UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE13a-16 OR15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the month of March 2020
Commission File Number:000-53445
KB Financial Group Inc.
(Translation of registrant’s name into English)
26,Gukjegeumyung-ro8-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 ofForm 20-F orForm 40-F.
Form 20-F ☒ Form 40-F ☐
Indicate by check mark if the registrant is submitting theForm 6-K in paper as permitted byRegulation S-T Rule 101(b)(1): ☐
Note: RegulationS-T Rule 101(b)(1) only permits the submission in paper of a Form6-K if submitted solely to provide an attached annual report to security holders.
Indicate by check mark if the registrant is submitting theForm 6-K in paper as permitted byRegulation S-T Rule 101(b)(7): ☐
Note: RegulationS-T Rule 101(b)(7) only permits the submission in paper of a Form6-K if submitted to furnish a report or other document that the registrant foreign private issuer must furnish and make public under the laws of the jurisdiction in which the registrant is incorporated, domiciled or legally organized (the registrant’s “home country”), or under the rules of the home country exchange on which the registrant’s securities are traded, as long as the report or other document is not a press release, is not required to be and has not been distributed to the registrant’s security holders, and, if discussing a material event, has already been the subject of a Form6-K submission or other Commission filing on EDGAR.
Audit Report of KB Financial Group Inc. for Fiscal Year 2019
On March 5, 2020, KB Financial Group Inc. (“KB Financial Group”) disclosed audit reports for fiscal year 2019 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, 2019 and 2018 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 Form6-K filing:
Exhibit 99.1:An English-language translation of the Consolidated Audit Report of KB Financial Group for FY 2019.
Exhibit 99.2:An English-language translation of the Separate Audit Report of KB Financial Group for FY 2019.
SIGNATURES
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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 6, 2020 | By: /s/Ki-Hwan Kim | |||||||
(Signature) | ||||||||
Name: | Ki-Hwan Kim | |||||||
Title: | Deputy President and Chief Finance Officer |
KB Financial Group Inc. and Subsidiaries
December 31, 2019 and 2018
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Consolidated Financial Statements | ||||
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10 - 260 |
(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 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, 2019 and 2018, 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, 2019 and 2018, 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 theAuditor’s 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 :
The impairment guidance under Korean IFRS 1109Financial Instruments requires determination of significant increases in credit risk and measurement of expected credit losses using forward-looking information and others. Accordingly, the Group developed a new measurement model utilizing various types of information, which requires a higher level of management’s interpretation and judgment.
1
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 judgment. 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.
Loans measured at amortized cost subject to individual or collective assessment areW 342,092,076 million, with loan loss allowances ofW 2,408,016 million, as of December 31, 2019(See Note4-2, 10, 11). In addition, unused commitments and guarantees areW 163,972,499 million, with related provisions ofW 291,970 million as of December 31, 2019(See Note4-2, 23, 40). Significantly affected subsidiaries are Kookmin Bank and KB Kookmin Card.
How our audit addressed the key audit matter :
(1) Assessment of expected credit losses on an individual basis
We obtained an understanding and evaluated the processes 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 management’s estimation was reasonable and we assessed the key assumptions in the 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 assessed the appropriateness of collateral valuation by conducting our own research on recent property prices and engaged independent appraisal specialists in assessing reasonableness of appraisal reports, models and methodologies used by management.
(2) Assessment of expected credit losses on a collective basis
We obtained an understanding and evaluated the processes and controls relating to management’s calculation of expected credit losses on a collective basis in accordance with impairment requirements under Korean IFRS 1109Financial Instruments. As explained in Note 2, management assesses credit ratings to recognize lifetime expected credit losses on loans with significant increase in credit risk and impaired loans. Other than these cases, management recognizes twelve-months of expected credit losses. To calculate all expected credit losses, management has applied forward-looking information, probability of default, loss given default, and other assumptions estimated through its internal procedures and controls implemented for various assumptions.
We assessed the design and operating effectiveness of controls relating to credit ratings that reasonably reflect both qualitative and quantitative information. Our testing over the accuracy and reliability of the information included agreeing qualitative and quantitative information with relevant evidence.
We reviewed the appropriateness of management policies and procedures to determine significant increases in credit risk, and tested reasonableness of expected credit loss model applied by each of the three stages(Stage 1, 2 and 3) depending on how significantly credit risk was increased.
Our audit involved risk specialists to statistically analyze the correlation between forward-looking information and probability of default or loss given default. We assessed the appropriateness of methodologies for adjusting the probability of default and loss given default to reflect forward-looking information on estimation of expected credit losses. We further tested the reasonableness and mathematical accuracy of the information through recalculation and inspection of supporting data.
2
We reviewed the 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 assessed reasonableness and accuracy of probability of default and loss given default through procedures including recalculation, and evaluated management’s default and loss data.
2. Valuation ofOver-The-Counter Derivatives
Why it is determined to be a key audit matter :
Fair value of large portion ofover-the-counter derivatives in the consolidated financial statements is calculated through the use of an internally developed 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 theseover-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 toW 14,444,557 million as of December 31, 2019, including financial liabilities designated as at fair value through profit or loss related to structured securities and financial assets at fair value through profit or loss(See Note 6).
How our audit addressed the key audit matter :
We obtained an understanding and evaluated processes and 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 management’s internal 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.) used in management’s determination of estimated fair value. We tested transaction data used in the valuation by examining supporting evidence including contracts and trade confirmations.
We also evaluated the design and tested the operating effectiveness of controls over periodic verification of management’s internal valuation system to ensure the valuation methodologies configured in the system were operating as intended. We involved our derivative valuation specialist to independently estimate fair values utilizing independent valuation models and variables to see if management’s 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.
3
In preparing the consolidated financial statements, management is responsible for assessing the Group’s 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 Group’s financial reporting process.
Auditor’s 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 auditor’s 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 entity’s 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 management’s 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 Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s 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 auditor’s 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. |
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.
4
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 auditor’s 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 auditor’s report is Yeob Yu, Certified Public Accountant.
/s/ Samil PricewaterhouseCoopers
Seoul, Korea
March 5, 2020
This report is effective as of March 5, 2020, the audit report date. Certain subsequent events or circumstances, which may occur between the audit report date and the time of reading this report, could have a material impact on the accompanying consolidated financial statements and notes thereto. Accordingly, the readers of the audit report should understand that there is a possibility that the above audit report may have to be revised to reflect the impact of such subsequent events or circumstances, if any. |
5
KB Financial Group Inc. and Subsidiaries
Consolidated Statements of Financial Position
December 31, 2019 and 2018
(in millions of Korean won) | Notes | 2019 | 2018 | |||||||||
Assets | ||||||||||||
Cash and due from financial institutions | 4,6,7,8,39 | |||||||||||
Financial assets at fair value through profit or loss | 4,6,8,12 | 53,549,086 | 50,987,847 | |||||||||
Derivative financial assets | 4,6,9 | 3,190,673 | 2,025,962 | |||||||||
Loans at amortized cost | 4,6,10,11 | 339,684,059 | 319,201,603 | |||||||||
Financial investments | 4,6,8,12 | 71,782,606 | 61,665,094 | |||||||||
Investments in associates and joint ventures | 13 | 598,240 | 504,932 | |||||||||
Property and equipment | 14 | 5,067,377 | 4,272,127 | |||||||||
Investment property | 14 | 2,827,988 | 2,119,811 | |||||||||
Intangible assets | 15 | 2,737,813 | 2,755,783 | |||||||||
Net defined benefit assets | 24 | 946 | — | |||||||||
Current income tax assets | 19,095 | 10,004 | ||||||||||
Deferred income tax assets | 16,33 | 3,597 | 4,158 | |||||||||
Assets held for sale | 17 | 23,151 | 16,952 | |||||||||
Other assets | 4,6,18 | 18,215,608 | 15,749,535 | |||||||||
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Total assets | ||||||||||||
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Liabilities | ||||||||||||
Financial liabilities at fair value through profit or loss | 4,6,19 | |||||||||||
Derivative financial liabilities | 4,6,9 | 3,007,341 | 2,901,247 | |||||||||
Deposits | 4,6,20 | 305,592,771 | 276,770,449 | |||||||||
Debts | 4,6,21 | 37,818,860 | 33,004,834 | |||||||||
Debentures | 4,6,22 | 50,935,583 | 53,278,697 | |||||||||
Provisions | 23 | 527,929 | 525,859 | |||||||||
Net defined benefit liabilities | 24 | 253,989 | 262,213 | |||||||||
Current income tax liabilities | 432,431 | 698,634 | ||||||||||
Deferred income tax liabilities | 16,33 | 777,793 | 492,534 | |||||||||
Insurance contract liabilities | 37 | 34,966,683 | 33,412,949 | |||||||||
Other liabilities | 4,6,25 | 29,737,259 | 27,200,996 | |||||||||
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Total liabilities | 479,418,792 | 443,875,271 | ||||||||||
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Equity | ||||||||||||
Share capital | 26 | 2,090,558 | 2,090,558 | |||||||||
Hybrid securities | 26 | 399,205 | — | |||||||||
Capital surplus | 26 | 17,122,777 | 17,121,660 | |||||||||
Accumulated other comprehensive income | 26,35 | 348,021 | 177,806 | |||||||||
Retained earnings | 26 | 19,709,545 | 17,282,441 | |||||||||
Treasury shares | 26 | (1,136,188 | ) | (968,549 | ) | |||||||
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Equity attributable to shareholders of the Parent Company | 26 | 38,533,918 | 35,703,916 | |||||||||
Non-controlling interests | 585,407 | 9,111 | ||||||||||
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Total equity | 39,119,325 | 35,713,027 | ||||||||||
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Total liabilities and equity | ||||||||||||
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The above consolidated statements of financial position should be read in conjunction with the accompanying notes.
6
KB Financial Group Inc. and Subsidiaries
Consolidated Statements of Comprehensive Income
Years Ended December 31, 2019 and 2018
(In millions of Korean won, except per share amounts) | Notes | 2019 | 2018 | |||||||||
Interest income | ||||||||||||
Interest income from financial instruments at fair value through other comprehensive income and amortized cost | 13,935,124 | 12,986,209 | ||||||||||
Interest income from financial instruments at fair value through profit or loss | 704,063 | 748,360 | ||||||||||
Interest expense | (5,442,400 | ) | (4,829,641 | ) | ||||||||
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Net interest income | 5,27 | 9,196,787 | 8,904,928 | |||||||||
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Fee and commission income | 3,879,247 | 3,717,720 | ||||||||||
Fee and commission expense | (1,524,243 | ) | (1,474,344 | ) | ||||||||
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Net fee and commission income | 5,28 | 2,355,004 | 2,243,376 | |||||||||
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Insurance income | 12,317,182 | 11,975,070 | ||||||||||
Insurance expense | (12,017,670 | ) | (11,484,954 | ) | ||||||||
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Net Insurance income | 5,37 | 299,512 | 490,116 | |||||||||
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Net gains on financial instruments at fair value through profit or loss before applying overlay approach | 912,187 | 350,490 | ||||||||||
Net gains/(losses) on overlay adjustments | (268,315 | ) | 813 | |||||||||
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Net gains on financial assets/liabilities at fair value through profit or loss | 5,29 | 643,872 | 351,303 | |||||||||
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Net other operating expenses | 5,30 | (1,063,324 | ) | (1,130,036 | ) | |||||||
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General and administrative expenses | 5,31 | (6,271,017 | ) | (5,918,512 | ) | |||||||
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Operating profit before provision for credit losses | 5 | 5,160,834 | 4,941,175 | |||||||||
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Provision for credit losses | 5,7,11,12,18,23 | (670,185 | ) | (673,694 | ) | |||||||
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Net operating income | 4,490,649 | 4,267,481 | ||||||||||
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Share of profit of associates and joint ventures | 13 | 16,451 | 24,260 | |||||||||
Net othernon-operating income | 32 | 26,886 | 9,791 | |||||||||
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Netnon-operating income | 43,337 | 34,051 | ||||||||||
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Profit before income tax | 4,533,986 | 4,301,532 | ||||||||||
Income tax expense | 33 | (1,220,787 | ) | (1,239,586 | ) | |||||||
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Profit for the year | 5 | 3,313,199 | 3,061,946 | |||||||||
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Items that will not be reclassified to profit or loss: | ||||||||||||
Remeasurements of net defined benefit liabilities | 24 | (55,827 | ) | (138,016 | ) | |||||||
Share of other comprehensive income of associates and joint ventures | (105 | ) | (74 | ) | ||||||||
Revaluation losses on equity instruments at fair value through other comprehensive income | (17,329 | ) | (31,169 | ) | ||||||||
Fair value changes on financial liabilities designated at fair value due to own credit risk | (11,372 | ) | 1,484 | |||||||||
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(84,633 | ) | (167,775 | ) | |||||||||
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Items that may be reclassified subsequently to profit or loss: | ||||||||||||
Exchange differences on translating foreign operations | 37,861 | 48,820 | ||||||||||
Net gains on debt instruments at fair value through other comprehensive income | 35,490 | 119,182 | ||||||||||
Shares of other comprehensive income of associates and joint ventures | 7,800 | (3,659 | ) | |||||||||
Cash flow hedges | (33,182 | ) | (9,038 | ) | ||||||||
Losses on hedges of a net investment in a foreign operation | (8,900 | ) | (27,134 | ) | ||||||||
Other comprehensive income arising from separate account | 3,364 | 28,709 | ||||||||||
Net gains on overlay adjustment | 37 | 194,223 | 413 | |||||||||
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236,656 | 157,293 | |||||||||||
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Other comprehensive income for the year, net of tax | 152,023 | (10,482 | ) | |||||||||
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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 | 1,371 | 755 | ||||||||||
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Total comprehensive income for the year attributable to: | ||||||||||||
Shareholders of the Parent Company | ||||||||||||
Non-controlling interests | 1,655 | 659 | ||||||||||
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Earnings per share | 36 | |||||||||||
Basic earnings per share | ||||||||||||
Diluted earnings per share | 8,389 | 7,676 |
The above consolidated statements of comprehensive income should be read in conjunction with the accompanying notes.
7
KB Financial Group Inc. and Subsidiaries
Consolidated Statements of Changes in Equity
Years Ended December 31, 2019 and 2018
Equity attributable to shareholders of the Parent Company | ||||||||||||||||||||||||||||||||
Accumulated | ||||||||||||||||||||||||||||||||
Other | ||||||||||||||||||||||||||||||||
(in millions of Korean won) | Share | Hybrid | Capital | Comprehensive | Retained | Treasury | Non-controlling | Total | ||||||||||||||||||||||||
Capital | Securities | Surplus | Income | Earnings | Shares | Interests | Equity | |||||||||||||||||||||||||
Balance at January 1, 2018 | ||||||||||||||||||||||||||||||||
The effect of changing of accounting policy | — | — | — | (349,476 | ) | (71,724 | ) | — | — | (421,200 | ) | |||||||||||||||||||||
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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 | ||||||||||||||||||||||||
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Total comprehensive income/(loss) for the year | — | — | — | (10,386 | ) | 3,076,689 | — | 659 | 3,066,962 | |||||||||||||||||||||||
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Transactions with shareholders | ||||||||||||||||||||||||||||||||
Annual 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 | — | — | — | — | — | — | 2,238 | 2,238 | ||||||||||||||||||||||||
Others | — | — | (568 | ) | — | — | — | 70 | (498 | ) | ||||||||||||||||||||||
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Total transactions with shareholders | — | — | (568 | ) | — | (766,728 | ) | (212,576 | ) | 2,308 | (977,564 | ) | ||||||||||||||||||||
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Balance at December 31, 2018 | ||||||||||||||||||||||||||||||||
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Balance at January 1, 2019 | ||||||||||||||||||||||||||||||||
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Comprehensive income | ||||||||||||||||||||||||||||||||
Profit for the year | — | — | — | — | 3,311,828 | — | 1,371 | 3,313,199 | ||||||||||||||||||||||||
Remeasurements of net defined benefit liabilities | — | — | — | (55,827 | ) | — | — | — | (55,827 | ) | ||||||||||||||||||||||
Exchange differences on translating foreign operations | — | — | — | 37,577 | — | — | 284 | 37,861 | ||||||||||||||||||||||||
Net gains on financial instruments at fair value through other comprehensive income | — | — | — | 36,637 | (18,475 | ) | — | — | 18,162 | |||||||||||||||||||||||
Shares of other comprehensive income of associates and joint ventures | — | — | — | 7,695 | — | — | — | 7,695 | ||||||||||||||||||||||||
Cash flow hedges | — | — | — | (33,182 | ) | — | — | — | (33,182 | ) | ||||||||||||||||||||||
Losses on hedges of a net investment in a foreign operation | — | — | — | (8,900 | ) | — | — | — | (8,900 | ) | ||||||||||||||||||||||
Other comprehensive income arising from separate account | — | — | — | 3,364 | — | — | — | 3,364 | ||||||||||||||||||||||||
Fair value changes on financial liabilities designated at fair value due to own credit risk | — | — | — | (11,372 | ) | — | — | — | (11,372 | ) | ||||||||||||||||||||||
Net gains on overlay adjustment | — | — | — | 194,223 | — | — | — | 194,223 | ||||||||||||||||||||||||
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Total comprehensive income for the year | — | — | — | 170,215 | 3,293,353 | — | 1,655 | 3,465,223 | ||||||||||||||||||||||||
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Transactions with shareholders | ||||||||||||||||||||||||||||||||
Annual dividends paid to shareholders of the Parent Company | — | — | — | (759,736 | ) | — | — | (759,736 | ) | |||||||||||||||||||||||
Issuance of hybrid securities | — | 399,205 | — | — | — | — | 574,580 | 973,785 | ||||||||||||||||||||||||
Dividends on hybrid securities | — | — | — | — | (6,513 | ) | — | — | (6,513 | ) | ||||||||||||||||||||||
Acquisition and retirement of treasury shares | — | — | — | — | (100,000 | ) | (167,639 | ) | — | (267,639 | ) | |||||||||||||||||||||
Others | — | — | 1,117 | — | — | — | 61 | 1,178 | ||||||||||||||||||||||||
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Total transactions with shareholders | — | 399,205 | 1,117 | — | (866,249 | ) | (167,639 | ) | 574,641 | (58,925 | ) | |||||||||||||||||||||
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Balance at December 31, 2019 | ||||||||||||||||||||||||||||||||
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The above consolidated statements of changes in equity should be read in conjunction with the accompanying notes.
8
KB Financial Group Inc. and Subsidiaries
Consolidated Statements of Cash Flows
Years Ended December 31, 2019 and 2018
(in millions of Korean won) | 2019 | 2018 | ||||||
Cash flows from operating activities | ||||||||
Profit for the year | ||||||||
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| |||||
Adjustment fornon-cash items | ||||||||
Net gain on financial assets/liabilities at fair value through profit or loss | (438,567 | ) | (104,755 | ) | ||||
Net gain on derivative financial instruments for hedging purposes | (3,835 | ) | 186,029 | |||||
Adjustment of fair value of derivative financial instruments | 282 | 410 | ||||||
Provision for credit loss | 670,185 | 673,694 | ||||||
Net gain on financial investments | (206,192 | ) | (99,253 | ) | ||||
Share of profit of associates and joint ventures | (16,451 | ) | (24,260 | ) | ||||
Depreciation and amortization expense | 784,431 | 409,481 | ||||||
Depreciation and amortization expense on VOBA | 192,459 | 214,153 | ||||||
Other net gains on property and equipment/intangible assets | (33,238 | ) | (138,553 | ) | ||||
Share-based payments | 49,418 | 10,930 | ||||||
Policy reserve appropriation | 1,546,271 | 1,608,175 | ||||||
Post-employment benefits | 231,913 | 220,215 | ||||||
Net interest expense | 313,550 | 277,152 | ||||||
Net gain on foreign currency translation | (74,488 | ) | (142,586 | ) | ||||
Net other expense | 390,074 | 207,025 | ||||||
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| |||||
3,405,812 | 3,297,857 | |||||||
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| |||||
Changes in operating assets and liabilities | ||||||||
Financial asset at fair value through profit or loss | (916,415 | ) | (8,446,927 | ) | ||||
Derivative financial instruments | (644,342 | ) | 151,297 | |||||
Loans at fair value through other comprehensive income | 15,536 | (40,413 | ) | |||||
Loans at amortized cost | (21,681,258 | ) | (31,334,606 | ) | ||||
Current income tax assets | (9,091 | ) | (3,668 | ) | ||||
Deferred income tax assets | 803 | (557 | ) | |||||
Other assets | (3,668,385 | ) | (2,292,160 | ) | ||||
Financial liabilities at fair value through profit or loss | (77,231 | ) | 3,690,005 | |||||
Deposits | 28,480,993 | 20,679,844 | ||||||
Tax liabilities for current period | (266,204 | ) | 264,765 | |||||
Deferred income tax liabilities | 235,209 | 115,208 | ||||||
Other liabilities | 1,212,080 | 1,899,791 | ||||||
2,681,695 | (15,317,421 | ) | ||||||
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| |||||
Net cash inflow (outflow) from operating activities | 9,400,706 | (8,957,618 | ) | |||||
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| |||||
Cash flows from investing activities | ||||||||
Net cash flows from derivative financial instruments for hedging purposes | (206,680 | ) | 42,305 | |||||
Disposal of financial asset at fair value through profit or loss | 11,364,615 | 9,582,940 | ||||||
Acquisition of financial asset at fair value through profit or loss | (12,359,886 | ) | (8,707,420 | ) | ||||
Disposal of financial investments | 69,489,132 | 60,773,660 | ||||||
Acquisition of financial investments | (79,083,472 | ) | (64,729,380 | ) | ||||
Disposal in investments in associates and joint ventures | 26,185 | 34,717 | ||||||
Acquisition of investments in associates and joint ventures | (92,200 | ) | (187,077 | ) | ||||
Disposal of property and equipment | 12,786 | 2,272 | ||||||
Acquisition of property and equipment | (608,736 | ) | (452,270 | ) | ||||
Disposal of investment property | 94,207 | 140,969 | ||||||
Acquisition of investment property | (806,088 | ) | (1,288,125 | ) | ||||
Disposal of intangible assets | 14,694 | 10,706 | ||||||
Acquisition of intangible assets | (333,557 | ) | (126,163 | ) | ||||
Net cash flows from the change in subsidiaries | 91,592 | 188,140 | ||||||
Others | 62,984 | 234,440 | ||||||
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| |||||
Net cash outflow from investing activities | (12,334,424 | ) | (4,480,286 | ) | ||||
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| |||||
Cash flows from financing activities | ||||||||
Net cash flows from derivative financial instruments for hedging purposes | (28,631 | ) | 15,044 | |||||
Net increase in debts | 5,027,313 | 4,216,014 | ||||||
Increase in debentures | 93,655,747 | 143,603,589 | ||||||
Decrease in debentures | (96,145,669 | ) | (135,180,630 | ) | ||||
Increase (decrease) in other payables from trust accounts | (68,648 | ) | 267,077 | |||||
Dividends paid | (759,736 | ) | (766,728 | ) | ||||
Dividends paid on hybrid securities | (6,513 | ) | — | |||||
Acquisition of treasury shares | (274,317 | ) | (224,700 | ) | ||||
Issuance of hybrid securities | 399,205 | — | ||||||
Increase or decrease ofnon-controlling interest | 574,580 | — | ||||||
Principal elements of lease payments | (229,750 | ) | — | |||||
Others | 134,027 | (185,894 | ) | |||||
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| |||||
Net cash inflow from financing activities | 2,277,608 | 11,743,772 | ||||||
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| |||||
Effect of exchange rate changes on cash and cash equivalents | 137,019 | (67,950 | ) | |||||
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| |||||
Net decrease in cash and cash equivalents | (519,091 | ) | (1,762,082 | ) | ||||
Cash and cash equivalents at the beginning of the year | 6,642,816 | 8,404,898 | ||||||
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Cash and cash equivalents at the end of the year | ||||||||
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The above consolidated statements of cash flows should be read in conjunction with the accompanying notes.
9
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
1. The Parent Company
KB Financial Group Inc. (the “Parent Company”) was incorporated on September 29, 2008, under the Financial Holding Companies Act of Korea. KB Financial Group Inc. and its subsidiaries (the “Group”) derive substantially all of their revenue and income from providing a broad range of banking and related financial services to consumers and corporations primarily in Korea and in selected international markets. The Parent Company’s 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 Company’s share capital as of December 31, 2019, isW 2,090,558 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 Group’s 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 Group’s 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.
10
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
The Group recognized an amount of services to customers as expenses in previous consolidated Statements of Comprehensive Income but recognized as the reduction of revenue in accordance with Korean IFRS 1115Revenue from Contracts with Customers. Accordingly, certain accounts reported in the consolidated statement of comprehensive income for the year ended December 31, 2018 have been reclassified to facilitate the comparison with the consolidated statement of comprehensive income for the year ended December 31. 2019. The reclassification of the accounts does not have any effect on the net asset value or profit for the period of the Group as reported in the year ended December 31, 2018.
2.1.1 New and amended standards and interpretations adopted by the Group
The Group has applied the following standards and amendments for the first time for their annual reporting period commencing January 1, 2019.
• | Enactment of Korean IFRS 1116Leases |
Korean IFRS 1116 Leases, the new standard, replaces Korean IFRS 1017 Leases. Under the new standard, with implementation of a single lease model, lessee is required to recognize assets and liabilities for all lease which lease term is over 12 months and underlying assets are not low value assets. A lessee is required to recognize aright-of-use asset and a lease liability representing its obligation to make lease payments.
With implementation of Korean IFRS 1116 Lease, the Group has changed accounting policy. The Group has adopted Korean IFRS 1116 retrospectively, as permitted under the specific transitional provisions in the standard and recognized the cumulative impact of initially applying the standard as at January 1, 2019, the date of initial application. The Group has not restated comparatives for the 2018 reporting period. The impact of the adoption of the leasing standard and the new accounting policies are disclosed in Note 45.
• | Amendments to Korean IFRS 1109Financial Instruments |
The narrow-scope amendments made to Korean IFRS 1109Financial 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. The amendment does not have a significant impact on the financial statements.
• | Amendments to Korean IFRS 1019Employee 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. The amendment does not have a significant impact on the financial statements.
• | Amendments to Korean IFRS 1028Investments 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 entity’s net investment in an associate or joint venture. The amendment does not have a significant impact on the financial statements.
11
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
• | Enactment of Interpretation of Korean IFRS 2123Uncertainty 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. The enactment does not have a significant impact on the financial statements.
