Disposal of property and equipment |
2,272 | 31,167 | ||||||
Acquisition of property and equipment |
(452,270 | ) | (298,368 | ) | ||||
Disposal of investment property |
140,969 | 1,593 | ||||||
Acquisition of investment property |
(1,288,125 | ) | (262 | ) | ||||
Disposal of intangible assets |
10,706 | 7,603 | ||||||
Acquisition of intangible assets |
(126,163 | ) | (111,894 | ) | ||||
Net cash flows from the change in subsidiaries |
188,140 | (405,817 | ) | |||||
Others |
234,440 | 446,628 | ||||||
|
|
|
|
10
KB Financial Group Inc. and Subsidiaries
Consolidated Statements of Cash Flows
Years Ended December 31, 2018 and 2017
(in millions of Korean won) | 2018 | 2017 | ||||||
Net cash outflow from investing activities |
(4,480,286 | ) | (8,729,419 | ) | ||||
|
|
|
|
|||||
Cash flows from financing activities |
||||||||
Net cash flows from derivative financial instruments for hedging purposes |
15,044 | 63,827 | ||||||
Net increase in debts |
4,216,014 | 4,272,011 | ||||||
Increase in debentures |
143,603,589 | 139,700,967 | ||||||
Decrease in debentures |
(135,180,630 | ) | (129,235,557 | ) | ||||
Increase in other payables from trust accounts |
267,077 | 587,523 | ||||||
Dividends paid to shareholders of the Parent Company |
(766,728 | ) | (497,969 | ) | ||||
Disposal of treasury shares |
| 3,515 | ||||||
Acquisition of treasury shares |
(224,700 | ) | (185,532 | ) | ||||
Dividends paid to non-controlling interests |
| (5,156 | ) | |||||
Increase in non-controlling interests |
| (163,658 | ) | |||||
Others |
(185,894 | ) | 148,775 | |||||
|
|
|
|
|||||
Net cash inflow from financing activities |
11,743,772 | 14,688,746 | ||||||
|
|
|
|
|||||
Effect of exchange rate changes on cash and cash equivalents |
(67,950 | ) | (133,240 | ) | ||||
|
|
|
|
|||||
Net increase (decrease) in cash and cash equivalents |
(1,762,082 | ) | 990,062 | |||||
Cash and cash equivalents at the beginning of the year |
8,404,898 | 7,414,836 | ||||||
|
|
|
|
|||||
Cash and cash equivalents at the end of the year |
||||||||
|
|
|
|
1 | The consolidated statement of cash flows for the year ended December 31, 2018 is prepared in accordance with Korean IFRS 1109 and Korean IFRS 1115, and the comparatives for the year ended December 31, 2017 has not been restated. |
The accompanying notes are an integral part of these consolidated financial statements.
11
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
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 (collectively referred to as 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.
The Parent Companys share capital as of December 31, 2018, 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 (Hangeul) 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.
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.
12
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
The Group has applied the following standards and amendments for the first time for their annual reporting period commencing January 1, 2018. The adoption of these amendments did not have any significant impact on the current period or any prior period and is not likely to affect future periods, with the exception of the application of Korean IFRS 1109 Financial Instruments and IFRS 1115 Revenue from Contracts with Customers discussed below.
| Amendments to Korean IFRS 1028 Investments in Associates and Joint Ventures |
Amendments to Korean IFRS 1028 clarifies that a venture capital organization or a mutual fund, and similar entities may elect, at initial recognition, to measure investments in an associate or joint venture at fair value through profit or loss separately for each associate or joint venture.
| Amendments to Korean IFRS 1040 Transfers of Investment Property |
Amendments to 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. Paragraph 57 of the standard provides a list of such circumstances as examples.
| Amendments to Korean IFRS 1102 Share-based Payment |
Amendments to Korean IFRS 1102 clarifies 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. Also, it clarifies 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.
| Enactment of Korean IFRS 2122 Foreign Currency Transactions and Advance Consideration |
According to the enacted interpretation, 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 thereof) is the date on which an entity initially recognizes the non-monetary asset or non-monetary liability arising from the prepayment or receipt of advance consideration. In case there are multiple payments or receipts in advance, the entity should determine a date of the transaction for each payment or receipt of advance consideration.
| Korean IFRS 1109 Financial Instruments |
The Group applied Korean IFRS 1109 Financial Instruments with a date of initial application of January 1, 2018. As permitted by the transition requirements of Korean IFRS 1109, comparative periods have not been restated. The Group recognized the difference between the previous carrying amount and the carrying amount at the beginning of the annual reporting period that includes the date of initial application in the opening retained earnings of the annual reporting period that includes the date of initial application. Also, the Group applied The Overlay Approach under Korean IFRS 1104 at the initial application of Korean IFRS 1109. For details about impacts of the adoption of this Korean IFRS, see Note 46.
13
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
| Korean IFRS 1115 Revenue from Contracts with Customers |
The Group has applied Korean IFRS 1115 Revenue from Contracts with Customers. As permitted by the transition requirements of Korean IFRS 1115, comparative periods have not been restated.
For details about impacts of the application of this Korean IFRS, see Note 28 and 46.
The Group has changed the accounting policy for their annual reporting period commencing January 1, 2018.
| Presentation of interest income arising from financial assets measured at fair value through profit or loss |
The Group previously recognized interest income arising from financial assets at fair value through profit or loss as net gains (losses) on financial assets/liabilities at fair value through profit or loss in the consolidated statements of comprehensive income. From January 1, 2018, the Group changed the accounting policy, and corresponding interest income is presented as a portion of interest income in the consolidated statements of comprehensive income. The Group expects the change in accounting policy provides more relevant information.
The consolidated statement of comprehensive income for year ended December 31, 2017, has been restated by adjusting classification of interest income.
The Group does not expect the change in accounting policy to have an impact on the consolidated statements of financial position, and total comprehensive income. The results and impact of the change on the consolidated statement of comprehensive income for the year ended December 31, 2018 and 2017, are as follows:
(in millions of Korean won) | 2018 | 2017 | ||||||
Increase in interest income |
||||||||
Decrease in net gains (losses) on financial assets/liabilities at fair value through profit or loss |
(748,360 | ) | | |||||
Decrease in net gains (losses) on financial assets/liabilities at fair value through profit or loss (under Korean IFRS 1039) |
| (536,605 | ) |
Certain new accounting standards and interpretations that have been published that are not mandatory for annual reporting period commencing January 1, 2018 and have not been early adopted by the Group are set out below. The Group expects the effect on the financial statements applying the new standard will not be significant, with the exception of the adoption of Korean IFRS 1116 Lease
| 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 Korean IFRS 2104 Determining whether an Arrangement contains a Lease, Interpretation Korean IFRS 2015 Operating Leases-Incentives, and Interpretation Korean IFRS 2027 Evaluating the Substance of Transactions Involving the Legal Form of a Lease.
14
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
At inception of a contract, the Group shall assess whether the contract is, or contains, a lease. Also, at the date of initial application, the Group shall assess whether the contract is, or contains, a lease in accordance with the standard. However, the Group may not need to reassess all contracts, if the Group elects to apply the practical expedient not to apply the standard to contracts that were entered into before the date of initial application. At inception of a contract, the Group will assess whether the contract is, or contains, a lease.
For a contract that is, or contains, a lease, the Group shall account for each lease component within the contract as a lease separately from non-lease components of the contract. 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. For the all (or partial) lease agreements, or the agreements including lease components, the Group plans to apply the practical expedient to account for each lease component and any associated non-lease components as a single lease agreement.
A lessee 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). The Group plans not to apply the requirements to real estates rent for single-use (a lease for education and others) and low value assets (e.g. underlying
assets below W5 million and $5,000).
In relation with sale and leaseback transactions, the Group (the seller-lessee) shall apply the requirements for determining when a performance obligation is satisfied in Korean IFRS 1115 Revenue from Contracts with Customers to determine whether the transfer of an asset is accounted for as a sale of that asset. However, for those transactions before the date of initial application, the Group shall not reassess them.
The accounting treatment as a lessor did not change significantly from the one under Korean IFRS 1017 Leases. The Bank expects the effect on the financial statements applying the new standard will not be significant as accounting for the Bank, as a lessor, will not significantly change.
A lessee shall apply this standard to its leases either (a) retrospectively to each prior reporting period presented applying Korean IFRS 1008 Accounting Policies, Changes in Accounting Estimates and Errors (Full retrospective application); or (b) retrospectively with the cumulative effect of initially applying the standard recognized at the date of initial application.
The Group plans to apply Korean IFRS 1116 retrospectively with the cumulative effect of initially applying the standard and as such will not restate any comparative information.
The Group performed an impact assessment to identify potential financial effects of applying Korean IFRS 1116 based on available information as at December 31, 2018 to identify effects on 2019 financial statements.
15
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
The total minimum lease payment expected to be paid by the Group in relation to operating leases before
discounted to their present value is W591,190 million. When the payment is discounted at incremental borrowing rate of the lessee, the total minimum lease payment amounts to W550,322 million. As a result of the
financial effects on the financial statements analyzed, the Group expects the underlying leased asset and a lease liability as at December 31, 2018 to be increased by W580,698 million and
W550,322 million, respectively. The difference between the right-of-use asset and the lease liability has been arising from the adjustments made at
the right-of-use asset for the lease contracts entered before the date of the adoption of this standard. On the other hand, the results of the assessment may change due
to additional information that the Group may obtain after the assessment.
Enactment, Amendments and Annual Improvements
| Amendments to Korean IFRS 1109 Financial Instruments |
The narrow-scope amendments made to Korean IFRS 1109 Financial Instruments enable entities to measure certain prepayable financial assets with negative compensation at amortized cost. When a modification of a financial liability measured at amortized cost that does not result in derecognition, a modification gain or loss shall be recognized in profit or loss.
| Amendments to Korean IFRS 1019 Employee Benefits |
The amendments require that an entity shall calculate current service cost and net interest for the remainder of the reporting period after a plan amendment, curtailment or settlement based on updated actuarial assumptions from the date of the change. The amendments also require that a reduction in a surplus must be recognized in profit or loss even if that surplus was not previously recognized because of the impact of the asset ceiling.
| Amendments to Korean IFRS 1028 Investments in Associates and Joint Ventures |
The amendments clarify that an entity shall apply Korean IFRS 1109 to financial instruments in an associate or joint venture to which the equity method is not applied. These include long-term interests that, in substance, form part of the entitys net investment in an associate or joint venture. These amendments will be applied for annual periods beginning on or after January 1, 2019, with early adoption permitted. In accordance with the transitional provisions in Korean IFRS 1109, the restatement of the comparative information is not required and the cumulative effects of initially applying the amendments retrospectively should be recognized in the beginning balance of retained earnings (or other components of equity, as appropriate) at the date of initial application.
| Enactment to Interpretation of Korean IFRS 2123 Uncertainty over Income Tax Treatments |
The enactment clarifies the accounting for uncertainties in income taxes in the event that the decision of taxation authorities or courts can change tax treatment. The enactment presents calculating methods of disclosure amount based on the possibility of future recognition of the income tax treatment, and requires disclosure of the uncertainty of the amount.
| Annual Improvements to Korean IFRS 1103 Business Combination |
The amendments clarify that when a party to a joint arrangement obtains control of a business that is a joint operation, and had rights to the assets and obligations for the liabilities relating to that joint operation immediately before the acquisition date, the transaction is a business combination achieved in stages. In such cases, the acquirer shall remeasure its entire previously held interest in the joint operation.
16
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
| Annual Improvements to Korean IFRS 1111 Joint Agreements |
The amendments clarify that when a party that participates in, but does not have joint control of, a joint operation might obtain joint control of the joint operation in which the activity of the joint operation constitutes a business. In such cases, previously held interests in the joint operation are not remeasured.
| Annual Improvements to Paragraph 57A of Korean IFRS 1012 Income Tax |
The amendment is applied to all the income tax consequences of dividends and requires an entity to recognize the income tax consequences of dividends in profit or loss, other comprehensive income or equity according to where the entity originally recognized those past transactions or events.
| Annual Improvements to Korean IFRS 1023 Borrowing Cost |
The amendments clarify that if a specific borrowing remains outstanding after the related qualifying asset is ready for its intended use (or sale), it becomes part of general borrowings.
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:
17
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
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, and others in accordance with the Tax System for Promotion of Investment and Collaborative Cooperation (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 2018. 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 others, 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 tests impairment and recognizes allowances for losses on financial assets classified at amortized cost, debt instruments measured at fair value through other comprehensive income and lease receivables through impairment testing and recognizes provisions for guarantees, and unused loan commitments. Accuracy of provisions for credit losses is dependent upon estimation of expected cash flows of the borrower for individually assessed allowances of loans, and upon assumptions and methodology used for 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).
18
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
3. Significant Accounting Policies
The significant accounting policies applied in the preparation of these consolidated financial statements are set out below. The items related to financial instruments on the consolidated financial statements were stated under Korean IFRS 1109 for the current year, and under Korean IFRS 1039 for the year ended December 31, 2017. And The items related to Revenue from Contracts with Customers were stated under Korean IFRS 1115 for the current year, and under Korean IFRS 1018 for the year ended December 31, 2017. The accounting policies on financial instruments were applied for current period, and comparatives are not restated retrospectively. Except for the changes related to financial instruments, these policies have been consistently applied to all periods presented.
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 Company and to the non-controlling interests, if any. Total comprehensive income is attributed to the owners of the Parent Company and to the non-controlling interests even if this results in the non-controlling interests having a negative 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 exercising their entitlement. 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. Amounts previously recognized in other comprehensive income are reclassified to profit or loss.
19
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
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.
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 recognized in other comprehensive income shall be reclassified as profit or loss, or retained earnings, 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 are entities over which the Group has significant influence in the financial and operating policy decisions. Generally, if the Group holds 20% to 50% of the voting power of the investee, it is presumed that the Group has significant influence, it is presumed that the Group has significant influence.
Joint ventures are investments in which the Group jointly controls over economic activities pursuant to contractual arrangement. Decisions on financial and operating policies require unanimous consent of the parties sharing control.
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.
20
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
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.
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.
21
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
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.
Assets and liabilities for each statement of financial position presented (including comparatives) are translated at the closing rate at the end of the reporting period, unless the functional currency of the foreign operation is in hyper-inflationary economy. Income and expenses in the statement of comprehensive income presented are translated using the 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.
3.2.3 Net investment in a foreign operation
If the settlement of a monetary item receivable from or payable to a foreign operation is neither planned nor likely to occur in the foreseeable future, then foreign currency difference arising on the item which in substance is considered to form part of the net investment in the foreign operation, are recognized in the other comprehensive income and shall be reclassified to profit or loss on disposal of the investment.
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.
22
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
The Group classifies financial assets as financial assets at fair value through profit or loss, financial assets at fair value through other comprehensive income, or financial assets at amortized cost. 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 amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arms length transaction. 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.
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 on initial recognition:
| minus the principal repayments |
| plus or minus the cumulative amortization using the effective interest method of any difference between that initial amount and the maturity amount |
| or any reduction (directly or through the use of an allowance account) due to 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.
23
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
In addition, the fair value information recognized in the statements of financial position is classified into the following fair value hierarchy, reflecting the significance of the input variables used in the fair value measurement.
Level | 1 : quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date |
Level | 2 : inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. |
Level | 3 : 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.
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.
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.
24
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
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 entirety and recognize a financial liability for the consideration received.
The Group writes off financial assets in its entirety or to a portion thereof when the principal and interest on the principal amount outstanding are determined to be no longer recoverable. In general, the Group considers write-off if significant financial difficulties of the debtor, or delinquency in interest or principal payments is indicated. The write-off decision is made in accordance with internal regulations and may require approval from external institution, if necessary. After the write-off, the Group can collect the written-off loans continuously according to the internal policy. Recovered amounts of financial assets previously written-off are recognized at profit or loss.
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 Due from Financial Institutions
Cash and due from financial institutions 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, and due from financial institutions. Cash and due from financial institutions are measured at amortized cost.
3.5 Non-derivative Financial Assets
3.5.1 Financial assets at fair value through profit or loss
Financial assets classified as held for trading, financial assets designated by the Group as at fair value through profit or loss upon initial recognition, and financial assets that are required to be mandatorily measured at fair value through profit or loss are classified as financial assets at fair value through profit or loss
The Group may designate certain financial assets upon initial recognition as at fair value through profit or loss when the designation 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.
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 and dividend income from financial assets at fair value through profit or loss are also recognized in the statement of comprehensive income.
25
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
3.5.2 Financial assets at fair value through other comprehensive income
The Group classifies below financial assets as financial assets at fair value through other comprehensive income;
| debt instruments that are a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets, and consistent with representing solely payments of principal and interest on the principal amount outstanding or; |
| equity instruments, not held for trading with the objective of generating a profit from short-term fluctuations in price or dealers margin, designated as financial assets at fair value through other comprehensive income |
After initial recognition, a financial asset at fair value through other comprehensive income is measured at fair value. Gain and loss from changes in fair value, other than dividend income and interest income amortized using effective interest method and exchange differences arising on monetary items which are recognized directly in income as interest income or expense, are recognized as other comprehensive income in equity.
At disposal of financial assets at fair value through other comprehensive income, cumulative gain or loss is recognized as profit or loss for the reporting period. However, cumulative gain or loss of equity instrument designated as fair value through other comprehensive income are not recycled to profit or loss at disposal.
Financial assets at fair value through other comprehensive income denominated in foreign currencies are translated at the closing rate. Exchange differences resulting from changes in amortized cost are recognized in profit or loss, and other changes are recognized as equity.
3.5.3 Financial assets measured at amortized cost
A financial asset, which are held within the business model whose objective is to hold assets in order to collect contractual cash flows and consistent with representing solely payments of principal and interest on the principal amount outstanding, are classified as a financial asset at amortized cost.
Financial assets at amortized cost are subsequently measured at amortized cost using the effective interest method after initial recognition and interest income is recognized using the effective interest method.
3.6 Expected Credit Loss of Financial Assets (Debt Instruments)
The Group measures expected credit loss and recognizes loss allowance at the end of the reporting period for financial assets measured at amortized cost and fair value through other comprehensive income with the exception of financial asset measured at fair value through profit or loss.
Expected credit losses are a probability-weighted estimate of credit losses (i.e. the present value of all cash shortfalls) over the expected life of the financial instrument. The Group measures expected credit losses by reflecting reasonable and supportable information that is reasonably available at the reporting date without undue cost or effort, including information about past events, current conditions and forecasts of future economic conditions.
26
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
The Group uses the following three measurement techniques in accordance with Korean IFRS:
| General approach: for financial assets and off-balance-sheet unused credit line that are not applied below two approaches |
| Simplified approach: for receivables, contract assets and lease receivables |
| Credit-impaired approach: for purchased or originated credit-impaired financial assets |
Different measurement approaches are applied depending on significant increase in credit risk. 12 month expected credit losses is recognized when credit risk has not significantly increased since initial recognition. A loss allowance at an amount equal to lifetime expected credit losses is recognized when credit risk has significantly increased since initial recognition. Lifetime is presumed to be a period to the contractual maturity date of a financial asset (the expected life of the financial asset).
One or more of the following items is deemed significant increase in credit risk. 30 days past due presumption is applicable for all consolidated subsidiaries, and other standards are selectively applied considering applicability of each subsidiary with its specific indicators. When the contractual cash flows of a financial asset are renegotiated or otherwise modified, the Group determines whether the credit risk has increased significantly since initial recognition using the following information.
| more than 30 days past due; |
| decline in credit rating at period end by more than certain notches as compared to that at initial recognition; |
| decline in ratings below certain level in the early warning system; |
| debt restructuring (except for impaired financial assets); and |
| credit delinquency information on Korea Federation of Banks, and etc. |
Under simplified approach, the Group shall always measure the loss allowance at an amount equal to lifetime expected credit losses. Under credit-impaired approach, the Group shall only recognize the cumulative changes in lifetime expected credit losses since initial recognition as a loss allowance for purchased or originated credit-impaired financial assets. In assessing credit impairment, the Group uses definition of default as in the new Basel Accord which rules calculation of Capital Adequacy Ratio.
The Group generally deems one or more of the following items credit-impaired:
| no less than 90 days past due; |
| legal proceedings related to collection; |
| a borrower that has received a warning from the Korea Federation of Banks; |
| corporate borrowers that are rated C or D; |
| refinancing; and |
| debt restructuring. |
27
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
3.6.1 Forward-looking information
The Group uses forward-looking information, when it determines whether the credit risk has increased significantly since initial recognition and measures expected credit losses.
The Group assumes the risk component has a certain correlation with the business cycle, and calculates the expected credit loss by reflecting the forward-looking information with macroeconomic variables on the measurement inputs.
The correlation between the major macroeconomic variables and the credit risk is as follows;
Key macroeconomic variables |
Correlation between the major macroeconomic variables and the credit risk | |
Domestic GDP growth rate | (-) | |
Composite stock index | (-) | |
Construction investment change rate | (-) | |
Housing transaction price index | (-) | |
Consumer price index | (+) | |
Overnight call rate changes compare to previous year(%P) | (+) | |
Unemployment rate | (+) | |
Retail loan change rate | (-) |
Forward looking information used in calculation of expected credit loss is derived by KB Financial Group Research Institute after comprehensive consideration of a variety of factors including scenario in management planning, third party forecast, and others.
3.6.2 Measuring expected credit losses on financial assets at amortized cost
The amount of the loss on financial assets at amortized cost 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 Group estimates expected future cash flows for financial assets that are individually significant (individual assessment of impairment).
For financial assets that are not individually significant, the Group collectively estimates expected credit loss by grouping loans with homogeneous credit risk profile (collective assessment of impairment).
Individual assessment of impairment
Individual assessment of impairment losses are calculated using managements best estimate on present value of expected future cash flows. The Group uses all the available information including operating cash flow of the borrower and net realizable value of any collateral held.
28
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
Collective assessment of impairment
Collective assessment of loss allowance involves historical loss experience along with incorporation of forward-looking information. Such process incorporates factors such as type of collateral, product and borrowers, credit rating, size of portfolio and recovery period and applies probability of default (PD) on a group of assets and loss given default (LGD) by type of recovery method. Also, the expected credit loss model involves certain assumption to determine input based on loss experience and forward-looking information. These models and assumptions are periodically reviewed to reduce gap between loss estimate and actual loss experience.
Lifetime expected credit loss as at the end of the reporting period is calculated by product of carrying amount net of expected repayment, PD for each period and LGD adjusted by change in carrying amount.
3.6.3 Measuring expected credit losses on financial assets at fair value through other comprehensive income
Measuring method of expected credit losses on financial assets at fair value through other comprehensive income is equal to the method of financial assets at amortized cost, except for loss allowances that are recognized as other comprehensive income. Amounts recognized in other comprehensive income for sale or repayment of financial assets at fair value through other comprehensive income are reclassified to profit or loss.
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. This documentation includes identification of the hedging instrument, the hedged item or transaction, the nature of the risk being hedged and how the Group will assess the hedging instruments effectiveness in offsetting the exposure to changes in the hedged items fair value or cash flows attributable to the hedged risk.
Derivatives are initially recognized at fair value. Subsequent to initial recognition, derivatives are measured at fair value, and changes therein are accounted for as described below.
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.
29
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
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. If hedged items are equity instruments and designated to present the change in fair value of the hedging instrument in other comprehensive income, recognized hedge ineffectiveness are presented in other comprehensive income. 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 effective portion of changes in fair value of derivatives that are designated and qualify as cash flow hedges is recognized in other comprehensive income, limited to the cumulative change in fair value (present value) of the hedged item (the present value of the cumulative change in the future expected cash flows of the hedged item) from the inception of the hedge. The ineffective portion is recognized in gain or loss (other operating income or expense). 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. 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 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 derivatives and non-derivatives 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 1109 Financial Instruments.
3.7.5 Embedded derivatives
If a hybrid contract contains a host that is not an asset, 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.
30
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
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.
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 | 20 ~ 40 years | ||
Leasehold improvements | Declining-balance/ Straight-line | 4 ~ 15 years | ||
Equipment and vehicles | Declining-balance/ Straight-line | 3 ~ 15 years | ||
Finance leased assets | Declining-balance | 8 months ~ 5 years and 8 months |
31
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
The residual value, the useful life and the depreciation method applied to an asset are reviewed 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 | 20~40 years |
The residual value, the useful life and the depreciation method applied to an asset are reviewed at each financial year end. 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 | 3~19 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 | 1~10 years |
The amortization period and the amortization method for intangible assets with a definite useful life are reviewed 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 definite useful life is accounted for as a change in an accounting estimate.
32
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
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 over the above estimated useful life using declining balance method, and the depreciation is recognized as insurance expense.
3.10.2 Goodwill
Recognition and measurement
Goodwill arisen 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.
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.
33
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
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.
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 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, and the incentives from operating lease are recognized as a reduction of lease payments over the lease term.
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.
34
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
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 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 arising from 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.
35
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
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
The Group classifies non-derivative financial liabilities into financial liabilities at fair value through profit or loss or other financial liabilities in accordance with the substance of the contractual arrangement and the definitions of financial liabilities.
The Group recognizes financial liabilities in the consolidated statement of financial position when the Group becomes a party to the contractual provisions of the financial liability.
3.15.1 Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss include financial liabilities held for trading or designated as such upon initial recognition. Subsequent to initial recognition, financial liabilities at fair value through profit or loss are measured at fair value, and changes therein are recognized in profit or loss. Upon initial recognition, transaction costs that are directly attributable to the acquisition are recognized in profit or loss as incurred.
In relation to securities lending or borrowing transactions, the Group records transaction using memo value when it borrows securities from Korea Securities Depository etc. The borrowed securities are treated as financial liabilities at fair value through profit and loss when the Group sells them. Changes in fair value at the end of the reporting period and difference between carrying amount at redemption and purchased amount are recognized as profit and loss.
In addition, for the amount of change in the fair value of the financial liability that is attributable to changes in the credit risk of that liability, the Group presents this change in other comprehensive income, and does not recycle this to profit or loss, subsequently. When this treatment creates or enlarges an accounting mismatch, the Group recognizes this change as profit or loss for the current period.
36
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
3.15.2 Other financial liabilities
Non-derivative financial liabilities other than financial liabilities at fair value through profit or loss are classified as other financial liabilities. Other financial liabilities include Deposits, Debts, Debentures and others. At the date of initial recognition, other financial liabilities are measured at fair value minus transaction costs that are directly attributable to the acquisition. Subsequent to initial recognition, other financial liabilities are measured at amortized cost, and its interest expense is recognized, using the effective interest method.
In case an asset is sold under repurchase agreement, the Group continues to recognize the asset with the amount sold being accounted for as borrowing.
The Group derecognizes a financial liability from the consolidated statement of financial position only when it is extinguished (i.e. when the obligation specified in the contract is discharged, cancelled or expires).
3.16 Insurance Contracts
KB Life Insurance Co., Ltd., and KB Insurance Co., Ltd., the subsidiaries of the Group, issue 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 1109, Financial Instruments 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 not earned 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
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. It is calculated as the greater of the amount using standard interest rate and standard loss ratio defined by Financial Supervisory Services and the amount using the actual underlying data that have been used in premium calculation.
37
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
Reserve for outstanding claims
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
The premiums that are due before the end of the reporting period but applicable to the next period are included.
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 insufficient in light of the estimated future cash flows, additional reserve is recognized for the deficient amount. 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 to use 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.
38
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
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.
If the Group has an onerous contract, 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 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 as other liabilities, and are amortized over the contractual term. After initial recognition, financial guarantee contracts are measured at the higher of:
- | The amount determined in accordance with Korean IFRS 1109, Financial Instruments or |
- | The initial amount recognized, less, when appropriate, cumulative amortization recognized in accordance with Korean IFRS 1115, Revenue from Contracts with Customers. |
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 or the exercise of stock option are deducted from the equity, net of any tax effects.
3.19.2 Hybrid capital instruments
The Group classifies issued financial instruments, or their component parts, as a financial liability or an equity instrument depending on the substance of the contractual arrangement of such financial instruments. Hybrid bonds are classified as equity instruments and presented in equity, if the Group has an unconditional right to avoid delivering cash or another financial asset to settle a contractual obligation.
39
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
3.19.3 Treasury shares
If the Group acquires its own equity instruments, these are accounted for as treasury shares and are deducted directly from equity. No gains or losses are recognized in profit or loss on the purchase, sale, issue or cancellation of own equity instruments. If an entity within the Group acquires and retains treasury shares, the consideration paid or received is directly recognized in equity.
3.19.4 Hybrid financial instruments
A hybrid financial instrument is classified as a financial liability or an equity instrument depending on the substance of the contractual arrangement of such financial instrument. The liability component of the hybrid financial instrument is measured at fair value of the similar liability without conversion option at initial recognition and subsequently measured at amortized cost using effective interest rate method until it is extinguished by conversion or matured. Equity component is initially measured at fair value of hybrid financial instrument in entirety less fair value of liability component net of tax effect and it is not remeasured subsequently.
3.20 Revenue Recognition
The Group recognizes revenues in accordance with the following revenue recognition standard:
| Step 1: Identify the contract with a customer. |
| Step 2: Identify the performance obligations in the contract. |
| Step 3: Determine the transaction price. |
| Step 4: Allocate the transaction price to the performance obligations in the contract. |
| Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation. |
3.20.1 Interest income and expense
Interest income of financial assets at amortized cost and financial assets at fair value through other comprehensive income, and expense are recognized in statements of comprehensive income 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 instrument but does not consider future credit losses. The calculation includes all fees and points paid (main components of effective interest rates only) 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.
Interest earned arising from debt investments at fair value through profit or loss is also classified as interest income in statements of comprehensive income.
40
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
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. Fees which can be earned through the certain periods, including account servicing fees, investment management fees, and etc. are recognized when the related services are provided.
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 Net gains/losses on financial instruments at fair value through profit or loss
Net gains/losses on financial instruments at fair value through profit or loss include profit or loss (changes in fair value, dividends, and gain/loss from foreign currency translation) from following financial instruments:
| Gain or loss from financial instruments at fair value through profit or loss |
| Gain or loss from derivatives for trading, including derivatives for hedging that does not meet the condition of hedge accounting |
3.20.4 Dividend income
Dividend income is recognized in profit or loss when the right to receive payment is established. Dividend income is recognized as relevant items on statements of profit or loss and other comprehensive income in accordance with the classification of equity instruments.
41
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
3.21 Employee Compensation and Benefits
3.21.1 Post-employment benefits: defined contribution plans
The contributions are recognized as employee benefit expense when they are due.
3.21.2 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 reporting period.
3.21.3 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.
3.21.4 Share-based payment
The Group has provided its directors and employees with stock grant, and mileage stock programs. When stock grant 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. When mileage stock options are exercised, the Group pays the amount equivalent to KB Financial Groups share price in cash.
42
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
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. For mileage stock option, the Group accounts for the transaction in accordance with cash-settled share-based payment transactions, which are recognized as accrued expenses at the time of vesting.
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 reporting period.
3.21.5 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.
43
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
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, associates and joint ventures, 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.
44
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
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.
3.25 Overlay Approach
The Group applies the overlay approach in accordance with Korean IFRS 1104, and financial asset is eligible for designation for the overlay approach if, and only if, the following criteria are met:
| It is measured at fair value through profit or loss applying Korean IFRS 1109 but would not have been measured at fair value through profit or loss in its entirety applying Korean IFRS 1039. |
| It is not held in respect of an activity that is unconnected with contracts within the scope of Korean IFRS 1104. |
The Group reclassifies between profit or loss and other comprehensive income, and the amount reclassified is equal to the difference between:
| The amount reported in profit or loss for the designated financial assets applying Korean IFRS 1109. |
| The amount that would have been reported in profit or loss for the designated financial assets if the insurer had applied Korean IFRS 1039. |
The Group is permitted to apply this approach either at initial recognition or it may subsequently designate financial assets that newly meet criterion of not being held in respect of activity unconnected with insurance contract, they having previously not met that criterion.
The Group continues to apply the overlay approach to a designated financial asset until that financial asset is derecognized. However, the Group de-designates a financial asset when the financial asset no longer meets the criterion. In this case, the Group reclassifies from accumulated other comprehensive income to profit or loss as a reclassification adjustment any balance relating to that financial asset.
At the beginning of any annual period, the Group may stop applying the overlay approach to all designated financial assets, and shall not subsequently apply the overlay approach, if it stops using this approach because it is no longer an insurer.
45
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
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.
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.
The Group uses definition of default as defined and applied in the calculation of Capital Adequacy Ratio (Basel III) in accordance with the new Basel Accord.
46
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
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.
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, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | |||
Financial assets |
||||
Due from financial institutions at amortized cost 1 |
||||
Financial assets at fair value through profit or loss |
||||
Due from financial institutions |
381,719 | |||
Securities |
48,285,482 | |||
Loans |
954,176 | |||
Financial instruments indexed to the price of gold |
78,808 | |||
Derivatives |
2,025,962 | |||
Loans at amortized cost1 |
319,201,603 | |||
Financial investments |
||||
Securities measured at fair value through other comprehensive income |
35,243,634 | |||
Securities measured at amortized cost1 |
23,661,522 | |||
Loans measured at fair value through other comprehensive income |
389,822 | |||
Other financial assets1 |
8,133,556 | |||
|
|
|||
455,572,572 | ||||
|
|
|||
Off-balance sheet items |
||||
Acceptances and guarantees contracts |
7,277,136 | |||
Financial guarantee contracts |
3,626,532 | |||
Commitments |
138,590,372 | |||
|
|
|||
149,494,040 | ||||
|
|
|||
|
|
1 | Due from financial institutions, loans at amortized cost, securities measured at amortized cost and other financial assets are net of allowance. |
47
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
(In millions of Korean won) | 2017 | |||
Financial assets |
||||
Due from financial institutions |
||||
Financial assets at fair value through profit or loss |
||||
Financial assets held for trading1 |
25,242,193 | |||
Financial assets designated at fair value through profit or loss |
1,982,224 | |||
Derivatives |
3,310,166 | |||
Loans2 |
290,122,838 | |||
Financial investments |
||||
Available-for-sale financial assets |
38,959,401 | |||
Held-to-maturity financial assets |
18,491,980 | |||
Other financial assets2 |
10,195,015 | |||
|
|
|||
405,523,478 | ||||
|
|
|||
Off-balance sheet items |
||||
Acceptances and guarantees contracts |
6,977,468 | |||
Financial guarantee contracts |
3,683,875 | |||
Commitments |
102,183,167 | |||
|
|
|||
112,844,510 | ||||
|
|
|||
|
|
1 | Including financial instruments indexed to 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 assesses expected credit loss on financial asset at amortized cost and financial asset at fair value through other comprehensive income other than financial asset at fair value through profit or loss and recognizes loss allowance. Expected credit losses are a probability-weighted estimate of possible credit losses within certain range by reflecting reasonable and supportable information that is reasonably available at the reporting date without undue cost or effort, including information about past events, current conditions and forecasts of future economic conditions. The Group assesses the expected credit losses for loans categorized in financial assets at amortized cost, and presents it with the name of account allowance for loan losses netting from the related carrying amounts. For the expected credit losses for loans categorized in financial assets at fair value through other comprehensive income, the Group presents it in other comprehensive income.
48
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
Loans as of December 31, 2018, are classified as follows:
(In millions of Korean won)
2018 | ||||||||||||||||||||
The financial instruments applying 12-month expected credit losses |
The financial instruments applying lifetime expected credit losses |
Financial instruments not applying expected credit losses |
Total | |||||||||||||||||
Non-impaired | Impaired | |||||||||||||||||||
Loans at amortized cost1 |
| |||||||||||||||||||
Corporate |
| |||||||||||||||||||
Grade 1 |
||||||||||||||||||||
Grade 2 |
55,292,251 | 4,227,041 | 2,016 | | 59,521,308 | |||||||||||||||
Grade 3 |
2,957,463 | 1,757,607 | 6,579 | | 4,721,649 | |||||||||||||||
Grade 4 |
484,248 | 965,094 | 68,271 | | 1,517,613 | |||||||||||||||
Grade 5 |
244,593 | 378,588 | 1,063,646 | | 1,686,827 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
134,763,702 | 9,472,505 | 1,142,150 | | 145,378,357 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Retail |
| |||||||||||||||||||
Grade 1 |
133,946,705 | 4,411,122 | 9,180 | | 138,367,007 | |||||||||||||||
Grade 2 |
7,819,152 | 7,497,880 | 17,767 | | 15,334,799 | |||||||||||||||
Grade 3 |
1,718,104 | 1,559,980 | 6,694 | | 3,284,778 | |||||||||||||||
Grade 4 |
706,797 | 421,800 | 13,318 | | 1,141,915 | |||||||||||||||
Grade 5 |
14,110 | 447,064 | 489,196 | | 950,370 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
144,204,868 | 14,337,846 | 536,155 | | 159,078,869 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Credit card |
| |||||||||||||||||||
Grade 1 |
8,411,723 | 176,312 | | | 8,588,035 | |||||||||||||||
Grade 2 |
4,449,617 | 587,254 | | | 5,036,871 | |||||||||||||||
Grade 3 |
1,460,344 | 1,228,087 | | | 2,688,431 | |||||||||||||||
Grade 4 |
6,004 | 467,012 | | | 473,016 | |||||||||||||||
Grade 5 |
112 | 148,149 | 419,444 | | 567,705 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
14,327,800 | 2,606,814 | 419,444 | | 17,354,058 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
293,296,370 | 26,417,165 | 2,097,749 | | 321,811,284 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Loans at fair value through other comprehensive income |
| |||||||||||||||||||
Corporate |
| |||||||||||||||||||
Grade1 |
189,501 | 25,731 | | | 215,232 | |||||||||||||||
Grade2 |
128,712 | 45,878 | | | 174,590 | |||||||||||||||
Grade3 |
| | | | | |||||||||||||||
Grade4 |
| | | | | |||||||||||||||
Grade5 |
| | | | | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
318,213 | 71,609 | | | 389,822 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
318,213 | 71,609 | | | 389,822 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
1 | Before netting of allowance. |
Credit quality of loans graded according to internal credit ratings are as follows:
Range of Probability of Default (%) |
Retail | Corporate | ||||
Grade 1 |
0.0 ~ 1.0 | 1 ~ 5 grade | AAA ~ BBB+ | |||
Grade 2 |
1.0 ~ 5.0 | 6 ~ 8 grade | BBB ~ BB | |||
Grade 3 |
5.0 ~ 15.0 | 9 ~ 10 grade | BB- ~ B | |||
Grade 4 |
15.0 ~ 30.0 | 11 grade | B- ~ CCC | |||
Grade 5 |
30.0 ~ | 12 grade or under | CC or under |
49
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
Loans as of December 31, 2017, 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 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
146,270,980 | 100.00 | 130,757,242 | 100.00 | 15,204,847 | 100.00 | 292,233,069 | 100.00 | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Less: Allowances1 |
(429,299 | ) | 0.29 | (1,231,666 | ) | 0.94 | (449,266 | ) | 2.95 | (2,110,231 | ) | 0.72 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Carrying amount |
||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
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 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
|
|
|
|
|
|
|
|
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 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
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 | ) | |||||||||
|
|
|
|
|
|
|
|
|||||||||
|
|
|
|
|
|
|
|
50
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
The quantification of the extent to which collateral and other credit enhancements mitigate credit risk as of December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | |||||||||||||||
The financial instruments applying 12-month expected credit losses |
The financial instruments applying lifetime expected credit losses |
Total | ||||||||||||||
Non-impaired | Impaired | |||||||||||||||
Guarantees |
||||||||||||||||
Deposits and savings |
4,200,448 | 77,024 | 6,485 | 4,283,957 | ||||||||||||
Property and equipment |
8,644,719 | 616,318 | 54,492 | 9,315,529 | ||||||||||||
Real estate |
147,682,808 | 12,828,076 | 442,287 | 160,953,171 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
|
|
|
|
|
|
|
|
(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 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
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, 2018, are as follows:
(In millions of Korean won)
2018 | ||||||||||||||||||||
The financial instruments applying 12-month expected credit losses |
The financial instruments applying lifetime expected credit losses |
Financial instruments not applying expected credit losses |
Total | |||||||||||||||||
Non-impaired | Impaired | |||||||||||||||||||
Securities measured at amortized cost1 |
| |||||||||||||||||||
Grade 1 |
||||||||||||||||||||
Grade 2 |
120,546 | | | | 120,546 | |||||||||||||||
Grade 3 |
18,572 | | | | 18,572 | |||||||||||||||
Grade 4 |
| | | | | |||||||||||||||
Grade 5 |
| | | | | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
23,663,238 | | | | 23,663,238 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Securities measured at fair value through other comprehensive income |
| |||||||||||||||||||
Grade 1 |
32,498,155 | | | | 32,498,155 | |||||||||||||||
Grade 2 |
2,740,053 | | | | 2,740,053 | |||||||||||||||
Grade 3 |
| | | | | |||||||||||||||
Grade 4 |
2,510 | | | | 2,510 | |||||||||||||||
Grade 5 |
| | 2,916 | | 2,916 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
35,240,718 | | 2,916 | | 35,243,634 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
51
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
1 | Before netting of allowance |
The credit qualities of securities, excluding equity securities according to the credit ratings by external rating agencies as of December 31, 2018 and 2017, are as follows:
Credit quality |
Domestic |
Foreign | ||||||||||||
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 debt securities denominated in Korean won are based on the lowest credit rating by the domestic credit rating agencies, and those denominated in foreign currencies are based on the lowest credit rating by the foreign credit rating agencies.
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 are as follows:
(In millions of Korean won) | 2017 | |||
Securities that are neither past due nor impaired |
||||
Impaired securities |
4,869 | |||
|
|
|||
|
|
The credit quality of securities, excluding equity securities, that are neither past due nor impaired as of December 31, 2017, is 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 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
52
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
4.2.6 Credit risk of due from financial institutions
The credit quality of due from financial institutions as of December 31, 2018, is classified as follows:
(In millions of Korean won)
2018 | ||||||||||||||||||||
The financial instruments applying 12-month expected credit losses |
The financial instruments applying lifetime expected credit losses |
Financial instruments not applying expected credit losses |
Total | |||||||||||||||||
Non-impaired | Impaired | |||||||||||||||||||
Due from financial institutions at amortized cost1 |
| |||||||||||||||||||
Grade 1 |
||||||||||||||||||||
Grade 2 |
213,903 | | | | 213,903 | |||||||||||||||
Grade 3 |
608,314 | | | | 608,314 | |||||||||||||||
Grade 4 |
19,531 | | | | 19,531 | |||||||||||||||
Grade 5 |
1,691 | | | | 1,691 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
1 | Before netting of allowance |
The credit qualities of due from financial institutions according to the credit ratings by external rating agencies as of December 31, 2018 is same as the credit qualities of securities, excluding equity securities.
4.2.7 Credit risk mitigation of derivatives
The quantification of the extent to which derivatives and other credit enhancements mitigate credit risk as of December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | 2017 | ||||||
Deposits and savings |
||||||||
|
|
|
|
|||||
460,670 | 1,277,851 | |||||||
|
|
|
|
4.2.8 Credit risk concentration analysis
Details of the Groups loans by jurisdiction as of December 31, 2018 and 2017, are as follows:
(In millions of Korean won)
2018 | ||||||||||||||||||||||||||||
Retail | Corporate | Credit card | Total | % | Allowances | Carrying amount |
||||||||||||||||||||||
Korea |
98.40 | |||||||||||||||||||||||||||
Europe |
| 649,281 | | 649,281 | 0.20 | (512 | ) | 648,769 | ||||||||||||||||||||
China |
| 2,259,202 | 807 | 2,260,009 | 0.70 | (20,570 | ) | 2,239,439 | ||||||||||||||||||||
Japan |
106 | 354,181 | 60 | 354,347 | 0.11 | (1,900 | ) | 352,447 | ||||||||||||||||||||
United States |
| 997,321 | 6,967 | 1,004,288 | 0.31 | (5,706 | ) | 998,582 | ||||||||||||||||||||
Others |
317,898 | 597,726 | | 915,624 | 0.28 | (6,757 | ) | 908,867 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
100.00 | ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
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|
|
|
|
53
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
1 | The above is the Groups loans at fair value through profit and loss, other comprehensive income or amortized cost. |
(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 | ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Details of the Groups corporate loans by industry as of December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | |||||||||||||||
Loans | % | Allowances | Carrying amount | |||||||||||||
Financial institutions |
9.67 | |||||||||||||||
Manufacturing |
42,672,986 | 29.08 | (449,406 | ) | 42,223,580 | |||||||||||
Service |
61,467,174 | 41.89 | (270,846 | ) | 61,196,328 | |||||||||||
Wholesale & Retail |
16,739,852 | 11.41 | (102,197 | ) | 16,637,655 | |||||||||||
Construction |
3,282,508 | 2.24 | (291,211 | ) | 2,991,297 | |||||||||||
Public sector |
873,281 | 0.60 | (3,301 | ) | 869,980 | |||||||||||
Others |
7,493,112 | 5.11 | (93,409 | ) | 7,399,703 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
100.00 | ||||||||||||||||
|
|
|
|
|
|
|
|
(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 | |||||||||||
|
|
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|
|
|
|
|
|||||||||
100.00 | ||||||||||||||||
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|
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|
|
54
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
Types of the Groups retail and credit card loans as of December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | |||||||||||||||
Loans | % | Allowances | Carrying amount |
|||||||||||||
Housing |
40.19 | |||||||||||||||
General |
88,162,865 | 49.97 | (613,528 | ) | 87,549,337 | |||||||||||
Credit card |
17,354,058 | 9.84 | (710,941 | ) | 16,643,117 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
100.00 | ||||||||||||||||
|
|
|
|
|
|
|
|
(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 | ||||||||||||||||
|
|
|
|
|
|
|
|
Credit risk concentration of due from financial institutions, securities, excluding equity securities and derivative financial instruments
Details of the Groups credit risk concentration of due from financial institutions, securities, excluding equity securities, and derivative financial instruments as of December 31, 2018, are as follows:
(In millions of Korean won) | 2018 | |||||||||||||||
Amount | % | Allowances | Carrying amount | |||||||||||||
Due from financial institutions at amortized cost |
| |||||||||||||||
Banking and insurance |
100.00 | |||||||||||||||
|
|
|
|
|
|
|
|
|||||||||
17,218,307 | 100.00 | (2,019 | ) | 17,216,288 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Due from financial institutions at fair value through profit or loss |
| |||||||||||||||
Banking and insurance |
381,719 | 100.00 | | 381,719 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
381,719 | 100.00 | | 381,719 | |||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Securities measured at fair value through profit or loss |
| |||||||||||||||
Government and government funded institutions |
14,354,157 | 29.73 | | 14,354,157 | ||||||||||||
Banking and insurance |
27,273,372 | 56.48 | | 27,273,372 | ||||||||||||
Others |
6,657,953 | 13.79 | | 6,657,953 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
48,285,482 | 100.00 | | 48,285,482 | |||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Derivatives |
| |||||||||||||||
Government and government funded institutions |
39,290 | 1.94 | | 39,290 | ||||||||||||
Banking and insurance |
1,849,078 | 91.27 | | 1,849,078 | ||||||||||||
Others |
137,594 | 6.79 | | 137,594 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
2,025,962 | 100.00 | | 2,025,962 | |||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Securities measured at fair value through other comprehensive income |
| |||||||||||||||
Government and government funded institutions |
9,504,156 | 26.97 | | 9,504,156 | ||||||||||||
Banking and insurance |
21,210,983 | 60.18 | | 21,210,983 | ||||||||||||
Others |
4,528,495 | 12.85 | | 4,528,495 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
35,243,634 | 100.00 | | 35,243,634 | |||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Securities measured at amortized cost |
| |||||||||||||||
Government and government funded institutions |
10,321,667 | 43.62 | (25 | ) | 10,321,642 | |||||||||||
Banking and insurance |
11,424,418 | 48.28 | (1,399 | ) | 11,423,019 | |||||||||||
Others |
1,917,153 | 8.10 | (292 | ) | 1,916,861 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
23,663,238 | 100.00 | (1,716 | ) | 23,661,522 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
|
|
|
|
|
|
55
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
Details of the Groups credit risk of securities, excluding equity securities, and derivative financial instruments by industry as of December 31, 2017, 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 | |||||||
|
|
|
|
|||||
|
|
56
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
Credit risk concentrations of due from financial institutions, securities, excluding equity securities and derivative financial instruments by country
Details of the Groups credit risk concentration of due from financial institutions, securities, excluding equity securities, and derivative financial instruments by country, as of December 31, 2018, is as follows:
(In millions of Korean won) | 2018 | |||||||||||||||
Amount | % | Allowances | Carrying amount | |||||||||||||
Due from financial institutions at amortized cost |
| |||||||||||||||
Korea |
78.39 | |||||||||||||||
United States |
826,660 | 4.80 | (16 | ) | 826,644 | |||||||||||
Others |
2,894,318 | 16.81 | (1,665 | ) | 2,892,653 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
17,218,307 | 100.00 | (2,019 | ) | 17,216,288 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Due from financial institutions at fair value through profit or loss |
| |||||||||||||||
Korea |
381,719 | 100.00 | | 381,719 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
381,719 | 100.00 | | 381,719 | |||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Securities measured at fair value through profit or loss1 |
| |||||||||||||||
Korea |
43,697,736 | 90.50 | | 43,697,736 | ||||||||||||
United States |
1,813,902 | 3.76 | | 1,813,902 | ||||||||||||
Others |
2,773,844 | 5.74 | | 2,773,844 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
48,285,482 | 100.00 | | 48,285,482 | |||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Derivatives |
| |||||||||||||||
Korea |
1,024,392 | 50.56 | | 1,024,392 | ||||||||||||
United States |
316,482 | 15.62 | | 316,482 | ||||||||||||
France |
237,080 | 11.70 | | 237,080 | ||||||||||||
Singapore |
109,101 | 5.39 | | 109,101 | ||||||||||||
Japan |
97,351 | 4.81 | | 97,351 | ||||||||||||
Others |
241,556 | 11.92 | | 241,556 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
2,025,962 | 100.00 | | 2,025,962 | |||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Securities measured at fair value through other comprehensive income |
| |||||||||||||||
Korea |
33,156,041 | 94.08 | | 33,156,041 | ||||||||||||
United States |
1,100,199 | 3.12 | | 1,100,199 | ||||||||||||
Others |
987,394 | 2.80 | | 987,394 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
35,243,634 | 100.00 | | 35,243,634 | |||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Securities measured at amortized cost |
| |||||||||||||||
Korea |
21,175,749 | 89.49 | (1,136 | ) | 21,174,613 | |||||||||||
United States |
1,252,426 | 5.29 | (216 | ) | 1,252,210 | |||||||||||
Others |
1,235,063 | 5.22 | (364 | ) | 1,234,699 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
23,663,238 | 100.00 | (1,716 | ) | 23,661,522 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
|
|
|
|
|
|
57
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
Details of the Groups credit risk concentration of securities, excluding equity securities, and derivative financial instruments by country, as of December 31, 2017, 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 | ||||||||
|
|
|
|
|||||
|
|
Due from financial institutions, financial assets at fair value through profit or loss and derivatives that linked to gold price are mostly relevant to financial and insurance industry with high credit ratings.
58
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
4.3 Liquidity Risk
4.3.1 Overview of liquidity risk
Liquidity risk is a risk that the Group becomes insolvent 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 financing, and off-balance sheet items related to cash flow of currency derivative instruments and others.
Cash flows disclosed for the maturity analysis are undiscounted contractual principal and interest to be received (paid) and; thus, are not identical to the amount in the financial statements that are based on the present value of expected cash flows in some cases. The amount of interest to be received or paid on floating rate assets and liabilities is measured on the assumption that the current interest rate would be the same through the maturity.
4.3.2. Liquidity risk management and indicator
The liquidity risk is managed by risk management policy and liquidity risk management guidelines which are applied to the risk management policies and procedures that address all the possible risks that arise from the overall business of the Group.
The Group computes and manages cumulative liquidity gap and liquidity rate subject to all 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.
The remaining contractual maturity of financial assets and liabilities, excluding derivatives held for cash flow hedging, as of December 31, 2018 and 2017, are as follows:
59
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
(In millions of Korean won) | 2018 | |||||||||||||||||||||||||||
On demand |
Up to 1 month |
1-3 months |
3-12 months |
1-5 years |
Over 5 years |
Total | ||||||||||||||||||||||
Financial assets |
| |||||||||||||||||||||||||||
Cash and due from financial institutions1 |
||||||||||||||||||||||||||||
Financial assets at fair value through profit or loss2 |
50,139,812 | 672,326 | 162,459 | 254,632 | 215,436 | 1,113,694 | 52,558,359 | |||||||||||||||||||||
Derivatives held for trading2 |
1,915,532 | | | | | | 1,915,532 | |||||||||||||||||||||
Derivatives held for fair value hedging3 |
| 4,344 | 1,724 | 17,948 | 21,367 | 40,830 | 86,213 | |||||||||||||||||||||
Loans at amortized cost |
3,180,412 | 27,520,126 | 32,374,297 | 116,479,553 | 84,600,284 | 102,789,366 | 366,944,038 | |||||||||||||||||||||
Financial investments4 |
||||||||||||||||||||||||||||
Financial assets measured at fair value through other comprehensive income |
2,117,560 | 1,812,270 | 2,694,083 | 11,210,903 | 18,626,405 | 2,728,392 | 39,189,613 | |||||||||||||||||||||
Securities measured at amortized cost |
| 1,245,353 | 1,483,667 | 4,412,816 | 8,932,468 | 14,380,433 | 30,454,737 | |||||||||||||||||||||
Other financial assets |
89,890 | 5,454,381 | 160,182 | 1,488,164 | 53,425 | 37,841 | 7,283,883 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
60
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
(In millions of Korean won) | 2018 | |||||||||||||||||||||||||||
On demand |
Up to 1 month |
1-3 months |
3-12 months |
1-5 years |
Over 5 years |
Total | ||||||||||||||||||||||
Financial liabilities |
| |||||||||||||||||||||||||||
Financial liabilities at fair value through profit or loss2 |
||||||||||||||||||||||||||||
Financial liabilities designated at fair value through profit or loss2 |
12,503,039 | | | | | | 12,503,039 | |||||||||||||||||||||
Derivatives held for trading2 |
2,724,994 | | | | | | 2,724,994 | |||||||||||||||||||||
Derivatives held for fair value hedging3 |
| (2,403 | ) | (8,231 | ) | (37,851 | ) | 13,831 | 31 | (34,623 | ) | |||||||||||||||||
Deposits5 |
126,781,682 | 16,852,129 | 28,053,517 | 95,568,339 | 11,284,243 | 2,608,630 | 281,148,540 | |||||||||||||||||||||
Debts |
5,909,297 | 10,355,022 | 3,975,372 | 7,205,116 | 4,714,743 | 1,249,785 | 33,409,335 | |||||||||||||||||||||
Debentures |
30,160 | 1,699,165 | 5,875,093 | 13,471,021 | 32,474,579 | 2,489,146 | 56,039,164 | |||||||||||||||||||||
Other financial liabilities |
91,381 | 15,943,018 | 170,851 | 275,135 | 581,537 | 65,721 | 17,127,643 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Off- balance sheet items |
| |||||||||||||||||||||||||||
Commitments6 |
||||||||||||||||||||||||||||
Financial guarantee contract7 |
3,626,532 | | | | | | 3,626,532 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 | The amounts of |
2 | Financial liabilities measured or designated at fair value through profit or loss and derivatives held for trading are not managed by contractual maturity because they are expected to be traded or redeemed before maturity. Therefore, the carrying amounts of those financial instruments are classified as on demand category. |
3 | Cash flows of derivative instruments held for hedging are shown at net cash flow by remaining contractual maturity. |
4 | The equity securities designated as financial assets measured at fair value through other comprehensive income are are included under the On demand category as they can be disposed without difficulty. However, the equity securities restricted from disposal are included on the category that the releasing date of restriction is belonged to. |
5 | Deposits that are contractually repayable on demand or on short notice are classified under the on demand category. |
6 | Commitments are included under the On demand category because payments will be made upon request. |
7 | The financial guarantee contracts are included under the On demand category as payments will be made upon request. |
61
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
(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 |
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Cash and due from financial institutions1 |
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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 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 | |||||||||||||||||||||
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62
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
Financial liabilities |
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Financial liabilities held for trading2 |
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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 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 | |||||||||||||||||||||
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Off- balance sheet items |
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Commitments6 |
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Financial guarantee contract7 |
3,683,875 | | | | | | 3,683,875 | |||||||||||||||||||||
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1 | The amounts of |
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 | The equity securities among available-for-sale financial assets are included under the On demand category as they can be disposed without difficulty. However, the equity securities restricted from disposal are included on the category that the releasing date of restriction is belonged to. |
5 | Deposits that are contractually repayable on demand or on short notice are classified under the on demand category. |
6 | Commitments are included under the on demand category because payments will be made upon request. |
7 | The financial guarantee contracts are included under the on demand category as payments will be made upon request. |
63
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
The contractual cash flows of derivatives held for cash flow hedging as of December 31, 2018 and 2017, are as follows:
(In millions of Korean won)
2018 | ||||||||||||||||||||||||
Up to 1 month |
1-3 months |
3-12 months |
1-5 years |
Over 5 years |
Total | |||||||||||||||||||
Net cash flow of net-settled derivatives |
||||||||||||||||||||||||
Cash flow to be received of gross-settlement derivatives |
47,526 | 129,826 | 286,219 | 2,116,253 | | 2,579,824 | ||||||||||||||||||
Cash flow to be paid of gross-settlement derivatives |
(50,281 | ) | (137,834 | ) | (286,165 | ) | (2,151,808 | ) | | (2,626,088 | ) |
(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-settled derivatives |
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Cash flow to be received of gross-settled derivatives |
196,795 | 298,108 | 745,490 | 1,404,317 | | 2,644,710 | ||||||||||||||||||
Cash flow to be paid of gross-settled derivatives |
(188,698 | ) | (285,397 | ) | (698,054 | ) | (1,324,504 | ) | | (2,496,653 | ) |
4.4 Market Risk
4.4.1 Concept
Market risk represents possible losses which arise from changes in market factors including interest rate, stock price, foreign exchange rate and other market factors that affect the fair value or future cash flows of financial instruments including securities and derivatives amongst others. The most significant risk associated with trading positions interest rate risks, currency risks and also, stock price risks. In addition, the Group is exposed to interest rate risks associated with non-trading positions. The Group classifies exposures to market risk into either trading or non-trading positions. The Group measures and manages market risk separately for each subsidiary.
4.4.2 Risk management
The Group sets internal capital limits for market risk and interest rate risk and monitors the risks to manage the risk of trading and non-trading positions. The Group maintains risk management systems and procedures including trading policies and procedures, and market risk management guidelines for trading positions, and interest rate risk management guidelines for non-trading positions in order to manage market risk efficiently. The procedures mentioned are implemented with approval from the Risk Management Committee and Risk Management Council.
64
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
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 Asset-Liability Management Committee(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 including interest gap, duration gap and interest rate VaR (Value at Risk), are reported to the ALCO and Risk Management Council on a monthly basis and to the Risk Management Committee on a quarterly basis. To ensure adequacy of interest rate and liquidity risk management, the Risk Management Department assigns the limits, monitors and reviews the risk management procedures and tasks conducted by the Financial Planning Department. Also, the Risk Management Department independently reports related information to the management.
4.4.3 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 |
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)
65
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
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 holds 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, 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.
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, 2018 and 2017, are as follows:
Kookmin Bank
(In millions of Korean won) | 2018 | |||||||||||||||
Average | Minimum | Maximum | Ending | |||||||||||||
Interest rate risk |
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Stock price risk |
2,995 | 1,253 | 4,831 | 3,348 | ||||||||||||
Foreign exchange rate risk |
9,443 | 5,033 | 16,453 | 16,453 | ||||||||||||
Deduction of diversification effect |
| | | (11,939 | ) | |||||||||||
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Total VaR |
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66
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
(In millions of Korean won) | 2017 | |||||||||||||||
Average | Minimum | Maximum | Ending | |||||||||||||
Interest rate risk |
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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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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, 2018 and 2017, are as follows:
Kookmin Bank
(In millions of Korean won) |
2018 | 2017 | ||||||
Interest rate risk |
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Stock price risk |
19,756 | 1,646 | ||||||
Foreign exchange rate risk |
1,339 | 810 | ||||||
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KB Securities Co., Ltd.
(In millions of Korean won) | 2018 | |||||||||||||||
Average | Minimum | Maximum | Ending | |||||||||||||
Interest rate risk |
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Stock price risk |
293,623 | 236,329 | 335,900 | 261,341 | ||||||||||||
Foreign exchange rate risk |
5,923 | 2,383 | 12,613 | 3,692 | ||||||||||||
Commodity risk |
5 | 1 | 22 | 1 | ||||||||||||
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(In millions of Korean won) | 2017 | |||||||||||||||
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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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KB Insurance Co., Ltd.
(In millions of Korean won) | 2018 | |||||||||||||||
Average | Minimum | Maximum | Ending | |||||||||||||
Interest rate risk |
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Stock price risk |
11,074 | 8,484 | 15,053 | 14,769 | ||||||||||||
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67
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
(In millions of Korean won) | 2017 | |||||||||||||||
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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KB Life Insurance Co., Ltd.
(In millions of Korean won) | 2018 | |||||||||||||||
Average | Minimum | Maximum | Ending | |||||||||||||
Interest rate risk |
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(In millions of Korean won) | 2017 | |||||||||||||||
Average | Minimum | Maximum | Ending | |||||||||||||
Interest rate risk |
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KB Investment Co., Ltd.
(In millions of Korean won) | 2018 | |||||||||||||||
Average | Minimum | Maximum | Ending | |||||||||||||
Stock price risk |
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Foreign exchange rate risk |
2,064 | 1,776 | 3,033 | 3,033 | ||||||||||||
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(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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KB Asset Management Co., Ltd.
(In millions of Korean won) | 2018 | |||||||||||||||
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Average | Minimum | Maximum | Ending | |||||||||||||
Interest rate risk |
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Stock price risk |
1,658 | | 1,952 | 1,839 | ||||||||||||
Foreign exchange rate risk |
782 | 627 | 1,125 | 837 | ||||||||||||
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68
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
(In millions of Korean won) | 2017 | |||||||||||||||
Average | Minimum | Maximum | Ending | |||||||||||||
Interest rate risk |
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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.
4.4.4 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.
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 earning at risk (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.