• | Amendments to Korean IFRS 1109Financial Instruments, and 1107Financial Instruments: Disclosure |
These amendments provide exceptions applying hedge accounting even though interest rate benchmark reform gives rise to uncertainties. In the hedging relationship, an entity shall assume that the interest rate benchmark on which the hedge cash flows are based is not altered as a result of interest rate benchmark reform when determining whether a forecast transaction is highly probable and prospectively assessing hedging effectiveness. For a hedge of anon-contractually specified benchmark component of interest rate risk, an entity shall apply the requirement that the risk component shall be separately identifiable only at the inception of the hedging relationship. The application of this exception is ceased either when the uncertainty arising from interest rate benchmark reform is no longer present with respect to the timing and the amount of the interest rate benchmark-based cash flows of the hedge item, or when the hedging relationship that the hedge item is part of is discontinued. These amendments will be effective for annual periods beginning on or after January 1, 2020. However, the Group early adopted the amendments as it is permitted. The significant benchmark interest rate indicator for the hedge relationship is LIBOR, and the hedge accounting in Note 9 directly affected by these amendments.
• | Annual Improvements to Korean IFRS 1103Business 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. The amendment does not have a significant impact on the financial statements.
• | Annual Improvements to Korean IFRS 1111Joint 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. The amendment does not have a significant impact on the financial statements.
• | Annual Improvements to Paragraph 57A of Korean IFRS 1012Income 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. The amendment does not have a significant impact on the financial statements.
12
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
• | Annual Improvements to Korean IFRS 1023Borrowing 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. The amendment does not have a significant impact on the financial statements.
2.1.2 New and amended standards and interpretations not yet adopted by the Group
Certain new accounting standards and interpretations that have been published but are not mandatory for the reporting period commencing January 1, 2019 and have not been early adopted by the Group are set out below.
• | Amendments to Korean IFRS 1001Presentation of Financial Statements and Korean IFRS 1008 Accounting policies, changes in accounting estimates and errors – Definition of Material |
The amendments clarify the explanation of the definition of material and amended Korean IFRS 1001 and Korean IFRS 1008 in accordance with the clarified definitions. Materiality is assessed by reference to omission or misstatement of material information as well as effects of immaterial information, and to the nature of the users when determining the information to be disclosed by the Group. These amendments should be applied for annual periods beginning on or after January 1, 2020, and earlier application of permitted. The Group does not expect that these amendments have a significant impact on the financial statements.
• | Amendments to Korean IFRS 1103Business Combination – Definition of a Business |
To consider the integration of the required activities and assets as a business, the amended definition of a business requires an acquisition to include an input and a substantive process that together significantly contribute to the ability to create outputs and excludes economic benefits from the lower costs. An entity can apply a concentration test, an optional test, where substantially all of the fair value of gross assets acquired is concentrated in a single asset or a group of similar assets, the assets acquired would not represent a business. These amendments should be applied for annual periods beginning on or after January 1, 2020, and earlier application of permitted. The Group does not expect that these amendments have a significant impact on the financial statements.
• | IFRS Interpretation Committee’s agenda decisions—Lease Term |
On December 16, 2019, the IFRS Interpretations Committee announced an interpretation of the “lease term and useful life of leasehold improvements”. This interpretation deals with how to determine the lease term of a cancellable lease or a renewable lease and whether the useful life ofnon-removable leasehold improvements is limited by the relevant lease term. According to this interpretation, the Group should identify factors to consider the broader economic penalty, reflect identified factors to accounting policies, and calculate lease term again based on accounting policy. However, due to the large number of lease contracts held by the Group and varying terms of the contract, the Group determined that sufficient time would be required to set up items to be included in the review of extensive economic penalty and to establish procedures for collecting and analyzing necessary information. Therefore, the effect of the changes in accounting policy for the lease term is not reflected in the consolidated financial statements for the current reporting period. If the accounting policy for the lease term is changed in the annual periods beginning on or after January 1, 2020, the amount of the relatedright-of-use assets and lease liabilities may increase, and the consolidated financial statements may need to be retroactively restated to reflect this effect.
13
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
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 Company’s functional and presentation currency.
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). Management’s estimates of outcomes may differ from actual outcomes if management’s estimates and assumptions based on management’s 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:
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 Group’s income tax is dependent on the investments, increase in wages, and others, there exists uncertainty with regard to measuring the final tax effects.
14
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
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
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 onvalue-in-use calculations to test whether goodwill has suffered any impairment (Note 15).
3. Significant Accounting Policies
The significant accounting policies and calculation methods applied in the preparation of these consolidated 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 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 andde-consolidated from the date when control is lost.
15
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
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 subsidiary’s accounting policies conform to those of the Group when the subsidiary’s 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 thenon-controlling interests, if any. Total comprehensive income is attributed to the owners of the Parent Company and to thenon-controlling interests even if this results in thenon-controlling interests having a negative balance.
Transactions withnon-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 tonon-controlling interests are also recorded in equity.
When the Group ceases to have control, any retained interest in the entity isre-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.
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 anynon-controlling interest in the acquiree on anacquisition-by-acquisition basis in the event of liquidation, either at fair value or at thenon-controlling interest’s proportionate share of the recognized amounts of acquiree’s 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.
16
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
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 Group’s share of the profit or loss of the investee and changes in the investee’s equity after the date of acquisition. The Group’s share of the profit or loss of the investee is recognized in the Group’s 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 Group’s 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 uses accounting policies other than those of the Group for like transactions and events in similar circumstances, if necessary, adjustments shall be made to make the associate’s accounting policies conform to those of the Group when the associate’s financial statements are used by the entity in applying the equity method.
If the Group’s share of losses of associates and joint ventures equals or exceeds its interest in the associate (including long-term interests that, in substance, form part of the Group’s net investment in the associate), the Group discontinues recognizing its share of further losses. After the Group’s interest 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 associate.
The Group determines at each reporting period whether there is any objective evidence that the investments in the associates 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 statement 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 Group’s consolidated financial statements, except for trusts and funds over which the Group has control.
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KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
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 andnon-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 anon-monetary item are recognized in other comprehensive income, any exchange component of those gains or losses are also recognized in other comprehensive income. Conversely, when gains or losses on a non-monetary item are recognized in profit or loss, any exchange component of those gains or losses are also recognized in profit or loss.
3.2.2 Foreign operations
The financial performance and financial position of all foreign operations, whose functional currencies differ from the Group’s presentation currency, are translated into the Group’s 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.
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KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
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 thenon-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.
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 arm’s 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 arm’s 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 |
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KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
• | 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 arm’s 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 arm’s 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 commonover-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.
In addition, the fair value information recognized in the statement 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.
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KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
The chosen valuation technique makes maximum use of market inputs and relies as little as possible on entity-specific inputs. It incorporates all factors that market participants would consider in setting a price and is consistent with economic methodologies applied for pricing financial instruments. Periodically, the Group calibrates the valuation technique and tests its validity using prices of observable current market transactions of the same instrument or based on other relevant observable market data.
3.3.3 Derecognition
Derecognition is the removal of a previously recognized financial asset or financial liability from the statement of financial position. The Group derecognizes a financial asset or a financial liability when, and only when:
Derecognition of financial assets
Financial assets are derecognized when the contractual rights to the cash flows from the financial assets expire or the financial assets have been transferred and substantially all the risks and rewards of ownership of the financial assets are also transferred, or all the risks and rewards of ownership of the financial assets are neither substantially transferred nor retained and the Group has not retained control. If the Group neither transfers nor disposes of substantially all the risks and rewards of ownership of the financial assets, the Group continues to recognize the financial asset to the extent of its continuing involvement in the financial asset.
If the Group transfers the contractual rights to receive the cash flows of the financial asset, but retains substantially all the risks and rewards of ownership of the financial asset, the Group continues to recognize the transferred asset in its 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 considerswrite-off if significant financial difficulties of the debtor, or delinquency in interest or principal payments is indicated. Thewrite-off decision is made in accordance with internal regulations and may require approval from external institution, if necessary. After thewrite-off, the Group can collect thewritten-off loans continuously according to the internal policy. Recovered amounts of financial assets previouslywritten-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 statement 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.
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KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
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.
3.5Non-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.
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 dealer’s 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.
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KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
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.
The Group uses the following three measurement techniques in accordance with Korean IFRS:
• | General approach: for financial assets andoff-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 |
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KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
• | 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. |
3.6.1 Forward-looking information
The Group uses forward-looking information, when it determines whether the credit risk has increased significantly and measures the expected credit losses.
The Group assumes the risk components have a certain correlation with the economic cycle, and uses statistical methodologies to estimate the relation between key macroeconomic variables and risk components for the expected credit losses.
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 | (-) | |
Rate of change in housing transaction price index | (-) | |
Interest rate spread | (+) | |
Private consumption growth rate | (-) | |
Change of call rate compared to the last year (%p) | (+) | |
Household loan change rate | (-) |
Forward-looking information used in calculation of expected credit losses is based on the macroeconomic forecasts utilized by management of the Group for its business plan taking into account reliable external agency’s forecasts and others. The forward-looking information is generated by KB Research under the Parent Company with comprehensive approach to capture the possibility of various economic forecast scenarios that are derived from the internal and external viewpoints of the macroeconomic situation. The Group determines the macroeconomic variables to be used in forecasting future condition of the economy, taking into account the direction of the forecast scenario and the significant relationship between macroeconomic variables and time series data. And there are some changes compared to the macroeconomic variables used in the previous year.
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KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
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 asset’s carrying amount and the present value of estimated future cash flows discounted at the financial asset’s 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 management’s 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.
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.
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KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
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 designatesnon-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 Group’s 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 instrument’s effectiveness in offsetting the exposure to changes in the hedged item’s 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.
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.
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KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
3.7.4 Hedge of net investment
If derivatives andnon-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 1109Financial 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.
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.
27
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
Subsequent expenditures are capitalized only when they prolong the useful life or enhance values of the assets but the costs of theday-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 asset’s future economic benefits are expected to be consumed by the Group. 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 lives | ||
Buildings and structures | Straight-line | 20~40 years | ||
Leasehold improvements | Declining-balance/ Straight-line | 4~5 years | ||
Equipment and vehicles | Declining-balance/ Straight-line | 3~15 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.
3.9 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 asset’s 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 properties | Depreciation method | Estimated useful lives | ||
Buildings | Straight-line | 20~40 years |
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KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
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 lives | ||
Industrial property rights | Straight-line | 3 ~ 19 years | ||
Software | Straight-line | 3 ~ 5 years | ||
VOBA | Declining-balance | 60 years | ||
Others | Straight-line | 1 ~ 13 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.
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 Group’s 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 ofnon-controlling interest and the acquisition-date fair value of the acquirer’s 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.
29
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
For each business combination, the Group decides whether thenon-controlling interest in the acquiree is initially measured at fair value or at thenon-controlling interest’s proportionate share of the acquiree’s 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 ofnon-controlling interest
Additional acquisitions ofnon-controlling interests are accounted for as equity transactions. Therefore, no additional goodwill is recognized.
Subsequent measurement
Goodwill is not amortized and is stated at cost less accumulated impairment losses. However, goodwill that forms part of the carrying amount of an investment in associates is not separately recognized and an impairment loss recognized is not allocated to any asset, including goodwill, which forms part of the carrying amount of the investment in the associates.
3.10.3 Subsequent expenditure
Subsequent expenditure is capitalized only when it enhances values of the assets. Internally generated intangible assets, such as goodwill and trade name, are not recognized as assets but expensed as incurred.
3.11 Impairment ofNon-financial Assets
The Group assesses at the end of each reporting period whether there is any indication that anon-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 asset’s 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 apre-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.
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KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
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 asset’s recoverable amount since the last impairment loss was recognized. The increased carrying amount of an asset other than goodwill attributable to a reversal of an impairment loss cannot exceed the carrying amount that would have been determined (net of amortization or depreciation) had no impairment loss been recognized for the asset in prior years.
3.12Non-current Assets Held for Sale
Anon-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. Anon-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.
Anon-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.
3.13 Financial Liabilities
The Group classifiesnon-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.
3.13.1 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.
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KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
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.
3.13.2 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).
3.14 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 statement of financial position, and as other operating income (expenses) in the statement of comprehensive income, respectively.
3.14.1 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.
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KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
3.14.2 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.
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.
3.14.3 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.
33
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
3.14.4 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.
3.15 Provisions
Provisions are recognized when the Group has a present obligation (legal or constructive) as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. The risks and uncertainties that inevitably surround many events and circumstances are taken into account in reaching the best estimate of provisions, and where the effect of the time value of money is material, the amount of provisions are the present value of the expenditures expected to be required to settle the obligation.
Provisions on confirmed and unconfirmed acceptances and guarantees, unfunded commitments of credit cards and unused credit lines of consumer and corporate loans are recognized using a valuation model that applies the credit conversion factor, probability of default, and loss given default.
Provisions are reviewed at the end of each reporting period and adjusted to reflect the current best estimate. If it is no longer probable that an outflow of resources embodying economic benefits will be required to settle the obligation, the provisions are reversed.
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.
3.16 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 Instrumentsor |
• | The initial amount recognized, less, when appropriate, cumulative amortization recognized in accordance with Korean IFRS 1115,Revenue from Contracts with Customers. |
3.17 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.
34
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
3.17.1 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.
3.17.2 Hybrid Securities
The financial instruments can be classified as either financial liabilities or equity in accordance with the terms of the contract. The Group classifies hybrid securities as an equity if the Group has the unconditional right to avoid any contractual obligation to deliver financial assets such as cash in relation to the financial instruments. As a result, hybrid securities issued by subsidiaries are classified asnon-controlling interests, dividends are recognized in the consolidated statement of comprehensive income as profit attributable tonon-controlling interests.
3.17.3 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.
3.17.4 Compound financial instruments
A compound 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 compound 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 compound financial instrument in entirety less fair value of liability component net of tax effect and it is not remeasured subsequently.
3.18 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. |
3.18.1 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 the statement 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.
35
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
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 the statement of comprehensive income.
3.18.2 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 borrower’s 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.
36
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
3.18.3 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 |
3.18.4 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.
3.19 Employee Compensation and Benefits
3.19.1 Post-employment benefits:defined contribution plans
The contributions are recognized as employee benefit expense when they are due.
3.19.2 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.
37
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
3.19.3 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.
3.19.4 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 distribute newly issued shares or treasury shares or compensate in cash based on the share price. When mileage stock options are exercised, the Group pays the amount equivalent to KB Financial Group’s share price in cash.
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.
3.19.5 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.
3.20 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.
38
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
3.20.1 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.
3.20.2 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.
39
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
3.20.3 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.
3.21 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.
3.22 Leases
As explained in Note 2.2 above, the Group has changed its accounting policy for leases. The impact of the new accounting policies is disclosed in Note 45.
Lease income from operating leases where the Group is a lessor is recognized in income on a straight-line basis over the lease term. Initial direct costs incurred in obtaining an operating lease are added to the carrying amount of the underlying asset and recognized as expense over the lease term on the same basis as lease income. The respective leased assets are included in the statement of financial position based on their nature. The Group did not need to make any adjustments to the accounting for assets held as a lessor as a result of adopting the new leasing standard.
At inception of a contract, the Group is required to assess whether the contract is, or contains, a lease. Also, at the date of initial application, the Group has assessed whether the contract is, or contains, a lease in accordance with the standard. However, the Group did not reassess all contracts as the Group elected to apply the practical expedient not to apply the standard to contracts that were not previously identified as containing a lease. On the basis of the date of initial application, the Group assesses whether the contract is, or contains, a lease.
A lessee is required to recognize aright-of-use asset (lease assets) representing its right to use the underlying leased asset and a lease liability representing its obligation to make lease payments. Assets and liabilities arising from a lease are initially measured on a present value basis.
40
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
Lease liabilities include the net present value of the following lease payments:
• | Fixed payments (includingin-substance fixed payments), less any lease incentives receivable |
• | Variable lease payment that are based on an index or a rate |
• | Amounts expected to be payable by the lessee under residual value guarantees |
• | The exercise price of a purchase option if the lessee is reasonably certain to exercise that option, and |
• | Payments of penalties for terminating the lease, if the lease term reflects the lessee exercising that option |
The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be determined, the lessee’s incremental borrowing rate is used, being the rate that the lessee would have to pay to borrow the funds necessary to obtain an asset of similar value in a similar economic environment with similar terms and conditions.
Right-of-use assets are measured at cost comprising the following:
• | The amount of the initial measurement of lease liability |
• | Any lease payments made at or before the commencement date less any lease incentives received |
• | Any initial direct costs, and |
• | Restoration costs |
However, short-term lease (lease that, at the commencement date, has a lease term of 12 months or less) and lease oflow-value assets (For example, underlying leased asset under $ 5,000) are permitted to elect exceptional conditions.
Theright-of-use asset is depreciated over the shorter of the asset’s useful life and the lease term.
Related to sale and leaseback, an entity (seller-lessee) is required to applying 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, the Group has not reassessed sale and leaseback transactions entered into before the date of initial application.
Extension and termination options are included in a number of leases across the Group. These terms are used to maximize operational flexibility in terms of managing contracts. The majority of extension and termination options held are exercisable only by the Group and not by the respective lessor. But the Group is evaluating its application in accordance with the IFRIC’s decision about “lease term and useful life of leasehold Improvements”
3.23 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.
41
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
3.24 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 Groupde-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.
42
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
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 Group’s 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 Group’s long-term strategy and business decisions efficiently. Credit risk, market risk, liquidity risk, and operational risk have been recognized as the Group’s 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 Group’s 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 Group’s 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 Group’s risk management.
Risk Management Division
The Risk Management Division is responsible for monitoring and managing the Group’s economic capital limit and managing detailed policies, procedures and working processes relating to the Group’s 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 counterparty’s default, breach of contract and deterioration in the credit quality of the counterparty. For risk management reporting purposes, the individual borrower’s 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.
43
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
4.2.2 Credit risk management
The Group measures expected losses and economic capital on assets that are subject to credit risk management whetheron- 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 Group’s 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 Group’s maximum exposures of financial instruments, excluding equity securities, to credit risk without consideration of collateral values as of December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | 2018 | ||||||
Financial assets | ||||||||
Due from financial institutions at amortized cost1 | ||||||||
Financial assets at fair value through profit or loss | ||||||||
Due from financial institutions | 216,367 | 381,719 | ||||||
Securities | 50,721,526 | 48,285,482 | ||||||
Loans | 427,545 | 954,176 | ||||||
Financial instruments indexed to the price of gold | 79,805 | 78,808 | ||||||
Derivatives | 3,190,673 | 2,025,962 | ||||||
Loans at amortized cost1 | 339,684,059 | 319,201,603 | ||||||
Financial investments | ||||||||
Securities measured at fair value through other comprehensive income | 43,556,848 | 35,243,634 | ||||||
Securities at amortized cost1 | 25,346,555 | 23,661,522 | ||||||
Loans measured at fair value through other comprehensive income | 375,098 | 389,822 | ||||||
Other financial assets1 | 9,147,059 | 8,133,556 | ||||||
|
|
|
| |||||
490,888,495 | 455,572,572 | |||||||
|
|
|
| |||||
Off-balance sheet items | ||||||||
Acceptances and guarantees contracts | 8,327,494 | 7,277,136 | ||||||
Financial guarantee contracts | 3,847,390 | 3,626,532 | ||||||
Commitments | 151,797,615 | 138,590,372 | ||||||
|
|
|
| |||||
163,972,499 | 149,494,040 | |||||||
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| |||||
|
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|
1 | Due from financial institutions, loans and securities measured at amortized cost and other financial assets are net of allowance. |
44
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
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.
Loans as of December 31, 2019 and 2018 are classified as follows:
(In millions of Korean won)
2019 | ||||||||||||||||||||
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 | 58,057,809 | 4,683,445 | 7,052 | — | 62,748,306 | |||||||||||||||
Grade 3 | 2,650,199 | 2,187,662 | 4,194 | — | 4,842,055 | |||||||||||||||
Grade 4 | 518,108 | 900,386 | 4,605 | — | 1,423,099 | |||||||||||||||
Grade 5 | 16,648 | 355,893 | 805,938 | — | 1,178,479 | |||||||||||||||
|
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| |||||||||||
145,082,471 | 10,749,284 | 822,789 | — | 156,654,544 | ||||||||||||||||
|
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|
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|
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| |||||||||||
Retail |
| |||||||||||||||||||
Grade 1 | 146,265,744 | 3,611,001 | 8,155 | — | 149,884,900 | |||||||||||||||
Grade 2 | 7,081,846 | 4,433,832 | 29,304 | — | 11,544,982 | |||||||||||||||
Grade 3 | 2,080,690 | 1,541,647 | 11,366 | — | 3,633,703 | |||||||||||||||
Grade 4 | 185,081 | 387,811 | 9,722 | — | 582,614 | |||||||||||||||
Grade 5 | 10,180 | 587,448 | 545,295 | — | 1,142,923 | |||||||||||||||
|
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|
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| |||||||||||
155,623,541 | 10,561,739 | 603,842 | — | 166,789,122 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Credit card |
| |||||||||||||||||||
Grade 1 | 8,390,177 | 96,052 | — | — | 8,486,229 | |||||||||||||||
Grade 2 | 5,695,069 | 719,065 | — | — | 6,414,134 | |||||||||||||||
Grade 3 | 1,558,999 | 1,161,396 | — | — | 2,720,395 | |||||||||||||||
Grade 4 | 26,404 | 390,941 | — | — | 417,345 | |||||||||||||||
Grade 5 | 350 | 135,630 | 474,327 | — | 610,307 | |||||||||||||||
|
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| |||||||||||
15,670,999 | 2,503,084 | 474,327 | — | 18,648,410 | ||||||||||||||||
|
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|
|
|
|
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|
| |||||||||||
316,377,011 | 23,814,107 | 1,900,958 | — | 342,092,076 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Loans at fair value through other comprehensive income |
| |||||||||||||||||||
Corporate |
| |||||||||||||||||||
Grade 1 | 241,524 | — | — | — | 241,524 | |||||||||||||||
Grade 2 | 133,574 | — | — | — | 133,574 | |||||||||||||||
Grade 3 | — | — | — | — | — | |||||||||||||||
Grade 4 | — | — | — | — | — | |||||||||||||||
Grade 5 | — | — | — | — | — | |||||||||||||||
|
|
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| |||||||||||
375,098 | — | — | — | 375,098 | ||||||||||||||||
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| |||||||||||
375,098 | — | — | — | 375,098 | ||||||||||||||||
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| |||||||||||
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1 | Before netting of allowance. |
45
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
(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 |
| |||||||||||||||||||
Grade 1 | 189,501 | 25,731 | — | — | 215,232 | |||||||||||||||
Grade 2 | 128,712 | 45,878 | — | — | 174,590 | |||||||||||||||
Grade 3 | — | — | — | — | — | |||||||||||||||
Grade 4 | — | — | — | — | — | |||||||||||||||
Grade 5 | — | — | — | — | — | |||||||||||||||
|
|
|
|
|
|
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|
|
| |||||||||||
318,213 | 71,609 | — | — | 389,822 | ||||||||||||||||
|
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| |||||||||||
318,213 | 71,609 | — | — | 389,822 | ||||||||||||||||
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| |||||||||||
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|
|
|
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|
|
1 | Before netting of allowance. |
46
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
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 |
The quantification of the extent to which collateral and other credit enhancements mitigate credit risk as of December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | |||||||||||||||
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 | 4,478,032 | 118,221 | 8,034 | 4,604,287 | ||||||||||||
Property and equipment | 10,014,552 | 582,109 | 55,410 | 10,652,071 | ||||||||||||
Real estate | 155,769,901 | 10,839,595 | 417,815 | 167,027,311 | ||||||||||||
|
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|
|
|
|
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| |||||||||
|
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|
|
|
|
|
(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 | ||||||||||||
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| |||||||||
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|
47
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
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, 2019 and 2018 are as follows:
(In millions of Korean won)
2019 | ||||||||||||||||||||
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 at amortized cost1 | ||||||||||||||||||||
Grade 1 | ||||||||||||||||||||
Grade 2 | 157,881 | — | — | — | 157,881 | |||||||||||||||
Grade 3 | 42,710 | — | — | — | 42,710 | |||||||||||||||
Grade 4 | — | — | — | — | — | |||||||||||||||
Grade 5 | — | — | — | — | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
25,348,227 | — | — | — | 25,348,227 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Securities measured at fair value through other comprehensive income |
| |||||||||||||||||||
Grade 1 | 40,206,856 | — | — | — | 40,206,856 | |||||||||||||||
Grade 2 | 3,337,327 | — | — | — | 3,337,327 | |||||||||||||||
Grade 3 | 12,665 | — | — | — | 12,665 | |||||||||||||||
Grade 4 | — | — | — | — | — | |||||||||||||||
Grade 5 | — | — | — | — | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
43,556,848 | — | — | — | 43,556,848 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
|
|
|
|
|
|
|
|
|
|
(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 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 | |||||||||||||||
|
|
|
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|
|
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| |||||||||||
35,240,718 | — | 2,916 | — | 35,243,634 | ||||||||||||||||
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| |||||||||||
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1 | Before netting of allowance |
48
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
The credit qualities of securities, excluding equity securities according to the credit ratings by external rating agencies as of December 31, 2019 and 2018, are as follows:
Credit quality | Domestic | Foreign | ||||||||||||
KIS | NICE P&I | KAP | FnPricing Inc. | S&P | Fitch-IBCA | Moody’s | ||||||||
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.