69
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
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, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | 2017 | ||||||
Kookmin Bank |
||||||||
KB Securities Co., Ltd. |
23,004 | 39,717 | ||||||
KB Insurance Co., Ltd. |
270,507 | 451,335 | ||||||
KB Kookmin Card Co., Ltd. |
27,894 | 12,775 | ||||||
KB Life Insurance Co., Ltd. |
47,089 | 51,677 | ||||||
KB Savings Bank Co., Ltd. |
8,760 | 6,447 | ||||||
KB Capital Co., Ltd. |
19,852 | 10,912 |
70
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
4.4.5 Financial Instruments in Foreign Currencies
Details of financial instruments presented in foreign currencies translated into Korean won as of December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | |||||||||||||||||||||||||||
USD | JPY | EUR | GBP | CNY | Others | Total | ||||||||||||||||||||||
Financial Assets |
||||||||||||||||||||||||||||
Cash and due from financial institutions |
||||||||||||||||||||||||||||
Financial assets at fair value through profit or loss |
6,025,782 | 87,764 | 432,047 | 18,481 | 8,585 | 73,759 | 6,646,418 | |||||||||||||||||||||
Derivatives held for trading |
163,064 | 2,947 | 31,370 | 308 | 4,643 | 18,349 | 220,681 | |||||||||||||||||||||
Derivatives held for hedging |
32,996 | | | | | | 32,996 | |||||||||||||||||||||
Loans at amortized cost |
12,372,434 | 354,111 | 807,019 | 45,335 | 990,705 | 515,051 | 15,084,655 | |||||||||||||||||||||
Financial assets measured at fair value through other comprehensive income |
3,925,922 | 36,538 | 32,842 | | 125,571 | 4,261 | 4,125,134 | |||||||||||||||||||||
Financial assets at amortized cost |
2,257,057 | | 287,732 | | 38,802 | 27,554 | 2,611,145 | |||||||||||||||||||||
Other financial assets |
1,528,235 | 300,116 | 24,511 | 28,080 | 275,578 | 234,086 | 2,390,606 | |||||||||||||||||||||
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Financial liabilities |
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Financial liabilities designated at fair value through profit or loss |
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Derivatives held for trading |
313,303 | 39,311 | 143,836 | 90 | 4,062 | 168,339 | 668,941 | |||||||||||||||||||||
Derivatives held for hedging |
88,367 | | | | | | 88,367 | |||||||||||||||||||||
Deposits |
9,294,189 | 629,083 | 592,495 | 48,418 | 1,267,102 | 468,615 | 12,299,902 | |||||||||||||||||||||
Debts |
9,427,662 | 90,778 | 286,123 | 220,150 | 11,393 | 65,412 | 10,101,518 | |||||||||||||||||||||
Debentures |
4,405,842 | | 31,979 | | | 266,935 | 4,704,756 | |||||||||||||||||||||
Other financial liabilities |
959,797 | 105,798 | 136,053 | 3,659 | 284,498 | 159,649 | 1,649,454 | |||||||||||||||||||||
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26,808,529 | 864,970 | 1,190,486 | 272,317 | 1,567,055 | 1,128,950 | 31,832,307 | ||||||||||||||||||||||
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Off-balance sheet items |
71
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
(In millions of Korean won) | 2017 | |||||||||||||||||||||||||||
USD | JPY | EUR | GBP | CNY | Others | Total | ||||||||||||||||||||||
Financial Assets |
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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 |
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Financial liabilities designated at fair value through profit or loss |
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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 |
72
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
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 7.125%(2017: 6.250%), a minimum Tier 1 ratio of 8.625%(2017: 7.750%) and a minimum Total Regulatory Capital of 10.625%(2017: 9.75%) as of December 31, 2018.
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. |
73
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
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, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | 2017 | ||||||
Equity Capital: |
||||||||
Tier 1 Capital |
32,993,826 | 31,059,475 | ||||||
Common Equity Tier 1 Capital |
32,993,826 | 31,059,475 | ||||||
Additional Tier 1 Capital |
| | ||||||
Tier 2 Capital |
1,482,346 | 1,342,105 | ||||||
Risk-weighted assets: |
236,099,017 | 212,777,226 | ||||||
Equity Capital (%): |
14.60 | 15.23 | ||||||
Tier 1 Capital (%) |
13.97 | 14.60 | ||||||
Common Equity Tier 1 Capital (%) |
13.97 | 14.60 |
74
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
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 |
Loans, deposit products and other related financial services to large, small and medium-sized enterprises and SOHO(small office home office)s. | ||
Retail Banking |
Loans, deposit products and other related financial services to individuals and households. | |||
Other Banking Services |
Trading activities in securities and derivatives, funding and other supporting activities. | |||
Securities Business | Investment banking, brokerage services and other supporting activities. | |||
Non-life Insurance Business | The activities within this segment include property insurance and other supporting activities. | |||
Credit Card Business | The activities within this segment include credit sale, cash service, card loan and other supporting activities. | |||
Life Insurance Business | Life insurance and other supporting activities. |
75
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
Financial information by business segment as of and for the year ended December 31, 2018, is as follows:
(In millions of Korean won) | Banking business | |||||||||||||||||||||||||||||||||||||||||||
Corporate Banking |
Retail Banking |
Other Banking Services |
Sub-total | Securities | Non-life Insurance |
Credit Card | Life Insurance |
Others | Intra-group adjustment |
Total | ||||||||||||||||||||||||||||||||||
Operating revenues from external customers |
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Intra-segment operating revenues (expenses) |
94,910 | | 179,300 | 274,210 | (17,541 | ) | (20,529 | ) | (219,680 | ) | (26,809 | ) | 167,789 | (157,440 | ) | | ||||||||||||||||||||||||||||
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Net interest income |
2,753,928 | 2,960,598 | 386,196 | 6,100,722 | 542,206 | 616,173 | 1,168,284 | 185,094 | 291,415 | 1,034 | 8,904,928 | |||||||||||||||||||||||||||||||||
Interest income |
4,267,675 | 4,547,615 | 1,204,598 | 10,019,888 | 819,462 | 616,483 | 1,474,376 | 185,109 | 644,975 | (25,724 | ) | 13,734,569 | ||||||||||||||||||||||||||||||||
Interest expense |
(1,513,747 | ) | (1,587,017 | ) | (818,402 | ) | (3,919,166 | ) | (277,256 | ) | (310 | ) | (306,092 | ) | (15 | ) | (353,560 | ) | 26,758 | (4,829,641 | ) | |||||||||||||||||||||||
Net fee and commission income (expense) |
287,978 | 490,447 | 344,323 | 1,122,748 | 625,729 | (147,041 | ) | 264,651 | (13,163 | ) | 385,930 | 4,522 | 2,243,376 | |||||||||||||||||||||||||||||||
Fee and commission income |
381,481 | 583,213 | 458,097 | 1,422,791 | 734,287 | 3,238 | 1,426,436 | 214 | 443,455 | (312,701 | ) | 3,717,720 | ||||||||||||||||||||||||||||||||
Fee and commission expense |
(93,503 | ) | (92,766 | ) | (113,774 | ) | (300,043 | ) | (108,558 | ) | (150,279 | ) | (1,161,785 | ) | (13,377 | ) | (57,525 | ) | 317,223 | (1,474,344 | ) | |||||||||||||||||||||||
Net insurance income (expense) |
| | | | | 611,277 | 18,386 | (139,400 | ) | 1 | (148 | ) | 490,116 | |||||||||||||||||||||||||||||||
Insurance income |
| | | | | 10,847,323 | 32,271 | 1,132,155 | | (36,679 | ) | 11,975,070 | ||||||||||||||||||||||||||||||||
Insurance expense |
| | | | | (10,236,046 | ) | (13,885 | ) | (1,271,555 | ) | 1 | 36,531 | (11,484,954 | ) | |||||||||||||||||||||||||||||
Net gains (losses) on financial instruments at fair value through profit or loss |
13,933 | | 312,462 | 326,395 | (222,014 | ) | 180,808 | 3,866 | 62,779 | 89,059 | (89,590 | ) | 351,303 | |||||||||||||||||||||||||||||||
Net other operating income (expense) |
(642,117 | ) | (461,805 | ) | 407,436 | (696,486 | ) | 34,436 | (98,352 | ) | (150,172 | ) | (8,881 | ) | (137,323 | ) | (73,258 | ) | (1,130,036 | ) | ||||||||||||||||||||||||
General and administrative expenses |
(1,091,556 | ) | (1,970,409 | ) | (705,030 | ) | (3,766,995 | ) | (735,227 | ) | (789,443 | ) | (404,927 | ) | (63,406 | ) | (308,559 | ) | 150,045 | (5,918,512 | ) | |||||||||||||||||||||||
Operating profit before provision for credit losses |
1,322,166 | 1,018,831 | 745,387 | 3,086,384 | 245,130 | 373,422 | 900,088 | 23,023 | 320,523 | (7,395 | ) | 4,941,175 | ||||||||||||||||||||||||||||||||
Reversal (provision) for credit losses |
77,224 | (179,229 | ) | 8,089 | (93,916 | ) | (9,993 | ) | (14,392 | ) | (431,032 | ) | (464 | ) | (124,215 | ) | 318 | (673,694 | ) | |||||||||||||||||||||||||
Net operating income |
1,399,390 | 839,602 | 753,476 | 2,992,468 | 235,137 | 359,030 | 469,056 | 22,559 | 196,308 | (7,077 | ) | 4,267,481 | ||||||||||||||||||||||||||||||||
Share of profit (loss) of associates and joint ventures |
| | 49,698 | 49,698 | 175 | (16 | ) | 202 | | 3,104 | (28,903 | ) | 24,260 | |||||||||||||||||||||||||||||||
Net other non-operating income (expense) |
(65 | ) | | 44,237 | 44,172 | 13,770 | 8,085 | (33,062 | ) | (1,402 | ) | 16,465 | (38,237 | ) | 9,791 | |||||||||||||||||||||||||||||
Segment profits before income tax |
1,399,325 | 839,602 | 847,411 | 3,086,338 | 249,082 | 367,099 | 436,196 | 21,157 | 215,877 | (74,217 | ) | 4,301,532 | ||||||||||||||||||||||||||||||||
Income tax expense |
(386,764 | ) | (230,891 | ) | (209,485 | ) | (827,140 | ) | (70,222 | ) | (104,667 | ) | (149,623 | ) | (6,332 | ) | (88,372 | ) | 6,770 | (1,239,586 | ) | |||||||||||||||||||||||
Profit for the reporting period |
1,012,561 | 608,711 | 637,926 | 2,259,198 | 178,860 | 262,432 | 286,573 | 14,825 | 127,505 | (67,447 | ) | 3,061,946 | ||||||||||||||||||||||||||||||||
Profit attributable to shareholders of the Parent Company |
1,012,561 | 608,711 | 637,926 | 2,259,198 | 178,850 | 262,267 | 286,599 | 14,825 | 126,021 | (66,569 | ) | 3,061,191 | ||||||||||||||||||||||||||||||||
Profit (loss) attributable to non-controlling interests |
| | | | 10 | 165 | (26 | ) | | 1,484 | (878 | ) | 755 | |||||||||||||||||||||||||||||||
Total assets1 |
131,303,734 | 140,814,393 | 84,841,131 | 356,959,258 | 45,086,292 | 34,785,551 | 20,528,951 | 9,680,379 | 40,399,287 | (27,851,420 | ) | 479,588,298 | ||||||||||||||||||||||||||||||||
Total liabilities1 |
123,880,329 | 152,173,062 | 54,238,001 | 330,291,392 | 40,613,424 | 31,289,705 | 16,570,282 | 9,128,148 | 17,441,868 | (1,459,548 | ) | 443,875,271 |
1 | Assets and liabilities of the reporting segments are amounts before intra-segment transaction adjustment. |
76
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
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 | 361,236 | 5,564,784 | 598,485 | 465,268 | 1,083,665 | 215,752 | 316,277 | 2,383 | 8,246,614 | |||||||||||||||||||||||||||||||||
Interest income |
3,584,021 | 3,935,895 | 988,977 | 8,508,893 | 799,380 | 465,396 | 1,341,150 | 215,777 | 602,221 | (13,760) | 11,919,057 | |||||||||||||||||||||||||||||||||
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) | | (69,457) | (71,207) | 179,505 | 40,827 | | 7,786 | 392 | 46,421 | 203,724 | |||||||||||||||||||||||||||||||||
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 | |||||||||||||||||||||||||||||||||
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. |
77
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
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, 2018 and 2017, are as follows:
(In millions of Korean won)
2018 | 2017 | |||||||
Banking service |
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Securities service |
997,898 | 1,074,365 | ||||||
Non-life Insurance service |
1,183,394 | 1,121,108 | ||||||
Credit card service |
1,524,695 | 1,276,803 | ||||||
Life insurance service |
113,238 | 129,513 | ||||||
Other service |
461,293 | 345,077 | ||||||
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5.2.2 Geographical information
Geographical operating revenues from external customers for the year ended December 31, 2018 and 2017, and major non-current assets as of December 31, 2018 and 2017, are as follows:
(In millions of Korean won)
2018 | 2017 | |||||||||||||||
Revenues from external customers |
Major non- current assets |
Revenues from external customers |
Major non- current assets |
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Domestic |
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United States |
46,391 | 370,252 | 17,596 | 363,330 | ||||||||||||
New Zealand |
6,213 | 72 | 5,855 | 57 | ||||||||||||
China |
94,996 | 5,454 | 44,531 | 4,585 | ||||||||||||
Cambodia |
11,062 | 3,733 | 7,475 | 1,753 | ||||||||||||
United Kingdom |
8,119 | 537 | 11,547 | 319 | ||||||||||||
Others |
26,320 | 584,466 | 26,925 | 78,142 | ||||||||||||
Intra-group adjustment |
| 69,011 | | 72,455 | ||||||||||||
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78
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
6. Financial Assets and Financial Liabilities
6.1 Classification and Fair Value of Financial Instruments
6.1.1 Carrying amount and fair value of financial assets and liabilities as of December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | |||||||
Carrying amount | Fair value | |||||||
Financial assets |
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Cash and due from financial institutions |
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Financial assets at fair value through profit or loss |
50,987,847 | 50,987,847 | ||||||
Due from financial institutions |
381,719 | 381,719 | ||||||
Debt securities |
48,285,482 | 48,285,482 | ||||||
Equity securities |
1,287,662 | 1,287,662 | ||||||
Loans |
954,176 | 954,176 | ||||||
Others |
78,808 | 78,808 | ||||||
Derivatives held for trading |
1,915,532 | 1,915,532 | ||||||
Derivatives held for hedging |
110,430 | 110,430 | ||||||
Loans at amortized cost |
319,201,603 | 320,003,844 | ||||||
Financial assets at amortized cost |
23,661,522 | 24,159,137 | ||||||
Financial assets measured at fair value through other comprehensive income |
38,003,572 | 38,003,572 | ||||||
Debt securities |
35,243,634 | 35,243,634 | ||||||
Equity securities |
2,370,116 | 2,370,116 | ||||||
Loans |
389,822 | 389,822 | ||||||
Others |
8,133,556 | 8,133,556 | ||||||
|
|
|
|
|||||
|
|
|
|
|||||
Financial liabilities |
||||||||
Financial liabilities at fair value through profit or loss |
||||||||
Financial liabilities designated at fair value through profit or loss |
12,503,039 | 12,503,039 | ||||||
Derivatives held for trading |
2,724,994 | 2,724,994 | ||||||
Derivatives held for hedging |
176,253 | 176,253 | ||||||
Deposits |
276,770,449 | 277,423,194 | ||||||
Debts |
33,004,834 | 33,028,205 | ||||||
Debentures |
53,278,697 | 53,771,564 | ||||||
Other financial liabilities |
19,828,307 | 19,833,885 | ||||||
|
|
|
|
|||||
|
|
|
|
79
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
(In millions of Korean won) | 2017 | |||||||
Carrying amount | Fair value | |||||||
Financial assets |
||||||||
Cash and due from financial institutions |
||||||||
Financial assets held for trading |
30,177,293 | 30,177,293 | ||||||
Debt securities |
25,168,338 | 25,168,338 | ||||||
Equity securities |
4,935,100 | 4,935,100 | ||||||
Others |
73,855 | 73,855 | ||||||
Financial assets designated at fair value through profit or loss |
2,050,052 | 2,050,052 | ||||||
Debt securities |
368,820 | 368,820 | ||||||
Equity securities |
67,828 | 67,828 | ||||||
Derivative-linked securities |
1,613,404 | 1,613,404 | ||||||
Derivatives held for trading |
2,998,042 | 2,998,042 | ||||||
Derivatives held for hedging |
312,124 | 312,124 | ||||||
Loans |
290,122,838 | 289,807,038 | ||||||
Available-for-sale financial assets |
48,116,263 | 48,116,263 | ||||||
Debt securities |
38,959,401 | 38,959,401 | ||||||
Equity securities |
9,156,862 | 9,156,862 | ||||||
Held-to-maturity financial assets |
18,491,980 | 18,483,065 | ||||||
Other financial assets |
10,195,015 | 10,195,015 | ||||||
|
|
|
|
|||||
|
|
|
|
|||||
Financial liabilities |
||||||||
Financial liabilities held for trading |
||||||||
Financial liabilities designated at fair value through profit or loss |
10,078,288 | 10,078,288 | ||||||
Derivatives held for trading |
3,054,614 | 3,054,614 | ||||||
Derivatives held for hedging |
88,151 | 88,151 | ||||||
Deposits |
255,800,048 | 256,222,490 | ||||||
Debts |
28,820,928 | 28,814,801 | ||||||
Debentures |
44,992,724 | 44,400,325 | ||||||
Other financial liabilities |
18,330,004 | 18,328,276 | ||||||
|
|
|
|
|||||
|
|
|
|
80
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
The fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an ordinary 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 at amortized cost | 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 instruments 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. |
81
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
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. |
6.1.2 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.
82
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
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, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | |||||||||||||||
Fair value hierarchy | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Financial assets |
||||||||||||||||
Financial assets at fair value through profit or loss |
||||||||||||||||
Due from financial institutions |
||||||||||||||||
Debt securities |
11,312,317 | 29,879,850 | 7,093,315 | 48,285,482 | ||||||||||||
Equity securities |
737,808 | 178,309 | 371,545 | 1,287,662 | ||||||||||||
Loans |
| 740,973 | 213,203 | 954,176 | ||||||||||||
Others |
78,808 | | | 78,808 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
12,128,933 | 31,132,108 | 7,726,806 | 50,987,847 | |||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Derivatives held for trading |
67,436 | 1,737,033 | 111,063 | 1,915,532 | ||||||||||||
Derivatives held for hedging |
| 110,430 | | 110,430 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Financial assets measured at fair value through other comprehensive income |
||||||||||||||||
Debt securities |
9,542,948 | 25,700,686 | | 35,243,634 | ||||||||||||
Equity securities |
971,367 | 66,031 | 1,332,718 | 2,370,116 | ||||||||||||
Loans |
| 389,822 | | 389,822 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
10,514,315 | 26,156,539 | 1,332,718 | 38,003,572 | |||||||||||||
|
|
|
|
|
|
|
|
|||||||||
|
|
|
|
|
|
|
|
|||||||||
Financial liabilities |
||||||||||||||||
Financial liabilities at fair value through profit or loss |
||||||||||||||||
Financial liabilities designated at fair value through profit or loss |
126 | 1,629,530 | 10,873,383 | 12,503,039 | ||||||||||||
Derivatives held for trading |
479,264 | 1,834,536 | 411,194 | 2,724,994 | ||||||||||||
Derivatives held for hedging |
| 176,253 | | 176,253 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
|
|
|
|
|
|
|
|
83
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
(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 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
10,229,273 | 19,948,020 | | 30,177,293 | |||||||||||||
|
|
|
|
|
|
|
|
|||||||||
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 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
| 735,708 | 1,314,344 | 2,050,052 | |||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Derivatives held for trading |
80,678 | 2,720,285 | 197,079 | 2,998,042 |
Derivatives held for hedging |
| 311,349 | 775 | 312,124 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Available-for-sale financial assets1 |
||||||||||||||||
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 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
11,996,767 | 30,253,520 | 5,865,976 | 48,116,263 | |||||||||||||
|
|
|
|
|
|
|
|
|||||||||
|
|
|
|
|
|
|
|
|||||||||
Financial liabilities |
||||||||||||||||
Financial liabilities held for trading |
||||||||||||||||
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 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
|
|
|
|
|
|
|
|
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 |
84
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
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, 2018 and 2017, are as follows:
(In millions of Korean won) |
||||||||
2018 | ||||||||
Fair value | Valuation techniques | Inputs | ||||||
Financial assets |
||||||||
Financial assets at fair value through profit or loss Due from financial institutions |
One factor Hull-White Model, DCF Model | Discount rate, Volatility and others | ||||||
Debt securities |
29,879,850 | DCF Model, Closed Form, Monte Carlo Simulation, Black-Scholes Model, Hull and White Model, Net Asset Value and others | Projected cash flow, Fair value of underlying asset, Dividend yield, Interest rate, Underlying asset price, Discount rate, Volatility and others | |||||
Equity securities |
178,309 | DCF Model | Interest rate, Discount rate and others | |||||
Loans |
740,973 | DCF Model | Interest rate, Discount rate and others | |||||
|
|
|||||||
31,132,108 | ||||||||
|
|
|||||||
Derivatives held for trading |
1,737,033 | DCF Model, FDM, Closed Form, Option Model, Monte Carlo Simulation, Black-Scholes Model, Hull and White Model and others | Underlying asset Index, Discount rate, Volatility, Foreign exchange rate, Stock price, Dividend rate and others | |||||
Derivatives held for hedging |
110,430 | DCF Model, Closed Form, FDM | Discount rate, Volatility, Foreign exchange rate and Others | |||||
Financial assets measured at fair value through other comprehensive income |
||||||||
Debt securities |
25,700,686 | DCF Model, Option model, Market value approach | Discount rate, Underlying asset Index, Volatility, Interest rate and others | |||||
Equity securities |
66,031 | DCF Model, Black-Scholes Model | Discount rate, Volatility, Price of Underlying asset and others | |||||
Loans |
389,822 | DCF Model | Discount rate | |||||
26,156,539 | ||||||||
|
|
|||||||
|
|
|||||||
Financial liabilities |
||||||||
Financial liabilities designated at fair value through profit or loss |
1,629,530 | DCF Model, Closed Form, Monte Carlo Simulation, Black-Scholes Model, Hull and White Model and others | Price of Underlying asset, Discount rate, Dividend rate, Volatility | |||||
Derivatives held for trading |
1,834,536 | DCF Model, Closed Form, FDM and others | Discount rate, Price of Underlying asset , Volatility, Foreign exchange rate, Credit Spread, Stock price and others | |||||
Derivatives held for hedging |
176,253 | DCF Model, Closed Form, FDM and others | Discount rate, Volatility, Foreign exchange rate and others | |||||
|
|
|||||||
|
|
85
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
(In millions of Korean won) | ||||||||
2017 | ||||||||
Fair value | Valuation techniques | Inputs | ||||||
Financial assets |
||||||||
Financial assets held for trading |
DCF Model, option model | Underlying asset Index, Discount rate, Volatility | ||||||
Equity securities |
2,594,603 | DCF Model, Net Asset Value, Option Model | Underlying asset Index, Volatility, Discount rate, Fair value of underlying asset | |||||
|
|
|||||||
19,948,020 | ||||||||
|
|
|||||||
Financial assets designated at fair value through profit or loss |
66,969 | DCF Model, Hull and White Model, | Discount rate, Volatility | |||||
Derivative-linked securities |
668,739 | DCF Model, Closed Form, Monte Carlo Simulation, Option Model | Underlying asset Index, Discount rate, Volatility | |||||
|
|
|||||||
735,708 | ||||||||
|
|
Derivatives held for trading |
2,720,285 | 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, Stock price, Dividend rate and others | |||||
Derivatives held for hedging |
311,349 | DCF Model, Closed Form, FDM | Discount rate, Volatility, Foreign exchange rate and others | |||||
Available-for-sale financial assets Debt securities |
28,464,019 | DCF Model, option model, Net Asset Value | Discount rate | |||||
Equity securities |
1,789,501 | DCF Model, Option Model, Net Asset Value | Discount rate, Fair value of underlying asset | |||||
|
|
|||||||
30,253,520 | ||||||||
|
|
|||||||
|
|
|||||||
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 | ||||||||
|
|
|||||||
Derivatives held for trading |
2,717,862 | 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 | DCF Model, Closed Form, FDM | Discount rate, Volatility, Foreign exchange rate and others | |||||
|
|
|||||||
|
|
86
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
Fair value hierarchy of financial assets and liabilities whose fair values are disclosed
The fair value hierarchy of financial assets and liabilities whose fair values are disclosed as of December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | |||||||||||||||
Fair value hierarchy | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Financial assets |
||||||||||||||||
Cash and due from financial institutions1 |
||||||||||||||||
Loans at amortized cost |
| 493,773 | 319,510,071 | 320,003,844 | ||||||||||||
Securities measured at amortized cost |
8,629,708 | 15,529,429 | | 24,159,137 | ||||||||||||
Other financial assets2 |
| | 8,133,556 | 8,133,556 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
|
|
|
|
|
|
|
|
|||||||||
Financial liabilities |
||||||||||||||||
Deposits1 |
||||||||||||||||
Debts3 |
| 1,114,900 | 31,913,305 | 33,028,205 | ||||||||||||
Debentures |
| 48,680,196 | 5,091,368 | 53,771,564 | ||||||||||||
Other financial liabilities4 |
| | 19,833,885 | 19,833,885 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
|
|
|
|
|
|
|
|
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 |
(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 |
||||||||||||||||
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 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
|
|
|
|
|
|
|
|
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 |
87
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
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, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | |||||||||||
Fair value | Valuation technique |
Inputs | ||||||||||
Financial assets |
||||||||||||
Loans at amortized cost |
DCF Model | Discount rate | ||||||||||
Securities measured at amortized cost |
15,529,429 | DCF Model | Discount rate | |||||||||
Financial liabilities |
||||||||||||
Debts |
1,076,497 | DCF Model | Discount rate | |||||||||
Debentures |
48,680,196 | DCF Model | Discount rate |
(In millions of Korean won) | 2017 | |||||||||||
Fair value | Valuation technique |
Inputs | ||||||||||
Financial assets |
||||||||||||
Loans |
DCF Model | Discount rate | ||||||||||
Held-to-maturity financial assets |
13,653,429 | DCF Model | Discount rate | |||||||||
Financial liabilities |
||||||||||||
Debts |
833,795 | DCF Model | Discount rate | |||||||||
Debentures |
41,058,076 | DCF Model | Discount rate |
88
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
Valuation techniques and inputs of financial assets and liabilities whose fair values are disclosed and classified as Level 3 as of December 31, 2018 and 2017, are as follows:
(In millions of Korean won)
2018 | ||||||
Fair value | Valuation technique |
Inputs |
Financial assets |
||||||||||
Cash and due from financial institutions |
DCF Model | Credit spread, Other spread, Interest rates | ||||||||
Loans at amortized cost |
319,510,071 | DCF Model | Credit spread, Other spread, Early termination ratio, Interest rates | |||||||
|
|
|||||||||
|
|
|||||||||
Financial liabilities |
||||||||||
Deposits |
DCF Model | Other spread, Interest rates, Early termination ratio | ||||||||
Debts |
31,913,305 | DCF Model | Other spread, Interest rates | |||||||
Debentures |
5,091,368 | DCF Model | Other spread, Interest rates | |||||||
Other financial liabilities |
583,633 | DCF Model | Other spread, Interest rates | |||||||
|
|
|||||||||
|
|
(In millions of Korean won)
2017 | ||||||||||
Fair value | Valuation technique |
Inputs | ||||||||
Financial assets |
||||||||||
Cash and due from financial institutions |
DCF Model | Credit spread, Other spread, Interest rates | ||||||||
Loans |
289,237,413 | DCF Model | Credit spread, Other spread, Early termination ratio, Interest rates | |||||||
Held-to-maturity financial assets |
4,243 | DCF Model | Interest rates | |||||||
|
|
|||||||||
|
|
|||||||||
Financial liabilities |
||||||||||
Deposits |
DCF Model | Other spread, Early termination ratio, Interest rates | ||||||||
Debts |
27,961,186 | DCF Model | Other spread, Interest rates | |||||||
Debentures |
3,342,249 | DCF Model | Other spread, Implied default probability, Interest rates | |||||||
Other financial liabilities |
445,367 | DCF Model | Other spread, Interest rates | |||||||
|
|
|||||||||
|
|
89
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
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 third-party valuation service in addition to internal valuation models 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.
90
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
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 year ended December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | |||||||||||||||||||||||||||
Financial assets at fair value through profit or loss | Financial investments |
Financial liabilities at fair value through profit or loss |
Net derivative financial instruments |
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Cash and due from financial institutions at fair value through profit or loss |
Securities measured at fair value through profit or loss |
Loans at fair value through profit or loss |
Financial assets measured at fair value through other comprehensive income |
Financial liabilities designated at fair value through profit or loss |
Derivatives held for trading |
Derivatives held for fair value hedging |
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Beginning2 |
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Total gains or losses |
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- Profit or loss |
537 | 178,569 | 4,367 | | 27,583 | (247,194 | ) | (116 | ) | |||||||||||||||||||
- Other comprehensive income |
(37 | ) | 60,624 | | 142,415 | (8,597 | ) | | | |||||||||||||||||||
Purchases |
| 3,011,701 | 184,655 | 83,566 | | 7,706 | | |||||||||||||||||||||
Sales |
| (1,855,118 | ) | (109,128 | ) | (80,480 | ) | | (90,270 | ) | | |||||||||||||||||
Issues |
| | | | (11,090,504 | ) | (76,519 | ) | | |||||||||||||||||||
Settlements |
| | | | 8,886,027 | 12,803 | (589 | ) | ||||||||||||||||||||
Transfers into Level 31 |
| 2,103 | | | | (3,011 | ) | | ||||||||||||||||||||
Transfers out of Level 31 |
| (39,735 | ) | | | | | | ||||||||||||||||||||
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Ending |
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1 | The changes in levels for the financial instruments occurred due to the change in the availability of observable market data. |
2 | Prepared in accordance with Korean IFRS 1109. |
91
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
(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 derivative financial instruments |
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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 |
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Beginning |
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Total gains or losses |
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- 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 | ) | | | | ||||||||||||||
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Ending |
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1 | The changes in levels for the financial instruments occurred due to the change in the availability of observable market data. |
In relation to changes in Level 3 of the fair value hierarchy, total gains or losses recognized in profit or loss, and total gains or losses included in profit or loss for financial instruments held at the end of the reporting period in the statements of comprehensive income for the year ended December 31, 2018 and 2017, are as follows:
92
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
(In millions of Korean won) | 2018 | |||||||||||
Net income (loss) from financial investments at fair value through profit or loss |
Other operating loss |
Net interest income |
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Total gains or losses included in profit or loss for the period |
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Total gains or losses for the period included in profit or loss for financial instruments held at the end of the reporting period |
144,674 | (289 | ) | 43 |
(In millions of Korean won) | 2017 | |||||||||||
Net loss from financial through profit or loss |
Other operating income (loss) |
Net interest income |
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Total gains or losses included in profit or loss for the period |
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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 | ) | |
93
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
6.2.3 Sensitivity analysis of changes in unobservable inputs
Information about fair value measurements using unobservable inputs as of December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | |||||||||||||
Fair value | Valuation technique | Unobservable inputs | Range of unobservable inputs(%) |
Relationship of unobservable inputs to fair value | ||||||||||
Financial assets |
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Financial assets at fair value through profit or loss |
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Cash and due from financial institutions |
DCF Model, Option Model, Net Asset Value, Income approach, Market approach | Volatility of the underlying asset | 11.25~31.28 | The higher the volatility, the higher the fair value fluctuation | ||||||||||
Correlation | 8.79~79.78 | The higher the correlation, the higher the fair value fluctuation | ||||||||||||
Recovery rate | 40.00 | The higher the recovery rate, the higher the fair value | ||||||||||||
Discount rate | 1.19~11.30 | The lower the discount rate, the higher the fair value | ||||||||||||
Growth rate | 0.29~2.20 | The higher the growth rate, the higher the fair value | ||||||||||||
Debt securities |
7,093,315 | DCF Model, Closed Form, FDM, Monte Carlo Simulation, Hull-White Model, Black-Scholes Model, Option Model, Tree Model, Net Asset Value, Income approach, Market approach and others |
Growth rate | 0.29~2.20 | The higher the growth rate, the higher the fair value | |||||||||
Volatility of the underlying asset | 11.25~41.00 | The higher the volatility, the higher the fair value fluctuation | ||||||||||||
Value of Real estate | -1.00~1.00 | The higher the value of Real estate, the higher the fair value | ||||||||||||
Discount rate | 1.95~11.30 | The lower the discount rate, the higher the fair value | ||||||||||||
Recovery rate | 40.00 | The higher the recovery rate, the higher the fair value | ||||||||||||
Correlation between underlying asset | 8.79~88.46 | The higher the correlation, the higher the fair value fluctuation |
94
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
Equity securities |
371,545 | Income approach, Market approach, Asset value approach, DCF Model, Comparable Company Analysis, Adjusted discount rate method, Dividend Discount Model, Usage of past transactions, Tree Model and others | Growth rate | 0~2.20 | The higher the growth rate, the higher the fair value | |||||||||
Discount rate | 1.19~21.96 | The lower the discount rate, the higher the fair value | ||||||||||||
Liquidation value | -1.00~1.00 | The higher the liquidation value, the higher the fair value | ||||||||||||
Volatility | 11.25~39.94 | The higher the volatility, the higher the fair value fluctuation | ||||||||||||
Correlation | 8.79~79.78 | The higher the correlation, the higher the fair value fluctuation | ||||||||||||
Recovery rate | 40 | The higher the recovery rate, the higher the fair value | ||||||||||||
Loans |
213,203 | Tree Model | Stock price, Volatility of the stock price | 13.11~49.28 | The higher the volatility, the higher the fair value fluctuation | |||||||||
Derivatives held for trading |
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Stock and index |
50,824 | DCF Model, Closed Form, FDM, Monte Carlo Simulation, Hull and White Model, Black-Scholes Model, Tree Model | Volatility of the underlying asset | 14.00~50.00 | The higher the volatility, the higher the fair value fluctuation | |||||||||
Correlation between underlying asset | 8.74~68.77 | The higher the correlation, the higher the fair value fluctuation | ||||||||||||
Currency, interest rate and others |
60,239 | DCF Model, Hull and White Model, Monte Carlo Simulation, Tree Model | Loss given default | 100.00 | The higher the loss given default, the lower the fair value | |||||||||
Volatility | 1.00~36.00 | The higher the volatility, the higher the fair value fluctuation | ||||||||||||
Correlation between underlying asset | -46.89~90.11 | The higher the absolute value of correlation, the higher the fair value fluctuation | ||||||||||||
Financial assets measured at fair value through other comprehensive income | ||||||||||||||
Equity securities |
1,332,718 | Adjusted discount rate method, IMV Model, DCF Model, Comparable Company Analysis, Dividend discount model, Option Model, Net asset value method, Market approach, One Factor Hull-White Model and others | Growth rate | 0~2.20 | The higher the growth rate, the higher the fair value | |||||||||
Discount rate | 7.05~16.30 | The lower the discount rate, the higher the fair value | ||||||||||||
Volatility | 17.62~25.14 | The higher the volatility, the higher the fair value fluctuation | ||||||||||||
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95
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
Financial liabilities |
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Financial liabilities designated at fair value through profit or loss |
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Derivative-linked securities |
DCF Model, Closed Form, FDM, Monte Carlo Simulation, Hull and White Model, Black Scholes-Model | Volatility of the underlying asset | 1.00~115.00 | The higher the volatility, the higher the fair value fluctuation | ||||||||||
Correlation between underlying asset | -49.00~90.11 | The higher the absolute value of correlation, the higher the fair value fluctuation | ||||||||||||
Derivatives held for trading |
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Stock and index |
240,817 | DCF Model, Closed Form, FDM, Monte Carlo Simulation, Hull and White Model, Black-Scholes Model, Tree Model | Volatility | 2.00~54.00 | The higher the volatility, the higher the fair value fluctuation | |||||||||
Correlation between underlying asset | 4.27~70.17 | The higher the correlation, the higher the fair value fluctuation | ||||||||||||
Others |
170,377 | Monte Carlo Simulation, Hull and White Model, DCF Model, Closed form formula | Volatility | 1.00~115.00 | The higher the volatility, the higher the fair value fluctuation | |||||||||
Volatility of the stock price | 20.85 | The higher the volatility, the higher the fair value fluctuation | ||||||||||||
Volatility of the interest rate | 0.69 | The higher the volatility, the higher the fair value fluctuation | ||||||||||||
Discount rate | 2.19~2.26 | The lower the discount rate, the higher the fair value | ||||||||||||
Correlation between underlying asset | -49.00~90.11 | The higher the absolute value of correlation, the higher the fair value fluctuation | ||||||||||||
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96
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
(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 |
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Financial assets designated at fair value through profit or loss |
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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 |
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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 |
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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 |
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Debt securities |
49,381 | DCF Model, Option Model, Net asset value method, Market approach | Volatility | 15.26 ~30.07 | The higher the volatility, the higher the fair value fluctuation | |||||||||
Correlation between underlying assets | 48.82 ~82.16 | The coefficient of correlation is different for each item | ||||||||||||
Discount rate | 2.57 ~ 11.08 | The lower the discount rate, the higher the fair value | ||||||||||||
Growth rate | 0.00 ~ 2.20 | The higher the growth rate, the higher the fair value |
97
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
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 higher the volatility, the higher the fair value fluctuation | ||||||||||||
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Financial liabilities |
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Financial liabilities designated at fair value through profit or loss |
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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 |
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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 |
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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 | |||||||||
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98
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
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 (i) equity-related derivatives, currency-related derivatives and interest rate related derivatives whose fair value changes are recognized in profit or loss, (ii) financial liabilities designated at fair value through profit or loss, and (iii) due from financial institutions, debt securities, equity securities and loan receivables whose fair value changes are recognized in profit or loss or other comprehensive income. If overlay approach is applied in accordance with Korean IFRS 1104, changes in fair value of financial assets at fair value through profit or loss are recognized as other comprehensive income.
The results of the sensitivity analysis from changes in inputs are as follows:
(In millions of Korean won) | 2018 | |||||||||||||||
Recognition in profit or loss |
Other comprehensive income |
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Favorable changes |
Unfavorable changes |
Favorable changes |
Unfavorable changes |
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Financial assets |
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Financial assets at fair value through profit or loss 1 |
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Due from financial institutions |
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Debt securities 4 |
20,261 | (17,885 | ) | 2,183 | (2,097 | ) | ||||||||||
Equity securities 3 |
14,241 | (10,162 | ) | 848 | (656 | ) | ||||||||||
Loans |
129 | (46 | ) | | | |||||||||||
Derivatives held for trading 2 |
27,639 | (26,155 | ) | | | |||||||||||
Financial assets measured at fair value through other comprehensive income |
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Equity securities 3 |
| | 162,563 | (86,094 | ) | |||||||||||
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Financial liabilities |
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Financial liabilities designated at fair value through profit or loss 1 |
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Derivatives held for trading2 |
112,827 | (105,875 | ) | | | |||||||||||
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1 | For financial instruments at fair value through profit or loss, the changes in fair value are calculated by shifting principal unobservable input parameters such as volatility of the underlying asset or correlation between underlying asset by ± 10%. |
2 | For Derivatives financial instruments, the changes in fair value are calculated by shifting principal unobservable input parameters; such as, price of underlying asset, volatility of stock price, interest rate by ± 10% and the loss given default ratio, discount rate by ± 1% |
3 | For equity securities, the changes in fair value are calculated by shifting principal unobservable input parameters; such as, correlation between growth rate (0~2.2%) and discount rate, or liquidation value (-1~1%) and discount rate. |
4 | 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%). |
99
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
(In millions of Korean won) | 2017 | |||||||||||||||
Recognition in profit or loss |
Other comprehensive income |
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Favorable changes |
Unfavorable changes |
Favorable changes |
Unfavorable changes |
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Financial assets |
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Financial assets designated at fair value through profit or loss1 |
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Debt securities |
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Equity securities |
654 | (626 | ) | | | |||||||||||
Derivative-linked securities |
6,906 | (6,820 | ) | | | |||||||||||
Derivatives held for trading2 |
25,616 | (28,488 | ) | | | |||||||||||
Available-for-sale financial assets |
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Debt securities3 |
| | 205 | (51 | ) | |||||||||||
Equity securities4 |
| | 126,916 | (71,396 | ) | |||||||||||
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Financial liabilities |
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Financial liabilities designated at fair value through profit or loss1 |
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Derivatives held for trading2 |
11,091 | (10,827 | ) | | | |||||||||||
Derivatives held for hedging2 |
2 | (2 | ) | | | |||||||||||
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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 as 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%). |
100
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
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, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | 2017 | ||||||
Balance at the beginning of the period |
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New transactions and others |
131,504 | 58,445 | ||||||
Changes during the period |
(92,163 | ) | (74,664 | ) | ||||
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Balance at the end of the period |
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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. The measurement methodology by categories of financial instruments is addressed at Note 3.
The carrying amounts of financial assets and liabilities by category as of December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | ||||||||||||||||||||||||
2018 | ||||||||||||||||||||||||
Financial instruments at fair value through profit loss |
Financial instruments measured at fair value through other comprehensive income |
Financial instruments at amortized cost |
Derivatives held for hedging |
Total | ||||||||||||||||||||
Financial assets measured at value through other comprehensive income |
Financial instruments designated at fair value through other comprehensive income |
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Financial assets |
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Cash and due from financial institutions |
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Financial assets at fair value through profit or loss |
50,987,847 | | | | | 50,987,847 | ||||||||||||||||||
Derivatives |
1,915,532 | | | | 110,430 | 2,025,962 | ||||||||||||||||||
Loans at amortized cost |
| | | 319,201,603 | | 319,201,603 | ||||||||||||||||||
Financial investments |
| 35,633,456 | 2,370,116 | 23,661,522 | | 61,665,094 | ||||||||||||||||||
Other financial assets |
| | | 8,133,556 | | 8,133,556 | ||||||||||||||||||
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|
|
|
101
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
(In millions of Korean won) | ||||||||||||||||||||
2018 | ||||||||||||||||||||
Financial instruments at fair value through profit or loss |
||||||||||||||||||||
Financial instruments at fair value through profit or loss |
Financial instruments designated at fair value through profit or loss |
Financial instruments at amortized cost |
Derivatives held for hedging |
Total | ||||||||||||||||
Financial liabilities |
||||||||||||||||||||
Financial liabilities at fair value through profit or loss |
||||||||||||||||||||
Derivatives |
2,724,994 | | | 176,253 | 2,901,247 | |||||||||||||||
Deposits |
| | 276,770,449 | | 276,770,449 | |||||||||||||||
Debts |
| | 33,004,834 | | 33,004,834 | |||||||||||||||
Debentures |
| | 53,278,697 | | 53,278,697 | |||||||||||||||
Other financial liabilities |
| | 19,828,307 | | 19,828,307 | |||||||||||||||
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|||||||||||
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|
(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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102
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
(In millions of Korean won) | 2017 | |||||||||||||||||||
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 |
3,054,614 | | | 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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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 (special purpose entity), while the maximum exposure to loss (carrying amount) from its continuing involvement in the derecognized financial assets as of December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 |
|||||||||||
Type of continuing involvement |
Classification of financial instruments |
Carrying amount of financial position |
Fair value of continuing involvement |
|||||||||
Discovery ABS Second Co., Ltd. |
Subordinate debt | Financial assets at fair value through profit or loss | ||||||||||
FK1411 Co., Ltd. |
Subordinate debt | Financial assets at fair value through profit or loss | 8,883 | 8,883 | ||||||||
AP 3B ABS Ltd. |
Subordinate debt | Financial assets at fair value through profit or loss | 5,512 | 5,512 | ||||||||
AP 4D ABS Ltd.1 |
Subordinated debt | Financial assets at fair value through profit or loss | 13,494 | 13,494 | ||||||||
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|
|||||||||
|
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|
|
1 | 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 |
103
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
(In millions of Korean won) | 2017 |
|||||||||||
Type of continuing involvement |
Classification of financial instruments |
Carrying amount of continuing involvement in statement 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 | |||||||||
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|||||||||
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|
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 |
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, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | 2017 | ||||||||||||||
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 |
627,630 | 336,929 | 600,813 | 324,425 | ||||||||||||
KB Kookmin Card Fourth Securitization Co., Ltd. 1 |
587,760 | 333,296 | 561,495 | 320,892 | ||||||||||||
KB Kookmin Card Fifth Securitization Co., Ltd. 1 |
562,239 | 299,754 | ||||||||||||||
Wise Mobile Thirteenth Securitization Specialty 2 |
| | 7,284 | | ||||||||||||
Wise Mobile Fourteenth Securitization Specialty 2 |
| | 8,504 | | ||||||||||||
Wise Mobile Fifteenth Securitization Specialty 2 |
| | 4,105 | | ||||||||||||
Wise Mobile Sixteenth Securitization Specialty 2 |
| | 5,500 | | ||||||||||||
Wise Mobile Seventeenth Securitization Specialty 2 |
| | 10,407 | 4,999 | ||||||||||||
Wise Mobile Eighteenth Securitization Specialty 2 |
| | 9,340 | 4,999 | ||||||||||||
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1 | The Group 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. To avoid such early redemption, the Group entrusts accounts and deposits in addition to the previously entrusted card accounts. |
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. |
104
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
The Group transferred the beneficiary certificates to Yuanta Securities at
W74,853 million and entered into a total return swap contract. If the fair value of the transferred asset changes, the risk is attributed to the company in accordance with the contract. The details of transferred financial
assets as of December 31, 2018 are as follows.
(In millions of Korean won) | 2018 | |||||||
Carrying amount of transferred assets |
Carrying amount of related liabilities |
|||||||
Financial assets at fair value through profit or loss |
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, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | |||||||
Carrying amount of transferred assets |
Carrying amount of related liabilities |
|||||||
Repurchase agreements1 |
||||||||
Loaned securities |
||||||||
Government bond |
1,160,362 | | ||||||
Stock |
58,171 | | ||||||
|
|
|
|
|||||
|
|
|
|
(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 | | ||||||
|
|
|
|
|||||
|
|
|
|
1 | The bonds sold under repurchase agreements amounts to |
105
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
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, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | |||||||||||||||||||||||
Non-offsetting amount | ||||||||||||||||||||||||
Gross assets | Gross asset offset |
Net amounts presented in the statement of financial position |
Financial instruments |
Cash collateral |
Net amount | |||||||||||||||||||
Derivatives held for trading and Derivatives linked securities |
||||||||||||||||||||||||
Derivatives held for hedging |
110,430 | | 110,430 | (74,910 | ) | | 35,520 | |||||||||||||||||
Payable spot exchange |
2,222,164 | | 2,222,164 | (2,213,967 | ) | | 8,197 | |||||||||||||||||
Repurchase agreements |
3,411,700 | | 3,411,700 | (3,332,700 | ) | | 79,000 | |||||||||||||||||
Domestic exchange settlement credits |
27,723,990 | (26,992,637 | ) | 731,353 | | | 731,353 | |||||||||||||||||
Other financial instruments |
1,157,569 | (1,103,015 | ) | 54,554 | (3,932 | ) | | 50,622 | ||||||||||||||||
|
|
|
|
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|
|||||||||||||
|
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|
|
|
|||||||||||||
(In millions of Korean won) | 2017 | |||||||||||||||||||||||
Non-offsetting amount | ||||||||||||||||||||||||
Gross assets | Gross asset offset |
Net amounts presented in the statement of financial position |
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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|||||||||||||
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|
106
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
Details of financial liabilities subject to offsetting, enforceable master netting arrangements or similar agreement as of December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | |||||||||||||||||||||||
Non-offsetting amount | ||||||||||||||||||||||||
Gross liabilities | Gross asset offset | Net amounts presented in the statement of financial position |
Financial instruments |
Cash collateral |
Net amount | |||||||||||||||||||
Derivatives held for trading and Derivatives linked securities |
||||||||||||||||||||||||
Derivatives held for hedging |
176,253 | | 176,253 | (72,691) | (977) | 102,585 | ||||||||||||||||||
Payable spot exchange |
2,219,980 | | 2,219,980 | (2,208,302) | | 11,678 | ||||||||||||||||||
Repurchase agreements1 |
11,946,896 | | 11,946,896 | (11,862,096) | | 84,800 | ||||||||||||||||||
Securities borrowing agreements |
2,745,906 | | 2,745,906 | (2,745,906) | | | ||||||||||||||||||
Domestic exchange settlement credits |
28,672,551 | (26,992,637) | 1,679,914 | (1,679,914) | | | ||||||||||||||||||
Other financial instruments |
1,151,697 | (1,103,015) | 48,682 | (3,932) | | 44,750 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
|
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|
|
|
|
|
|
|
|
|
|||||||||||||
(In millions of Korean won) | 2017 | |||||||||||||||||||||||
Non-offsetting amount | ||||||||||||||||||||||||
Gross liabilities | Gross asset offset | Net amounts presented in the statement of financial position |
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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|
|
1 | Includes repurchase agreements sold to customers. |
107
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
7. Due from Financial Institutions at Amortized Cost
Details of due from financial institutions as of December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | Financial institutions | Interest rate(%) |
2018 | 2017 | ||||||||||
Due from financial institutions in Korean won |
Due from Bank of Korea |
Bank of Korea |
0.00 ~ 1.78 | |||||||||||
Due from financial institutions |
Standard Chartered Bank Korea Limited and others |
0.00 ~ 2.75 | 3,245,841 | 2,267,778 | ||||||||||
Due from others |
Korea Securities Finance Corportion and others |
0.00 ~ 1.79 | 1,132,908 | 3,377,102 | ||||||||||
|
|
|
|
|||||||||||
13,102,510 | 14,156,175 | |||||||||||||
|
|
|
|
|||||||||||
Due from financial institutions in foreign currencies |
Due from financial institutions in foreign currencies |
Wells Fargo Bank, N.A. and others |
0.00 ~ 0.76 | 1,734,660 | 1,670,935 | |||||||||
Time deposits in foreign currencies |
Bank of Shanghai, Beijing Branch and others |
0.00 ~ 4.10 | 1,001,600 | 775,917 | ||||||||||
Due from others |
Societe Generale and others |
0.00 ~ 0.02 | 1,379,537 | 616,634 | ||||||||||
|
|
|
|
|||||||||||
4,115,797 | 3,063,486 | |||||||||||||
|
|
|
|
|||||||||||
|
|
|
|
1 | Loans and other financial assets are net of allowance. |
Restricted cash from financial institutions as of December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | Financial Institutions | 2018 | 2017 | Reason for restriction | ||||||||||
Due from financial institutions in Korean won |
Due from Bank of Korea |
Bank of Korea |
Bank of Korea Act | |||||||||||
Due from Banking institution |
Standard Chartered Bank Korea Limited and others |
1,348,099 | 572,132 | Net settlement and others | ||||||||||
Due from others |
Korea Securities Finance Corportion and others |
655,194 | 371,398 | Derivatives margin account and others | ||||||||||
|
|
|
|
|||||||||||
10,727,054 | 9,454,825 | |||||||||||||
|
|
|
|
|||||||||||
Due from financial institutions in foreign currencies |
Due from financial institutions in foreign currencies |
Bank of Korea and others |
375,130 | 619,130 | Bank of Korea Act and others | |||||||||
Time deposits in foreign currencies |
Bank NY Branch and others |
30,538 | 29,650 | Bank Act of the State of New York | ||||||||||
Due from others |
Societe Generale and others |
1,214,905 | 509,484 | Derivatives margin account and others | ||||||||||
|
|
|
|
|||||||||||
1,620,573 | 1,158,264 | |||||||||||||
|
|
|
|
|||||||||||
|
|
|
|
1 | Loans and other financial assets are net of allowance. |
108
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
Changes in the allowances for due from financial institutions losses
Changes in the allowances for due from financial institutions losses for the year ended December 31, 2018, are as follows:
(In millions of Korean won) | 2018 | |||||||||||
The financial instruments applying 12-month expected credit losses |
The financial instruments applying lifetime expected credit losses |
|||||||||||
Non-impaired | Impaired | |||||||||||
Beginning1 |
||||||||||||
Transfer between stages |
| | | |||||||||
Transfer to 12-month expected credit losses |
| | | |||||||||
Transfer to lifetime expected credit losses |
| | | |||||||||
Impairment |
| | | |||||||||
Disposal |
| | ||||||||||
Provision (reversal) for loan losses |
221 | | | |||||||||
Others (change of currency ratio, etc.) |
1 | | | |||||||||
|
|
|
|
|
|
|||||||
Ending |
||||||||||||
|
|
|
|
|
|
1 | Prepared in accordance with Korean IFRS 1109. |
8. Assets Pledged as Collateral
Details of assets pledged as collateral as of December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | |||||||
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 measured at fair value through profit or loss |
Korea Securities Depository and others |
7,676,111 | Repurchase agreements | |||||
Korea Securities Depository and others |
9,303,600 | Securities borrowing transactions | ||||||
Samsung Futures Inc. and others |
1,503,088 | Derivatives transactions | ||||||
|
|
|||||||
18,482,799 | ||||||||
|
|
|||||||
Financial assets measured at fair value through other comprehensive income |
Korea Securities Depository and others |
1,258,694 | Repurchase agreements |
109
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
Korea Securities Depository and others |
1,001,259 | Securities borrowing transactions | ||||||
Bank of Korea |
49,948 | Borrowings from Bank of Korea | ||||||
Bank of Korea |
479,784 | Settlement risk of Bank of Korea | ||||||
Samsung Futures Inc. and others |
395,221 | Derivatives transactions | ||||||
|
|
|||||||
3,184,906 | ||||||||
|
|
|||||||
Securities at amortized cost |
Korea Securities Depository and others |
276,688 | Repurchase agreements | |||||
Bank of Korea |
1,911,160 | Borrowings from Bank of Korea | ||||||
Bank of Korea |
1,474,529 | Settlement risk of Bank of Korea | ||||||
Samsung Futures Inc. and others |
162,184 | Derivatives transactions | ||||||
Others |
350,292 | Others | ||||||
|
|
|||||||
4,174,853 | ||||||||
|
|
|||||||
Mortgage loans |
Others |
4,060,863 | Covered bond | |||||
|
|
|||||||
Real estate |
NATIXIS REAL ESTATE CAPITAL LLC and others |
801,944 | Borrowings from Bank and others | |||||
|
|
|||||||
|
|
|||||||
(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 | ||||||||
|
|
110
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
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 W6,472,993 million and W3,185,601 million of its borrowing
securities and securities held as collateral with KSFC and others as at December 31, 2018 and 2017.
The fair values of collateral available to sell or repledge, and collateral sold or repledged, regardless of debtors default, as of December 31, 2018 and 2017, are as follows:
(In millions of Korean won)
2018 | ||||||||||||
Fair value of collateral held |
Fair value of collateral sold or repledged |
Total | ||||||||||
Securities |
3,547,179 | | 3,547,179 |
(In millions of Korean won)
2017 | ||||||||||||
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. |
111
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
In particular, the Group applies fair value hedge accounting using cross currency swaps, interest rate swaps and others to hedge the risk of changes in fair values due to the changes in interest rates and foreign exchange rates of structured debts in Korean won, financial debentures in foreign currencies, structured deposits in Korean won, and structured deposits in foreign currencies. In addition, the Group applies net investment hedge accounting by designating financial debentures in foreign currencies as hedging instruments to hedge foreign exchange risks on net investments in foreign operations.