4.2.6 Credit risk of due from financial institutions
The credit quality of due from financial institutions as of December 31, 2019 and 2018, is classified as follows:
(In millions of Korean won)
2019 | ||||||||||||||||||||
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 | 149,927 | — | — | — | 149,927 | |||||||||||||||
Grade 3 | 677,249 | — | — | — | 677,249 | |||||||||||||||
Grade 4 | — | — | — | — | — | |||||||||||||||
Grade 5 | 13,991 | 13,179 | 360 | — | 27,530 | |||||||||||||||
|
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|
|
|
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| |||||||||||
|
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|
|
|
|
|
|
(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 | |||||||||||||||
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| |||||||||||
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|
1 | Before netting of allowance |
49
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
The credit qualities of due from financial institutions according to the credit ratings by external rating agencies as of December 31, 2019 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, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | 2018 | ||||||
Deposits, savings, securities, etc. | ||||||||
|
|
|
| |||||
|
|
|
|
4.2.8 Credit risk concentration analysis
Details of the Group’s loans by jurisdiction as of December 31, 2019 and 2018, are as follows:
(In millions of Korean won)
2019 | ||||||||||||||||||||||||||||
Retail | Corporate | Credit card | Total | % | Allowances | Carrying amount | ||||||||||||||||||||||
Korea | 97.44 | |||||||||||||||||||||||||||
Europe | — | 1,118,429 | — | 1,118,429 | 0.33 | (4,181 | ) | 1,114,248 | ||||||||||||||||||||
China | — | 3,135,501 | 358 | 3,135,859 | 0.91 | (20,654 | ) | 3,115,205 | ||||||||||||||||||||
Japan | 101 | 647,956 | 81 | 648,138 | 0.19 | (576 | ) | 647,562 | ||||||||||||||||||||
United States | — | 2,333,269 | — | 2,333,269 | 0.68 | (9,205 | ) | 2,324,064 | ||||||||||||||||||||
Others | 478,564 | 1,072,375 | 5,860 | 1,556,799 | 0.45 | (10,069 | ) | 1,546,730 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
100.00 | ||||||||||||||||||||||||||||
|
|
|
|
|
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|
|
|
|
|
|
|
|
50
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
(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 | ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 | The above is the Group’s loans at fair value through profit and loss, other comprehensive income or amortized cost. |
Details of the Group’s corporate loans by industry as of December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | |||||||||||||||
Loans | % | Allowances | Carrying amount | |||||||||||||
Financial institutions | 10.42 | |||||||||||||||
Manufacturing | 43,265,607 | 27.48 | (394,428 | ) | 42,871,179 | |||||||||||
Service | 65,277,701 | 41.46 | (195,205 | ) | 65,082,496 | |||||||||||
Wholesale & Retail | 18,593,540 | 11.81 | (99,051 | ) | 18,494,489 | |||||||||||
Construction | 3,679,798 | 2.34 | (194,737 | ) | 3,485,061 | |||||||||||
Public sector | 1,250,909 | 0.79 | (2,084 | ) | 1,248,825 | |||||||||||
Others | 8,984,228 | 5.70 | (56,662 | ) | 8,927,566 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
100.00 | ||||||||||||||||
|
|
|
|
|
|
|
|
(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 | ||||||||||||||||
|
|
|
|
|
|
|
|
51
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
Types of the Group’s retail and credit card loans as of December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | |||||||||||||||
Loans | % | Allowances | Carrying amount | |||||||||||||
Housing | 42.12 | |||||||||||||||
General | 88,686,485 | 47.83 | (676,927 | ) | 88,009,558 | |||||||||||
Credit card | 18,648,410 | 10.05 | (739,709 | ) | 17,908,701 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
100.00 | ||||||||||||||||
|
|
|
|
|
|
|
|
(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 | |||||||||||
|
|
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|
|
|
|
| |||||||||
100.00 | ||||||||||||||||
|
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|
|
|
52
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
Credit risk concentration of due from financial institutions, securities, excluding equity securities and derivative financial instruments
Details of the Group’s credit risk concentration of due from financial institutions, securities, excluding equity securities, and derivative financial instruments as of December 31, 2019, are as follows:
(In millions of Korean won) | 2019 | |||||||||||||||
Amount | % | Allowances | Carrying amount | |||||||||||||
Due from financial institutions at amortized cost |
| |||||||||||||||
Banking and insurance | 100.00 | |||||||||||||||
|
|
|
|
|
|
|
| |||||||||
18,147,672 | 100.00 | (4,712 | ) | 18,142,960 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Due from financial institutions at fair value through profit or loss |
| |||||||||||||||
Banking and insurance | 216,367 | 100.00 | — | 216,367 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
216,367 | 100.00 | — | 216,367 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
Securities measured at fair value through profit or loss |
| |||||||||||||||
Government and government funded institutions | 11,937,703 | 23.53 | — | 11,937,703 | ||||||||||||
Banking and insurance | 32,475,354 | 64.03 | — | 32,475,354 | ||||||||||||
Others | 6,308,469 | 12.44 | — | 6,308,469 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
50,721,526 | 100.00 | — | 50,721,526 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
Derivatives |
| |||||||||||||||
Government and government funded institutions | 7,330 | 0.23 | — | 7,330 | ||||||||||||
Banking and insurance | 3,003,371 | 94.13 | — | 3,003,371 | ||||||||||||
Others | 179,972 | 5.64 | — | 179,972 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
3,190,673 | 100.00 | — | 3,190,673 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
Securities measured at fair value through other comprehensive income |
| |||||||||||||||
Government and government funded institutions | 16,744,232 | 38.44 | — | 16,744,232 | ||||||||||||
Banking and insurance | 21,439,272 | 49.22 | — | 21,439,272 | ||||||||||||
Others | 5,373,344 | 12.34 | — | 5,373,344 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
43,556,848 | 100.00 | — | 43,556,848 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
Securities at amortized cost |
| |||||||||||||||
Government and government funded institutions | 11,115,435 | 43.86 | (37 | ) | 11,115,398 | |||||||||||
Banking and insurance | 12,279,883 | 48.44 | (1,349 | ) | 12,278,534 | |||||||||||
Others | 1,952,909 | 7.70 | (286 | ) | 1,952,623 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
25,348,227 | 100.00 | (1,672 | ) | 25,346,555 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
|
|
|
|
|
|
53
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
(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 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 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
|
|
|
|
|
|
54
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
Credit risk concentrations of due from financial institutions, securities, excluding equity securities and derivative financial instruments by country
Details of the Group’s credit risk concentration of due from financial institutions, securities, excluding equity securities, and derivative financial instruments by country, as of December 31, 2019, is as follows:
(In millions of Korean won) | 2019 | |||||||||||||||
Amount | % | Allowances | Carrying amount | |||||||||||||
Due from financial institutions at amortized cost |
| |||||||||||||||
Korea | 76.40 | |||||||||||||||
United States | 1,318,582 | 7.27 | (1 | ) | 1,318,581 | |||||||||||
Others | 2,964,403 | 16.33 | (4,156 | ) | 2,960,247 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
18,147,672 | 100.00 | (4,712 | ) | 18,142,960 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Due from financial institutions at fair value through profit or loss |
| |||||||||||||||
Korea | 216,367 | 100.00 | — | 216,367 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
216,367 | 100.00 | — | 216,367 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
Securities measured at fair value through profit or loss |
| |||||||||||||||
Korea | 46,413,061 | 91.51 | — | 46,413,061 | ||||||||||||
United States | 1,939,330 | 3.82 | — | 1,939,330 | ||||||||||||
Others | 2,369,135 | 4.67 | — | 2,369,135 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
50,721,526 | 100.00 | — | 50,721,526 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
Derivatives |
| |||||||||||||||
Korea | 1,440,349 | 45.14 | — | 1,440,349 | ||||||||||||
United States | 529,956 | 16.61 | — | 529,956 | ||||||||||||
France | 358,951 | 11.25 | — | 358,951 | ||||||||||||
Others | 861,417 | 27.00 | — | 861,417 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
3,190,673 | 100.00 | — | 3,190,673 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
Securities measured at fair value through other comprehensive income |
| |||||||||||||||
Korea | 40,948,853 | 94.01 | — | 40,948,853 | ||||||||||||
United States | 687,243 | 1.58 | — | 687,243 | ||||||||||||
Others | 1,920,752 | 4.41 | — | 1,920,752 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
43,556,848 | 100.00 | — | 43,556,848 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
Securities at amortized cost |
| |||||||||||||||
Korea | 22,591,541 | 89.12 | (1,034 | ) | 22,590,507 | |||||||||||
United States | 1,312,941 | 5.18 | (217 | ) | 1,312,724 | |||||||||||
Others | 1,443,745 | 5.70 | (421 | ) | 1,443,324 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
25,348,227 | 100.00 | (1,672 | ) | 25,346,555 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
|
|
|
|
|
|
55
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
(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 loss |
| |||||||||||||||
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 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 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
|
|
|
|
|
|
Due from financial institutions, financial assets at fair value through profit or loss and derivatives that are linked to gold price are mostly relevant to financial and insurance industry with high credit ratings.
56
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
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, andoff-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 andoff-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.
57
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
The remaining contractual maturity of financial assets and liabilities, excluding derivatives held for cash flow hedging, as of December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | December 31, 2019 | |||||||||||||||||||||||||||
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 loss | 52,488,545 | 446,069 | 273,144 | 187,821 | 236,130 | 1,011,289 | 54,642,998 | |||||||||||||||||||||
Derivatives held for trading2 | 3,008,598 | — | — | — | — | — | 3,008,598 | |||||||||||||||||||||
Derivatives held for fair value hedging3 | — | 4,892 | 20,216 | 37,441 | 41,401 | 66,176 | 170,126 | |||||||||||||||||||||
Loans at amortized cost | 2,908,095 | 33,042,040 | 32,668,128 | 125,125,270 | 94,802,566 | 96,757,198 | 385,303,297 | |||||||||||||||||||||
Financial investments4 | ||||||||||||||||||||||||||||
Financial assets measured at fair value through other comprehensive income | 2,101,605 | 526,465 | 1,403,884 | 6,761,533 | 33,604,010 | 4,506,581 | 48,904,078 | |||||||||||||||||||||
Securities at amortized cost | — | 1,002,164 | 2,080,834 | 5,700,500 | 7,366,945 | 15,888,344 | 32,038,787 | |||||||||||||||||||||
Other financial assets | 71,528 | 6,578,005 | 179,790 | 1,373,850 | 40,243 | 35,927 | 8,279,343 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
58
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
(In millions of Korean won) | December 31, 2019 | |||||||||||||||||||||||||||
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 | 12,704,826 | — | — | — | — | — | 12,704,826 | |||||||||||||||||||||
Derivatives held for trading2 | 2,842,950 | — | — | — | — | — | 2,842,950 | |||||||||||||||||||||
Derivatives held for fair value hedging3 | — | 14,764 | 15,588 | 1,652 | 20,044 | 129 | 52,177 | |||||||||||||||||||||
Deposits5 | 141,821,986 | 17,180,492 | 27,300,542 | 110,410,809 | 10,804,440 | 2,354,504 | 309,872,773 | |||||||||||||||||||||
Debts | 7,074,508 | 12,341,516 | 3,057,980 | 8,994,817 | 4,950,294 | 1,763,234 | 38,182,349 | |||||||||||||||||||||
Debentures | 22,285 | 2,652,730 | 3,812,476 | 11,062,873 | 32,477,672 | 3,515,716 | 53,543,752 | |||||||||||||||||||||
Lease liabilities | 256 | 19,304 | 35,730 | 137,419 | 318,781 | 66,032 | 577,522 | |||||||||||||||||||||
Other financial liabilities | 114,320 | 17,663,385 | 187,976 | 212,059 | 693,921 | 119,637 | 18,991,298 | |||||||||||||||||||||
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Commitments6 | — | — | — | — | — | |||||||||||||||||||||||
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Financial guarantee contract7 | 3,847,390 | — | — | — | — | — | 3,847,390 | |||||||||||||||||||||
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— | — | — | — | — | ||||||||||||||||||||||||
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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. |
59
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
December 31, 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 | ||||||||||||||||||||||||||||
Financial assets at fair value through profit or loss | 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 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 | |||||||||||||||||||||
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60
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
December 31, 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 | |||||||||||||||||||||
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Commitments6 | ||||||||||||||||||||||||||||
Financial guarantee contract7 | 3,626,532 | — | — | — | — | — | 3,626,532 | |||||||||||||||||||||
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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, 2019 and 2018
The contractual cash flows of derivatives held for cash flow hedging as of September 30, 2019 and December 31, 2018, are as follows:
(In millions of Korean won)
2019 | ||||||||||||||||||||||||
Up to 1 month | 1-3 months | 3-12 months | 1-5 years | Over 5 years | Total | |||||||||||||||||||
Net cash flow ofnet-settled derivatives | ||||||||||||||||||||||||
Cash flow to be received of gross-settled derivatives | 14,119 | 200,170 | 657,909 | 1,888,772 | — | 2,760,970 | ||||||||||||||||||
Cash flow to be paid of gross-settled derivatives | (18,171 | ) | (199,141 | ) | (671,375 | ) | (1,955,650 | ) | — | (2,844,337 | ) |
(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 ofnet-settled derivatives | ||||||||||||||||||||||||
Cash flow to be received of gross-settled derivatives | 47,526 | 129,826 | 286,219 | 2,116,253 | — | 2,579,824 | ||||||||||||||||||
Cash flow to be paid of gross-settled derivatives | (50,281 | ) | (137,834 | ) | (286,165 | ) | (2,151,808 | ) | — | (2,626,088 | ) |
62
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
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 withnon-trading positions. The Group classifies exposures to market risk into either trading ornon-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 andnon-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 fornon-trading positions in order to manage market risk efficiently. The procedures mentioned are implemented with approval from the Risk Management Committee and Risk Management Council.
Kookmin Bank, one of the subsidiaries, establishes market risk management policy, sets position limits, loss limits and VaR limits of each business group and approves newly developed instruments through its Risk Management Council. The Market Risk Management Committee, which is chaired by the Chief Risk Officer (CRO), is the decision maker and sets position limits, loss limits, VaR limits, sensitivity limits and scenario loss limits for each division, at the level of each individual business department.
The ALCO of Kookmin Bank determines the operational standards of interest and commission, the details of the establishment and prosecution of the Asset Liability Management (ALM) policies and enacts and amends relevant guidelines. The Risk Management Committee and Risk Management Council monitor the establishment and enforcement of ALM risk management policies, and enact and amend ALM risk management guidelines. The interest rate risk limit is set based on the future assets/liabilities position and interest rate volatility estimation reflects the annual work plan. The ALM 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 ALM Department. Also, the Risk Management Department independently reports related information to the management.
63
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
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 withoutpre-approval. |
• | The trading position is reported periodically to management for the purpose of the Group’s 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)
Kookmin Bank, one of the subsidiaries, uses thevalue-at-risk methodology to measure the market risk of trading positions. Kookmin Bank uses the10-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 portfolio’s value changes are estimated based on the data over the previous 250 business days, andten-day VaR is calculated by subtracting net present market value from the value measured at a 99% confident level of portfolio’s 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.
64
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
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 andavailable-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 aten-day holding period by a subsidiary as of December 31, 2019 and 2018, are as follows:
Kookmin Bank
(In millions of Korean won) | 2019 | |||||||||||||||
Average | Minimum | Maximum | Ending | |||||||||||||
Interest rate risk | ||||||||||||||||
Stock price risk | 3,434 | 2,402 | 4,310 | 3,914 | ||||||||||||
Foreign exchange rate risk | 15,760 | 11,416 | 20,704 | 13,081 | ||||||||||||
Deduction of diversification effect | (13,246 | ) | ||||||||||||||
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(In millions of Korean won) | 2018 | |||||||||||||||
Average | Minimum | Maximum | Ending | |||||||||||||
Interest rate risk | ||||||||||||||||
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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65
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
Meanwhile, the required equity capital using the standardized method related to the positions which are not measured by VaR or thenon-banking subsidiaries as of December 31, 2019 and 2018, are as follows:
Kookmin Bank
(In millions of Korean won) | 2019 | 2018 | ||||||
Interest rate risk | ||||||||
Stock price risk | 1,954 | 19,756 | ||||||
Foreign exchange rate risk | 1,850 | 1,339 | ||||||
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KB Securities Co., Ltd.
(In millions of Korean won) | 2019 | |||||||||||||||
Average | Minimum | Maximum | Ending | |||||||||||||
Interest rate risk | ||||||||||||||||
Stock price risk | 248,183 | 217,149 | 282,584 | 270,443 | ||||||||||||
Foreign exchange rate risk | 15,785 | 7,578 | 23,674 | 21,418 | ||||||||||||
Commodity risk | 3 | 1 | 20 | 1 | ||||||||||||
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(In millions of Korean won) | 2018 | |||||||||||||||
Average | Minimum | Maximum | Ending | |||||||||||||
Interest rate risk | ||||||||||||||||
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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KB Insurance Co., Ltd.
(In millions of Korean won) | 2019 | |||||||||||||||
Average | Minimum | Maximum | Ending | |||||||||||||
Interest rate risk | ||||||||||||||||
Stock price risk | 23,293 | 16,153 | 27,550 | 26,140 | ||||||||||||
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(In millions of Korean won) | 2018 | |||||||||||||||
Average | Minimum | Maximum | Ending | |||||||||||||
Interest rate risk | ||||||||||||||||
Stock price risk | 11,074 | 8,484 | 15,053 | 14,769 | ||||||||||||
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66
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
KB Life Insurance Co., Ltd.
(In millions of Korean won) | 2019 | |||||||||||||||
Average | Minimum | Maximum | Ending | |||||||||||||
Interest rate risk | ||||||||||||||||
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(In millions of Korean won) | 2018 | |||||||||||||||
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KB Investment Co., Ltd.
(In millions of Korean won) | 2019 | |||||||||||||||
Average | Minimum | Maximum | Ending | |||||||||||||
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(In millions of Korean won) | 2018 | |||||||||||||||
Average | Minimum | Maximum | Ending | |||||||||||||
Stock price risk | ||||||||||||||||
Foreign exchange rate risk | 2,064 | 1,776 | 3,033 | 3,033 | ||||||||||||
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KB Asset Management Co., Ltd.
(In millions of Korean won) | 2019 | |||||||||||||||
Average | Minimum | Maximum | Ending | |||||||||||||
Interest rate risk | ||||||||||||||||
Stock price risk | 3,456 | 1,965 | 6,248 | 6,248 | ||||||||||||
Foreign exchange rate risk | 825 | 362 | 1,427 | 362 | ||||||||||||
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(In millions of Korean won) | 2018 | |||||||||||||||
Average | Minimum | Maximum | Ending | |||||||||||||
Interest rate risk | ||||||||||||||||
Stock price risk | 1,658 | — | 1,952 | 1,839 | ||||||||||||
Foreign exchange rate risk | 782 | 627 | 1,125 | 837 | ||||||||||||
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67
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
Details of risk factors
i. Interest rate risk
Trading position interest rate risk usually arises from debt securities denominated in Korean won. The Group’s 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 andnon-trading portfolios.
4.4.4Non-trading position
Definition ofnon-trading position
Managed interest rate risk innon-trading position includeson- oroff-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 fromnon-trading position
As a qualitative methodology, interest rate risk arises from a change in equity and earnings caused by fluctuation in value of interest rate sensitive assets and liabilities, and these risks are measured with change in Economic Value of Equity (DEVE) or interest rate VaR and change in Net Interest Income (DNII). In addition, as a quantitative methodology, average and longest maturity of interest rate revision fornon-maturity deposits are monitored by the Group.
Interest rate risk levels
i. Subsidiary Kookmin Bank
Kookmin Bank calculatesDEVE by applying six types of rate shock and crisis scenarios, andDNII by applying parallel rise and decline impact scenarios. The results as at December 31, 2019 are as follows:
(In millions of Korean won)
2019 | ||||||||
Changes in the Economic Value of Equity | Changes in Net Interest Income | |||||||
Scenario 1 (Parallel rise) | 483,207 | 152,013 | ||||||
Scenario 2 (Parallel decline) | 31,718 | 9,717 | ||||||
Scenario 3(Short-term decline, long-term rise) | 257,756 | — | ||||||
Scenario 4 (Short-term rise, long-term decline) | 411,237 | — | ||||||
Scenario 5 (Short-term rise) | 378,380 | — | ||||||
Scenario 6 (Short-term decline) | 492,047 | — | ||||||
Maximum of Scenarios1-6 | 492,047 | 152,013 | ||||||
Basic capital | 27,609,684 | — |
(*) | As of the end of December 2019, interest rate risk was calculated by different method from the previous disclosure due to the revision of the Detailed Supervisory Regulations on Banking Business. |
68
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
The results of previous method as at December 31, 2018 are as follows:
(In millions of Korean won) | 2018 | |||
Interest Rate VaR | 168,282 |
ii.Non-bank Subsidiaries
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, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | 2018 | ||||||
KB Securities Co., Ltd. | ||||||||
KB Insurance Co.,Ltd. | 345,292 | 270,507 | ||||||
KB Kookmin Card Co., Ltd. | 49,878 | 27,894 | ||||||
KB Life Insurance Co., Ltd. | 56,214 | 47,089 | ||||||
KB Savings Bank Co., Ltd. | 6,510 | 8,760 | ||||||
KB Capital Co., Ltd. | 33,038 | 19,852 |
69
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
4.4.5 Financial Instruments in Foreign Currencies
Details of financial instruments presented in foreign currencies translated into Korean won as of December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | December 31, 2019 | |||||||||||||||||||||||||||
USD | JPY | EUR | GBP | CNY | Others | Total | ||||||||||||||||||||||
Financial assets | ||||||||||||||||||||||||||||
Cash and due from financial institutions | ||||||||||||||||||||||||||||
Financial assets at fair value through profit or loss | 6,275,426 | 43,124 | 610,820 | 23,034 | 6,131 | 149,188 | 7,107,723 | |||||||||||||||||||||
Derivatives held for trading | 244,010 | 22,729 | 25,226 | 698 | 6,786 | 48,396 | 347,845 | |||||||||||||||||||||
Derivatives held for hedging | 83,610 | — | — | — | — | — | 83,610 | |||||||||||||||||||||
Loans at amortized cost | 14,478,537 | 484,087 | 795,285 | 178,628 | 1,205,297 | 991,445 | 18,133,279 | |||||||||||||||||||||
Financial assets measured at fair value through other comprehensive income | 4,643,921 | 21,267 | 71,078 | — | 282,390 | 39,186 | 5,057,842 | |||||||||||||||||||||
Financial assets at amortized cost | 2,380,000 | — | 304,484 | — | 97,845 | 101,958 | 2,884,287 | |||||||||||||||||||||
Other financial assets | 1,619,738 | 230,542 | 313,363 | 18,237 | 186,607 | 195,691 | 2,564,178 | |||||||||||||||||||||
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Financial liabilities | ||||||||||||||||||||||||||||
Financial liabilities designated at fair value through profit or loss | ||||||||||||||||||||||||||||
Derivatives held for trading | 351,394 | 39,050 | 36,018 | — | 7,806 | 67,809 | 502,077 | |||||||||||||||||||||
Derivatives held for hedging | 35,538 | — | — | — | — | — | 35,538 | |||||||||||||||||||||
Deposits | 12,266,565 | 766,720 | 791,638 | 45,892 | 1,477,097 | 560,939 | 15,908,851 | |||||||||||||||||||||
Debts | 9,399,828 | 125,096 | 419,155 | 408,918 | 15,092 | 247,943 | 10,616,032 | |||||||||||||||||||||
Debentures | 5,007,285 | — | — | — | — | 338,225 | 5,345,510 | |||||||||||||||||||||
Other financial liabilities | 2,556,502 | 60,029 | 101,289 | 22,531 | 190,841 | 254,876 | 3,186,068 | |||||||||||||||||||||
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Off-balance sheet items |
70
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
(In millions of Korean won) | December 31, 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 | ||||||||||||||||||||||||||||
Financial liabilities designated at fair value through profit or loss | ||||||||||||||||||||||||||||
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, 2019 and 2018
4.5 Operational Risk
4.5.1 Concept
The Group defines operational risk broadly to include all financial andnon-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 8.0%(2018: 7.125%), a minimum Tier 1 ratio of :9.5%(2018: 8.625%) and a minimum Total Regulatory Capital of 11.5%(2018:10.625%) as of December 31, 2019.
The Group’s 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. |
72
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
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 Group’s 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 Group’s capital adequacy calculation in line with Basel III requirements as of December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | 2018 | ||||||
Equity Capital: | ||||||||
Tier 1 Capital | 35,426,114 | 32,993,826 | ||||||
Common Equity Tier 1 Capital | 34,709,873 | 32,993,826 | ||||||
Additional Tier 1 Capital | 716,241 | — | ||||||
Tier 2 Capital | 1,569,067 | 1,482,346 | ||||||
Risk-weighted assets: | 255,549,020 | 236,099,017 | ||||||
Equity Capital (%): | 14.48 | 14.60 | ||||||
Tier 1 Capital (%) | 13.86 | 13.97 | ||||||
Common Equity Tier 1 Capital (%) | 13.58 | 13.97 |
73
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
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 Group’s management organization.
Banking Business | Corporate Banking | Loans, deposit products and other related financial services to large, small andmedium-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. |
74
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
Financial information by business segment as of and for the year ended December 31, 2019, is as follows:
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 | ||||||||||||||||||||||||||||||||||||||||||||
Intra-segment operating revenues(expenses) | 204,476 | — | 167,966 | 372,442 | (18,795 | ) | (54,160 | ) | (209,874 | ) | (22,742 | ) | 124,857 | (191,728 | ) | — | ||||||||||||||||||||||||||||
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Net interest income | 2,844,880 | 3,148,061 | 370,846 | 6,363,787 | 529,888 | 616,378 | 1,230,288 | 159,248 | 296,512 | 686 | 9,196,787 | |||||||||||||||||||||||||||||||||
Interest income | 4,642,555 | 4,872,937 | 1,264,456 | 10,779,948 | 852,153 | 617,617 | 1,581,178 | 159,463 | 687,823 | (38,995 | ) | 14,639,187 | ||||||||||||||||||||||||||||||||
Interest expense | (1,797,675 | ) | (1,724,876 | ) | (893,610 | ) | (4,416,161 | ) | (322,265 | ) | (1,239 | ) | (350,890 | ) | (215 | ) | (391,311 | ) | 39,681 | (5,442,400 | ) | |||||||||||||||||||||||
Net fee and commission income (expenses) | 349,393 | 471,869 | 312,034 | 1,133,296 | 580,435 | (152,597 | ) | 261,829 | (16,792 | ) | 541,343 | 7,490 | 2,355,004 | |||||||||||||||||||||||||||||||
Fee and commission income | 459,879 | 577,845 | 445,638 | 1,483,362 | 683,600 | 11,095 | 1,406,273 | 239 | 617,622 | (322,944 | ) | 3,879,247 | ||||||||||||||||||||||||||||||||
Fee and commission expense | (110,486 | ) | (105,976 | ) | (133,604 | ) | (350,066 | ) | (103,165 | ) | (163,692 | ) | (1,144,444 | ) | (17,031 | ) | (76,279 | ) | 330,434 | (1,524,243 | ) | |||||||||||||||||||||||
Net insurance income (expenses) | — | — | — | — | — | 415,112 | 15,748 | (122,295 | ) | — | (9,053 | ) | 299,512 | |||||||||||||||||||||||||||||||
Insurance income | — | — | — | — | — | 11,375,543 | 28,874 | 942,662 | — | (29,897 | ) | 12,317,182 | ||||||||||||||||||||||||||||||||
Insurance expenses | — | — | — | — | — | (10,960,431 | ) | (13,126 | ) | (1,064,957 | ) | — | 20,844 | (12,017,670 | ) | |||||||||||||||||||||||||||||
Net gains (losses) on financial instruments at fair value through profit or loss | (2,526 | ) | — | 425,150 | 422,624 | (103,815 | ) | 265,187 | 371 | 66,773 | 137,680 | (144,948 | ) | 643,872 | ||||||||||||||||||||||||||||||
Net other operating income (expense) | (611,471 | ) | (640,427 | ) | 651,259 | (600,639 | ) | 87,897 | (12,640 | ) | (247,200 | ) | (2,272 | ) | (242,567 | ) | (45,903 | ) | (1,063,324 | ) | ||||||||||||||||||||||||
General and administrative expenses | (1,241,721 | ) | (1,982,375 | ) | (663,323 | ) | (3,887,419 | ) | (757,276 | ) | (843,800 | ) | (441,921 | ) | (66,514 | ) | (373,919 | ) | 99,832 | (6,271,017 | ) | |||||||||||||||||||||||
Operating profit before Provision for credit losses | 1,338,555 | 997,128 | 1,095,966 | 3,431,649 | 337,129 | 287,640 | 819,115 | 18,148 | 359,049 | (91,896 | ) | 5,160,834 | ||||||||||||||||||||||||||||||||
Provision (reversal) for credit losses | 125,919 | (235,995 | ) | 6,546 | (103,530 | ) | (14,366 | ) | 12,959 | (439,765 | ) | 3,084 | (128,331 | ) | (236 | ) | (670,185 | ) | ||||||||||||||||||||||||||
Net operating income | 1,464,474 | 761,133 | 1,102,512 | 3,328,119 | 322,763 | 300,599 | 379,350 | 21,232 | 230,718 | (92,132 | ) | 4,490,649 | ||||||||||||||||||||||||||||||||
Share of profit of associates and joint ventures | — | — | 29,240 | 29,240 | (103 | ) | (21 | ) | 1,106 | — | 7,201 | (20,972 | ) | 16,451 | ||||||||||||||||||||||||||||||
Net othernon-operating income (expense) | (262 | ) | — | (38,625 | ) | (38,887 | ) | 30,518 | 26,490 | 3,362 | (30 | ) | 34,644 | (29,211 | ) | 26,886 | ||||||||||||||||||||||||||||
Segment profits before income tax | 1,464,212 | 761,133 | 1,093,127 | 3,318,472 | 353,178 | 327,068 | 383,818 | 21,202 | 272,563 | (142,315 | ) | 4,533,986 | ||||||||||||||||||||||||||||||||
Income tax expense | (404,426 | ) | (209,311 | ) | (265,656 | ) | (879,393 | ) | (95,271 | ) | (92,381 | ) | (67,262 | ) | (5,238 | ) | (90,366 | ) | 9,124 | (1,220,787 | ) | |||||||||||||||||||||||
Profit for the year | 1,059,786 | 551,822 | 827,471 | 2,439,079 | 257,907 | 234,687 | 316,556 | 15,964 | 182,197 | (133,191 | ) | 3,313,199 | ||||||||||||||||||||||||||||||||
Profit attributable to shareholders of the Parent Company | 1,059,786 | 551,822 | 827,471 | 2,439,079 | 257,893 | 234,326 | 316,545 | 15,964 | 179,783 | (131,762 | ) | 3,311,828 | ||||||||||||||||||||||||||||||||
Profit attributable tonon-controlling interests | — | — | — | — | 14 | 361 | 11 | — | 2,414 | (1,429 | ) | 1,371 | ||||||||||||||||||||||||||||||||
Total assets1 | 139,496,393 | 147,468,173 | 100,460,472 | 387,425,038 | 47,816,512 | 36,552,368 | 22,990,115 | 9,801,904 | 42,140,936 | (28,188,756 | ) | 518,538,117 | ||||||||||||||||||||||||||||||||
Total liabilities1 | 142,063,122 | 161,834,984 | 54,522,699 | 358,420,805 | 43,131,858 | 32,689,460 | 18,925,195 | 9,186,567 | 18,675,585 | (1,610,678 | ) | 479,418,792 |
1 | Assets and liabilities of the reporting segments are amounts before intra-segment transaction adjustment. |
75
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
Financial information by business segment for the year ended December 31, 2018, is as follows:
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 | ||||||||||||||||||||||||||||||||||||||||||||
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 (expenses) | 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 | 683,198 | 214 | 443,455 | (312,701 | ) | 2,974,482 | ||||||||||||||||||||||||||||||||
Fee and commission expense | (93,503 | ) | (92,766 | ) | (113,774 | ) | (300,043 | ) | (108,558 | ) | (150,279 | ) | (418,547 | ) | (13,377 | ) | (57,525 | ) | 317,223 | (731,106 | ) | |||||||||||||||||||||||
Net insurance income (expenses) | — | — | — | — | — | 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 expenses | — | — | — | — | — | (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 | ||||||||||||||||||||||||||||||||
Provision (reversal) 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 of associates and joint ventures | — | — | 49,698 | 49,698 | 175 | (16 | ) | 202 | — | 3,104 | (28,903 | ) | 24,260 | |||||||||||||||||||||||||||||||
Net othernon-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 year | 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 attributable tonon-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, 2019 and 2018
5.2 Services and Geographical Segments
5.2.1 Services information
Operating revenues from external customers for each service for the years ended December 31, 2019 and 2018, are as follows:
(In millions of Korean won)
2019 | 2018 | |||||||
Banking service | ||||||||
Securities service | 1,113,200 | 997,898 | ||||||
Non-life Insurance service | 1,185,600 | 1,183,394 | ||||||
Credit card service | 1,470,910 | 1,524,695 | ||||||
Life insurance service | 107,404 | 113,238 | ||||||
Other service | 608,111 | 461,293 | ||||||
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5.2.2 Geographical information
Geographical operating revenues from external customers for the years ended December 31, 2019 and 2018, and majornon-current assets as of December 31, 2019 and 2018, are as follows:
(In millions of Korean won)
2019 | 2018 | |||||||||||||||
Revenues from external customers | Major non- current assets | Revenues from external customers | Major non- current assets | |||||||||||||
Domestic | ||||||||||||||||
United States | 72,945 | 386,724 | 46,391 | 370,252 | ||||||||||||
New Zealand | 6,946 | 3,516 | �� | 6,213 | 72 | |||||||||||
China | 109,574 | 15,119 | 94,996 | 5,454 | ||||||||||||
Cambodia | 19,534 | 7,162 | 11,062 | 3,733 | ||||||||||||
United Kingdom | 10,037 | 85,634 | 8,119 | 537 | ||||||||||||
Others | 70,551 | 551,039 | 26,320 | 584,466 | ||||||||||||
Intra-groupadjustment | — | 68,764 | — | 69,011 | ||||||||||||
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77
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
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, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | |||||||
Carrying amount | Fair value | |||||||
Financial assets | ||||||||
Cash and due from financial institutions | ||||||||
Financial assets at fair value through profit or loss | 53,549,086 | 53,549,086 | ||||||
Due from financial institutions | 216,367 | 216,367 | ||||||
Debt securities | 50,721,526 | 50,721,526 | ||||||
Equity securities | 2,103,843 | 2,103,843 | ||||||
Loans | 427,545 | 427,545 | ||||||
Others | 79,805 | 79,805 | ||||||
Derivatives held for trading | 3,008,598 | 3,008,598 | ||||||
Derivatives held for hedging | 182,075 | 182,075 | ||||||
Loans at amortized cost | 339,684,059 | 340,836,884 | ||||||
Securities at amortized cost | 25,346,555 | 26,570,494 | ||||||
Financial assets measured at fair value through other comprehensive income | 46,436,051 | 46,436,051 | ||||||
Debt securities | 43,556,848 | 43,556,848 | ||||||
Equity securities | 2,504,105 | 2,504,105 | ||||||
Loans | 375,098 | 375,098 | ||||||
Others | 9,147,059 | 9,147,059 | ||||||
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Financial liabilities | ||||||||
Financial liabilities at fair value through profit or loss | ||||||||
Financial liabilities designated at fair value through profit or loss | 12,704,826 | 12,704,826 | ||||||
Derivatives held for trading | 2,842,950 | 2,842,950 | ||||||
Derivatives held for hedging | 164,391 | 164,391 | ||||||
Deposits | 305,592,771 | 306,048,291 | ||||||
Debts | 37,818,860 | 37,808,944 | ||||||
Debentures | 50,935,583 | 51,558,748 | ||||||
Other financial liabilities | 22,629,587 | 22,629,587 | ||||||
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78
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
(In millions of Korean won) | 2018 | |||||||
Carrying amount | Fair value | |||||||
Financial assets | ||||||||
Cash and due from financial institutions | ||||||||
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 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 | ||||||
Securities at amortized cost | 23,661,522 | 24,159,137 | ||||||
Others | 8,133,556 | 8,133,556 | ||||||
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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 | ||||||
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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.
79
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
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. | |
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. |
80
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
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 statement of financial position are appropriate. However, the fair values of the financial instruments recognized in the statement 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.
When the inputs used to measure the fair value of an asset or a liability might be categorized within different levels of the fair value hierarchy, the fair value measurement is categorized in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement. Assessing the significance of a particular input to the entire measurement requires judgment, taking into account factors specific to the asset or liability. If a fair value measurement uses observable inputs that require significant adjustment based on unobservable inputs, that measurement is a Level 3 measurement.
81
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
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, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | |||||||||||||||
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 | — | 165,242 | 51,125 | 216,367 | ||||||||||||
Debt securities | 9,853,733 | 30,735,027 | 10,132,766 | 50,721,526 | ||||||||||||
Equity securities | 1,244,178 | 336,389 | 523,276 | 2,103,843 | ||||||||||||
Loans | — | 239,412 | 188,133 | 427,545 | ||||||||||||
Others | 79,805 | — | — | 79,805 | ||||||||||||
Derivatives held for trading | 72,983 | 2,398,831 | 536,784 | 3,008,598 | ||||||||||||
Derivatives held for hedging | — | 182,075 | — | 182,075 | ||||||||||||
Financial assets measured at fair value through other comprehensive income | 15,188,993 | 29,764,660 | 1,482,398 | 46,436,051 | ||||||||||||
Debt securities | 14,236,566 | 29,320,282 | — | 43,556,848 | ||||||||||||
Equity securities | 952,427 | 69,280 | 1,482,398 | 2,504,105 | ||||||||||||
Loans | — | 375,098 | — | 375,098 | ||||||||||||
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Financial liabilities | ||||||||||||||||
Financial liabilities at fair value through profit or loss | ||||||||||||||||
Financial liabilities designated at fair value through profit or loss | 492 | 1,482,302 | 11,222,032 | 12,704,826 | ||||||||||||
Derivatives held for trading | 157,634 | 2,458,498 | 226,818 | 2,842,950 | ||||||||||||
Derivatives held for hedging | — | 164,391 | — | 164,391 | ||||||||||||
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(*) | Valuation target amount of the KB Securities Co., Ltd.’sover-the-counter (OTC) derivatives consist of |
82
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
(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 | — | 332,976 | 48,743 | 381,719 | ||||||||||||
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 | ||||||||||||
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 | 10,514,315 | 26,156,539 | 1,332,718 | 38,003,572 | ||||||||||||
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 | ||||||||||||
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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 | ||||||||||||
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83
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
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, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | |||||||
Fair value | Valuation techniques | Inputs | ||||||
Financial assets | ||||||||
Financial assets at fair value through profit or loss | ||||||||
Due from financial institutions | 165,242 | DCF Model, One factor Hull-White Model, | Discount rate, Volatility and others | |||||
Debt securities | 30,735,027 | 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, Correlation coefficient, Discount rate, Volatility and others | |||||
Equity securities | 336,389 | DCF Model | Interest rate, Discount rate and others | |||||
Loans | 239,412 | DCF Model | Interest rate, Discount rate and others | |||||
Derivatives held for trading | 2,398,831 | 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, Correlation coefficient, Interest rate, PD, Credit Spread. Foreign exchange rate, Stock price, Dividend rate and others | |||||
Derivatives held for hedging | 182,075 | DCF Model, Closed Form, FDM | Discount rate, Volatility, Foreign exchange rate and Others | |||||
Financial assets measured at fair value through other comprehensive income | 29,764,660 | |||||||
Debt securities | 29,320,282 | DCF Model, Option model, Market value approach | Discount rate, Underlying asset Index, Volatility, and others | |||||
Equity securities | 69,280 | DCF Model, Black-Scholes Model | Discount rate, Underlying asset Index, Volatility, and others | |||||
Loans | 375,098 | DCF Model, Option Model | Discount rate, Underlying asset Index, Volatility, and others | |||||
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Financial liabilities | ||||||||
Financial liabilities designated at fair value through profit or loss | DCF Model, Closed Form, Monte Carlo Simulation, Black-Scholes Model, Hull and White Model and others | Price of Underlying asset, interest rate, Discount rate, Dividend rate, Volatility and others | ||||||
Derivatives held for trading | 2,458,498 | DCF Model, Closed Form, FDM, Monte Carlo Simulation, Black-Sholes Model, Hull and White Model, Option Model and others | Discount rate, Underlying asset Index, Volatility, Correlation coefficient, Interest rate, Stock price, Foreign exchange rate, Dividend rate, PD, Credit Spread, and others | |||||
Derivatives held for hedging | 164,391 | DCF Model, Closed Form, FDM and others | Discount rate, Volatility, Foreign exchange rate and others | |||||
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84
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
(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 | 332,976 | 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 | |||||
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 | 26,156,539 | |||||||
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 | |||||
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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 | |||||
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85
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
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, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | |||||||||||||||
Fair value hierarchy | Total | |||||||||||||||
Level 1 | Level 2 | Level 3 | ||||||||||||||
Financial assets | ||||||||||||||||
Cash and due from financial institutions1 | ||||||||||||||||
Loans at amortized cost | — | 372,988 | 340,463,896 | 340,836,884 | ||||||||||||
Securities at amortized cost | 9,587,770 | 16,979,656 | 3,068 | 26,570,494 | ||||||||||||
Other financial assets2 | — | — | 9,147,059 | 9,147,059 | ||||||||||||
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Financial liabilities | ||||||||||||||||
Deposits1 | ||||||||||||||||
Debts3 | — | 1,469,263 | 36,339,681 | 37,808,944 | ||||||||||||
Debentures | — | 46,969,992 | 4,588,756 | 51,558,748 | ||||||||||||
Other financial liabilities2 | — | — | 22,629,587 | 22,629,587 | ||||||||||||
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1 | The amounts included in Level 2 are the carrying amounts which are reasonable approximations of the fair values. |
2 | Other financial assets included in Level 3 are the carrying amounts which are reasonable approximation of fair values as of December 31, 2019. |
3 | Debts of |
(In millions of Korean won) | 2018 | |||||||||||||||
Fair value hierarchy | Total | |||||||||||||||
Level 1 | Level 2 | Level 3 | ||||||||||||||
Financial assets | ||||||||||||||||
Cash and due from financial institutions1 | ||||||||||||||||
Loans at amortized cost | — | 493,773 | 319,510,071 | 320,003,844 | ||||||||||||
Securities at amortized cost | 8,629,708 | 15,529,429 | — | 24,159,137 | ||||||||||||
Other financial assets2 | — | — | 8,133,556 | 8,133,556 | ||||||||||||
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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 | ||||||||||||
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1 | The amounts included in Level 2 are the carrying amounts which are reasonable approximations of the fair values. |
2 | Other financial assets of |
3 | Debts of |
4 | Other financial liabilities of |
86
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
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, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | |||||||||||
Fair value | Valuation technique | Inputs | ||||||||||
Financial assets | ||||||||||||
Loans at amortized cost | DCF Model | Discount rate | ||||||||||
Securities at amortized cost | | 16,979,656 | | | DCF Model, Monte Carlo | | | Discount rate, Interest rate |
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Financial liabilities | ||||||||||||
Debts | 1,464,578 | DCF Model | Discount rate | |||||||||
Debentures | 46,969,992 | DCF Model | Discount rate |
(In millions of Korean won) | 2018 | |||||||||||
Fair value | Valuation technique | Inputs | ||||||||||
Financial assets | ||||||||||||
Loans at amortized cost | DCF Model | Discount rate | ||||||||||
Securities 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 |
87
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
Valuation techniques and inputs of financial assets and liabilities whose fair values are disclosed and classified as Level 3 as of December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | |||||||||||
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 | 340,463,896 | DCF Model | | Credit spread, Other spread, Early termination ratio, Interest rates | | |||||||
Securities at amortized cost | 3,068 | DCF Model | Interest rates | |||||||||
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Financial liabilities | ||||||||||||
Deposits | DCF Model | | Other spread, Interest rates, Early termination ratio | | ||||||||
Debts | 36,339,681 | DCF Model | | Other spread, Interest rates | | |||||||
Debentures | 4,588,756 | DCF Model | | Other spread, Interest rates | | |||||||
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88
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
(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 | |||||||
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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 | |||||||
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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 Group’s 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 Group’s policy is to recognize such transfers as having occurred at the beginning of the reporting period.
89
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
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, 2019 and 2018, are as follows:
2019 | ||||||||||||||||||||||||||||
Financial assets at fair value through profit or loss | Financial investments | Financial liabilities at fair value through profit or loss | Net derivatives financial instruments | |||||||||||||||||||||||||
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 | ||||||||||||||||||||||
Beginning | ||||||||||||||||||||||||||||
Total gains or losses | ||||||||||||||||||||||||||||
- Profit or loss | 1,207 | (66,208 | ) | 10,412 | — | (1,285,157 | ) | 851,453 | — | |||||||||||||||||||
- Other comprehensive income | 1,175 | 111,826 | — | 55,993 | (25,538 | ) | — | — | ||||||||||||||||||||
Purchases | — | 4,544,254 | 154,005 | 95,359 | — | — | — | |||||||||||||||||||||
Sales | — | (2,139,174 | ) | (189,487 | ) | (1,672 | ) | — | (163,856 | ) | — | |||||||||||||||||
Issues | — | — | — | — | (12,416,402 | ) | (59,202 | ) | — | |||||||||||||||||||
Settlements | — | — | — | — | 13,378,448 | (1,316 | ) | — | ||||||||||||||||||||
Transfers into Level 31 | — | 851,457 | — | — | — | (16,982 | ) | — | ||||||||||||||||||||
Transfers out of Level 31 | — | (110,973 | ) | — | — | — | — | — | ||||||||||||||||||||
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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. |
90
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
2018 | ||||||||||||||||||||||||||||
Financial assets at fair value through profit or loss | Financial investments | Financial liabilities at fair value through profit or loss | Net derivatives financial instruments | |||||||||||||||||||||||||
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 | ||||||||||||||||||||||
Beginning2 | ||||||||||||||||||||||||||||
Total gains or losses | ||||||||||||||||||||||||||||
- 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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1 | The changes in levels for the financial instruments occurred due to the change in the availability of observable market data. |
2 | Restated based on Korean IFRS 1109. |
91
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
In relation to changes in Level 3 of the fair value hierarchy, total gains or losses recognized in profit or loss for the year, 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 years ended December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | |||||||||||
Net income (loss) from financial investments at fair value through profit or loss | Other operating loss | Net interest income | ||||||||||
Total gains or losses included in profit or loss for the year | ||||||||||||
Total gains or losses for the year included in profit or loss for financial instruments held at the end of the reporting period | (37,668 | ) | 1,331 | — |
(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 | ||||||||||
Total gains or losses included in profit or loss for the year | ||||||||||||
Total gains or losses for the year included in profit or loss for financial instruments held at the end of the reporting period | 144,674 | (289 | ) | 43 |
92
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
6.2.3 Sensitivity analysis of changes in unobservable inputs
Information about fair value measurements using unobservable inputs as of December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | December 31, 2019 | |||||||||||||
Fair value | Valuation technique | Unobservable inputs | Range of unobservable inputs(%) | Relationship of | ||||||||||
Financial assets |
| |||||||||||||
Financial assets at fair value through profit or loss | ||||||||||||||
Cash and due from financial institutions | Option Model | Volatility of the underlying asset | 11.43~34.39 | The higher the volatility, the higher the fair value fluctuation | ||||||||||
Correlation | -4.84 | The higher the correlation, the higher the fair value fluctuation | ||||||||||||
Debt securities | 10,132,766 | 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 | -1.00~1.00 | The higher the growth rate, the higher the fair value | |||||||||
Volatility of underlying assets | 1.00~48.00 | The higher the volatility, the higher the fair value change | ||||||||||||
Discount rate | 0.75~17.37 | 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 | 3.11~95.67 | The higher the correlation coefficient, the higher the fair value change. | ||||||||||||
Liquidation value | 0.00 | The higher the liquidation value, the higher the fair value | ||||||||||||
Volatility of real estate price | -1.00~1.00 | The higher the price of real estate, the higher the fair value | ||||||||||||
Equity securities | 523,276 | Income approach, Market approach, Asset value approach, DCF Model, Comparable Company Analysis, Adjusted discount rate method, Dividend Discount Model, Usage of past transactions, Binomial Model and others | Growth rate | 0.00~2.20 | The higher the growth rate, the higher the fair value | |||||||||
Discount rate | 2.00~22.00 | 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 | 11.90 | The higher the volatility, the higher the fair value fluctuation | ||||||||||||
Loans | 188,133 | Binomial Model, DCF Model | Volatility of the stock price | 12.91~48.28 | The higher the volatility, the higher the fair value fluctuation | |||||||||
Discount rate | 10.81 | The lower the discount rate, the higher the fair value |
93
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
Derivatives held for trading |
| |||||||||||||
Stock and index | 416,486 | DCF Model, Closed Form, FDM, Monte Carlo Simulation, Hull and White Model, Black-Scholes Model, Binomial Model | Volatility of the underlying asset | 9.75~52.00 | The higher the volatility, the higher the fair value fluctuation | |||||||||
Correlation between underlying asset | 4.00~77.00 | The higher the correlation, the higher the fair value fluctuation | ||||||||||||
Currency, interest rate and others | 120,298 | DCF Model, Hull-White Model | Volatility | 2.00~58.00 | The higher the volatility, the higher the fair value fluctuation | |||||||||
Correlation between underlying asset | -49.00~90.00 | 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 | 1,482,398 | 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 | 0.00~2.20 | The higher the growth rate, the higher the fair value | |||||||||
Discount rate | 3.04~16.37 | The lower the discount rate, the higher the fair value | ||||||||||||
Volatility | 20.97~34.87 | The higher the volatility, the higher the fair value fluctuation | ||||||||||||
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Financial liabilities | ||||||||||||||
Financial liabilities designated at fair value through profit or loss | ||||||||||||||
Derivative-linked securities | DCF Model, Closed Form, FDM, Monte Carlo Simulation, Hull and White Model, Black Scholes-Model | Volatility of the underlying asset | 1.00~58.00 | The higher the volatility, the higher the fair value fluctuation | ||||||||||
Correlation between underlying asset | -49.00~90.00 | The higher the absolute value of correlation, the higher the fair value fluctuation | ||||||||||||
Stock and index | 54,341 | DCF Model, Closed Form, FDM, Monte Carlo Simulation, Hull and White Model, Black-Scholes Model, Tree Model | Volatility | 12.00~52.00 | The higher the volatility, the higher the fair value fluctuation | |||||||||
Correlation between underlying asset | 9.00~77.00 | The higher the absolute value of correlation, the higher the fair value fluctuation | ||||||||||||
Others | 172,477 | Monte Carlo Simulation, Hull and White Model, DCF Model, Closed form formula | Volatility | 2.00~58.00 | The higher the volatility, the higher the fair value fluctuation | |||||||||
Volatility of the stock price | 16.28 | The higher the volatility, the higher the fair value fluctuation | ||||||||||||
Volatility of the interest rate | 0.52 | The higher the volatility, the higher the fair value fluctuation | ||||||||||||
Discount rate | 1.94~2.00 | The lower the discount rate, the higher the fair value | ||||||||||||
Correlation between underlying asset | 19.00~90.00 | The higher the absolute value of correlation, the higher the fair value fluctuation | ||||||||||||
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94
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
(In millions of Korean won) | December 31, 2018 | |||||||||||||
Fair value | Valuation technique | Unobservable inputs | Range of unobservable inputs(%) | Relationship of | ||||||||||
Financial assets | ||||||||||||||
Financial assets at fair value through profit or loss | ||||||||||||||
Cash and due from financial institutions | Option Model | Volatility of the underlying asset | 11.25~31.28 | The higher the volatility, the higher the fair value fluctuation | ||||||||||
Correlation | 8.79 | The higher the correlation, the higher the fair value fluctuation | ||||||||||||
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 sale price, the higher the fair value | ||||||||||||
Volatility of real estate price | -1.00~1.00 | The higher the price of real estate, the higher the fair value | ||||||||||||
Discount rate | 1.19~11.30 | 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 | 18.16~88.46 | The higher the absolute value of correlation, the higher the fair value fluctuation | ||||||||||||
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 | 77.62~79.78 | 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 | Volatility of the stock price | 13.11~49.28 | The higher the volatility, the higher the fair value fluctuation | |||||||||
Derivatives held for trading | ||||||||||||||
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 |
95
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
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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96
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
Financial liabilities |
| |||||||||||||
Financial liabilities designated at fair value through profit or loss | ||||||||||||||
Derivative-linked securities | DCF Model, Closed Form, FDM, Monte Carlo Simulation, Hull and White Model, Black Scholes-Model | Volatility of the underlying asset | 1.00~115.00 | 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 | ||||||||||||||
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 absolute value of 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 higher the discount rate, the lower 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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97
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
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) | 2019 | |||||||||||||||
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 loss1 | ||||||||||||||||
Due from financial institutions | ||||||||||||||||
Debt securities4 | 30,771 | (27,062 | ) | 2,341 | (2,276 | ) | ||||||||||
Equity securities3 | 24,456 | (10,251 | ) | 1,110 | (824 | ) | ||||||||||
Loans | 6,362 | (4,344 | ) | — | — | |||||||||||
Derivatives held for trading2 | 25,830 | (29,317 | ) | — | — | |||||||||||
Financial assets measured at fair value through other comprehensive income | ||||||||||||||||
Equity securities3 | — | — | 214,268 | (110,687 | ) | |||||||||||
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Financial liabilities | ||||||||||||||||
Financial liabilities designated at fair value through profit or loss1 | ||||||||||||||||
Derivatives held for trading2 | 14,638 | (13,572 | ) | — | — | |||||||||||
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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% |
98
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
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. |
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%). |
(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 loss1 | ||||||||||||||||
Due from financial institutions | ||||||||||||||||
Debt securities4 | 20,261 | (17,885 | ) | 2,183 | (2,097 | ) | ||||||||||
Equity securities3 | 14,241 | (10,162 | ) | 848 | (656 | ) | ||||||||||
Loans | 129 | (46 | ) | — | — | |||||||||||
Derivatives held for trading2 | 27,639 | (26,155 | ) | — | — | |||||||||||
Financial assets measured at fair value through other comprehensive income | ||||||||||||||||
Equity securities3 | — | — | 162,563 | (86,094 | ) | |||||||||||
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Financial liabilities | ||||||||||||||||
Financial liabilities designated at fair value through profit or loss1 | ||||||||||||||||
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%). |
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.