Details of derivative financial instruments held for trading as of December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | |||||||||||
Notional amount | Assets | Liabilities | ||||||||||
Interest rate |
||||||||||||
Forwards |
||||||||||||
Futures1 |
4,269,407 | 1,124 | 3,852 | |||||||||
Swaps |
219,558,592 | 421,591 | 471,915 | |||||||||
Options |
16,937,362 | 159,218 | 276,392 | |||||||||
|
|
|
|
|
|
|||||||
241,335,361 | 581,933 | 807,215 | ||||||||||
|
|
|
|
|
|
|||||||
Currency |
||||||||||||
Forwards |
74,189,998 | 622,745 | 548,127 | |||||||||
Futures1 |
602,805 | 37 | 240 | |||||||||
Swaps |
36,073,995 | 470,499 | 452,390 | |||||||||
Options |
2,449,469 | 6,071 | 13,602 | |||||||||
|
|
|
|
|
|
|||||||
113,316,267 | 1,099,352 | 1,014,359 | ||||||||||
|
|
|
|
|
|
|||||||
Stock and index |
||||||||||||
Futures1 |
1,155,861 | 4,902 | 10,820 | |||||||||
Swaps |
8,190,648 | 82,803 | 321,135 | |||||||||
Options |
5,442,775 | 70,740 | 464,226 | |||||||||
|
|
|
|
|
|
|||||||
14,789,284 | 158,445 | 796,181 | ||||||||||
|
|
|
|
|
|
|||||||
Credit |
||||||||||||
Swaps |
4,300,208 | 32,711 | 25,047 | |||||||||
|
|
|
|
|
|
|||||||
4,300,208 | 32,711 | 25,047 | ||||||||||
|
|
|
|
|
|
|||||||
Commodity |
||||||||||||
Futures1 |
5,807 | 150 | 128 | |||||||||
Swaps |
140,382 | 2,202 | 3,199 | |||||||||
Options |
| | | |||||||||
|
|
|
|
|
|
|||||||
146,189 | 2,352 | 3,327 | ||||||||||
|
|
|
|
|
|
|||||||
Other |
2,361,827 | 40,739 | 78,865 | |||||||||
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
112
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
(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 | |||||||||
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
1 | Gains or losses arising from daily mark-to-market futures are reflected in the margin accounts. |
113
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
The average of hedge ratio for each type of hedge accounting as of December 31, 2018, is as follows:
(In millions of Korean won) | 2018 | |||||||||||||||||||||||||||
1 year | 2 years | 3 years | 4 years | 5 years | More than 5 years |
Total | ||||||||||||||||||||||
Fair value hedge |
| |||||||||||||||||||||||||||
The quantity of the hedging instrument |
1,371,901 | 728,308 | 1,372,040 | 567,030 | 195,392 | 1,308,602 | 5,543,273 | |||||||||||||||||||||
Average ratio of hedging |
100.73 | % | 98.65 | % | 100.00 | % | 100.00 | % | 100.00 | % | 100.00 | % | 100.00 | % | ||||||||||||||
Cash flow hedge |
| |||||||||||||||||||||||||||
The quantity of the hedging instrument |
2,641,861 | 1,403,129 | 902,911 | 919,258 | 525,629 | 50,000 | 6,442,788 | |||||||||||||||||||||
Average ratio of hedging |
100.00 | % | 100.00 | % | 100.00 | % | 100.00 | % | 100.00 | % | 100.00 | % | 100.00 | % | ||||||||||||||
Hedge of net investments in a foreign operations |
| |||||||||||||||||||||||||||
The quantity of the hedging instrument |
528,025 | 2,942 | | | | | 530,967 | |||||||||||||||||||||
Average ratio of hedging |
100.00 | % | 100.00 | % | 0.00 | % | 0.00 | % | 0.00 | % | 0.00 | % | 100.00 | % |
Fair Value Hedge
Details of hedged item in fair value hedge as of December 31, 2018, are as follows:
(In millions of Korean won) | 2018 | |||||||||||||||||||||
Carrying amount | Accumulated adjusted amount |
Changes in the fair value |
||||||||||||||||||||
Assets | Liabilities | Assets | Liabilities | |||||||||||||||||||
Hedge accounting |
| |||||||||||||||||||||
Interest rate |
Debt securities in KRW |
|||||||||||||||||||||
Debt securities in foreign currencies |
702,727 | | (9,790 | ) | | (1,233 | ) | |||||||||||||||
Deposits in foreign currencies |
| 805,215 | | (89,265 | ) | 38,232 | ||||||||||||||||
Debts in KRW |
| 349,252 | | 19,252 | (2,308 | ) | ||||||||||||||||
Debts in foreign currencies |
| 1,429,457 | | (24,073 | ) | (1,868 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||
1,167,940 | 2,583,924 | (8,576 | ) | (94,086 | ) | 38,824 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Currency |
Deposits in foreign currencies |
1,845,253 | | (75,255 | ) | | 86,209 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||
1,845,253 | | (75,255 | ) | | 86,209 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
|
|
|
|
|
|
|
|
|
114
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
Details of derivative instruments designated as fair value hedge as of December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | |||||||||||||||
Notional amount | Assets | Liabilities | Changes in the fair value |
|||||||||||||
Interest rate |
| |||||||||||||||
Swaps |
||||||||||||||||
Currency |
||||||||||||||||
Forwards |
1,697,718 | 5,923 | 32,565 | (106,903 | ) | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
|
|
|
|
|
|
|
|
(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 | |||||||||
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
The fair value of non-derivative financial instruments designated as hedging instruments is as follows:
(In millions of Korean won) | 2018 | 2017 | ||||||
Deposits in foreign currencies |
Details of hedge ineffectiveness recognized in profit or loss from derivatives for the year ended December 31, 2018, is as follows:
(In millions of Korean won) | 2018 | |||
Hedge ineffectiveness recognized in profit |
||||
From hedge accounting |
| |||
Interest rate |
||||
Currency rate |
(20,694 | ) | ||
|
|
|||
|
|
Gains and losses from fair value hedging instruments and hedged items attributable to the hedged risk for the years ended December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | 2017 | ||||||
Gains (losses) on hedging instruments |
||||||||
Gains (losses) on the hedged items attributable to the hedged risk |
135,556 | (56,461 | ) | |||||
|
|
|
|
|||||
|
|
|
|
115
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
Cash Flow Hedge
Details of hedged item in cash flow hedge as of December 31, 2018 are as follows:
(In millions of Korean won) | 2018 | |||||||
Changes in fair value |
Other comprehensive income for cash flow hedge |
|||||||
Hedge accounting |
| |||||||
Interest rate |
||||||||
Foreign currency change risk |
18,650 | 1,163 | ||||||
|
|
|
|
|||||
|
|
|
|
Details of derivative instruments designated as cash flow hedge as of December 31, 2018 and 2017, are as follows:
2018 | ||||||||||||||||
Notional amount |
Assets | Liabilities | Changes in fair value |
|||||||||||||
Interest rate |
| |||||||||||||||
Swaps |
||||||||||||||||
Currency |
||||||||||||||||
Swaps |
2,300,452 | 22,759 | 40,493 | (16,658 | ) | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
|
|
|
|
|
|
|
|
(In millions of Korean won) | 2017 | |||||||||||
Notional amount |
Assets | Liabilities | ||||||||||
Interest rate |
||||||||||||
Swaps |
||||||||||||
Currency |
||||||||||||
Swaps |
2,396,957 | 117,597 | 33,342 | |||||||||
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
Gains and losses from cash flow hedging instruments and hedged items attributable to the hedged risk for the years ended December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | 2017 | ||||||
Gains (losses) on hedging instruments |
||||||||
Gains (losses) on effectiveness (amount recognized in other comprehensive income) |
(24,672 | ) | (100,949 | ) | ||||
Gains on ineffectiveness (amount recognized in profit or loss) |
1,650 | (11,564 | ) |
Amounts recognized in other comprehensive income and reclassified from equity to profit or loss for the years ended December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | 2017 | ||||||
Amount recognized in other comprehensive income |
||||||||
Amount reclassified from equity to profit or loss |
15,234 | 126,239 | ||||||
Tax effect |
400 | (4,331 | ) | |||||
OCI after tax |
(9,038 | ) | 20,959 |
116
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
Hedge on Net Investments in Foreign Operations
Details of hedged item in hedge on foreign operation net investments hedge as of December 31, 2018, are as follows:
(In millions of Korean won) | 2018 | |||||||
Changes in fair value |
Other comprehensive income for hedge on net investment in a foreign operation |
|||||||
Hedge accounting |
| |||||||
Currency(foreign currency change risk) |
Details of financial instruments designated as hedging instrument in hedge on net investments in foreign operations as of December 31, 2018, is as follows:
2018 | ||||||||||||||||
Nominal amount |
Assets | Liabilities | Changes in fair value |
|||||||||||||
Currency |
| |||||||||||||||
Forwards |
||||||||||||||||
Financial debentures in foreign currencies |
89,448 | | 89,109 | (3,321 | ) | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
|
|
|
|
|
|
|
|
Details of derivative instruments designated as hedging instrument in hedge on net investments in foreign operations as of December 31, 2017, is as follows:
(In millions of Korean won) | 2017 | |||||||||||
Notional amount |
Assets | Liabilities | ||||||||||
Currency | ||||||||||||
Forwards |
The fair value of non-derivative financial instruments designated as hedging instruments as of December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | 2017 | ||||||
Financial debentures in foreign currencies |
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, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | 2017 | ||||||
Gains (losses) on hedging instruments |
||||||||
Effective portion of gains (losses) on hedges of net investments in foreign operations (amount recognized in other comprehensive income) |
(25,096 | ) | 34,800 | |||||
Ineffective portion of gains (losses) on hedges of net investments in foreign operations (amount recognized in profit or loss) |
| 1,129 |
117
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
The effective portion of gains (losses) on hedging instruments recognized in other comprehensive income for the years ended December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | 2017 | ||||||
Amount recognized in other comprehensive income |
||||||||
Amount reclassified from equity to profit or loss |
(12,330 | ) | | |||||
Tax effect |
10,292 | (8,186 | ) | |||||
|
|
|
|
|||||
Amount recognized in other comprehensive income, net of tax |
||||||||
|
|
|
|
10. Loans at Amortized Cost
Details of loans as of December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | 2017 | ||||||
Loans at amortized cost |
||||||||
Deferred loan origination fees and costs |
753,126 | 719,816 | ||||||
Less: Allowances for loan losses |
(2,609,681 | ) | (2,110,231 | ) | ||||
|
|
|
|
|||||
Carrying amount |
||||||||
|
|
|
|
Details of loans for other banks as of December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | 2017 | ||||||
Loans at amortized cost |
||||||||
Less: Allowances for loan losses |
(620 | ) | (77 | ) | ||||
|
|
|
|
|||||
Carrying amount |
||||||||
|
|
|
|
Details of loan types and customer types of loans to customers, other than banks, as of December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | |||||||||||||||
Retail | Corporate | Credit card | Total | |||||||||||||
Loans in Korean won |
||||||||||||||||
Loans in foreign currencies |
259,015 | 4,711,234 | | 4,970,249 | ||||||||||||
Domestic import usance bills |
| 2,817,174 | | 2,817,174 | ||||||||||||
Off-shore funding loans |
| 844,954 | | 844,954 | ||||||||||||
Call loans |
| 1,473,397 | | 1,473,397 | ||||||||||||
Bills bought in Korean won |
| 3,057 | | 3,057 | ||||||||||||
Bills bought in foreign currencies |
| 3,427,368 | | 3,427,368 | ||||||||||||
Guarantee payments under payment guarantee |
46 | 4,104 | | 4,150 | ||||||||||||
Credit card receivables in Korean won |
| | 17,346,224 | 17,346,224 | ||||||||||||
Credit card receivables in foreign currencies |
| | 7,834 | 7,834 | ||||||||||||
Reverse repurchase agreements |
| 3,341,700 | | 3,341,700 | ||||||||||||
Privately placed bonds |
| 823,178 | | 823,178 | ||||||||||||
Factored receivables |
446 | 5,939 | | 6,385 | ||||||||||||
Lease receivables |
1,712,597 | 81,985 | | 1,794,582 | ||||||||||||
Loans for installment credit |
4,582,913 | 25,107 | | 4,608,020 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
159,078,869 | 141,894,147 | 17,354,058 | 318,327,074 | |||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Proportion (%) |
49.97 | 44.57 | 5.46 | 100.00 | ||||||||||||
Less: Allowances |
(642,897 | ) | (1,255,223 | ) | (710,941 | ) | (2,609,061 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
|
|
|
|
|
|
|
|
118
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
(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 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
|
|
|
|
|
|
|
|
119
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
The changes in deferred loan origination fees and costs for the years ended December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | |||||||||||||||||||||||
Beginning | Increase | Decrease | Business combination |
Others | Ending | |||||||||||||||||||
Deferred loan origination costs |
||||||||||||||||||||||||
Loans in Korean won |
||||||||||||||||||||||||
Other origination costs |
126,265 | 77,464 | (83,950 | ) | | 1 | 119,780 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
758,945 | 495,183 | (470,112 | ) | | 1 | 784,017 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Deferred loan origination fees |
||||||||||||||||||||||||
Loans in Korean won |
11,561 | 6,832 | (9,338 | ) | | | 9,055 | |||||||||||||||||
Other origination fees |
27,568 | 9,927 | (15,660 | ) | | 1 | 21,836 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
39,129 | 16,759 | (24,998 | ) | | 1 | 30,891 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
(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 | |||||||||||||||||
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|
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|
|||||||||||||
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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|
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|
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44,294 | 27,260 | (32,416 | ) | | (9 | ) | 39,129 | |||||||||||||||||
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120
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
11. Allowances for Loan Losses
Changes in the allowances for loan losses for the years ended December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | |||||||||||||||||||||||||||||||||||
Retails | Corporates | Credit cards | ||||||||||||||||||||||||||||||||||
The financial instruments applying 12-month expected credit losses |
The financial instruments applying lifetime expected credit losses |
The financial instruments applying 12-month expected credit losses |
The financial instruments applying lifetime expected credit losses |
The financial instruments applying 12-month expected credit losses |
The financial instruments applying lifetime expected credit losses |
|||||||||||||||||||||||||||||||
Non-impaired | Impaired | Non-impaired | Impaired | Non-impaired | Impaired | |||||||||||||||||||||||||||||||
Beginning2 |
||||||||||||||||||||||||||||||||||||
Transfer between stages |
||||||||||||||||||||||||||||||||||||
Transfer to 12-month expected credit losses |
106,143 | (105,597 | ) | (546 | ) | 38,360 | (36,402 | ) | (1,958 | ) | 45,824 | (44,706 | ) | (1,118 | ) | |||||||||||||||||||||
Transfer to lifetime expected credit losses (non-impaired) |
(99,242 | ) | 115,493 | (16,251 | ) | (36,518 | ) | 47,001 | (10,483 | ) | (23,345 | ) | 24,438 | (1,093 | ) | |||||||||||||||||||||
Transfer to lifetime expected credit losses (impaired) |
(2,107 | ) | (49,241 | ) | 51,348 | (2,746 | ) | (31,157 | ) | 33,903 | (2,007 | ) | (11,804 | ) | 13,811 | |||||||||||||||||||||
Write-offs |
| (2 | ) | (380,698 | ) | | (6 | ) | (233,314 | ) | | | (465,415 | ) | ||||||||||||||||||||||
Disposal |
(1,707 | ) | (1,795 | ) | (1,661 | ) | (72 | ) | | (14,172 | ) | | | (47 | ) | |||||||||||||||||||||
Provision (reversal) for loan losses3 |
(15,533 | ) | 60,180 | 350,578 | 7,927 | 62,901 | 58,515 | 5,919 | 61,935 | 488,975 | ||||||||||||||||||||||||||
Business combination |
172 | | | 22 | | | | | | |||||||||||||||||||||||||||
Others (change of currency ratio, etc.) |
488 | 318 | 178 | (1,015 | ) | 597 | 25,321 | | | (7,845 | ) | |||||||||||||||||||||||||
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Ending |
||||||||||||||||||||||||||||||||||||
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1 | Provision for credit losses in statements of comprehensive income also includes provision (reversal) for due from financial institutions (Note 7), and provision (reversal) for securities (Note 12), provision for unused commitments and guarantees (Note 23), provision (reversal) for financial guarantees contracts (Note 23), and provision (reversal) for other financial assets (Note 18). |
2 | Prepared in accordance with Korean IFRS 1109. |
3 | Recovery of written-off loans amounting to
|
121
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
(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 |
(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 includes provision for unused commitments and guarantees (Note 23), provision (reversal) for financial guarantees contracts (Note 23), and provision (reversal) for other financial assets (Note 18). |
The Group manages the written-off loans that their extinctive prescription did not occur, and that are not collected;
the balance of those are W 12,067,272 million as of December 31, 2018.
Changes in the book value of loans at amortized cost for the year ended December 31, 2018, are as follows:
(In millions of Korean won) | 2018 | |||||||||||
12-month expected credit losses |
Lifetime expected credit losses | |||||||||||
Non-impaired | Impaired | |||||||||||
Beginning1 |
||||||||||||
Transfer between stages |
||||||||||||
Transfer to 12-month expected credit losses |
8,399,033 | (8,322,782 | ) | (76,251 | ) | |||||||
Transfer to lifetime expected credit losses |
(11,867,144 | ) | 11,938,263 | (71,119 | ) | |||||||
Transfer to lifetime expected credit losses (impaired) |
(780,095 | ) | (901,109 | ) | 1,681,204 | |||||||
Write-offs |
| (8 | ) | (1,079,427 | ) | |||||||
Disposal |
(490,070 | ) | (10,557 | ) | (192,415 | ) | ||||||
Net increase(decrease) (Execution, repayment and others) |
35,941,823 | (3,502,876 | ) | (434,337 | ) | |||||||
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Ending |
||||||||||||
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122
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
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, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | |||
Financial assets at fair value through profit or loss |
||||
Debt securities: |
||||
Government and public bonds |
||||
Financial bonds |
14,978,408 | |||
Corporate bonds |
4,101,066 | |||
Asset-backed securities |
84,382 | |||
Puttable instruments (investment funds, etc.) |
10,252,377 | |||
Derivatives linked securities |
3,516,626 | |||
Other debt securities |
7,429,687 | |||
Equity securities: |
||||
Stocks |
1,094,441 | |||
Other equity securities |
193,221 | |||
Loans: |
||||
Private placed corporate bonds |
823,071 | |||
Other loans |
131,105 | |||
Due from financial institutions: |
||||
Other due from financial institutions |
381,719 | |||
Others |
78,808 | |||
|
|
|||
50,987,847 | ||||
|
|
|||
Financial Investments |
| |||
Financial assets measured at fair value through other comprehensive income |
| |||
Debt securities: |
||||
Government and public bonds |
3,475,214 | |||
Financial bonds |
20,107,719 | |||
Corporate bonds |
10,540,985 | |||
Asset-backed securities |
1,100,041 | |||
Other debt securities |
19,675 | |||
Equity securities: |
||||
Stocks |
2,262,379 | |||
Equity investments |
38,584 | |||
Other equity securities |
69,153 | |||
Loans: |
||||
Private placed corporate bonds |
389,822 | |||
|
|
|||
38,003,572 | ||||
|
|
|||
Financial assets at amortized cost |
| |||
Debt securities: |
||||
Government and public bonds |
5,090,051 | |||
Financial bonds |
6,847,055 | |||
Corporate bonds |
6,943,332 | |||
Asset-backed securities |
4,782,800 | |||
Allowance |
(1,716 | ) | ||
|
|
|||
23,661,522 | ||||
|
|
|||
|
|
123
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
(In millions of Korean won) | 2017 | |||
Financial assets held for trading |
||||
Debt securities: |
||||
Government and public bonds |
||||
Financial bonds |
11,324,330 | |||
Corporate bonds |
5,133,226 | |||
Asset-backed securities |
161,991 | |||
Others |
2,316,277 | |||
Equity securities: |
||||
Stocks and others |
1,009,190 | |||
Beneficiary certificates |
3,925,910 | |||
Others |
73,855 | |||
|
|
|||
30,177,293 | ||||
|
|
|||
Financial assets designated at fair value through profit or loss |
| |||
Debt securities: |
||||
Corporate bonds |
66,969 | |||
Equity securities: |
||||
Stocks and others |
67,828 | |||
Derivative-linked securities |
1,613,404 | |||
Privately placed bonds |
301,851 | |||
|
|
|||
2,050,052 | ||||
|
|
|||
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 | |||
Corporate bonds |
10,570,501 | |||
Asset-backed securities |
2,402,437 | |||
Others |
1,410,884 | |||
Equity securities: |
||||
Stocks and others |
3,077,748 | |||
Equity investments and others |
459,808 | |||
Beneficiary certificates |
5,619,306 | |||
|
|
|||
48,116,263 | ||||
|
|
|||
|
||||
Debts securities: |
||||
Government and public bonds |
5,448,471 | |||
Financial bonds |
2,474,841 | |||
Corporate bonds |
|
6,218,723 4,305,678 |
| |
Asset-backed securities | ||||
Others |
44,267 | |||
|
|
|||
18,491,980 | ||||
|
|
|||
Total financial investments |
||||
|
|
124
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
Dividend incomes from the equity securities measured at fair value through other comprehensive income for the year ended December 31, 2018, are as follows:
(In millions of Korean won) | 2018 | |||||||||
From the financial asset derecognized |
From the remaining financial asset |
|||||||||
Equity securities at fair value through other comprehensive income |
| |||||||||
Stocks |
Listed | |||||||||
Non-listed | | 25,121 | ||||||||
Equity investments |
| 2,256 | ||||||||
Other equity securities |
2,508 | 1,798 | ||||||||
|
|
|
|
|||||||
|
|
|
|
The derecognized equity securities, measured at fair value through other comprehensive income for the year ended December 31, 2018, is as follows:
(In millions of Korean won) | 2018 | |||||||||
Disposal price |
Accumulated OCI as of disposal date |
|||||||||
Equity securities at fair value through other comprehensive income |
| |||||||||
Stocks |
Listed | |||||||||
Non-listed | 480 | 480 | ||||||||
Other equity securities |
80,000 | 2,567 | ||||||||
|
|
|
|
|||||||
|
|
|
|
Provision, and reversal for the allowance of financial investments for the year ended December 31, 2018, are as follows:
(In millions of Korean won) | Impairment losses |
Reversal of impairment |
Total | |||||||||
Securities measured at fair value through other comprehensive income |
||||||||||||
Loans measured at fair value through other comprehensive income |
963 | 826 | 137 | |||||||||
Securities measured at amortized cost |
296 | 282 | 14 | |||||||||
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
The impairment losses and the reversal of impairment losses recognized in relation to financial investments for the year ended December 31, 2017, are as follows:
(In millions of Korean won) | 2017 | |||||||||||
Impairment | Reversal | Net | ||||||||||
Available-for-sale financial assets |
125
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
Changes in the allowances for debt securities for the year ended December 31, 2018, are as follows:
(In millions of Korean won) | 2018 | |||||||||||
12-month credit losses |
Lifetime expected credit losses |
|||||||||||
Non-impaired | Impaired | |||||||||||
Beginning1 |
||||||||||||
Transfer between stages |
||||||||||||
Transfer to 12-month expected credit losses |
125 | (125 | ) | | ||||||||
Transfer to lifetime expected credit losses |
| | | |||||||||
Impairment |
| | | |||||||||
Disposal |
(170 | ) | | | ||||||||
Provision (reversal) for loan losses |
716 | (180 | ) | (398 | ) | |||||||
Others (change of currency ratio, etc.) |
49 | 16 | | |||||||||
|
|
|
|
|
|
|||||||
Ending |
||||||||||||
|
|
|
|
|
|
1 | Prepared in accordance with Korean IFRS 1109. |
126
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
13. Investments in Associates and Joint Ventures
Investments in associates and joint ventures as of December 31, 2018 and 2017, are as follows:
(in millions of Korean won) | December 31, 2018 | |||||||||||||||||||||
Ownership (%) |
Acquisition cost |
Share of net asset amount |
Carrying amount |
Industry | Location | |||||||||||||||||
Associates and joint ventures |
||||||||||||||||||||||
KB Pre IPO Secondary Venture Fund 1st1 |
15.19 | Investment finance |
Korea | |||||||||||||||||||
KB GwS Private Securities Investment Trust |
26.74 | 113,880 | 136,208 | 134,362 | Investment finance |
Korea | ||||||||||||||||
KB-KDBC New Technology Business Fund8 |
66.66 | 15,000 | 14,594 | 14,594 | Investment finance |
Korea | ||||||||||||||||
KB Star office Private real estate Investment Trust No.1 |
21.05 | 20,000 | 20,252 | 19,839 | Investment finance |
Korea | ||||||||||||||||
PT Bank Bukopin TBK,15, 16 |
22.00 | 116,422 | 106,484 | 113,932 | Banking and foreign exchange transaction |
Indonesia | ||||||||||||||||
Sun Surgery Center Inc. |
28.00 | 2,682 | 2,760 | 2,715 | Hospital |
|
United States of America |
| ||||||||||||||
Dae-A Leisure Co., Ltd.6 |
49.36 | | 1,613 | 578 | Earth works |
Korea | ||||||||||||||||
Doosung Metal Co., Ltd 6 |
26.52 | | (16 | ) | | Manufacture of metal products |
Korea | |||||||||||||||
RAND Bio Science Co., Ltd. |
21.91 | 2,000 | 185 | 843 | Research and experimental development on medical sciences and pharmacy |
Korea | ||||||||||||||||
Balhae Infrastructure Company1 |
12.61 | 104,622 | 108,050 | 108,050 | Investment finance |
Korea | ||||||||||||||||
Aju Good Technology Venture Fund |
38.46 | 18,038 | 18,134 | 18,134 | Investment finance |
Korea | ||||||||||||||||
Acts Co., Ltd.10 |
7.14 | 500 | (14 | ) | | Manufacture of optical lens and elements |
Korea | |||||||||||||||
SY Auto Capital Co., Ltd. |
49.00 | 9,800 | 15,257 | 10,672 | Installment loan |
Korea | ||||||||||||||||
Wise Asset Management Co., Ltd.7 |
33.00 | | | | Asset management |
Korea | ||||||||||||||||
Incheon Bridge Co., Ltd.1 |
14.99 | 9,158 | (16,689 | ) | | Operation of highways and related facilities |
Korea | |||||||||||||||
Jungdong Steel Co., Ltd.6 |
42.88 | | (433 | ) | | Wholesale of primary metal |
Korea | |||||||||||||||
Kendae Co., Ltd.6 |
41.01 | | (252 | ) | 98 | Screen printing |
Korea | |||||||||||||||
Dongjo Co., Ltd.6 |
29.29 | | 806 | 115 | Wholesale of agricultural and forestry machinery and equipment |
Korea | ||||||||||||||||
Dpaps Co., Ltd.6 |
38.62 | | 14 | | Wholesale of paper products |
Korea | ||||||||||||||||
Big Dipper Co., Ltd. |
29.33 | 440 | 166 | 280 | Big data consulting |
Korea | ||||||||||||||||
Builton Co., Ltd.12 |
21.96 | 800 | 67 | 304 | Software development and supply |
Korea | ||||||||||||||||
Shinla Construction Co., Ltd.6 |
20.24 | | (551 | ) | | Specialty construction |
Korea | |||||||||||||||
Shinhwa Underwear Co., Ltd.6 |
26.24 | | (57 | ) | 185 | Manufacture of underwears and sleepwears |
Korea |
127
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
A-PRO Co., Ltd.1 |
13.71 | 1,500 | 1,554 | 1,403 | Manufacture of electric power storage system |
Korea | ||||||||||||||
MJT&I Co., Ltd.6 |
22.89 | | (606 | ) | 122 | Wholesale of other goods |
Korea | |||||||||||||
Jaeyang Industry Co., Ltd.6 |
20.86 | | (552 | ) | | Manufacture of luggage and other protective cases |
Korea | |||||||||||||
Jungdo Co., Ltd.6 |
25.53 | | 1,492 | | Office, commercial and institutional building construction |
Korea | ||||||||||||||
Jinseung Tech Co., Ltd.6 |
30.04 | | (176 | ) | | Manufacture of other general-purpose machinery n.e.c. |
Korea | |||||||||||||
Terra Co., Ltd.6 |
24.06 | | 2 | | Manufacture of hand-operated kitchen appliances and metal ware |
Korea | ||||||||||||||
Paycoms Co., Ltd.9 |
11.70 | 800 | 71 | 103 | System software publishing |
Korea | ||||||||||||||
Food Factory Co., Ltd.11 |
22.22 | 1,000 | 206 | 928 | Farm product distribution industry |
Korea | ||||||||||||||
Korea NM Tech Co., Ltd.6 |
22.41 | | 552 | | Manufacture of motor vehicles, trailers and semitrailers |
Korea | ||||||||||||||
KB IGen Private Equity Fund No.11 |
0.03 | | | | Investment finance |
Korea | ||||||||||||||
KB No.9 Special Purpose Acquisition Company1, |
0.11 | 24 | 31 | 31 | SPAC |
Korea | ||||||||||||||
KB No.10 Special Purpose Acquisition Company1,4 |
0.19 | 10 | 20 | 20 | SPAC |
Korea | ||||||||||||||
KB No.11 Special Purpose Acquisition Company1,5 |
0.31 | 10 | 19 | 19 | SPAC |
Korea | ||||||||||||||
KB Private Equity FundIII1 |
15.68 | 8,000 | 7,830 | 7,830 | Investment finance |
Korea | ||||||||||||||
Korea Credit Bureau Co., Ltd.1 |
9.00 | 4,500 | 5,941 | 5,941 | Credit information |
Korea | ||||||||||||||
KoFC KBIC Frontier Champ 2010-5(PEF) |
50.00 | 364 | 233 | 233 | Investment finance |
Korea | ||||||||||||||
KoFC POSCO HANHWA KB shared growth Private Equity Fund No.2 |
25.00 | 12,970 | 14,601 | 14,601 | Investment finance |
Korea | ||||||||||||||
Keystone-Hyundai Securities No. 1 Private Equity Fund1 |
5.64 | 1,842 | 1,581 | 1,581 | Investment finance |
Korea | ||||||||||||||
POSCO-KB Shipbuilding Fund |
31.25 | 5,000 | 4,463 | 4,463 | Investment finance |
Korea | ||||||||||||||
GH Real Estate I LP |
42.00 | 17,678 | 17,252 | 17,252 | Asset management |
Guernsey | ||||||||||||||
KBTS Technology Venture Private Equity Fund8 |
56.00 | 14,224 | 13,777 | 13,777 | Investment finance |
Korea | ||||||||||||||
KB-Brain KOSDAQ Scale-up New Technology Business Investment Fund8 |
42.55 | 8,000 | 7,930 | 7,930 | Investment finance |
Korea | ||||||||||||||
KB-SJ Tourism Venture Fund1,8 |
18.52 | 1,500 | 1,386 | 1,386 | Investment finance |
Korea | ||||||||||||||
UNION Media Commerce Fund |
29.00 | 1,000 | 962 | 962 | Investment finance |
Korea | ||||||||||||||
CHONG IL MACHINE & TOOLS CO.,LTD.,6 |
21.71 | | (107 | ) | | Machinery and equipment wholesale |
Korea | |||||||||||||
IMT TECHNOLOGY CO.,LTD. 6 |
25.29 | | 18 | | Computer Peripherals Distribution |
Korea | ||||||||||||||
IWON ALLOY CO.,LTD. 6 |
23.31 | | 394 | | Manufacture of smelting, refining and alloys |
Korea | ||||||||||||||
CARLIFE CO.,LTD. 6 |
24.39 | | (75 | ) | | Publishing of magazines and periodicals (publishing industry) |
Korea | |||||||||||||
COMPUTERLIFE CO.,LTD.,6 |
45.71 | | (329 | ) | | Publishing of magazines and periodicals (publishing industry) |
Korea | |||||||||||||
SKYDIGITAL INC.6 |
20.40 | | (142 | ) | | Multi Media, Manufacture of Multi Media Equipment |
Korea | |||||||||||||
JO YANG INDUSTRIAL CO., LTD.6 |
23.14 | | 75 | | Manufacture of Special Glass |
Korea | ||||||||||||||
|
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|
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|
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|
|
128
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
(in millions of Korean won) | December 31, 2017 | |||||||||||||||||||||
Ownership (%) |
Acquisition cost |
Share of net asset amount |
Carrying amount |
Industry | Location | |||||||||||||||||
Associates |
||||||||||||||||||||||
KB Pre IPO Secondary Venture Fund 1st1 |
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 Fund1,7,9 |
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.6 |
49.36 | | 1,017 | | Earth works |
Korea | ||||||||||||||||
Doosung Metal Co., Ltd.6 |
26.52 | | (20 | ) | | Manufacture of metal products |
Korea | |||||||||||||||
RAND Bio Science Co., Ltd. |
21.91 | 2,000 | 2,000 | 2,000 | Research and experimental development on medical sciences and pharmacy |
Korea | ||||||||||||||||
Balhae Infrastructure Company1 |
12.61 | 101,794 | 105,190 | 105,190 | Investment finance |
Korea | ||||||||||||||||
Bungaejangter Inc.13 |
24.68 | 3,484 | 3,484 | 3,484 | Portals and other internet information media service activities |
Korea | ||||||||||||||||
Aju Good Technology Venture Fund |
38.46 | 8,230 | 7,856 | 8,230 | Investment finance |
Korea | ||||||||||||||||
Acts Co., Ltd.10 |
7.14 | 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.8 |
33.00 | | | | Asset management |
Korea | ||||||||||||||||
Incheon Bridge Co., Ltd.1 |
14.99 | 9,158 | (16,202 | ) | | Operation of highways and related facilities |
Korea | |||||||||||||||
Jungdong Steel Co., Ltd.6 |
42.88 | | (436 | ) | | Wholesale of primary metal |
Korea | |||||||||||||||
Kendae Co., Ltd.6 |
41.01 | | (223 | ) | 127 | Screen printing |
Korea | |||||||||||||||
Daesang Techlon Co., Ltd.6 |
47.73 | | 97 | | Manufacture of plastic wires, bars, pipes, tubes and hoses |
Korea | ||||||||||||||||
Dongjo Co., Ltd.6 |
29.29 | | 691 | | Wholesale of agricultural and forestry machinery and equipment |
Korea | ||||||||||||||||
Dpaps Co., Ltd.6 |
38.62 | | 155 | | Wholesale of paper products |
Korea | ||||||||||||||||
Big Dipper Co., Ltd. |
29.33 | 440 | 325 | 440 | Big data consulting |
Korea | ||||||||||||||||
Builton Co., Ltd. |
20.58 | 800 | 800 | 800 | Software development and supply |
Korea | ||||||||||||||||
Shinla Construction Co., Ltd.6 |
20.24 | | (553 | ) | | Specialty construction |
Korea | |||||||||||||||
Shinhwa Underwear Co., Ltd.6 |
26.24 | | (103 | ) | 138 | Manufacture of underwears and sleepwears |
Korea | |||||||||||||||
A-PRO Co., Ltd.1 |
12.61 | 1,500 | 1,500 | 1,500 | Manufacture of electric power storage system |
Korea | ||||||||||||||||
MJT&I Co., Ltd.6 |
22.89 | | (601 | ) | 127 | Wholesale of other goods |
Korea | |||||||||||||||
Inno Lending Co., Ltd.1 |
19.90 | 398 | 230 | 230 | Credit rating model development |
Korea | ||||||||||||||||
Jaeyang Industry Co., Ltd.6 |
20.86 | | (522 | ) | | Manufacture of luggage and other protective cases |
Korea | |||||||||||||||
Jungdo Co., Ltd.6 |
25.53 | | 1,664 | | Office, commercial and institutional building construction |
Korea | ||||||||||||||||
Jinseung Tech Co., Ltd.6 |
30.04 | | (173 | ) | | Manufacture of other general-purpose machinery n.e.c. |
Korea |
129
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
Terra Co., Ltd.6 |
24.06 | | 36 | 20 | Manufacture of hand-operated kitchen appliances and metal ware |
Korea | ||||||||||||||||
Paycoms Co., Ltd.9 |
12.35 | 800 | 800 | 800 | System software publishing |
Korea | ||||||||||||||||
Food Factory Co., Ltd.11 |
22.22 | 1,000 | 1,000 | 1,000 | Farm product distribution industry |
Korea | ||||||||||||||||
Korea NM Tech Co., Ltd.6 |
22.41 | | 580 | | Manufacture of motor vehicles, trailers and semitrailers |
Korea | ||||||||||||||||
KB IGen Private Equity Fund No.11 |
0.03 | 3 | 3 | 3 | Investment finance |
Korea | ||||||||||||||||
KB No.8 Special Purpose Acquisition Company2 |
0.10 | 10 | 20 | 20 | SPAC |
Korea | ||||||||||||||||
KB No.9 Special Purpose Acquisition Company3 |
0.11 | 24 | 31 | 31 | SPAC |
Korea | ||||||||||||||||
KB No.10 Special Purpose Acquisition Company1,4 |
0.19 | 10 | 20 | 20 | SPAC |
Korea | ||||||||||||||||
KB No.11 Special Purpose Acquisition Company1,5 |
0.31 | 10 | 19 | 19 | SPAC |
Korea | ||||||||||||||||
KB Private Equity FundIII1 |
15.68 | 8,000 | 7,899 | 7,899 | Investment finance |
Korea | ||||||||||||||||
Korea Credit Bureau Co., Ltd.1 |
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 Fund1 |
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 | ||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||
|
|
|
|
|
|
1 | As of December 31, 2018 and 2017, the Group is represented on 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. |
2 | The market value of KB No.8 Special Purpose Acquisition Company, reflecting the quoted market price as of
December 31, 2017, amounts to |
3 | The market value of KB No.9 Special Purpose Acquisition Company, reflecting the quoted market price as of
December 31, 2017, amounts to |
4 | The market value of KB No.10 Special Purpose Acquisition Company, reflecting the quoted market price as of
December 31, 2018 and 2017, amounts to |
5 | The market value of KB No.11 Special Purpose Acquisition Company, reflecting the quoted market price as of
December 31, 2018 and 2017, amounts to |
6 | The investment in associates was reclassified from available-for-sale financial assets due to re-instated voting rights from termination of rehabilitation procedures. |
130
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
7 | Carrying amount of the investment has been recognized as a loss from the date Hyundai Securities Co., Ltd. was included in the consolidation scope. |
8 | In order to direct relevant activities, it is necessary to obtain the consent of the two co-operative members; the Group has applied the equity method as the Group cannot control the investee by itself. |
9 | The ownership of Paycoms Co., Ltd. would be 22.96% and 24.06% as of December 31, 2018 and 2017, respectively, considering the potential voting rights from convertible bond. |
10 | The ownership of Acts Co., Ltd. would be 27.22% and 27.78% as of December 31, 2018 and 2017, respectively, considering the potential voting rights from convertible bond. . |
11 | The ownership of Food Factory Co., Ltd. would be 30.00% and 30.00% as of December 31, 2018 and 2017, respectively, considering the potential voting rights from convertible bond. . |
12 | The ownership of Builton Co., Ltd. would be 26.86% as of December 31, 2018, considering the potential voting rights from convertible bond. |
13 | The ownership of Bungaejangter Inc. would be 22.69% as of December 31, 2017, considering the potential voting rights from convertible bond. |
14 | In accordance with Korean IFRS 1028 Investments in Associates and Joint Ventures, application of the equity method is exempted, and the Group designates its investments in JLK INSPECTION Inc., Rainist Co., Ltd., TESTIAN Inc., Spark Biopharma, Inc., RMGP Bio-Pharma Investment Fund, L.P.,RMGP Bio-Pharma Investment, L.P, HEYBIT, Inc.,Hasys.,Stratio, Inc. |
15 | The Group has entered into an agreement with PT Bosowa Corporindo, the major shareholder of PT Bank Bukopin TBK. Under this agreement, the Group has a right of first refusal, a tag-along right and a drag-along right. The drag-along right can be exercised for the duration of two years after three years from the acquisition date, subject to the occurrence of certain situations as defined in the agreement. |
16 | The fair value of PT Bank Bukopin TBK common stock is |
131
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
Summarized financial information on major associates and joint ventures, adjustments to carrying amount of investment in associates and dividends received from the associates are as follows:
(In millions of Korean won) | 20181 | |||||||||||||||||||||||||||
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 |
516,115 | 741 | 425,814 | 515,374 | 136,208 | (1,846 | ) | 134,362 | ||||||||||||||||||||
KB-KDBC New Technology Business Investment Fund |
22,492 | 602 | 22,500 | 21,890 | 14,594 | | 14,594 | |||||||||||||||||||||
KB Star office Private real estate Investment Trust No.1 |
218,025 | 121,828 | 95,000 | 96,197 | 20,252 | (413 | ) | 19,839 | ||||||||||||||||||||
PT Bank Bukopin TBK2 |
7,195,249 | 6,711,233 | 106,536 | 484,016 | 106,484 | 7,448 | 113,932 | |||||||||||||||||||||
Sun Surgery Center Inc |
10,468 | 610 | 9,428 | 9,858 | 2,760 | (45 | ) | 2,715 | ||||||||||||||||||||
RAND Bio Science Co., Ltd. |
2,913 | 2,070 | 913 | 843 | 185 | 658 | 843 | |||||||||||||||||||||
Balhae Infrastructure Company |
859,040 | 1,843 | 829,995 | 857,197 | 108,050 | | 108,050 | |||||||||||||||||||||
Aju Good Technology Venture Fund |
47,216 | 66 | 46,900 | 47,150 | 18,134 | | 18,134 | |||||||||||||||||||||
Acts Co., Ltd. |
6,666 | 6,823 | 117 | (157 | ) | (14 | ) | 14 | | |||||||||||||||||||
SY Auto Capital Co., Ltd. |
89,948 | 58,812 | 20,000 | 31,136 | 15,257 | (4,585 | ) | 10,672 | ||||||||||||||||||||
Incheon Bridge Co., Ltd. |
617,560 | 728,896 | 61,096 | (111,336 | ) | (16,689 | ) | 16,689 | | |||||||||||||||||||
Big Dipper Co., Ltd. |
723 | 157 | 1,500 | 566 | 166 | 114 | 280 | |||||||||||||||||||||
Builton Co., Ltd. |
1,908 | 1,604 | 325 | 304 | 67 | 237 | 304 | |||||||||||||||||||||
A-PRO Co., Ltd. |
29,438 | 18,099 | 1,713 | 11,339 | 1,554 | (151 | ) | 1,403 | ||||||||||||||||||||
Paycoms Co., Ltd. |
2,126 | 1,520 | 855 | 606 | 71 | 32 | 103 | |||||||||||||||||||||
Food Factory Co., Ltd. |
4,096 | 3,168 | 450 | 928 | 206 | 722 | 928 | |||||||||||||||||||||
KB IGen Private Equity Fund No. 1 |
148 | 8 | 170 | 140 | | | | |||||||||||||||||||||
KB No.9 Special Purpose Acquisition Company |
30,288 | 2,629 | 1,382 | 27,659 | 31 | | 31 | |||||||||||||||||||||
KB No.10 Special Purpose Acquisition Company |
11,960 | 1,704 | 521 | 10,256 | 20 | | 20 | |||||||||||||||||||||
KB No.11 Special Purpose Acquisition Company |
6,807 | 742 | 321 | 6,065 | 19 | | 19 | |||||||||||||||||||||
KB Private Equity FundIII |
49,924 | 5 | 51,000 | 49,919 | 7,830 | | 7,830 | |||||||||||||||||||||
Korea Credit Bureau Co., Ltd. |
88,797 | 22,788 | 10,000 | 66,009 | 5,941 | | 5,941 | |||||||||||||||||||||
KoFC KBIC Frontier Champ 2010-5(PEF) |
469 | 3 | 300 | 466 | 233 | | 233 | |||||||||||||||||||||
KoFC POSCO HANHWA KB shared growth Private Equity Fund No. 2 |
59,464 | 1,061 | 51,880 | 58,403 | 14,601 | | 14,601 | |||||||||||||||||||||
Keystone-Hyundai Securities No. 1 Private Equity Fund |
177,024 | 151,862 | 34,114 | 25,162 | 1,581 | | 1,581 | |||||||||||||||||||||
POSCO-KB Shipbuilding Fund |
14,287 | 4 | 16,000 | 14,283 | 4,463 | | 4,463 | |||||||||||||||||||||
GH Real Estate I LP |
41,206 | 190 | 42,093 | 41,016 | 17,252 | | 17,252 | |||||||||||||||||||||
KBTS Technology Venture Private Equity Fund |
24,810 | 208 | 25,400 | 24,602 | 13,777 | | 13,777 | |||||||||||||||||||||
KB-Brain KOSDAQ Scale-up New Technology Business Investment Fund |
18,820 | 181 | 18,800 | 18,639 | 7,930 | | 7,930 | |||||||||||||||||||||
KB-SJ Tourism Venture Fund |
7,484 | 2 | 8,100 | 7,482 | 1,386 | | 1,386 | |||||||||||||||||||||
UNION Media Commerce Fund |
3,318 | | 3,450 | 3,318 | 962 | | 962 |
132
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
(In millions of Korean won) | 20181 | |||||||||||||||||||
Operating income |
Profit (loss) | Other comprehensive income (loss) |
Total comprehensive income (loss) |
Dividends | ||||||||||||||||
Associates and joint ventures |
||||||||||||||||||||
KB Pre IPO Secondary Venture Fund 1st |
||||||||||||||||||||
KB GwS Private Securities Investment Trust |
42,502 | 41,524 | | 41,524 | 8,160 | |||||||||||||||
KB-KDBC New Technology Business Investment Fund |
39 | (568 | ) | | (568 | ) | | |||||||||||||
KB Star office Private real estate Investment Trust No.1 |
14,092 | 6,135 | | 6,135 | 1,162 | |||||||||||||||
PT Bank Bukopin TBK |
148,793 | (8,843 | ) | (2,325 | ) | (11,168 | ) | | ||||||||||||
Sun Surgery Center Inc. |
873 | 71 | 342 | 413 | | |||||||||||||||
RAND Bio Science Co., Ltd. |
| (2,076 | ) | | (2,076 | ) | | |||||||||||||
Balhae Infrastructure Company |
61,525 | 54,241 | | 54,241 | 6,804 | |||||||||||||||
Aju Good Technology Venture Fund |
2,491 | 1,356 | | 1,356 | | |||||||||||||||
Acts Co., Ltd. |
2,472 | (628 | ) | | (628 | ) | | |||||||||||||
SY Auto Capital Co., Ltd. |
16,525 | 2,729 | (151 | ) | 2,578 | | ||||||||||||||
Incheon Bridge Co., Ltd. |
94,373 | (2,757 | ) | | (2,757 | ) | | |||||||||||||
Big Dipper Co., Ltd. |
441 | (543 | ) | | (543 | ) | | |||||||||||||
Builton Co., Ltd. |
1,867 | (287 | ) | | (287 | ) | | |||||||||||||
A-PRO Co., Ltd. |
47,926 | 2,015 | | 2,015 | | |||||||||||||||
Paycoms Co., Ltd. |
686 | (409 | ) | | (409 | ) | | |||||||||||||
Food Factory Co., Ltd. |
4,753 | 412 | | 412 | | |||||||||||||||
KB IGen Private Equity Fund No. 1 |
| 3,693 | | 3,693 | | |||||||||||||||
KB No.9 Special Purpose Acquisition Company |
| 262 | | 262 | | |||||||||||||||
KB No.10 Special Purpose Acquisition Company |
| 73 | | 73 | | |||||||||||||||
KB No.11 Special Purpose Acquisition Company |
| 218 | | 218 | | |||||||||||||||
KB Private Equity FundIII |
| (438 | ) | | (438 | ) | | |||||||||||||
Korea Credit Bureau Co., Ltd. |
78,018 | 9,901 | | 9,901 | 112 | |||||||||||||||
KoFC KBIC Frontier Champ 2010-5(PEF) |
1,460 | 1,453 | | 1,453 | 999 | |||||||||||||||
KoFC POSCO HANHWA KB shared growth Private Equity Fund No. 2 |
2,401 | (12,313 | ) | | (12,313 | ) | | |||||||||||||
Keystone-Hyundai Securities No. 1 Private Equity Fund |
15,507 | (3,194 | ) | | (3,194 | ) | | |||||||||||||
POSCO-KB Shipbuilding Fund |
160 | (1,222 | ) | | (1,222 | ) | | |||||||||||||
GH Real Estate I LP |
4,293 | 3,089 | (307 | ) | 2,782 | 1,595 | ||||||||||||||
KBTS Technology Venture Private Equity Fund |
| (798 | ) | | (798 | ) | | |||||||||||||
KB-Brain KOSDAQ Scale-up New Technology Business Investment Fund |
20 | (161 | ) | | (161 | ) | | |||||||||||||
KB-SJ Tourism Venture Fund |
| (618 | ) | | (618 | ) | | |||||||||||||
UNION Media Commerce Fund |
| (132 | ) | | (132 | ) | |
133
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
(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 |
134
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
(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. |
2 | The amounts of goodwill on PT Bank Bukopin TBK is |
135
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
Changes in investments in associates and joint ventures for the years ended December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | |||||||||||||||||||||||||||||||
Beginning1 | Acquisition | Disposal | Dividends | Gains (losses) on equity-method accounting |
Other compre- hensive income |
Others | Ending | |||||||||||||||||||||||||
Associates and joint ventures |
||||||||||||||||||||||||||||||||
KB Pre IPO Secondary Venture Fund 1st |
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KB GwS Private Securities Investment Trust |
131,420 | | | (8,160 | ) | 11,102 | | | 134,362 | |||||||||||||||||||||||
KB-KDBC New Technology Business Investment Fund |
4,972 | 10,000 | | | (378 | ) | | | 14,594 | |||||||||||||||||||||||
KB Star office Private real estate Investment Trust No.1 |
19,709 | | | (1,162 | ) | 1,292 | | | 19,839 | |||||||||||||||||||||||
PT Bank Bukopin TBK |
| 116,422 | | | (1,946 | ) | (544 | ) | | 113,932 | ||||||||||||||||||||||
Sun Suregery Center Inc. |
2,682 | | | | 33 | | | 2,715 | ||||||||||||||||||||||||
Dae-A Leisure Co., Ltd. |
| | | | 3,698 | (3,120 | ) | | 578 | |||||||||||||||||||||||
RAND Bio Science Co., Ltd. |
2,000 | | | | (1,157 | ) | | | 843 | |||||||||||||||||||||||
Balhae Infrastructure Company |
105,190 | 4,645 | (1,817 | ) | (6,804 | ) | 6,836 | | | 108,050 | ||||||||||||||||||||||
Bungaejangter Inc.3 |
3,484 | | (1,384 | ) | | | | (2,100 | ) | | ||||||||||||||||||||||
Aju Good Technology Venture Fund |
8,230 | 9,808 | | | 96 | | | 18,134 | ||||||||||||||||||||||||
Acts Co., Ltd. 2 |
500 | | | | | | (500 | ) | | |||||||||||||||||||||||
SY Auto Capital Co., Ltd. |
8,070 | | | | 2,676 | (74 | ) | | 10,672 | |||||||||||||||||||||||
Kendae Co., Ltd. |
127 | | | | (29 | ) | | | 98 | |||||||||||||||||||||||
Dassang Techlon Co., Ltd. |
| | | | | | | | ||||||||||||||||||||||||
Dong Jo Co., Ltd. |
| | | | 115 | | | 115 | ||||||||||||||||||||||||
Big Dipper Co., Ltd. |
440 | | | | (160 | ) | | | 280 | |||||||||||||||||||||||
Builton Co., Ltd. |
800 | | | | (496 | ) | | | 304 | |||||||||||||||||||||||
Shinhwa Underwear Co., Ltd. |
138 | | | | 47 | | | 185 | ||||||||||||||||||||||||
A-PRO Co., Ltd. |
1,500 | | | | (97 | ) | | | 1,403 |
136
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
MJT&I Co., Ltd. |
127 | | | | (5 | ) | | | 122 | |||||||||||||||||||||||
Inno Lending Co., Ltd. |
230 | | (230 | ) | | | | | | |||||||||||||||||||||||
Terra Co., Ltd. |
20 | | | | (20 | ) | | | | |||||||||||||||||||||||
Paycoms Co., Ltd. |
800 | | | | (697 | ) | | | 103 | |||||||||||||||||||||||
Food Factory Co., Ltd. |
1,000 | | | | (72 | ) | | | 928 | |||||||||||||||||||||||
KB IGen Private Equity Fund No. 1 |
3 | | (4 | ) | | 1 | | | | |||||||||||||||||||||||
KB No.8 Special Purpose Acquisition Company |
20 | | (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 Company |
19 | | | | 1 | (1 | ) | | 19 | |||||||||||||||||||||||
KB Private Equity FundIII |
7,899 | | | | (69 | ) | | | 7,830 | |||||||||||||||||||||||
Korea Credit Bureau Co., Ltd. |
5,056 | | | (112 | ) | 997 | | | 5,941 | |||||||||||||||||||||||
KoFC KBIC Frontier Champ 2010-5(PEF) |
7,120 | | (6,121 | ) | (999 | ) | 233 | | | 233 | ||||||||||||||||||||||
KoFC POSCO HANHWA KB shared growth Private Equity Fund No. 2 |
17,713 | | | | (1,873 | ) | (1,239 | ) | | 14,601 | ||||||||||||||||||||||
Keystone-Hyundai Securities No. 1 Private Equity Fund |
1,761 | | | | (180 | ) | | | 1,581 | |||||||||||||||||||||||
POSCO-KB Shipbuilding Fund |
2,345 | 2,500 | | | (382 | ) | | | 4,463 | |||||||||||||||||||||||
Hyundai-Tongyang Agrifood Private Equity Fund |
543 | | (74 | ) | (469 | ) | | | | | ||||||||||||||||||||||
GH Real Estate I LP |
| 17,678 | | (1,595 | ) | 1,298 | (129 | ) | | 17,252 | ||||||||||||||||||||||
KBTS Technology Venture Private Equity Fund |
| 14,224 | | | (447 | ) | | | 13,777 | |||||||||||||||||||||||
KB-Brain KOSDAQ Scale-up New Technology Business Investment Fund |
| 8,000 | | | (70 | ) | | | 7,930 | |||||||||||||||||||||||
KB-SJ Tourism Venture Fund |
| 1,500 | | | (114 | ) | | | 1,386 | |||||||||||||||||||||||
CUBE Growth Fund No.2 |
| 1,300 | (1,300 | ) | | | | | | |||||||||||||||||||||||
UNION Media Commerce Fund |
| 1,000 | | | (38 | ) | | | 962 | |||||||||||||||||||||||
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1 | Prepared in accordance with Korean IFRS 1109 |
2 | Recognized |
3 | The amount of reclassification as financial assets is |
4 | Gain on disposal of investments in associates and joint ventures for the year ended December 31, 2018 is
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137
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
(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 | ) | | | | | |
138
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
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 | | | | |||||||||||||||||||||||
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 Q2 2017.. |
2 | Other gain of KB No.11 Special Purpose Acquisition Company amounting to |
3 | Gain on disposal of investments in associates for the year ended December 31, 2017, amounts to
|
139
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
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, 2018 and 2017, are as follows:
2018 | 2017 | |||||||||||||||
Unrecognized loss |
Accumulated unrecognized loss |
Unrecognized loss |
Accumulated unrecognized loss |
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Doosung Metal Co., Ltd |
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Incheon Bridge Co., Ltd. |
487 | 16,689 | 16,202 | 16,202 | ||||||||||||
Jungdong Steel Co., Ltd. |
| 489 | 13 | 489 | ||||||||||||
Dpaps Co., Ltd. |
141 | 325 | (4 | ) | 184 | |||||||||||
Shinla Construction Co., Ltd. |
| 183 | 7 | 183 | ||||||||||||
Jaeyang Industry Co., Ltd. |
30 | 30 | | | ||||||||||||
Terra Co., Ltd. |
14 | 14 | | | ||||||||||||
Jungdo Co., Ltd. |
161 | 161 | | | ||||||||||||
Jinseung Tech Co., Ltd.6 |
3 | 3 | | | ||||||||||||
Korea NM Tech Co., Ltd. |
28 | 28 | | | ||||||||||||
Ejade Co., Ltd. |
| | (1,181 | ) | | |||||||||||
JSC Bank CenterCredit |
| | (108,761 | ) | |
14. Property and Equipment, and Investment Properties
Details of property and equipment as of December 31, 2018 and 2017, are as follows:
2018 | ||||||||||||||||
(In millions of Korean won) | Acquisition cost |
Accumulated depreciation |
Accumulated impairment losses |
Carrying amount |
||||||||||||
Land |
||||||||||||||||
Buildings |
2,043,459 | (707,389 | ) | (5,859 | ) | 1,330,211 | ||||||||||
Leasehold improvements |
878,078 | (750,442 | ) | | 127,636 | |||||||||||
Equipment and vehicles |
1,729,223 | (1,448,599 | ) | | 280,624 | |||||||||||
Construction in progress |
88,618 | | | 88,618 | ||||||||||||
Financial lease assets |
44,429 | (31,432 | ) | | 12,997 | |||||||||||
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2017 | ||||||||||||||||
(In millions of Korean won) | Acquisition cost |
Accumulated depreciation |
Accumulated impairment losses |
Carrying amount |
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Land |
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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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140
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
The changes in property and equipment for the years ended December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | |||||||||||||||||||||||||||||||
Beginning | Acquisition | Transfers1 | Disposal | Depreciation2 | Business combination |
Others | Ending | |||||||||||||||||||||||||
Land |
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Buildings |
1,371,153 | 3,738 | 9,683 | (4,528 | ) | (51,881 | ) | | 2,046 | 1,330,211 | ||||||||||||||||||||||
Leasehold improvement |
89,729 | 28,922 | 70,221 | (633 | ) | (71,931 | ) | | 11,328 | 127,636 | ||||||||||||||||||||||
Equipment and vehicles |
243,205 | 182,868 | 242 | (1,026 | ) | (144,791 | ) | 121 | 5 | 280,624 | ||||||||||||||||||||||
Construction in-progress |
14,808 | 236,495 | (161,330 | ) | | | 644 | (1,999 | ) | 88,618 | ||||||||||||||||||||||
Financial lease assets |
8,448 | 9,640 | | | (5,091 | ) | | | 12,997 | |||||||||||||||||||||||
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(In millions of Korean won) | 2017 | |||||||||||||||||||||||||||||||
Beginning | Acquisition | Transfers1 | Disposal | Depreciation2 | Business combination |
Others | Ending | |||||||||||||||||||||||||
Land |
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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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1 | Including transfers with investment property and assets held for sale. |
2 | Including depreciation cost and others amounting to |
The changes in accumulated impairment losses of property and equipment for the years ended December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | ||||||||||||||||||||||
2018 | ||||||||||||||||||||||
Beginning | Impairment | Reversal | Business combination |
Disposal and Others |
Ending | |||||||||||||||||
| | | |
141
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
2017 | ||||||||||||||||||||||
Beginning | Impairment | Reversal | Business combination |
Disposal and others |
Ending | |||||||||||||||||
Details of investment property as of December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | |||||||||||||||
Acquisition cost |
Accumulated depreciation |
Accumulated impairment losses |
Carrying amount |
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Land |
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Buildings |
1,295,668 | (148,419 | ) | | 1,147,249 | |||||||||||
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(In millions of Korean won) | 2017 | |||||||||||||||
Acquisition cost |
Accumulated depreciation |
Accumulated impairment losses |
Carrying amount |
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Land |
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Buildings |
719,920 | (122,935 | ) | | 596,985 | |||||||||||
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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, 2018, are as follows:
(In millions of Korean won) | 2018 | |||||||
Fair value | Valuation technique | Inputs | ||||||
Land and buildings |
Cost Approach Method | - Price per square meter - Replacement cost | ||||||
976,857 | Market comparison method | - Price per square meter | ||||||
1,123,323 | Cash flow approach | - Prospective rental market growth rate - Period of vacancy - Rental rate - Discount rate and others | ||||||
161,473 | Income approach | - Discount rate - Capitalization rate - Vacancy rate |
142
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
As of December 31, 2018 and 2017, fair values of the investment properties amount to
W2,287,012 million and W893,583 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, 2018 and 2017, amounts to W87,513 million and
W59,259 million, respectively.
The changes in investment property for the years ended December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | |||||||||||||||||||||||||||
Beginning | Acquisition | Transfers | Disposal | Depreciation | Others | Ending | ||||||||||||||||||||||
Land |
||||||||||||||||||||||||||||
Buildings |
596,985 | 573,671 | 44,622 | (50,872 | ) | (26,092 | ) | 8,935 | 1,147,249 | |||||||||||||||||||
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(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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143
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
15. Intangible Assets
Details of intangible assets as of December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | |||||||||||||||||||
Acquisition cost |
Accumulated amortization |
Accumulated impairment losses |
Other | Carrying Amount |
||||||||||||||||
Goodwill |
||||||||||||||||||||
Other intangible assets |
4,140,355 | (1,614,775 | ) | (45,017 | ) | | 2,480,563 | |||||||||||||
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(In millions of Korean won) | 2017 | |||||||||||||||||||
Acquisition cost |
Accumulated amortization |
Accumulated impairment losses |
Other | Carrying Amount |
||||||||||||||||
Goodwill |
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Other intangible assets |
4,012,563 | (1,299,879 | ) | (43,074 | ) | | 2,669,610 | |||||||||||||
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Details of goodwill as of December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | 2017 | ||||||||||||||
Acquisition cost |
Carrying amount |
Acquisition cost |
Carrying amount |
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Housing & Commercial Bank |
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KB Cambodia Bank |
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 Securities Vietnam Joint Stock Company2 |
13,092 | 12,520 | 13,092 | 12,260 | ||||||||||||
KB Daehan Specialed Bank PLC. |
1,515 | 1,510 | | | ||||||||||||
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1 | The amount occurred from formerly known as KB Investment & Securities Co., Ltd. |
2 | MARITIME SECURITIES INCORPORATION changed its name to KB Securities Vietnam joint stock company. |
The changes in accumulated impairment losses of goodwill for the years ended December 31, 2018 and 2017, are as follows:
(In millions of Korean won)
2018 | ||||||||||||||
Beginning | Impairment | Others | Ending | |||||||||||
144
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
2017 | ||||||||||||||
Beginning | Impairment | Others | Ending | |||||||||||
The details of allocating goodwill to cash-generating units and related information for impairment testing as of December 31, 2018, are as follows:
(In millions of Korean won)
Housing & Commercial Bank | KB Securities Co., Ltd.1 |
KB Capital Co., Ltd. |
KB Savings Bank Co., Ltd. and Yehansoul Savings Bank Co., Ltd. |
KB Securities Vietnam Joint Stock Company |
Total | |||||||||||||||||||||||
Retail Banking |
Corporate Banking |
|||||||||||||||||||||||||||
Carrying amounts |
||||||||||||||||||||||||||||
Recoverable amount exceeded carrying amount |
4,281,676 | 2,875,939 | 658,365 | 1,703,417 | 317,394 | 5,595 | 9,842,386 | |||||||||||||||||||||
Discount rate (%) |
15.51 | % | 15.74 | % | 20.05 | % | 10.29 | % | 8.09 | % | 23.63 | % | ||||||||||||||||
Permanent growth rate (%) |
1.00 | 1.00 | 1.00 | 1.00 | 1.00 | 1.00 |
1 | Goodwill arisen from a business combination during 2018 has not been tested for impairment. |
2 | The amount occurred from formerly known as KB Investment&Securities Co., Ltd. |
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 W65,288 million related to goodwill acquired in the
merger of Housing & Commercial Bank. Of those respective amounts, the amounts of W49,315 million and W15,973 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.
145
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
Details of intangible assets, excluding goodwill, as of December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | |||||||||||||||
Acquisition cost |
Accumulated amortization |
Accumulated impairment losses |
Carrying amount |
|||||||||||||
Industrial property rights |
||||||||||||||||
Software |
1,169,549 | (965,044 | ) | | 204,505 | |||||||||||
Other intangible assets |
515,041 | (223,503 | ) | (42,927 | ) | 248,611 | ||||||||||
Value of Business Acquired (VOBA) |
2,395,291 | (393,346 | ) | | 2,001,945 | |||||||||||
Finance leases assets |
51,226 | (30,221 | ) | | 21,005 | |||||||||||
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(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 Acquired (VOBA) |
2,395,291 | (179,193 | ) | | 2,216,098 | |||||||||||
Finance leases assets |
43,202 | (21,833 | ) | | 21,369 | |||||||||||
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The changes in intangible assets, excluding goodwill, for the years ended December 31, 2018 and 2017, are as follows:
(In millions of Korean won)
2018 | ||||||||||||||||||||||||||||
Beginning | Acquisition & Transfer |
Disposal | Amortization1 | Business combination |
Others | Ending | ||||||||||||||||||||||
Industrial property rights |
||||||||||||||||||||||||||||
Software |
177,566 | 103,398 | (6 | ) | (76,280 | ) | 17 | (190 | ) | 204,505 | ||||||||||||||||||
Other intangible assets2 |
247,479 | 36,014 | (10,290 | ) | (24,388 | ) | | (204 | ) | 248,611 | ||||||||||||||||||
Value of Business Aquired (VOBA) |
2,216,098 | | (214,153 | ) | | | 2,001,945 | |||||||||||||||||||||
Finance leases assets |
21,369 | 8,024 | | (8,388 | ) | | | 21,005 | ||||||||||||||||||||
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|||||||||||||||
2,669,610 | ||||||||||||||||||||||||||||
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146
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
(In millions of Korean won)
|
||||||||||||||||||||||||||||
2017 | ||||||||||||||||||||||||||||
Beginning | Acquisition & Transfer |
Disposal | Amortization1 | Business combination |
Others | Ending | ||||||||||||||||||||||
Industrial property rights |
||||||||||||||||||||||||||||
Software |
137,101 | 88,172 | (48 | ) | (66,655 | ) | 20,396 | (1,400 | ) | 177,566 | ||||||||||||||||||
Other intangible assets2 |
221,867 | 34,755 | (7,054 | ) | (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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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. |
The changes in accumulated impairment losses on intangible assets for the years ended December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | |||||||||||||||||||
Beginning | Impairment | Reversal | Disposal and others |
Ending | ||||||||||||||||
Accumulated impairment losses on intangible assets | ||||||||||||||||||||
(In millions of Korean won) | 2017 | |||||||||||||||||||
Beginning | Impairment | Reversal | Disposal and others |
Ending | ||||||||||||||||
Accumulated impairment losses on intangible assets |
From 2018, the Group has to pay the fine, if the actual emission exceeds the targeted emission amount; therefore, the emission rights (intangible asset) do not occur even if it is below the targeted emission amount.
147
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
Changes in emission rights for the year ended December 31, 2017, 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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|
|
16. Deferred Income Tax Assets and Liabilities
Details of deferred income tax assets and liabilities as of December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | |||||||||||
Assets | Liabilities | Net amount | ||||||||||
Other provisions |
||||||||||||
Allowances for loan losses |
3,327 | (65 | ) | 3,262 | ||||||||
Impairment losses on property and equipment |
6,030 | (2,032 | ) | 3,998 | ||||||||
Share-based payments |
17,655 | | 17,655 | |||||||||
Provisions for guarantees |
20,298 | | 20,298 | |||||||||
Losses (gains) from valuation on derivative financial instruments |
138,401 | (13,485 | ) | 124,916 | ||||||||
Present value discount |
6,763 | (2,380 | ) | 4,383 | ||||||||
Losses (gains) from fair value hedged item |
| (25,873 | ) | (25,873 | ) | |||||||
Accrued interest |
| (113,152 | ) | (113,152 | ) | |||||||
Deferred loan origination fees and costs |
506 | (194,848 | ) | (194,342 | ) | |||||||
Advanced depreciation provision |
| (1,703 | ) | (1,703 | ) | |||||||
Gains from revaluation |
648 | (330,548 | ) | (329,900 | ) | |||||||
Investments in subsidiaries and others |
33,589 | (78,586 | ) | (44,997 | ) | |||||||
Gains on valuation of security investment |
76,558 | (181,638 | ) | (105,080 | ) | |||||||
Defined benefit liabilities |
494,572 | | 494,572 | |||||||||
Accrued expenses |
272,190 | | 272,190 | |||||||||
Retirement insurance expense |
17,559 | (444,244 | ) | (426,685 | ) | |||||||
Adjustments to the prepaid contributions |
| (19,033 | ) | (19,033 | ) | |||||||
Derivative-linked securities |
3,762 | (74,765 | ) | (71,003 | ) | |||||||
Others |
360,754 | (568,357 | ) | (207,603 | ) | |||||||
|
|
|
|
|
|
|||||||
1,562,333 | (2,050,709 | ) | (488,376 | ) | ||||||||
|
|
|
|
|
|
|||||||
Offsetting of deferred income tax assets and liabilities |
(1,558,175 | ) | 1,558,175 | | ||||||||
|
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|
|
|
|||||||
|
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148
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
(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 |
5,614 | (407 | ) | 5,207 | ||||||||
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 |
352,437 | (452,303 | ) | (99,866 | ) | |||||||
|
|
|
|
|
|
|||||||
1,325,367 | (1,854,445 | ) | (529,078 | ) | ||||||||
|
|
|
|
|
|
|||||||
Offsetting of deferred income tax assets and liabilities |
(1,321,376 | ) | 1,321,376 | | ||||||||
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
Unrecognized deferred income tax assets
No deferred income tax assets have been recognized for the deductible temporary difference of W73,764 million associated with investments in
subsidiaries and others as of December 31, 2018, 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 W120,704 million with others, as of
December 31, 2018, 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 W62,367 million associated with
investment in subsidiaries and associates as of December 31, 2018, 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. |
No deferred income tax liabilities have been recognized as of December 31, 2018, 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.