99
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
The aggregate difference yet to be recognized in profit or loss at the beginning and end of the year and a reconciliation of changes in the balance of this difference for the years ended December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | 2018 | ||||||
Balance at the beginning of the year | ||||||||
New transactions and others | 168,225 | 131,504 | ||||||
Changes during the year | (184,613 | ) | (92,163 | ) | ||||
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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, 2019 and 2018, are as follows:
(In millions of Korean won) | ||||||||||||||||||||||||
2019 | ||||||||||||||||||||||||
Financial instruments at fair value through profit or loss | Financial assets measured at fair value through other comprehensive income | Financial instruments designated at fair value through other comprehensive income | Financial instruments at amortized cost | Derivatives held for hedging | Total | |||||||||||||||||||
Financial assets | ||||||||||||||||||||||||
Cash and due from financial institutions | ||||||||||||||||||||||||
Financial assets at fair value through profit or loss | 53,549,086 | — | — | — | — | 53,549,086 | ||||||||||||||||||
Derivatives | 3,008,598 | — | — | — | 182,075 | 3,190,673 | ||||||||||||||||||
Loans at amortized cost | — | — | — | 339,684,059 | — | 339,684,059 | ||||||||||||||||||
Financial investments | — | 43,931,946 | 2,504,105 | 25,346,555 | — | 71,782,606 | ||||||||||||||||||
Other financial assets | — | — | — | 9,147,059 | — | 9,147,059 | ||||||||||||||||||
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100
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
(In millions of Korean won) | ||||||||||||||||||||
2019 | ||||||||||||||||||||
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 | 2,842,950 | — | — | 164,391 | 3,007,341 | |||||||||||||||
Deposits | — | — | 305,592,771 | — | 305,592,771 | |||||||||||||||
Debts | — | — | 37,818,860 | — | 37,818,860 | |||||||||||||||
Debentures | — | — | 50,935,583 | — | 50,935,583 | |||||||||||||||
Other financial liabilities | — | — | 22,629,587 | — | 22,629,587 | |||||||||||||||
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(In millions of Korean won) | ||||||||||||||||||||||||
2018 | ||||||||||||||||||||||||
Financial instruments at fair value through profit or loss | Financial assets measured at fair value through other comprehensive income | Financial instruments designated at fair value through other comprehensive income | Financial instruments at amortized cost | Derivatives held for hedging | Total | |||||||||||||||||||
Financial assets | ||||||||||||||||||||||||
Cash and due from financial institutions | ||||||||||||||||||||||||
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, 2019 and 2018
(In millions of Korean won) | ||||||||||||||||||||
2018 | ||||||||||||||||||||
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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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, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | |||||||||||
Type of continuing | Classification of instruments | Carrying amount of continuing involvement in the statement 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 | 5,428 | 5,428 | ||||||||
AP 3B ABS Ltd. | Subordinate debt | Financial assets at fair value through profit or loss | 3,205 | 3,205 | ||||||||
AP 4D ABS Ltd.1 | Subordinated debt | Financial assets at fair value through profit or loss | 6,175 | 6,175 | ||||||||
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102
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
(In millions of Korean won) | 2018 | |||||||||||
Type of continuing | Classification of instruments | Carrying amount of continuing involvement in the statement 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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��
1 | Other than above, additionally recovered portion in excess of the consideration paid attributable to adjustments based on the agreement with the National Happiness Fund fornon-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, 2019, are as follows:
(In millions of Korean won) | 2019 | |||||||||||||||
Carrying amount of underlying assets | Fair value of underlying assets | Carrying amount of senior debentures | Fair value of senior debentures | |||||||||||||
KB Kookmin Card Third Securitization Co., Ltd.1 | ||||||||||||||||
KB Kookmin Card Fourth Securitization Co., Ltd.1 | 560,903 | 552,216 | 347,387 | 340,820 | ||||||||||||
KB Kookmin Card Fifth Securitization Co., Ltd.1 | 542,861 | 534,630 | 299,795 | 304,835 | ||||||||||||
KB Kookmin Card Sixth Securitization Co., Ltd.1 | 795,884 | 784,080 | 461,909 | 469,600 | ||||||||||||
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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. |
103
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
The Group transferred held in the previous year the beneficiary certificates to Yuanta Securities atW74,853 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.
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, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | |||||||
Carrying amount of transferred assets | Carrying amount of related liabilities | |||||||
Repurchase agreements1 | ||||||||
Loaned securities | ||||||||
Government bond | 2,259,096 | — | ||||||
Stock | 25,725 | — | ||||||
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(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 | — | ||||||
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1 | The bond sold under repurchase agreements amounts to |
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 Group’s derivative and spot exchange counterparties. Similar netting agreements are also entered into with the Group’s 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.
104
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
Details of financial assets subject to offsetting, enforceable master netting arrangements or similar agreement as of December 31, 2019 and 2018, are as follows:
2019 | ||||||||||||||||||||||||
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 | 182,075 | — | 182,075 | |||||||||||||||||||||
Payable spot exchange | 3,051,390 | — | 3,051,390 | (3,050,116 | ) | — | 1,274 | |||||||||||||||||
Repurchase agreements | 6,507,646 | — | 6,507,646 | (6,507,046 | ) | — | 600 | |||||||||||||||||
Domestic exchange settlement credits | 31,344,009 | (30,794,160 | ) | 549,849 | — | — | 549,849 | |||||||||||||||||
Other financial instruments | 1,043,320 | (1,022,977 | ) | 20,343 | (2,492 | ) | — | 17,851 | ||||||||||||||||
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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 | |||||||||||||||||||||
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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105
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
Details of financial liabilities subject to offsetting, enforceable master netting arrangements or similar agreement as of December 31, 2019 and 2018, are as follows:
2019 | ||||||||||||||||||||||||
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 | 164,391 | — | 164,391 | — | ||||||||||||||||||||
Payable spot exchange | 3,050,982 | — | 3,050,982 | (3,034,679 | ) | — | 16,303 | |||||||||||||||||
Repurchase agreements1 | 13,011,121 | — | 13,011,121 | (13,000,321 | ) | — | 10,800 | |||||||||||||||||
Securities borrowing agreements | 2,583,092 | — | 2,583,092 | (2,583,092 | ) | — | — | |||||||||||||||||
Domestic exchange settlement credits | 32,867,423 | (30,794,160 | ) | 2,073,263 | (2,073,263 | ) | — | — | ||||||||||||||||
Other financial instruments | 1,156,345 | (1,022,977 | ) | 133,368 | (2,492 | ) | — | 130,876 | ||||||||||||||||
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106
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
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 | |||||||||||||||||||||
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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1 | Includes repurchase agreements sold to customers. |
107
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
7. Due from Financial Institutions at Amortized Cost
Details of due from financial institutions as of December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | Financial institutions | Interest | 2019 | 2018 | ||||||||||
Due from financial institutions in Korean won | Due from Bank of Korea | Bank of Korea | — | |||||||||||
Due from banking institutions | KEB Hana Bank and others | 0.00~2.75 | 4,641,714 | 3,245,841 | ||||||||||
Due from others | Korea Securities Finance Corporation and others | 0.00~1.23 | 654,981 | 1,132,908 | ||||||||||
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13,414,535 | 13,102,510 | |||||||||||||
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Due from financial institutions in foreign currencies | Due from banking institutions | Bank of Korea and others | 0.00~0.50 | 2,351,929 | 1,734,660 | |||||||||
Time deposits | INDUSTRIAL BANK CHANGSHA BR. and others | 0.00~7.80 | 1,053,776 | 1,001,600 | ||||||||||
Due from others | Morgan Stanley Bank International and others | 0.00~8.00 | 1,327,432 | 1,379,537 | ||||||||||
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4,733,137 | 4,115,797 | |||||||||||||
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1 | Before netting of allowance. |
108
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
Restricted cash from financial institutions as of December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | Financial Institutions | December 31, 2019 | December 31, 2018 | 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 institutions | NH Investment Securities and others | 3,027,963 | 1,348,099 | Net settlement and others | ||||||||||
Due from others | Korea Securities Finance Corporation and others | 555,294 | 655,194 | Derivatives margin account and others | ||||||||||
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Due from financial institutions in foreign currencies | Due from banking institutions | Bank of Korea and others | 490,071 | 375,130 | Bank of Korea Act and others | |||||||||
Time deposits | ICBC NEW YORK and others | 31,443 | 30,538 | Bank Act of the State of New York and others | ||||||||||
Due from others | Morgan Stanley Bank International and others | 1,150,355 | 1,214,905 | Derivatives margin account and others | ||||||||||
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1,671,869 | 1,620,573 | |||||||||||||
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1 | Before netting of allowance. |
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) | 2019 | |||||||||||
The financial instruments applying12- month expected credit losses | The financial instruments applying lifetime expected credit losses | |||||||||||
Non-impaired | Impaired | |||||||||||
Beginning | ||||||||||||
Transfer between stages | ||||||||||||
Transfer to12-month expected credit losses | — | — | — | |||||||||
Transfer to lifetime expected credit losses | — | — | — | |||||||||
Impairment | — | — | — | |||||||||
Disposal | — | — | — | |||||||||
Provision for loan losses | 1,116 | 1,210 | 360 | |||||||||
Others (change of currency ratio, etc.) | 29 | (22 | ) | — | ||||||||
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Ending | ||||||||||||
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109
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
(In millions of Korean won) | 2018 | |||||||||||
The financial instruments applying12- month expected credit losses | The financial instruments applying lifetime expected credit losses | |||||||||||
Non-impaired | Impaired | |||||||||||
Beginning1 | ||||||||||||
Transfer between stages | — | — | — | |||||||||
Transfer to12-month expected credit losses | — | — | — | |||||||||
Transfer to lifetime expected credit losses | — | — | — | |||||||||
Impairment | — | — | — | |||||||||
Disposal | — | — | ||||||||||
Provision for loan losses | 221 | — | — | |||||||||
Others (change of currency ratio, etc.) | 1 | — | — | |||||||||
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Ending | ||||||||||||
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1 | Restated based on Korean IFRS 1109. |
8. Assets Pledged as Collateral
Details of assets pledged as collateral as of December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | |||||||
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 | 7,561,287 | Repurchase agreements | |||||
Korea Securities Depository and others | 7,745,154 | Securities borrowing transactions | ||||||
Samsung Futures Inc. and others | 1,090,495 | Derivatives transactions | ||||||
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16,396,936 | ||||||||
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Financial assets measured at fair value through other comprehensive income | Korea Securities Depository and others | 1,139,852 | Repurchase agreements | |||||
Korea Securities Depository and others | 1,168,515 | Securities borrowing transactions | ||||||
Bank of Korea | 1,212,021 | Borrowings from Bank of Korea | ||||||
Bank of Korea | 653,825 | Settlement risk of Bank of Korea | ||||||
Samsung Futures Inc. and others | 167,600 | Derivatives transactions | ||||||
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4,341,813 | ||||||||
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110
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
Securities at amortized cost | Korea Securities Depository and others | 581,268 | Repurchase agreements | |||||
Bank of Korea | 1,767,559 | Borrowings from Bank of Korea | ||||||
Bank of Korea | 3,077,151 | Settlement risk of Bank of Korea | ||||||
Samsung Futures Inc. and others | 247,301 | Derivatives transactions | ||||||
Others | 494,785 | Others | ||||||
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6,168,064 | ||||||||
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Mortgage loans | Others | 6,487,022 | Covered bond | |||||
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Real estate | NATIXIS REAL ESTATE CAPITAL LLC and others | 1,665,368 | Borrowings from bank and others | |||||
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(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 | ||||||||
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Financial assets measured at fair value through other comprehensive income | Korea Securities Depository and others | 1,258,694 | Repurchase agreements | |||||
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 | ||||||
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3,184,906 | ||||||||
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Securities at amortized cost | Korea Securities Depository and others | 276,688 | Repurchase agreements |
111
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
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 | ||||||
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4,174,853 | ||||||||
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Mortgage loans | Others | 4,060,863 | Covered bond | |||||
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Real estate | NATIXIS REAL ESTATE CAPITAL LLC and others | 801,944 | Borrowings from bank and others | |||||
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The Group providesW7,320,220 million andW6,472,993 million of its borrowing securities and securities held as collateral with Korea Securities Finance Corporation and others as of December 31, 2019 and 2018.
The fair values of collateral available to sell or repledge, and collateral sold or repledged, regardless of debtor’s default, as of December 31, 2019 and 2018, are as follows:
(In millions of Korean won)
2019 | ||||||||||||
Fair value of collateral held | Fair value of collateral sold or repledged | Total | ||||||||||
Securities |
(In millions of Korean won)
2018 | ||||||||||||
Fair value of collateral held | Fair value of collateral sold or repledged | Total | ||||||||||
Securities |
9. Derivative Financial Instruments and Hedge Accounting
The Group’s derivative operations focus on addressing the needs of the Group’s corporate clients to hedge their risk exposure and to hedge the Group’s 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 Group’s own assets and liabilities. In addition, the Group engages in proprietary trading of derivatives within the Group’s 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. |
112
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
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, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | 2018 | ||||||||||||||||||||||
Notional amount | Assets | Liabilities | Notional amount | Assets | Liabilities | |||||||||||||||||||
Interest rate | ||||||||||||||||||||||||
Forwards | ||||||||||||||||||||||||
Futures1 | 2,951,770 | 698 | 235 | 4,269,407 | 1,124 | 3,852 | ||||||||||||||||||
Swaps | 270,091,778 | 512,145 | 557,511 | 219,558,592 | 421,591 | 471,915 | ||||||||||||||||||
Options | 17,521,156 | 267,697 | 379,262 | 16,937,362 | 159,218 | 276,392 | ||||||||||||||||||
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291,134,704 | 780,746 | 1,021,134 | 241,335,361 | 581,933 | 807,215 | |||||||||||||||||||
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Currency | ||||||||||||||||||||||||
Forwards | 87,373,417 | 942,632 | 750,380 | 74,189,998 | 622,745 | 548,127 | ||||||||||||||||||
Futures1 | 107,793 | — | 349 | 602,805 | 37 | 240 | ||||||||||||||||||
Swaps | 46,501,399 | 606,464 | 610,275 | 36,073,995 | 470,499 | 452,390 | ||||||||||||||||||
Options | 2,789,562 | 5,438 | 14,346 | 2,449,469 | 6,071 | 13,602 | ||||||||||||||||||
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136,772,171 | 1,554,534 | 1,375,350 | 113,316,267 | 1,099,352 | 1,014,359 | |||||||||||||||||||
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Stock and index | ||||||||||||||||||||||||
Futures1 | 1,646,785 | 22,451 | 20,704 | 1,155,861 | 4,902 | 10,820 | ||||||||||||||||||
Swaps | 6,773,467 | 448,803 | 86,100 | 8,190,648 | 82,803 | 321,135 | ||||||||||||||||||
Options | 5,559,865 | 99,013 | 176,141 | 5,442,775 | 70,740 | 464,226 | ||||||||||||||||||
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13,980,117 | 570,267 | 282,945 | 14,789,284 | 158,445 | 796,181 | |||||||||||||||||||
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|
| |||||||||||||
Credit | ||||||||||||||||||||||||
Swaps | 4,433,960 | 19,178 | 13,659 | 4,300,208 | 32,711 | 25,047 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
4,433,960 | 19,178 | 13,659 | 4,300,208 | 32,711 | 25,047 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Commodity | ||||||||||||||||||||||||
Futures1 | 3,281 | 68 | 3 | 5,807 | 150 | 128 | ||||||||||||||||||
Swaps | 105,658 | 2,948 | 474 | 140,382 | 2,202 | 3,199 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
108,939 | 3,016 | 477 | 146,189 | 2,352 | 3,327 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Other | 3,160,013 | 80,857 | 149,385 | 2,361,827 | 40,739 | 78,865 | ||||||||||||||||||
|
|
|
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|
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| |||||||||||||
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|
|
1 | Gains or losses arising from dailymark-to-market futures are reflected in the margin accounts. |
113
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
Average price or rate of the nominal cash flow for each type of hedge accounting as of December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | |||||||||||||||||||||||||||
1 year | 2 years | 3 years | 4 years | 5 years | More than 5 years | Total | ||||||||||||||||||||||
Fair value hedge | ||||||||||||||||||||||||||||
The nominal of the hedging instrument | 2,649,272 | 1,807,950 | 897,562 | 309,882 | 466,053 | 1,414,570 | 7,545,289 | |||||||||||||||||||||
Average rate (%) | 2.29 | 2.70 | 2.29 | 3.16 | 2.50 | 3.92 | 2.91 | |||||||||||||||||||||
Average price (USD/KRW) | 1,149.90 | 1,138.82 | 1,094.35 | — | — | — | 1,146.84 | |||||||||||||||||||||
Average price (EUR/KRW) | 1,319.66 | 1,346.38 | — | — | — | — | 1,327.68 | |||||||||||||||||||||
Average price (AUD/KRW) | 803.71 | — | — | — | — | — | 803.71 | |||||||||||||||||||||
Cash flow hedge | ||||||||||||||||||||||||||||
The nominal of the hedging instrument | 2,450,918 | 1,199,124 | 1,764,991 | 529,202 | 120,000 | 150,000 | 6,214,235 | |||||||||||||||||||||
Average rate (%) | 2.64 | 2.56 | 2.66 | 2.79 | 2.00 | 1.67 | 2.59 | |||||||||||||||||||||
Average price (USD/KRW) | 1,129.58 | 1,111.66 | 1,153.15 | 1,095.73 | — | — | 1,132.99 | |||||||||||||||||||||
Average price (EUR/KRW) | 1,305.22 | 1,306.76 | 1,312.75 | — | — | — | 1,306.91 | |||||||||||||||||||||
Average price (AUD/KRW) | — | 837 | — | — | — | — | 837 | |||||||||||||||||||||
Average price (SGD/KRW) | 815.80 | 831.49 | — | — | — | — | 823.54 | |||||||||||||||||||||
Hedge of net investments in a foreign operations | ||||||||||||||||||||||||||||
The nominal of the hedging instrument | 248,233 | — | 27,336 | — | — | — | 275,569 | |||||||||||||||||||||
Average price (USD/KRW) | 1,151.49 | — | — | — | — | — | 1,151.49 | |||||||||||||||||||||
Average price (GBP/KRW) | — | — | 1,465.26 | — | — | — | 1,465.26 |
114
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
(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 nominal of the hedging instrument | 1,371,901 | 728,308 | 1,372,040 | 567,030 | 195,392 | 1,308,602 | 5,543,273 | |||||||||||||||||||||
Average rate (%) | 2.21 | 2.26 | 2.65 | 2.23 | 3.25 | 3.66 | 2.80 | |||||||||||||||||||||
Average price (USD/KRW) | 1,094.95 | — | 1,063.84 | — | — | — | 1,094.53 | |||||||||||||||||||||
Average price (EUR/KRW) | 1,319.66 | 1,331.65 | — | — | — | — | 1,322.81 | |||||||||||||||||||||
Cash flow hedge | ||||||||||||||||||||||||||||
The nominal of the hedging instrument | 2,641,861 | 1,403,129 | 902,911 | 919,258 | 525,629 | 50,000 | 6,442,788 | |||||||||||||||||||||
Average rate (%) | 2.70 | 2.94 | 2.36 | 2.70 | 2.79 | 2.53 | 2.73 | |||||||||||||||||||||
Average price (USD/KRW) | 1,103.25 | 1,129.90 | 1,110.49 | 1,087.84 | 1,095.73 | — | 1,111.63 | |||||||||||||||||||||
Average price (EUR/KRW) | — | 1,305.59 | 1,306.76 | 1,312.75 | — | — | 1,306.99 | |||||||||||||||||||||
Average price (AUD/KRW) | — | — | 837.00 | — | — | — | 837.00 | |||||||||||||||||||||
Average price (SGD/KRW) | — | 815.80 | 831.49 | — | — | — | 823.54 | |||||||||||||||||||||
Hedge of net investments in a foreign operations | ||||||||||||||||||||||||||||
The nominal of the hedging instrument | 528,025 | 2,942 | — | — | — | — | 530,967 | |||||||||||||||||||||
Average price (USD/KRW) | 1,120.33 | — | — | — | — | — | 1,120.33 | |||||||||||||||||||||
Average price (EUR/KRW) | 1,348.19 | 1,295.40 | — | — | — | — | 1,335.88 |
115
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
Fair Value Hedge
Details of derivative instruments designated as fair value hedge as of December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | |||||||||||||||||||||
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 | 1,670,838 | — | 19,243 | — | 25,540 | |||||||||||||||||
Deposits in foreign currencies | — | 780,491 | — | (18,391 | ) | (62,439 | ) | |||||||||||||||
Debts in KRW | — | 351,070 | — | 21,070 | (1,818 | ) | ||||||||||||||||
Debts in foreign currencies | — | 2,067,556 | — | 41,406 | (65,480 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||
2,220,364 | 3,199,117 | 24,728 | 44,085 | (98,695 | ) | |||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||
Currency | Debt securities in foreign currencies | 2,339,239 | — | 24,181 | — | 61,133 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||
2,339,239 | — | 24,181 | — | 61,133 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||
|
|
|
|
|
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|
|
|
|
(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 | Debt securities in foreign currencies | 1,845,253 | — | (75,255 | ) | — | 86,209 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||
1,845,253 | — | (75,255 | ) | — | 86,209 | |||||||||||||||||
|
|
|
|
|
|
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| |||||||||||||
|
|
|
|
|
|
|
|
|
|
Details of derivative instruments designated as fair value hedge as of December 31, 2019 and 2018, are as follows:
116
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
(In millions of Korean won) | 2019 | |||||||||||||||
National amount | Assets | Liabilities | Changes in the fair value1 | |||||||||||||
Interest rate |
| |||||||||||||||
Swaps | ||||||||||||||||
Currency | ||||||||||||||||
Forwards | 2,218,789 | 22,503 | 27,862 | (74,372 | ) | |||||||||||
|
|
|
|
|
|
|
| |||||||||
|
|
|
|
|
|
|
|
(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 | ) | |||||||||||
|
|
|
|
|
|
|
| |||||||||
|
|
|
|
|
|
|
|
Details of hedge ineffectiveness recognized in profit or loss from derivatives for the year ended December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | Hedge ineffectiveness recognized in profit or loss | |||||||
2019 | 2018 | |||||||
From hedge accounting | ||||||||
Interest rate | ||||||||
Currency rate | (13,239 | ) | (20,694 | ) | ||||
|
|
|
| |||||
|
|
|
|
Gains and losses from fair value hedging instruments and hedged items attributable to the hedged risk for the years ended December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | 2018 | ||||||
Gains (losses) on hedging instruments | ||||||||
Gains (losses) on the hedged items attributable to the hedged risk | (44,655 | ) | 135,556 | |||||
|
|
|
| |||||
|
|
|
|
117
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
Cash Flow Hedge
Details of hedged item in cash flow hedge as of December 31, 2019 and 2018 are as follows:
(In millions of Korean won) | 2019 | |||||||
Changes in fair value | Other comprehensive income for cash flow hedge | |||||||
Hedge accounting |
| |||||||
Interest rate risk | ||||||||
Foreign currency change risk | 42,357 | (11,663 | ) | |||||
|
|
|
| |||||
|
|
|
|
(In millions of Korean won) | 2018 | |||||||
Changes in fair value | Other comprehensive income for cash flow hedge | |||||||
Hedge accounting |
| |||||||
Interest rate risk | ||||||||
Foreign currency change risk | 18,650 | 1,163 | ||||||
|
|
|
| |||||
|
|
|
|
Details of derivative instruments designated as cash flow hedge as of December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | |||||||||||||||
National amount | Assets | Liabilities | Changes in the fair value | |||||||||||||
Interest rate |
| |||||||||||||||
Swaps | ||||||||||||||||
Currency | ||||||||||||||||
Swaps | 2,613,901 | 23,382 | 73,067 | (38,534 | ) | |||||||||||
|
|
|
|
|
|
|
| |||||||||
|
|
|
|
|
|
|
|
(In millions of Korean won) | 2018 | |||||||||||||||
Notional amount | Assets | Liabilities | Changes in fair value | |||||||||||||
Interest rate |
| |||||||||||||||
Swaps | ||||||||||||||||
Currency | ||||||||||||||||
Swaps | 2,300,452 | 22,759 | 40,493 | (16,658 | ) | |||||||||||
|
|
|
|
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| |||||||||
|
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|
|
|
118
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
Gains and losses from cash flow hedging instruments and hedged items attributable to the hedged risk for the years ended December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | 2018 | ||||||
Gains (losses) on hedging instruments | ||||||||
Gains (losses) on effectiveness (amount recognized in other comprehensive income) | (65,323 | ) | (24,672 | ) | ||||
|
|
|
| |||||
Gains (losses) on ineffectiveness (amount recognized in profit or loss) | ||||||||
|
|
|
|
Amounts recognized in other comprehensive income and reclassified from equity to profit or loss for the years ended December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | 2018 | ||||||
Amount recognized in other comprehensive income | ||||||||
Amount reclassified from equity to profit or loss | 21,604 | 15,234 | ||||||
Tax effect | 10,537 | 400 | ||||||
|
|
|
| |||||
Amount recognized in other comprehensive income net of tax | ||||||||
|
|
|
|
Hedge on Net Investments in Foreign Operations
Details of hedged item in hedge on foreign operation net investments hedge as of December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | |||||||
Changes in fair value | Other comprehensive income for hedge on net investment in a foreign operation | |||||||
Hedge accounting |
| |||||||
Currency (foreign currency change risk) |
(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) |
119
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
Details of financial instruments designated as hedging instrument in hedge on net investments in foreign operations as of December 31, 2019 and 2018, is as follows:
2019 | ||||||||||||||||
Nominal amount | Assets | Liabilities | Changes in the fair value1 | |||||||||||||
Currency |
| |||||||||||||||
Forwards | ||||||||||||||||
Financial debentures in foreign currencies | 97,255 | — | 97,255 | (3,080 | ) | |||||||||||
|
|
|
|
|
|
|
| |||||||||
|
|
|
|
|
|
|
|
2018 | ||||||||||||||||
Nominal amount | Assets | Liabilities | Changes in fair value | |||||||||||||
Currency |
| |||||||||||||||
Forwards | ||||||||||||||||
Financial debentures in foreign currencies | 89,448 | — | 89,109 | (3,321 | ) | |||||||||||
|
|
|
|
|
|
|
| |||||||||
|
|
|
|
|
|
|
|
The fair value ofnon-derivative financial instruments designated as hedging instruments as of December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | 2018 | ||||||
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, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | 2018 | ||||||
Gains (losses) on hedging instruments | ||||||||
Effective portion of gains (losses) on hedge on net investment in a foreign operation (amount recognized in other comprehensive income) | (13,410 | ) | (25,096 | ) | ||||
Ineffective portion of gain on hedge on net investment in a foreign operation (amount recognized in profit or loss) | — | — |
120
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
The effective portion of gains (losses) on hedging instruments recognized in other comprehensive income for the years ended December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | 2018 | ||||||
Amount recognized in other comprehensive income | ||||||||
Amount of other comprehensive income reclassified to profit or loss | 1,316 | (12,330 | ) | |||||
Tax effect | 3,194 | 10,292 | ||||||
|
|
|
| |||||
Amount recognized in other comprehensive income, net of tax | ||||||||
|
|
|
|
10. Loans at Amortized Cost
Details of loans as of December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | 2018 | ||||||
Loans at amortized cost | ||||||||
Deferred loan origination fees and costs | 728,270 | 753,126 | ||||||
Less: Allowances for loan losses | (2,408,016 | ) | (2,609,681 | ) | ||||
|
|
|
| |||||
Carrying amount | ||||||||
|
|
|
|
Details of loans for other banks as of December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | 2018 | ||||||
Loans at amortized cost | ||||||||
Less: Allowances for loan losses | (432 | ) | (620 | ) | ||||
|
|
|
| |||||
Carrying amount | ||||||||
|
|
|
|
121
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
Details of loan types and customer types of loans to customers, other than banks, as of December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | |||||||||||||||
Retail | Corporate | Credit card | Total | |||||||||||||
Loans in Korean won | ||||||||||||||||
Loans in foreign currencies | 433,399 | 8,125,029 | — | 8,558,428 | ||||||||||||
Domestic import usance bills | — | 2,617,862 | — | 2,617,862 | ||||||||||||
Off-shore funding loans | — | 1,387,798 | — | 1,387,798 | ||||||||||||
Call loans | — | 610,001 | — | 610,001 | ||||||||||||
Bills bought in Korean won | — | 2,843 | — | 2,843 | ||||||||||||
Bills bought in foreign currencies | — | 2,158,877 | — | 2,158,877 | ||||||||||||
Guarantee payments under payment guarantee | 36 | 3,312 | — | 3,348 | ||||||||||||
Credit card receivables in Korean won | — | — | 18,642,111 | 18,642,111 | ||||||||||||
Credit card receivables in foreign currencies | — | — | 6,299 | 6,299 | ||||||||||||
Reverse repurchase agreements | — | 6,149,458 | — | 6,149,458 | ||||||||||||
Privately placed bonds | — | 971,414 | — | 971,414 | ||||||||||||
Factored receivables | 117 | 167 | — | 284 | ||||||||||||
Lease receivables | 1,385,617 | 194,576 | — | 1,580,193 | ||||||||||||
Loans for installment credit | 5,737,458 | 38,700 | — | 5,776,158 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
166,789,122 | 152,643,297 | 18,648,410 | 338,080,829 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
Proportion (%) | 49.33 | 45.15 | 5.52 | 100 | ||||||||||||
Less: Allowances | (711,322 | ) | (956,554 | ) | (739,708 | ) | (2,407,584 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
|
|
|
|
|
|
|
|
122
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
(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 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
|
|
|
|
|
|
|
|
123
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
The changes in deferred loan origination fees and costs for the years ended December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | |||||||||||||||||||
Beginning | Increase | Decrease | Others | Ending | ||||||||||||||||
Deferred loan origination costs | ||||||||||||||||||||
Loans in Korean won | ||||||||||||||||||||
Other origination costs | 119,780 | 56,030 | (79,432 | ) | — | 96,378 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
784,017 | 443,450 | (485,784 | ) | — | 741,683 | |||||||||||||||
Deferred loan origination fees | ||||||||||||||||||||
Loans in Korean won | 9,055 | 7,238 | (7,693 | ) | — | 8,600 | ||||||||||||||
Other origination fees | 21,836 | 3,415 | (20,439 | ) | 1 | 4,813 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
30,891 | 10,653 | (28,132 | ) | 1 | 13,413 | |||||||||||||||
|
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|
|
|
|
|
|
|
| |||||||||||
|
|
|
|
|
|
|
|
|
|
(In millions of Korean won) | 2018 | |||||||||||||||||||
Beginning | Increase | Decrease | Others | Ending | ||||||||||||||||
Deferred loan origination costs | ||||||||||||||||||||
Loans in Korean won | ||||||||||||||||||||
Other origination costs | 126,265 | 77,464 | (83,950 | ) | 1 | 119,780 | ||||||||||||||
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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 | |||||||||||||||
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124
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
11. Allowances for Loan Losses
Changes in the allowances for loan losses for the years ended December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | |||||||||||||||||||||||||||||||||||
Retails | Corporates | Credit cards | ||||||||||||||||||||||||||||||||||
The financial | The financial instruments applying lifetime expected credit losses | The financial instruments applying 12-month expected | The financial instruments applying lifetime expected credit losses | The financial instruments applying 12-month expected | The financial instruments applying lifetime expected credit losses | |||||||||||||||||||||||||||||||
credit losses | Non-impaired | Impaired | credit losses | Non-impaired | Impaired | credit losses | Non-impaired | Impaired | ||||||||||||||||||||||||||||
Beginning | ||||||||||||||||||||||||||||||||||||
Transfer between stages | ||||||||||||||||||||||||||||||||||||
Transfer to12-month expected credit losses | 168,460 | (167,957 | ) | (503 | ) | 59,848 | (46,312 | ) | (13,536 | ) | 51,542 | (50,627 | ) | (915 | ) | |||||||||||||||||||||
Transfer to lifetime expected credit losses | (144,590 | ) | 160,509 | (15,919 | ) | (53,696 | ) | 141,398 | (87,702 | ) | (23,537 | ) | 24,529 | (992 | ) | |||||||||||||||||||||
Impairment | (1,619 | ) | (54,736 | ) | 56,355 | (2,250 | ) | (36,656 | ) | 38,906 | (2,388 | ) | (14,377 | ) | 16,765 | |||||||||||||||||||||
Write-offs | (2 | ) | 24 | (443,034 | ) | — | 2 | (239,319 | ) | — | — | (506,255 | ) | |||||||||||||||||||||||
Disposal | (486 | ) | (70 | ) | (782 | ) | — | — | (8,909 | ) | — | — | — | |||||||||||||||||||||||
Provision (reversal) for loan losses1,2 | 19,152 | 71,231 | 424,758 | (3,540 | ) | (89,234 | ) | 80,216 | 3,567 | 16,633 | 524,652 | |||||||||||||||||||||||||
Others (change of currency ratio, etc.) | 25 | 161 | (2,552 | ) | 395 | 2,456 | (40,924 | ) | — | — | (9,830 | ) | ||||||||||||||||||||||||
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1 | Provision for credit losses in the statement of comprehensive income also include provision (reversal) for due from financial institutions (Note 7.3), and provision (reversal) for securities (Note 12.5), provision for unused commitments and guarantees (Note 23.2), provision (reversal) for financial guarantees contracts (Note 23.3), and provision (reversal) for other financial assets (Note 18.2). |
2 | Included |
125
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
(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 to12-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 losses1,3 | (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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1 | Provision for credit losses in the statement of comprehensive income also includes provision (reversal) for due from financial institutions (Note 7.3), and provision (reversal) for securities (Note 12.5), provision for unused commitments and guarantees (Note 23.2), provision (reversal) for financial guarantees contracts (Note 23.3), and provision (reversal) for other financial assets (Note 18.2). |
2 | Prepared in accordance with Korean IFRS 1109. |
3 | Included |
126
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
The Group manages thewritten-off loans that their extinctive prescription did not occur, and that are not collected; the balance of those are respectivelyW11,264,785 million andW12,067,272 million as of December 31, 2019 and 2018.
Changes in the book value of loans at amortized cost for the years ended December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | |||||||||||
12-month expected credit losses | Lifetime expected credit losses | |||||||||||
Non-impaired | Impaired | |||||||||||
Beginning | ||||||||||||
Transfer between stages | ||||||||||||
Transfer to12-month expected credit losses | 54,530,173 | (54,412,664 | ) | (117,509 | ) | |||||||
Transfer to lifetime expected credit losses | (57,514,696 | ) | 58,078,679 | (563,983 | ) | |||||||
Transfer to lifetime expected credit losses (impaired) | (564,375 | ) | (1,792,641 | ) | 2,357,016 | |||||||
Write-offs | (2 | ) | 26 | (1,188,608 | ) | |||||||
Disposal | (889,880 | ) | (18,163 | ) | (188,080 | ) | ||||||
Net increase(decrease) (Execution, repayment and others) | 27,519,419 | (4,458,294 | ) | (495,627 | ) | |||||||
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(In millions of Korean won) | 2018 | |||||||||||
12-month expected credit losses | Lifetime expected credit losses | |||||||||||
Non-impaired | Impaired | |||||||||||
Beginning | ||||||||||||
Transfer between stages | ||||||||||||
Transfer to12-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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127
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
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, 2019 and 2018, are as follows:
(In millions of Korean won) | December 31, 2019 | December 31, 2018 | ||||||
Financial assets at fair value through profit or loss | ||||||||
Debt securities: | ||||||||
Government and public bonds | ||||||||
Financial bonds | 16,360,495 | 14,978,408 | ||||||
Corporate bonds | 3,218,480 | 4,101,066 | ||||||
Asset-backed securities | 124,898 | 84,382 | ||||||
Beneficiary certificates | 12,375,326 | 10,252,377 | ||||||
Derivatives linked securities | 3,623,648 | 3,516,626 | ||||||
Other debt securities | 8,449,207 | 7,429,687 | ||||||
Equity securities: | ||||||||
Stocks | 1,716,149 | 1,094,441 | ||||||
Other equity securities | 387,694 | 193,221 | ||||||
Loans: | ||||||||
Private placed corporate bonds | 265,499 | 823,071 | ||||||
Other loans | 162,046 | 131,105 | ||||||
Due from financial institutions: | ||||||||
Other due from financial institutions | 216,367 | 381,719 | ||||||
Others | 79,805 | 78,808 | ||||||
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53,549,086 | 50,987,847 | |||||||
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Financial Investments |
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Financial assets measured at fair value through other comprehensive income |
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Debt securities: | ||||||||
Government and public bonds | 9,501,642 | 3,475,214 | ||||||
Financial bonds | 20,913,361 | 20,107,719 | ||||||
Corporate bonds | 12,289,820 | 10,540,985 | ||||||
Asset-backed securities | 832,160 | 1,100,041 | ||||||
Other debt securities | 19,865 | 19,675 | ||||||
Equity securities: | ||||||||
Stocks | 2,377,994 | 2,262,379 | ||||||
Equity investments | 41,042 | 38,584 | ||||||
Other equity securities | 85,069 | 69,153 | ||||||
Loans: | ||||||||
Private placed corporate bonds | 375,098 | 389,822 | ||||||
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46,436,051 | 38,003,572 | |||||||
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Financial assets at amortized cost |
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Debt securities: | ||||||||
Government and public bonds | 5,395,720 | 5,090,051 | ||||||
Financial bonds | 8,157,428 | 6,847,055 | ||||||
Corporate bonds | 7,536,805 | 6,943,332 | ||||||
Asset-backed securities | 4,258,274 | 4,782,800 | ||||||
Allowance | (1,672 | ) | (1,716 | ) | ||||
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25,346,555 | 23,661,522 | |||||||
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128
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
Dividend incomes from the equity securities measured at fair value through other comprehensive income for the years ended December 31, 2019 and 2018 are as follows:
(In millions of Korean won) | 2019 | |||||||||
From the financial asset derecognized | From the remaining financial asset | |||||||||
Equity securities at fair value through other comprehensive income |
| |||||||||
Stocks | Listed | |||||||||
Non-listed | — | 25,599 | ||||||||
Equity investments | — | 95 | ||||||||
Other equity securities | — | 2,953 | ||||||||
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(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 |
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Stocks | Listed | |||||||||
Non-listed | — | 25,121 | ||||||||
Equity investments | — | 2,256 | ||||||||
Other equity securities | 2,508 | 1,798 | ||||||||
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The derecognized equity securities, measured at fair value through other comprehensive income for the years ended December 31, 2019 and 2018 are as follows:
(In millions of Korean won) | 2019 | |||||||||
Disposal price | Accumulated OCI as of disposal date | |||||||||
Equity securities at fair value through other comprehensive income |
| |||||||||
Stocks | Listed | |||||||||
Unlisted | 1,671 | 169 | ||||||||
Other equity securities | — | — | ||||||||
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(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 | |||||||||
Unlisted | 480 | 480 | ||||||||
Other equity securities | 80,000 | 2,567 | ||||||||
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129
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
Provision (reversal) for the allowance of financial investments for the year periods ended December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | |||||||||||
Impairment losses | Reversal of impairment | Total | ||||||||||
Securities measured at fair value through other comprehensive income | ||||||||||||
Loans measured at fair value through other comprehensive income | 170 | 982 | (812 | ) | ||||||||
Securities at amortized cost | 216 | 280 | (64 | ) | ||||||||
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(In millions of Korean won) | 2018 | |||||||||||
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 at amortized cost | 296 | 282 | 14 | |||||||||
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Changes in the allowances for debt securities for the years ended December 31, 2019 and 2018 are as follows:
(In millions of Korean won) | 2019 | |||||||||||
12-month expected credit losses | Lifetime expected credit losses | |||||||||||
Non-impaired | Impaired | |||||||||||
Beginning | ||||||||||||
Transfer between stages | ||||||||||||
Transfer to12-month expected credit losses | 437 | (188 | ) | (249 | ) | |||||||
Transfer to lifetime expected credit losses | (669 | ) | 669 | — | ||||||||
Disposal | (329 | ) | — | — | ||||||||
Provision (reversal) for loan losses | 219 | (702 | ) | — | ||||||||
Others (change of currency ratio, etc.) | 55 | 29 | (73 | ) | ||||||||
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Ending | ||||||||||||
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130
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
(In millions of Korean won) | 2018 | |||||||||||
12-month expected credit losses | Lifetime expected credit losses | |||||||||||
Non-impaired | Impaired | |||||||||||
Beginning1 | ||||||||||||
Transfer between stages | ||||||||||||
Transfer to12-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 | — | |||||||||
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Ending | ||||||||||||
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1 | Prepared in accordance with Korean IFRS 1109. |
13. Investments in Associates and Joint Ventures
Investments in associates and joint ventures as of December 31, 2019 and 2018, are as follows:
(in millions of Korean won) | 2019 | |||||||||||||||||||||
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 | 138,013 | 136,168 | Investment finance | Korea | ||||||||||||||||
KB-KDBC New Technology Business investment Fund10 | 66.66 | 20,000 | 18,988 | 18,988 | Investment finance | Korea | ||||||||||||||||
KB Star office Private real estate Investment Trust No.1 | 21.05 | 20,000 | 19,839 | 19,839 | Investment finance | Korea | ||||||||||||||||
PT Bank Bukopin TBK16, 17 | 22.00 | 116,422 | 115,321 | 121,381 | Banking and foreign exchange transaction | Indonesia | ||||||||||||||||
Dae-A Leisure Co., Ltd.8 | 49.36 | — | 1,613 | 578 | Earth works | Korea | ||||||||||||||||
Doosung Metal Co., Ltd 8 | 26.52 | — | (62 | ) | — | Manufacture of metal products | Korea | |||||||||||||||
RAND Bio Science Co., Ltd. 1 | 14.92 | 2,000 | 1,037 | — | Research and experimental development on medical sciences and pharmacy | Korea | ||||||||||||||||
Balhae Infrastructure Company1 | 12.61 | 105,214 | 101,391 | 101,391 | Investment finance | Korea | ||||||||||||||||
Aju Good Technology Venture Fund | 38.46 | 19,998 | 23,016 | 23,016 | Investment finance | Korea | ||||||||||||||||
Acts Co., Ltd.12 | 7.14 | 500 | (119 | ) | — | Manufacture of optical lens and elements | Korea | |||||||||||||||
SY Auto Capital Co., Ltd. | 49.00 | 9,800 | 17,736 | 12,725 | Installment loan | Korea | ||||||||||||||||
Wise Asset Management Co., Ltd.9 | 33.00 | — | — | — | Asset management | Korea |
131
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
Incheon Bridge Co., Ltd.1 | 14.99 | 9,158 | (14,746 | ) | — | Operation of highways and related facilities | Korea | |||||||||||||
Jungdong Steel Co., Ltd.8 | 42.88 | — | (433 | ) | — | Wholesale of primary metal | Korea | |||||||||||||
Kendae Co., Ltd. 8 | 41.01 | — | (252 | ) | 98 | Screen printing | Korea | |||||||||||||
Dongjo Co., Ltd. 8 | 29.29 | — | 806 | 115 | Wholesale of agricultural and forestry machinery and equipment | Korea | ||||||||||||||
Dpaps Co., Ltd. 8 | 38.62 | — | — | — | Wholesale of paper products | Korea | ||||||||||||||
Big Dipper Co., Ltd. | 29.33 | 440 | 10 | 125 | Big data consulting | Korea | ||||||||||||||
Shinla Construction Co., Ltd. 8 | 20.24 | — | (551 | ) | — | Specialty construction | Korea | |||||||||||||
Shinhwa Underwear Co., Ltd. 8 | 26.24 | — | 16 | 258 | Manufacture of underwears and sleepwears | Korea | ||||||||||||||
A-PRO Co., Ltd.1 | 15.19 | 1,500 | 2,565 | 2,790 | Manufacture of electric power storage system | Korea | ||||||||||||||
MJT&I Co., Ltd. 8 | 22.89 | — | (613 | ) | 116 | Wholesale of other goods | Korea | |||||||||||||
Jaeyang Industry Co., Ltd. 8 | 20.86 | — | (552 | ) | — | Manufacture of luggage and other protective cases | Korea | |||||||||||||
Jungdo Co., Ltd. 8 | 25.53 | — | 1,492 | — | Office, commercial and institutional building construction | Korea | ||||||||||||||
Jinseung Tech Co., Ltd. 8 | 30.04 | — | (194 | ) | — | Manufacture of other general-purpose machinery n.e.c. | Korea | |||||||||||||
Terra Co., Ltd. 8 | 24.06 | — | 2 | — | Manufacture of hand-operated kitchen appliances and metal ware | Korea | ||||||||||||||
Paycoms Co., Ltd.11 | 11.70 | 800 | 17 | 45 | System software publishing | Korea | ||||||||||||||
Food Factory Co., Ltd.13 | 22.22 | 1,000 | 398 | 1,000 | Farm product distribution industry | Korea | ||||||||||||||
Korea NM Tech Co., Ltd.8 | 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.17 Special Purpose | ||||||||||||||||||||
Acquisition Company1, 4 | 0.02 | 1 | 1 | 1 | SPAC | Korea | ||||||||||||||
KB No.18 Special Purpose Acquisition Company1 ,5 | 0.02 | 2 | 3 | 3 | SPAC | Korea | ||||||||||||||
KB No.19 Special Purpose Acquisition Company1, 6 | 0.01 | 1 | 2 | 2 | SPAC | Korea | ||||||||||||||
KB No.20 Special Purpose Acquisition Company1, 7 | 0.02 | 1 | 1 | 1 | SPAC | Korea |
132
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
KBSP Private Equity Fund IV1, 10 | 14.95 | 6,100 | 5,904 | 5,904 | Investment finance | Korea | ||||||||||||||
KB Private Equity Fund III1 | 15.69 | 8,000 | 7,754 | 7,754 | Investment finance | Korea | ||||||||||||||
Korea Credit Bureau Co., Ltd.1 | 9.00 | 4,500 | 5,991 | 5,991 | Credit information | Korea | ||||||||||||||
KoFC POSCO HANHWA KB shared growth Private Equity Fund No. 2 | 25.00 | 12,970 | 13,616 | 13,616 | Investment finance | Korea | ||||||||||||||
Keystone-Hyundai Securities No. 1 Private Equity Fund1 | 4.49 | 1,908 | 1,625 | 1,625 | Investment finance | Korea | ||||||||||||||
KB Social Impact Fund | 30.00 | 1,500 | 1,465 | 1,465 | Investment finance | Korea | ||||||||||||||
KB-Solidus Global Healthcare Fund | 43.33 | 42,697 | 45,021 | 45,718 | Investment finance | Korea | ||||||||||||||
POSCO-KB Shipbuilding Fund | 31.25 | 7,500 | 6,847 | 6,847 | Investment finance | Korea | ||||||||||||||
GH Real Estate I LP | 42.00 | 17,678 | 19,042 | 19,042 | Asset management | Guernsey | ||||||||||||||
KBTS Technology Venture Private Equity Fund10 | 56.00 | 19,824 | 19,731 | 19,731 | Investment finance | Korea | ||||||||||||||
KB-Brain KOSDAQScale-up New Technology Business Investment Fund10 | 42.55 | 21,250 | 20,504 | 19,752 | Investment finance | Korea | ||||||||||||||
KB-SJ Tourism Venture Fund1, 10 | 18.52 | 3,000 | 2,761 | 2,761 | Investment finance | Korea | ||||||||||||||
UNION Media Commerce Fund | 28.99 | 1,000 | 961 | 961 | Investment finance | Korea | ||||||||||||||
KB-Stonebridge Secondary Private Equity Fund11 | 14.56 | 5,215 | 4,944 | 4,944 | Investment finance | Korea | ||||||||||||||
KB SPROTT Renewable Private Equity Fund I | 37.69 | 1,667 | 1,295 | 1,295 | Investment finance | Korea | ||||||||||||||
KB-UTC Inno-Tech Venture Fund | 44.29 | 450 | 417 | 417 | Investment finance | Korea | ||||||||||||||
CHONG IL MACHINE & TOOLS CO., LTD. 8 | 21.71 | — | (126 | ) | — | Machinery and equipment wholesale | Korea | |||||||||||||
IMT TECHNOLOGY CO., LTD.8 | 25.29 | — | 22 | 3 | Computer Peripherals Distribution | Korea | ||||||||||||||
IWON ALLOY CO., LTD. 8 | 23.31 | — | 394 | — | Manufacture of smelting, refining and alloys | Korea | ||||||||||||||
CARLIFE CO., LTD. 8 | 24.39 | — | (75 | ) | — | Publishing of magazines and periodicals (publishing industry) | Korea | |||||||||||||
COMPUTERLIFE CO., LTD. 8 | 45.71 | — | (260 | ) | 69 | Publishing of magazines and periodicals (publishing industry) | Korea | |||||||||||||
SKYDIGITAL INC. 8 | 20.40 | — | (248 | ) | — | Multi Media, Manufacture of Multi Media Equipment | Korea | |||||||||||||
JO YANG INDUSTRIAL CO., LTD. 8 | 23.14 | — | 75 | — | Manufacture of Special Glass | Korea | ||||||||||||||
IL-KWANG ELECTRONIC MATERIALS CO., LTD. 8 | 29.06 | — | (398 | ) | — | Electronic parts | Korea | |||||||||||||
SO-MYUNG RECYCLING CO., LTD. 8 | 20.23 | — | 184 | — | Non-ferrous metals | Korea |
133
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
IDTECK CO., LTD.8 | 32.80 | — | (103 | ) | — | Other wireless communication equipment manufacturing | Korea | |||||||||||||
Seyoon Development Company. 8 | 26.95 | — | 2 | — | Civil facilities construction | Korea | ||||||||||||||
PIP System CO., LTD8 | 20.72 | — | 27 | — | Print equipment | Korea | ||||||||||||||
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134
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
(in millions of Korean won) | 2018 | |||||||||||||||||||||
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 | 136,208 | 134,362 | Investment finance | Korea | ||||||||||||||||
KB-KDBC New Technology Business Investment Fund10 | 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 TBK16, 17 | 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.8 | 49.36 | — | 1,613 | 578 | Earth works | Korea | ||||||||||||||||
Doosung Metal Co., Ltd 8 | 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.12 | 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.9 | 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.8 | 42.88 | — | (433 | ) | — | Wholesale of primary metal | Korea | |||||||||||||||
Kendae Co., Ltd.8 | 41.01 | — | (252 | ) | 98 | Screen printing | Korea | |||||||||||||||
Dongjo Co., Ltd.8 | 29.29 | — | 806 | 115 | Wholesale of agricultural and forestry machinery and equipment | Korea | ||||||||||||||||
Dpaps Co., Ltd.8 | 38.62 | — | 14 | — | Wholesale of paper products | Korea | ||||||||||||||||
Big Dipper Co., Ltd. | 29.33 | 440 | 166 | 280 | Big data consulting | Korea | ||||||||||||||||
Builton Co., Ltd.14 | 21.96 | 800 | 67 | 304 | Software development and supply | Korea |
135
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
Shinla Construction Co., Ltd.8 | 20.24 | — | (551 | ) | — | Specialty construction | Korea | |||||||||||||
Shinhwa Underwear Co., Ltd.8 | 26.24 | — | (57 | ) | 185 | Manufacture of underwears and sleepwears | Korea | |||||||||||||
A-PRO Co., Ltd.1 | 13.71 | 1,500 | 1,554 | 1,403 | Manufacture of electric power storage system | Korea | ||||||||||||||
MJT&I Co., Ltd.8 | 22.89 | — | (606 | ) | 122 | Wholesale of other goods | Korea | |||||||||||||
Jaeyang Industry Co., Ltd.8 | 20.86 | — | (552 | ) | — | Manufacture of luggage and other protective cases | Korea | |||||||||||||
Jungdo Co., Ltd.8 | 25.53 | — | 1,492 | — | Office, commercial and institutional building construction | Korea | ||||||||||||||
Jinseung Tech Co., Ltd.8 | 30.04 | — | (176 | ) | — | Manufacture of other general-purpose machinery n.e.c. | Korea | |||||||||||||
Terra Co., Ltd.8 | 24.06 | — | 2 | — | Manufacture of hand-operated kitchen appliances and metal ware | Korea | ||||||||||||||
Paycoms Co., Ltd.11 | 11.70 | 800 | 71 | 103 | System software publishing | Korea | ||||||||||||||
Food Factory Co., Ltd.13 | 22.22 | 1,000 | 206 | 928 | Farm product distribution industry | Korea | ||||||||||||||
Korea NM Tech Co., Ltd.8 | 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 Company1,2 | 0.19 | 10 | 20 | 20 | SPAC | Korea | ||||||||||||||
KB No.11 Special Purpose Acquisition Company1,3 | 0.31 | 10 | 19 | 19 | SPAC | Korea | ||||||||||||||
KB Private Equity Fund III1 | 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 Champ2010-5(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 |
136
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
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 Fund10 | 56.00 | 14,224 | 13,777 | 13,777 | Investment finance | Korea | ||||||||||||||
KB-Brain KOSDAQScale-up New Technology Business Investment Fund10 | 42.55 | 8,000 | 7,930 | 7,930 | Investment finance | Korea | ||||||||||||||
KB-SJ Tourism Venture Fund1, 10 | 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. 8 | 21.71 | — | (107 | ) | — | Machinery and equipment wholesale | Korea | |||||||||||||
IMT TECHNOLOGY CO., LTD. 8 | 25.29 | — | 18 | — | Computer Peripherals Distribution | Korea | ||||||||||||||
IWON ALLOY CO., LTD. 8 | 23.31 | — | 394 | — | Manufacture of smelting, refining and alloys | Korea | ||||||||||||||
CARLIFE CO., LTD. 8 | 24.39 | — | (75 | ) | — | Publishing of magazines and periodicals (publishing industry) | Korea | |||||||||||||
COMPUTERLIFE CO., LTD. 8 | 45.71 | — | (329 | ) | — | Publishing of magazines and periodicals (publishing industry) | Korea | |||||||||||||
SKYDIGITAL INC.8 | 20.40 | — | (142 | ) | — | Multi Media, Manufacture of Multi Media Equipment | Korea | |||||||||||||
JO YANG INDUSTRIAL CO., LTD.8 | 23.14 | — | 75 | — | Manufacture of Special Glass | Korea | ||||||||||||||
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1 | As of December 31, 2019 and 2018, 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.10 Special Purpose Acquisition Company, reflecting the quoted market price as of December 31, 2018, amounts to |
3 | The market value of KB No.11 Special Purpose Acquisition Company, reflecting the quoted market price as of December 31, 2018, amounts to |
4 | The market value of KB No.17 Special Purpose Acquisition Company, reflecting the quoted market price as of December 31, 2019, amounts to |
5 | The market value of KB No.18 Special Purpose Acquisition Company, reflecting the quoted market price as of December 31, 2019, amounts to |
6 | The market value of KB No.19 Special Purpose Acquisition Company, reflecting the quoted market price as of December 31, 2019, amounts to |
7 | The market value of KB No.20 Special Purpose Acquisition Company, reflecting the quoted market price as of December 31, 2019, amounts to |
137
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
8 | Reclassified to investments in associates due to termination of rehabilitation procedures. |
9 | Carrying amount of the investment has been recognized as a loss from the date Hyundai Securities Co., Ltd. was included in the consolidation scope. |
10 | In order to direct relevant activities, it is necessary to obtain the consent of the twoco-operative members; the Group has applied the equity method as the Group cannot control the investee by itself. |
11 | The ownership of Paycoms Co., Ltd. would be 22.96% and 22.96% as of December 31, 2019 and 2018, respectively, considering the potential voting rights from convertible bond. |
12 | The ownership of Acts Co., Ltd. would be 27.22% and 27.22% as of December 31, 2019 and 2018, respectively, considering the potential voting rights from convertible bond. |
13 | The ownership of Food Factory Co., Ltd. would be 30.00% and 30.00% as of December 31, 2019 and 2018, respectively, considering the potential voting rights from convertible bond. |
14 | The ownership of Builton Co., Ltd. would be 26.86% as of December 31, 2018, considering the potential voting rights from convertible bond. |
15 | 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 measured at fair value through profit or loss in Rainist Co., Ltd., RMGPBio-Pharma Investment Fund, L.P.,RMGPBio-Pharma Investment, L.P, HEYBIT, Inc.,Hasys.,Stratio, Inc., Honest Fund Co.,Ltd., Cellincells Co., Ltd., CY CO., Ltd., ZOYI corporation INC., KOSESEUJITO CO., LTD., Bomapp Inc., KB Cape No.1 Private Equity Fund., Mitoimmune Therapeutics, BNF Corporation Ltd., Fabric Types CO., LTD.. |
16 | 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, atag-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. |
17 | The fair value of PT Bank Bukopin TBK ordinary share is |
Although the Group holds more than 20% of ownership, it has been excluded from associates by limited influence due to the trust agreement on related activities, bankruptcy and rehabilitation procedures.