149
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
The changes in cumulative temporary differences for the years ended December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | ||||||||||||||||
Beginning | Decrease | Increase | Ending | |||||||||||||
Deductible temporary differences |
||||||||||||||||
Other provisions |
||||||||||||||||
Allowances for loan losses |
546,506 | 542,139 | 8,114 | 12,481 | ||||||||||||
Impairment losses on property and equipment |
20,415 | 19,678 | 21,190 | 21,927 | ||||||||||||
Deferred loan origination fees and costs |
1,207 | 1,207 | 1,841 | 1,841 | ||||||||||||
Interest on equity index-linked deposits |
155 | 155 | 0 | 0 | ||||||||||||
Share-based payments |
84,502 | 74,429 | 49,998 | 60,071 | ||||||||||||
Provisions for guarantees |
98,294 | 98,294 | 73,809 | 73,809 | ||||||||||||
Gains(losses) from valuation on derivative financial instruments |
23,162 | 23,162 | 503,277 | 503,277 | ||||||||||||
Present value discount |
104,117 | 104,116 | 24,592 | 24,593 | ||||||||||||
Loss on SPE repurchase |
80,204 | 80,204 | 0 | 0 | ||||||||||||
Investments in subsidiaries and others |
137,591 | 26,748 | 74,027 | 184,870 | ||||||||||||
Gains on valuation of security investment |
415,392 | 412,284 | 266,623 | 269,731 | ||||||||||||
Defined benefit liabilities |
1,682,234 | 211,994 | 507,190 | 1,977,430 | ||||||||||||
Accrued expenses |
706,535 | 706,535 | 993,906 | 993,906 | ||||||||||||
Derivative linked securities |
101,789 | 101,789 | 13,679 | 13,679 | ||||||||||||
Others |
1,189,756 | 517,189 | 616,755 | 1,289,322 | ||||||||||||
5,632,947 | 3,360,788 | 3,566,681 | 5,838,840 | |||||||||||||
Unrecognized deferred income tax assets: |
||||||||||||||||
Other provisions |
2,879 | 3,416 | ||||||||||||||
Loss on SPE repurchase |
80,204 | | ||||||||||||||
Investments in subsidiaries and others |
55,546 | 73,764 | ||||||||||||||
Others |
112,030 | 120,704 | ||||||||||||||
|
|
|
|
|||||||||||||
5,382,288 | 5,640,956 | |||||||||||||||
Tax rate (%) |
27.5 | 27.5 | ||||||||||||||
|
|
|
|
|||||||||||||
Total deferred income tax assets from deductible temporary differences |
||||||||||||||||
|
|
|
|
|||||||||||||
Taxable temporary differences |
||||||||||||||||
Losses(gains) from fair value hedged item |
||||||||||||||||
Accrued interest |
(405,542 | ) | (364,518 | ) | (370,463 | ) | (411,487 | ) | ||||||||
Impairment losses on property and equipment |
(1,481 | ) | | (2,976 | ) | (4,457 | ) | |||||||||
Deferred loan origination fees and costs |
(668,657 | ) | (668,657 | ) | (727,528 | ) | (727,528 | ) | ||||||||
advanced depreciation provision |
(6,192 | ) | | | (6,192 | ) | ||||||||||
Gains(losses) from valuation on derivative financial instruments |
(38,051 | ) | (38,051 | ) | (49,036 | ) | (49,036 | ) | ||||||||
Present value discount |
(11,948 | ) | (11,948 | ) | (8,656 | ) | (8,656 | ) | ||||||||
Goodwill |
(65,288 | ) | | | (65,288 | ) | ||||||||||
Gains on revaluation |
(1,275,641 | ) | (124,407 | ) | (50,758 | ) | (1,201,992 | ) | ||||||||
Investments in subsidiaries and others |
(387,733 | ) | (146,234 | ) | (74,847 | ) | (316,346 | ) | ||||||||
Gains on valuation of security investment |
(800,041 | ) | (799,187 | ) | (600,642 | ) | (601,496 | ) | ||||||||
Retirement insurance expense |
(1,342,012 | ) | (136,444 | ) | (405,907 | ) | (1,611,475 | ) | ||||||||
Adjustments to the prepaid contributions |
(59,040 | ) | (59,040 | ) | (69,212 | ) | (69,212 | ) | ||||||||
Derivative linked securities |
(20,650 | ) | (20,650 | ) | (271,873 | ) | (271,873 | ) | ||||||||
Others |
(1,695,063 | ) | (1,261,852 | ) | (1,664,205 | ) | (2,097,416 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
|
|
|
|
|
|
|
|
|||||||||
Unrecognized deferred income tax assets: |
||||||||||||||||
Goodwill |
(65,288 | ) | (65,288 | ) | ||||||||||||
Investments in subsidiaries and others |
(17,205 | ) | (62,367 | ) | ||||||||||||
Others |
(906 | ) | (588 | ) | ||||||||||||
|
|
|
|
|||||||||||||
(6,751,023 | ) | (7,408,534 | ) | |||||||||||||
Tax rate (%) |
27.5 | 27.5 | ||||||||||||||
|
|
|
|
|||||||||||||
Total deferred income tax assets from deductible temporary differences |
||||||||||||||||
|
|
|
|
1 | Prepared in accordance with Korean IFRS 1109. |
150
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
(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 | | 31,988 | 19,677 | 20,415 | |||||||||||||||
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 | 107,755 | 736,757 | 614,570 | 1,388,214 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
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 | ) | |||||||||||
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. |
151
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
17. Assets Held for Sale
Details of assets held for sale as of December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | |||||||||||||||
Acquisition cost1 |
Accumulated impairment |
Carrying amount |
Fair value less costs to sell |
|||||||||||||
Land held for sale |
||||||||||||||||
Buildings held for sale |
9,054 | (4,708 | ) | 4,346 | 4,403 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
|
|
|
|
|
|
|
|
|||||||||
(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 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
|
|
|
|
|
|
|
|
1 | Acquisition cost of buildings held for sale is net of accumulated depreciation. |
The valuation technique and input variables that are used to measure the fair value of assets held for sale as of December 31, 2018, are as follows:
(In millions of Korean won) | 2018 | |||||||||
Fair value | Valuation technique1 |
Unobservable input2 |
Range of unobservable inputs (%) |
Relationship of inputs to fair value | ||||||
Land and buildings | Market comparison approach model and others | Adjustment index | 0.30 ~1.08 | 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. |
152
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
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, 2018 and 2017, are as follows:
(In millions of Korean won) | ||||||||||||||||||
2018 | ||||||||||||||||||
Beginning | Provision | Reversal | Others | Ending | ||||||||||||||
(In millions of Korean won) | ||||||||||||||||||
2017 | ||||||||||||||||||
Beginning | Provision1 | Reversal | Disposal and Others1 |
Ending | ||||||||||||||
1 | Including the amount related to the group of the assets disposed in 2017, which was classified as held for sale |
As of December 31, 2018, assets held for sale consist of eight real estates of closed offices, which were committed to sell by the management, but not yet sold as of December 31, 2018. Negotiation with buyers is in process for the two assets and the remaining six assets are also being actively marketed.
18. Other Assets
Details of other assets as of December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | 2017 | ||||||
Other financial assets |
||||||||
Other receivables |
||||||||
Accrued income |
1,724,328 | 1,594,455 | ||||||
Guarantee deposits |
1,182,686 | 1,211,841 | ||||||
Domestic exchange settlement debits |
504,899 | 949,897 | ||||||
Others |
125,380 | 101,909 | ||||||
Allowances |
(106,275 | ) | (104,813 | ) | ||||
Present value discount |
(6,372 | ) | (5,679 | ) | ||||
|
|
|
|
|||||
8,133,556 | 10,195,015 | |||||||
|
|
|
|
|||||
Other non-financial assets |
||||||||
Other receivables |
4,965 | 3,640 | ||||||
Prepaid expenses |
205,394 | 153,650 | ||||||
Guarantee deposits |
4,529 | 4,904 | ||||||
Insurance assets |
1,362,877 | 1,180,980 | ||||||
Separate account assets |
4,715,414 | 4,119,203 | ||||||
Others |
1,347,580 | 578,795 | ||||||
Allowances |
(24,780 | ) | (32,018 | ) | ||||
|
|
|
|
|||||
7,615,979 | 6,009,154 | |||||||
|
|
|
|
|||||
|
|
|
|
153
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
Changes in allowances on other assets for the years ended December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | |||||||||||
Other financial assets |
Other non- financial assets |
Total | ||||||||||
Beginning1 |
||||||||||||
Written-off |
(38,184 | ) | (1,863 | ) | (40,047 | ) | ||||||
Provision |
32,495 | (5,375 | ) | 27,120 | ||||||||
Business combination |
| | | |||||||||
Others |
2,065 | | 2,065 | |||||||||
|
|
|
|
|
|
|||||||
Ending |
||||||||||||
|
|
|
|
|
|
1 | Prepared in accordance with Korean IFRS 1109. |
(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 |
||||||||||||
|
|
|
|
|
|
19. Financial Liabilities at Fair Value through Profit or Loss
Details of financial liabilities at fair value through profit or loss, and financial liabilities designated at fair value through profit or loss as of December 31, 2018 and 2017, are as follows:
154
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
(In millions of Korean won) | 2018 | |||
Financial liabilities at fair value through profit or loss |
||||
Securities sold |
||||
Other |
77,914 | |||
|
|
|||
|
|
|||
Financial liabilities designated at fair value through profit or loss |
||||
Derivative-linked securities |
12,503,039 | |||
|
|
|||
Total financial liabilities at fair value through profit or loss |
||||
|
|
|||
(In millions of Korean won) | 2017 | |||
Financial liabilities held for trading |
||||
Securities sold |
||||
Other |
74,191 | |||
|
|
|||
1,944,770 | ||||
|
|
|||
Financial liabilities designated at fair value through profit or loss |
||||
Derivative-linked securities |
10,078,288 | |||
|
|
|||
Total financial liabilities at fair value through profit or loss |
||||
|
|
The difference between the carrying amount and contractual cash flow amount of financial liabilities designated at fair value through profit or loss as of December 31, 2018 is as follows:
(In millions of Korean won) | 2018 | |||
Contractual cash flow amount |
||||
Carrying amount |
12,503,039 | |||
Difference |
20. Deposits
Details of deposits as of December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | 2017 | ||||||
Demand deposits |
||||||||
Demand deposits in Korean won |
||||||||
Demand deposits in foreign currencies |
6,887,280 | 6,911,782 | ||||||
|
|
|
|
|||||
122,489,971 | 120,588,781 | |||||||
|
|
|
|
|||||
Time deposits |
||||||||
Time deposits in Korean won |
145,336,136 | 127,562,153 | ||||||
Time deposits in foreign currencies |
5,501,887 | 4,481,607 | ||||||
Fair value adjustments on valuation of fair value hedged items |
(89,264 | ) | (51,033 | ) | ||||
|
|
|
|
|||||
5,412,623 | 4,430,574 | |||||||
|
|
|
|
|||||
150,748,759 | 131,992,727 | |||||||
|
|
|
|
|||||
Certificates of deposits |
3,531,719 | 3,218,540 | ||||||
|
|
|
|
|||||
Total deposits |
||||||||
|
|
|
|
155
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
21. Debts
Details of debts as of December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | 2017 | ||||||
Borrowings |
||||||||
Repurchase agreements and others |
11,954,491 | 10,676,219 | ||||||
Call money |
1,081,015 | 1,298,637 | ||||||
|
|
|
|
|||||
|
|
|
|
Details of borrowings as of December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | Lender | Annual interest rate (%) |
2018 | 2017 | ||||||||||
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 | 1,745,940 | 1,726,543 | ||||||||||
Borrowings from banks |
Shinhan Bank and others |
2.99 ~ 3.45 | 100,100 | 36,806 | ||||||||||
Borrowings from non-banking financial institutions |
The Korea Development Bank and others |
0.22 ~ 5.00 | 1,852,953 | 1,631,376 | ||||||||||
Other borrowings |
The Korea Development Bank and others |
0.00 ~ 5.20 | 5,033,768 | 4,409,261 | ||||||||||
|
|
|
|
|||||||||||
10,405,475 | 9,692,866 | |||||||||||||
|
|
|
|
|||||||||||
Borrowings in foreign currencies |
Due to banks |
Commerzbank AG and Others |
| 13,353 | 19,820 | |||||||||
Borrowings from banks |
Central Bank of Uzbekistan and Others |
0.00 ~ 8.15 | 7,521,197 | 5,470,569 | ||||||||||
Borrowings from other financial institutions |
The Export-Import Bank of Korea and others |
3.20 ~ 3.94 | 18,725 | 76,134 | ||||||||||
Other borrowings |
Standard Chartered Bank and others |
| 2,010,578 | 1,586,683 | ||||||||||
|
|
|
|
|||||||||||
9,563,853 | 7,153,206 | |||||||||||||
|
|
|
|
|||||||||||
|
|
|
|
The details of repurchase agreements and others as of December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | Lenders | Annual interest rate (%) |
2018 | 2017 | ||||||||
Repurchase agreements |
Individuals, Groups and Corporations | 1.19 ~ 2.22 | ||||||||||
Bills sold |
Counter sale | 0.40 ~ 1.00 | 7,595 | 9,904 | ||||||||
|
|
|
|
|||||||||
|
|
|
|
156
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
The details of call money as of December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | Lenders | Annual interest rate (%) |
2018 | 2017 | ||||||||||
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 | 362,415 | 408,637 | ||||||||||
|
|
|
|
|||||||||||
|
|
|
|
22. Debentures
Details of debentures as of December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | Annual Interest rate (%) |
2018 | 2017 | |||||||||
Debentures in Korean won |
||||||||||||
Structured debentures |
1.49 ~ 5.86 | |||||||||||
Subordinated fixed rate debentures in Korean won |
1.63 ~ 4.35 | 3,437,729 | 2,913,411 | |||||||||
Fixed rate debentures in Korean won |
1.35 ~ 5.70 | 42,203,545 | 36,823,365 | |||||||||
Floating rate debentures in Korean won |
1.72 ~ 1.77 | 1,650,000 | 728,000 | |||||||||
|
|
|
|
|||||||||
48,588,134 | 41,334,070 | |||||||||||
|
|
|
|
|||||||||
Fair value adjustments on fair value hedged financial debentures in Korean won |
19,252 | 19,891 | ||||||||||
Less: Discount on debentures in Korean won |
(33,445 | ) | (53,897 | ) | ||||||||
|
|
|
|
|||||||||
48,573,941 | 41,300,064 | |||||||||||
|
|
|
|
|||||||||
Debentures in foreign currencies |
||||||||||||
Floating rate debentures |
0.00 ~ 3.72 | 1,791,868 | 1,371,392 | |||||||||
Fixed rate debentures |
1.63 ~ 3.63 | 2,951,251 | 2,363,486 | |||||||||
|
|
|
|
|||||||||
4,743,119 | 3,734,878 | |||||||||||
|
|
|
|
|||||||||
Fair value adjustments on fair value hedged debentures in foreign currencies |
(24,073 | ) | (25,941 | ) | ||||||||
Less: Discount on debentures in foreign currencies |
(14,290 | ) | (16,277 | ) | ||||||||
|
|
|
|
|||||||||
4,704,756 | 3,692,660 | |||||||||||
|
|
|
|
|||||||||
|
|
|
|
Changes in debentures based on face value for the year ended December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | |||||||||||||||||||
Beginning | Issues | Repayments | Others | Ending | ||||||||||||||||
Debentures in Korean won |
||||||||||||||||||||
Structured debentures |
||||||||||||||||||||
Subordinated fixed rate debentures in Korean won |
2,913,411 | 600,000 | (75,682 | ) | | 3,437,729 | ||||||||||||||
Fixed rate debentures in Korean won |
36,823,365 | 136,987,100 | (131,606,920 | ) | | 42,203,545 | ||||||||||||||
Floating rate debentures in Korean won |
728,000 | 1,160,000 | (238,000 | ) | | 1,650,000 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Debentures in foreign currencies |
||||||||||||||||||||
Floating rate debentures |
1,371,392 | 725,638 | (384,230 | ) | 79,068 | 1,791,868 | ||||||||||||||
Fixed rate debentures |
2,363,486 | 493,022 | | 94,743 | 2,951,251 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
3,734,878 | 1,218,660 | (384,230 | ) | 173,811 | 4,743,119 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
157
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
(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 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
23. Provisions
Details of provisions as of December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | 2017 | ||||||
Provisions for unused loan commitments |
||||||||
Provisions for payment guarantees |
75,175 | 88,809 | ||||||
Provisions for financial guarantee contracts |
4,275 | 2,682 | ||||||
Provisions for restoration cost |
108,000 | 95,194 | ||||||
Others |
127,732 | 203,146 | ||||||
|
|
|
|
|||||
|
|
|
|
158
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
Changes in provisions for unused loan commitments, payment guarantees for the years ended December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | |||||||||||||||||||||||
Provisions for unused loan commitments | Provisions for payment guarantees | |||||||||||||||||||||||
12-month expected credit losses |
Lifetime expected credit losses |
12-month expected credit losses |
Lifetime expected credit losses |
|||||||||||||||||||||
Non- impaired |
Impaired | Non- impaired |
Impaired | |||||||||||||||||||||
Beginning1 |
||||||||||||||||||||||||
Transfer between stages Transfer to 12-month expected credit losses |
25,562 | (24,067 | ) | (1,494 | ) | 660 | (661 | ) | | |||||||||||||||
Transfer to lifetime expected credit losses (non-impaired) |
(11,053 | ) | 11,381 | (327 | ) | (913 | ) | 1,055 | (141 | ) | ||||||||||||||
Transfer to lifetime expected credit losses (impaired) |
(481 | ) | (1,333 | ) | 1,815 | (6 | ) | (87 | ) | 93 | ||||||||||||||
Provision (reversal) for loan losses |
(5,932 | ) | 19,374 | 1,141 | (14,702 | ) | (10,069 | ) | (897 | ) | ||||||||||||||
Others (change of exchange rate, etc.) |
293 | 158 | | 408 | 243 | 183 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Ending |
||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
1 | Prepared in accordance with Korean IFRS 1109 |
(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 | ) | ||||||
Reversal |
(9,850 | ) | (34,250 | ) | (44,100 | ) | ||||||
Business combination |
19 | | 19 | |||||||||
|
|
|
|
|
|
|||||||
Ending |
||||||||||||
|
|
|
|
|
|
Changes in provisions for financial guarantee contracts for the years ended December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | 2017 | ||||||
Beginning1 |
||||||||
Reversal |
(582 | ) | (1,651 | ) | ||||
|
|
|
|
|||||
Ending |
||||||||
|
|
|
|
1 | Prepared in accordance with Korean IFRS 1109. |
Changes in provisions for restoration cost for the years ended December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | 2017 | ||||||
Beginning |
||||||||
Provision |
7,301 | 5,150 | ||||||
Reversal |
(2,055 | ) | (1,211 | ) | ||||
Used |
(3,627 | ) | (7,049 | ) | ||||
Unwinding of discount |
2,507 | 2,078 | ||||||
Effects of changes in foreign exchange rate |
8,680 | 10,510 | ||||||
Business combination |
| 862 | ||||||
|
|
|
|
|||||
Ending |
||||||||
|
|
|
|
159
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
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, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | |||||||||||||||||||||||
Membership rewards program |
Dormant accounts |
Litigations | Greenhouse gas emission liabilities |
Others1 | Total | |||||||||||||||||||
Beginning |
||||||||||||||||||||||||
Increase |
46,277 | 2,657 | 2,699 | | 24,722 | 76,355 | ||||||||||||||||||
Decrease |
(48,735 | ) | (3,330 | ) | (5,272 | ) | (177 | ) | (94,255 | ) | (151,769 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Ending |
||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
1 | As of December 31, 2018, the Groups provision on incomplete sales on cardssurance are
|
(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 |
| | | | 71,763 | 71,763 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Ending |
||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
1 | As of December 31, 2017, the estimated greenhouse gas emission is 112,121 tons. |
2 | As of December 31, 2017, the groups provision on incomplete sales on cardssurance are
|
160
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
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, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | |||||||||||
Present value of defined benefit obligation |
Fair value of plan assets |
Net defined benefit liabilities |
||||||||||
Beginning |
||||||||||||
Current service cost |
208,470 | | 208,470 | |||||||||
Past service cost |
30,218 | | 30,218 | |||||||||
Gain or loss on settlement |
(1,000 | ) | | (1,000 | ) | |||||||
Interest cost (income) |
51,522 | (47,689 | ) | 3,833 | ||||||||
Remeasurements: |
||||||||||||
Actuarial gains and losses by changes in demographic assumptions |
38,894 | | 38,894 | |||||||||
Actuarial gains and losses by changes in financial assumptions |
95,111 | | 95,111 | |||||||||
Actuarial gains and losses by experience adjustments |
33,968 | | 33,968 | |||||||||
Return on plan assets (excluding amounts included in interest income) |
| 22,420 | 22,420 | |||||||||
Contributions |
| (300,245 | ) | (300,245 | ) | |||||||
Payments from plans (benefit payments) |
(103,663 | ) | 103,652 | (11 | ) | |||||||
Payments from the Group |
(29,583 | ) | | (29,583 | ) | |||||||
Transfer in |
8,614 | (8,394 | ) | 220 | ||||||||
Transfer out |
(8,394 | ) | 8,394 | | ||||||||
Effect of exchange rate changes |
17 | | 17 | |||||||||
Effect of business combination and disposal of business |
| | | |||||||||
Others |
6,095 | (2 | ) | 6,093 | ||||||||
|
|
|
|
|
|
|||||||
Ending |
||||||||||||
|
|
|
|
|
|
161
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
(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 |
Details of the net defined benefit liabilities as of December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | 2017 | ||||||
Present value of defined benefit obligation |
||||||||
Fair value of plan assets |
(1,910,047 | ) | (1,688,183 | ) | ||||
|
|
|
|
|||||
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, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | 2017 | ||||||
Current service cost |
||||||||
Past service cost1 |
7,912 | 21,356 | ||||||
Net interest expenses of net defined benefit liabilities |
3,833 | 4,108 | ||||||
Gain or loss on settlement |
(1,000 | ) | | |||||
|
|
|
|
|||||
Post-employment benefits2 |
||||||||
|
|
|
|
162
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
1 | During the year ended December 31, 2018, other provisions (amounting to |
2 | Including post-employment benefits amounting to |
Remeasurements of the net defined benefit liabilities recognized as other comprehensive income for the years ended December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | 2017 | ||||||
Remeasurements: |
||||||||
Return on plan assets (excluding amounts included in interest income) |
||||||||
Actuarial gains and losses |
(167,973 | ) | 46,040 | |||||
Income tax effects |
52,377 | (7,216 | ) | |||||
|
|
|
|
|||||
Remeasurements after income tax |
||||||||
|
|
|
|
The details of fair value of plan assets as of December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | |||||||||||
Assets quoted in an active market |
Assets not quoted in an active market |
Total | ||||||||||
Cash and due from financial institutions |
||||||||||||
Investment fund |
| 2,019 | 2,019 | |||||||||
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|||||||
(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 | |||||||||
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
Key actuarial assumptions used as of December 31, 2018 and 2017, are as follows:
2018 | 2017 | |||||||
Discount rate (%) |
2.00~2.30 | 2.10~2.90 | ||||||
Salary increase rate (%) |
0.00~7.50 | 0.00~7.50 | ||||||
Turnover (%) |
0.00~50.00 | 0.00~50.00 |
Mortality assumptions are based on the experience-based mortality table of Korea Insurance Development Institute of 2015.
163
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
The sensitivity of the defined benefit obligation to changes in the weighted principal assumptions as of December 31, 2018, are as follows:
Effect on net defined benefit obligation | ||||||
Changes in principal assumption |
Increase in principal assumption |
Decrease in principal assumption | ||||
Discount rate (%) | 0.5 p. | 4.23 decrease | 4.48 increase | |||
Salary increase rate (%) | 0.5 p. | 4.13 increase | 3.95 decrease | |||
Turnover (%) | 0.5 p. | 0.66 decrease | 0.57 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, 2018, 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 amount to be settled per promotion-incentivized defined contribution plan. |
The weighted average duration of the defined benefit obligation is 1.0 ~ 11.2 years.
Expected contribution to plan assets for periods after December 31, 2018, is estimated to be W 207,020 million.
25. Other Liabilities
Details of other liabilities as of December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | 2017 | ||||||
Other financial liabilities |
||||||||
Other payables |
||||||||
Prepaid card and debit card |
25,831 | 21,767 | ||||||
Accrued expenses |
2,986,210 | 2,654,345 | ||||||
Financial guarantee liabilities |
43,395 | 34,114 | ||||||
Deposits for letter of guarantees and others |
685,451 | 798,207 | ||||||
Domestic exchange settlement credits |
1,689,908 | 48,133 | ||||||
Foreign exchanges settlement credits |
102,187 | 124,728 | ||||||
Borrowings from other business accounts |
13,166 | 5,408 | ||||||
Other payables from trust accounts |
5,285,108 | 5,018,031 | ||||||
Liability incurred from agency relationships |
605,076 | 518,955 | ||||||
Account for agency businesses |
460,949 | 257,761 | ||||||
Dividend payables |
2,019 | 474 | ||||||
Others |
18,120 | 41,114 | ||||||
|
|
|
|
|||||
19,828,307 | 18,330,004 | |||||||
|
|
|
|
|||||
Other non-financial liabilities |
164
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
Other payables |
319,267 | 196,142 | ||||||
Unearned revenue |
378,792 | 271,787 | ||||||
Accrued expenses |
744,863 | 634,236 | ||||||
Deferred revenue on credit card points |
187,459 | 176,840 | ||||||
Withholding taxes |
137,236 | 179,903 | ||||||
Separate account liabilities |
5,401,192 | 4,463,687 | ||||||
Others |
203,880 | 217,709 | ||||||
|
|
|
|
|||||
7,372,689 | 6,140,304 | |||||||
|
|
|
|
|||||
|
|
|
|
26. Equity
26.1 Share Capital
Details of share capital and number of issued shares of the Parent Company as of December 31, 2018 and 2017, are as follows:
2018 | 2017 | |||||||
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. |
Changes in outstanding shares for the years ended December 31, 2018 and 2017, are as follows:
(In number of shares) | 2018 | 2017 | ||||||
Beginning |
||||||||
Increase |
| 4,513,969 | ||||||
Decrease |
(3,486,286 | ) | (3,761,823 | ) | ||||
|
|
|
|
|||||
Ending |
||||||||
|
|
|
|
26.2 Capital Surplus
Details of capital surplus as of December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | 2017 | ||||||
Share premium |
||||||||
Loss on sales of treasury shares |
(481,332 | ) | (481,332 | ) | ||||
Other capital surplus |
4,412,718 | 4,413,286 | ||||||
|
|
|
|
|||||
|
|
|
|
165
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
26.3 Accumulated Other Comprehensive Income
Details of accumulated other comprehensive income as of December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | 2017 | ||||||
Remeasurements of net defined benefit liabilities |
||||||||
Exchange differences on translating foreign operations |
(5,784 | ) | (56,589 | ) | ||||
Change in value of available-for-sale financial assets |
| 694,321 | ||||||
Change in value of held-to-maturity financial assets |
| (78 | ) | |||||
Financial assets measured at fair value through other comprehensive income |
450,694 | | ||||||
Shares of other comprehensive income of associates |
(4,377 | ) | 1,069 | |||||
Cash flow hedges |
5,849 | 14,980 | ||||||
Hedges of net investments in foreign operations |
(33,092 | ) | (5,958 | ) | ||||
Other comprehensive income of separate account |
15,017 | (13,692 | ) | |||||
Profit or loss from credit risk of financial liabilities designated at fair value |
(8,954 | ) | | |||||
Net loss on overlay adjustment |
(7,146 | ) | | |||||
|
|
|
|
|||||
|
|
|
|
26.4 Retained Earnings
Details of retained earnings as of December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | 2017 | ||||||
Legal reserves1 |
||||||||
Voluntary reserves |
982,000 | 982,000 | ||||||
Unappropriated retained earnings |
15,910,225 | 13,727,331 | ||||||
|
|
|
|
|||||
|
|
|
|
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. |
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, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | 2017 | ||||||
Regulatory reserve for credit losses attributable to: |
||||||||
Shareholders of the Parent Company |
||||||||
Non-controlling interests |
1,354 | 2,536 | ||||||
|
|
|
|
|||||
|
|
|
|
166
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
The adjustments to the regulatory reserve for credit losses for the year ended December 31, 2018 and 2017, are as follows:
(In millions of Korean won, except earnings per share) | 2018 | 2017 | ||||||
Provision of regulatory reserve for credit losses1 |
||||||||
Adjusted profit after provision of regulatory reserve for credit losses2 |
2,705,828 | 2,926,374 | ||||||
Adjusted basic earnings per share after provision of regulatory reserve for credit losses2 |
6,824 | 7,339 | ||||||
Adjusted diluted earnings per share after provision of regulatory reserve for credit losses2 |
6,785 | 7,297 |
1 | The amount expected to be appropriated is the amount required to reserve for credit losses, calculated based on the beginning balance of regulatory reserve for credit losses (including unearned reserves) that reflects the effect of adoption of Korean IFRS 1109 retrospectively. |
2 | Adjusted profit after provision of regulatory reserve for credit losses is not based on Korean IFRS; this is calculated reflecting provision (reversal) of the reserve before tax to the net profit to shareholders of the Parent Company. |
26.5 Treasury Shares
Changes in treasury shares outstanding for the years ended December 31, 2018 and 2017, are as follows:
(In number of shares and millions of Korean won) |
2018 | |||||||||||||||
Beginning | Acquisition | Disposal | Ending | |||||||||||||
Number of treasury shares1 |
19,073,954 | 3,486,286 | | 22,560,240 | ||||||||||||
Carrying amount1 |
1 | For the year ended December 31, 2018, the treasury stock trust agreement of
|
(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 | For the year ended December 31, 2017, the treasury stock trust agreement of
|
167
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
27. Net Interest Income
Details of interest income and interest expense for the years ended December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | |||
Interest income |
||||
Due from financial institutions at fair value through profit or loss |
||||
Securities measured at fair value through profit or loss |
713,058 | |||
Loans measured at fair value through profit or loss |
26,066 | |||
Securities measured at fair value through other comprehensive income |
718,327 | |||
Loans measured at fair value through other comprehensive income |
2,373 | |||
Deposits at amortized cost |
109,155 | |||
Equity instruments at amortized cost |
604,709 | |||
Loans at amortized cost |
11,431,359 | |||
Other |
120,286 | |||
|
|
|||
13,734,569 | ||||
|
|
|||
Interest expenses |
||||
Deposits |
3,041,739 | |||
Debts |
544,562 | |||
Debentures |
1,148,729 | |||
Other |
94,611 | |||
|
|
|||
4,829,641 | ||||
|
|
|||
Net interest income |
||||
|
|
|||
(In millions of Korean won) | 2017 1 | |||
Interest income |
||||
Due from financial institutions |
||||
Financial assets at fair value through profit or loss |
536,605 | |||
Loans |
9,990,792 | |||
Financial investments |
||||
Available-for-sale financial assets |
678,716 | |||
Held-to-maturity financial assets |
480,595 | |||
Other |
104,915 | |||
|
|
|||
11,919,057 | ||||
|
|
|||
Interest expenses |
||||
Deposits |
2,345,885 | |||
Debts |
367,587 | |||
Debentures |
880,709 | |||
Other |
78,262 | |||
|
|
|||
3,672,443 | ||||
|
|
|||
Net interest income |
||||
|
|
1 | Regarding reclassification of interest income following the change in accounting policy, interest income for 2017 has been restated. |
168
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
Interest income recognized on impaired loans is W 48,974 million and W
54,235 million for the years ended December 31, 2018 and 2017, respectively.
28. Net Fee and Commission Income
Details of fee and commission income, and fee and commission expense for the years ended December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | 2017 | ||||||
Fee and commission income |
||||||||
Banking activity fees |
||||||||
Lending activity fees |
74,340 | 74,858 | ||||||
Credit & Debit card related fees and commissions1 |
1,360,515 | 1,847,743 | ||||||
Agent activity fees |
149,585 | 152,028 | ||||||
Trust and other fiduciary fees |
363,767 | 353,903 | ||||||
Fund management related fees |
132,657 | 132,889 | ||||||
Guarantee fees |
44,104 | 49,546 | ||||||
Foreign currency related fees |
124,201 | 106,038 | ||||||
Commissions from transfer agent services |
167,071 | 195,556 | ||||||
Other business account commission on consignment |
36,947 | 33,793 | ||||||
Commissions received on securities business |
518,309 | 450,199 | ||||||
Lease fees |
246,537 | 144,221 | ||||||
Others |
291,244 | 259,071 | ||||||
|
|
|
|
|||||
3,717,720 | 3,988,250 | |||||||
|
|
|
|
|||||
Fee and commission expense |
||||||||
Trading activity related fees2 |
31,889 | 29,547 | ||||||
Lending activity fees |
25,734 | 23,253 | ||||||
Credit & Debit card related fees and commissions1 |
907,831 | 1,482,221 | ||||||
Outsourcing related fees |
164,594 | 127,542 | ||||||
Foreign currency related fees |
43,053 | 27,394 | ||||||
Others |
301,243 | 248,269 | ||||||
|
|
|
|
|||||
1,474,344 | 1,938,226 | |||||||
|
|
|
|
|||||
Net fee and commission income |
||||||||
|
|
|
|
1 | In accordance with Korean IFRS 1115, the amount of |
2 | The fees from financial instruments at fair value through profit or loss. |
169
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
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 at fair value through profit or loss includes dividend income, 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, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | |||
Revenue from financial instruments at fair value through profit or loss |
||||
Financial assets at fair value through profit or loss |
||||
Debt securities |
||||
Equity securities |
571,404 | |||
|
|
|||
2,116,296 | ||||
|
|
|||
Derivatives held for trading |
||||
Interest rate |
2,328,576 | |||
Currency |
3,764,985 | |||
Stock or stock index |
1,383,446 | |||
Credit |
38,461 | |||
Commodity |
8,285 | |||
Other |
92,947 | |||
|
|
|||
7,616,700 | ||||
|
|
|||
Financial liabilities at fair value through profit or loss |
72,410 | |||
|
|
|||
Other financial instruments |
22 | |||
|
|
|||
|
|
|||
Expense from financial instruments at fair value through profit or loss |
||||
Financial assets at fair value through profit or loss |
||||
Debt securities |
||||
Equity securities |
475,968 | |||
|
|
|||
1,326,097 | ||||
|
|
|||
Derivatives held for trading |
||||
Interest rate |
2,610,305 | |||
Currency |
3,499,356 | |||
Stock or stock index |
1,626,007 | |||
Credit |
36,747 | |||
Commodity |
10,456 | |||
Other |
117,741 | |||
|
|
|||
7,900,612 | ||||
|
|
|||
Financial liabilities at fair value through profit or loss |
134,287 | |||
|
|
|||
Other financial instruments |
60 | |||
|
|
|||
9,361,056 | ||||
|
|
|||
Net gains or losses on financial instruments held for trading |
||||
|
|
170
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
(In millions of Korean won) | 2017 1 | |||
Gains related to financial instruments held for trading |
||||
Financial assets held for trading |
||||
Debt securities |
||||
Equity securities |
546,169 | |||
|
|
|||
737,412 | ||||
|
|
|||
Derivatives held for trading |
||||
Interest rate |
1,753,449 | |||
Currency |
5,777,818 | |||
Stock or stock index |
2,094,667 | |||
Credit |
76,700 | |||
Commodity |
17,278 | |||
Other |
23,397 | |||
|
|
|||
9,743,309 | ||||
|
|
|||
Financial liabilities held for trading |
29,726 | |||
|
|
|||
Other financial instruments |
109 | |||
|
|
|||
|
|
|||
Losses related to financial instruments held for trading |
||||
Financial assets held for trading |
||||
Debt securities |
||||
Equity securities |
353,864 | |||
|
|
|||
669,370 | ||||
|
|
|||
Derivatives held for trading |
||||
Interest rate |
1,625,541 | |||
Currency |
5,661,323 | |||
Stock or stock index |
1,445,714 | |||
Credit |
76,483 | |||
Commodity |
8,481 | |||
Other |
20,053 | |||
|
|
|||
8,837,595 | ||||
|
|
|||
Financial liabilities held for trading |
58,267 | |||
|
|
|||
Other financial instruments |
117 | |||
|
|
|||
9,565,349 | ||||
|
|
|||
Net gains or losses on financial instruments held for trading |
||||
|
|
1 | Regarding reclassification of interest income following the change of accounting policy, gains related to financial instruments held for trading for 2017 has been restated. |
171
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
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 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, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | 2017 1 | ||||||
Revenue from 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 |
667,508 | 474,736 | ||||||
|
|
|
|
|||||
667,508 | 603,409 | |||||||
|
|
|
|
|||||
Expense from financial instruments designated at fair value through profit or loss |
||||||||
Financial assets designated at fair value through profit or loss |
| 78,113 | ||||||
Financial liabilities designated at fair value through profit or loss |
760,577 | 1,266,779 | ||||||
|
|
|
|
|||||
760,577 | 1,344,892 | |||||||
|
|
|
|
|||||
Net gains or losses on financial instruments designated at fair value through profit or loss |
||||||||
|
|
|
|
1 | Regarding reclassification of interest income following the change of accounting policy, gains related to financial instruments held for trading for 2017 has been restated. |
172
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
30. Other Operating Income and Expenses
Details of other operating income and expenses for the years ended December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | |||
Other operating income |
||||
Revenue related to financial assets mandatorily measured at fair value through other comprehensive income |
||||
Gain on redemption of financial assets mandatorily measured at fair value through other comprehensive income |
||||
Gain on sale of financial assets mandatorily measured at fair value through other comprehensive income |
134,875 | |||
|
|
|||
135,134 | ||||
|
|
|||
Financial assets at amortized cost |
||||
Gain on sale of loans at amortized cost |
46,877 | |||
|
|
|||
46,877 | ||||
|
|
|||
Gain on foreign exchange transactions |
1,600,161 | |||
Dividend income |
83,930 | |||
Others |
260,709 | |||
|
|
|||
2,126,811 | ||||
|
|
|||
Other operating expenses |
||||
Expense on redemption of financial assets mandatorily measured at fair value through other comprehensive income |
||||
Losses on redemption of financial assets mandatorily measured at fair value through other comprehensive income |
17 | |||
Losses on sale of financial assets mandatorily measured at fair value through other comprehensive income |
35,864 | |||
|
|
|||
35,881 | ||||
|
|
|||
Financial assets at amortized cost |
||||
Loss on sale of loans at amortized cost |
9,006 | |||
|
|
|||
9,006 | ||||
|
|
|||
Loss on foreign exchanges transactions |
1,539,837 | |||
Others |
1,672,123 | |||
|
|
|||
3,256,847 | ||||
|
|
|||
Net other operating expenses |
||||
|
|
173
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
(In millions of Korean won) | 2017 | |||
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 | |||
113,885 | ||||
|
|
|||
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 | |||
Dividend income |
276,829 | |||
Others |
325,745 | |||
|
|
|||
3,237,001 | ||||
|
|
|||
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 | |||
Impairment on available-for-sale financial assets |
47,917 | |||
|
|
|||
223,863 | ||||
|
|
|||
Loss on foreign exchanges transactions |
2,472,657 | |||
Others |
1,442,371 | |||
|
|
|||
4,138,891 | ||||
|
|
|||
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, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | 2017 | ||||||
Employee Benefits |
||||||||
Salaries and short-term employee benefitssalaries |
||||||||
Salaries and short-term employee benefitsothers |
870,356 | 822,536 | ||||||
Post-employment benefitsdefined benefit plans |
217,085 | 231,704 | ||||||
Post-employment benefitsdefined contribution plans |
21,056 | 15,046 | ||||||
Termination benefits |
242,010 | 160,798 | ||||||
Share-based payments |
10,930 | 73,370 | ||||||
|
|
|
|
|||||
3,874,382 | 3,768,586 | |||||||
|
|
|
|
|||||
Depreciation and amortization |
408,771 | 370,378 | ||||||
|
|
|
|
|||||
Other general and administrative expenses |
||||||||
Rental expense |
361,344 | 320,920 | ||||||
Tax and dues |
214,683 | 195,965 |
174
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
Communication |
46,661 | 44,516 | ||||||
Electricity and utilities |
28,823 | 31,158 | ||||||
Publication |
16,018 | 17,383 | ||||||
Repairs and maintenance |
22,432 | 20,524 | ||||||
Vehicle |
12,495 | 11,587 | ||||||
Travel |
19,393 | 17,407 | ||||||
Training |
30,310 | 26,664 | ||||||
Service fees |
210,081 | 179,311 | ||||||
Electronic data processing expenses |
189,007 | 172,007 | ||||||
Advertising |
217,244 | 199,676 | ||||||
Others |
266,868 | 252,582 | ||||||
|
|
|
|
|||||
1,635,359 | 1,489,700 | |||||||
|
|
|
|
|||||
|
|
|
|
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, 2018, are as follows:
(In number of shares) | Grant date | Number of granted shares1 |
Vesting conditions | |||||
KB Financial Group Inc. |
||||||||
Series 17 |
Jan. 01, 2017 | 16,579 | Services fulfillment, Achievement of targets on the basis of market performance (30~50%)3, Achievement of targets on the basis of non-market performance (50~70%)4 | |||||
Series 18 |
July. 17, 2017 | 7,444 | Services fulfillment, Achievement of targets on the basis of market performance (30~50%)3, Achievement of targets on the basis of non-market performance (50~70%)4 | |||||
Series 19 |
Nov. 21, 2017 | 46,890 | Services fulfillment, Achievement of targets on the basis of market performance (35%)3, Achievement of targets on the basis of non-market performance (65%)5 | |||||
Series 20 |
Jan. 01, 2018 | 35,330 | Services fulfillment, Achievement of targets on the basis of market performance (30~50%)3, Achievement of targets on the basis of non-market performance (50~70%)4 | |||||
Deferred grant |
2012 | 5,415 | Satisfied in 2012 | |||||
Deferred grant |
2013 | 588 | Satisfied in 2013 |
175
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
Deferred grant |
2015 | 15,154 | Satisfied in 2015 | |||||||
Deferred grant |
2016 | 14,538 | Satisfied in 2016 | |||||||
Deferred grant |
2017 | 73,473 | Satisfied in 2017 | |||||||
|
|
|||||||||
Kookmin Bank |
215,411 | |||||||||
|
|
|||||||||
Series 69 |
Jan. 01, 2017 | 173,030 | Services fulfillment, Achievement of targets on the basis of market performance (30~50%), Achievement of targets on the basis of non-market performance (50~70%) | |||||||
Series 71 |
Aug. 26, 2017 | 4,372 | Services fulfillment, Achievement of targets on the basis of market performance (30~50%), Achievement of targets on the basis of non-market performance (50~70%) | |||||||
Series 72 |
Aug. 28, 2017 | 5,601 | Services fulfillment, Achievement of targets on the basis of market performance (30~50%), Achievement of targets on the basis of non-market performance (50~70%) | |||||||
Series 73 |
Nov. 21, 2017 | 27,786 | Services fulfillment, Achievement of targets on the basis of market performance (30~50%), Achievement of targets on the basis of non-market performance (50~70%) | |||||||
Series 74 |
Jan. 01, 2018 | 190,536 | Services fulfillment, Achievement of targets on the basis of market performance (30~50%), Achievement of targets on the basis of non-market performance (50~70%) | |||||||
Deferred grant |
2015 | 33,050 | Satisfied | |||||||
Deferred grant |
2016 | 110,967 | Satisfied | |||||||
Deferred grant |
2017 | 139,697 | Satisfied | |||||||
|
|
|||||||||
685,039 | ||||||||||
|
|
|||||||||
Other subsidiaries |
||||||||||
Stock granted in 2010 |
| 206 | Services fulfillment, Achievement of targets on the basis of market performance (10~50%), Achievement of targets on the basis of non-market performance (50~90%) | |||||||
Stock granted in 2011 |
| 382 | ||||||||
Stock granted in 2012 |
| 1,540 | ||||||||
Stock granted in 2013 |
| 2,093 | ||||||||
Stock granted in 2014 |
| 1,885 | ||||||||
Stock granted in 2015 |
| 11,533 | ||||||||
Stock granted in 2016 |
| 122,494 | ||||||||
Stock granted in 2017 |
| 297,384 | ||||||||
Stock granted in 2018 |
| 147,034 | ||||||||
|
|
|||||||||
584,551 | ||||||||||
|
|
|||||||||
1,485,001 | ||||||||||
|
|
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 at the end of the reporting period). |
176
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
2 | 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 | Relative TSR (Total Shareholders Return) : ((fair value at contract end date - fair value at contract commencement date) + (total dividend paid for the period)) / fair value at contract commencement date |
4 | Accomplishment of subsidiaries performance and accomplishment of performance results |
5 | EPS, Asset Quality, HCROI, Accomplishment of Non-Banking performance |
Details of stock grants linked to short-term performance as of December 31, 2018, 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 | 474 | Satisfied | |||||||
Stock granted in 2015 |
Jan. 01, 2015 | 13,516 | Satisfied | |||||||
Stock granted in 2016 |
Jan. 01, 2016 | 16,526 | Satisfied | |||||||
Stock granted in 2017 |
Jan. 01, 2017 | 16,855 | Satisfied | |||||||
Stock granted in 2018 |
Jan. 01, 2018 | 23,216 | Proportional to service period | |||||||
Kookmin Bank |
||||||||||
Stock granted in 2015 |
Jan. 01, 2015 | 58,366 | Satisfied | |||||||
Stock granted in 2016 |
Jan. 01, 2016 | 83,794 | Satisfied | |||||||
Stock granted in 2017 |
Jan. 01, 2017 | 80,331 | Satisfied | |||||||
Stock granted in 2018 |
Jan. 01, 2018 | 109,871 | Proportional to service period | |||||||
Other subsidiaries |
|
|||||||||
Stock granted in 2015 |
| 67,912 | Satisfied | |||||||
Stock granted in 2016 |
| 149,326 | Satisfied | |||||||
Stock granted in 2017 |
| 335,401 | Satisfied | |||||||
Stock granted in 2018 |
| 286,707 | Proportional to service period |
1 | 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. |
177
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
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, 2018, are as follows:
Risk free rate (%) |
Fair value (Market |
Fair value (Non-market |
||||||||||
Linked to long term performance |
|
|||||||||||
(KB Financial Group Inc.) |
|
|||||||||||
Series 17 |
1.75 | 40,224~47,153 | 40,224~47,153 | |||||||||
Series 18 |
1.75 | 41,473~45,236 | 41,473~45,236 | |||||||||
Series 19 |
1.75 | 36,941~40,362 | 40,368~44,107 | |||||||||
Series 20 |
1.75 | 39,641~44,580 | 40,224~45,236 | |||||||||
Deferred grant in 2012 |
1.75 | | 34,180~40,662 | |||||||||
Deferred grant in 2013 |
1.75 | | 31,245~38,404 | |||||||||
Deferred grant in 2015 |
1.75 | | 39,077~47,153 | |||||||||
Deferred grant in 2016 |
1.75 | | 40,224~47,153 | |||||||||
Deferred grant in 2017 |
1.75 | | 41,473~47,153 | |||||||||
(Kookmin Bank) |
||||||||||||
Series 69 |
1.75 | 40,224~47,153 | 40,224~47,153 | |||||||||
Series 71 |
1.75 | 41,473~45,236 | 41,473~45,236 | |||||||||
Series 72 |
1.75 | 41,473~45,236 | 41,473~45,236 | |||||||||
Series 73 |
1.75 | 41,614~45,382 | 41,614~45,382 | |||||||||
Series 74 |
1.75 | 38,510~44,580 | 39,077~45,236 | |||||||||
Grant deferred in 2015 |
1.75 | | 42,682~47,153 | |||||||||
Grant deferred in 2016 |
1.75 | | 40,224~47,153 | |||||||||
Grant deferred in 2017 |
1.75 | | 41,473~47,153 | |||||||||
(Other subsidiaries) |
|
|||||||||||
Share granted in 2010 |
1.75 | | 43,965~47,153 | |||||||||
Share granted in 2011 |
1.75 | | 43,965~47,153 | |||||||||
Share granted in 2012 |
1.75 | | 43,965~47,153 | |||||||||
Share granted in 2013 |
1.75 | | 43,965~47,153 | |||||||||
Share granted in 2014 |
1.75 | | 43,965~47,153 | |||||||||
Share granted in 2015 |
1.75 | | 39,077~47,153 | |||||||||
Share granted in 2016 |
1.75 | 42,682~47,153 | 40,224~47,153 | |||||||||
Share granted in 2017 |
1.75 | 39,077~47,153 | 39,077~47,153 | |||||||||
Share granted in 2018 |
1.75 | 36,769~44,580 | 37,840~46,317 | |||||||||
Linked to short-term performance |
|
|||||||||||
(KB Financial Group Inc.) |
|
|||||||||||
Share granted in 2010 |
1.75 | | 40,662 | |||||||||
Share granted in 2011 |
1.75 | | 38,111~40,662 | |||||||||
Share granted in 2012 |
1.75 | | 34,180~40,662 | |||||||||
Share granted in 2013 |
1.75 | | 31,245~37,881 | |||||||||
Share granted in 2015 |
1.75 | | 39,077~47,153 | |||||||||
Share granted in 2016 |
1.75 | | 37,840~47,153 | |||||||||
Share granted in 2017 |
1.75 | | 40,224~47,153 | |||||||||
Share granted in 2018 |
1.75 | | 40,224~47,153 | |||||||||
(Kookmin Bank) |
||||||||||||
Share granted in 2015 |
1.75 | | 40,224~47,153 | |||||||||
Share granted in 2016 |
1.75 | | 39,077~47,153 | |||||||||
Share granted in 2017 |
1.75 | | 39,077~47,153 | |||||||||
Share granted in 2018 |
1.75 | | 39,077~45,236 |
178
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
(Other subsidiaries) |
|
|||||||||||
Share granted in 2015 |
1.75 | | 39,077~47,153 | |||||||||
Share granted in 2016 |
1.75 | | 37,840~47,153 | |||||||||
Share granted in 2017 |
1.75 | | 37,840~47,153 | |||||||||
Share granted in 2018 |
1.75 | | 37,840~64,683 |
The Group used the volatility of the stock price over the previous year as the expected volatility, and used the dividend yield as the arithmetic mean of the dividend rate of one year before, two years before, and three years before the base year, in order to calculate fair value.
As of December 31, 2018 and 2017, the accrued expenses related to share-based payments including share grants amounted to W
111,058 million and W 133,496 million, respectively, and the compensation costs from share grants amounting to W 10,930 million and W 73,370 million were incurred during the
years ended 2018 and 2017, respectively.
Details of Mileage stock as of December 31, 2018, 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 | 0.00~0.06 | 12,334 | ||||||||||
Apr. 29, 2016 | 60 | 0.00~0.33 | 21 | |||||||||||
July 07, 2016 | 280 | 0.00~0.52 | 62 | |||||||||||
July 18, 2016 | 767 | 0.00~0.55 | | |||||||||||
Aug. 03, 2016 | 107 | 0.00~0.59 | 38 | |||||||||||
Aug. 17, 2016 | 51 | 0.00~0.63 | 23 | |||||||||||
Aug. 30, 2016 | 256 | 0.00~0.66 | 168 | |||||||||||
Sept. 06, 2016 | 206 | 0.00~0.68 | 103 | |||||||||||
Oct. 07, 2016 | 105 | 0.00~0.77 | 69 | |||||||||||
Nov. 01, 2016 | 118 | 0.00~0.84 | 24 | |||||||||||
Dec. 07, 2016 | 211 | 0.00~0.93 | 96 | |||||||||||
Dec. 08, 2016 | 43 | 0.00~0.94 | 32 | |||||||||||
Dec. 15, 2016 | 12 | 0.00~0.96 | 12 | |||||||||||
Dec. 20, 2016 | 309 | 0.00~0.97 | 169 | |||||||||||
Dec. 28, 2016 | 76 | 0.00~0.99 | 40 | |||||||||||
Dec. 30, 2016 | 210 | 0.00~1.00 | 79 | |||||||||||
Stock granted in 2017 |
Jan. 09, 2017 | 28,925 | 0.00~1.02 | 13,198 | ||||||||||
Feb. 03, 2017 | 43 | 0.00~1.09 | 28 | |||||||||||
Apr. 03, 2017 | 82 | 0.00~1.25 | 61 | |||||||||||
May 22, 2017 | 20 | 0.00~1.39 | 20 | |||||||||||
July 03, 2017 | 52 | 0.00~1.50 | 52 | |||||||||||
Aug. 07, 2017 | 29 | 0.00~1.60 | 19 | |||||||||||
Aug. 08, 2017 | 5 | 0.00~1.60 | 2 | |||||||||||
Aug. 16, 2017 | 204 | 0.00~1.62 | 166 | |||||||||||
Aug. 17, 2017 | 40 | 0.00~1.63 | 32 | |||||||||||
Aug. 24, 2017 | 387 | 0.00~1.65 | 323 | |||||||||||
Sep. 08, 2017 | 82 | 0.00~1.69 | 73 | |||||||||||
Oct. 20, 2017 | 9 | 0.00~1.80 | | |||||||||||
Nov. 01, 2017 | 120 | 0.00~1.84 | 103 | |||||||||||
Nov. 06, 2017 | 106 | 0.00~1.85 | 106 | |||||||||||
Dec. 06, 2017 | 105 | 0.00~1.93 | 91 | |||||||||||
Dec. 26, 2017 | 254 | 0.00~1.99 | 215 | |||||||||||
Dec. 29, 2017 | 114 | 0.00~1.99 | 98 |
179
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
Stock granted in 2018 |
Jan. 10, 2018 | 19,197 | 0.00~2.03 | 18,663 | ||||||||||
Feb. 12, 2018 | 9 | 0.00~2.12 | 9 | |||||||||||
Apr. 02, 2018 | 115 | 0.00~2.25 | 115 | |||||||||||
Apr. 30, 2018 | 86 | 0.00~2.33 | 86 | |||||||||||
May 08, 2018 | 170 | 0.00~2.35 | 166 | |||||||||||
June 01, 2018 | 140 | 0.00~2.42 | 140 | |||||||||||
July 02, 2018 | 180 | 0.00~2.50 | 180 | |||||||||||
Aug. 07, 2018 | 194 | 0.00~2.60 | 194 | |||||||||||
Aug. 09, 2018 | 47 | 0.00~2.61 | 47 | |||||||||||
Aug. 14, 2018 | 30 | 0.00~2.62 | 30 | |||||||||||
Aug. 16, 2018 | 130 | 0.00~2.62 | 130 | |||||||||||
Sep. 07, 2018 | 106 | 0.00~2.68 | 106 | |||||||||||
Oct. 04, 2018 | 129 | 0.00~2.76 | 129 | |||||||||||
Nov. 01, 2018 | 258 | 0.00~2.84 | 258 | |||||||||||
Nov. 06, 2018 | 236 | 0.00~2.85 | 236 | |||||||||||
Dec. 04, 2018 | 21 | 0.00~2.93 | 21 | |||||||||||
Dec. 07, 2018 | 91 | 0.00~2.93 | 91 | |||||||||||
Dec. 03, 2018 | 132 | 0.00~2.92 | 132 | |||||||||||
Dec. 12, 2018 | 64 | 0.00~2.95 | 64 | |||||||||||
Dec. 18, 2018 | 271 | 0.00~2.96 | 271 | |||||||||||
Dec. 19, 2018 | 42 | 0.00~2.97 | 42 | |||||||||||
Dec. 31, 2018 | 127 | 0.00~3.00 | 127 | |||||||||||
|
|
|
|
|||||||||||
88,992 | 49,094 | |||||||||||||
|
|
|
|
1 | Mileage stock may be exercised after one year from the grant date for two years. 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 may still be exercised at the closing price of prior month. |
2 | The remaining shares are assessed based on the stock price as of December 31, 2018. These shares may be vested immediately at grant date. |
As of December 31, 2018 and 2017, the accrued expenses for share-based payments in regards to
mileage stock amounted to W 2,283 million and W 2,973 million, respectively, and the compensation costs amounting to W 1,350 million and W 2,378 million were
incurred during the year ended December 31, 2018 and 2017, respectively.
180
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
32. Net Other Non-operating Income and Expenses
Details of other non-operating income and expenses for the years ended December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | 2017 | ||||||
Other non-operating income |
||||||||
Gain on disposal of property and equipment |
||||||||
Rent received |
55,321 | 32,254 | ||||||
Gain on bargain purchase |
| 122,986 | ||||||
Gain on sales of disposal group held for sale |
118,716 | 22,371 | ||||||
Others |
37,122 | 72,248 | ||||||
|
|
|
|
|||||
245,397 | 260,726 | |||||||
|
|
|
|
|||||
Other non-operating expenses |
||||||||
Loss on disposal of property and equipment |
6,131 | 2,500 | ||||||
Donation |
130,249 | 54,419 | ||||||
Restoration cost |
4,386 | 3,465 | ||||||
Management cost for special bonds |
3,338 | 3,279 | ||||||
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 |
91,502 | 104,023 | ||||||
|
|
|
|
|||||
235,606 | 221,850 | |||||||
|
|
|
|
|||||
Net other non-operating income |
||||||||
|
|
|
|
33. Income Tax Expense
Income tax expense for the years ended December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | 2017 | ||||||
Tax payable |
||||||||
Current tax expense |
||||||||
Adjustments recognized in the period for current tax of prior years |
22,925 | (39,445 | ) | |||||
|
|
|
|
|||||
1,119,525 | 661,152 | |||||||
|
|
|
|
|||||
Changes in deferred income tax liabilities (assets) |
114,345 | 212,195 | ||||||
|
|
|
|
|||||
Income tax recognized directly in equity |
||||||||
Remeasurements of net defined benefit liabilities |
52,377 | (7,240 | ) | |||||
Exchange difference in foreign operation |
(13,087 | ) | 25,674 | |||||
Change in value of available-for-sale financial assets |
| (84,781 | ) | |||||
Change in value of held-to-maturity financial assets |
| (3,789 | ) | |||||
OCI related with financial assets at fair value through profit or loss |
(33,329 | ) | | |||||
OCI related with investments in associates and joint ventures |
1,374 | 20,975 | ||||||
Cash flow hedges |
400 | (4,368 | ) | |||||
Hedges of a net investment in a foreign operation |
10,292 | (8,186 | ) | |||||
OCI related with assets held for sale |
| (21,498 | ) | |||||
OCI related with separate account assets |
(10,864 | ) | 4,829 | |||||
Profit or loss related with credit risk change of financial liabilities designated at fair value through profit or loss |
(563 | ) | | |||||
Net gains on overlay adjustment |
(884 | ) | | |||||
|
|
|
|
|||||
5,716 | (78,384 | ) | ||||||
|
|
|
|
|||||
Others |
| | ||||||
|
|
|
|
|||||
Tax expense |
||||||||
|
|
|
|
181
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
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, 2018 and 2017, follows:
(In millions of Korean won) | 2018 | 2017 | ||||||||||||||
Tax rate (%) |
Amount | Tax rate (%) |
Amount | |||||||||||||
Net profit before income tax |
||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Tax at the applicable tax rate1 |
27.26 | 1,172,559 | 24.19 | 1,001,037 | ||||||||||||
Non-taxable income |
(0.28 | ) | (11,888 | ) | (5.02 | ) | (207,777 | ) | ||||||||
Non-deductible expense |
0.64 | 27,551 | 0.26 | 10,706 | ||||||||||||
Tax credit and tax exemption |
(0.01 | ) | (637 | ) | (0.04 | ) | (1,658 | ) | ||||||||
Temporary difference for which no deferred tax is recognized |
0.29 | 12,260 | (0.16 | ) | (6,484 | ) | ||||||||||
Deferred tax relating to changes in recognition and measurement |
(0.06 | ) | (2,692 | ) | (0.12 | ) | (4,894 | ) | ||||||||
Income tax refund for tax of prior years |
(0.19 | ) | (8,135 | ) | (0.12 | ) | (4,854 | ) | ||||||||
Income tax expense of overseas branch |
0.09 | 3,882 | 0.04 | 1,549 | ||||||||||||
Effects from change in tax rate |
(0.03 | ) | (1,470 | ) | 0.42 | 17,367 | ||||||||||
Others |
1.12 | 48,156 | (0.24 | ) | (10,029 | ) | ||||||||||
|
|
|
|
|||||||||||||
Average effective tax rate and tax expense |
28.82 | 19.21 | ||||||||||||||
|
|
|
|
1 | Applicable income tax rate for |
34. Dividends
The dividends paid to the shareholders of
the Parent Company in 2018 and 2017 were W 766,728 million (W 1,920 per share) and W 497,969 million (W 1,250 per share), respectively. The dividend to the shareholders in
respect of the year ended December 31, 2018 of W 1,920 per share, amounting to total dividends of W 759,736 is to be proposed at the annual general meeting on March 27, 2019. The Groups financial
statements as of December 31, 2018, do not reflect this dividend payable.
182
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
35. Accumulated Other Comprehensive Income
Details of changes in accumulated other comprehensive income for the years ended December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | |||||||||||||||||||||||
Beginning1 | Changes except for reclassification |
Reclassification to profit or loss |
Replaced by retained earnings |
Tax effect | Ending | |||||||||||||||||||
Remeasurements of net defined benefit liabilities |
||||||||||||||||||||||||
Exchange differences on translating foreign operations |
(54,700 | ) | 46,946 | 15,057 | | (13,087 | ) | (5,784 | ) | |||||||||||||||
Other comprehensive income related with financial assets at fair value through profit or loss |
362,681 | 134,198 | 8,521 | (21,377 | ) | (33,329 | ) | 450,694 | ||||||||||||||||
Other comprehensive income related with investments in associates and joint ventures |
(644 | ) | (5,107 | ) | | | 1,374 | (4,377 | ) | |||||||||||||||
Cash flow hedges |
14,887 | (24,672 | ) | 15,234 | | 400 | 5,849 | |||||||||||||||||
Hedges of a net investment in a foreign operation |
(5,958 | ) | (25,096 | ) | (12,330 | ) | | 10,292 | (33,092 | ) | ||||||||||||||
Other comprehensive income related with separate account assets |
(13,692 | ) | 35,826 | 3,747 | | (10,864 | ) | 15,017 | ||||||||||||||||
Profit or loss related with credit risk change of Financial liabilities designated at fair value through profit or loss |
(10,438 | ) | 2,047 | | | (563 | ) | (8,954 | ) | |||||||||||||||
Net gains/(losses) on overlay adjustment |
(7,559 | ) | 24,458 | (23,161 | ) | | (884 | ) | (7,146 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
1 | Prepared in accordance with Korean IFRS 1109 |
(In millions of Korean won) | 2017 | |||||||||||||||||||||||||||||||
Beginning | Changes except for reclassification |
Reclassification to profit or loss |
Tax effect |
Replaced by retained earnings |
Replaced 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 | ) | | | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
183
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
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, 2018 and 2017.