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) | 20191 | |||||||||||||||||||||||||||
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 | 522,865 | 741 | 425,814 | 522,124 | 138,013 | (1,845 | ) | 136,168 | ||||||||||||||||||||
KB-KDBC New Technology Business Investment Fund | 29,086 | 603 | 30,000 | 28,483 | 18,988 | — | 18,988 | |||||||||||||||||||||
KB Star office Private real estate Investment Trust No. 1 | 218,611 | 122,465 | 95,000 | 96,146 | 19,839 | — | 19,839 | |||||||||||||||||||||
PT Bank Bukopin TBK2 | 8,148,013 | 7,623,829 | 106,536 | 524,184 | 115,321 | 6,060 | 121,381 | |||||||||||||||||||||
RAND Bioscience Co., Ltd. | 7,026 | 74 | 1,340 | 6,952 | 1,037 | (1,037 | ) | — | ||||||||||||||||||||
Balhae Infrastructure Company | 806,218 | 1,854 | 834,695 | 804,364 | 101,391 | — | 101,391 | |||||||||||||||||||||
Aju Good Technology Venture Fund | 60,675 | 828 | 52,000 | 59,847 | 23,016 | — | 23,016 | |||||||||||||||||||||
Acts Co., Ltd. | 5,302 | 6,973 | 117 | (1,671 | ) | (119 | ) | 119 | — |
138
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
SY Auto Capital Co., Ltd. | 88,611 | 52,415 | 20,000 | 36,196 | 17,736 | (5,011 | ) | 12,725 | ||||||||||||||||||||
Incheon Bridge Co., Ltd. | 609,194 | 707,563 | 61,096 | (98,369 | ) | (14,746 | ) | 14,746 | — | |||||||||||||||||||
Big Dipper Co., Ltd. | 370 | 336 | 1,500 | 34 | 10 | 115 | 125 | |||||||||||||||||||||
A-PRO Co., Ltd. | 47,164 | 30,281 | 2,468 | 16,883 | 2,565 | 225 | 2,790 | |||||||||||||||||||||
Paycoms Co., Ltd. | 1,763 | 1,620 | 855 | 143 | 17 | 28 | 45 | |||||||||||||||||||||
Food Factory Co., Ltd. | 5,587 | 3,797 | 450 | 1,790 | 398 | 602 | 1,000 | |||||||||||||||||||||
KB IGen Private Equity Fund No. 1 | 191 | 8 | 7,270 | 183 | — | — | — | |||||||||||||||||||||
KB No.17 Special Purpose Acquisition Company | 11,857 | 1,328 | 546 | 10,529 | 1 | — | 1 | |||||||||||||||||||||
KB No.18 Special Purpose Acquisition Company | 17,242 | 2,022 | 782 | 15,220 | 3 | — | 3 | |||||||||||||||||||||
KB No.19 Special Purpose Acquisition Company | 9,123 | 924 | 430 | 8,199 | 2 | — | 2 | |||||||||||||||||||||
KB No.20 Special Purpose Acquisition Company | 1,991 | 1,372 | 50 | 619 | 1 | — | 1 | |||||||||||||||||||||
KBSP Private Equity Fund IV | 39,492 | 2 | 40,800 | 39,490 | 5,904 | — | 5,904 | |||||||||||||||||||||
KB Private Equity Fund III | 49,437 | 4 | 51,000 | 49,433 | 7,754 | — | 7,754 | |||||||||||||||||||||
Korea Credit Bureau Co., Ltd. | 96,855 | 30,289 | 10,000 | 66,566 | 5,991 | — | 5,991 | |||||||||||||||||||||
KoFC POSCO HANHWA KB shared growth Private Equity Fund No. 2 | 55,524 | 1,063 | 51,880 | 54,461 | 13,616 | — | 13,616 | |||||||||||||||||||||
Keystone-Hyundai Securities No. 1 Private Equity Fund | 187,156 | 153,842 | 42,837 | 33,314 | 1,625 | — | 1,625 | |||||||||||||||||||||
KB Social Impact Fund | 4,885 | 3 | 5,000 | 4,882 | 1,465 | — | 1,465 | |||||||||||||||||||||
KB-Solidus Global Healthcare Fund | 103,896 | 5 | 61,800 | 103,891 | 45,021 | 697 | 45,718 | |||||||||||||||||||||
POSCO-KB Shipbuilding Fund | 21,916 | 4 | 24,000 | 21,912 | 6,847 | — | 6,847 | |||||||||||||||||||||
GH Real Estate I LP | 45,340 | 61 | 42,093 | 45,279 | 19,042 | — | 19,042 | |||||||||||||||||||||
KBTS Technology Venture Private Equity Fund | 36,445 | 1,212 | 35,400 | 35,233 | 19,731 | — | 19,731 | |||||||||||||||||||||
KB-Brain KOSDAQScale-up New Technology Business Investment Fund | 48,369 | 185 | 51,700 | 48,184 | 20,504 | (752 | ) | 19,752 | ||||||||||||||||||||
KB-SJ Tourism Venture Fund | 14,914 | 4 | 16,200 | 14,910 | 2,761 | — | 2,761 | |||||||||||||||||||||
UNION Media Commerce Fund | 3,318 | 4 | 3,450 | 3,314 | 961 | — | 961 | |||||||||||||||||||||
KB-Stonebridge Secondary Private Equity Fund | 34,450 | 507 | 35,805 | 33,943 | 4,944 | — | 4,944 | |||||||||||||||||||||
KB SPROTT Renewable Private Equity Fund I | 3,686 | 249 | 9,640 | 3,437 | 1,295 | — | 1,295 | |||||||||||||||||||||
KB-UTC Inno-Tech Venture Fund | 1,016 | 75 | 1,016 | 941 | 417 | — | 417 |
(In millions of Korean won) | 20191 | |||||||||||||||||||
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 | 42,503 | 41,524 | — | 41,524 | 9,297 | |||||||||||||||
KB-KDBC New Technology Business Investment Fund | 371 | (638 | ) | — | (638 | ) | — | |||||||||||||
KB Star office Private real estate Investment Trust No. 1 | 14,455 | 6,004 | — | 6,004 | — | |||||||||||||||
PT Bank Bukopin TBK | 721,169 | (5,612 | ) | 45,780 | 40,168 | — |
139
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
RAND Bio Science Co., Ltd. | — | (2,928 | ) | — | (2,928 | ) | — | |||||||||||||
Balhae Infrastructure Company | 62,113 | (3,153 | ) | — | (3,153 | ) | 6,855 | |||||||||||||
Aju Good Technology Venture Fund | 9,288 | 7,734 | — | 7,734 | — | |||||||||||||||
Acts Co., Ltd. | 1,542 | (507 | ) | — | (507 | ) | — | |||||||||||||
SY Auto Capital Co., Ltd. | 20,394 | 5,292 | (215 | ) | 5,077 | — | ||||||||||||||
Incheon Bridge Co., Ltd. | 107,178 | 9,127 | — | 9,127 | — | |||||||||||||||
Big Dipper Co., Ltd. | 598 | (532 | ) | — | (532 | ) | — | |||||||||||||
A-PRO Co., Ltd. | 47,725 | 7,702 | — | 7,702 | — | |||||||||||||||
Paycoms Co., Ltd. | 262 | (343 | ) | — | (343 | ) | — | |||||||||||||
Food Factory Co., Ltd. | 6,807 | 664 | — | 664 | — | |||||||||||||||
KB IGen Private Equity Fund No. 1 | — | 5,851 | — | 5,851 | — | |||||||||||||||
KB No.17 Special Purpose Acquisition Company | — | 8 | — | 8 | — | |||||||||||||||
KB No.18 Special Purpose Acquisition Company | — | (3 | ) | — | (3 | ) | — | |||||||||||||
KB No.19 Special Purpose Acquisition Company | — | (25 | ) | — | (25 | ) | — | |||||||||||||
KB No.20 Special Purpose Acquisition Company | — | (9 | ) | — | (9 | ) | — | |||||||||||||
KBSP Private Equity Fund IV | 39 | (1,304 | ) | — | (1,304 | ) | — | |||||||||||||
KB Private Equity Fund III | — | (485 | ) | — | (485 | ) | — | |||||||||||||
Korea Credit Bureau Co., Ltd. | 91,200 | 1,480 | — | 1,480 | 135 | |||||||||||||||
KoFC POSCO HANHWA KB shared growth Private Equity Fund No. 2 | 4,077 | (3,911 | ) | — | (3,911 | ) | — | |||||||||||||
Keystone-Hyundai Securities No. 1 Private Equity Fund | 18,342 | (572 | ) | — | (572 | ) | — | |||||||||||||
KB Social Impact Fund | 8 | (118 | ) | — | (118 | ) | — | |||||||||||||
KB-Solidus Global Healthcare Fund | 13,085 | 8,708 | — | 8,708 | — | |||||||||||||||
POSCO-KB Shipbuilding Fund | 1,000 | (371 | ) | — | (371 | ) | — | |||||||||||||
GH Real Estate I LP | 5,043 | 3,698 | 565 | 4,263 | — | |||||||||||||||
KBTS Technology Venture Private Equity Fund | 1,643 | 632 | — | 632 | — | |||||||||||||||
KB-Brain KOSDAQScale-up New Technology Business Investment Fund | 138 | (3,355 | ) | — | (3,355 | ) | — | |||||||||||||
KB-SJ Tourism Venture Fund | — | (673 | ) | — | (673 | ) | — | |||||||||||||
UNION Media Commerce Fund | — | (3 | ) | — | (3 | ) | — | |||||||||||||
KB-Stonebridge Secondary Private Equity Fund | 346 | (1,856 | ) | — | (1,856 | ) | — | |||||||||||||
KB SPROTT Renewable Private Equity Fund I | 1 | (986 | ) | — | (986 | ) | — | |||||||||||||
KB-UTC Inno-Tech Venture Fund | — | (75 | ) | — | (75 | ) | — |
140
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
(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 Fund III | 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 Champ2010-5(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 KOSDAQScale-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 |
141
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
(In millions of Korean won) | 20181 | |||||||||||||||||||
Operating income | Profit (loss) | Other comprehensive income | Total comprehensive income | Dividends | ||||||||||||||||
Associates and joint ventures | ||||||||||||||||||||
KB Pre IPO Secondary Venture Fund 1st | ||||||||||||||||||||
KBGwS 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 TPK | 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 Fund III | — | (438 | ) | — | (438 | ) | — | |||||||||||||
Korea Credit Bureau Co., Ltd. | 78,018 | 9,901 | — | 9,901 | 112 | |||||||||||||||
KoFC KBIC Frontier Champ2010-5(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 KOSDAQScale-up New Technology Business Investment Fund | 20 | (161 | ) | — | (161 | ) | — | |||||||||||||
KB-SJ Tourism Venture Fund | — | (618 | ) | — | (618 | ) | — | |||||||||||||
UNION Media Commerce Fund | — | (132 | ) | — | (132 | ) | — |
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 |
142
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
Changes in investments in associates and joint ventures for the years ended December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | |||||||||||||||||||||||||||||||
Beginning | Acquisition and others | Disposal and others | Dividends | Gains (losses) on equity-method accounting | Other comprehensive income | Impairment loss | Ending | |||||||||||||||||||||||||
Associates and joint ventures | ||||||||||||||||||||||||||||||||
KB Pre IPO Secondary Venture Fund 1st | ||||||||||||||||||||||||||||||||
KB GwS Private Securities Investment Trust | 134,362 | — | — | (9,297 | ) | 11,103 | — | — | 136,168 | |||||||||||||||||||||||
KB-KDBC New Technology Business Investment Fund | 14,594 | 5,000 | — | — | (606 | ) | — | — | 18,988 | |||||||||||||||||||||||
KB Star office Private real estate Investment Trust No.1 | 19,839 | — | — | — | — | — | — | 19,839 | ||||||||||||||||||||||||
PT Bank Bukopin TBK | 113,932 | — | — | — | (1,236 | ) | 10,408 | (1,723 | ) | 121,381 | ||||||||||||||||||||||
Sun Surgery Center Inc. | 2,715 | — | (3,321 | ) | — | 396 | 210 | — | — | |||||||||||||||||||||||
Dae-A Leisure Co., Ltd. | 578 | — | — | — | — | — | — | 578 | ||||||||||||||||||||||||
RAND Bio Science Co., Ltd. | 843 | — | — | — | — | — | (843 | ) | — | |||||||||||||||||||||||
Balhae Infrastructure Company | 108,050 | 592 | — | (6,855 | ) | (396 | ) | — | — | 101,391 | ||||||||||||||||||||||
Aju Good Technology Venture Fund | 18,134 | 1,960 | — | — | 2,922 | — | — | 23,016 | ||||||||||||||||||||||||
SY Auto Capital Co., Ltd. | 10,672 | — | — | — | 2,158 | (105 | ) | — | 12,725 | |||||||||||||||||||||||
Kendae Co., Ltd. | 98 | — | — | — | — | — | — | 98 | ||||||||||||||||||||||||
Dong Jo Co., Ltd. | 115 | — | — | — | — | — | — | 115 | ||||||||||||||||||||||||
Big Dipper Co., Ltd. | 280 | — | — | — | (155 | ) | — | — | 125 |
143
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
Builton Co., Ltd. | 304 | 403 | (839 | ) | — | 132 | — | — | — | |||||||||||||||||||||||
Shinhwa Underwear Co., Ltd. | 185 | — | — | — | 73 | — | — | 258 | ||||||||||||||||||||||||
A-PRO Co., Ltd. | 1,403 | — | — | — | 1,386 | 1 | — | 2,790 | ||||||||||||||||||||||||
MJT&I Co., Ltd. | 122 | — | — | — | (6 | ) | — | — | 116 | |||||||||||||||||||||||
Paycoms Co., Ltd. | 103 | — | — | — | (58 | ) | — | — | 45 | |||||||||||||||||||||||
Food Factory Co., Ltd. | 928 | — | — | — | 72 | — | — | 1,000 | ||||||||||||||||||||||||
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 | — | (19 | ) | — | — | — | — | — | |||||||||||||||||||||||
KB No.17 Special Purpose Acquisition Company | — | 1 | — | — | — | — | — | 1 | ||||||||||||||||||||||||
KB No.18 Special Purpose Acquisition Company | — | 2 | — | — | — | 1 | — | 3 | ||||||||||||||||||||||||
KB No.19 Special Purpose Acquisition Company | — | 1 | — | — | — | 1 | — | 2 | ||||||||||||||||||||||||
KB No.20 Special Purpose Acquisition Company | — | 1 | — | — | — | — | — | 1 | ||||||||||||||||||||||||
KBSP Private Equity Fund IV | — | 6,100 | — | — | (196 | ) | — | — | 5,904 | |||||||||||||||||||||||
KB Private Equity Fund III | 7,830 | — | — | — | (76 | ) | — | — | 7,754 | |||||||||||||||||||||||
Korea Credit Bureau Co., Ltd. | 5,941 | — | — | (135 | ) | 185 | — | — | 5,991 | |||||||||||||||||||||||
KoFC KBIC Frontier Champ2010-5(PEF) | 233 | — | (233 | ) | — | — | — | — | — | |||||||||||||||||||||||
KoFC POSCO HANHWA KB shared growth Private Equity Fund No. 2 | 14,601 | — | — | — | (985 | ) | — | — | 13,616 |
144
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
Keystone-Hyundai Securities No. 1 Private Equity Fund | 1,581 | 66 | — | — | (26 | ) | 4 | — | 1,625 | |||||||||||||||||||||||
KB Social Impact Fund | — | 1,500 | — | — | (35 | ) | — | — | 1,465 | |||||||||||||||||||||||
KB-Solidus Global Healthcare Fund3 | — | 42,697 | — | — | 3,021 | — | — | 45,718 | ||||||||||||||||||||||||
POSCO-KB Shipbuilding Fund | 4,463 | 2,500 | — | — | (116 | ) | — | — | 6,847 | |||||||||||||||||||||||
GH Real Estate I LP | 17,252 | — | — | — | 1,553 | 237 | — | 19,042 | ||||||||||||||||||||||||
KBTS Technology Venture Private Equity Fund | 13,777 | 7,440 | (1,840 | ) | — | 269 | 85 | — | 19,731 | |||||||||||||||||||||||
KB-Brain KOSDAQScale-up New Technology Business Investment Fund | 7,930 | 13,250 | — | — | (1,428 | ) | — | — | 19,752 | |||||||||||||||||||||||
KB-SJ Tourism Venture Fund | 1,386 | 1,500 | — | — | (125 | ) | — | — | 2,761 | |||||||||||||||||||||||
UNION Media Commerce Fund | 962 | — | — | — | (1 | ) | — | — | 961 | |||||||||||||||||||||||
KB-Stonebridge Secondary Private Equity Fund | — | 7,070 | (1,855 | ) | — | (271 | ) | — | — | 4,944 | ||||||||||||||||||||||
KB SPROTT Renewable Private Equity Fund No.1 | — | 1,667 | — | — | (372 | ) | — | — | 1,295 | |||||||||||||||||||||||
KB-UTC Inno-Tech Venture Fund | — | 450 | — | — | (33 | ) | — | — | 417 | |||||||||||||||||||||||
IMT TECHNOLOGY CO., LTD. | — | — | — | — | 3 | — | — | 3 | ||||||||||||||||||||||||
COMPUTERLIFE CO., LTD., | — | — | — | — | 69 | — | — | 69 | ||||||||||||||||||||||||
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1 | Gain on disposal of investments in associates and joint ventures for the year ended December 31, 2019 is |
145
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
(In millions of Korean won) | 2018 | |||||||||||||||||||||||||||||||
Beginning1 | 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 | 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 Surgery 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 | |||||||||||||||||||||||
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 | |||||||||||||||||||||||
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 Fund III | 7,899 | — | — | — | (69 | ) | — | — | 7,830 | |||||||||||||||||||||||
Korea Credit Bureau Co., Ltd. | 5,056 | — | — | (112 | ) | 997 | — | — | 5,941 |
146
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
KoFC KBIC Frontier Champ2010-5(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 KOSDAQScale-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 |
147
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
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, 2019 and 2018, are as follows:
2019 | 2018 | |||||||||||||||
Unrecognized loss | Accumulated unrecognized loss | Unrecognized loss | Accumulated unrecognized loss | |||||||||||||
Doosung Metal Co., Ltd | ||||||||||||||||
Incheon Bridge Co., Ltd. | (1,943 | ) | 14,746 | 487 | 16,689 | |||||||||||
Jungdong Steel Co., Ltd. | — | 489 | — | 489 | ||||||||||||
Dpaps Co., Ltd. | 14 | 339 | 141 | 325 | ||||||||||||
Shinla Construction Co., Ltd. | — | 183 | — | 183 | ||||||||||||
Jaeyang Industry Co., Ltd. | — | 30 | 30 | 30 | ||||||||||||
Terra Co., Ltd. | — | 14 | 14 | 14 | ||||||||||||
Jungdo Co., Ltd. | — | 161 | 161 | 161 | ||||||||||||
Jinseung Tech Co., Ltd. | 18 | 21 | 3 | 3 | ||||||||||||
Korea NM Tech Co., Ltd. | — | 28 | 28 | 28 | ||||||||||||
CHONG IL MACHINE & TOOLS CO.,LTD. | 19 | 19 | — | — | ||||||||||||
SKYDIGITAL INC | 106 | 106 | — | — |
14. Property and Equipment, and Investment Properties
Details of property and equipment as of December 31, 2019 and 2018, are as follows:
2019 | ||||||||||||||||
(In millions of Korean won) | Acquisition cost | Accumulated depreciation | Accumulated impairment losses | Carrying amount | ||||||||||||
Land | ||||||||||||||||
Buildings | 2,265,929 | (757,147 | ) | (5,859 | ) | 1,502,923 | ||||||||||
Leasehold improvements | 865,531 | (749,407 | ) | — | 116,124 | |||||||||||
Equipment and vehicles | 1,867,739 | (1,487,386 | ) | — | 380,353 | |||||||||||
Construction in progress | 86,303 | — | — | 86,303 | ||||||||||||
Right-of-use assets | 854,327 | (302,269 | ) | (1,178 | ) | 550,880 | ||||||||||
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148
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
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 | ||||||||||||
Finance lease assets | 44,429 | (31,432 | ) | — | 12,997 | |||||||||||
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The changes in property and equipment for the years ended December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | |||||||||||||||||||||||||||||||
Beginning | Acquisition | Transfers1 | Disposal | Depreciation2 | Business combination | Others | Ending | |||||||||||||||||||||||||
Land | ||||||||||||||||||||||||||||||||
Buildings | 1,330,211 | 10,908 | 220,535 | (9,964 | ) | (55,669 | ) | — | 6,902 | 1,502,923 | ||||||||||||||||||||||
Leasehold improvement3 | 122,309 | 13,398 | 58,645 | (338 | ) | (77,948 | ) | — | 58 | 116,124 | ||||||||||||||||||||||
Equipment and vehicles | 280,624 | 283,896 | (4 | ) | (526 | ) | (183,900 | ) | — | 263 | 380,353 | |||||||||||||||||||||
Construction in progress | 88,618 | 293,204 | (288,136 | ) | — | — | — | (7,383 | ) | 86,303 | ||||||||||||||||||||||
Right-of-use assets3 | 589,188 | 379,934 | 19 | (153,034 | ) | (281,404 | ) | — | 16,177 | 550,880 | ||||||||||||||||||||||
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(In millions of Korean won) | 2018 | |||||||||||||||||||||||||||||||
Beginning | Acquisition | Transfers1 | Disposal | Depreciation2 | Business combination | Others | Ending | |||||||||||||||||||||||||
Land | ||||||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||
Finance lease assets | 8,448 | 9,640 | — | — | (5,091 | ) | — | — | 12,997 | |||||||||||||||||||||||
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1 | Including transfers with investment property and assets held for sale. |
2 | Including depreciation cost and others amounting to |
149
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
3 | Beginning balances of leasehold improvement andright-of-use assets are based on Korean IFRS 1116. |
The changes in accumulated impairment losses of property and equipment for the years ended December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | ||||||||||||||||||||||
2019 | ||||||||||||||||||||||
Beginning | Impairment | Reversal | Business combination | Disposal and Others | Ending | |||||||||||||||||
— | (1,178 | ) | — | — | — | (1,178 | ) | |||||||||||||||
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(In millions of Korean won) | ||||||||||||||||||||||
2018 | ||||||||||||||||||||||
Beginning | Impairment | Reversal | Business combination | Disposal and Others | Ending | |||||||||||||||||
— | — | — | — |
Details of investment property as of December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | |||||||||||||||
Acquisition cost | Accumulated depreciation | Accumulated impairment losses | Carrying amount | |||||||||||||
Land | ||||||||||||||||
Buildings | 1,463,736 | (172,988 | ) | — | 1,290,748 | |||||||||||
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(In millions of Korean won) | 2018 | |||||||||||||||
Acquisition cost | Accumulated depreciation | Accumulated impairment losses | Carrying amount | |||||||||||||
Land | ||||||||||||||||
Buildings | 1,295,668 | (148,419 | ) | — | 1,147,249 | |||||||||||
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150
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
The valuation technique and input variables that are used to measure the fair value of investment property as of December 31, 2019, are as follows:
(In millions of Korean won) | 2019 | |||||||
Fair value | Valuation technique | Inputs | ||||||
Land and buildings | Cost Approach Method | - Price per square meter - Replacement cost | ||||||
1,000,227 | Market comparison method | - Price per square meter | ||||||
1,602,772 | Cash flow approach | - Prospective rental market growth rate - Period of vacancy - Rental rate - Discount rate and others | ||||||
396,133 | Income approach | - Discount rate - Capitalization rate - Vacancy rate |
As of December 31, 2019 and 2018, fair values of the investment properties amount toW 3,032,726 million andW 2,287,012 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, 2019 and 2018, amounts toW 129,944 million andW 87,513 million , respectively.