Weighted average number of ordinary shares outstanding:
(In number of shares) | 2018 | 2017 | ||||||
Beginning |
418,111,537 | 418,111,537 | ||||||
Treasury shares |
(21,611,579 | ) | (19,386,575 | ) | ||||
|
|
|
|
|||||
Weighted average number of ordinary shares outstanding |
396,499,958 | 398,724,962 | ||||||
|
|
|
|
Basic earnings per share:
(In Korean won and in number of shares) | 2018 | 2017 | ||||||
Profit attributable to ordinary shares (D) |
||||||||
Weighted average number of ordinary shares |
396,499,958 | 398,724,962 | ||||||
Basic earnings per share (F = D / E) |
36.2 Diluted Earnings per Share
Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume 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, 2018 and 2017, are as follows:
(In Korean won) | 2018 | 2017 | ||||||
Profit attributable to ordinary shares |
||||||||
Adjustment |
| | ||||||
|
|
|
|
|||||
Adjusted profit for diluted earnings |
||||||||
|
|
|
|
184
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
Adjusted weighted average number of ordinary shares outstanding to calculate diluted earnings per share for the years ended December 31, 2018 and 2017, are as follows:
(In number of shares) | 2018 | 2017 | ||||||
Weighted average number of ordinary shares outstanding |
396,499,958 | 398,724,962 | ||||||
Adjustment |
||||||||
Stock grants |
2,307,630 | 2,319,533 | ||||||
Adjusted weighted average number of ordinary shares outstanding for diluted earnings per share |
398,807,588 | 401,044,495 |
Diluted earnings per share for the years ended December 31, 2018 and 2017, are as follows:
(in Korean won and in number of shares) | 2018 | 2017 | ||||||
Adjusted profit for diluted earnings per share |
||||||||
Adjusted weighted average number of ordinary shares outstanding for diluted earnings per share |
398,807,588 | 401,044,495 | ||||||
Diluted earnings per share |
37. Insurance Contracts
37.1 Insurance Assets
Details of deferred acquisition costs included in other assets as of December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | 2017 | ||||||
Non-life insurance |
||||||||
Life insurance |
119,293 | 130,393 | ||||||
|
|
|
|
|||||
|
|
|
|
Changes in the deferred acquisition costs for the years ended December 31, 2018 and 2017, are as follows
2018 | ||||||||||||||||
(In millions of Korean won) | Beginning | Increase | Decrease | Ending | ||||||||||||
Non-life insurance |
||||||||||||||||
Life insurance |
130,393 | 102,552 | (113,652 | ) | 119,293 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
|
|
|
|
|
|
|
|
|||||||||
2017 | ||||||||||||||||
(In millions of Korean won) | Beginning | Increase | Decrease | Ending | ||||||||||||
Non-life insurance |
||||||||||||||||
Life insurance |
122,151 | 116,826 | (108,584 | ) | 130,393 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
|
|
|
|
|
|
|
|
185
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
Details of reinsurance assets included in other assets as of December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | 2017 | ||||||||
Non-life insurance |
Reserve for outstanding claims |
|||||||||
General insurance |
||||||||||
Automobile insurance |
18,057 | 13,320 | ||||||||
Long-term insurance |
109,751 | 89,317 | ||||||||
Unearned premium reserve General insurance |
171,240 | 178,586 | ||||||||
Automobile insurance |
30,864 | 14,986 | ||||||||
|
|
|
|
|||||||
690,909 | 776,969 | |||||||||
|
|
|
|
|||||||
Life insurance |
Reserve for outstanding claims |
1,912 | 1,410 | |||||||
Unearned premium reserve |
448 | 490 | ||||||||
|
|
|
|
|||||||
2,360 | 1,900 | |||||||||
|
|
|
|
|||||||
Others |
Reserve for outstanding claims |
3,417 | 3,670 | |||||||
Unearned premium reserve |
983 | 1,075 | ||||||||
|
|
|
|
|||||||
4,400 | 4,745 | |||||||||
|
|
|
|
|||||||
Total reinsurance assets |
697,669 | 783,614 | ||||||||
Allowance for impairment |
1,916 | 629 | ||||||||
|
|
|
|
|||||||
Total reinsurance assets, net |
||||||||||
|
|
|
|
The changes in reinsurance assets included in other assets as of December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | |||||||||||||
Beginning | Net increase (decrease) |
Ending | ||||||||||||
Non-life insurance |
Reserve for outstanding claims |
|||||||||||||
General insurance |
||||||||||||||
Automobile insurance |
13,320 | 4,737 | 18,057 | |||||||||||
Long-term insurance |
89,317 | 20,434 | 109,751 | |||||||||||
Unearned premium reserve |
||||||||||||||
General insurance |
178,586 | (7,346 | ) | 171,240 | ||||||||||
Automobile insurance |
14,986 | 15,878 | 30,864 | |||||||||||
|
|
|
|
|
|
|||||||||
776,969 | (86,060 | ) | 690,909 | |||||||||||
|
|
|
|
|
|
|||||||||
Life insurance |
Reserve for outstanding claims |
1,410 | 502 | 1,912 | ||||||||||
Unearned premium reserve |
490 | (42 | ) | 448 | ||||||||||
|
|
|
|
|
|
|||||||||
1,900 | 460 | 2,360 | ||||||||||||
|
|
|
|
|
|
|||||||||
Others |
Reserve for outstanding claims |
3,670 | (253 | ) | 3,417 | |||||||||
Unearned premium reserve |
1,075 | (92 | ) | 983 | ||||||||||
|
|
|
|
|
|
|||||||||
4,745 | (345 | ) | 4,400 | |||||||||||
|
|
|
|
|
|
|||||||||
Total reinsurance assets |
783,614 | (85,945 | ) | 697,669 | ||||||||||
Allowance for impairment |
629 | 1,287 | 1,916 | |||||||||||
|
|
|
|
|
|
|||||||||
Total reinsurance assets, net |
||||||||||||||
|
|
|
|
|
|
186
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
(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 |
||||||||||||||||||
|
|
|
|
|
|
|
|
37.2 Insurance Liabilities
Details of insurance liabilities presented within other liabilities as of December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | |||||||||||||||
Non-life Insurance |
Life insurance |
Others | Total | |||||||||||||
Long-term insurance premium reserve |
||||||||||||||||
Reserve for outstanding claims |
2,152,018 | 89,400 | 3,417 | 2,244,835 | ||||||||||||
Unearned premium reserve |
1,393,570 | 2,199 | 983 | 1,396,752 | ||||||||||||
Reserve for participating policyholders dividends on long-term insurance |
104,461 | 30,187 | | 134,648 | ||||||||||||
Unallocated Divisible Surplus to Future Policyholders |
40,690 | 4,290 | | 44,980 | ||||||||||||
Reserve for compensation for losses on dividend-paying insurance contracts |
19,410 | 5,644 | | 25,054 | ||||||||||||
Guarantee reserve |
| 18,412 | | 18,412 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
|
|
|
|
|
|
|
|
187
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
(In millions of Korean won) | December 31, 2017 | |||||||||||||||
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 | | 123,155 | ||||||||||||
Unallocated Divisible Surplus to Future Policyholders |
24,304 | 6,264 | | 30,568 | ||||||||||||
Reserve for compensation for losses on dividend-paying insurance contracts |
25,730 | 7,920 | | 33,650 | ||||||||||||
Guarantee reserve |
| 12,687 | | 12,687 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
|
|
|
|
|
|
|
|
The changes in insurance liability as of December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | |||||||||||||
Beginning | Net increase (decrease) 2 |
Ending | ||||||||||||
Non-life insurance |
General insurance |
|||||||||||||
Automobile insurance |
1,477,569 | 14,725 | 1,492,294 | |||||||||||
Long-term insurance |
21,598,125 | 1,788,154 | 23,386,279 | |||||||||||
Long-term investment contract |
112,509 | (2,253 | ) | 110,256 | ||||||||||
Life insurance |
Pure endowment insurance |
5,249,627 | (16,136 | ) | 5,233,491 | |||||||||
Death insurance |
366,303 | 134,268 | 500,571 | |||||||||||
Joint insurance |
1,782,885 | (161,425 | ) | 1,621,460 | ||||||||||
Group insurance |
1,069 | (334 | ) | 735 | ||||||||||
Other1 |
14,183 | (5,543 | ) | 8,640 | ||||||||||
Others |
4,745 | (345 | ) | 4,400 | ||||||||||
|
|
|
|
|
|
|||||||||
Total |
||||||||||||||
|
|
|
|
|
|
(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 | |||||||||||||
Other1 |
17,816 | | (3,633 | ) | 14,183 | |||||||||||||
Others |
4,221 | | 524 | 4,745 | ||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Total |
||||||||||||||||||
|
|
|
|
|
|
|
|
1 | Including contractors profit dividend reserve and loss on dividend insurance reserve |
2 | Including currency translation effect and decrease in liability related to investment contract |
188
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
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, 2018 and 2017, is as follows: |
Assumptions (%) |
Basis | |||||
2018 | 2017 | |||||
Long-term insurance |
||||||
Discount rate |
2.64%~9.05% | 1.63% ~ 9.12% | Applied regulators scenario requiring use of liquidity premium over risk-free rate | |||
Expense ratio |
6.43% | 6.51% | Reflected the Parent Companys future expense cost based on the most recent one-year data | |||
Lapse ratio |
1.50%~31.40% | 1.30%~34.80% | Based on the most recent five year data | |||
Mortality |
9.0%~724.0% | 12.0% ~633.0% | Rate of risk to the anticipated risk premium of the insurer for the most recent five years | |||
General insurance |
||||||
Expense ratio |
10.42% | 11.59% | Expense ratio divided by the most recent one year accrued insurance premium | |||
Appraisal cost ratio |
4.63% | 4.73% | Appraisal cost divided by the most recent three year accrued insurance premium | |||
Claim settlement ratio |
63.77% | 67.23% | Claim payment divided by the most recent five year accrued insurance premium | |||
Automobile insurance |
||||||
Expense ratio |
10.11% | 11.00% | Expense ratio divided by the most recent one year accrued insurance premium | |||
Appraisal cost ratio |
9.09% | 9.33% | Appraisal cost divided by the most recent three year accrued insurance premium | |||
Claim settlement ratio |
77.51% | 77.02% | Claim payment divided by the most recent five year accrued insurance premium |
The results of liability adequacy test as of December 31, 2018 and 2017, are as follows:
2018 | ||||||||||||
(In millions of Korean won) | Recognized liabilities 1 |
Estimated adequate liabilities |
Shortfall (surplus) |
|||||||||
Long-term insurance |
||||||||||||
General insurance |
341,439 | 279,756 | (61,683 | ) | ||||||||
Automobile insurance |
1,020,861 | 967,236 | (53,625 | ) | ||||||||
|
|
|
|
|||||||||
|
|
|
|
|
|
|||||||
2017 | ||||||||||||
(In millions of Korean won) | Recognized liabilities 1 |
Estimated adequate liabilities |
Shortfall (surplus) |
|||||||||
Long-term insurance |
||||||||||||
General insurance |
354,177 | 305,682 | (48,495 | ) | ||||||||
Automobile insurance |
1,011,000 | 964,975 | (46,025 | ) | ||||||||
|
|
|
|
|||||||||
|
|
|
|
|
|
1 | Long-term insurance is for premium reserves and unrecognized premium reserves; the premium reserve is the amount deducted from the unearned premiums and insurance contract loans in accordance with Article 6-3 of the Insurance Supervisory Regulation. |
189
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
As a result of adequacy test, the Group did not set additional reserve as it shows net surplus. As such, there was no amount recorded as a result of liability adequacy test.
37.3.2 Life insurance
Assumptions and basis for the insurance liability adequacy test as of December 31, 2018 and 2017, are as follows:
Assumptions(%) |
Basis | |||||||
2018 | 2017 | 2016 | ||||||
Rate of surrender value |
0~64.95 | 0.44~60.30 | 0.48~85.55 | The ratio of cancelled premiums to premiums by product group, method of payment, channel, and elapsed period calculated based on the most recent five-year experience statistics | ||||
Rate of claim |
8~122 | 6~118 | 6~140 | The ratio of incidents by collateral, gender, elapsed period to the number of holding insurances based on the most recent seven-year experience statistics | ||||
Discount rate |
(1.72)~13.06 | (1.95)~14.31 | (3.21)~14.53 | 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, 2018, 2017 and 2016, are as follows:
(In millions of Korean won) | 2018 | |||||||||||||
Recognized liabilities |
Estimated adequate liabilities |
Shortfall (surplus) |
||||||||||||
Fixed interest type |
Participating |
|||||||||||||
Non-participating |
133,137 | 87,657 | (45,480 | ) | ||||||||||
|
|
|
|
|
|
|||||||||
Variable interest type |
Participating |
1,087,007 | 1,087,344 | 337 | ||||||||||
Non-participating |
5,538,893 | 5,081,544 | (457,349 | ) | ||||||||||
|
|
|
|
|
|
|||||||||
Variable type |
(31,481 | ) | (122,731 | ) | (91,250 | ) | ||||||||
|
|
|
|
|
|
|||||||||
Total |
||||||||||||||
|
|
|
|
|
|
|||||||||
(In millions of Korean won) | 2017 | |||||||||||||
Recognized liabilities |
Estimated adequate liabilities |
Shortfall (surplus) |
||||||||||||
Fixed interest type |
Participating |
|||||||||||||
Non-participating |
97,093 | 30,822 | (66,271 | ) | ||||||||||
|
|
|
|
|
|
|||||||||
Variable interest type |
Participating |
1,136,444 | 1,115,755 | (20,689 | ) | |||||||||
Non-participating |
5,581,698 | 4,955,777 | (625,921 | ) | ||||||||||
|
|
|
|
|
|
|||||||||
Variable type |
(28,699 | ) | (105,076 | ) | (76,377 | ) | ||||||||
|
|
|
|
|
|
|||||||||
Total |
||||||||||||||
|
|
|
|
|
|
190
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
2016 | ||||||||||||||
(In millions of Korean won) | Recognized liabilities |
Estimated adequate liabilities |
Shortfall (surplus) |
|||||||||||
Fixed interest type |
Participating | 51,600 | ||||||||||||
Non-participating | 60,860 | (19,237 | ) | (80,097 | ) | |||||||||
|
|
|
|
|
|
|||||||||
Variable interest type |
Participating | 1,136,049 | 1,120,843 | (15,206 | ) | |||||||||
Non-participating | 5,514,847 | 5,159,996 | (354,851 | ) | ||||||||||
|
|
|
|
|
|
|||||||||
Variable type |
(29,025 | ) | (85,349 | ) | (56,324 | ) | ||||||||
|
|
|
|
|
|
|||||||||
Total |
||||||||||||||
|
|
|
|
|
|
As a result of adequacy test, the group did not set additional reserve as it shows net surplus. As such, there was no amount recorded as a result of liability adequacy test.
37.4 Insurance Income and Expense
Insurance income and expenses for the years ended December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | 2017 | ||||||||
Insurance income |
Premium income |
|||||||||
Reinsurance income |
873,053 | 564,894 | ||||||||
Reversal of policy reserves |
344 | |||||||||
Separate account income |
360,664 | 118,080 | ||||||||
Income of change in reinsurance assets |
| 49,466 | ||||||||
Other insurance income |
10,782 | 3,821 | ||||||||
|
|
|
|
|||||||
11,975,070 | 8,970,992 | |||||||||
|
|
|
|
|||||||
Insurance expenses |
Insurance claims paid |
4,415,760 | 2,945,158 | |||||||
Dividend expenses |
9,400 | 6,233 | ||||||||
Refunds of surrender value |
2,855,573 | 2,193,843 | ||||||||
Reinsurance expenses |
947,560 | 652,910 | ||||||||
Provision of policy reserves |
1,608,519 | 1,644,389 | ||||||||
Separate account expenses |
276,412 | 65,773 | ||||||||
Insurance operating expenses |
418,646 | 293,591 | ||||||||
Deferred acquisition costs |
606,073 | 361,909 | ||||||||
Expenses of change in reinsurance assets |
89,621 | (126 | ) | |||||||
Claim survey expenses paid |
38,782 | 20,564 | ||||||||
Other insurance expenses |
218,608 | 193,038 | ||||||||
|
|
|
|
|||||||
11,484,954 | 8,377,282 | |||||||||
|
|
|
|
|||||||
Net insurance income(expenses) |
||||||||||
|
|
|
|
37.5 Risk management of insurance
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.
191
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
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 outlines 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 various subsequent measures such as the adjustments in the interest rate and sales conditions, termination of selling specific product and others 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.
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 aims at policy holders safety and its stable profit achievement. For the long-term goal, the Group manages risk at a comprehensive level to keep its value at the maximum.
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 one 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, 2018 and 2017, as follows:
2018 | ||||||||||||||||
(In millions of Korean won) | Direct insurance |
Inward reinsurance |
Outward reinsurance |
Total | ||||||||||||
General |
||||||||||||||||
Automobile |
1,940,602 | | (63,720 | ) | 1,876,882 | |||||||||||
Long-term |
2,285,378 | | (326,337 | ) | 1,959,041 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
|
|
|
|
|
|
|
|
|||||||||
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 severe level of risk, although there is rare possibility of the occurrence of disaster, such as storm and flood insurance are limited, and the Group controls the risk through joint acquisition.
192
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
Loss development tables
The Group uses claim development of payments and the estimated ultimate claims for the years where the accident has occurred, 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, 2018 and 2017, are as follows:
<2018>
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) |
||||||||||||||||||||
2014.1.1 ~ 2014.12.31 |
||||||||||||||||||||
2015.1.1 ~ 2015.12.31 |
125,170 | 145,637 | 148,165 | 151,594 | | |||||||||||||||
2016.1.1 ~ 2016.12.31 |
145,618 | 168,119 | 171,506 | | | |||||||||||||||
2017.1.1 ~ 2017.12.31 |
168,409 | 201,100 | | | | |||||||||||||||
2018.1.1 ~ 2018.12.31 |
201,014 | | | | | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
768,114 | 659,771 | 466,101 | 298,127 | 146,508 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Gross cumulative claim payments (B) |
||||||||||||||||||||
2014.1.1 ~ 2014.12.31 |
94,901 | 129,652 | 136,689 | 141,170 | 142,217 | |||||||||||||||
2015.1.1 ~ 2015.12.31 |
93,443 | 130,430 | 137,854 | 142,645 | | |||||||||||||||
2016.1.1 ~ 2016.12.31 |
108,098 | 151,583 | 162,360 | | | |||||||||||||||
2017.1.1 ~ 2017.12.31 |
132,430 | 184,716 | | | | |||||||||||||||
2018.1.1 ~ 2018.12.31 |
153,770 | | | | | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
582,642 | 596,381 | 436,903 | 283,815 | 142,217 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
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) |
||||||||||||||||||||||||||||
2012.1.1 ~ 2012.12.31 |
||||||||||||||||||||||||||||
2013.1.1 ~ 2013.12.31 |
1,131,945 | 1,156,535 | 1,170,968 | 1,179,458 | 1,179,323 | 1,179,514 | | |||||||||||||||||||||
2014.1.1 ~ 2014.12.31 |
1,174,611 | 1,193,832 | 1,205,524 | 1,212,025 | 1,212,162 | | | |||||||||||||||||||||
2015.1.1 ~ 2015.12.31 |
1,227,106 | 1,245,780 | 1,256,058 | 1,263,044 | | | | |||||||||||||||||||||
2016.1.1 ~ 2016.12.31 |
1,276,939 | 1,281,381 | 1,287,728 | | | | | |||||||||||||||||||||
2017.1.1 ~ 2017.12.31 |
1,342,998 | 1,348,828 | | | | | | |||||||||||||||||||||
2018.1.1 ~ 2018.12.31 |
1,468,784 | | | | | | | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
8,740,033 | 7,373,135 | 6,075,807 | 4,816,602 | 3,556,259 | 2,345,984 | 1,165,352 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Gross cumulative claim payments(B) |
||||||||||||||||||||||||||||
2012.1.1 ~ 2012.12.31 |
939,239 | 1,105,672 | 1,135,064 | 1,149,585 | 1,156,150 | 1,159,614 | 1,160,769 | |||||||||||||||||||||
2013.1.1 ~ 2013.12.31 |
939,569 | 1,114,063 | 1,145,110 | 1,161,624 | 1,168,617 | 1,175,681 | | |||||||||||||||||||||
2014.1.1 ~ 2014.12.31 |
969,211 | 1,150,462 | 1,180,953 | 1,196,387 | 1,204,580 | | | |||||||||||||||||||||
2015.1.1 ~ 2015.12.31 |
1,020,975 | 1,198,241 | 1,228,357 | 1,245,779 | | | | |||||||||||||||||||||
2016.1.1 ~ 2016.12.31 |
1,052,830 | 1,235,656 | 1,264,651 | | | | | |||||||||||||||||||||
2017.1.1 ~ 2017.12.31 |
1,104,158 | 1,306,235 | | | | | | |||||||||||||||||||||
2018.1.1 ~ 2018.12.31 |
1,224,820 | | | | | | | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
7,250,802 | 7,110,329 | 5,954,135 | 4,753,375 | 3,529,347 | 2,335,295 | 1,160,769 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Difference (A-B) |
||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
193
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
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) |
||||||||||||||||||||
2014.1.1 ~ 2014.12.31 |
||||||||||||||||||||
2015.1.1 ~ 2015.12.31 |
885,476 | 1,219,393 | 1,256,051 | 1,266,881 | | |||||||||||||||
2016.1.1 ~ 2016.12.31 |
1,064,744 | 1,437,573 | 1,485,839 | | | |||||||||||||||
2017.1.1 ~ 2017.12.31 |
1,184,224 | 1,614,903 | | | | |||||||||||||||
2018.1.1 ~ 2018.12.31 |
1,372,706 | | | | | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
5,296,237 | 5,354,917 | 3,856,711 | 2,386,087 | 1,122,192 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Gross cumulative claim payments (B) |
||||||||||||||||||||
2014.1.1 ~ 2014.12.31 |
744,944 | 1,065,792 | 1,104,468 | 1,114,341 | 1,119,531 | |||||||||||||||
2015.1.1 ~ 2015.12.31 |
836,471 | 1,205,130 | 1,248,475 | 1,262,528 | | |||||||||||||||
2016.1.1 ~ 2016.12.31 |
1,017,243 | 1,424,948 | 1,477,415 | | | |||||||||||||||
2017.1.1 ~ 2017.12.31 |
1,130,868 | 1,599,227 | | | | |||||||||||||||
2018.1.1 ~ 2018.12.31 |
1,319,613 | | | | | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
5,049,139 | 5,295,097 | 3,830,358 | 2,376,869 | 1,119,531 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Difference (A-B) |
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
<2017>
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) |
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
194
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
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 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Difference (A-B) |
||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 | | | | | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
4,401,026 | 4,649,364 | 3,342,900 | 2,114,285 | 1,003,715 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Difference (A-B) |
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
195
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
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 | 2018 | |||||||
change | Effect on LAT | |||||||
Surrenders and termination rates |
+10 | % | ||||||
-10 | % | (481,587 | ) | |||||
Loss ratio |
+10 | % | 4,235,661 | |||||
-10 | % | (4,235,661 | ) | |||||
Insurance operating expenses ratio |
+10 | % | 332,885 | |||||
-10 | % | (332,885 | ) | |||||
Discount rate |
+0.5 | % | (1,297,557 | ) | ||||
-0.5 | % | 1,608,051 |
(In millions of Korean won) | ||||||||
Assumption | 2017 | |||||||
change | Effect on LAT | |||||||
Surrenders and termination rates |
+10 | % | ||||||
-10 | % | (399,768 | ) | |||||
Loss ratio |
+10 | % | 3,365,242 | |||||
-10 | % | (3,365,242 | ) | |||||
Insurance operating expenses ratio |
+10 | % | 293,299 | |||||
-10 | % | (293,299 | ) | |||||
Discount rate |
+0.5 | % | (1,254,409 | ) | ||||
-0.5 | % | 1,490,817 |
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, 2018 and 2017, as follows:
20181 | ||||||||||||||||||||||||
(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 |
419,874 | 2,774,991 | 2,169,861 | 726,859 | 11,900,385 | 17,991,970 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
447,351 | 3,076,833 | 2,264,364 | 767,988 | 11,996,236 | 18,552,772 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Annuity |
||||||||||||||||||||||||
Non-linked |
5 | 251 | 2,279 | 3,736 | 1,327 | 7,598 | ||||||||||||||||||
Linked |
200 | 58,182 | 339,662 | 1,176,168 | 2,194,381 | 3,768,593 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
205 | 58,433 | 341,941 | 1,179,904 | 2,195,708 | 3,776,191 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Asset-linked |
||||||||||||||||||||||||
Linked |
| 27,480 | | | | 27,480 | ||||||||||||||||||
Total |
||||||||||||||||||||||||
Non-linked |
27,482 | 302,093 | 96,782 | 44,865 | 97,178 | 568,400 | ||||||||||||||||||
Linked |
420,074 | 2,860,653 | 2,509,523 | 1,903,027 | 14,094,766 | 21,788,043 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
1 | Includes long-term investment contract amounting to |
196
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
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 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
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 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
172 | 47,079 | 309,572 | 1,093,939 | 2,142,990 | 3,593,752 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
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 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
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, only the insurers rated above BBB- of S&P rating are accepted for the insurance contracts.
As of December 31, 2018, there are 155 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 |
70.21 | % | AA | |||
SWISSRE |
4.34 | % | AAA | |||
HDIgerling |
2.85 | % | AA+ |
Exposures to credit risk related to reinsurance as of December 31, 2018 and 2017 as follows:
(In millions of Korean won) | 2018 | 2017 | ||||||
Reinsurance assets1 |
||||||||
Net receivables from reinsurers2 |
398,575 | 237,750 | ||||||
|
|
|
|
|||||
|
|
|
|
1 | Net carrying amounts after impairment loss |
2 | Net carrying amounts of each reinsurance company that reinsurance accounts receivable and reinsurance accounts are offset 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, 2018 and 2017, are as follows:
197
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
i) Exposure to interest rate risk
(In millions of Korean won) | 2018 | |||
Liabilities |
||||
Fixed interest rate |
||||
Variable interest rate |
20,332,094 | |||
|
|
|||
20,892,565 | ||||
|
|
|||
Assets |
||||
Due from financial institutions at amortized cost ans cash |
100,701 | |||
Financial assets at fair value through profit or loss |
4,257,959 | |||
Financial assets at fair value through other comprehensive income |
2,691,744 | |||
Financial assets at amortized cost |
7,718,337 | |||
Loans at amortized cost |
6,877,139 | |||
|
|
|||
|
|
|||
(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 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. Where duration of assets is shorter than that of liabilities with the interest rates fall, the interest risk is increased since the incremental portion of liabilities exceeds that of assets.
iv) Negative spread risk control
In order to manage the reverse margins risk between interest expenses from liabilities and investment incomes on assets, the Group set the disclosure rate every month considering the market interest rate and the managing portfolios profit ratio.
198
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
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 received 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 exposure of insurance price risk is measured by the risk premium for all insurance contracts held for one year prior to the calculation date. The premium for risk retention is calculated by adding direct insurance premium and reinsurance assumed premium, and deducting reinsurance ceded premium (which is paid to reinsurance companies). If the holding risk premium is less than zero, the exposure of the insurance price is measured as zero.
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.
199
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
The maximum exposures to insurance price risk as of December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | |||||||
Before reinsurance mitigation |
After reinsurance mitigation |
|||||||
Death |
||||||||
Disability |
858 | 296 | ||||||
Hospitalization |
1,287 | 358 | ||||||
Operation and diagnosis |
3,936 | 1,031 | ||||||
Actual losses for medical expense |
1,059 | 85 | ||||||
Others |
1,019 | 96 | ||||||
|
|
|
|
|||||
|
|
|
|
|||||
(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 | ||||||
|
|
|
|
|||||
|
|
|
|
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, 2018 and 2017, were 67.6% and 65.9%, respectively.
The exposure of market risk arising from embedded derivatives included in host insurance contracts as of December 31, 2018 and 2017, are as follows:
(In millions of Korean won)
2018 | 2017 | |||||||||||||||
Policyholders reserve1 |
Guarantee reserve |
Policyholders reserve1 |
Guarantee reserve |
|||||||||||||
Variable annuity |
||||||||||||||||
Variable universal |
84,783 | 4,129 | 97,893 | 3,572 | ||||||||||||
Variable saving |
542,035 | 396 | 429,985 | 316 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
|
|
|
|
|
|
|
|
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 provided by the regulatory authority and in accordance with the Regulations 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 as required by the Regulation on Supervision of Insurance Business.
200
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
37.6.5 Premium reserves and unearned premium reserves residual maturity
Premium reserves maturity structure as of December 31, 2018 and 2017, as follows:
(In millions of Korean won)
2018 | ||||||||||||||||||||||||||||
Less than 3 years |
3-5 years |
5-10 years | 10-15 years | 15-20 years | 20 years or more |
Total | ||||||||||||||||||||||
Premium reserves |
||||||||||||||||||||||||||||
(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 |
37.7 The Overlay Approach
The Group applied The Overlay Approach under Korean IFRS 1104 at the initial application of Korean IFRS 1109.
Details of financial assets applied The Overlay Approach as of December 31, 2018, are as follows:
(In millions of Korean won) | 2018 | |||
Financial assets designated at fair value through profit or loss |
||||
Cash and due from financial institutions |
||||
Debt securities |
7,044,081 | |||
Equity securities |
81,949 | |||
|
|
|||
|
|
Changes of net losses on overlay adjustment for the year ended December 31, 2018, are as follows:
(In millions of Korean won) | Net losses on overlay adjustment2 | |||
Beginning1 |
||||
Recognition due to acquisition |
17,205 | |||
Reclassification to profit or loss due to disposal |
(16,792 | ) | ||
Recognition of OCI from profit or loss due to re-designation |
| |||
Recognition of profit or loss from OCI due to de-designation |
| |||
|
|
|||
Ending |
||||
|
|
1 | Calculated based on Korean IFRS 1109 |
2 | Amounts are net of tax |
38. Trust Accounts
Financial information of the trust accounts that Kookmin Bank manages as of December 31, 2018 and 2017, are as follows:
201
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
(In millions of Korean won) | 2018 | 2017 | ||||||||||||||
Total assets |
Operating revenues |
Total assets |
Operating revenues |
|||||||||||||
Consolidated |
||||||||||||||||
Unconsolidated |
47,644,193 | 1,609,587 | 43,256,371 | 2,590,728 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
|
|
|
|
|
|
|
|
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. |
Significant transactions between the Group and the trust accounts for the years ended December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | 2017 | ||||||
Revenues |
||||||||
Fees and commissions from trust accounts |
||||||||
Interest income from loans on trust accounts |
5,586 | 1,447 | ||||||
Commissions from early termination in trust accounts |
88 | 92 | ||||||
|
|
|
|
|||||
|
|
|
|
|||||
Expenses |
||||||||
Interest expenses due to trust accounts |
||||||||
|
|
|
|
|||||
Receivables |
||||||||
Accrued trust fees |
||||||||
Due from trust accounts |
109,357 | 37,973 | ||||||
|
|
|
|
|||||
|
|
|
|
|||||
Payables |
||||||||
Due to trust accounts |
||||||||
Accrued interest on due to trust accounts |
10,547 | 7,632 | ||||||
|
|
|
|
|||||
|
|
|
|
39. Supplemental Cash Flow Information
Cash and cash equivalents as of December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | 2017 | ||||||
Cash |
||||||||
Checks with other banks |
872,166 | 430,253 | ||||||
Due from Bank of Korea |
9,098,891 | 8,981,665 | ||||||
Due from other financial institutions |
8,117,398 | 8,237,996 | ||||||
|
|
|
|
|||||
20,274,490 | 19,817,825 | |||||||
|
|
|
|
|||||
Due from financial institutions at fair value through profit or loss |
381,718 | | ||||||
|
|
|
|
|||||
20,656,208 | 19,817,825 | |||||||
|
|
|
|
|||||
Restricted cash from financial institutions |
(12,347,627 | ) | (10,613,089 | ) | ||||
Due from financial institutions with original maturities over three months |
(1,665,765 | ) | (799,838 | ) | ||||
|
|
|
|
|||||
(14,013,392 | ) | (11,412,927 | ) | |||||
|
|
|
|
|||||
|
|
|
|
202
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
Significant non-cash transactions for the years ended December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | 2017 | ||||||
Decrease in loans due to the write-offs |
||||||||
Changes in accumulated other comprehensive income due to valuation of financial investments |
| 89,117 | ||||||
Changes in accumulated other comprehensive income due to valuation of financial investments at fair value through other comprehensive income |
119,182 | | ||||||
Decrease in accumulated other comprehensive income from measurement of investment securities in associates |
(3,733 | ) | 100,735 | |||||
Changes in shares of investment in associate due to KB Insurance Co., Ltd.s inclusion of the consolidation scope |
| (1,417,397 | ) | |||||
Changes in other payables due to treasury stock trust agreement, etc |
6,678 | 18,802 |
Cash inflows and outflows from income tax, interests and dividends for the year ended December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | Activity | 2018 | 2017 | |||||||
Income tax paid |
Operating | |||||||||
Interest received |
Operating | 12,346,795 | 11,243,363 | |||||||
Interest paid |
Operating | 4,069,935 | 3,444,715 | |||||||
Dividends received |
Operating | 222,670 | 229,289 | |||||||
Dividends paid |
Financing | 766,728 | 497,969 |
Changes in liabilities arising from financing activities
Changes in liabilities and assets that arising from financing activities for the year ended December 31, 2018 are as follows:
(In millions of Korean won)
2018 | ||||||||||||||||||||||||||||||||
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 |
28,820,928 | 4,216,014 | | 178,543 | | (8,487 | ) | (202,164 | ) | 33,004,834 | ||||||||||||||||||||||
Debentures |
44,992,724 | 8,422,959 | | 173,760 | 4,176 | (355,800 | ) | 40,878 | 53,278,697 | |||||||||||||||||||||||
Other payables from trust accounts |
5,018,031 | 267,077 | | | | | | 5,285,108 | ||||||||||||||||||||||||
Others |
325,437 | (185,894 | ) | 17,664 | 7,242 | | | 2,679 | 167,128 | |||||||||||||||||||||||
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1. | Derivatives held for hedging purposes are the net amount after offsetting liabilities from assets |
203
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
The net cash outflow associated with the change of the subsidiaries for the year ended December 31, 2018
was W188,140 million.
40. Contingent Liabilities and Commitments
Details of payment guarantees as of December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | 2017 | ||||||
Confirmed payment guarantees |
||||||||
Confirmed payment guarantees in Korean won |
||||||||
Payment guarantees for KB purchasing loan |
||||||||
Other payment guarantees |
597,636 | 530,272 | ||||||
|
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|
|
|||||
794,153 | 783,089 | |||||||
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|
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Confirmed payment guarantees in foreign currency |
||||||||
Acceptances of letter of credit |
208,926 | 147,987 | ||||||
Letter of guarantees |
53,210 | 60,853 | ||||||
Bid bond |
51,528 | 46,984 | ||||||
Performance bond |
604,311 | 563,506 | ||||||
Refund guarantees |
592,925 | 778,779 | ||||||
Other payment guarantees in foreign currency |
2,539,900 | 1,960,769 | ||||||
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4,050,800 | 3,558,878 | |||||||
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|
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Financial guarantees |
||||||||
Payment guarantees for mortgage |
50,497 | 57,446 | ||||||
Overseas debt guarantees |
311,796 | 285,576 | ||||||
International financing guarantees in foreign currencies |
110,070 | 46,953 | ||||||
|
|
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Other financing payment guarantees |
270,000 | 270,029 | ||||||
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|
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742,363 | 660,004 | |||||||
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5,587,316 | 5,001,971 | |||||||
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|
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Unconfirmed acceptances and guarantees |
||||||||
Guarantees of letter of credit |
1,745,340 | 2,250,542 | ||||||
Refund guarantees |
686,843 | 384,959 | ||||||
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2,432,183 | 2,635,501 | |||||||
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Payment guarantees that are exposed to credit risk as of December 31, 2018, are as follows:
(In millions of Korean won) | ||||||||||||||||
The financial credit losses |
The financial instruments applying lifetime expected credit losses |
Total | ||||||||||||||
Non-impaired | Impaired | |||||||||||||||
Confirmed payment guarantees |
|
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Grade 1 |
||||||||||||||||
Grade 2 |
1,571,258 | 29,034 | | 1,600,292 | ||||||||||||
Grade 3 |
84,251 | 13,585 | | 97,836 | ||||||||||||
Grade 4 |
30,443 | 117,166 | 420 | 148,029 | ||||||||||||
Grade 5 |
| 171 | 14,550 | 14,721 | ||||||||||||
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5,412,211 | 160,135 | 14,970 | 5,587,316 | |||||||||||||
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Unconfirmed acceptances and guarantees |
| |||||||||||||||
Grade 1 |
1,102,478 | 1,747 | | 1,104,225 | ||||||||||||
Grade 2 |
1,180,137 | 17,795 | | 1,197,932 | ||||||||||||
Grade 3 |
25,749 | 16,225 | | 41,974 | ||||||||||||
Grade 4 |
9,627 | 66,186 | | 75,813 | ||||||||||||
Grade 5 |
| 219 | 12,020 | 12,239 | ||||||||||||
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2,317,991 | 102,172 | 12,020 | 2,432,183 | |||||||||||||
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204
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
Acceptances and guarantees by counterparty as of December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | |||||||||||||||
Confirmed guarantees |
Unconfirmed guarantees |
Total | Proportion (%) |
|||||||||||||
Corporations |
83.27 | |||||||||||||||
Small companies |
617,458 | 423,947 | 1,041,405 | 12.99 | ||||||||||||
Public and others |
194,020 | 106,285 | 300,305 | 3.74 | ||||||||||||
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100.00 | ||||||||||||||||
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(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 | ||||||||||||
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100.00 | ||||||||||||||||
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Acceptances and guarantees by industry as of December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | |||||||||||||||
Confirmed guarantees |
Unconfirmed guarantees |
Total | Proportion (%) |
|||||||||||||
Financial institutions |
0.95 | |||||||||||||||
Manufacturing |
2,981,245 | 1,451,657 | 4,432,902 | 55.27 | ||||||||||||
Service |
931,680 | 84,586 | 1,016,266 | 12.67 | ||||||||||||
Whole sale & Retail |
998,333 | 723,367 | 1,721,700 | 21.47 | ||||||||||||
Construction |
280,146 | 40,988 | 321,134 | 4.00 | ||||||||||||
Public sector |
165,571 | 36,256 | 201,827 | 2.52 | ||||||||||||
Others |
158,270 | 91,593 | 249,863 | 3.12 | ||||||||||||
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100.00 | ||||||||||||||||
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205
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
(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 | ||||||||||||
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100.00 | ||||||||||||||||
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Commitments as of December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | 2017 | ||||||
Commitments |
||||||||
Corporate loan commitments |
||||||||
Retail loan commitments |
41,335,454 | 16,074,323 | ||||||
Credit line on credit cards |
54,488,133 | 49,299,924 | ||||||
Purchase of other security investment and others |
5,426,058 | 3,951,304 | ||||||
|
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|
|||||
138,590,372 | 102,183,167 | |||||||
|
|
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|
|||||
Financial Guarantees |
||||||||
Credit line |
2,447,369 | 2,669,071 | ||||||
Purchase of security investment |
436,800 | 354,800 | ||||||
|
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|
|||||
2,884,169 | 3,023,871 | |||||||
|
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|
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|
|
Other Matters (including litigation)
a) The Group has filed 185 lawsuits as a plaintiff (excluding minor lawsuits in relation to the collection or management of loans), involving aggregate claims
of W526,449 million, and faces 288 lawsuits (as a defendant) (excluding minor lawsuits in relation to the collection or management of loans) involving aggregate damages of W229,430 million, which arose in
the normal course of the business and are still pending as of December 31, 2018.
b) Kookmin Bank made a construction contract building the integrated
company building, and the integrated central IT, amounting to W151,280 million, and W116,563 million, respectively; for the year ended December 31, 2018, the subsidiary has paid
W7,605 million and W42,857 million for each the integrated company building and the integrated central IT, respectively.
c) The face value of the securities which Kookmin Bank sold to general customers through the bank tellers amounts to W372 million and
W372 million as of December 31, 2018 and 2017, respectively.
206
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
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 113 filed as a defendant, with an aggregate claim of
W6,906 million as of December 31, 2018. A provision liability of W9,886 million has been recognized for these pending lawsuits. In addition, the additional lawsuits may be filed against the Group;
however, the final outcome of the cases cannot be reasonably ascertained.
e) As of December 31, 2018, the Group is in the process of filing complaints regarding insurance contracts including reverse pension plans; the amount paid and the timing related with this filing cannot be predicted as of December 31, 2018.
207
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
41. Subsidiaries
Details of subsidiaries as of December 31, 2018, 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 | Collective investment and advisory | ||||||
KB Capital Co., Ltd. |
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)6 |
100.00 | United Kingdom | 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. | ||||||
KBD Tower 1st L.L.C. and 33 others2 |
| Korea | Dec. 31 | Asset-backed securitization | ||||||
KB Multi-Asset Private Securities Fund S-1(Bond Mixed) |
99.96 | Korea | Dec. 31 | Investment trust | ||||||
KB Multi-Asset Private Securities Fund P-1(Bond Mixed) |
99.96 | Korea | Dec. 31 | Investment trust | ||||||
KB Haeoreum private securities investment trust 96(Bond)3 |
49.95 | Korea | Dec. 31 | Capital investment | ||||||
Samsung KODEX 10Y F-LKTB Inverse ETF(Bond-Derivatives) |
88.74 | Korea | Dec. 31 | Capital investment | ||||||
KB Haeoreum private securities investment trust 83(Bond)3 |
99.95 | Korea | Dec. 31 | Capital investment |
208
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
Investor | Investee | Ownership interests (%) |
Location | Date of financial statements |
Industry | |||||
Kiwoom Frontier Private placement fund 10[Bond] |
99.85 | Korea | Dec. 31 | Capital investment | ||||||
Tong Yang Safe Plus Qualified Private Trust S-8(Bond) |
99.93 | Korea | Dec. 31 | Capital investment | ||||||
Mirae Asset Triumph Global Privately placed Feeder Investment Trust 1 |
99.92 | Korea | Dec. 31 | Capital investment | ||||||
NH-AMUNDI GLOBAL PRIVATE SECURITIES INVESTMENT TRUST 1(BOND)] |
83.31 | Korea | Dec. 31 | Capital investment | ||||||
Meritz Private Real Estate Fund 9-2 |
99.98 | Korea | Dec. 31 | Capital investment | ||||||
AIP US RED PRIVATE REAL ESTATE TRUST NO.10 |
99.97 | Korea | Dec. 31 | Capital investment | ||||||
KB Evergrren Private Securities Fund 98(Bond)3 |
49.34 | Korea | Dec. 31 | Capital investment | ||||||
KB Korea Choet Term Premium Private Securities 5(USD)(Bond) |
50.00 | Korea | Dec. 31 | Capital investment | ||||||
KB Korea Short Term Premium Private Securities 4(USD)(Bond)3 |
49.60 | Korea | Dec. 31 | Capital investment | ||||||
KB Securities Co., Ltd. |
KBFG Securities America Inc. |
100.00 | United States of America | Dec. 31 | Investment advisory and securities dealing activities | |||||
KB Securities Hong Kong Ltd. |
100.00 | China | Dec. 31 | Investment advisory and securities dealing activities | ||||||
KB SECURITEIS VIETNAM JOINT STOCK COMPANY |
99.67 | Vietnam | Dec. 31 | Investment advisory and securities dealing activities | ||||||
Able NS Co., Ltd and 61 others2 |
| Korea | Dec. 31 | Asset-backed securitization | ||||||
KB NA COMPASS ENERGY PRIVATE SPECIAL ASSET FUND3 |
29.70 | Korea | Dec. 31 | Capital investment |
209
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
Investor | Investee | Ownership interests (%) |
Location | Date of financial statements |
Industry | |||||
Hyundai You First Private Real Estate Investment Trust No. 1 |
98.54 | Korea | Dec. 31 | Capital investment | ||||||
Hyundai Smart Index Alpha Securities Feeder Investment Trust No.1 |
98.76 | Korea | Dec. 31 | Capital investment | ||||||
Hyundai Strong Korea Equity Trust No.1 |
99.34 | Korea | Dec. 31 | Capital investment | ||||||
Hyundai Kidzania Equity Feeder Trust No.1 |
79.13 | Korea | Dec. 31 | Capital investment | ||||||
Hyundai Value Plus Equity Feeder Trust No.1 |
99.64 | Korea | Dec. 31 | Capital investment | ||||||
Hyundai Strong-small Corporate Trust No.1 |
90.57 | Korea | Dec. 31 | Capital investment | ||||||
Heungkuk Highclass Private Real Estate Trust No. 21 |
100.00 | Korea | Dec. 31 | Capital investment | ||||||
JB New Jersey Private Real Estate Investment Trust No. 1 |
98.15 | Korea | Dec. 31 | Capital investment | ||||||
Heungkuk Global Highclass Private Real Estate Trust No. 23 |
100.00 | Korea | Dec. 31 | Capital investment | ||||||
Hyundai Dynamic Mix Secruticies Feeder Investment Trust No.1 |
99.99 | Korea | Dec. 31 | Capital investment | ||||||
Hyundai Quant Long Short Securities Feeder Investment Trust No. 1 |
100.00 | Korea | Dec. 31 | Capital investment | ||||||
Hyudai China Index Plus Securities Investment Trust No.1 |
81.90 | Korea | Dec. 31 | Capital investment | ||||||
Hyundai Kon-tiki Specialized Privately Placed Fund No.1 |
98.05 | Korea | Dec. 31 | Capital investment | ||||||
DGB Private real estate Investment Trust No.8 |
98.77 | Korea | Dec. 31 | Capital investment |
210
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
Investor | Investee | Ownership interests (%) |
Location | Date of financial statements |
Industry | |||||
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 | ||||||
Mangrove Feeder Fund |
100.00 | Cayman islands | Dec. 31 | Capital investment | ||||||
LB Irealand Private Real Estate Investment Trust 8 |
99.85 | Korea | Dec. 31 | Capital investment | ||||||
KTB Aircraft Private Investment Trust No.21-1 |
99.61 | Korea | Dec. 31 | Capital investment | ||||||
Pacific US Blackrock Private Placement Real Estate Fund No.15 |
99.50 | Korea | Dec. 31 | Capital investment | ||||||
Vestas Qualified Investors Private Real Estate Fund Investment Trust No.38 |
54.04 | Korea | Dec. 31 | Capital investment | ||||||
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 AMP Infra Private Special Asset Fund 1(FoFs)3 |
41.67 | Korea | Dec. 31 | Capital investment | ||||||
KB Muni bond Private Securities Fund 1(USD)(bond) 3 |
33.33 | Korea | Dec. 31 | Capital investment | ||||||
KB CHILE SOLAR FUND |
80.00 | Korea | Dec. 31 | Capital investment | ||||||
Meritz Private Specific Real Estate Fund 1-2 |
87.21 | Korea | Dec. 31 | Capital investment | ||||||
KB Global Private Real Estate Debt Fund 13 |
50.00 | Korea | Dec. 31 | Capital investment |
211
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
Investor | Investee | Ownership interests (%) |
Location | Date of financial statements |
Industry | |||||
Dongbu Private Fund 16th |
89.52 | Korea | Dec. 31 | Financial investment | ||||||
Hana Landchip Real estate Private Fund 58th |
99.99 | Korea | Dec. 31 | Financial investment | ||||||
Hyundai Aviation Private Fund 3rd |
99.96 | Korea | Dec. 31 | Financial investment | ||||||
Hyundai Power Professional Investment Type Private Investment Fund No.4 |
99.78 | Korea | Dec. 31 | Financial investment | ||||||
KB U.S. LongShort Private Securities Fund 1 |
99.39 | Korea | Dec. 31 | Financial investment | ||||||
Hyundai Infra Professional Investment Type Private Investment Trust No.5 |
99.80 | Korea | Dec. 31 | Financial investment | ||||||
KB SAUDI Private Special Asset Fund |
80.00 | Korea | Dec. 31 | Financial investment | ||||||
Meritz Private Real Estate Fund 8 |
99.36 | Korea | Dec. 31 | Financial investment | ||||||
Hyundia Star Private Real Estate Investment Trust No. 14 |
99.98 | Korea | Dec. 31 | Financial investment | ||||||
Vogo debt strategy private real estate fund VII |
98.93 | Korea | Dec. 31 | Financial investment | ||||||
KORAMCO Europe Debt Strategy Private Real-Estate Fund 2nd |
99.80 | Korea | Dec. 31 | Capital investment | ||||||
KB Peru Transmission Facility Invesment Private Fund |
99.03 | Korea | Dec. 31 | Capital investment | ||||||
KB Global Private Real Estate Debt Fund 2 |
98.36 | Korea | Dec. 31 | Capital investment | ||||||
KB Europe Private Real Estate Debt Fund 1 |
57.14 | Korea | Dec. 31 | Capital investment | ||||||
KB Kookmin Card Co., Ltd. |
Wise Mobile 18th Securitization Co., Ltd.2 |
0.50 | Korea | Dec. 31 | Asset-backed securitization and others | |||||
KB Kookmin Card 3rd Securitization Co., Ltd. And 2 other2 |
0.50 | Korea | Dec. 31 | Asset-backed securitization and others |
212
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
Investor | Investee | Ownership interests (%) |
Location | Date of financial statements |
Industry | |||||
Heungkuk Life Insurance Money Market Trust |
100.00 | Korea | Dec. 31 | Trust asset management | ||||||
KB DAEHAN SPECIALIED BANK PLC. |
90.00 | Kambodia | Dec. 31 | Banking | ||||||
KB Life Insurance Co., Ltd. |
KB Evergreen Private Securities Fund No. 59(Bond) |
100.00 | Korea | Dec. 31 | Private fund | |||||
KB Haeoreum Private Securities Investment Trust 1st(debt securities) |
100.00 | Korea | Dec. 31 | Private fund | ||||||
KB Asset Management Co., Ltd. |
KB Star Office Private Real Estate Feeder fund 3-2 |
88.00 | Korea | Dec. 31 | Financial investment | |||||
KB Asset Management Singapore Pte, Ltd. |
100.00 | Singapore | Dec. 31 | Collective investment | ||||||
KB Global Equity Solution Securities Feeder Fund(Equity-FoFs)3 |
44.04 | Korea | Dec. 31 | Capital investment | ||||||
KB Star Short Term Securities Feeder Fund(Bond)3 |
37.11 | Korea | Dec. 31 | Capital investment | ||||||
KB Onkookmin Life Income RIF 20 Feeder Fund(Fofs)3 |
49.98 | Korea | Dec. 31 | Capital investment | ||||||
KB Onkookmin Life Income RIF 40 Feeder Fund(Fofs)3 |
49.13 | Korea | Dec. 31 | Capital investment | ||||||
KB Active Investor Secruticies Investment Trust(Derivatives Mixed) |
99.95 | Korea | Dec. 31 | Financial investment | ||||||
KB Global Multiasset Income Securities Feeder Fund(Bond Mixed-FoFs) |
96.17 | Korea | Dec. 31 | Financial investment | ||||||
KB G2 Plus Korea Securities Fund(Equity) |
91.03 | Korea | Dec. 31 | Financial investment | ||||||
KB Investment Co., Ltd. |
2011 KIF-KB IT Venture Fund4 |
43.33 | Korea | Dec. 31 | Capital investment |
213
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
Investor | Investee | Ownership interests (%) |
Location | Date of financial statements |
Industry | |||||
KoFC-KB Young Pioneer 1st Fund4 |
33.33 | Korea | Dec. 31 | Capital investment | ||||||
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 Pre IPO Secondary Venture Fund 24 |
21.00 | Korea | Dec. 31 | Capital investment | ||||||
KB Contents Panda iMBC Contents Venture Fund |
20.00 | Korea | Dec. 31 | Capital investment | ||||||
Heungkuk Global Highclass Private Real Estate Trust 23 |
HYUNDAI ABLE INVESTMENT REIT |
99.90 | United States of America | Dec. 31 | Real Estate Activities | |||||
Hyundai Strong Korea Equity Trust No.1 |
Hyundai Strong Korea Equity Trust No.1[Master] |
80.93 | Korea | Dec. 31 | Capital investment | |||||
Hyundai Trust Securities Feeder Investment Trust No.1- Bond |
Hyundai Trust Securities Master Investment TrustBond |
96.83 | Korea | Dec. 31 | Capital investment | |||||
Hyundai Quant Long Short Securities Feeder Investment Trust |
Hyundai Quant Long Short Securities Master Investment Trust |
100.00 | Korea | Dec. 31 | Capital investment | |||||
Hyundai Smart Index Alpha Securities Feeder Inv Trust 1 |
Hyundai Smart Index Alpha Securities Master Investment Trust |
99.91 | Korea | Dec. 31 | Capital investment | |||||
Hyundai Value Plus Securities Feeder Investment Trust 1 and others |
Hyundai Value Plus Securities Master Investment Trust |
100.00 | Korea | Dec. 31 | Capital investment | |||||
Hyundai Dynamic Mix Securities Feeder Investment Trust |
Hyundai Dynamic Mix Securities Master Investment Trust |
99.02 | Korea | Dec. 31 | Capital investment | |||||
KB Securities Co., Ltd., KB Insurance Co., Ltd., KB Asset Management Co., Ltd. |
KB Star Office Private Real Estate Investment Trust 4 |
51.96 | Korea | Dec. 31 | Capital investment | |||||
Kookmin Bank, KB Insurance Co., Ltd., KB Investment Co., Ltd., KB Capital Co., Ltd. |
KB Digital Innovation Investment Fund Limited partnership |
62.40 | Korea | Dec. 31 | Capital investment |
214
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
Investor | Investee | Ownership interests (%) |
Location | Date of financial statements |
Industry | |||||
Kookmin Bank, KB Insurance Co., Ltd., KB life Insurance Co., Ltd. |
KB Hope Sharing BTL Private Special Asset3 |
46.00 | Korea | Dec. 31 | Capital investment | |||||
Kookmin Bank, KB Insurance Co., Ltd., KB life Insurance Co., Ltd. |
KB Senior Loan Private Fund3 |
37.39 | Korea | Dec. 31 | Capital investment | |||||
Kookmin Bank, KB Insurance Co., Ltd. |
Hanbando BTL Private Special Asset Fund 1st3 |
46.36 | Korea | Dec. 31 | Capital investment | |||||
Kookmin Bank, KB Insurance Co., Ltd. |
KB KBSTAR KTB 3Y Futures Inverse ETF |
79.95 | Korea | Dec. 31 | Capital investment | |||||
Kookmin Bank, KB Insurance Co., Ltd. |
KB KBSTAR Mid-Long Term KTB Active ETF |
63.16 | Korea | Dec. 31 | Capital investment | |||||
Kookmin Bank, KB Securities Co., Ltd., KB Insurance Co., Ltd., KB life Insurance, KB Kookmin Card Co., Ltd., KB Capital Co., Ltd. |
KB digital innovation&growth New Technology Business Investment Fund |
100.00 | Korea | Dec. 31 | Capital investment | |||||
Kookmin Bank, KB Securities Co., Ltd., KB Insurance Co., Ltd., KB life Insurance, KB Asset Management Co., Ltd. |
KB Global Core Bond Securities Fund Master Fund(Bond) |
100.00 | Korea | Dec. 31 | Capital investment | |||||
Kookmin Bank, KB Securities Co., Ltd., KB Asset Management Co., Ltd. |
KB Everyone TDF 2035 Securities Investment TrustBond Balanced-Fund of Funds3 |
37.62 | Korea | Dec. 31 | Financial investment | |||||
Kookmin Bank, KB Securities Co., Ltd., KB Asset Management Co., Ltd. |
KB Everyone TDF 2045 Securities Investment TrustBond Balanced-Fund of Funds |
54.06 | Korea | Dec. 31 | Financial investment | |||||
Kookmin Bank, KB Insurance Co., Ltd., KB Securities Co., Ltd., KB Real Estate Trust Co., Ltd. |
KB Wise Star Private Real Estate Feeder Fund 1st. |
100.00 | Korea | Dec. 31 | Investment trust | |||||
Kookmin Bank, KB Investment Co., Ltd., KB Capital Co., Ltd. |
KB Intellectual Property Fund 2 |
75.00 | Korea | Dec. 31 | Capital investment | |||||
Kookmin Bank, KB Investment Co., Ltd. |
KB12-1 Venture Investment |
100.00 | Korea | Dec. 31 | Capital investment |
215
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
Investor | Investee | Ownership interests (%) |
Location | Date of financial statements |
Industry | |||||
Kookmin Bank, KB Investment Co., Ltd. |
KB Start-up Creation Fund |
62.50 | 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 life Insurance Co., Ltd. |
KB Mezzanine Private Securities Fund 2nd3 |
40.74 | 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 Insurance Co., Ltd., KB life Insurance Co., Ltd., KB Investment Co., Ltd. |
KB-Solidus Global Healthcare Fund3 |
43.33 | Korea | Dec. 31 | Capital investment | |||||
KB Kookmin Card Co., Ltd., KB Capital Co., Ltd. |
KB KOLAO LEASING CO., Ltd |
80.00 | Laos | Dec. 31 | Auto installment finance | |||||
Mirae Asset Triumph Global Privately placed Feeder Investment Trust 1 |
Mirae Asset Triumph Global Privately placed Master Investment Trust 1 |
100.00 | Korea | Dec. 31 | Capital investment | |||||
Mangrove Feeder Fund |
Mangrove Master Fund |
100.00 | Cayman islands | Dec. 31 | Capital investment | |||||
LB Irealand Private Real Estate Investment Trust 8 |
BECKETT ACQUISITION LIMITED |
100.00 | Ireland | Dec. 31 | Real Estate Activities | |||||
KB Securities Co., Ltd., KB Insurance Co., Ltd., KB Asset Management Co., Ltd. |
KB Star Fund_KB Value Focus Korea Equity |
95.45 | Luxembourg | Dec. 31 | Capital investment | |||||
KB Securities Co., Ltd., KB Investment Co., Ltd. |
KB KONEX Market Vitalization Fund4 |
46.88 | Korea | Dec. 31 | Capital investment | |||||
KB Securities Co., Ltd., KB Investment Co., Ltd. |
KB Neo Paradigm Agriculture Venture |
50.00 | Korea | Dec. 31 | Capital investment | |||||
KB Securities Co., Ltd., KB Investment Co., Ltd. |
KB New Paradigm Fisheries Venture Fund4 |
33.33 | Korea | Dec. 31 | Capital investment | |||||
KB Wise Star Private Real Estate Feeder Fund 1st. |
KB Star Office Private Real Estate Master Investment Trust 25 |
44.44 | Korea | Dec. 31 | Capital investment |
216
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
Investor | Investee | Ownership interests (%) |
Location | Date of financial statements |
Industry | |||||
KB Wise Star Private Real Estate Feeder Fund 1st. |
KB Star Office Private Real Estate Investment Trust 3 |
54.51 | Korea | Dec. 31 | Capital investment | |||||
KB Star Short Term SecuritiesFeeder Fund(Bond) |
KB Star Short Term SecuritiesMaster Fund(Bond) |
96.67 | Korea | Dec. 31 | Capital investment | |||||
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 | |||||
KB Global Core Bond Securities Master Fund(Bond) |
KB Global Core Bond Securities Master Fund(Bond) |
100.00 | Korea | Dec. 31 | Capital investment | |||||
KB Global Equity Solution Securities Feeder Fund(Equity-FoFs)) |
KB Global Equity Solution Securities Master Fund(Equity-FoFs) |
100.00 | Korea | Dec. 31 | Capital investment | |||||
KB Global Multiasset Income Securities Feeder Fund(Bond Mixed-FoFs) |
KB Global Multiasset Income Securities Master Fund(Bond Mixed-FoFs) |
73.76 | Korea | Dec. 31 | Capital investment | |||||
KBFG Securities America Inc. |
Global Investment Opportunity Limited |
100.00 | Malaysia | Dec. 31 | Financial investment and Real Estate Activities | |||||
KB Onkookmin Life Income RIF 40 Feeder Fund(Fofs) |
KB Onkookmin Life Income RIF 40 Master Fund(Fofs) |
96.48 | Korea | Dec. 31 | Capital investment | |||||
KB Onkookmin Life Income RIF 20Feeder Fund(Fofs) |
KB Onkookmin Life Income RIF 20Master Fund(Fofs) |
96.14 | Korea | Dec. 31 | Capital investment | |||||
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 | |||||
HYUNDAI ABLE INVESTMENT REIT |
HYUNDAI ABLE PATRIOTS PARK, LLC |
100.00 | United States of America | Dec. 31 | Real Estate Activities | |||||
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 |
217
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
Investor | Investee | Ownership interests (%) |
Location | Date of financial statements |
Industry | |||||
AGRAF Real Estate Holding No.1, Senningerberg |
HD 1 Grundstucksgesellschaft mbH & Co. KG |
94.90 | Germany | Dec. 31 | Real Estate Activities | |||||
AGRAF Real Estate Holding No.1, Senningerberg |
Sechste Casalog KG |
94.90 | Germany | Dec. 31 | Real Estate Activities | |||||
Able Quant Asia Pacific Feeder Fund(T.E.) Limited |
Able Quant Asia Pacific Master Fund Limited |
100.00 | Cayman islands | Dec. 31 | Capital investment | |||||
ABLE NJ DSM INVESTMENT REIT |
ABLE NJ DSM, LLC |
100.00 | United States of America | Dec. 31 | Real Estate Activities | |||||
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. |
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 | Although the Group holds less than a majority of the investees voting rights, the Group participated directly in establishment of this entity and has power over relevant activities, and is significantly exposed to variable returns which is affected by the performance of the investee, and has ability to affect the performance through its power. Accordingly the Group has control over the investee. |
6 | The Group changed Kookmin Bank Intl Ltd. (London) to Kookmin Bank London Branch on May 16, 2018, and
this event is categorized as business combination of entities under common control. The assets and liabilities acquired under business combinations under common control are recognized at the carrying amounts in the consolidated financial statements
of the Group. The transferred assets and liabilities due to this business combination are |
218
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
The condensed financial information of major subsidiaries as of December 31, 2018 and 2017, and for the years ended December 31, 2018 and 2017, is as follows:
(In millions of Korean won)
2018 | ||||||||||||||||||||||||
Assets | Liabilities | Equity | Operating income | Profit (loss) for the period |
Total comprehensive income (loss) for the period |
|||||||||||||||||||
Kookmin Bank1 |
||||||||||||||||||||||||
KB Securities Co., Ltd.1,2 |
45,086,292 | 40,613,423 | 4,472,869 | 6,667,005 | 178,850 | 204,903 | ||||||||||||||||||
KB Insurance Co., Ltd.1,2 |
34,785,551 | 31,289,706 | 3,495,845 | 11,977,601 | 262,266 | 317,067 | ||||||||||||||||||
KB Kookmin Card Co., Ltd.1 |
20,528,951 | 16,570,280 | 3,958,671 | 3,045,039 | 286,599 | 261,667 | ||||||||||||||||||
KB Life Insurance Co., Ltd.1 |
9,680,379 | 9,128,148 | 552,231 | 1,305,231 | 14,824 | 25,062 | ||||||||||||||||||
KB Asset Management Co., Ltd.1 |
254,256 | 107,504 | 146,752 | 130,027 | 39,586 | 40,154 | ||||||||||||||||||
KB Capital Co., Ltd.1,2 |
9,517,239 | 8,516,838 | 1,000,401 | 734,499 | 111,939 | 111,758 | ||||||||||||||||||
KB Savings Bank Co., Ltd. |
1,388,844 | 1,186,871 | 201,973 | 85,346 | 11,018 | 10,832 | ||||||||||||||||||
KB Real Estate Trust Co., Ltd. |
293,063 | 57,229 | 235,834 | 114,660 | 47,004 | 46,813 | ||||||||||||||||||
KB Investment Co., Ltd.1 |
528,701 | 374,925 | 153,776 | 114,914 | 14,532 | 14,529 | ||||||||||||||||||
KB Credit Information Co., Ltd. |
26,276 | 11,041 | 15,235 | 35,219 | 185 | 95 | ||||||||||||||||||
KB Data System Co., Ltd. |
40,197 | 23,788 | 16,409 | 131,374 | 2,942 | 1,705 |
219
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
(In millions of Korean won)
2017 | ||||||||||||||||||||||||
Assets | Liabilities | Equity | Operating income | Profit (loss) for the period |
Total comprehensive income (loss) for the period |
|||||||||||||||||||
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 |
1 | Financial information is based on its consolidated financial statements. |
2 | The amount includes the fair value adjustments due to the merger. |
220
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
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 |
| The Group provides capital commitment to KB Wise Star Private Real Estate Feeder Fund 1st. and 13 other
subsidiaries. The unexecuted amount of the investment agreement is |
| 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, 2018, are as follows:
Company |
Description | |
Tong Yang Safe Plus Qualified Private Trust S-8(Bond) and 24 others | Holds over than a majority of the ownership interests | |
KBD Tower 1st L.L.C. and 50 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 Global Private Real Estate Debt Fund 1 and 22 others | Holds the power to determine the operation of the trust and exposed to variable returns by holding significant amount of ownership interests | |
KB Pre IPO Secondary Venture Fund 2nd and 5 other | The Group has a power over the investee as a general partner, is significantly exposed to variable returns due to significant percentage of ownership. |
The subsidiaries excluded from consolidation during the year ended December 31, 2018, are as follows:
Company |
Description | |
Able Vison 1st Co., Ltd and 27 others | Lost the right of variable returns due to the releasing debt | |
Wise Mobile 12th Securitization Co., Ltd. and 14 others | Settlement | |
LIME ORANGE PRIVATE EQUITY FUND 6 and 8 others | Disposal | |
KB Everyone TDF 2025 Securities Investment TrustBond Balanced-Fund of Funds and 10 others | Ownership decrease under 50% |
221
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
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 | |||
Investment funds | Investment in beneficiary certificates
Investment in PEF and partnerships |
Management of fund assets
Payment of fund fees and allocation of fund profits |
Sales of beneficiary certificate instruments
Investment of managing partners and limited partners |
222
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
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, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | |||||||||||||||||||||||
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 |
3,846,725 | 111,452 | | 7,934,662 | 17,915 | 11,910,754 | ||||||||||||||||||
Derivative financial assets |
4,089 | | | 23,794 | | 27,883 | ||||||||||||||||||
Loans at amortized cost |
956,733 | 3,015,613 | 34,000 | 391,665 | 650,833 | 5,048,844 | ||||||||||||||||||
Financial investments |
6,040,008 | | | 8,636 | | 6,048,644 | ||||||||||||||||||
Investment in associates and joint ventures |
| | | 258,594 | | 258,594 | ||||||||||||||||||
Other assets |
16,837 | 1,680 | 109,357 | 48,872 | 248 | 176,994 | ||||||||||||||||||
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Liabilities |
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Deposits |
||||||||||||||||||||||||
Derivative financial liabilities |
1,285 | | | 6,232 | | 7,517 | ||||||||||||||||||
Other liabilities |
28,461 | 1,246 | | 59 | | 29,766 | ||||||||||||||||||
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Maximum exposure to loss1 |
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Holding assets |
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Purchase and investment commitments |
1,094,489 | | | 3,345,947 | | 4,440,436 | ||||||||||||||||||
Unused credit |
2,211,226 | 6,789 | | 1,450 | | 2,219,465 | ||||||||||||||||||
Payment guarantee and loan commitments |
889,315 | 1,213,261 | | | | 2,102,576 | ||||||||||||||||||
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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 |
|
223
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
(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 | ||||||||||||||||||
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Liabilities |
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Deposits |
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Derivative financial liabilities |
1,487 | | | 2,792 | | 4,279 | ||||||||||||||||||
Other liabilities |
11,292 | 44 | | 48 | | 11,384 | ||||||||||||||||||
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Maximum exposure to loss1 |
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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 | ||||||||||||||||||
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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. |
224
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
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, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | 2017 | ||||||
Net carrying amount of finance lease assets |
||||||||
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Minimum lease payment |
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Within 1 year |
6,827 | 2,555 | ||||||
1-5 years |
3,553 | 2,150 | ||||||
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10,380 | 4,705 | |||||||
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Present value of minimum lease payment |
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Within 1 year |
6,705 | 2,510 | ||||||
1-5 years |
3,456 | 2,059 | ||||||
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10,161 | 4,569 | |||||||
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43.1.2 The Group as finance lessor
Total lease investment and the present value of minimum lease payments as of December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | 2017 | ||||||||||||||
Total lease investment |
Present value payment |
Total lease investment |
Present value payment |
|||||||||||||
Within 1 year |
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1-5 years |
1,225,265 | 1,121,063 | 1,330,610 | 1,215,476 | ||||||||||||
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|
|
|||||||||
|
|
|
|
|
|
|
|
Unearned interest income of finance lease as of December 31, 2018 and 2017, is as follows:
(In millions of Korean won) | 2018 | 2017 | ||||||
Total lease investment |
||||||||
Net lease investment |
||||||||
Present value of minimum lease payment |
1,739,232 | 1,772,664 | ||||||
|
|
|
|
|||||
Unearned interest income |
||||||||
|
|
|
|
225
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
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, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | 2017 | ||||||
Minimum lease payment |
||||||||
Within 1 year |
||||||||
1-5 years |
299,900 | 196,050 | ||||||
Over 5 years |
111,906 | 34,128 | ||||||
|
|
|
|
|||||
|
|
|
|
|||||
Minimum sublease payment |
The lease payment reflected in profit or loss for the years ended December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | 2017 | ||||||
Lease payment reflected in profit or loss |
||||||||
Minimum lease payment |
||||||||
Sublease payment |
(1,804 | ) | (2,441 | ) | ||||
|
|
|
|
|||||
|
|
|
|
43.2.2 The Group as operating lessor
The future minimum lease receipts arising from the non-cancellable lease contracts as of December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | 2017 | ||||||
Minimum lease receipts |
||||||||
Within 1 year |
||||||||
1-5 years |
985,097 | 375,344 | ||||||
Over 5 years |
280,084 | 282,470 | ||||||
|
|
|
|
|||||
|
|
|
|
226
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
44. Related Party Transactions
Profit and loss arising from transactions with related parties for the years ended December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | 2017 | ||||||||
Associates and joint ventures |
||||||||||
KB Insurance Co., Ltd.1 |
Interest income |
|||||||||
Interest expense |
| 202 | ||||||||
Fee and commission income |
| 8,994 | ||||||||
Fee and commission expense |
| 1,021 | ||||||||
Gains on financial assets/liabilities at fair value through profit or loss(under Korean IFRS 1039) |
| 796 | ||||||||
Losses on financial assets/liabilities at fair value through profit or loss(under Korean IFRS 1039) |
| 18,717 | ||||||||
Other operating income |
| 16,743 | ||||||||
Other operating expense |
| 633 | ||||||||
General and administrative expenses |
| 5,601 | ||||||||
Provision for credit losses |
| 12 | ||||||||
Other non-operating income |
| 51 | ||||||||
Balhae Infrastructure Fund |
Fee and commission income |
6,691 | 7,162 | |||||||
Korea Credit Bureau Co., Ltd. |
Interest expense |
127 | 132 | |||||||
Fee and commission income |
1,194 | 1,374 | ||||||||
Fee and commission expense |
1,909 | 2,645 | ||||||||
General and administrative expenses |
| 2,202 | ||||||||
Provision for credit losses |
| 1 | ||||||||
Other operating expense |
4 | | ||||||||
KoFC KBIC Frontier Champ 2010-5(PEF) |
Fee and commission income |
197 | 216 | |||||||
KB GwS Private Securities Investment Trust |
Fee and commission income |
851 | 851 |
227
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
Incheon Bridge Co., Ltd. |
Interest income |
9,426 | 25,511 | |||||||
Interest expense |
296 | 292 | ||||||||
Fee and commission income |
9 | | ||||||||
Fee and commission expense |
2 | | ||||||||
Insurance income |
365 | 162 | ||||||||
Reversal for credit losses |
6 | 43 | ||||||||
Provision for credit losses |
1 | | ||||||||
Jaeyang Industry Co., Ltd. |
Interest income |
| 98 | |||||||
Reversal for credit losses |
| 6 | ||||||||
KoFC POSCO HANHWA KB Shared Growth Private Equity Fund No. 2 |
Fee and commission income |
210 | 481 | |||||||
Aju Good Technology Venture Fund |
Interest expense |
30 | 14 | |||||||
KB Star Office Private Real Estate Investment Trust No.1 |
Interest income |
370 | 370 | |||||||
Interest expense |
93 | 63 | ||||||||
Fee and commission income |
435 | 435 | ||||||||
Provision for credit losses |
| 3 | ||||||||
RAND Bio Science Co., Ltd. |
Interest expense |
3 | 16 | |||||||
Inno Lending Co., Ltd. 1 |
Fee and commission income |
1 | 3 | |||||||
Interest expense |
| 1 | ||||||||
KBIC Private Equity Fund No. 31 |
Fee and commission income |
| 38 | |||||||
SY Auto Capital Co., Ltd. |
Interest income |
1,279 | 828 | |||||||
Interest expense |
| 22 | ||||||||
Fee and commission income |
73 | 47 | ||||||||
Fee and commission expense |
840 | 2,956 | ||||||||
Insurance income |
33 | 29 | ||||||||
Other operating income |
621 | 731 | ||||||||
Other operating expense |
415 | 128 | ||||||||
Reversal for credit losses |
| 32 | ||||||||
Provision for credit losses |
14 | | ||||||||
Other non-operating income |
| 51 | ||||||||
Kyobo 7 Special Purpose Acquisition Co., Ltd.1 |
Interest expense |
| 1 | |||||||
Food Factory Co., Ltd. |
Interest income |
9 | 24 | |||||||
Insurance income |
5 | 3 | ||||||||
Fee and commission expense |
1 | | ||||||||
Gains on financial assets/liabilities at fair value through profit or loss |
30 | | ||||||||
Reversal for credit losses |
1 | |
228
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
Provision for credit losses |
1 | 44 | ||||||||
KB Pre IPO Secondary Venture Fund 1st |
Interest expense |
27 | 60 | |||||||
Fee and commission income |
110 | 83 | ||||||||
Builton Co., Ltd. |
Interest income |
4 | | |||||||
Insurance income |
2 | 1 | ||||||||
Losses on financial assets/liabilities at fair value through profit or loss |
1 | | ||||||||
KB Private Equity Fund III |
Fee and commission income |
521 | 457 | |||||||
Wise Asset Management Co., Ltd. |
Interest expense |
9 | 5 | |||||||
Acts Co., Ltd. |
Interest income |
| 249 | |||||||
Insurance income |
2 | 2 | ||||||||
Losses on financial assets/liabilities at fair value through profit or loss |
1,851 | | ||||||||
Losses on financial assets/liabilities at fair value through profit or loss (under Korean IFRS 1039) |
| 220 | ||||||||
Provision for credit losses |
| 66 | ||||||||
General and administrative expenses |
| 150 | ||||||||
Other non-operating expense |
1,246 | | ||||||||
COBI Co., Ltd.1 |
Interest income |
| 183 | |||||||
Provision for credit losses |
| 89 | ||||||||
Dongjo Co., Ltd. |
Reversal for credit losses |
31 | 2 | |||||||
Insurance income |
2 | | ||||||||
A-PRO Co., Ltd. |
Interest expense |
1 | | |||||||
Insurance income |
5 | | ||||||||
POSCO-KB Shipbuilding Fund |
Fee and commission income |
490 | 257 | |||||||
Interest expense |
81 | 3 | ||||||||
Dae-A Leisure Co., Ltd. |
Interest expense |
9 | 1 | |||||||
Paycoms Co., Ltd. |
Interest income |
10 | 61 | |||||||
Insurance income |
1 | | ||||||||
Gains on financial assets/liabilities at fair value through profit or loss |
125 | |
229
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
Provision for credit losses |
| 32 | ||||||||
Bungaejangter Inc. 1 |
Interest income |
60 | 31 | |||||||
Provision for credit losses |
| 44 | ||||||||
Faromancorporation Co.,Ltd.1 |
Reversal for credit losses |
| 345 | |||||||
Daesang Techlon Co., Ltd. 1 |
Insurance income |
| 1 | |||||||
Big Dipper Co., Ltd. |
Reversal for credit losses |
2 | | |||||||
Provision for credit losses |
| 2 | ||||||||
KB-KDBC New Technology Business Investment Fund |
Interest expense |
39 | 4 | |||||||
Fee and commission income |
322 | | ||||||||
KBTS Technology Venture Private Equity Fund |
Fee and commission income |
305 | | |||||||
KB-SJ Tourism Venture Fund |
Fee and commission income |
314 | | |||||||
JLK INSPECTION Inc. |
Interest income |
6 | | |||||||
TESTIAN Inc. |
Interest income |
4 | | |||||||
Gains on financial assets/liabilities at fair value through profit or loss |
83 | | ||||||||
Rainist Co., Ltd. |
Interest expense |
2 | | |||||||
IWON ALLOY CO.,LTD. |
Insurance income |
1 | | |||||||
RMGP Bio-Pharma Investment Fund, L.P. |
Other non-operating income |
10 | | |||||||
Hasys. |
Losses on financial assets/liabilities at fair value through profit or loss |
136 | | |||||||
Insurance income |
4 | | ||||||||
KB-Brain KOSDAQ Scale-up New Technology Business Investment Fund |
Interest expense |
21 | | |||||||
Fee and commission income |
108 | | ||||||||
Spark Biopharma, Inc. |
Interest expense |
25 | | |||||||
KB No.8 Special Purpose Acquisition Company1 |
Interest income |
| 75 | |||||||
Interest expense |
17 | 36 | ||||||||
Losses on financial assets/liabilities at fair value through profit or loss |
2,330 | | ||||||||
Losses on financial assets/liabilities at fair value through profit or loss (under Korean IFRS 1039) |
| 170 |
230
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
KB No.9 Special Purpose Acquisition Company |
Interest income |
| 76 | |||||||
Interest expense |
43 | 33 | ||||||||
Losses on financial assets/liabilities at fair value through profit or loss |
2,256 | | ||||||||
Losses on financial assets/liabilities at fair value through profit or loss (under Korean IFRS 1039) |
| 200 | ||||||||
Gains on financial assets/liabilities at fair value through profit or loss |
48 | | ||||||||
KB No.10 Special Purpose Acquisition Company |
Interest income |
| 48 | |||||||
Interest expense |
30 | 24 | ||||||||
Losses on financial assets/liabilities at fair value through profit or loss (under Korean IFRS 1039) |
| 103 | ||||||||
Gains on financial assets/liabilities at fair value through profit or loss |
121 | | ||||||||
KB No.11 Special Purpose Acquisition Company |
Interest income |
| 22 | |||||||
Interest expense |
12 | | ||||||||
Fee and commission income |
| 150 | ||||||||
Gains on financial assets/liabilities at fair value through profit or loss |
56 | | ||||||||
Gains on financial assets/liabilities at fair value through profit or loss(under Korean IFRS 1039) |
| 711 | ||||||||
Hyundai-Tongyang Agrifood Private Equity Fund 1 |
Fee and commission income |
151 | 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 |
116 | 94 | |||||||
Doosung Metal Co., Ltd. |
Insurance income |
1 | 1 | |||||||
Other |
||||||||||
Retirement pension |
Fee and commission income |
876 | 795 | |||||||
Interest expense |
3 | 3 |
231
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
Meanwhile, the Group purchased installment financial assets from SY Auto Capital Co., Ltd. amounts to
W881,502 million and W838,010 million for the years ended December 31, 2018 and 2017
Details of receivables and payables, and related allowances for loan losses arising from the related party transactions as of December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | 2017 | ||||||||
Associates and joint ventures |
||||||||||
Balhae Infrastructure Fund |
Other assets |
|||||||||
Korea Credit Bureau Co., Ltd. |
Loans at amortized cost (Gross amount) |
22 | 22 | |||||||
Deposits |
15,674 | 25,513 | ||||||||
Provisions |
| 1 | ||||||||
Other liabilities |
98 | 469 | ||||||||
KB GwS Private Securities Investment Trust |
Other assets |
641 | 641 | |||||||
Incheon Bridge Co., Ltd. |
Financial assets at fair value through profit or loss |
32,882 | | |||||||
Loans at amortized cost (Gross amount) |
158,206 | 200,414 | ||||||||
Allowances for loan losses |
15 | 288 | ||||||||
Other assets |
736 | 710 | ||||||||
Deposits |
43,666 | 48,795 | ||||||||
Provisions |
10 | 3 | ||||||||
Insurance contract liabilities |
113 | 189 | ||||||||
Other liabilities |
24 | 29 | ||||||||
KoFC POSCO HANHWA KB Shared Growth Private Equity Fund No. 2 |
Other assets |
90 | 176 | |||||||
Terra Co., Ltd. |
Deposits |
| 10 | |||||||
Jungdo Co., Ltd. |
Deposits |
4 | 4 | |||||||
Dongjo Co., Ltd. |
Loans at amortized cost (Gross amount) |
| 116 | |||||||
Allowances for loan losses |
| 1 | ||||||||
Insurance contract liabilities |
2 | | ||||||||
Dae-A Leisure Co., Ltd. |
Deposits |
1,229 | 466 | |||||||
Other liabilities |
7 | 14 | ||||||||
Aju Good Technology Venture Fund |
Deposits |
6,439 | 2,771 | |||||||
Other liabilities |
2 | 1 | ||||||||
Jungdong Steel Co., Ltd. |
Deposits |
| 3 | |||||||
Doosung Metal Co., Ltd. |
Deposits |
3 | | |||||||
Insurance contract liabilities |
| 1 | ||||||||
KB-Brain KOSDAQ Scale-up New Technology Business Investment Fund |
Deposits |
18,813 | | |||||||
Other liabilities |
7 | | ||||||||
KB Star Office Private Real Estate Investment Trust No.1 |
Loans at amortized cost (Gross amount) |
10,000 | 10,000 | |||||||
Allowances for loan losses |
4 | 3 | ||||||||
Other assets |
136 | 136 | ||||||||
Deposits |
7,946 | 6,962 | ||||||||
Other liabilities |
58 | 45 | ||||||||
KB IGen Private Equity Fund No.1 |
Deposits |
148 | |
232
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
RAND Bio Science Co., Ltd. |
Deposits |
232 | 1,032 | |||||||
Loans at amortized cost (Gross amount) |
1 | 1 | ||||||||
Other liabilities |
| 4 | ||||||||
Inno Lending Co., Ltd. 1 |
Loans at amortized cost (Gross amount) |
| 2 | |||||||
Deposits |
| 41 | ||||||||
SY Auto Capital Co., Ltd. |
Loans at amortized cost (Gross amount) |
48,356 | 40,057 | |||||||
Allowances for loan losses |
18 | | ||||||||
Other assets |
94 | 51 | ||||||||
Deposits |
5 | 6 | ||||||||
Provisions |
11 | 29 | ||||||||
Insurance contract liabilities |
6 | 8 | ||||||||
Other liabilities |
102 | 349 | ||||||||
Food Factory Co., Ltd. |
Financial assets at fair value through profit or loss |
530 | | |||||||
Loans at amortized cost (Gross amount) |
200 | 679 | ||||||||
Allowances for loan losses |
1 | 44 | ||||||||
Other assets |
1 | 1 | ||||||||
Deposits |
68 | 1 | ||||||||
Insurance contract liabilities |
3 | 3 | ||||||||
KB Pre IPO Secondary Venture Fund 1st |
Other assets |
| 28 | |||||||
Deposits |
1,115 | 2,690 | ||||||||
Other liabilities |
1 | 6 | ||||||||
Builton Co., Ltd. |
Other assets |
1 | | |||||||
Financial assets at fair value through profit or loss |
399 | | ||||||||
Loans at amortized cost (Gross amount) |
2 | 1 | ||||||||
Deposits |
7 | 26 | ||||||||
Insurance contract liabilities |
1 | 1 | ||||||||
Wise Asset Management Co., Ltd. |
Deposits |
696 | 340 | |||||||
Other liabilities |
2 | 1 | ||||||||
Acts Co., Ltd. |
Loans at amortized cost (Gross amount) |
| 1,927 | |||||||
Allowances for loan losses |
| 161 | ||||||||
Intangible assets |
530 | 1,275 | ||||||||
Deposits |
29 | 4 | ||||||||
Insurance contract liabilities |
| 1 | ||||||||
Other liabilities |
530 | | ||||||||
POSCO-KB Shipbuilding Fund |
Other assets |
| 123 | |||||||
Bungaejanter. Inc.1 |
Loans at amortized cost (Gross amount) |
| 425 | |||||||
Allowances for loan losses |
| 36 | ||||||||
Paycoms Co., Ltd. |
Other assets |
1 | |
233
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
Financial assets at fair value through profit or loss |
1,032 | | ||||||||
Loans at amortized cost (Gross amount) |
| 1,066 | ||||||||
Allowances for loan losses |
| 89 | ||||||||
Deposits |
1 | | ||||||||
Daesang Techlon Co., Ltd.1 |
Deposits |
| 2 | |||||||
Big Dipper Co., Ltd. |
Loans at amortized cost (Gross amount) |
5 | 6 | |||||||
Deposits |
182 | 473 | ||||||||
Provisions |
| 2 | ||||||||
KB-KDBC New Technology Business Investment Fund |
Deposits |
7,088 | 7,500 | |||||||
Other liabilities |
3 | 4 | ||||||||
A-PRO Co., Ltd. |
Insurance contract liabilities |
2 | | |||||||
Deposits |
2,201 | | ||||||||
JLK INSPECTION Inc. |
Financial assets at fair value through profit or loss |
7,300 | | |||||||
TESTIAN Inc. |
Other assets |
1 | | |||||||
Financial assets at fair value through profit or loss |
615 | | ||||||||
IWON ALLOY CO.,LTD. |
Insurance contract liabilities |
2 | | |||||||
CARLIFE CO.,LTD. |
Deposits |
2 | | |||||||
COMPUTERLIFE CO.,LTD. |
Deposits |
1 | | |||||||
RMGP Bio-Pharma Investment Fund, L.P. |
Financial assets at fair value through profit or loss |
3,051 | | |||||||
Other liabilities |
35 | | ||||||||
RMGP Bio-Pharma Investment, L.P. |
Financial assets at fair value through profit or loss |
4 | | |||||||
Hasys. |
Financial assets at fair value through profit or loss |
5,864 | | |||||||
Insurance contract liabilities |
29 | | ||||||||
SKYDIGITAL INC |
Deposits |
16 | | |||||||
Rainist Co., Ltd. |
Financial assets at fair value through profit or loss |
2,504 | | |||||||
Deposits |
1 | | ||||||||
Spark Biopharma, Inc. |
Financial assets at fair value through profit or loss |
6,500 | | |||||||
Deposits |
2,630 | | ||||||||
Other liabilities |
19 | | ||||||||
HEYBIT, Inc., |
Financial assets at fair value through profit or loss |
250 | | |||||||
Stratio, Inc. |
Financial assets at fair value through profit or loss |
1,000 | | |||||||
KB No.8 Special Purpose Acquisition Company1 |
Derivative financial assets |
| 2,122 | |||||||
Loans at amortized cost (Gross amount) |
| 2,296 | ||||||||
Deposits |
| 2,339 | ||||||||
Other liabilities |
| 19 | ||||||||
KB No.9 Special Purpose Acquisition Company |
Financial assets at fair value through profit or loss |
2,481 | |
234
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
Derivative financial assets |
| 2,241 | ||||||||
Loans at amortized cost (Gross amount) |
| 2,356 | ||||||||
Deposits |
2,275 | 2,309 | ||||||||
Other liabilities |
42 | 38 | ||||||||
KB No.10 Special Purpose Acquisition Company |
Financial assets at fair value through profit or loss |
2,025 | | |||||||
Derivative financial assets |
1,659 | 1,930 | ||||||||
Loans at amortized cost (Gross amount) |
| 1,603 | ||||||||
Deposits |
1,666 | 1,698 | ||||||||
Other liabilities |
11 | 10 | ||||||||
KB No.11 Special Purpose Acquisition Company |
Financial assets at fair value through profit or loss |
737 | | |||||||
Derivative financial assets |
873 | 846 | ||||||||
Loans at amortized cost (Gross amount) |
| 697 | ||||||||
Deposits |
658 | 530 | ||||||||
Other liabilities |
2 | | ||||||||
Key management |
Loans at amortized cost (Gross amount) |
2,338 | 1,665 | |||||||
Other assets |
2 | 2 | ||||||||
Deposits |
10,828 | 8,707 | ||||||||
Insurance contract liabilities |
1,092 | 809 | ||||||||
Other liabilities |
178 | 124 | ||||||||
Other |
||||||||||
Retirement pension |
Other assets |
331 | 348 | |||||||
Other liabilities |
25,238 | 10,056 |
1 | The amounts are not disclosed as the entity is excluded from the Groups related party as of December 31, 2018. |
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. Refer to Note 13 for details on investments in associates and joint ventures.
235
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
Significant lending transactions with related parties for the years ended December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | 20181 | |||||||||||||||
Beginning | Increase | Decrease | Ending | |||||||||||||
Associates |
||||||||||||||||
Korea Credit Bureau Co., Ltd. |
||||||||||||||||
Incheon Bridge Co., Ltd. |
200,414 | 5,388 | (14,714 | ) | 191,088 | |||||||||||
Dongjo Co., Ltd. |
116 | | (116 | ) | | |||||||||||
KB Star Office Private Real Estate Investment Trust No.1 |
10,000 | | | 10,000 | ||||||||||||
RAND Bio Science Co., Ltd. |
1 | 1 | (1 | ) | 1 | |||||||||||
Inno Lending Co., Ltd. 2 |
2 | | (2 | ) | | |||||||||||
SY Auto Capital Co., Ltd. |
40,057 | 50,109 | (41,810 | ) | 48,356 | |||||||||||
Food Factory Co., Ltd. |
679 | 51 | | 730 | ||||||||||||
Builton Co., Ltd. |
1 | 402 | (2 | ) | 401 | |||||||||||
Acts Co., Ltd. |
1,927 | | (1,927 | ) | | |||||||||||
Bungaejanter. Inc. 2 |
425 | | (425 | ) | | |||||||||||
Paycoms Co., Ltd. |
1,066 | 1,032 | (1,066 | ) | 1,032 | |||||||||||
Big Dipper Co., Ltd. |
6 | 5 | (6 | ) | 5 | |||||||||||
JLK INSPECTION Inc. |
| 7,300 | | 7,300 | ||||||||||||
TESTIAN Inc. |
| 615 | | 615 | ||||||||||||
RMGP Bio-Pharma Investment Fund, L.P. |
| 3,051 | | 3,051 | ||||||||||||
RMGP Bio-Pharma Investment, L.P. |
| 4 | | 4 | ||||||||||||
Hasys. |
| 6,000 | (136 | ) | 5,864 | |||||||||||
Rainist Co., Ltd. |
| 2,504 | | 2,504 | ||||||||||||
Spark Biopharma, Inc. |
| 6,500 | | 6,500 | ||||||||||||
HEYBIT, Inc., |
| 250 | | 250 | ||||||||||||
Stratio, Inc. |
| 1,000 | | 1,000 | ||||||||||||
KB No.8 Special Purpose Acquisition Company 2 |
2,296 | | (2,296 | ) | | |||||||||||
KB No.9 Special Purpose Acquisition Company |
2,356 | 2,481 | (2,356 | ) | 2,481 | |||||||||||
KB No.10 Special Purpose Acquisition Company |
1,603 | 2,025 | (1,603 | ) | 2,025 | |||||||||||
KB No.11 Special Purpose Acquisition Company |
697 | 737 | (697 | ) | 737 | |||||||||||
Key management |
1,665 | 1,509 | (836 | ) | 2,338 | |||||||||||
(In millions of Korean won) | 20171 | |||||||||||||||
Beginning | Increase | Decrease | 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 | |||||||||||
Dongjo Co., Ltd. |
| 116 | | 116 | ||||||||||||
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 | | 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 | ||||||||||||
Acts Co., Ltd. |
| 1,927 | | 1,927 | ||||||||||||
Bungaejanter. Inc. 2 |
| 425 | | 425 | ||||||||||||
Paycoms Co., Ltd. |
| 1,066 | | 1,066 | ||||||||||||
Big Dipper Co., Ltd. |
| 6 | | 6 | ||||||||||||
KB No.8 Special Purpose Acquisition Company 2 |
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 | |||||||||||
Key management |
1,982 | | (317 | ) | 1,665 |
1 | Transactions from operating activities with related parties (i.e. such as settlement, daily overdraft loans, etc) are excluded. |
2 | Excluded from the Groups related party as of December 31, 2018. |
236
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
Significant borrowing transactions with related parties for the years ended December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | |||||||||||||||||||
Beginning | Borrowing | Repaymnet | Others1 | Ending | ||||||||||||||||
Associates |
||||||||||||||||||||
Korea Credit Bureau Co., Ltd. |
||||||||||||||||||||
Incheon Bridge Co., Ltd. |
48,795 | 1,260 | (1,270 | ) | (5,119 | ) | 43,666 | |||||||||||||
Terra Co., Ltd. |
10 | | | (10 | ) | | ||||||||||||||
Jungdong Steel Co., Ltd. |
3 | | | (3 | ) | | ||||||||||||||
Doosung Metal Co., Ltd |
| | | 3 | 3 | |||||||||||||||
Jungdo Co., Ltd. |
4 | | | | 4 | |||||||||||||||
Dae-A Leisure Co., Ltd. |
466 | 479 | (466 | ) | 750 | 1,229 | ||||||||||||||
Daesang Techlon Co., Ltd.2 |
2 | | | (2 | ) | | ||||||||||||||
CARLIFE CO.,LTD. |
| | | 2 | 2 | |||||||||||||||
COMPUTERLIFE CO.,LTD., |
| | | 1 | 1 | |||||||||||||||
SKYDIGITAL INC |
| | | 16 | 16 | |||||||||||||||
Aju Good Technology Venture Fund |
2,771 | | | 3,668 | 6,439 | |||||||||||||||
KB-KDBC New Technology Business Fund |
7,500 | | | (412 | ) | 7,088 | ||||||||||||||
KB-Brain KOSDAQ Scale-up New Technology Business Investment Fund |
| | | 18,813 | 18,813 | |||||||||||||||
KB Star Office Private Real Estate Investment Trust No.1 |
6,962 | 351 | | 633 | 7,946 | |||||||||||||||
SY Auto Capital Co., Ltd. |
6 | | | (1 | ) | 5 | ||||||||||||||
KB No.8 Special Purpose Acquisition Company 2 |
2,339 | | (2,300 | ) | (39 | ) | | |||||||||||||
KB No.9 Special Purpose Acquisition Company |
2,309 | 2,266 | (2,234 | ) | (66 | ) | 2,275 | |||||||||||||
KB No.10 Special Purpose Acquisition Company |
1,698 | 1,618 | (1,618 | ) | (32 | ) | 1,666 | |||||||||||||
KB No.11 Special Purpose Acquisition Company |
530 | 530 | (530 | ) | 128 | 658 | ||||||||||||||
RAND Bio Science Co., Ltd. |
1,032 | | (500 | ) | (300 | ) | 232 | |||||||||||||
Wise Asset Management Co., Ltd. |
340 | 2,366 | (2,008 | ) | (2 | ) | 696 | |||||||||||||
Builton Co., Ltd. |
26 | | | (19 | ) | 7 | ||||||||||||||
Food Factory Co., Ltd. |
1 | | | 67 | 68 | |||||||||||||||
Acts Co., Ltd. |
4 | | | 25 | 29 | |||||||||||||||
Paycoms Co., Ltd. |
| | | 1 | 1 | |||||||||||||||
Big Dipper Co., Ltd. |
473 | | | (291 | ) | 182 | ||||||||||||||
A-PRO Co., Ltd. |
| | | 2,201 | 2,201 | |||||||||||||||
Rainist Co., Ltd. |
| | | 1 | 1 | |||||||||||||||
Spark Biopharma, Inc. |
| 4,300 | (3,300 | ) | 1,630 | 2,630 | ||||||||||||||
KB IGen Private Equity Fund No.1 |
| | | 148 | 148 | |||||||||||||||
KB Pre IPO Secondary Venture Fund 1st |
2,690 | 2,000 | (4,000 | ) | 425 | 1,115 | ||||||||||||||
POSCO-KB Shipbuilding Fund |
| 32,800 | (32,800 | ) | | | ||||||||||||||
Inno Lending Co., Ltd. 2 |
41 | | | (41 | ) | | ||||||||||||||
Key management3 |
8,260 | 7,587 | (5,283 | ) | 264 | 10,828 |
237
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
(In millions of Korean won) | 2017 | |||||||||||||||||||
Beginning | Borrowing | Repaymnet | Others1 | Ending | ||||||||||||||||
Associates |
||||||||||||||||||||
Korea Credit Bureau Co., Ltd. |
||||||||||||||||||||
Incheon Bridge Co., Ltd. |
38,556 | 1,270 | (21,270 | ) | 30,239 | 48,795 | ||||||||||||||
Terra Co., Ltd. |
| | | 10 | 10 | |||||||||||||||
Jungdong Steel Co., Ltd. |
3 | | | | 3 | |||||||||||||||
Jungdo Co., Ltd. |
| | | 4 | 4 | |||||||||||||||
Dae-A Leisure Co., Ltd. |
| | | 466 | 466 | |||||||||||||||
Daesang Techlon Co., Ltd.2 |
| | | 2 | 2 | |||||||||||||||
Aju Good Technology Venture Fund |
1,201 | | | 1,570 | 2,771 | |||||||||||||||
KB Pre IPO Secondary Venture Fund 1st |
| | | 7,500 | 7,500 | |||||||||||||||
Ejade Co., Ltd.2 |
2 | | | (2 | ) | | ||||||||||||||
KB Star office Private real estate Investment Trust No.1 |
6,682 | 303 | | (23 | ) | 6,962 | ||||||||||||||
KB No.8 Special Purpose Acquisition Company 2 |
2,342 | 2,300 | (2,300 | ) | (3 | ) | 2,339 | |||||||||||||
KB No.9 Special Purpose Acquisition Company |
2,399 | | (100 | ) | 10 | 2,309 | ||||||||||||||
KB No.10 Special Purpose Acquisition Company |
1,754 | 1,618 | (1,600 | ) | (74 | ) | 1,698 | |||||||||||||
KB No.11 Special Purpose Acquisition Company |
| 530 | | | 530 | |||||||||||||||
SY Auto Capital Co., Ltd. |
3,997 | 2,000 | (2,000 | ) | (3,991 | ) | 6 | |||||||||||||
RAND Bio Science Co., Ltd. |
2,356 | 1,000 | (2,500 | ) | 176 | 1,032 | ||||||||||||||
Wise Asset Management Co., Ltd. |
| 1,346 | (1,475 | ) | 469 | 340 | ||||||||||||||
Builton Co., Ltd. |
| | | 26 | 26 | |||||||||||||||
Food Factory Co., Ltd. |
| | | 1 | 1 | |||||||||||||||
Acts Co., Ltd. |
| | | 4 | 4 | |||||||||||||||
Big Dipper Co., Ltd. |
| | | 473 | 473 | |||||||||||||||
KB Pre IPO Secondary Venture Fund 1st |
| 13,000 | (11,000 | ) | 690 | 2,690 | ||||||||||||||
POSCO-KB Shipbuilding Fund |
| 3,000 | (3,000 | ) | | | ||||||||||||||
Inno Lending Co., Ltd. 2 |
1,902 | | | (1,861 | ) | 41 | ||||||||||||||
KBIC Private Equity Fund No. 32 |
700 | | (700 | ) | | |
1 | Transactions from operating activities with related parties (i.e. such as settlement, deposit on demend, etc) are netted. |
2 | Excluded from the Groups related party as of December 31, 2018. |
3 | Represents the transactions have started occurring since the current year. |
238
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
Significant investment and collection transaction with related parties for the year ended December 31, 2018 is as follows:
(In millions of Korean won) | 2018 | |||||||
Equity investments | Withdrawal and others |
|||||||
Korea Credit Bureau Co., Ltd. |
||||||||
Balhae Infrastructure Company |
4,645 | 8,623 | ||||||
Daesang Techlon Co.,Ltd.1 |
| 42 | ||||||
PT Bank Bukopin TBK |
116,422 | | ||||||
KoFC KBIC Frontier Champ 2010-5(PEF) |
| 4,800 | ||||||
KB GwS Private Securities Investment Trust |
| 6,386 | ||||||
Aju Good Technology Venture Fund |
9,808 | | ||||||
KB-KDBC Pre-IPO New Technology Business Fund |
10,000 | | ||||||
KBTS Technology Venture Private Equity Fund |
14,224 | | ||||||
KB-Brain KOSDAQ Scale-up New Technology Business Investment Fund |
8,000 | | ||||||
KB Star office Private real estate Investment Trust No.1 |
| 1,162 | ||||||
KB No.8 Special Purpose Acquisition Company1 |
| 5 | ||||||
Hyundai-Tongyang Agrifood Private Equity Fund1 |
| 82 | ||||||
KB IGen Private Equity Fund No.1 |
| 3 | ||||||
GH Real Estate I LP |
17,678 | | ||||||
KB-SJ Tourism Venture Fund |
1,500 | | ||||||
CUBE Growth Fund No.2 |
1,300 | 1,300 | ||||||
UNION Media Commerce Fund |
1,000 | |
1 | Excluded from the Groups related party as of December 31, 2018. |
239
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
Unused commitments to related parties as of December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | 2017 | ||||||||
Associates and joint ventures |
||||||||||
Balhae Infrastructure Fund |
Purchase of security investment |
|||||||||
Korea Credit Bureau Co., Ltd. |
Unused commitments of credit card |
108 | 108 | |||||||
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 |
1,960 | 11,768 | |||||||
Incheon Bridge Co., Ltd. |
Loan commitments in Korean won |
20,000 | 20,000 | |||||||
Unused commitments of credit card |
94 | 86 | ||||||||
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 |
6,700 | 10,000 | |||||||
Unused commitments of credit card |
94 | 92 | ||||||||
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 | 5 | |||||||
RAND Bio Science Co., Ltd. |
Unused commitments of credit card |
24 | 24 | |||||||
Builton Co., Ltd. |
Unused commitments of credit card |
3 | 4 | |||||||
Food Factory Co., Ltd. |
Unused commitments of credit card |
11 | 11 | |||||||
Inno Lending Co., Ltd. 1 |
Unused commitments of credit card |
| 13 | |||||||
Big Dipper Co., Ltd. |
Unused commitments of credit card |
95 | 94 | |||||||
KB-KDBC New Technology Business Investment Fund |
Purchase of security investment |
5,000 | 15,000 | |||||||
KBTS Technology Venture Private Equity Fund |
Purchase of security investment |
13,776 | | |||||||
KB-SJ Tourism Venture Fund |
Purchase of security investment |
3,500 | | |||||||
KB-Brain KOSDAQ Scale-up New Technology Business Investment Fund |
Purchase of security investment |
32,000 | | |||||||
Key management |
Loan commitments in Korean won |
1,559 | 984 |
1 | Excluded from the Groups related party as of December 31, 2018. |
Compensation to key management for the years ended December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | |||||||||||||||
Short-term employee benefits |
Post- employment benefits |
Share-based payments |
Total | |||||||||||||
Registered directors (executive) |
||||||||||||||||
Registered directors (non-executive) |
960 | | | 960 | ||||||||||||
Non-registered directors |
7,135 | 273 | 3,314 | 10,722 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
|
|
|
|
|
|
|
|
|||||||||
(In millions of Korean won) | 2017 | |||||||||||||||
Short-term employee benefits |
Post- employment benefits |
Share-based payments |
Total | |||||||||||||
Registered directors (executive) |
||||||||||||||||
Registered directors (non-executive) |
896 | | | 896 | ||||||||||||
Non-registered directors |
8,420 | 338 | 14,610 | 23,368 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
|
|
|
|
|
|
|
|
240
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
Collateral received from related parties as of December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | 2017 | ||||||||
Associates |
||||||||||
KB Star Office Private Real Estate Investment Trust No.1 |
Real estate |
|||||||||
Key management |
Time deposits and others |
401 | 388 | |||||||
Real estate |
3,182 | 2,287 |
As of December 31, 2018, Incheon Bridge Co., Ltd., a related party, provides fund management account, insurance for civil
engineering completion, and management rights as senior collateral amounting to W611,000 million to a financial syndicate that consists of the Group and five other institutions, and as subordinated collateral amounting to
W384,800 million to subordinated debt holders that consist of the Group and two other institutions. Also, it provides certificate of credit guarantee amounting to W400,000 million as collateral to a financial
syndicate consisting of the Group and five other institutions.
45 Business Combination
On July 6, 2018, the Group obtained control over KB Daehan Specialized Bank (which was renamed from Tomato Specialized Bank in March 2018) in Cambodia by acquiring 90% share of interests.
Regarding the business combination above, the amounts of the consideration transferred and the assets and liabilities acquired at the acquisition date are as follows:
(In millions of Korean won) | 2018 | |||
Consideration |
||||
Cash and cash equivalents |
||||
Recognized amounts of identifiable assets acquired and liabilities assumed |
| |||
Cash and Due from financial institutions |
11,995 | |||
Loans at amortized cost |
8,484 | |||
Property and equipment |
765 | |||
Intangible assets |
17 | |||
Other assets |
1,389 | |||
|
|
|||
Total assets |
22,650 | |||
|
|
|||
Other liabilities |
273 | |||
|
|
|||
Total liabilities |
273 | |||
|
|
|||
Fair value of identifiable assets |
22,377 | |||
Non-controlling interest |
2,238 | |||
Goodwill |
1,515 |
As a result of business combination goodwill has been recognized, and the Group has accounted for as an intangible asset in the consolidated financial statements.
241
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
46 Application of Korean IFRS 1109 Financial Instruments and IFRS 1115 Revenue from Contracts with Customers
The Group has applied Korean IFRS 1109 Financial Instruments and IFRS 1115 Revenue from Contracts with Customers, which was issued on September 25, 2015, for the first time for their annual reporting period commencing January 1, 2018. Impact of the application of Korean IFRS 1109 and IFRS 1115 on the Groups consolidated financial statements is as follows:
The Groups categories and carrying amounts of financial assets per Korean IFRS 1039 and 1109 as of the initial application date are as follows:
(In millions of Korean won) | ||||||||||||||||||
Measurement categories |
Carrying amounts | |||||||||||||||||
December 31, 2017 (Korean IFRS 1039) |
January 1, 2018 (Korean IFRS 1109) |
Korean IFRS 1039 1 |
Reclassification | Remeasurement | Korean IFRS 1109 1 |
|||||||||||||
Cash and due from financial institutions |
Financial assets at amortized cost |
|||||||||||||||||
Financial assets at fair value through profit or loss 2 |
| 2,795,702 | (12,881 | ) | 2,782,821 | |||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
19,817,825 | 401 | (14,678 | ) | 19,803,548 | ||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Financial assets at fair value through profit or loss |
| |||||||||||||||||
Financial assets held for trading: debt securities |
Financial assets at fair value through profit or loss |
25,168,338 | | | 32,227,345 | |||||||||||||
Financial assets held for trading: equity securities |
4,935,100 | |||||||||||||||||
Financial assets held for trading: others |
73,855 | |||||||||||||||||
Financial assets designated at fair value through profit or loss 3 |
2,050,052 | |||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
32,227,345 | | | 32,227,345 | |||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Derivative financial instruments held for trading |
Derivative financial instruments held for trading |
2,998,042 | (43,787 | ) | | 2,954,255 | ||||||||||||
Derivative instruments designated for hedging |
Derivative instruments designated for hedging |
312,124 | | | 312,124 | |||||||||||||
3,310,166 | (43,787 | ) | | 3,266,379 | ||||||||||||||
|
|
|
|
|
|
|
|
242
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
Loans |
Financial assets at amortized cost |
290,122,838 | (608,156 | ) | (544,468 | ) | 288,970,214 | |||||||||||
Financial assets at fair value through profit or loss 2 |
| 616,666 | 12,557 | 629,223 | ||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
290,122,838 | 8,510 | (531,911 | ) | 289,599,437 | ||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Financial investments |
||||||||||||||||||
Available-for-sale financial assets: debt securities |
Financial assets at fair value through other comprehensive income |
38,959,401 | (5,347,493 | ) | | 33,611,908 | ||||||||||||
Financial assets at fair value through profit or loss 2 |
| 2,511,902 | | 2,511,902 | ||||||||||||||
Financial assets at amortized cost |
| 2,835,591 | 4,118 | 2,839,709 | ||||||||||||||
Available-for-sale financial assets: equity securities |
Financial assets measured at fair value through other comprehensive income |
9,156,862 | (6,789,392 | ) | 275 | 2,367,745 | ||||||||||||
Financial assets at fair value through profit or loss 2 |
| 6,800,720 | (88 | ) | 6,800,632 | |||||||||||||
Held-to-maturity financial assets |
Financial assets at amortized cost |
18,491,980 | (274,020 | ) | 4,116 | 18,222,076 | ||||||||||||
Financial assets at fair value through profit or loss 2 |
| 274,020 | (4,359 | ) | 269,661 | |||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
66,608,243 | 11,328 | 4,062 | 66,623,633 | |||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Other financial assets |
Financial assets at amortized cost |
10,195,015 | (1,637 | ) | (5,085 | ) | 10,188,293 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||||
|
|
|
|
|
|
|
|
1 | Net of allowance. |
2 | In accordance with Korean IFRS 1104, the Group has designated the financial assets related with insurance
contract (cash and due from financial institutions amounting to |
3 | Financial assets amounting to |
243
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
The Groups categories and carrying amounts of financial liability per Korean IFRS 1039 and 1109 as of the initial application date are as follows:
(In millions of Korean won) | ||||||||||||||||||
Measurement categories |
Carrying amounts | |||||||||||||||||
December 31, 2017 (Korean IFRS 1039) |
January 1, 2018 (Korean IFRS 1109) |
Korean IFRS 1039 |
Reclassification | Remeasurement | Korean IFRS 1109 |
|||||||||||||
Financial liabilities held for trading |
Financial liabilities at fair value through profit or loss |
|||||||||||||||||
Financial liabilities designated at fair value through profit or loss |
Financial liabilities designated at fair value through profit or loss |
10,078,288 | | | 10,078,288 | |||||||||||||
Derivative financial instruments held for trading |
Derivative financial instruments held for trading |
3,054,614 | (3,737 | ) | | 3,050,877 | ||||||||||||
Derivative instruments designated as fair value hedge |
Derivative instruments designated as fair value hedge |
88,151 | (404 | ) | | 87,747 | ||||||||||||
Deposits |
Financial liabilities at amortized cost |
255,800,048 | | | 255,800,048 | |||||||||||||
Debts |
Financial liabilities at amortized cost |
28,820,928 | | | 28,820,928 | |||||||||||||
Debentures |
Financial liabilities at amortized cost |
44,992,724 | | | 44,992,724 | |||||||||||||
Other financial liabilities |
Financial liabilities at amortized cost |
18,330,004 | (21,043 | ) | 2,899 | 18,311,860 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
|
|
|
|
|
|
|
|
244
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
The carrying amounts of the categories of financial assets per Korean IFRS 1109 as of the initial application date are as follows:
(In millions of Korean won) | January 1, 2018 | |||||||||||||||||||
Financial assets at through profit or loss |
Financial assets at fair value through other comprehensive |
Financial assets at cost1 |
Derivative for hedging |
Total | ||||||||||||||||
Cash and due from financial institutions |
||||||||||||||||||||
Financial assets at fair value through profit or loss |
45,221,584 | | | | 45,221,584 | |||||||||||||||
Derivative instruments designated for trading |
2,954,255 | | | | 2,954,255 | |||||||||||||||
Derivative instruments designated for hedging |
| | | 312,124 | 312,124 | |||||||||||||||
Loans at amortized cost |
| | 288,970,214 | | 288,970,214 | |||||||||||||||
Financial investments |
| 35,979,653 | 21,061,785 | | 57,041,438 | |||||||||||||||
Other financial assets |
| | 10,188,293 | | 10,188,293 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
1 | Net of allowance. |
245
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
On January 1, 2018 (the date of the initial application of Korean IFRS 1109), there were no financial assets at fair value through profit or loss reclassified to financial assets at amortized cost or financial assets at fair value through other comprehensive income.
On January 1, 2018 (the date of the initial application of Korean IFRS 1109), the Group classified certain financial assets, other than financial assets at amortized cost as at January 1, 2018, to amortized cost as follows:
(In millions of Korean won) | Measurement categories before reclassification |
Fair value | Recognizable valuation gain or loss if not reclassified |
|||||||||
Currency stabilization bond |
Available-for-sale | |||||||||||
Asset backed securities |
Available-for-sale | 860,590 | (4,046 | ) | ||||||||
|
|
|
|
|||||||||
|
|
|
|
246
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
The reconciliation of the ending allowances/provision in accordance with Korean IFRS 1039 to the opening allowances in accordance with Korean IFRS 1109 is as follows:
(In millions of Korean won)
Measurement categories |
Allowances/Provision | |||||||||||||||||
December 31, 2017 (Korean IFRS 1039) |
January 1, 2018 (Korean IFRS 1109) |
Korean IFRS 1039 1 |
Reclassification | Remeasurement | Korean IFRS 1109 1 |
|||||||||||||
Loans and receivables |
||||||||||||||||||
Due from financial institutions |
Financial assets at amortized cost |
|||||||||||||||||
Loans |
Financial assets at amortized cost |
2,064,469 | | 544,468 | 2,608,937 | |||||||||||||
Financial assets at fair value through profit or loss |
45,763 | (45,763 | ) | | | |||||||||||||
Other financial assets |
Financial assets at amortized cost |
104,813 | | 5,086 | 109,899 | |||||||||||||
Available-for-sale |
||||||||||||||||||
Debt securities |
Financial assets at fair value through other comprehensive income |
| | 4,433 | 4,433 | |||||||||||||
Financial assets at amortized cost |
| | 176 | 176 | ||||||||||||||
Held-to-maturity securities |
||||||||||||||||||
Debt securities |
Financial assets at amortized cost |
| | 1,530 | 1,530 | |||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
2,215,045 | (45,763 | ) | 557,490 | 2,726,772 | ||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Unused commitments and guarantees |
267,011 | | 28,637 | 295,648 | ||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Financial guarantees |
2,682 | | 2,175 | 4,857 | ||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
|
|
|
|
|
|
|
|
247
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
On January 1, 2018 (the date of the initial application of Korean IFRS 1109 and IFRS 1115), the impact on other comprehensive income due to financial liabilities designated at fair value through profit or loss is as follows:
(In millions of Korean won) | Impact of application | |||
December 31, 2017 |
||||
Valuation loss from own credit risk of financial liabilities designated at fair value through profit or loss |
(14,397 | ) | ||
Tax effect |
3,959 | |||
|
|
|||
January 1, 2018 |
||||
|
|
On January 1, 2018 (the date of the initial application of Korean IFRS 1109), the impact on other comprehensive income due to financial assets designated at fair value through other comprehensive income and others is as follows:
(In millions of Korean won) | Impact of application | |||
December 31, 2017 |
||||
Change of classification/subsequent measurement category: available for sale to financial assets at amortized cost |
4,295 | |||
Change of classification/subsequent measurement category: available for sale to financial assets at fair value through profit or loss |
145,670 | |||
Reclassification of valuation gain or loss of derivatives from equity securities at other comprehensive income |
5,854 | |||
Recognition of expected credit losses on debt securities at other comprehensive income |
4,433 | |||
Reversal of impairment on equity securities at other comprehensive income |
(617,004 | ) | ||
Changes in other comprehensive income of associates and joint ventures |
(3,611 | ) | ||
Application of overlay approach |
(10,903 | ) | ||
Adjustment of shares between contracting party |
3,809 | |||
Others |
391 | |||
Tax effect |
128,028 | |||
|
|
|||
January 1, 2018 (after adoption of Korean IFRS 1109) |
||||
|
|
248
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2018 and 2017
On January 1, 2018 (the date of the initial application of Korean IFRS 1109 and IFRS 1115), the impact on retained earnings is as follows:
(In millions of Korean won) | Impact of application | |||
December 31, 2017 |
||||
Change of classification/subsequent measurement category: available for sale to financial assets at fair value through profit or loss |
(145,670 | ) | ||
Reclassification of valuation gain or loss of derivatives from equity securities at other comprehensive income |
(5,854 | ) | ||
Recognition of expected credit losses on debt securities at other comprehensive income |
(4,433 | ) | ||
Reversal of impairment loss on equity securities at other comprehensive income |
617,004 | |||
Changes in gains or losses on equity method for investments in associates and joint ventures |
4,061 | |||
Effect of adjustment in convertible private bond |
12,558 | |||
Valuation of fair value of structured deposits and debts |
(17,291 | ) | ||
Application of expected credit losses on financial assets at amortized cost |
(553,057 | ) | ||
Effect of changes in provision for unused commitment, etc. |
(30,812 | ) | ||
Valuation loss from self-credit-risk of financial liabilities designated at fair value through profit or loss |
14,397 | |||
Application of overlay approach |
10,903 | |||
Effect of Retained Earnings by application of Korean IFRS 1115 |
883 | |||
Others |
2,527 | |||
Tax effect |
23,060 | |||
|
|
|||
January 1, 2018 |
||||
|
|
1 | The Group has applied the revenue recognition with distinguishing between the duty to perform management and agency service for fee. |
47. Approval of Issuance of the Financial Statements
The issuance of the Groups consolidated financial statements as of and for the year ended December 31, 2018, was initially approved on February 8, 2019 and re-approved due to revision on March 8, 2019 by the Board of Directors.
249
Index
December 31, 2018 and 2017
Page(s) | ||||
2~4 | ||||
Separate Financial Statements |
||||
5 | ||||
6 | ||||
7 | ||||
8 | ||||
9~72 | ||||
Report on Independent Auditors Review of Internal Control over Financial Reporting |
73 | |||
Report on the Effectiveness of the Internal Control over Financial Reporting |
74 |
1
(English Translation of a Report Originally Issued in Korean)
To the Board of Directors and Shareholders of KB Financial Group Inc.
Opinion
We have audited the accompanying separate financial statements of KB Financial Group Inc. (the Company), which comprise the separate statements of financial position as at December 31, 2018 and 2017, and the separate statements of comprehensive income, separate statements of changes in equity and separate statements of cash flows for the years then ended, and notes to the separate financial statements, including a summary of significant accounting policies.
In our opinion, the accompanying separate financial statements present fairly, in all material respects, the separate financial position of KB Financial Group Inc. as at December 31, 2018 and 2017, and its separate financial performance and its separate cash flows for the years then ended in accordance with International Financial Reporting Standards as adopted by the Republic of Korea (Korean IFRS).
Basis for Opinion
We conducted our audits in accordance with Korean Standards on Auditing. Our responsibilities under those standards are further described in the Auditors Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with the ethical requirements of the Republic of Korea that are relevant to our audit of the financial statements and we have fulfilled our other ethical responsibilities in accordance with the ethical requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Key Audit Matters
No key audit matter is identified to be described in this audit report.
Other Matter
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.
Responsibilities of Management and Those Charged with Governance for the Financial Statements
Management is responsible for the preparation and fair presentation of the separate financial statements in accordance with 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.
2
In preparing the financial statements, management is responsible for assessing the Companys ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations.
Those charged with governance are responsible for overseeing the Companys financial reporting process.
Auditors Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Korean Standards on Auditing will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
As part of an audit in accordance with Korean Standards on Auditing, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
| Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. |
| Obtain an understanding of internal control relevant to the audit 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 entitys internal control. |
| Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. |
| Conclude on the appropriateness of managements use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Companys ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors report. However, future events or conditions may cause the Company to cease to continue as a going concern. |
| Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. |
3
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
The engagement partner on the audit resulting in this independent auditors report is Yeob Yu, Certified Public Accountant.
/s/ Samil PricewaterhouseCoopers
Seoul, Korea
March 12, 2019
This report is effective as of March 12, 2019, 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 separate 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. |
4
Separate Statements of Financial Position
December 31, 2018 and December 31, 2017
(In millions of Korean won) | Notes | December 31, 2018 | December 31, 2017 | |||||||||
Assets |
||||||||||||
Cash and due from financial institutions |
4,5,6,28 | |||||||||||
Financial assets at fair value through profit or loss (under Korean IFRS 1039) |
4,5,7 | | 284,485 | |||||||||
Financial assets at fair value through profit or loss |
4,5,7 | 289,179 | | |||||||||
Loans at amortized cost |
4,5,8 | 50,000 | 10,000 | |||||||||
Investments in subsidiaries |
9 | 24,062,116 | 24,062,116 | |||||||||
Property and equipment |
10 | 2,185 | 697 | |||||||||
Intangible assets |
11 | 9,646 | 8,864 | |||||||||
Net defined benefit assets |
16 | | 201 | |||||||||
Deferred income tax assets |
12 | 8,184 | 10,282 | |||||||||
Other assets |
4,5,13 | 857,462 | 480,789 | |||||||||
|
|
|
|
|||||||||
Total assets |
||||||||||||
|
|
|
|
|||||||||
Liabilities |
||||||||||||
Debts |
4,5,14 | |||||||||||
Debentures |
4,5,15 | 5,373,266 | 5,162,600 | |||||||||
Net defined benefit liabilities |
16 | 183 | | |||||||||
Current income tax liabilities |
691,909 | 308,854 | ||||||||||
Other liabilities |
4,5,17 | 186,481 | 204,835 | |||||||||
|
|
|
|
|||||||||
Total liabilities |
6,551,839 | 5,976,289 | ||||||||||
|
|
|
|
|||||||||
Equity |
||||||||||||
Share capital |
18 | 2,090,558 | 2,090,558 | |||||||||
Capital surplus |
18 | 14,742,814 | 14,742,814 | |||||||||
Accumulated other comprehensive income |
18 | (7,144 | ) | (5,233 | ) | |||||||
Retained earnings |
18 | 3,213,556 | 3,054,379 | |||||||||
Treasury shares |
18 | (968,549 | ) | (755,973 | ) | |||||||
|
|
|
|
|||||||||
Total equity |
19,071,235 | 19,126,545 | ||||||||||
|
|
|
|
|||||||||
Total liabilities and equity |
||||||||||||
|
|
|
|
1 | The seperate statement of financial position as of December 31, 2018 is prepared in accordance with Korean IFRS 1109 and Korean IFRS 1115, and the comparatives as of December 31, 2017 has not been restated. |
The accompanying notes are an integral part of these separate financial statements.
5
Separate Statements of Comprehensive Income
Year Ended December 31, 2018 and 2017
(In millions of Korean won, except per share amounts) | Notes | 2018 | 2017 | |||||||||
Interest income |
||||||||||||
Interest expense |
(122,451 | ) | (101,107 | ) | ||||||||
|
|
|
|
|||||||||
Net interest expense |
20 | (115,835 | ) | (97,218 | ) | |||||||
|
|
|
|
|||||||||
Fee and commission income |
788 | 738 | ||||||||||
Fee and commission expense |
(5,996 | ) | (8,546 | ) | ||||||||
|
|
|
|
|||||||||
Net fee and commission expense |
21 | (5,208 | ) | (7,808 | ) | |||||||
|
|
|
|
|||||||||
Net gains on financial assets at fair value through profit or loss (under Korean IFRS 1039) |
22 | | 745 | |||||||||
|
|
|
|
|||||||||
Net gains on financial assets at fair value through profit or loss |
22 | 18,319 | | |||||||||
|
|
|
|
|||||||||
Net other operating income |
23 | 1,089,556 | 709,544 | |||||||||
|
|
|
|
|||||||||
General and administrative expenses |
24 | (57,845 | ) | (57,485 | ) | |||||||
|
|
|
|
|||||||||
Operating profit before provision for credit losses |
928,987 | 547,778 | ||||||||||
Provision for credit losses |
| | ||||||||||
|
|
|
|
|||||||||
Operating profit |
928,987 | 547,778 | ||||||||||
|
|
|
|
|||||||||
Net non-operating income (expense) |
25 | (259 | ) | 125 | ||||||||
|
|
|
|
|||||||||
Profit before income tax |
928,728 | 547,903 | ||||||||||
Income tax benefit (expense) |
26 | (2,823 | ) | 5,522 | ||||||||
|
|
|
|
|||||||||
Profit for the year |
925,905 | 553,425 | ||||||||||
|
|
|
|
|||||||||
Items that will not be reclassified to profit or loss: |
||||||||||||
Remeasurements of net defined benefit liabilities |
(1,911 | ) | (491 | ) | ||||||||
|
|
|
|
|||||||||
Other comprehensive loss for the year, net of tax |
(1,911 | ) | (491 | ) | ||||||||
|
|
|
|
|||||||||
Total comprehensive income for the year |
||||||||||||
|
|
|
|
|||||||||
Earnings per share |
||||||||||||
Basic earnings per share | 27 | 1,388 | ||||||||||
Diluted earnings per share | 27 | 2,322 | 1,380 |
1 | The seperate statement of comprehensive income for the year ended December 31, 2018 is prepared in accordance with Korean IFRS 1109 and Korean IFRS 1115, and the comparatives for the year ended December 31, 2017 has not been restated. |
The accompanying notes are an integral part of these separate financial statements.
6
Separate Statements of Changes in Equity
Year Ended December 31, 2018 and 2017
(In millions of Korean won) | Share Capital |
Capital Surplus |
Accumulated Other Comprehensive Income |
Retained Earnings |
Treasury Shares |
Total Equity |
||||||||||||||||||
Balance at January 1, 2017 |
||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Comprehensive income |
||||||||||||||||||||||||
Profit for the year |
| | | 553,425 | | 553,425 | ||||||||||||||||||
Remeasurements of net defined benefit liabilities |
| | (491 | ) | | | (491 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total comprehensive income |
| | (491 | ) | 553,425 | | 552,934 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Transactions with shareholders |
||||||||||||||||||||||||
Dividends |
| | | (497,969 | ) | | (497,969 | ) | ||||||||||||||||
Acquisition of treasury shares |
| | | | (201,985 | ) | (201,985 | ) | ||||||||||||||||
Disposal of treasury shares |
| 86,646 | | | 165,102 | 251,748 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total transactions with shareholders |
| 86,646 | | (497,969 | ) | (36,883 | ) | (448,206 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Balance at December 31, 2017 |
||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Balance at January 1, 2018 |
||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Comprehensive income |
||||||||||||||||||||||||
Profit for the year |
| | | 925,905 | | 925,905 | ||||||||||||||||||
Remeasurements of net defined benefit liabilities |
| | (1,911 | ) | | | (1,911 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total comprehensive income |
| | (1,911 | ) | 925,905 | | 923,994 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Transactions with shareholders |
||||||||||||||||||||||||
Dividends |
| | | (766,728 | ) | | (766,728 | ) | ||||||||||||||||
Acquisition of treasury shares |
| | | | (212,576 | ) | (212,576 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total transactions with shareholders |
| | | (766,728 | ) | (212,576 | ) | (979,304 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Balance at December 31, 2018 |
||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
1 | The seperate statement of changes in equity for the year ended December 31, 2018 is prepared in accordance with Korean IFRS 1109 and Korean IFRS 1115, and the comparatives for the year ended December 31, 2017 has not been restated. |
The accompanying notes are an integral part of these separate financial statements.
7
Separate Statements of Cash Flows
Year Ended December 31, 2018 and 2017
(In millions of Korean won) | Note | 2018 | 2017 | |||||||||
Cash flows from operating activities |
|
|||||||||||
Profit for the year |
||||||||||||
|
|
|
|
|||||||||
Adjustment for non-cash items |
||||||||||||
Depreciation and amortization |
864 | 604 | ||||||||||
Share-based payments |
551 | 7,804 | ||||||||||
Net interest expense |
5,198 | 9,430 | ||||||||||
Net gains on valuation on financial assets at fair value through profit or loss (under Korean IFRS 1039) |
| 12,171 | ||||||||||
Net gains on valuation on financial assets at fair value through profit or loss |
(4,694 | ) | | |||||||||
Net other expenses |
2,118 | 2,182 | ||||||||||
|
|
|
|
|||||||||
4,037 | 32,191 | |||||||||||
|
|
|
|
|||||||||
Changes in operating assets and liabilities |
||||||||||||
Deferred income tax assets |
2,782 | (5,521 | ) | |||||||||
Other assets |
(1,046 | ) | (699 | ) | ||||||||
Other liabilities |
(7,016 | ) | (9,253 | ) | ||||||||
|
|
|
|
|||||||||
(5,280 | ) | (15,473 | ) | |||||||||
|
|
|
|
|||||||||
Net cash inflow from operating activities |
924,662 | 570,143 | ||||||||||
|
|
|
|
|||||||||
Cash flows from investing activities |
||||||||||||
Acquisition of subsidiaries |
| (1,363,932 | ) | |||||||||
Acquisition of financial assets at fair value through profit or loss |
| (50,000 | ) | |||||||||
Decrease (increase) in loans at amortized cost |
(40,000 | ) | 19,415 | |||||||||
Acquisition of property and equipment |
(1,991 | ) | (466 | ) | ||||||||
Disposal of property and equipment |
| 2 | ||||||||||
Acquisition of intangible assets |
(866 | ) | (1,073 | ) | ||||||||
Disposal of intangible assets |
34 | | ||||||||||
Net increase in guarantee deposits paid |
(375 | ) | 3,498 | |||||||||
Other investing activities |
(356 | ) | | |||||||||
|
|
|
|
|||||||||
Net cash outflow from investing activities |
(43,554 | ) | (1,392,556 | ) | ||||||||
|
|
|
|
|||||||||
Cash flows from financing activities |
||||||||||||
Increase in debts |
298,321 | 1,621,552 | ||||||||||
Decrease in debts |
(298,485 | ) | (1,671,815 | ) | ||||||||
Increase in debentures |
897,872 | 1,836,114 | ||||||||||
Decrease in debentures |
(688,486 | ) | (149,669 | ) | ||||||||
Dividends paid to shareholders |
(766,728 | ) | (497,969 | ) | ||||||||
Acquisition of treasury shares |
(224,700 | ) | (185,465 | ) | ||||||||
|
|
|
|
|||||||||
Net cash inflow (outflow) from financing activities |
(782,206 | ) | 952,748 | |||||||||
|
|
|
|
|||||||||
Net increase in cash and cash equivalents |
98,902 | 130,335 | ||||||||||
Cash and cash equivalents at the beginning of the year |
28 | 245,397 | 115,062 | |||||||||
|
|
|
|
|||||||||
Cash and cash equivalents at the end of the year |
28 | |||||||||||
|
|
|
|
1 | The seperate statement of cash flows for the year ended December 31, 2018 is prepared in accordance with Korean IFRS 1109 and Korean IFRS 1115, and the comparatives for the year ended December 31, 2017 has not been restated. |
The accompanying notes are an integral part of these separate financial statements.
8
KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2018 and 2017
1. The Company
KB Financial Group Inc. (the Company), in accordance with Financial Holding Companies Act, was established on September 29, 2008, through
stock transfers with the former shareholders of Kookmin Bank, KB Investment & Securities Co., Ltd., KB Asset Management Co., Ltd., KB Real Estate Trust Co., Ltd., KB Investment Co., Ltd., KB Futures Co., Ltd., KB Credit Information Co.,
Ltd., and KB Data Systems Co., Ltd. in order to provide management services and financing to associated companies. The headquarters is located at 26,
Gukjegeumyung-ro-8-gil, Yeongdeungpo-gu, Seoul. The Companys share capital as of
December 31, 2018, is W 2,090,558 million. 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 Company 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 Company acquired Woori Financial Co., Ltd. and changed the name to KB Capital Co., Ltd. Meanwhile, the Company included LIG Insurance Co., Ltd. as an
associate and changed the name to KB Insurance Co., Ltd. in June 2015. Also, the Company included Hyundai Securities Co., Ltd. as an associate in June 2016 and included as a subsidiary on October 2016 by comprehensive exchange of shares. KB
Insurance Co., Ltd. became one of the subsidiaries through a tender offer in May 2017.
The 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 on its Articles of Incorporation is 1,000 million.
2. Basis of Preparation
2.1 Application of Korean IFRS
The Company maintains its accounting records in Korean won and prepares statutory financial statements in the Korean language (Hangeul) in accordance with International Financial Reporting Standards as adopted by the Republic of Korea (Korean IFRS). The accompanying separate 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 Companys financial position, financial performance or cash flows, is not presented in the accompanying separate financial statements.
The separate financial statements of the Company have been prepared in accordance with Korean IFRS. These are the standards, subsequent amendments and related interpretations issued by the International Accounting Standards Board (IASB) that have been adopted by the Republic of Korea.
The preparation of separate financial statements requires the use of certain critical accounting estimates. Management also needs to exercise judgment in applying the Companys accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the separate financial statements are disclosed in Note 2.4.
9
KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2018 and 2017
These financial statements have been prepared in accordance with the Korean IFRS which is effective or early adopted as of December 31, 2018.
The Company has applied the following standards and amendments for the first time for their annual reporting period commencing January 1, 2018.
| Amendments to Korean IFRS 1028 Investments in Associates and Joint Ventures |
Amendments to Korean IFRS 1028 clarifies that a venture capital organization or a mutual fund, and similar entities may elect, at initial recognition, to measure investments in an associate or joint venture at fair value through profit or loss separately for each associate or joint venture.
| Amendments to Korean IFRS 1040 Transfers of Investment Property |
Amendments to 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. Paragraph 57 of the standard provides a list of such circumstances as examples.
| Amendments to Korean IFRS 1102 Share-based Payment |
Amendments to Korean IFRS 1102 clarifies 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. And also, clarifies 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.
| Enactment of Korean IFRS 2122 Foreign Currency Transactions and Advance Consideration |
According to the enacted interpretation, 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 prepayment or receipt of advance consideration. In case there are multiple payments or receipts in advance, the entity should determine a date of the transaction for each payment or receipt of advance consideration.
| Enactment of Korean IFRS 1109 Financial Instruments |
The Company has adopted Korean IFRS 1109 Financial Instruments with a date of initial application of January 1, 2018. As permitted by the transition requirements of Korean IFRS 1109, comparative periods have not been restated. The adoption does not have a significant impact on the financial statements.
| Enactment of Korean IFRS 1115 Revenue from Contracts with Customers |
The Company has adopted Korean IFRS 1115 Revenue from Contracts with Customers. As permitted by the transition requirements of Korean IFRS 1115, comparative periods have not been restated. The amendments does not have a significant impact on the financial statements.
Certain new accounting standards and interpretations that have been published but are not mandatory for annual reporting period commencing January 1, 2018 and have not been early adopted by the Company are set out below. The Company expects the effect on the financial statements applying the new standard will not be significant, with the exception of the adoption of Korean IFRS 1116 Lease
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KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2018 and 2017
| 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 Korean IFRS 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.
At inception of a contract, the Company shall assess whether the contract is, or contains, a lease. Also, at the date of initial application, the Company shall assess whether the contract is, or contains, a lease in accordance with the standard. However, the Company may not need to reassess all contracts, if the Company elects to apply the practical expedient not to apply the standard to contracts that were entered into before the date of initial application. At the date of initial application, the Company will assess whether the contract is, or contains, a lease at inception of a contract.
For a contract that is, or contains, a lease, the Company shall account for each lease component within the contract as a lease separately from non-lease components of the contract. 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. For the all (or partial) lease agreements, or the agreements including lease components, the Company plans to apply account the practical expedient to account for each lease component and any associated non-lease components as a single lease agreement.
A lessee 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). The Company plans not to apply the requirements to real estates rent
for single-use (a lease for education and others) and low value assets (e.g. underlying assets below W 5 million and $ 5,000).
In relation with sale and leaseback transactions, the Company(the seller-lessee) shall apply the requirements for determining when a performance obligation is satisfied in Korean IFRS 1115 Revenue from Contracts with Customers to determine whether the transfer of an asset is accounted for as a sale of that asset. However, for those transactions before the date of initial application, the Company shall not reassess them.
The accounting treatment as a lessor did not change significantly from the one under Korean IFRS 1017 Leases. The Bank expects the effect on the financial statements applying the new standard will not be significant as accounting for the Bank, as a lessor, will not significantly change.
A lessee shall apply this standard to its leases either (a) retrospectively to each prior reporting period presented applying Korean IFRS 1008 Accounting Policies, Changes in Accounting Estimates and Errors (Full retrospective application); or (b) retrospectively with the cumulative effect of initially applying the standard recognized at the date of initial application.
11
KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2018 and 2017
The Company plans to apply Korean IFRS 1116 retrospectively with the cumulative effect of initially applying the standard and as such will not restate any comparative information.
The Company performed an impact assessment to identify potential financial effects of applying Korean IFRS 1116 based on available information as at December 31, 2018 to identify effects on 2019 financial statements.
The total
minimum lease payment expected to be paid by the Company in relation to operating leases before discounted to their present value is W 468 million. When the payment is discounted at incremental borrowing rate of the lessee, the
total minimum lease payment amounts to W 460 million. As a result of the financial effects on the financial statements analyzed, the Company expects the underlying leased asset and a lease liability as at December 31, 2018
to be increased by W 684 million and W 460 million, respectively. The difference between the right-of-use asset and the lease
liability has been arising from the adjustments made at the right-of-use asset for the lease contracts entered before the date of the adoption of this standard. On the
other hand, the results of the assessment may change due to additional information that the Company may obtain after the assessment.
Enactment, Amendments and Annual Improvements
| Korean IFRS 1109 Financial Instruments |
The narrow-scope amendments made to Korean IFRS 1109 Financial Instruments enable entities to measure certain prepayable financial assets with negative compensation at amortized cost. When a modification of a financial liability measured at amortized cost that does not result in the derecognition, a modification gain or loss shall be recognized in profit or loss.
| Amendments to Korean IFRS 1019 Employee Benefits |
The amendments require that an entity shall calculate current service cost and net interest for the remainder of the reporting period after a plan amendment, curtailment or settlement based on updated actuarial assumptions from the date of the change. The amendments also require that a reduction in a surplus must be recognized in profit or loss even if that surplus was not previously recognized because of the impact of the asset ceiling.
| Amendments to Korean IFRS 1028 Investments in Associates and Joint Ventures |
The amendments clarify that an entity shall apply Korean IFRS 1109 to financial instruments in an associate or joint venture to which the equity method is not applied. These include long-term interests that, in substance, form part of the entitys net investment in an associate or joint venture. These amendments will be applied for annual periods beginning on or after January 1, 2019, with early adoption permitted. In accordance with the transitional provisions in Korean IFRS 1109, the restatement of the comparative information is not required and the cumulative effects of initially applying the amendments retrospectively should be recognized in the beginning balance of retained earnings (or other components of equity, as appropriate) at the date of initial application.
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KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2018 and 2017
| Enactment to Interpretation of Korean IFRS 2123 Uncertainty over Income Tax Treatments |
The enactment clarifies the accounting for uncertainties in income taxes in the event that the decision of taxation authorities or courts can change tax treatment. The enactment presents calculating methods of disclosure amount based on the possibility of future recognition of the income tax treatment, and requires disclosure of the uncertainty of the amount.
| Annual Improvements to Korean IFRS 1103 Business Combination |
The amendments clarify that when a party to a joint arrangement obtains control of a business that is a joint operation, and had rights to the assets and obligations for the liabilities relating to that joint operation immediately before the acquisition date, the transaction is a business combination achieved in stages. In such cases, the acquirer shall remeasure its entire previously held interest in the joint operation.
| Annual Improvements to Korean IFRS 1111 Joint Agreements |
The amendments clarify that when a party that participates in, but does not have joint control of, a joint operation might obtain joint control of the joint operation in which the activity of the joint operation constitutes a business. In such cases, previously held interests in the joint operation are not remeasured.
| Annual Improvements to Paragraph 57A of Korean IFRS 1012 Income Tax |
The amendment is applied to all the income tax consequences of dividends and requires an entity to recognize the income tax consequences of dividends in profit or loss, other comprehensive income or equity according to where the entity originally recognized those past transactions or events.
| Annual Improvements to Korean IFRS 1023 Borrowing Cost |
The amendments clarify that if a specific borrowing remains outstanding after the related qualifying asset is ready for its intended use (or sale), it becomes part of general borrowings.
2.2 Measurement Basis
The separate financial statements have been prepared under the historical cost convention unless otherwise specified.
2.3 Functional and Presentation Currency
Items included in the separate financial statements of the Company are measured using the currency of the primary economic environment in which the Company operates (the functional currency). The separate financial statements are presented in Korean won, which is the Companys functional and presentation currency.
2.4 Critical Accounting Estimates
The preparation of separate 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.
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KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2018 and 2017
Estimates and assumptions are continually evaluated and any change in an accounting estimate is recognized prospectively by including it in profit or loss in the period of the change, if the change affects that period only. Alternatively, if the change in accounting estimate affects both the period of change and future periods, that change is recognized in the profit or loss of all those periods.
The significant accounting estimates and assumptions are consistently applied to all periods presented, except for the assumptions for income tax expense.
3. Significant Accounting Policies
The significant accounting policies and calculation methods applied in the preparation of these separate financial statements have been consistently applied to all periods presented, except for the impact of changes due to enactment of new standards, amendments and interpretations disclosed in Note 2.1 and the following paragraph.
3.1 Recognition and Measurement of Financial Instruments
3.1.1 Initial recognition
The Company recognizes a financial asset or a financial liability in its statement of financial position when the Company 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 Company classifies financial assets as financial assets at fair value through profit or loss, financial assets at fair value through other comprehensive income, or financial assets at amortized cost. The Company 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 separate 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 amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arms length transaction. 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.
3.1.2 Subsequent measurement
After initial recognition, financial instruments are measured at amortized cost or fair value based on classification at initial recognition.
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KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2018 and 2017
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 on initial recognition:
| minus the principal repayments |
| plus or minus the cumulative amortization using the effective interest method of any difference between that initial amount and the maturity amount |
| or any reduction (directly or through the use of an allowance account) due to impairment or uncollectibility |
Fair value
Fair values, which the Company 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 Company uses valuation models that are commonly used by market participants and customized for the Company 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 Company 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.
In addition, the fair value information recognized in the statements of financial position is classified into the following fair value hierarchy, reflecting the significance of the input variables used in the fair value measurement.
Level 1 : | quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date |
Level 2 : | inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. |
Level 3 : | 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.
15
KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2018 and 2017
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.
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 Company 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.
3.1.3 Derecognition
Derecognition is the removal of a previously recognized financial asset or financial liability from the statement of financial position. The Company 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 Company has not retained control. If the Company neither transfers nor disposes of substantially all the risks and rewards of ownership of the financial assets, the Company continues to recognize the financial asset to the extent of its continuing involvement in the financial asset.
If the Company 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 Company continues to recognize the transferred asset in its entirety and recognize a financial liability for the consideration received.
The Company writes off financial assets in its entirety or to a portion thereof when the principal and interest on the principal amount outstanding are determined to be no longer recoverable. In general, the Company considers write-off if significant financial difficulties of the debtor, or delinquency in interest or principal payments is indicated. The write-off decision is made in accordance with internal regulations and may require approval from external institution, if necessary. After the write-off, the Company can collect the written-off loans continuously according to the internal policy. Recovered amounts of financial assets previously written-off are recognized at profit or loss.
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.
3.1.4 Offsetting
Financial assets and liabilities are offset and the net amount reported in the separate 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 Company or the counterparty.
16
KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2018 and 2017
3.2 Cash and Due from Financial Institutions
Cash and due from financial institutions 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, and due from financial institutions. Cash and due from financial institutions are measured at amortized cost.
3.3 Non-derivative Financial Assets
3.3.1 Financial assets at fair value through profit or loss
Financial assets classified as held for trading, financial assets designated by the Company as at fair value through profit or loss upon initial recognition, and financial assets that are required to be mandatorily measured at fair value through profit or loss are classified as financial assets at fair value through profit or loss.
The Company may designate certain financial assets upon initial recognition as at fair value through profit or loss when the designation 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.
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 and dividend income from financial assets at fair value through profit or loss are also recognized in the statement of comprehensive income.
3.3.2 Financial assets at fair value through other comprehensive income
The Company classifies below financial assets as financial assets at fair value through other comprehensive income;
| debt instruments with a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets, and consistent with representing solely payments of principal and interest on the principal amount outstanding or; |
| equity instruments, not held for trading with the objective of generating a profit from short-term fluctuations in price or dealers margin, designated as financial assets at fair value through other comprehensive income |
After initial recognition, a financial asset at fair value through other comprehensive income is measured at fair value. Gain and loss from changes in fair value, other than dividend income and interest income amortized using effective interest method and exchange differences arising on monetary items which are recognized directly in income as interest income or expense, are recognized as other comprehensive income in equity.
At disposal of financial assets at fair value through other comprehensive income, cumulative gain or loss is recognized as profit or loss for the reporting period. However, cumulative gain or loss of equity instrument designated as fair value through other comprehensive income are not recycled to profit or loss at disposal.
17
KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2018 and 2017
Financial assets at fair value through other comprehensive income denominated in foreign currencies are translated at the closing rate. Exchange differences resulting from changes in amortized cost are recognized in profit or loss, and other changes are recognized as equity.
3.3.3 Financial assets measured at amortized cost
A financial asset, which are held within the business model whose objective is to hold assets in order to collect contractual cash flows and consistent with representing solely payments of principal and interest on the principal amount outstanding, are classified as a financial asset at amortized cost.
Financial assets at amortized cost are subsequently measured at amortized cost using the effective interest method after initial recognition and interest income is recognized using the effective interest method.
3.4 Expected Credit Loss of Financial Assets (Debt Instruments)
The Company measures expected credit loss and recognizes loss allowance at the end of the reporting period for financial assets measured at amortized cost and fair value through other comprehensive income with the exception of financial asset measured at fair value through profit or loss.
Expected credit losses are a probability-weighted estimate of credit losses (i.e. the present value of all cash shortfalls) over the expected life of the financial instrument. The Company measures expected credit losses by reflecting reasonable and supportable information that is reasonably available at the reporting date without undue cost or effort, including information about past events, current conditions and forecasts of future economic conditions.
The Company uses the following three measurement techniques in accordance with Korean IFRS:
| General approach: for financial assets and off-balance-sheet unused credit line that are not applied below two approaches |
| Simplified approach: for receivables, contract assets and lease receivables |
| Credit-impaired approach: for purchased or originated credit-impaired financial assets |
Different measurement approaches are applied depending on significant increase in credit risk. 12 month expected credit losses is recognized when credit risk has not significantly increased since initial recognition. A loss allowance at an amount equal to lifetime expected credit losses is recognized when credit risk has significantly increased since initial recognition. Lifetime is presumed to be a period to the contractual maturity date of a financial asset (the expected life of the financial asset.
18
KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2018 and 2017
One or more of the following items is deemed significant increase in credit risk. When the contractual cash flows of a financial asset are renegotiated or otherwise modified, the Company determines whether the credit risk has increased significantly since initial recognition using the following information.
| more than 30 days past due; |
| decline in credit rating at period end by more than certain notches as compared to that at initial recognition; |
| debt restructuring (except for impaired financial assets); and |
| credit delinquency information on Korea Federation of Banks, and etc. |
Under simplified approach, the Company shall always measure the loss allowance at an amount equal to lifetime expected credit losses. Under credit-impaired approach, the Company shall only recognize the cumulative changes in lifetime expected credit losses since initial recognition as a loss allowance for purchased or originated credit-impaired financial assets. In assessing credit impairment, the Company uses definition of default as in the new Basel Accord which rules calculation of Capital Adequacy Ratio.
The Company generally deems one or more of the following items credit-impaired:
| no less than 90 days past due; |
| legal proceedings related to collection; |
| a borrower that has received a warning from the Korea Federation of banks; |
| corporate borrowers that are rated C or D; |
| debt restructuring. |
3.4.1 Forward-looking information
The Company uses forward-looking information, when it determines whether the credit risk has increased significantly since initial recognition and measures expected credit losses.
The Company assumes the risk component has a certain correlation with the business cycle, and calculates the expected credit loss by reflecting the forward-looking information with macroeconomic variables on the measurement inputs.
Forward looking information used in calculation of expected credit loss is derived by KB Financial Group Research Institute after comprehensive consideration of a variety of factors including scenario in management planning, third party forecast, and others.
3.4.2 Measuring expected credit losses on financial assets at amortized cost
The amount of the loss on financial assets at amortized cost 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 Company estimates expected future cash flows for financial assets that are individually significant (individual assessment of impairment).
For financial assets that are not individually significant, the Company collectively estimates expected credit loss by grouping loans with homogeneous credit risk profile (collective assessment of impairment).
19
KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2018 and 2017
Individual assessment of impairment
Individual assessment of impairment losses are calculated using managements best estimate on present value of expected future cashflows. The Company uses all the available information including operating cash flow of the borrower and net realizable value of any collateral held.
Collective assessment of impairment
Collective assessment of loss allowance involves historical loss experience along with incorporation of forward-looking information. Such process incorporates factors such as type of collateral, product and borrowers, credit rating, size of portfolio and recovery period and applies Probability of Default(PD) on a group of assets and Loss Given Default(LGD) by type of recovery method. Also, the expected credit loss model involves certain assumption to determine input based on loss experience and forward-looking information. These models and assumptions are periodically reviewed to reduce gap between loss estimate and actual loss experience.
Lifetime expected credit loss as at the end of the reporting period is calculated by product of carrying amount net of expected repayment, PD for each period and LGD adjusted by change in carrying amount.
3.4.3 Measuring expected credit losses on financial assets at fair value through other comprehensive income
Measuring method of expected credit losses on financial assets at fair value through other comprehensive income is equal to the method of financial assets at amortized cost, except for loss allowances that are recognized as other comprehensive income. Amounts recognized in other comprehensive income for sale or repayment of financial assets at fair value through other comprehensive income are reclassified to profit or loss.
3.5 Revenue Recognition
The Company recognizes revenues in accordance with the following revenue recognition standard:
| Step 1: Identify the contract with a customer. |
| Step 2: Identify the performance obligations in the contract. |
| Step 3: Determine the transaction price. |
| Step 4: Allocate the transaction price to the performance obligations in the contract. |
| Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation. |
3.5.1 Interest income and expense
Interest income of financial assets at amortized cost and financial assets at fair value through other comprehensive income, and expense are recognized in statements of comprehensive income 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 Company estimates cash flows considering all contractual terms of the financial instrument but does not consider future credit losses. The calculation includes all fees and points paid (main components of effective interest rates only) 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 Company uses the contractual cash flows over the full contractual term of the financial instrument (or group of financial instruments).
20
KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2018 and 2017
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.
Interest earned arising from debt investments at fair value through profit or loss is also classified as interest income in statements of comprehensive income.
3.5.2 Fee and commission income
The Company 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. Fees which can be earned through the certain periods, including account servicing fees, investment management fees, and etc, are recognized when the related services are provided.
Fees that are earned on the execution of a significant act
Such fees are recognized as revenue when the significant act has been completed.
3.5.3 Net gains/losses on financial instruments at fair value through profit or loss
Net gains/losses on financial instruments at fair value through profit or loss include profit or loss (changes in fair value, dividends, and gain/loss from foreign currency translation) from following financial instruments:
| Gain or loss from financial instruments at fair value through profit or loss |
| Gain or loss from derivatives for trading, including derivatives for hedging that does not meet the condition of hedge accounting |
21
KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2018 and 2017
3.5.4 Dividend income
Dividend income is recognized in profit or loss when the right to receive payment is established. Dividend income is recognized as relevant items on statements of profit or loss and other comprehensive income in accordance with the classification of equity instruments.
3.6 Investments in Subsidiaries and Associates
Investments in subsidiaries and associates are accounted at cost method in accordance with Korean IFRS 1027. The Company determines at each reporting period whether there is any objective evidence that the investments in the subsidiaries and associates are impaired. If this is the case, the Company calculates the amount of impairment as the difference between the recoverable amount of the subsidiaries or associates and its carrying value.
3.7 Property and Equipment
Recognition and Measurement
All property and equipment that qualify for recognition as an asset are measured at its 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.
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.
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 Company. The depreciable amount of an asset is determined after deducting its residual value.
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 | ||
Leasehold improvements Equipment and vehicles |
Declining-balance Declining-balance |
4 years 4 years |
The residual value, the useful life and the depreciation method applied to an asset are reviewed at each financial year-end and, if expectations differ from previous estimates or if there has been a significant change in the expected pattern of consumption of the future economic benefits embodied in the asset, the changes are accounted for as a change in an accounting estimate.
22
KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2018 and 2017
3.8 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 membership right, are amortized using the straight-line 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 | ||
Software |
Straight-line | 4 years | ||
Others |
Straight-line | 4 ~ 19 years |
The amortization period and the amortization method for intangible assets with a definite or limited useful life are reviewed at each financial year end. Where an intangible asset is not being amortized because its useful life is considered to be indefinite, the Company 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 definite or limited useful life is accounted for as a change in an accounting estimate.
3.9 Impairment of Non-financial Assets
The Company 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 Company estimates the recoverable amount of the asset.
The recoverable amount is estimated for the individual asset. If it is not possible to estimate the recoverable amount of the individual asset, the Company 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 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.
3.10 Provisions
Provisions are recognized when the Company 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.
23
KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2018 and 2017
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.
3.11 Equity Instrument Issued by the Company
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.
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares are deducted from the equity.
3.12 Employee Compensation and Benefits
3.12.1 Post-employment benefit:
Defined benefit plans
All post-employment benefit, other than defined contribution plans, is 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 fair value of plan assets deducted from the total of the present value of the defined benefit obligation results in an asset, it is recognized to the extent of any cumulative unrecognized past service cost and 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 arises when the Company introduces a defined benefit plan that attributes to past service or changes the benefits payable for past service under an existing defined benefit plan. Such past service cost is recognized immediately in profit or loss.
Defined contribution plans
The contributions are recognized as employee benefit expense when they are due.
3.12.2 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.
24
KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2018 and 2017
The expected cost of profit-sharing and bonus payments are recognized as liabilities when the Company 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.
3.12.3 Share-based payment
The Company has share grant programs to directors and employees of the Company. When the stock grants are exercised, the Company can either select to issue new shares or distribute treasury shares, or compensate the difference in fair value of shares and exercise price.
For a share-based payment transaction in which the terms of the arrangement provide the Company with the choice of whether to settle in cash or by issuing equity instruments, the Company determined that it has a present obligation to settle in cash because the Company has a past practice and a stated policy of settling in cash. Therefore, the Company accounts for the transaction in accordance with the requirements of cash-settled share-based payment transactions.
The Company 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 Company 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.
3.12.4 Termination benefits
Termination benefits are employee benefits provided in exchange for the termination of an employees employment as a result of either (a) the Company decision to terminate an employees employment before the normal retirement date; or (b) an employees decision to accept an offer of benefits in exchange for the termination of employment. The Company recognizes liabilities and expenses for termination benefits at the earlier of the following dates: when the Company can no longer withdraw the offer of those benefits and when the Company 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 which are not expressed to be settled wholly before 12 months after the end of the reporting period are discounted to present values.
3.13 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 and included in profit or loss for the year, except to the extent that the tax arises from (a) a transaction or event which is recognized either in other comprehensive income or directly in equity and (b) a business combination.
25
KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2018 and 2017
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 expenses 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 Company offsets current income tax assets and current income tax liabilities if, and only if, the Company (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.
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.
The carrying amount of a deferred income tax asset is reviewed at the end of each reporting period. The Company 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 be applied 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 Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.
The Company offsets deferred income tax assets and deferred income tax liabilities when the Company 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.
Uncertain tax positions
Uncertain tax positions arise from a claim for rectification brought by the Company, an appeal for a refund of tax levied by the tax authorities, or others due to different interpretation of tax laws or others. The Company recognizes its uncertain tax positions in the separate 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.
26
KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2018 and 2017
3.14 Earnings per Share
The Company calculates basic earnings per share amounts and diluted earnings per share amounts for profit or loss attributable to ordinary equity holders 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 by the weighted average number of ordinary shares outstanding during the period. For the purpose of calculating diluted earnings per share, the Company adjusts profit or loss attributable to ordinary equity holders and the weighted average number of shares outstanding for the effects of all dilutive potential ordinary shares including convertible bond and share option.
3.15 Operating Segments
The Company is composed of a single operating segment. Therefore, disclosures on segments are omitted in accordance with Korean IFRS 1108, Operating Segments.
4. Financial Risk Management
4.1 Summary
4.1.1 Overview of financial risk management policy
The financial risks that the Company is exposed to are credit risk, market risk, liquidity risk and others.
The note regarding financial risk management provides information about the risks that the Company is exposed to, including the objectives, policies, assessment and management process of risks. Additional quantitative information is disclosed throughout the separate financial statements.
The Companys risk management system focuses on increasing transparency, developing the risk management environment, and the preemptive response to risk due to rapid changes in the financial environment to support the Companys long-term strategy and business decisions efficiently. Credit risk, market risk and liquidity risk have been recognized as the Companys key risks. These risks are measured and managed in Internal 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 Companys target risk appetite. The committee approves significant risk matters and reviews the level of risks that the Company is exposed to and the appropriateness of the Companys risk management operations as an ultimate decision-making authority.
27
KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2018 and 2017
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 Companys risk management.
Risk Management Division
The Risk Management Division is responsible for conducting detailed policies, procedures and working processes relating to the Companys 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 counterpartys default, breach of contract and deterioration in the credit quality of the counterparty. For risk management reporting purposes, the individual borrowers default risk is considered.
4.2.2 Credit risk management
The Company measures expected losses on assets that are subject to credit risk management and uses it as a management indicator.
4.2.3 Maximum exposure to credit risk
The Companys maximum exposures of financial instruments to credit risk without consideration of collateral values as of December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | |||
Due from financial institutions |
||||
Loans at amortized cost |
50,000 | |||
Other financial assets |
17,116 | |||
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(In millions of Korean won) | 2017 | |||
Due from financial institutions |
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Loans |
10,000 | |||
Other financial assets |
16,207 | |||
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4.2.4 Credit risk of loans
The Company maintains an allowance for loan losses associated with credit risk on loans to manage its credit risk.
The Company assesses expected credit loss on financial asset at amortized cost and financial asset at fair value through other comprehensive income other than financial asset at fair value through profit or loss and recognizes loss allowance. Expected credit losses are a probability-weighted estimate of possible credit losses within certain range by reflecting reasonable and supportable information that is reasonably available at the reporting date without undue cost or effort, including information about past events, current conditions and forecasts of future economic conditions. For financial assets at amortized cost, the Company measures the expected credit losses and presents it in the financial statements netting the allowance from the related loans; for financial assets measured at fair value through other comprehensive income, the Company presents it in the other comprehensive income.
28
KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2018 and 2017
Loans as of December 31, 2018 are classified as follows:
(In millions of Korean won) | 2018 | |||||||||||||||||||||||
The financial instruments applying 12-month expected credit losses |
The financial instruments applying lifetime expected credit losses |
Financial instruments applying credit loss model |
Financial instruments not applying expected credit losses |
Total | ||||||||||||||||||||
Non-impaired | Impaired | |||||||||||||||||||||||
Financial assets at amortized cost Corporate |
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Credit quality of loans graded according to the probability of default as of December 31, 2018 is as follows:
Range of PD (%) (Probability of Default) | ||
Grade 1 |
0.0 ~ 1.0 | |
Grade 2 |
1.0 ~ 5.0 | |
Grade 3 |
5.0 ~ 15.0 | |
Grade 4 |
15.0 ~ 30.0 | |
Grade 5 |
30.0 ~ |
Loans as of December 31, 2017 are classified as follows:
(In millions of Korean won) | 2017 | |||||||
Corporate loans |
Percentage (%) |
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Loans |
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Neither past due nor impaired |
100.00 | |||||||
Past due but not impaired |
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10,000 | 100.00 | |||||||
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Less: Allowances |
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Carrying amount |
100.00 | |||||||
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29
KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2018 and 2017
Credit quality of loans that are neither past due nor impaired are as follows:
Corporate Loans | ||||
(In millions of Korean won) | December 31, 2017 | |||
Grade 1 |
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Grade 2 |
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Grade 3 |
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Grade 4 |
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Grade 5 |
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Credit quality of loans graded according to the probability of default as of December 31, 2017 is as follows:
Range of PD (%) (Probability of Default) | ||
Grade 1 |
0.0 ~ 1.0 | |
Grade 2 |
1.0 ~ 5.0 | |
Grade 3 |
5.0 ~ 15.0 | |
Grade 4 |
15.0 ~ 30.0 | |
Grade 5 |
30.0 ~ |
4.2.5 Credit risk of due from financial institutions
The credit quality of due from financial institutions as of December 31, 2018, is classified as follows:
(In millions of Korean won) | 2018 | |||||||||||||||||||||||
The financial instruments applying 12-month expected credit losses |
The financial instruments applying lifetime expected credit losses |
Financial instruments applying credit loss model |
Financial instruments not applying expected credit losses |
Total | ||||||||||||||||||||
Non-impaired | Impaired | |||||||||||||||||||||||
Due from financial institutions at amortized cost |
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4.2.6 Credit risk concentration analysis
Details of the Companys loans by country as of December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | |||||||||||||||
Corporate loans |
% | Allowances | Carrying amount |
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Korea |
100.00 | |||||||||||||||
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100.00 | ||||||||||||||||
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30
KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2018 and 2017
(In millions of Korean won) | 2017 | |||||||||||||||
Corporate loans |
% | Allowances | Carrying amount |
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Korea |
100.00 | |||||||||||||||
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Details of the Companys corporate loans by industry as of December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | |||||||||||||||
Loans | % | Allowances | Carrying amount |
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Financial institutions |
100.00 | |||||||||||||||
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100.00 | ||||||||||||||||
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Loans | % | Allowances | Carrying amount |
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Financial institutions |
100.00 | |||||||||||||||
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100.00 | ||||||||||||||||
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Details of the Companys due from financial institutions by industry as of December 31, 2018 are as follows:
(In millions of Korean won) | 2018 | |||||||||||||||
Amount | % | Allowances | Carrying amount |
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Due from financial institutions at amortized cost |
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Financial Institutions |
100.00 | |||||||||||||||
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100.00 | ||||||||||||||||
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Details of the Companys due from financial institutions by country as of December 31, 2018 are as follows:
(In millions of Korean won) | 2018 | |||||||||||||||
Amount | % | Allowances | Carrying amount |
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Due from financial institutions at amortized cost |
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Korea |
100.00 | |||||||||||||||
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100.00 | ||||||||||||||||
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4.3 Liquidity Risk
4.3.1 Overview of liquidity risk
Liquidity risk is a risk that the Company becomes insolvent 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 Company manages its liquidity risk through analysis of the contractual maturity of interest-bearing assets and liabilities. The Company discloses the analysis of remaining contractual maturity of financial assets and liabilities by maturity group; such as, on demand, up to one month, between over one month and three months, between over three months and 12 months, between over one year and five years, and over five years.
31
KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2018 and 2017
Cash flows disclosed for the maturity analysis are undiscounted contractual principal and interest to be received (paid) and; thus, are not identical to the amount in the financial statements that are based on the present value of expected cash flows in some cases. The amount of interest to be received or paid on floating rate assets and liabilities is measured on the assumption that the current interest rate would be the same through the maturity.
4.3.2. Liquidity risk management
The liquidity risk is managed by liquidity management principles and related 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 Company.
4.3.3. Analysis of remaining contractual maturity of financial assets and liabilities
The remaining contractual maturity of financial assets and liabilities as of December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | |||||||||||||||||||||||||||
On demand |
Up to 1 month |
1-3 months |
3-12 months |
1-5 years |
Over 5 years |
Total | ||||||||||||||||||||||
Financial assets |
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Cash and due from financial institutions1 |
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Financial assets at fair value through profit or loss2 |
| | | | | 289,179 | 289,179 | |||||||||||||||||||||
Loans at amortized cost |
| | | 51,075 | | | 51,075 | |||||||||||||||||||||
Other financial assets |
| 1,532 | | 14,399 | | | 15,931 | |||||||||||||||||||||
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Financial liabilities |
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Debts |
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Debentures |
| 6,009 | 103,180 | 870,199 | 3,636,044 | 1,187,038 | 5,802,470 | |||||||||||||||||||||
Other financial liabilities |
| 7,555 | | | | | 7,555 | |||||||||||||||||||||
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32
KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2018 and 2017
(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 |
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Cash and due from financial institutions1 |
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Financial assets designated at fair value through profit or loss2 |
| | | | | 284,485 | 284,485 | |||||||||||||||||||||
Loans |
| | | 10,096 | | | 10,096 | |||||||||||||||||||||
Other financial assets |
| 795 | | 14,699 | | | 15,494 | |||||||||||||||||||||
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Financial liabilities |
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Debts |
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Debentures |
| 2,726 | 24,121 | 767,259 | 3,592,586 | 1,192,247 | 5,578,939 | |||||||||||||||||||||
Other financial liabilities |
| 19,942 | | | | | 19,942 | |||||||||||||||||||||
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1 | The amount of |
2 | Financial assets at fair value through profit or loss and financial assets designated at fair value through profit or loss are hybrid capital instruments and are included in the Over 5 years category according to their remaining contractual maturity because the assets point of sale is uncertain. |
4.4 Market Risk
4.4.1 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 of future cash flows of financial instruments. The most significant risk of the Company is interest rate risk.
4.4.2 Interest rate risk
Definition of interest rate risk
Interest rate risk is the risk that the fair value of items in the statement of financial position and cash flows relating to interest income and interest cost incurred from investing and financing activities change due to interest rate fluctuation.
Observation method and management indicator on interest rate risk
The main objective of interest rate risk management is to protect asset values against interest rate fluctuations. The Company manages the risk through measurement and management of Value at Risk(VaR) for the interest rate.
Interest Rate VaR
Interest rate VaR is the maximum possible loss due to interest rate risk at a 99.9% confidence level. The measurement results of risk as of December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | 2017 | ||||||
Interest rate VaR |
33
KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2018 and 2017
4.5 Capital Adequacy
The Company 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 for International Settlements in June 2011, and was implemented in Korea in December 2013. The Company is required to maintain a minimum Common Equity Tier 1 ratio of at least 7.125%(2017: 6.25%), a minimum Tier 1 ratio of 8.625%(2017: 7.75%) and a minimum Total Regulatory Capital ratio of 10.625%(2017: 9.75%) as of December 31, 2018.
The Companys equity capital is classified into three categories in accordance with the Supervisory Regulations and Detailed Supervisory Regulations on Financial Holding Companies as below:
| 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 Company, 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 Company 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 Company. Tier 2 Capital includes a fund raised by issuing subordinated debentures maturing in not less than 5 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. |
Risk weighted asset means the inherent risks in the total assets held by the Company. The Company 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 Company 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 Company). The Company 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 Company measures, allocates and monitors Internal Capital by risk type and subsidiaries.
The Risk Management Council of the Company determines the Companys 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 Company monitors the limit on Internal Capital and reports the results to management and the Risk Management Council. The Company 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.
34
KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2018 and 2017
Details of the Companys capital adequacy calculation in line with Basel III, as of December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | 2017 | ||||||
Equity Capital: |
||||||||
Tier 1 Capital |
32,993,826 | 31,059,475 | ||||||
Common Equity Tier 1 Capital |
32,993,826 | 31,059,475 | ||||||
Additional Tier 1 Capital |
| | ||||||
Tier 2 Capital |
1,482,346 | 1,342,105 | ||||||
Risk-weighted assets: |
236,099,017 | 212,777,226 | ||||||
Equity Capital (%): |
14.60 | 15.23 | ||||||
Tier 1 Capital (%) |
13.97 | 14.60 | ||||||
Common Equity Tier 1 Capital (%) |
13.97 | 14.60 |
5. Financial Assets and Financial Liabilities
5.1 Classification and Fair value of Financial Instruments
The carrying amounts and fair value of financial assets and liabilities by category as of December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | |||||||
Carrying amount |
Fair value |
|||||||
Financial assets |
||||||||
Financial assets at fair value through profit or loss |
||||||||
Financial assets at amortized cost |
||||||||
Due from financial institutions |
344,302 | 344,302 | ||||||
Loans |
50,000 | 50,000 | ||||||
Other financial assets |
17,116 | 17,116 | ||||||
|
|
|
|
|||||
|
|
|
|
|||||
Financial liabilities |
||||||||
Financial liabilities at amortized cost |
||||||||
Debts |
||||||||
Debentures |
5,373,266 | 5,398,656 | ||||||
Other financial liabilities |
19,953 | 19,953 | ||||||
|
|
|
|
|||||
|
|
|
|
35
KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2018 and 2017
(In millions of Korean won) | 2017 | |||||||
Carrying amount |
Fair value |
|||||||
Financial assets |
||||||||
Financial assets designated at fair value through profit or loss |
||||||||
Loans and receivables |
||||||||
Due from financial institutions |
245,400 | 245,400 | ||||||
Loans |
10,000 | 10,000 | ||||||
Other financial assets |
16,207 | 16,207 | ||||||
|
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|
|||||
|
|
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|
|||||
Financial liabilities |
||||||||
Financial liabilities at amortized cost |
||||||||
Debts |
||||||||
Debentures |
5,162,600 | 5,094,561 | ||||||
Other financial liabilities |
29,963 | 29,963 | ||||||
|
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|
|||||
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|
|
Fair value is the amount for which an asset could be exchanged, or a liability could be settled, between knowledgeable, willing parties in an arms length transaction. For each class of financial assets and financial liabilities, the Company 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 quoted price in an active market.
Methods of determining fair value of 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 (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, Imputed Market Value Model, Dividend Discount Model, Risk Adjusted Discount Rate Method, and Net Asset Value Method. | |
Derivatives |
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 Company 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 and the Monte Carlo Simulation or valuation results from independent external professional valuation institution. | |
Loans at amortized cost |
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. | |
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. |
36
KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2018 and 2017
Fair value hierarchy
The Company 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 Company 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.
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 measured at fair value in the statement of financial position as of December 31, 2018 and 2017, is as follows:
37
KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2018 and 2017
(In millions of Korean won) | 2018 | |||||||||||||||
Fair value hierarchy | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Financial assets |
||||||||||||||||
Financial assets at fair value through profit or loss |
||||||||||||||||
Derivative-linked securities |
(In millions of Korean won) | 2017 | |||||||||||||||
Fair value hierarchy | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Financial assets |
||||||||||||||||
Financial assets designated at fair value through profit or loss |
||||||||||||||||
Derivative-linked securities |
Fair value hierarchy of financial assets and liabilities whose fair values are disclosed
The fair value hierarchy of financial assets and liabilities whose fair values are disclosed as of December 31, 2018 and 2017, is as follows:
(In millions of Korean won) | 2018 | |||||||||||||||
Fair value hierarchy | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Financial assets |
||||||||||||||||
Cash and due from financial institutions1 |
||||||||||||||||
Loans at amortized cost2 |
| | 50,000 | 50,000 | ||||||||||||
Other financial assets3 |
| | 17,116 | 17,116 | ||||||||||||
|
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|
|||||||||
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|||||||||
Financial liabilities |
||||||||||||||||
Debts4 |
||||||||||||||||
Debentures |
| 5,398,656 | | 5,398,656 | ||||||||||||
Other financial liabilities3 |
| | 19,953 | 19,953 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
|
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|
|
|
(In millions of Korean won) | 2017 | |||||||||||||||
Fair value hierarchy | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Financial assets |
||||||||||||||||
Cash and due from financial institutions1 |
||||||||||||||||
Loans2 |
| | 10,000 | 10,000 | ||||||||||||
Other financial assets3 |
| | 16,207 | 16,207 | ||||||||||||
|
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|||||||||
Financial liabilities |
||||||||||||||||
Debts4 |
||||||||||||||||
Debentures |
| 5,094,561 | | 5,094,561 | ||||||||||||
Other financial liabilities3 |
| | 29,963 | 29,963 | ||||||||||||
|
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|
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38
KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2018 and 2017
1 | Because due from financial institutions classified as level 2 are deposits on demand, carrying amounts are reasonable approximations of fair values. And because due from financial institutions classified as level 3 are due from financial institutions with residual maturity of less than 3 months, carrying amounts are reasonable approximations of fair values. |
2 | Because loans at amortized cost and loans classified as level 3 are loans with residual maturity of less than one year, carrying amounts are reasonable approximations of fair values. |
3 | For other financial assets and other financial liabilities classified as level 3, carrying amounts are reasonable approximations of fair values. |
4 | Because debentures classified as level 2 are liabilities with residual maturity of less than one year, carrying amounts are reasonable approximations of fair values. |
Valuation techniques and 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, 2018 and 2017, are as follows:
(In millions of Korean won) | Fair value | Valuation Techniques |
Inputs | |||||||||||||
2018 | 2017 | |||||||||||||||
Financial liabilities |
||||||||||||||||
Debentures |
DCF model | Discount rate |
5.2 Level 3 of the Fair Value Hierarchy Disclosure
5.2.1 Valuation policy and process for fair value measurement categorized as Level 3
The Company uses external, independent and qualified professional valuers valuation to determine the fair value of the Companys assets at the end of every reporting period.
5.2.2 Changes in fair value (Level 3) measured using valuation technique based on assumption that is unobservable in the market
Details of changes in Level 3 of the fair value hierarchy for the years ended December 31, 2018 and 2017, are as follows:
39
KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2018 and 2017
(In millions of Korean won) | 2018 | |||
Financial assets at fair value through profit or loss |
||||
Beginning balance |
||||
Total gains or losses |
||||
- Profit or loss for the period |
4,694 | |||
- Other comprehensive income |
| |||
Purchases |
| |||
Sales |
| |||
Issues |
| |||
Settlements |
| |||
Transfers into Level 3 |
| |||
Transfers out of Level 3 |
| |||
|
|
|||
Ending balance |
||||
|
|
(In millions of Korean won) | 2017 | |||
Financial assets designated at fair value through profit or loss |
||||
Beginning balance |
||||
Total gains or losses |
||||
- Profit or loss for the period |
(12,171 | ) | ||
- Other comprehensive income |
| |||
Purchases |
50,000 | |||
Sales |
| |||
Issues |
| |||
Settlements |
| |||
Transfers into Level 3 |
| |||
Transfers out of Level 3 |
| |||
|
|
|||
Ending balance |
||||
|
|
In relation to changes in Level 3 of the fair value hierarchy, total gains or losses recognized in profit or loss, and profit or loss from financial instruments held at the end of the reporting period in the statement of comprehensive income for the years ended December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | |||||||||
Gains (losses) from financial investments at fair value through profit or loss |
Other operating income |
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 |
||||||||||
(In millions of Korean won) | 2017 | |||||||||
Gains (losses) from financial investments at fair value through profit or loss (under Korean IFRS 1039) |
Other operating income |
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 |
40
KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2018 and 2017
5.2.3 Sensitivity analysis of changes in unobservable inputs
Information about fair value measurements using unobservable inputs as of December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | |||||||||||||
Fair value | Valuation technique | Unobservable inputs |
Range of unobservable inputs (%) |
Relationship of unobservable inputs to fair value | ||||||||||
Financial assets |
|
|||||||||||||
Financial assets at fair value through profit or loss |
||||||||||||||
Derivative-linked securities |
Hull and White Model, Monte Carlo Simulation |
Discount rate
Volatility of interest rate |
|
2.43 ~ 4.80
0.47 |
|
The lower the discount rate, the higher the fair value The higher the volatility, the higher the fair value fluctuation | ||||||||
(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 |
||||||||||||||
Derivative-linked securities |
Hull and White Model, Monte Carlo Simulation, DCF Model |
Discount rate
Volatility of interest rate |
|
2.44 ~ 5.10
0.50
|
|
The lower the discount rate, the higher the fair value The higher the volatility, the higher the fair value fluctuation |
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 outcome. There are derivative-linked securities whose fair value changes are recognized in profit or loss.
41
KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2018 and 2017
The results of the sensitivity analysis from changes in inputs are as follows:
(In millions of Korean won) | 2018 | |||||||||||||||
Recognition in profit or loss |
Other comprehensive income |
|||||||||||||||
Favorable changes |
Unfavorable changes |
Favorable changes |
Unfavorable changes |
|||||||||||||
Financial assets |
||||||||||||||||
Financial assets at fair value through profit or loss |
||||||||||||||||
Derivative-linked securities1 |
(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 loss |
||||||||||||||||
Derivative-linked securities1 |
1 | For equity securities, the changes in fair value are calculated by shifting principal unobservable input parameters; such as, discount rate, the correlation of rates of long-term interest rate and short-term interest rate, or the volatility of the interest rate is shifted by ± 1%. |
6. Due from Financial Institution
Details of due from financial institution as of December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | Financial Institution | Interest rate (%) (As of December 31, 2018) |
2018 | 2017 | ||||||||||||
Due from financial institution in Korean won |
Due from banks | Kookmin Bank | 0.00 ~ 1.75 | |||||||||||||
Standard Chartered Bank | 1.55 | 41,350 | 60,694 | |||||||||||||
The Korea Securities Finance Corporation | 1.79 | 100,000 | | |||||||||||||
BNK Busan Bank | 1.75 | 133,331 | 138,644 | |||||||||||||
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42
KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2018 and 2017
Details of a maturity analysis of due from financial institution, excluding restricted cash, as of December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | |||||||||||||||||||||||
Up to 3 months |
3~6 months |
6~12 months |
1~3 years |
Over 3 years |
Total | |||||||||||||||||||
Due from financial institution in Korean won |
(In millions of Korean won) | 2017 | |||||||||||||||||||||||
Up to 3 months |
3~6 months |
6~12 months |
1~3 years |
Over 3 years |
Total | |||||||||||||||||||
Due from financial institution in Korean won |
Restricted cash from financial institution as of December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | Financial Institution |
2018 | 2017 | Reason for restriction | ||||||||||
Due from financial institution in Korean won |
Kookmin Bank | Pledged as collateral for the overdraft establishment |
7. Financial assets at fair value through profit or loss and financial assets at fair value through profit or loss (under Korean IFRS 1039)
Details of financial assets at fair value through profit or loss and financial assets at fair value through profit or loss (under Korean IFRS 1039) as of December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | 2017 | ||||||
Financial Assets at Fair Value through Profit or Loss and Financial Assets at Fair Value through Profit or Loss (under Korean IFRS 1039) |
||||||||
Derivative-linked securities |
8. Loans at Amortized Cost
Details of loans at amortized cost as of December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | 2017 | ||||||
Loans at amortized cost |
||||||||
Less: Allowances for loan losses |
| | ||||||
|
|
|
|
|||||
Carrying amount |
||||||||
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|
43
KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2018 and 2017
Details of loan types and customer types of loans to customers, other than banks, as of December 31, 2018 is as follows:
(In millions of Korean won) | 2018 | |||||||||||||||
Retail | Corporate | Credit card | Total | |||||||||||||
Loans |
||||||||||||||||
|
|
|
|
|
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|
|||||||||
| 50,000 | | 50,000 | |||||||||||||
|
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|
|||||||||
Proportion (%) |
| 100.00 | | 100.00 | ||||||||||||
Less: Allowances |
| | | | ||||||||||||
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9. Investments in Subsidiaries
Details of subsidiaries as of December 31, 2018, are as follows:
Name of subsidiary | Industry | Location | ||
Kookmin Bank | Banking and domestic, foreign exchange transaction | Korea | ||
KB Securities Co., Ltd. | Financial investment | Korea | ||
KB Insurance Co., Ltd | Insurance | Korea | ||
KB Kookmin Card Co., Ltd. | Credit card | Korea | ||
KB Life Insurance Co., Ltd. | Life insurance | Korea | ||
KB Asset Management Co., Ltd. | Investment advisory and collective investment | Korea | ||
KB Capital Co., Ltd. | Financial leasing | Korea | ||
KB Savings Bank Co., Ltd. | Savings banking | Korea | ||
KB Real Estate Trust Co., Ltd. | Real estate trust management | Korea | ||
KB Investment Co., Ltd. | Capital investment | Korea | ||
KB Credit Information Co., Ltd. | Collection of receivables and credit investigation | Korea | ||
KB Data System Co., Ltd. | System software, development and supply | Korea |
Investments in subsidiaries as of December 31, 2018 and 2017, are as follows:
(In millions of Korean won, except for shares and ownership %) | Number of Issued Shares |
Ownership(%) | Carrying amount | |||||||||||||
Name of subsidiary | As of December 31, 2018 | 2018 | 2017 | |||||||||||||
Kookmin Bank |
404,379,116 | 100.00 | ||||||||||||||
KB Securities Co., Ltd. |
298,620,424 | 100.00 | 3,342,391 | 3,342,391 | ||||||||||||
KB Insurance Co., Ltd. |
66,500,000 | 100.00 | 2,375,430 | 2,375,430 | ||||||||||||
KB Kookmin Card Co., Ltd. |
92,000,000 | 100.00 | 1,953,175 | 1,953,175 | ||||||||||||
KB Life Insurance Co., Ltd. |
91,200,000 | 100.00 | 485,314 | 485,314 | ||||||||||||
KB Asset Management Co., Ltd. |
7,667,550 | 100.00 | 96,312 | 96,312 | ||||||||||||
KB Capital Co., Ltd. |
21,492,128 | 100.00 | 573,811 | 573,811 | ||||||||||||
KB Savings Bank Co., Ltd. |
8,001,912 | 100.00 | 157,544 | 157,544 | ||||||||||||
KB Real Estate Trust Co., Ltd. |
16,000,000 | 100.00 | 121,553 | 121,553 | ||||||||||||
KB Investment Co., Ltd. |
8,951,797 | 100.00 | 104,910 | 104,910 | ||||||||||||
KB Credit Information Co., Ltd. |
1,252,400 | 100.00 | 23,621 | 23,621 | ||||||||||||
KB Data System Co., Ltd. |
800,000 | 100.00 | 6,334 | 6,334 | ||||||||||||
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44
KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2018 and 2017
Changes in accumulated impairment losses on investments in subsidiaries for the years ended December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | |||||||||||||||
Beginning | Impairment | Others | Ending | |||||||||||||
Accumulated impairment losses on investments in subsidiaries |
(In millions of Korean won) | 2017 | |||||||||||||||
Beginning | Impairment | Others | Ending | |||||||||||||
Accumulated impairment losses on investments in subsidiaries |
10. Property and Equipment
Details of property and equipment as of December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | |||||||||||||||
Acquisition cost |
Accumulated depreciation |
Accumulated impairment losses |
Carrying amount |
|||||||||||||
Leasehold improvements |
||||||||||||||||
Equipment and others |
5,455 | (3,462 | ) | | 1,993 | |||||||||||
|
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|||||||||
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|
|
(In millions of Korean won) | 2017 | |||||||||||||||
Acquisition cost |
Accumulated depreciation |
Accumulated impairment losses |
Carrying amount |
|||||||||||||
Leasehold improvements |
||||||||||||||||
Equipment and others |
3,675 | (3,054 | ) | | 621 | |||||||||||
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45
KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2018 and 2017
The changes in property and equipment for the years ended December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | |||||||||||||||||||
Beginning | Acquisition | Disposal | Depreciation | Ending | ||||||||||||||||
Leasehold improvements |
||||||||||||||||||||
Equipment and others |
621 | 1,780 | | (408 | ) | 1,993 | ||||||||||||||
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|
(In millions of Korean won) | 2017 | |||||||||||||||||||
Beginning | Acquisition | Disposal | Depreciation | Ending | ||||||||||||||||
Leasehold improvements |
||||||||||||||||||||
Equipment and others |
357 | 434 | (2 | ) | (168 | ) | 621 | |||||||||||||
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11. Intangible Assets
Details of intangible assets as of December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | |||||||||||||||
Acquisition cost |
Accumulated amortization |
Accumulated impairment losses |
Carrying amount |
|||||||||||||
Software |
||||||||||||||||
Membership rights |
9,623 | | (1,814 | ) | 7,809 | |||||||||||
Other intangible assets |
4,635 | (3,729 | ) | | 906 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
|
|
|
|
|
|
|
|
(In millions of Korean won) | 2017 | |||||||||||||||
Acquisition cost |
Accumulated amortization |
Accumulated impairment losses |
Carrying amount |
|||||||||||||
Software |
||||||||||||||||
Membership rights |
9,657 | | (1,864 | ) | 7,793 | |||||||||||
Other intangible assets |
4,116 | (3,537 | ) | | 579 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
|
|
|
|
|
|
|
|
The changes in intangible assets for the years ended December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | |||||||||||||||||||||||
Beginning | Acquisition | Disposal | Amortization | Reversal1 | Ending | |||||||||||||||||||
Software |
||||||||||||||||||||||||
Membership rights |
7,793 | | (34 | ) | | 50 | 7,809 | |||||||||||||||||
Other intangible assets |
579 | 520 | | (193 | ) | | 906 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
(In millions of Korean won) | 2017 | |||||||||||||||||||||||
Beginning | Acquisition | Disposal | Amortization | Reversal1 | Ending | |||||||||||||||||||
Software |
||||||||||||||||||||||||
Membership rights |
7,569 | 126 | | | 98 | 7,793 | ||||||||||||||||||
Other intangible assets |
358 | 460 | | (239 | ) | | 579 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
46
KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2018 and 2017
1 | Impairment loss for membership rights of intangible assets with indefinite useful life was recognized when its recoverable amount is lower than its carrying amount and reversal of impairment losses was recognized when its recoverable amount is higher than its carrying amount. |
The changes in accumulated impairment losses on intangible assets for the years ended December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | |||||||||||||||
Beginning | Reversal | Disposal | Ending | |||||||||||||
Accumulated impairment losses on intangible assets |
||||||||||||||||
(In millions of Korean won) | 2017 | |||||||||||||||
Beginning | Reversal | Disposal | Ending | |||||||||||||
Accumulated impairment losses on intangible assets |
12. Deferred Income Tax Assets and Liabilities
Details of deferred income tax assets and liabilities as of December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | |||||||||||
Assets | Liabilities | Net amounts | ||||||||||
Share-based payments |
||||||||||||
Membership rights |
499 | | 499 | |||||||||
Defined benefit obligation |
2,523 | | 2,523 | |||||||||
Plan assets |
| (1,604 | ) | (1,604 | ) | |||||||
Short-term employee benefits |
748 | | 748 | |||||||||
Gains (loss) on valuation of hybrid capital instruments |
2,976 | | 2,976 | |||||||||
Others |
120 | | 120 | |||||||||
|
|
|
|
|
|
|||||||
9,788 | (1,604 | ) | 8,184 | |||||||||
|
|
|
|
|
|
|||||||
Offsetting of deferred tax assets and liabilities |
(1,604 | ) | 1,604 | | ||||||||
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
(In millions of Korean won) | 2017 | |||||||||||
Assets | Liabilities | Net amounts | ||||||||||
Share-based payments |
||||||||||||
Membership rights |
513 | | 513 | |||||||||
Defined benefit obligation |
1,597 | | 1,597 | |||||||||
Plan assets |
| (948 | ) | (948 | ) | |||||||
Short-term employee benefits |
571 | | 571 | |||||||||
Gains (loss) on valuation of hybrid capital instruments |
4,267 | | 4,267 | |||||||||
Others |
124 | | 124 | |||||||||
|
|
|
|
|
|
|||||||
11,230 | (948 | ) | 10,282 | |||||||||
|
|
|
|
|
|
|||||||
Offsetting of deferred tax assets and liabilities |
(948 | ) | 948 | | ||||||||
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
47
KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2018 and 2017
Unrecognized deferred income tax assets
No deferred income tax assets have been recognized for the deductible temporary difference of W 2,896,164 million, W
66,162 million and W 51,742 million associated with investments in subsidiaries, tax loss carryforwards and impairment losses on investments in subsidiaries, respectively, as of December 31, 2018, due to the
uncertainty that all 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 2,395,805 million associated with
investments in subsidiaries as of December 31, 2018, due to the following reasons:
| The Company 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. |
The changes in cumulative temporary differences for the years ended December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | |||||||||||||||
Beginning | Decrease | Increase | Ending | |||||||||||||
Deductible temporary differences |
||||||||||||||||
Share-based payments |
||||||||||||||||
Membership rights |
1,864 | 50 | | 1,814 | ||||||||||||
Investments in subsidiaries |
2,896,164 | | | 2,896,164 | ||||||||||||
Defined benefit obligation |
5,808 | 1,393 | 4,760 | 9,175 | ||||||||||||
Short-term employee benefits |
2,077 | 2,077 | 2,721 | 2,721 | ||||||||||||
Tax loss carryforwards |
66,162 | | | 66,162 | ||||||||||||
Impairment losses on investments in subsidiaries |
51,742 | | | 51,742 | ||||||||||||
Gains(loss) on valuation of hybrid capital instruments |
15,515 | 4,693 | | 10,822 | ||||||||||||
Others |
451 | 416 | 404 | 439 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
3,054,904 | 13,677 | 8,436 | 3,049,663 | |||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Unrecognized deferred income tax assets: |
||||||||||||||||
Investments in subsidiaries |
2,896,164 | 2,896,164 | ||||||||||||||
Tax loss carryforwards |
66,162 | 66,162 | ||||||||||||||
Impairment losses on investments in subsidiaries |
51,742 | 51,742 | ||||||||||||||
|
|
|
|
|||||||||||||
40,836 | 35,595 | |||||||||||||||
|
|
|
|
|||||||||||||
Tax rate (%)1 |
27.5 | 27.5 | ||||||||||||||
|
|
|
|
|||||||||||||
Deferred income tax assets from deductible temporary differences |
||||||||||||||||
|
|
|
|
|||||||||||||
Taxable temporary differences |
||||||||||||||||
Investments in subsidiaries |
(2,395,805 | ) | | | (2,395,805 | ) | ||||||||||
Plan assets |
(3,449 | ) | (1,393 | ) | (3,779 | ) | (5,835 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
(2,399,254 | ) | (1,393 | ) | (3,779 | ) | (2,401,640 | ) | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Unrecognized deferred income tax liabilities: |
||||||||||||||||
Investments in subsidiaries |
(2,395,805 | ) | (2,395,805 | ) | ||||||||||||
|
|
|
|
|||||||||||||
(3,449 | ) | (5,835 | ) | |||||||||||||
|
|
|
|
|||||||||||||
Tax rate (%)1 |
27.5 | 27.5 | ||||||||||||||
|
|
|
|
|||||||||||||
Deferred income tax liabilities from taxable temporary differences |
||||||||||||||||
|
|
|
|
48
KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2018 and 2017
(In millions of Korean won) | 2017 | |||||||||||||||
Beginning | Decrease | Increase | Ending | |||||||||||||
Deductible temporary differences |
||||||||||||||||
Share-based payments |
||||||||||||||||
Membership rights |
1,962 | 100 | 2 | 1,864 | ||||||||||||
Investments in subsidiaries |
2,896,164 | | | 2,896,164 | ||||||||||||
Defined benefit obligation |
5,236 | 2,199 | 2,771 | 5,808 | ||||||||||||
Short-term employee benefits |
1,573 | 1,573 | 2,077 | 2,077 | ||||||||||||
Tax loss carryforwards |
66,162 | | | 66,162 | ||||||||||||
Impairment losses on investments in subsidiaries |
51,742 | | | 51,742 | ||||||||||||
Gains(loss) on valuation of hybrid capital instruments |
3,344 | | 12,171 | 15,515 | ||||||||||||
Others |
905 | 822 | 368 | 451 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
|
|
|
|
|
|
|
|
|||||||||
Unrecognized deferred income tax assets: |
||||||||||||||||
Investments in subsidiaries |
2,896,164 | 2,896,164 | ||||||||||||||
Tax loss carryforwards |
66,162 | 66,162 | ||||||||||||||
Impairment losses on investments in subsidiaries |
51,742 | 51,742 | ||||||||||||||
|
|
|
|
|||||||||||||
|
|
|
|
|||||||||||||
Tax rate (%)1 |
24.2 | 27.5 | ||||||||||||||
|
|
|
|
|||||||||||||
Deferred income tax assets from deductible temporary differences |
||||||||||||||||
Taxable temporary differences |
||||||||||||||||
Investments in subsidiaries |
(2,395,805 | ) | | | (2,395,805 | ) | ||||||||||
Plan assets |
(3,041 | ) | (2,199 | ) | (2,607 | ) | (3,449 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
|
|
|
|
|
|
|
|
|||||||||
Unrecognized deferred income tax liabilities: |
||||||||||||||||
Investments in subsidiaries |
(2,395,805 | ) | (2,395,805 | ) | ||||||||||||
|
|
|
|
|||||||||||||
(3,041 | ) | (3,449 | ) | |||||||||||||
|
|
|
|
|||||||||||||
Tax rate (%)1 |
24.2 | 27.5 | ||||||||||||||
|
|
|
|
|||||||||||||
Deferred income tax liabilities from taxable temporary differences |
||||||||||||||||
|
|
|
|
49
KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2018 and 2017
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, 2018. |
13. Other Assets
Details of other assets as of December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | 2017 | ||||||
Other financial assets |
||||||||
Receivables |
||||||||
Accrued income |
2,251 | 1,635 | ||||||
Guarantee deposits |
14,190 | 14,517 | ||||||
|
|
|
|
|||||
17,116 | 16,207 | |||||||
|
|
|
|
|||||
Other non-financial assets |
||||||||
Receivables |
838,450 | 463,012 | ||||||
Prepaid expenses |
1,763 | 1,532 | ||||||
Advanced payments |
133 | 38 | ||||||
|
|
|
|
|||||
840,346 | 464,582 | |||||||
|
|
|
|
|||||
|
|
|
|
14. Debts
Debts as of December 31, 2018 and 2017, consist of:
(In millions of Korean won) | 2018 | 2017 | ||||||
Borrowings |
50
KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2018 and 2017
Details of borrowings as of December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | Lender | Annual interest As of |
2018 | 2017 | ||||||||||||
Borrowings in Korean won |
Other borrowings | SK Securities Co., Ltd. |
| |||||||||||||
KB Securities Co., Ltd |
| | 150,000 | |||||||||||||
MERITZ Securities Co., Ltd |
2.27 | 300,000 | | |||||||||||||
|
|
|
|
|||||||||||||
|
|
|
|
The maturities of debts as of December 31, 2018 and 2017 are as follows:
(In millions of Korean won) | 2018 | |||||||||||||||||||||||
Up to 3 months |
3~6 months |
6~12 months |
1~3 years |
Over 3 years |
Total | |||||||||||||||||||
Borrowings in Korean won |
||||||||||||||||||||||||
(In millions of Korean won) | 2017 | |||||||||||||||||||||||
Up to 3 months |
3~6 months |
6~12 months |
1~3 years |
Over 3 years |
Total | |||||||||||||||||||
Borrowings in Korean won |
51
KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2018 and 2017
15. Debentures
Details of debentures as of December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | Issued date | |
Expiration date |
|
|
Annual interest rates (%) As of December 31, 2018 |
|
|
December 31, 2018 |
|
|
December 31, 2017 |
| |||||||
Unguaranteed debentures No. 3-2 |
Aug. 13, 2013 | Aug. 13, 2018 | | |||||||||||||||||
Unguaranteed debentures No. 3-3 |
Aug. 13, 2013 | Aug. 13, 2020 | 3.65 | 70,000 | 70,000 | |||||||||||||||
Unguaranteed debentures No. 5-1 |
Mar. 19, 2014 | Mar. 19, 2019 | 3.31 | 80,000 | 80,000 | |||||||||||||||
Unguaranteed debentures No. 5-2 |
Mar. 19, 2014 | Mar. 19, 2021 | 3.50 | 50,000 | 50,000 | |||||||||||||||
Unguaranteed debentures No. 6 |
Feb. 26, 2015 | Feb. 26, 2022 | 2.38 | 30,000 | 30,000 | |||||||||||||||
Unguaranteed debentures No. 7 |
June 23, 2015 | June 23, 2018 | | | 150,000 | |||||||||||||||
Unguaranteed debentures No. 8 |
June 23, 2015 | June 23, 2020 | 2.34 | 100,000 | 100,000 | |||||||||||||||
Unguaranteed debentures No. 9 |
June 23, 2015 | June 23, 2022 | 2.52 | 150,000 | 150,000 | |||||||||||||||
Unguaranteed debentures No. 10 |
Sept. 17, 2015 | Sept. 17, 2020 | 2.16 | 20,000 | 20,000 | |||||||||||||||
Unguaranteed debentures No. 11 |
Sept. 23, 2015 | Sept. 23, 2020 | 2.06 | 30,000 | 30,000 | |||||||||||||||
Unguaranteed debentures No. 12-1 |
Nov. 27, 2015 | Nov. 27, 2018 | | | 80,000 | |||||||||||||||
Unguaranteed debentures No. 12-2 |
Nov. 27, 2015 | Nov. 27, 2020 | 2.26 | 110,000 | 110,000 | |||||||||||||||
Unguaranteed debentures No. 12-3 |
Nov. 27, 2015 | Nov. 27, 2022 | 2.38 | 50,000 | 50,000 | |||||||||||||||
Unguaranteed debentures No. 13 |
Dec. 04, 2015 | Dec. 04, 2018 | | | 130,000 | |||||||||||||||
Unguaranteed debentures No. 14-1 |
Dec. 09, 2015 | Dec. 09, 2020 | 2.27 | 140,000 | 140,000 | |||||||||||||||
Unguaranteed debentures No. 14-2 |
Dec. 09, 2015 | Dec. 09, 2022 | 2.38 | 30,000 | 30,000 | |||||||||||||||
Unguaranteed debentures No. 15-1 |
May 12, 2016 | May 12, 2019 | 1.61 | 180,000 | 180,000 | |||||||||||||||
Unguaranteed debentures No. 15-2 |
May 12, 2016 | May 12, 2021 | 1.72 | 220,000 | 220,000 | |||||||||||||||
Unguaranteed debentures No. 15-3 |
May 12, 2016 | May 12, 2026 | 2.01 | 200,000 | 200,000 | |||||||||||||||
Unguaranteed debentures No. 16-1 |
May 27, 2016 | May 27, 2019 | 1.67 | 240,000 | 240,000 | |||||||||||||||
Unguaranteed debentures No. 16-2 |
May 27, 2016 | May 27, 2021 | 1.78 | 60,000 | 60,000 | |||||||||||||||
Unguaranteed debentures No. 16-3 |
May 27, 2016 | May 27, 2023 | 1.91 | 150,000 | 150,000 | |||||||||||||||
Unguaranteed debentures No. 17 |
June 27, 2016 | June 27, 2021 | 1.51 | 50,000 | 50,000 | |||||||||||||||
Unguaranteed debentures No. 18-1 |
July 25, 2016 | July 25, 2019 | 1.38 | 170,000 | 170,000 | |||||||||||||||
Unguaranteed debentures No. 18-2 |
July 25, 2016 | July 25, 2021 | 1.45 | 110,000 | 110,000 | |||||||||||||||
Unguaranteed debentures No. 18-3 |
July 25, 2016 | July 25, 2026 | 1.69 | 80,000 | 80,000 | |||||||||||||||
Unguaranteed debentures No. 19-1 |
Aug. 25, 2016 | Aug. 24, 2018 | | | 200,000 | |||||||||||||||
Unguaranteed debentures No. 19-2 |
Aug. 25, 2016 | Aug. 25, 2021 | 1.46 | 100,000 | 100,000 | |||||||||||||||
Unguaranteed debentures No. 19-3 |
Aug. 25, 2016 | Aug. 25, 2026 | 1.69 | 120,000 | 120,000 | |||||||||||||||
Unguaranteed debentures No. 20-1 |
Nov. 28, 2016 | Nov. 28, 2019 | 2.13 | 50,000 | 50,000 | |||||||||||||||
Unguaranteed debentures No. 20-2 |
Nov. 28, 2016 | Nov. 28, 2021 | 2.28 | 50,000 | 50,000 | |||||||||||||||
Unguaranteed debentures No. 21 |
Jan. 25, 2017 | Jan. 23, 2020 | 1.82 | 100,000 | 100,000 | |||||||||||||||
Unguaranteed debentures No. 22-1 |
Feb. 28, 2017 | Feb. 28, 2020 | 1.89 | 120,000 | 120,000 | |||||||||||||||
Unguaranteed debentures No. 22-2 |
Feb. 28, 2017 | Feb. 28, 2022 | 2.11 | 110,000 | 110,000 | |||||||||||||||
Unguaranteed debentures No. 23 |
Mar. 23, 2017 | Mar. 23, 2020 | 1.95 | 80,000 | 80,000 | |||||||||||||||
Unguaranteed debentures No. 24 |
Apr. 06, 2017 | Apr. 06, 2020 | 1.97 | 70,000 | 70,000 | |||||||||||||||
Unguaranteed debentures No. 25-1 |
May 24, 2017 | May 24, 2019 | 1.79 | 150,000 | 150,000 | |||||||||||||||
Unguaranteed debentures No. 25-2 |
May 24, 2017 | May 24, 2020 | 1.97 | 100,000 | 100,000 | |||||||||||||||
Unguaranteed debentures No. 25-3 |
May 24, 2017 | May 24, 2022 | 2.23 | 270,000 | 270,000 | |||||||||||||||
Unguaranteed debentures No. 25-4 |
May 24, 2017 | May 24, 2027 | 2.62 | 80,000 | 80,000 | |||||||||||||||
Unguaranteed debentures No. 26-1 |
June 27, 2017 | June 27, 2022 | 2.18 | 50,000 | 50,000 | |||||||||||||||
Unguaranteed debentures No. 26-2 |
June 27, 2017 | June 27, 2024 | 2.34 | 200,000 | 200,000 | |||||||||||||||
Unguaranteed debentures No. 27 |
July 19, 2017 | July 19, 2024 | 2.41 | 100,000 | 100,000 | |||||||||||||||
Unguaranteed debentures No. 28-1 |
Aug. 30, 2017 | Aug. 30, 2022 | 2.30 | 60,000 | 60,000 | |||||||||||||||
Unguaranteed debentures No. 28-2 |
Aug. 30, 2017 | Aug. 30, 2024 | 2.43 | 30,000 | 30,000 | |||||||||||||||
Unguaranteed debentures No. 28-3 |
Aug. 30, 2017 | Aug. 30, 2027 | 2.60 | 60,000 | 60,000 | |||||||||||||||
Unguaranteed debentures No. 29-1 |
Sept. 19, 2017 | Sept. 19, 2022 | 2.29 | 150,000 | 150,000 | |||||||||||||||
Unguaranteed debentures No. 29-2 |
Sept. 19, 2017 | Sept. 19, 2024 | 2.44 | 110,000 | 110,000 | |||||||||||||||
Unguaranteed debentures No. 30 |
Jan. 25, 2018 | Jan. 25, 2021 | 2.45 | 80,000 | | |||||||||||||||
Unguaranteed debentures No. 31-1 |
Feb. 28, 2018 | Feb. 26, 2021 | 2.57 | 150,000 | | |||||||||||||||
Unguaranteed debentures No. 31-2 |
Feb. 28, 2018 | Feb. 28, 2023 | 2.81 | 50,000 | | |||||||||||||||
Unguaranteed debentures No. 31-3 |
Feb. 28, 2018 | Feb. 28, 2028 | 3.02 | 60,000 | | |||||||||||||||
Unguaranteed debentures No. 32-1 |
Apr. 06, 2018 | Apr. 06, 2021 | 2.50 | 60,000 | | |||||||||||||||
Unguaranteed debentures No. 32-2 |
Apr. 06, 2018 | Apr. 06, 2023 | 2.71 | 80,000 | | |||||||||||||||
Unguaranteed debentures No. 32-3 |
Apr. 06, 2018 | Apr. 06, 2028 | 2.86 | 20,000 | | |||||||||||||||
Unguaranteed debentures No. 33-1 |
June 12, 2018 | June 12, 2023 | 2.81 | 100,000 | | |||||||||||||||
Unguaranteed debentures No. 33-2 |
June 12, 2018 | June 12, 2028 | 2.92 | 30,000 | | |||||||||||||||
Unguaranteed debentures No. 34-1 |
July 25, 2018 | July 23, 2021 | 2.41 | 40,000 | | |||||||||||||||
Unguaranteed debentures No. 34-2 |
July 25, 2018 | July 25, 2023 | 2.65 | 70,000 | | |||||||||||||||
Unguaranteed debentures No. 34-3 |
July 25, 2018 | July 25, 2025 | 2.71 | 20,000 | | |||||||||||||||
Unguaranteed debentures No. 34-4 |
July 25, 2018 | July 25, 2028 | 2.76 | 20,000 | | |||||||||||||||
Unguaranteed debentures No. 35 |
Oct. 05, 2018 | Oct. 05, 2023 | 2.52 | 120,000 | | |||||||||||||||
|
|
|
|
|||||||||||||||||
5,380,000 | 5,170,000 | |||||||||||||||||||
Less: Discount on debentures | (6,734 | ) | (7,400 | ) | ||||||||||||||||
|
|
|
|
|||||||||||||||||
|
|
|
|
52
KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2018 and 2017
The maturities of debentures as of December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | |||||||||||||||||||||||
Up to 3 months |
3~6 months |
6~12 months |
1~3 years |
Over 3 years |
Total | |||||||||||||||||||
Debentures in Korean won |
||||||||||||||||||||||||
(In millions of Korean won) | 2017 | |||||||||||||||||||||||
Up to 3 months |
3~6 months |
6~12 months |
1~3 years |
Over 3 years |
Total | |||||||||||||||||||
Debentures in Korean won |
53
KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2018 and 2017
Changes in debentures based on face value for the years ended December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | |||||||||||||||
Beginning | Issue | Repayment | Ending | |||||||||||||
Debentures in Korean won |
(In millions of Korean won) | 2017 | |||||||||||||||
Beginning | Issue | Repayment | Ending | |||||||||||||
Debentures in Korean won |
16. Net Defined Benefit Liabilities
Defined benefit plan
The Company operates defined benefit plans which have the following characteristics:
| The Company 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 Company. |
The net defined benefit liability recognized in the statements of financial position is calculated in accordance with actuarial valuation methods using market data; such as, interest rates, future salary increase rate and mortality rate based on historical data. Actuarial assumptions may differ from actual results, due to changes in the market, economic trends and mortality trends.
Changes in the defined benefit obligation for the years ended December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | |||||||||||
Present value of defined benefit obligation |
Fair value of plan assets |
Net defined benefit liabilities |
||||||||||
Beginning |
||||||||||||
Current service cost |
1,925 | | 1,925 | |||||||||
Interest cost (income) |
479 | (485 | ) | (6 | ) | |||||||
Remeasurements: |
||||||||||||
Actuarial gains and losses by changes in financial assumptions |
1,205 | | 1,205 | |||||||||
Actuarial gains and losses by experience adjustments |
1,151 | | 1,151 | |||||||||
Return on plan assets (excluding amounts included in interest income) |
| 280 | 280 | |||||||||
Contributions |
| (4,172 | ) | (4,172 | ) | |||||||
Payments from plans (benefit payments) |
(1,393 | ) | 1,393 | | ||||||||
Payments from the Company |
(38 | ) | | (38 | ) | |||||||
Transfer in |
2,883 | (2,844 | ) | 39 | ||||||||
Transfer out |
(2,443 | ) | 2,443 | | ||||||||
|
|
|
|
|
|
|||||||
Ending |
||||||||||||
|
|
|
|
|
|
(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 |
1,870 | | 1,870 | |||||||||
Interest cost (income) |
390 | (395 | ) | (5 | ) | |||||||
Remeasurements: |
||||||||||||
Actuarial gains and losses by changes in financial assumptions |
(533 | ) | | (533 | ) | |||||||
Actuarial gains and losses by experience adjustments |
960 | | 960 | |||||||||
Return on plan assets (excluding amounts included in interest income) |
| 220 | 220 | |||||||||
Contributions |
| (2,541 | ) | (2,541 | ) | |||||||
Payments from plans (benefit payments |
(2,199 | ) | 2,199 | | ||||||||
Payments from the Company |
(63 | ) | | (63 | ) | |||||||
Transfer in |
2,885 | (2,801 | ) | 84 | ||||||||
Transfer out |
(1,791 | ) | 1,791 | | ||||||||
|
|
|
|
|
|
|||||||
Ending |
||||||||||||
|
|
|
|
|
|
54
KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2018 and 2017
Details of the net defined benefit liabilities (assets) as of December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | 2017 | ||||||
Present value of defined benefit obligation |
||||||||
Fair value of plan assets |
(20,180 | ) | (16,795 | ) | ||||
|
|
|
|
|||||
Net defined benefit liabilities (assets) |
||||||||
|
|
|
|
Details of post-employment benefits recognized in profit or loss as employee compensation and benefits for the years ended December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | 2017 | ||||||
Current service cost |
||||||||
Net interest expenses of net defined benefit liabilities |
(6 | ) | (5 | ) | ||||
|
|
|
|
|||||
Post-employment benefits |
||||||||
|
|
|
|
Remeasurements of the net defined benefit liabilities recognized as other comprehensive income for the years ended December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | 2017 | ||||||
Remeasurements |
||||||||
Return on plan assets (excluding amounts included in interest income) |
||||||||
Actuarial gains and losses |
(2,356 | ) | (427 | ) | ||||
Income tax effects |
725 | 156 | ||||||
|
|
|
|
|||||
Remeasurements after income tax |
||||||||
|
|
|
|
Plan assets as of December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | |||||||||||
Assets quoted in an active market |
Assets not quoted in an active market |
Total | ||||||||||
Cash and due from financial institutions |
(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 |
Key actuarial assumptions used as of December 31, 2018 and 2017, are as follows:
2018 | 2017 | |||||||
Discount rate (%) |
2.30 | 2.90 | ||||||
Future salary increase rate (%) |
3.75 | 3.75 | ||||||
Turnover (%) |
1 | 1 |
55
KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2018 and 2017
Mortality assumptions are based on the 8th experience-based mortality table (retirement pension) of Korea Insurance Development Institute of 2015.
The sensitivity of the defined benefit obligation to changes in the principal assumptions as of December 31, 2018, is as follows:
Effect on defined benefit obligation | ||||||
Changes in principal assumption |
Increase in principal assumption |
Decrease in principal assumption | ||||
Discount rate (%) |
0.5%p. | 4.95 decrease | 5.30 increase | |||
Salary increase rate (%) |
0.5%p. | 5.44 increase | 5.13 decrease | |||
Turnover (%) |
0.5%p. | 0.45 decrease | 0.47 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 benefits) as of December 31, 2018, are 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 benefits |
The weighted average duration of the defined benefit obligation is 10.5 years.
Expected contribution to plan assets for periods after December 31, 2018, is estimated to be approximately W 2,200 million.
17. Other Liabilities
Details of other liabilities as of December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | 2017 | ||||||
Other financial liabilities |
||||||||
Payables |
||||||||
Accrued expenses |
12,578 | 10,521 | ||||||
|
|
|
|
|||||
19,953 | 29,963 | |||||||
|
|
|
|
|||||
Other non-financial liabilities |
||||||||
Payables |
49,348 | 36,899 | ||||||
Accrued expenses |
116,800 | 137,243 | ||||||
Withholding taxes |
380 | 730 | ||||||
|
|
|
|
|||||
166,528 | 174,872 | |||||||
|
|
|
|
|||||
|
|
|
|
56
KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2018 and 2017
18. Equity
18.1 Share Capital
Details of share capital and number of issued shares as of December 31, 2018 and 2017, are as follows:
2018 | 2017 | |||||||
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. |
Changes in shares outstanding for the years ended December 31, 2018 and 2017, are as follows:
(In number of shares) | 2018 | 2017 | ||||||
Beginning |
399,037,583 | 398,357,724 | ||||||
Increase |
| 4,440,000 | ||||||
Decrease |
(3,486,286 | ) | (3,760,141 | ) | ||||
|
|
|
|
|||||
Ending |
395,551,297 | 399,037,583 | ||||||
|
|
|
|
18.2 Capital Surplus
Details of capital surplus as of December 31, 2018 and December 31, 2017, are as follows:
(In millions of Korean won) | 2018 | 2017 | ||||||
Share premium |
||||||||
Other capital surplus |
1,465,893 | 1,465,893 | ||||||
Gain on sales of treasury share |
86,646 | 86,646 | ||||||
|
|
|
|
|||||
|
|
|
|
18.3 Accumulated Other Comprehensive Income (Loss)
Details of accumulated other comprehensive income (loss) as of December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | 2017 | ||||||
Remeasurements of net defined benefit liabilities |
Changes in accumulated other comprehensive income (loss) for the years ended December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | |||||||||||||||
Beginning | Changes | Tax effect | Ending | |||||||||||||
Remeasurements of net defined benefit liabilities |
57
KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2018 and 2017
(In millions of Korean won) | 2017 | |||||||||||||||
Beginning | Changes | Tax effect | Ending | |||||||||||||
Remeasurements of net defined benefit liabilities |
18.4 Retained Earnings
Details of retained earnings as of December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | 2017 | ||||||
Legal reserves |
||||||||
Voluntary reserves |
982,000 | 982,000 | ||||||
Regulatory reserve for credit losses |
2,374 | 2,498 | ||||||
Retained earnings before appropriation |
1,838,966 | 1,735,008 | ||||||
|
|
|
|
|||||
|
|
|
|
With respect to the allocation of net profit earned in a fiscal term, the 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.
Appropriation of retained earnings
(Expected date of appropriation for 2018: March 27, 2019)
(Date of appropriation for 2017: March 23, 2018)
(In millions of Korean won) | 2018 | 2017 | ||||||
Unappropriated retained earnings |
||||||||
Balance at the beginning of the year |
||||||||
Profit for the year |
925,905 | 553,425 | ||||||
|
|
|
|
|||||
1,838,966 | 1,735,008 | |||||||
|
|
|
|
|||||
Transfers such as discretionary reserves |
||||||||
Regulatory reserve for credit losses |
| 124 | ||||||
|
|
|
|
|||||
| 124 | |||||||
|
|
|
|
|||||
Appropriation of retained earnings |
||||||||
Legal reserve |
92,591 | 55,343 | ||||||
Regulatory reserve for credit losses |
2,084 | | ||||||
Cash dividends |
759,736 | 766,728 | ||||||
(Dividends per common share: (Dividends per common share: |
||||||||
|
|
|
|
|||||
854,411 | 822,071 | |||||||
|
|
|
|
|||||
Unappropriated retained earnings to be carried forward |
||||||||
|
|
|
|
Regulatory reserve for credit losses
Measurement and disclosure of regulatory reserve for credit losses are required in accordance with Articles 26 through 28 of the Supervisory Regulations on Financial Holding Companies.
Details of the regulatory reserve for credit losses as of December 31, 2018 and 2017, are as follows:
58
KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2018 and 2017
(In millions of Korean won) | 2018 | 2017 | ||||||
Beginning |
||||||||
Estimated amounts subject to provision (reversal) |
2,084 | (124 | ) | |||||
|
|
|
|
|||||
Ending |
||||||||
|
|
|
|
The adjustments to the regulatory reserve for credit losses for the years ended December 31, 2018 and 2017, are as follows:
(In millions of Korean won, except per share amounts) | 2018 | 2017 | ||||||
Provision of regulatory reserve for credit losses |
||||||||
Adjusted profit after provision of regulatory reserve for credit losses1 |
923,821 | 553,549 | ||||||
Adjusted basic earnings per share after provision of regulatory reserve for credit losses1 |
2,330 | 1,388 | ||||||
Adjusted diluted earnings per share after provision of regulatory reserve for credit losses1 |
1 | Adjusted profit after provision of regulatory reserve for credit losses is not in accordance with Korean IFRS and calculated on the assumption that provision of regulatory reserve for credit losses before income tax is adjusted to the profit for the period. |
18.5 Treasury Shares
Changes in treasury shares outstanding for the years ended December 31, 2018 and 2017, are as follows:
(In millions of Korean won and in number of shares) | 2018 | |||||||||||||||
Beginning | Acquisition | Disposal | Ending | |||||||||||||
Number of treasury shares1 |
19,073,954 | 3,486,286 | | 22,560,240 | ||||||||||||
Carrying amount1 |
1 | For the year ended December 31, 2018, the treasury stock trust agreement of
|
(In millions of Korean won and in number of shares) | 2017 | |||||||||||||||
Beginning | Acquisition | Disposal | Ending | |||||||||||||
Number of treasury shares1 |
19,753,813 | 3,760,141 | 4,440,000 | 19,073,954 | ||||||||||||
Carrying amount1 |
1 | For the year ended December 31, 2017, the treasury stock trust agreement of
|
59
KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2018 and 2017
19. Dividends
The dividends paid to the shareholders of the Company in 2018 and 2017 were W 766,728 million (W 1,920 per share) and
W 497,969 million (W1,250 per share), respectively. The dividend to the shareholders in respect of the year ended December 31, 2018, amounting to total dividends of W 759,736
million(W 1,920 per share) is to be proposed at the annual general meeting on March 27, 2019. The Companys separate financial statements as of December 31, 2018, do not reflect this dividend payable.
20. Net Interest Expense
Interest income (expense) and net interest expense for the years ended December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | 2017 | ||||||
Interest income |
||||||||
Due from financial institutions |
||||||||
Loans |
619 | 146 | ||||||
Other |
249 | 262 | ||||||
|
|
|
|
|||||
6,616 | 3,889 | |||||||
|
|
|
|
|||||
Interest expense |
||||||||
Debts |
1,458 | 7,996 | ||||||
Debentures |
120,993 | 93,111 | ||||||
|
|
|
|
|||||
122,451 | 101,107 | |||||||
|
|
|
|
|||||
Net interest expense |
||||||||
|
|
|
|
21. Net Fee and Commission Expense
Fee and commission income (expense) and net fee and commission expense for the years ended December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | 2017 | ||||||
Fee and commission income |
||||||||
Fees in Korean won |
||||||||
Fee and commission expense |
||||||||
Fees paid in Korean won |
5,867 | 8,380 | ||||||
Fees paid in foreign currency |
129 | 166 | ||||||
|
|
|
|
|||||
5,996 | 8,546 | |||||||
|
|
|
|
|||||
Net fee and commission expense |
||||||||
|
|
|
|
22. Net Gains on Financial Assets at Fair Value through Profit or Loss and Net Gains on Financial Assets at Fair Value through Profit or Loss (under Korean IFRS 1039)
Net gains on financial assets at fair value through profit or loss and net gains on financial assets at fair value through profit or loss (under Korean IFRS 1039) consist of gains or losses related to financial instrument that includes dividend income and gains or losses arising from changes in the fair values.
60
KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2018 and 2017
Details of net gains on financial assets at fair value through profit or loss and net gains on financial assets at fair value through profit or loss (under Korean IFRS 1039) as of December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | |||
Gains related to financial instruments at fair value through profit or loss |
||||
Dividend income on financial assets at fair value through profit or loss |
||||
Gains on valuation on financial assets at fair value through profit or loss |
4,694 | |||
|
|
|||
18,319 | ||||
|
|
|||
Losses related to financial instruments at fair value through profit or loss |
||||
Financial assets at fair value through profit or loss |
| |||
|
|
|||
Net gains on financial instruments at fair value through profit or loss |
||||
|
|
(In millions of Korean won) | 2017 | |||
Gains related to financial instruments at fair value through profit or loss |
||||
Financial assets designated at fair value through profit or loss |
||||
Losses related to financial instruments at fair value through profit or loss |
||||
Financial assets designated at fair value through profit or loss |
12,171 | |||
|
|
|||
Net gains on financial instruments at fair value through profit or loss |
||||
|
|
23. Net Other Operating Income
Other operating income or other operating expense for the years ended December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | 2017 | ||||||
Other operating income |
||||||||
Dividend income from subsidiaries |
||||||||
Dividend income from associate |
| 15,884 | ||||||
|
|
|
|
|||||
1,089,556 | 709,544 | |||||||
|
|
|
|
|||||
Net other operating income |
||||||||
|
|
|
|
61
KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2018 and 2017
24. General and Administrative Expenses
Details of general and administrative expenses for the years ended December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | 2017 | ||||||
Employee benefits |
||||||||
Salaries and other short-term employee benefits - Salaries |
||||||||
Salaries and other short-term employee benefits - Others |
4,508 | 4,000 | ||||||
Post employment benefits - defined benefit plans |
1,919 | 1,865 | ||||||
Post employment benefits - defined contribution plans |
85 | 26 | ||||||
Share-based payments |
551 | 7,804 | ||||||
|
|
|
|
|||||
34,084 | 38,565 | |||||||
|
|
|
|
|||||
Depreciation and amortization |
864 | 604 | ||||||
|
|
|
|
|||||
Other general and administrative expenses |
||||||||
Travel |
833 | 777 | ||||||
Communications |
520 | 497 | ||||||
Tax and dues |
326 | 268 | ||||||
Publication |
250 | 225 | ||||||
Rental expense |
1,503 | 1,620 | ||||||
Vehicle |
153 | 155 | ||||||
Service fees |
10,122 | 7,263 | ||||||
Advertising |
909 | 839 | ||||||
Training |
1,130 | 642 | ||||||
Others |
7,151 | 6,030 | ||||||
|
|
|
|
|||||
22,897 | 18,316 | |||||||
|
|
|
|
|||||
|
|
|
|
Share-based Payments
The Company entered into share-based payment plan for executives and employees of the Company and its subsidiaries.
Details of stock grants linked to long-term performance as of December 31, 2018, are as follows:
(In number of shares) | Grant date | Number of granted shares1 |
Vesting conditions | |||||
KB Financial Group Inc. |
||||||||
Series 17 |
Jan. 01, 2017 | 16,579 | Services fulfillment, Achievement of targets on the basis of market performance (30~50%)3, Achievement of targets on the basis of non-market performance (50~70%)4 | |||||
Series 18 |
July. 17, 2017 | 7,444 | Services fulfillment, Achievement of targets on the basis of market performance (30~50%)3, Achievement of targets on the basis of non-market performance (50~70%)4 | |||||
Series 19 |
Nov. 21, 2017 | 46,890 | Services fulfillment, Achievement of targets on the basis of market performance (35%)3, Achievement of targets on the basis of non-market performance (65%)5 |
62
KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2018 and 2017
(In number of shares) | Grant date | Number of granted shares1 |
Vesting conditions | |||||
Series 20 |
Jan. 01, 2018 | 35,330 | Services fulfillment, Achievement of targets on the basis of market performance (30~50%)3, Achievement of targets on the basis of non-market performance (50~70%)4 | |||||
Deferred grant |
2012 | 5,415 | Satisfied in 2012 | |||||
Deferred grant |
2013 | 588 | Satisfied in 2013 | |||||
Deferred grant |
2015 | 15,154 | Satisfied in 2015 | |||||
Deferred grant |
2016 | 14,538 | Satisfied in 2016 | |||||
Deferred grant |
2017 | 73,473 | Satisfied in 2017 | |||||
|
|
|||||||
215,411 | ||||||||
|
|
|||||||
Kookmin Bank |
||||||||
Series 69 |
Jan. 01, 2017 | 173,030 | Services fulfillment, Achievement of targets on the basis of market performance (30~50%), Achievement of targets on the basis of non-market performance (50~70%) | |||||
Series 71 |
Aug. 26, 2017 | 4,372 | Services fulfillment, Achievement of targets on the basis of market performance (30~50%), Achievement of targets on the basis of non-market performance (50~70%) | |||||
Series 72 |
Aug. 28, 2017 | 5,601 | Services fulfillment, Achievement of targets on the basis of market performance (30~50%), Achievement of targets on the basis of non-market performance (50~70%) | |||||
Series 73 |
Nov. 21, 2017 | 27,786 | Services fulfillment, Achievement of targets on the basis of market performance (30~50%), Achievement of targets on the basis of non-market performance (50~70%) | |||||
Series 74 |
Jan. 01, 2018 | 190,536 | Services fulfillment, Achievement of targets on the basis of market performance (30~50%), Achievement of targets on the basis of non-market performance (50~70%) | |||||
Deferred grant |
2015 | 33,050 | Satisfied | |||||
Deferred grant |
2016 | 110,967 | Satisfied | |||||
Deferred grant |
2017 | 139,697 | Satisfied | |||||
|
|
|||||||
685,039 | ||||||||
|
|
|||||||
Other subsidiaries |
||||||||
Stock granted in 2010 |
| 206 | Services fulfillment, Achievement of targets on the basis of market performance (10~50%), Achievement of targets on the basis of non-market performance (50~90%) | |||||
Stock granted in 2011 |
| 382 | ||||||
Stock granted in 2012 |
| 1,540 | ||||||
Stock granted in 2013 |
| 2,093 | ||||||
Stock granted in 2014 |
| 1,885 | ||||||
Stock granted in 2015 |
| 11,533 | ||||||
Stock granted in 2016 |
| 122,494 | ||||||
Stock granted in 2017 |
| 297,384 | ||||||
Stock granted in 2018 |
| 147,034 | ||||||
|
|
|||||||
584,551 | ||||||||
|
|
|||||||
1,485,001 | ||||||||
|
|
63
KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2018 and 2017
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 at the end of the reporting period). |
2 | 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 | Relative TSR (Total Shareholders Return) : ((fair value at contract end date-fair value at contract commencement date) + (total dividend paid for the period)) / fair value at contract commencement date |
4 | Accomplishment of subsidiaries performance and accomplishment of performance results |
5 | EPS, Asset Quality, HCROI, Accomplishment of Non-Banking performance |
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 short-term performances as of December 31, 2018, 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 | 474 | Satisfied | |||||
Stock granted in 2015 |
Jan. 01, 2015 | 13,516 | Satisfied | |||||
Stock granted in 2016 |
Jan. 01, 2016 | 16,526 | Satisfied | |||||
Stock granted in 2017 |
Jan. 01, 2017 | 16,855 | Satisfied | |||||
Stock granted in 2018 |
Jan. 01, 2018 | 23,216 | Proportional to service period | |||||
Kookmin Bank |
||||||||
Stock granted in 2015 |
Jan. 01, 2015 | 58,366 | Satisfied | |||||
Stock granted in 2016 |
Jan. 01, 2016 | 83,794 | Satisfied | |||||
Stock granted in 2017 |
Jan. 01, 2017 | 80,331 | Satisfied | |||||
Stock granted in 2018 |
Jan. 01, 2018 | 109,871 | Proportional to service period | |||||
Other subsidiaries |
||||||||
Stock granted in 2015 |
| 67,912 | Satisfied | |||||
Stock granted in 2016 |
| 149,326 | Satisfied | |||||
Stock granted in 2017 |
| 335,401 | Satisfied | |||||
Stock granted in 2018 |
| 286,707 | Proportional to service period |
64
KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2018 and 2017
1 | 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. |
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, 2018, are as follows:
Risk free rate (%) |
Fair value (Market performance condition) |
Fair value (Non-market performance condition) |
||||||||||
Linked to long term performance |
|
|||||||||||
(KB Financial Group Inc.) |
|
|||||||||||
Series 17 |
1.75 | 40,224~47,153 | 40,224~47,153 | |||||||||
Series 18 |
1.75 | 41,473~45,236 | 41,473~45,236 | |||||||||
Series 19 |
1.75 | 36,941~40,362 | 40,368~44,107 | |||||||||
Series 20 |
1.75 | 39,641~44,580 | 40,224~45,236 | |||||||||
Deferred grant in 2012 |
1.75 | | 34,180~40,662 | |||||||||
Deferred grant in 2013 |
1.75 | | 31,245~38,404 | |||||||||
Deferred grant in 2015 |
1.75 | | 39,077~47,153 | |||||||||
Deferred grant in 2016 |
1.75 | | 40,224~47,153 | |||||||||
Deferred grant in 2017 |
1.75 | | 41,473~47,153 | |||||||||
(Kookmin Bank) |
||||||||||||
Series 69 |
1.75 | 40,224~47,153 | 40,224~47,153 | |||||||||
Series 71 |
1.75 | 41,473~45,236 | 41,473~45,236 | |||||||||
Series 72 |
1.75 | 41,473~45,236 | 41,473~45,236 | |||||||||
Series 73 |
1.75 | 41,614~45,382 | 41,614~45,382 | |||||||||
Series 74 |
1.75 | 38,510~44,580 | 39,077~45,236 | |||||||||
Grant deferred in 2015 |
1.75 | | 42,682~47,153 | |||||||||
Grant deferred in 2016 |
1.75 | | 40,224~47,153 | |||||||||
Grant deferred in 2017 |
1.75 | | 41,473~47,153 | |||||||||
(Other subsidiaries) |
|
|||||||||||
Share granted in 2010 |
1.75 | | 43,965~47,153 | |||||||||
Share granted in 2011 |
1.75 | | 43,965~47,153 | |||||||||
Share granted in 2012 |
1.75 | | 43,965~47,153 | |||||||||
Share granted in 2013 |
1.75 | | 43,965~47,153 | |||||||||
Share granted in 2014 |
1.75 | | 43,965~47,153 | |||||||||
Share granted in 2015 |
1.75 | | 39,077~47,153 | |||||||||
Share granted in 2016 |
1.75 | 42,682~47,153 | 40,224~47,153 | |||||||||
Share granted in 2017 |
1.75 | 39,077~47,153 | 39,077~47,153 | |||||||||
Share granted in 2018 |
1.75 | 36,769~44,580 | 37,840~46,317 | |||||||||
Linked to short-term performance |
|
|||||||||||
(KB Financial Group Inc.) |
|
|||||||||||
Share granted in 2010 |
1.75 | | 40,662 | |||||||||
Share granted in 2011 |
1.75 | | 38,111~40,662 | |||||||||
Share granted in 2012 |
1.75 | | 34,180~40,662 | |||||||||
Share granted in 2013 |
1.75 | | 31,245~37,881 | |||||||||
Share granted in 2015 |
1.75 | | 39,077~47,153 | |||||||||
Share granted in 2016 |
1.75 | | 37,840~47,153 | |||||||||
Share granted in 2017 |
1.75 | | 40,224~47,153 | |||||||||
Share granted in 2018 |
1.75 | | 40,224~47,153 | |||||||||
(Kookmin Bank) |
||||||||||||
Share granted in 2015 |
1.75 | | 40,224~47,153 | |||||||||
Share granted in 2016 |
1.75 | | 39,077~47,153 | |||||||||
Share granted in 2017 |
1.75 | | 39,077~47,153 | |||||||||
Share granted in 2018 |
1.75 | | 39,077~45,236 | |||||||||
(Other subsidiaries) |
|
|||||||||||
Share granted in 2015 |
1.75 | | 39,077~47,153 | |||||||||
Share granted in 2016 |
1.75 | | 37,840~47,153 | |||||||||
Share granted in 2017 |
1.75 | | 37,840~47,153 | |||||||||
Share granted in 2018 |
1.75 | | 37,840~64,683 |
65
KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2018 and 2017
The Company used the volatility of the stock price over the previous year as the expected volatility, and used the arithmetic mean of the dividend rate of one year before, two years before, and three years before the base year as the dividend yield, in order to calculate fair value.
Share-based payment arrangement for subsidiaries was transferred to the Company in 2010, and the related compensation cost paid to the executives and
employees of subsidiaries is reimbursed by these companies. The accrued expenses representing share-based payments as of December 31, 2018 and 2017, are W 111,058 million and W 133,496 million,
respectively, and the receivables to be reimbursed by the subsidiaries for the compensation costs are W 100,434 million and W 118,375 million, respectively. The
compensation costs from share-based payments that amounts to W 551 million and W 7,804 million were recognized as an expense for the years ended
December 31, 2018 and 2017, respectively.
25. Non-operating Income (Expense)
Details of non-operating income and expenses for the years ended December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | 2017 | ||||||
Non-operating income |
||||||||
Reversal of impairment losses on intangible assets |
||||||||
Others |
876 | 711 | ||||||
|
|
|
|
|||||
926 | 811 | |||||||
|
|
|
|
|||||
Non-operating expenses |
||||||||
Impairment losses on intangible assets |
| 2 | ||||||
Donation |
1,184 | 669 | ||||||
Others |
1 | 15 | ||||||
|
|
|
|
|||||
1,185 | 686 | |||||||
|
|
|
|
|||||
Non-operating income (expenses) |
||||||||
|
|
|
|
26. Income Tax Expense
Details of income tax expense(benefit) for the years ended December 31, 2018 and 2017, are as follows:
66
KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2018 and 2017
(In millions of Korean won) | 2018 | 2017 | ||||||
Tax payable |
||||||||
Current tax expense |
||||||||
Change in deferred tax assets and liabilities |
||||||||
Origination and reversal of temporary differences |
(2,098 | ) | 5,678 | |||||
Tax expense recognized directly in equity |
||||||||
Remeasurements of net defined benefit liabilities |
(725 | ) | (156 | ) | ||||
|
|
|
|
|||||
Income tax benefit (expense) |
||||||||
|
|
|
|
The analysis of profit before tax and income tax expense (benefit) for the years ended December 31, 2018 and 2017, follows:
(In millions of Korean won) | 2018 | 2017 | ||||||||||||||
Tax rate (%) |
Amount | Tax rate (%) |
Amount | |||||||||||||
Profit before tax |
||||||||||||||||
|
|
|
|
|||||||||||||
Tax at the applicable tax rate1 |
26.38 | 245,038 | 24.12 | 132,131 | ||||||||||||
Non-taxable income |
(27.71 | ) | (257,323 | ) | (27.61 | ) | (151,302 | ) | ||||||||
Non-deductible expense |
0.08 | 739 | 0.08 | 455 | ||||||||||||
Effects from change in tax rate |
0.00 | | (0.23 | ) | (1,234 | ) | ||||||||||
Consolidated tax effect |
1.47 | 13,644 | 2.60 | 14,272 | ||||||||||||
Other |
0.08 | 725 | 0.03 | 156 | ||||||||||||
|
|
|
|
|||||||||||||
Average effective tax rate and tax expense(benefit) |
0.30 | (1.01 | ) | |||||||||||||
|
|
|
|
1 | Applicable income tax rate for |
27. Earnings (loss) per Share
Calculations of basic earnings (loss) per share on the profit (loss) attributable to ordinary shares are as follows:
Weighted average number of ordinary shares outstanding:
(In number of shares) | 2018 | 2017 | ||||||
Beginning (A) |
418,111,537 | 418,111,537 | ||||||
Acquisition of treasury shares (B) |
21,611,579 | 19,380,154 | ||||||
|
|
|
|
|||||
Weighted average number of ordinary shares outstanding (A-B) |
396,499,958 | 398,731,383 | ||||||
|
|
|
|
Basic earnings (loss) per share
(In Korean won and in number of shares) | 2018 | |||
Profit (loss) attributable to ordinary shares1 (C) |
||||
Weighted average number of ordinary shares outstanding (D) |
396,499,958 | |||
Basic earnings (loss) per share (E = C / D) |
67
KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2018 and 2017
(In Korean won and in number of shares) | 2017 | |||
Profit (loss) attributable to ordinary shares1 (C) |
||||
Weighted average number of ordinary shares outstanding (D) |
398,731,383 | |||
Basic earnings (loss) per share (E = C / D) |
1 | Profit (loss) attributable to ordinary shares is the same as profit (loss) for the period in the statements of comprehensive income. |
Diluted earnings (loss) per share
Diluted earnings (loss) per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. The Companys 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 Companys outstanding shares for the period) based on the monetary value of the subscription rights attached to the stock grants. 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 (loss) to calculate diluted earnings (loss) per share:
(In Korean won) | 2018 | 2017 | ||||||
Profit (loss) attributable to ordinary shares |
||||||||
Adjustment |
| | ||||||
|
|
|
|
|||||
Adjusted profit (loss) for diluted earnings (loss) |
||||||||
|
|
|
|
Adjusted weighted average number of ordinary shares outstanding to calculate diluted earnings (loss) per share:
(In number of shares) | 2018 | 2017 | ||||||
Weighted average number of ordinary shares outstanding |
396,499,958 | 398,731,383 | ||||||
Adjustment |
||||||||
Stock grants |
2,307,630 | 2,319,533 | ||||||
|
|
|
|
|||||
Adjusted weighted average number of ordinary shares outstanding for diluted earnings per share |
398,807,588 | 401,050,916 | ||||||
|
|
|
|
Diluted earnings per share : for the years ended December 31, 2018 and 2017
(In Korean won and in number of shares) | 2018 | 2017 | ||||||
Adjusted profit for diluted earnings per share |
||||||||
Adjusted weighted average number of ordinary shares outstanding for diluted earnings per share |
398,807,588 | 401,050,916 | ||||||
Diluted earnings per share |
68
KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2018 and 2017
28. Supplemental Cash Flow Information
Cash and cash equivalents as of December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | 2017 | ||||||
Due from financial institutions |
||||||||
Restricted cash from financial institutions |
(3 | ) | (3 | ) | ||||
|
|
|
|
|||||
|
|
|
|
Significant non-cash transactions for the years ended December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | 2017 | ||||||
Reclassified from Investments in associates to Investments in subsidiaries |
||||||||
Changes in investments in subsidiaries and share capital in relation to stock exchange |
| 251,748 | ||||||
Changes in receivables and payables from consolidated tax |
393,380 | (83,532 | ) | |||||
Changes in receivables and payables relating to stock grants |
(18,085 | ) | 47,678 | |||||
Changes in other payables related with acquisition of treasury shares and others |
6,678 | 18,802 |
Cash inflows and outflows due to interest and dividends for the years December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | Activity | 2018 | 2017 | |||||||||
Income tax paid |
Operating | |||||||||||
Interest received |
Operating | 5,868 | 3,273 | |||||||||
Interest paid |
Operating | 116,307 | 96,392 | |||||||||
Dividends received |
Operating | 1,103,182 | 722,063 | |||||||||
Dividends paid |
Financing | 766,728 | 497,969 |
Changes in liabilities arising from financing activities for the year ended December 31, 2018, is as follows:
(In millions of Korean won) | ||||||||||||||||||||||||||||
2018 | ||||||||||||||||||||||||||||
Opening balance |
Net cash flows |
Non-cash changes | Closing balance |
|||||||||||||||||||||||||
Acquisition | Changes in foreign exchange rates |
Changes in fair value |
Other changes |
|||||||||||||||||||||||||
Debts |
||||||||||||||||||||||||||||
Debentures |
5,162,600 | 209,386 | | | | 1,280 | 5,373,266 | |||||||||||||||||||||
|
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69
KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2018 and 2017
29. Contingent Liabilities and Commitments
Commitments made with financial institutions as of December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | 2017 | ||||||||||||||
Amount of commitment |
Amounts borrowed |
Amount of commitment |
Amounts borrowed |
|||||||||||||
Standard Chartered Bank Korea Ltd |
||||||||||||||||
NongHyup Bank |
| | 150,000 | | ||||||||||||
Woori Bank |
| | 80,000 | | ||||||||||||
|
|
|||||||||||||||
KEB Hana Bank |
50,000 | | 50,000 | | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
|
|
|
|
|
|
|
|
The Company faces two lawsuits as the defendant involving aggregate damages of W 191 million.
30. Related Party Transactions
Significant related party transactions for the years ended December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | 2017 | ||||||||||
Subsidiaries |
Kookmin Bank |
Interest income |
||||||||||
Fee and commission income |
778 | 671 | ||||||||||
Net other operating income |
640,132 | 359,493 | ||||||||||
General and administrative expenses |
5,452 | 3,955 | ||||||||||
KB Securities Co., Ltd. |
Net other operating income |
139,157 | | |||||||||
General and administrative expenses |
1,196 | 965 | ||||||||||
KB Insurance Co., Ltd. |
Net other operating income |
49,875 | 15,884 | |||||||||
General and administrative expenses |
1,031 | 1,078 | ||||||||||
KB Kookmin Card Co., Ltd |
Net other operating income |
180,044 | 250,056 | |||||||||
General and administrative expenses |
970 | 723 | ||||||||||
. | Net non-operating income | 5 | 4 | |||||||||
KB Life Insurance Co., Ltd. |
General and administrative expenses |
79 | 17 | |||||||||
KB Asset Management Co., Ltd. |
Net other operating income |
50,000 | 50,000 | |||||||||
KB Capital Co., Ltd. |
Net gains on financial assets at fair value through profit or loss (under Korean IFRS 1039) |
| 745 | |||||||||
Net gains on financial assets at fair value through profit or loss |
18,319 | | ||||||||||
Net other operating income | 10,746 | 5,590 | ||||||||||
General and administrative expenses | | 41 | ||||||||||
KB Savings Bank Co., Ltd. | Net other operating income | 8,802 | 5,521 | |||||||||
KB Real Estate Trust. Co., Ltd. |
Net other operating income |
10,800 | 20,000 | |||||||||
KB Investment Co., Ltd. |
Interest income |
615 | 96 | |||||||||
Net other operating income |
| 3,000 | ||||||||||
KB Data Systems Co., Ltd. |
General and administrative expenses |
1,477 | 1220 |
Significant receivables and payables, and related allowance for loan losses arising from the related party transactions as of December 31, 2018 and 2017, are as follows:
70
KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2018 and 2017
(In millions of Korean won) | 2018 | 2017 | ||||||||||
Subsidiaries |
Kookmin Bank |
Cash and due from financial institutions |
||||||||||
Other assets |
643,010 | 283,610 | ||||||||||
Other liabilities |
4,545 | 2,837 | ||||||||||
KB Securities Co., Ltd. |
Other assets |
62,993 | 18,630 | |||||||||
Other liabilities |
| 26,192 | ||||||||||
KB Insurance Co., Ltd. |
Other assets |
12,774 | 13,991 | |||||||||
Other liabilities |
35,177 | | ||||||||||
KB Kookmin Card Co., Ltd. |
Other assets |
79,288 | 107,637 | |||||||||
Other liabilities |
664 | 569 | ||||||||||
KB Life Insurance Co., Ltd. |
Other assets |
3,991 | 5,404 | |||||||||
Other liabilities |
5,315 | 7,647 | ||||||||||
KB Asset Management Co., Ltd. |
Other assets |
10,666 | 23,223 | |||||||||
KB Capital Co., Ltd. |
Financial assets at fair value through profit or loss (under Korean IFRS 1039) |
| 284,485 | |||||||||
Financial assets at fair value through profit or loss |
289,179 | | ||||||||||
Other assets |
18,383 | 4,928 | ||||||||||
KB Savings Bank Co., Ltd. |
Other assets |
1,670 | 4,824 | |||||||||
KB Real Estate Trust Co., Ltd. |
Other assets |
14,259 | 12,488 | |||||||||
KB Investment Co., Ltd. |
Loans at amortized cost |
50,000 | 10,000 | |||||||||
Other assets |
1,198 | 1,481 | ||||||||||
Other liabilities |
486 | | ||||||||||
KB Credit Information Co., Ltd. |
Other assets |
985 | 1,160 | |||||||||
Other liabilities |
| 16 | ||||||||||
KB Data Systems Co., Ltd. |
Tangible assets |
140 | 214 | |||||||||
Other assets |
3,357 | 2,735 | ||||||||||
Other liabilities |
137 | 98 |
According to Korean IFRS 1024, the Company includes subsidiaries and key management (including family members) in the scope of related parties. Additionally, the Company discloses balances (receivables and payables) and other amounts arising from the related party transactions in the notes to the separate financial statements. Refer to Note 9 for details on subsidiaries.
Key management includes the directors of the Company, their close family members, and the companies where the directors and/or their close family members have control or joint control.
Significant loan transaction with related parties for the years ended December 31, 2018 and 2017, is as follows:
(In millions of Korean won) | 20181 | |||||||||||||||||
Beginning | Loans | Repayments | Ending | |||||||||||||||
Subsidiary |
KB Investment Co., Ltd. |
71
KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2018 and 2017
1 | Transactions and balances arising from operating activities between related parties, such as settlements, are excluded. |
(In millions of Korean won) | 20171 | |||||||||||||||||||
Beginning | Loans | Repayments | Ending | |||||||||||||||||
Subsidiary |
KB Investment Co., Ltd. |
1 | Transactions and balances arising from operating activities between related parties, such as settlements, are excluded. |
Unused commitments by a related party as of December 31, 2018 and 2017, are as follows:
(In millions of Korean won) | 2018 | 2017 | ||||||||||
Subsidiary |
KB Kookmin Card Co., Ltd. | Unused commitments of credit card |
Compensation to key management for the years ended December 31, 2018 and 2017, consists of:
(In millions of Korean won) | 2018 | |||||||||||||||
Short-term employee benefits |
Post- employment benefits |
Share-based payments |
Total | |||||||||||||
Registered director (executive) |
||||||||||||||||
Registered director (non-executive) |
623 | | | 623 | ||||||||||||
Non-registered director |
2,328 | 90 | 97 | 2,515 | ||||||||||||
|
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|
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|
|
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|
|
|
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|
|
(In millions of Korean won) | 2017 | |||||||||||||||
Short-term employee benefits |
Post- employment benefits |
Share-based payments |
Total | |||||||||||||
Registered director (executive) |
||||||||||||||||
Registered director (non-executive) |
581 | | | 581 | ||||||||||||
Non-registered director |
3,430 | 160 | 6,644 | 10,234 | ||||||||||||
|
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31. Approval of Issuance of the Financial Statements
The issuance of the Companys separate financial statements as of and for the year ended December 31, 2018, was initially approved on February 8, 2019 and re-approved due to revision on March 8, 2019 by the Board of Directors.
72
Report on Independent Auditors
Review of Internal Control over Financial Reporting
To the President of
KB Financial Group Inc.
We have reviewed the accompanying managements report on the effectiveness of the Internal Control over Financial Reporting (ICFR) of KB Financial Group Inc. (the Company) as of December 31, 2018. The Companys management is responsible for designing and operating ICFR and for its assessment of the effectiveness of ICFR. Our responsibility is to review the managements report on the effectiveness of the ICFR and issue a report based on our review. The managements report on the effectiveness of the ICFR of the Company states that Based on the assessment results, Chief Executive Officer and ICFR Officer believe that the Companys ICFR, as at December 31, 2018, is designed and operating effectively, in all material respects, in conformity with the ICFR Design and Operating Conceptual Framework
Our review was conducted in accordance with the ICFR review standards established by the Korean Institute of Certified Public Accountants. Those standards require that we plan and perform, in all material respects, the review of managements report on the effectiveness of the ICFR to obtain a lower level of assurance than an audit. A review is to obtain an understanding of a companys ICFR and consists principally of inquiries of management and, when deemed necessary, a limited inspection of underlying documents, which is substantially less in scope than an audit.
A companys ICFR is a system to monitor and operate those policies and procedures designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with International Financial Reporting Standards as adopted by the Republic of Korea. Because of its inherent limitations, ICFR may not prevent or detect a material misstatement of the financial statements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Based on our review, nothing has come to our attention that causes us to believe that managements report on the effectiveness of the ICFR, referred to above, is not presented fairly, in all material respects, in accordance with the ICFR Evaluation and Reporting Best Practice Guideline.
Our review is based on the Companys ICFR as of December 31, 2018, and we did not review managements assessment of its ICFR subsequent to December 31, 2018. This report has been prepared pursuant to the Acts on External Audit for Stock Companies, etc. in Korea and may not be appropriate for other purposes or for other users.
/s/ Samil PricewaterhouseCoopers
March 12, 2019
73
Report on the Effectiveness of
the Internal Control over Financial Reporting
To the Shareholders, Board of Directors and Audit Committee of
KB Financial Group Inc.
We, as the Chief Executive Officer (CEO) and the Internal Control over Financial Reporting (ICFR) Officer of KB Financial Group Inc. (the Company), assessed the effectiveness of the design and operation of the Companys Internal Control over Financial Reporting for the year ended December 31, 2018.
The Companys management, including ourselves, is responsible for designing and operating ICFR. We assessed the design and operating effectiveness of the ICFR in the prevention and detection of an error or fraud which may cause material misstatements in the preparation and disclosure of reliable financial statements.
For the purpose of design and operation of ICFR, we have used ICFR Design and Operation Conceptual Framework as criteria which is established by the Operating Committee of Internal Control over Financial Reporting in Korea (the ICFR Committee). We also followed the ICFR Evaluation and Reporting Best Practice Guideline which is also established by the ICFR Committee to evaluate the effectiveness of the ICFR design and operation.
Based on the assessment results, we believe that the Companys ICFR, as at December 31, 2018, is designed and operating effectively, in all material respects, in conformity with the ICFR Design and Operation Conceptual Framework.
We certify that this report does not contain any untrue statement of a fact, or omit to state a fact necessary to be presented herein. We also certify that this report does not contain or present any statement which cause material misunderstandings, and we have reviewed and verified this report with sufficient due care.
February 28, 2019
Jong Kyoo Yoon,
Chief Executive Officer
Ki Hwan Kim,
Internal Control over Financial Reporting Officer
74