The changes in investment property for the years ended December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | |||||||||||||||||||||||||||
Beginning | Acquisition | Transfers | Disposal | Depreciation | Others | Ending | ||||||||||||||||||||||
Land | ||||||||||||||||||||||||||||
Buildings | 1,147,249 | 225,833 | (8,861 | ) | (50,780 | ) | (36,877 | ) | 14,184 | 1,290,748 | ||||||||||||||||||
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(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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151
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
15. Intangible Assets
Details of intangible assets as of December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | |||||||||||||||||||
Acquisition cost | Accumulated amortization | Accumulated impairment losses | Other | Carrying Amount | ||||||||||||||||
Goodwill | ||||||||||||||||||||
Other intangible assets | 4,420,371 | (1,926,647 | ) | (31,652 | ) | — | 2,462,072 | |||||||||||||
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(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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Details of goodwill as of December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | 2018 | ||||||||||||||
Acquisition cost | Carrying amount | Acquisition cost | Carrying amount | |||||||||||||
Housing & Commercial Bank | ||||||||||||||||
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 | 12,987 | 13,092 | 12,520 | ||||||||||||
KB Daehan Specialized Bank PLC. | 1,515 | 1,564 | 1,515 | 1,510 | ||||||||||||
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1 | The amount occurred from formerly known as KB Investment & Securities Co., Ltd. |
2 | Changed corporate name from MARITIME SECURITIES INCORPORATION. |
152
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
The changes in accumulated impairment losses of goodwill for the years ended December 31, 2019 and 2018, are as follows:
(In millions of Korean won)
2019 | ||||||||||||||
Beginning | Impairment | Others | Ending | |||||||||||
(In millions of Korean won)
2018 | ||||||||||||||
Beginning | Impairment | Others | Ending | |||||||||||
The details of allocating goodwill to cash-generating units and related information for impairment testing as of December 31, 2019 are as follows:
(In millions of Korean won)
2019 | ||||||||||||||||||||||||||||||||
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 Company2 | KB DAEHAN SPECIALIZED BANK PLC. | Total | ||||||||||||||||||||||||||
Retail Banking | Corporate Banking | |||||||||||||||||||||||||||||||
Carrying amounts | ||||||||||||||||||||||||||||||||
Recoverable amount exceeded carrying amount | 3,424,398 | 3,142,439 | 663,842 | 1,713,855 | 481,609 | 9,077 | 11,772 | 9,446,992 | ||||||||||||||||||||||||
Discount rate (%) | 13.02 | 13.09 | 17.25 | 11.54 | 8.29 | 19.95 | 19.55 | |||||||||||||||||||||||||
Permanent growth rate (%) | 1.00 | 1.00 | 1.00 | 1.00 | 1.00 | 1.00 | 1.00 |
1 | The amount occurred from formerly known as KB Investment&Securities Co., Ltd. |
2 | Changed corporate name from MARITIME SECURITIES INCORPORATION. |
Goodwill is allocated to cash-generating units, based on management’s 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 ofW 65,288 million related to goodwill acquired in the merger of Housing & Commercial Bank. Of those respective amounts, the amounts ofW 49,315 million andW 15,973 million were allocated to the Retail Banking and Corporate Banking, respectively. Cash-generating units to which goodwill has been allocated is tested for impairment annually, and whenever there is an indication that the unit may be impaired, by comparing the carrying amount of the unit, including the goodwill, with the recoverable amount of the unit.
153
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
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 arm’s 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 asset’s 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 Group’s market share. The discount rate is apre-tax rate that reflects assumptions regarding risk-free interest rate, market risk premium and the risks specific to the asset for which the future cash flow estimates have not been adjusted.
Details of intangible assets, excluding goodwill, as of December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | |||||||||||||||
Acquisition cost | Accumulated amortization | Accumulated impairment losses | Carrying amount | |||||||||||||
Industrial property rights | ||||||||||||||||
Software | 1,428,655 | (1,055,136 | ) | — | 373,519 | |||||||||||
Other intangible assets | 555,424 | (257,274 | ) | (31,633 | ) | 266,517 | ||||||||||
Value of Business Acquired (VOBA) | 2,395,290 | (585,805 | ) | — | 1,809,485 | |||||||||||
Right-of-use assets | 35,200 | (25,502 | ) | — | 9,698 | |||||||||||
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(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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154
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
The changes in intangible assets, excluding goodwill, for the years ended December 31, 2019 and 2018, are as follows:
(In millions of Korean won)
2019 | ||||||||||||||||||||||||||||
Beginning | Acquisition & Transfer | Disposal | Amortization1 | Business combination | Others | Ending | ||||||||||||||||||||||
Industrial property rights | ||||||||||||||||||||||||||||
Software | 204,505 | 274,583 | — | (105,228 | ) | — | (341 | ) | 373,519 | |||||||||||||||||||
Other intangible assets2 | 248,611 | 59,776 | (13,534 | ) | (33,590 | ) | — | 5,254 | 266,517 | |||||||||||||||||||
Value of Business Aquired (VOBA) | 2,001,945 | — | — | (192,460 | ) | — | — | 1,809,485 | ||||||||||||||||||||
Right-of-use assets | 21,063 | 1,010 | — | (9,893 | ) | — | (2,482 | ) | 9,698 | |||||||||||||||||||
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(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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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. |
155
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
The changes in accumulated impairment losses on intangible assets for the years ended December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | |||||||||||||||||||
Beginning | Impairment | Reversal | Disposal and others | Ending | ||||||||||||||||
Accumulated impairment losses on intangible assets | ||||||||||||||||||||
(In millions of Korean won) | 2018 | |||||||||||||||||||
Beginning | Impairment | Reversal | Disposal and others | Ending | ||||||||||||||||
Accumulated impairment losses on intangible assets |
16. Deferred Income Tax Assets and Liabilities
Details of deferred income tax assets and liabilities as of December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | |||||||||||
Assets | Liabilities | Net amount | ||||||||||
Other provisions | ||||||||||||
Allowances for loan losses | 451 | (3,266 | ) | (2,815 | ) | |||||||
Impairment losses on property and equipment | 4,396 | (1,952 | ) | 2,444 | ||||||||
Share-based payments | 18,002 | — | 18,002 | |||||||||
Provisions for guarantees | 20,959 | — | 20,959 | |||||||||
Losses (gains) from valuation on derivative financial instruments | 51,160 | (158,604 | ) | (107,444 | ) | |||||||
Present value discount | 8,244 | (4,201 | ) | 4,043 | ||||||||
Losses (gains) from fair value hedged item | 12,123 | — | 12,123 | |||||||||
Accrued interest | — | (110,359 | ) | (110,359 | ) | |||||||
Deferred loan origination fees and costs | 531 | (199,000 | ) | (198,469 | ) | |||||||
Advanced depreciation provision | — | (1,703 | ) | (1,703 | ) | |||||||
Gains from revaluation | 549 | (329,331 | ) | (328,782 | ) | |||||||
Investments in subsidiaries and others | 35,306 | (105,470 | ) | (70,164 | ) | |||||||
Losses (gains) on valuation of security investment | 39,949 | (265,934 | ) | (225,985 | ) | |||||||
Defined benefit liabilities | 557,423 | — | 557,423 | |||||||||
Accrued expenses | 249,999 | — | 249,999 | |||||||||
Retirement insurance expense | — | (489,602 | ) | (489,602 | ) | |||||||
Adjustments to the prepaid contributions | — | (22,897 | ) | (22,897 | ) | |||||||
Derivative-linked securities | 131,259 | (34,635 | ) | 96,624 | ||||||||
Others | 469,336 | (762,429 | ) | (293,093 | ) | |||||||
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Offsetting of deferred income tax assets and liabilities | (1,711,590 | ) | 1,711,590 | — | ||||||||
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156
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
(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 | ) | |||||||
Losses (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 | ) | |||||||
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Offsetting of deferred income tax assets and liabilities | (1,558,175 | ) | 1,558,175 | — | ||||||||
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Unrecognized deferred income tax assets
No deferred income tax assets have been recognized for the deductible temporary difference of W 67,645 million associated with investments in subsidiaries and others as of December 31, 2019, 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 ofW 125,158 million with others, as of December 31, 2019, due to the uncertainty that these will be realized in the future.
Unrecognized deferred income tax liabilities
No deferred income tax liabilities have been recognized for the taxable temporary difference of W 68,836 million associated with investment in subsidiaries and associates as of December 31, 2019, 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. |
157
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
No deferred income tax liabilities have been recognized as of December 31, 2019, for the taxable temporary difference ofW 65,288 million arising from the initial recognition of goodwill from the merger of Housing and Commercial Bank in 2001.
The changes in cumulative temporary differences for the years ended December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | |||||||||||||||
Beginning | Decrease | Increase | Ending | |||||||||||||
Deductible temporary differences | ||||||||||||||||
Losses (gains) from fair value hedged item | — | — | 44,085 | 44,085 | ||||||||||||
Other provisions | 411,903 | 411,747 | 424,227 | 424,383 | ||||||||||||
Allowances for loan losses | 12,481 | 16,160 | 5,697 | 2,018 | ||||||||||||
Impairment losses on property and equipment | 21,927 | 21,402 | 15,460 | 15,985 | ||||||||||||
Deferred loan origination fees and costs | 1,841 | 1,841 | 1,930 | 1,930 | ||||||||||||
Share-based payments | 60,071 | 52,475 | 55,496 | 63,092 | ||||||||||||
Provisions for guarantees | 73,809 | 73,809 | 76,214 | 76,214 | ||||||||||||
Gains (losses) from valuation on derivative financial instruments | 503,277 | 503,277 | 186,035 | 186,035 | ||||||||||||
Present value discount | 24,593 | 24,347 | 29,732 | 29,978 | ||||||||||||
Investments in subsidiaries and others | 184,870 | 47,217 | 47,727 | 185,380 | ||||||||||||
Gains on valuation of security investment | 269,731 | 264,318 | 130,823 | 136,236 | ||||||||||||
Defined benefit liabilities | 1,977,430 | 200,827 | 384,616 | 2,161,219 | ||||||||||||
Accrued expenses | 993,906 | 994,326 | 912,019 | 911,599 | ||||||||||||
Derivative linked securities | 13,679 | 13,679 | 477,307 | 477,307 | ||||||||||||
Others | 1,289,322 | 600,007 | 978,968 | 1,668,283 | ||||||||||||
5,838,840 | 3,225,432 | 3,770,336 | 6,383,744 | |||||||||||||
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Unrecognized deferred income tax assets: | ||||||||||||||||
Other provisions | 3,416 | 4,788 | ||||||||||||||
Investments in subsidiaries and others | 73,764 | 67,645 | ||||||||||||||
Others | 120,704 | 125,158 | ||||||||||||||
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5,640,956 | 6,186,153 | |||||||||||||||
Tax rate (%) | 27.5 | 27.5 | ||||||||||||||
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Total deferred income tax assets from deductible temporary differences | 1,562,333 | 1,715,187 | ||||||||||||||
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Taxable temporary differences | ||||||||||||||||
Losses (gains) from fair value hedged item | (94,085 | ) | (94,085 | ) | — | — | ||||||||||
Accrued interest | (411,487 | ) | (362,627 | ) | (352,477 | ) | (401,337 | ) | ||||||||
Allowances for loan losses | (238 | ) | (238 | ) | (11,877 | ) | (11,877 | ) | ||||||||
Impairment losses on property and equipment | (4,457 | ) | (212 | ) | 82 | (4,163 | ) | |||||||||
Deferred loan origination fees and costs | (727,528 | ) | (727,528 | ) | (752,178 | ) | (752,178 | ) | ||||||||
Advanced depreciation provision | (6,192 | ) | — | — | (6,192 | ) | ||||||||||
Gains (losses) from valuation on derivative financial instruments | (49,036 | ) | (49,036 | ) | (576,743 | ) | (576,743 | ) | ||||||||
Present value discount | (8,656 | ) | (8,656 | ) | (15,278 | ) | (15,278 | ) | ||||||||
Goodwill | (65,288 | ) | — | — | (65,288 | ) | ||||||||||
Gains on revaluation | (1,201,992 | ) | (52,470 | ) | (48,044 | ) | (1,197,566 | ) | ||||||||
Investments in subsidiaries and others | (316,346 | ) | (19,421 | ) | (122,130 | ) | (419,055 | ) | ||||||||
Gains on valuation of security investment | (601,496 | ) | (594,206 | ) | (899,500 | ) | (906,790 | ) | ||||||||
Retirement insurance expense | (1,611,475 | ) | (153,528 | ) | (317,793 | ) | (1,775,740 | ) | ||||||||
Adjustments to the prepaid contributions | (69,212 | ) | (69,212 | ) | (83,262 | ) | (83,262 | ) | ||||||||
Derivative linked securities | (271,873 | ) | (271,873 | ) | (125,947 | ) | (125,947 | ) | ||||||||
Others | (2,097,416 | ) | (2,916,575 | ) | (3,612,265 | ) | (2,793,106 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
(7,536,777 | ) | (5,319,667 | ) | (6,917,412 | ) | (9,134,522 | ) | |||||||||
|
|
|
|
|
|
|
| |||||||||
Unrecognized deferred income tax assets: | ||||||||||||||||
Goodwill | (65,288 | ) | (65,288 | ) | ||||||||||||
Investments in subsidiaries and others | (62,367 | ) | (68,836 | ) | ||||||||||||
Others | (588 | ) | (1,247 | ) | ||||||||||||
|
|
|
| |||||||||||||
(7,408,534 | ) | (8,999,151 | ) | |||||||||||||
Tax rate (%) | 27.5 | 27.5 | ||||||||||||||
|
|
|
| |||||||||||||
Total deferred income tax assets from deductible temporary differences | (2,050,709 | ) | (2,489,383 | ) | ||||||||||||
|
|
|
|
158
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
(In millions of Korean won) | 2018 | |||||||||||||||
Beginning | Decrease | Increase | Ending | |||||||||||||
Deductible temporary differences | ||||||||||||||||
Other provisions | 441,088 | 440,865 | 411,680 | 411,903 | ||||||||||||
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 | — | — | ||||||||||||
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 | — | — | ||||||||||||
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 | 1,487,039 | 1,562,333 | ||||||||||||||
|
|
|
| |||||||||||||
Taxable temporary differences | ||||||||||||||||
Losses(gains) from fair value hedged item | (57,083 | ) | (57,083 | ) | (94,085 | ) | (94,085 | ) | ||||||||
Accrued interest | (405,542 | ) | (364,518 | ) | (370,463 | ) | (411,487 | ) | ||||||||
Allowances for loan losses | — | — | (238 | ) | (238 | ) | ||||||||||
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 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
(6,834,422 | ) | (3,688,071 | ) | (4,390,426 | ) | (7,536,777 | ) | |||||||||
|
|
|
|
|
|
|
| |||||||||
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 | (1,861,070 | ) | (2,050,709 | ) | ||||||||||||
|
|
|
|
1 | Prepared in accordance with Korean IFRS 1109. |
159
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
17. Assets Held for Sale
Details of assets held for sale as of December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | |||||||||||||||
Acquisition cost1 | Accumulated impairment | Carrying amount | Fair value less costs to sell | |||||||||||||
Land held for sale | ||||||||||||||||
Buildings held for sale | 11,391 | (1,252 | ) | 10,139 | 12,396 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
|
|
|
|
|
|
|
|
(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 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
|
|
|
|
|
|
|
|
1 | Acquisition cost of buildings held for sale is net of accumulated depreciation. |
160
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
The valuation technique and input variables that are used to measure the fair value of assets held for sale as of December 31, 2019 are as follows:
(In millions of Korean won) | 2019 | |||||||||
Fair value | Valuation technique1 | Unobservable input2 | Range of unobservable inputs (%) | Relationship of | ||||||
Land and buildings | Market comparison approach model | Adjustment index | 0.44 ~ 1.40 | Fair value increases as the adjustment index rises. | ||||||
. |
1 | The Group adjusted the appraisal value by the adjustment ratio in the event the public sale is unsuccessful. |
2 | Adjustment index is calculated using the real estate index or the producer price index, or land price volatility. |
The fair values of assets held for sale were measured by qualified independent appraisers with experience in valuing similar properties in the same area. In addition, per the fair value hierarchy on Note 6.1, the fair value hierarchy of all investment properties has been categorized and classified as Level 3.
The changes in accumulated impairment losses of assets held for sale for the years ended December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | ||||||||||||||||||
2019 | ||||||||||||||||||
Beginning | Provision | Reversal | Others | Ending | ||||||||||||||
(In millions of Korean won) | ||||||||||||||||||
2018 | ||||||||||||||||||
Beginning | Provision | Reversal | Others | Ending | ||||||||||||||
As of December 31, 2019, assets held for sale consist of four real estates of closed offices, which were committed to sell by the management, but not yet sold as of December 31, 2019. Negotiation with buyers is in process for the one asset and the remaining three assets are also being actively marketed.
161
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
18. Other Assets
Details of other assets as of December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | 2018 | ||||||
Other financial assets | ||||||||
Other receivables | ||||||||
Accrued income | 1,659,182 | 1,724,328 | ||||||
Guarantee deposits | 1,146,000 | 1,182,686 | ||||||
Domestic exchange settlement debits | 531,356 | 504,899 | ||||||
Others | 129,039 | 125,380 | ||||||
Allowances | (104,629 | ) | (106,275 | ) | ||||
Present value discount | (6,703 | ) | (6,372 | ) | ||||
|
|
|
| |||||
9,147,059 | 8,133,556 | |||||||
|
|
|
| |||||
Othernon-financial assets | ||||||||
Other receivables | 1,294 | 4,965 | ||||||
Prepaid expenses | 198,893 | 205,394 | ||||||
Guarantee deposits | 4,084 | 4,529 | ||||||
Insurance assets | 1,662,016 | 1,362,877 | ||||||
Separate account assets | 5,052,804 | 4,715,414 | ||||||
Others | 2,173,693 | 1,347,580 | ||||||
Allowances | (24,235 | ) | (24,780 | ) | ||||
|
|
|
| |||||
9,068,549 | 7,615,979 | |||||||
|
|
|
| |||||
|
|
|
|
Changes in allowances on other assets for the years ended December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | |||||||||||
Other financial assets | Other non- financial assets | Total | ||||||||||
Beginning | ||||||||||||
Written-off | (5,883 | ) | (152 | ) | (6,035 | ) | ||||||
Provision (reversal) | 9,885 | (393 | ) | 9,492 | ||||||||
Others | (5,648 | ) | — | (5,648 | ) | |||||||
|
|
|
|
|
| |||||||
Ending | ||||||||||||
|
|
|
|
|
|
(In millions of Korean won) | 2018 | |||||||||||
Other financial assets | Other non- financial assets | Total | ||||||||||
Beginning1 | ||||||||||||
Written-off | (38,184 | ) | (1,863 | ) | (40,047 | ) | ||||||
Provision (reversal) | 32,495 | (5,375 | ) | 27,120 | ||||||||
Others | 2,065 | — | 2,065 | |||||||||
|
|
|
|
|
| |||||||
Ending | ||||||||||||
|
|
|
|
|
|
1 | Prepared in accordance with Korean IFRS 1109. |
162
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
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, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | 2018 | ||||||
Financial liabilities held for trading | ||||||||
Securities sold | ||||||||
Other | 80,235 | 77,914 | ||||||
|
|
|
| |||||
|
|
|
| |||||
Financial liabilities designated at fair value through profit or loss | ||||||||
Derivative-linked securities | 12,704,826 | 12,503,039 | ||||||
|
|
|
| |||||
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, 2019 and 2018 is as follows:
(In millions of Korean won) | 2019 | 2018 | ||||||
Contractual cash flow amount | ||||||||
Carrying amount | 12,704,826 | 12,503,039 | ||||||
|
|
|
| |||||
Difference | ||||||||
|
|
|
|
20. Deposits
Details of deposits as of December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | 2018 | ||||||
Demand deposits | ||||||||
Demand deposits in Korean won | ||||||||
Demand deposits in foreign currencies | 8,550,068 | 6,887,280 | ||||||
|
|
|
| |||||
136,340,417 | 122,489,971 | |||||||
|
|
|
| |||||
Time deposits | ||||||||
Time deposits in Korean won | 157,653,603 | 145,336,136 | ||||||
|
|
|
| |||||
157,653,603 | 145,336,136 | |||||||
|
|
|
| |||||
Time deposits in foreign currencies | 7,377,173 | 5,501,887 | ||||||
Fair value adjustments on valuation of fair value hedged items | (18,391 | ) | (89,264 | ) | ||||
|
|
|
| |||||
7,358,782 | 5,412,623 | |||||||
|
|
|
| |||||
165,012,385 | 150,748,759 | |||||||
|
|
|
| |||||
Certificates of deposits | 4,239,969 | 3,531,719 | ||||||
|
|
|
| |||||
Total deposits | ||||||||
|
|
|
|
163
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
21. Debts
Details of debts as of December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | 2018 | ||||||
Borrowings | ||||||||
Repurchase agreements and others | 13,015,506 | 11,954,491 | ||||||
Call money | 432,787 | 1,081,015 | ||||||
|
|
|
| |||||
|
|
|
|
Details of borrowings as of December 31, 2019 and 2018, are as follows:
Lenders | Annual | 2019 | 2018 | |||||||||||
Borrowings in Korean won | Borrowings from Bank of Korea | Bank of Korea | 0.50 ~ 0.75 | |||||||||||
Borrowings from the government | SEMAS and others | 0.00 ~ 3.00 | 1,658,810 | 1,745,940 | ||||||||||
Borrowings from banks | Shinhan Bank and others | 1.71 ~ 3.25 | 116,160 | 100,100 | ||||||||||
Borrowings fromnon-banking financial institutions | Korea Securities Finance Corporation and others | 0.20 ~ 3.80 | 1,982,242 | 1,852,953 | ||||||||||
Other borrowings | The Korea Development Bank and others | 0.00 ~ 4.90 | 8,022,921 | 5,033,768 | ||||||||||
|
|
|
| |||||||||||
|
|
|
| |||||||||||
Borrowings in foreign currencies | Due to banks | KEB Hana Bank and others | — | 4,682 | 13,353 | |||||||||
Borrowings from banks | Central Bank of Uzbekistan and others | 0.00 ~ 8.50 | 8,089,368 | 7,521,197 | ||||||||||
Borrowings from other financial institutions | The Export-Import Bank of Korea and others | 2.28 ~3.08 | 7,081 | 18,725 | ||||||||||
Other borrowings | Standard Chartered Bank and others | 0.00 ~ 3.00 | 1,839,452 | 2,010,578 | ||||||||||
|
|
|
| |||||||||||
9,940,583 | 9,563,853 | |||||||||||||
|
|
|
| |||||||||||
|
|
|
|
164
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
The details of repurchase agreements and others as of December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | Lenders | Annual interest rate (%) | 2019 | 2018 | ||||||||||
Repurchase agreements | Individuals, Groups and Corporations | 0.91~2.90 | ||||||||||||
Bills sold | Counter sale | 0.70~1.05 | 4,385 | 7,595 | ||||||||||
|
|
|
| |||||||||||
|
|
|
|
The details of call money as of December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | Lenders | Annual interest rate (%) | 2019 | 2018 | ||||||||||
Call money in Korean won | HI Asset Management and others | 1.42~1.44 | ||||||||||||
Call money in foreign currencies | Central Bank of Uzbekistan and others | 2.91~4.30 | 267,787 | 362,415 | ||||||||||
|
|
|
| |||||||||||
|
|
|
|
22. Debentures
Details of debentures as of December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | Annual interest rate (%) | 2019 | 2018 | |||||||||
Debentures in Korean won | ||||||||||||
Structured debentures | 1.74 ~ 5.86 | |||||||||||
Subordinated fixed rate debentures | 2.96 ~ 4.35 | 3,386,590 | 3,437,729 | |||||||||
Fixed rate debentures | 1.35 ~ 3.79 | 39,171,514 | 42,203,545 | |||||||||
Floating rate debentures | 1.52 ~ 2.24 | 1,580,000 | 1,650,000 | |||||||||
|
|
|
| |||||||||
45,596,655 | 48,588,134 | |||||||||||
|
|
|
| |||||||||
Fair value adjustments on fair value hedged debentures in Korean won | 21,070 | 19,252 | ||||||||||
Less: Discount on debentures in Korean won | (30,029 | ) | (33,445 | ) | ||||||||
|
|
|
| |||||||||
45,587,696 | 48,573,941 | |||||||||||
|
|
|
| |||||||||
Debentures in foreign currencies | ||||||||||||
Floating rate debentures | 2.26 ~ 2.84 | 2,227,607 | 1,791,868 | |||||||||
Fixed rate debentures | 1.60 ~ 4.50 | 3,094,196 | 2,951,251 | |||||||||
|
|
|
| |||||||||
5,321,803 | 4,743,119 | |||||||||||
|
|
|
| |||||||||
Fair value adjustments on fair value hedged debentures in foreign currencies | 41,406 | (24,073 | ) | |||||||||
|
|
|
| |||||||||
Less: Discount on debentures in foreign currencies | (15,322 | ) | (14,290 | ) | ||||||||
|
|
|
| |||||||||
5,347,887 | 4,704,756 | |||||||||||
|
|
|
| |||||||||
|
|
|
|
165
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
Changes in debentures based on face value for the years ended December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | |||||||||||||||||||
Beginning | Issues | Repayments | Others | Ending | ||||||||||||||||
Debentures in Korean won | ||||||||||||||||||||
Structured debentures | ||||||||||||||||||||
Subordinated fixed rate debentures | 3,437,729 | — | (51,139 | ) | — | 3,386,590 | ||||||||||||||
Fixed rate debentures | 42,203,545 | 90,534,800 | (93,566,831 | ) | — | 39,171,514 | ||||||||||||||
Floating rate debentures | 1,650,000 | 570,000 | (640,000 | ) | — | 1,580,000 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Debentures in foreign currencies | ||||||||||||||||||||
Floating rate debentures | 1,791,868 | 532,380 | (33,199 | ) | (63,442 | ) | 2,227,607 | |||||||||||||
Fixed rate debentures | 2,951,251 | 595,490 | (590,950 | ) | 138,405 | 3,094,196 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
4,743,119 | 1,127,870 | (624,149 | ) | 74,963 | 5,321,803 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
|
|
|
|
|
|
|
|
|
|
(In millions of Korean won) | 2018 | |||||||||||||||||||
Beginning | Issues | Repayments | Others | Ending | ||||||||||||||||
Debentures in Korean won | ||||||||||||||||||||
Structured debentures | ||||||||||||||||||||
Subordinated fixed rate debentures | 2,913,411 | 600,000 | (75,682 | ) | — | 3,437,729 | ||||||||||||||
Fixed rate debentures | 36,823,365 | 136,987,100 | (131,606,920 | ) | — | 42,203,545 | ||||||||||||||
Floating rate debentures | 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 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
|
|
|
|
|
|
|
|
|
|
166
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
23. Provisions
Details of provisions as of December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | 2018 | ||||||
Provisions for unused loan commitments | ||||||||
Provisions for payment guarantees | 77,759 | 75,175 | ||||||
Provisions for financial guarantee contracts | 6,063 | 4,275 | ||||||
Provisions for restoration cost | 120,340 | 108,000 | ||||||
Others | 115,619 | 127,732 | ||||||
|
|
|
| |||||
|
|
|
|
Changes in provisions for unused loan commitments, payment guarantees for the years ended December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | |||||||||||||||||||||||
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 | |||||||||||||||||||||
Beginning | ||||||||||||||||||||||||
Transfer between stages | ||||||||||||||||||||||||
Transfer to12-month expected credit losses | 32,622 | (31,408 | ) | (1,214 | ) | 365 | (365 | ) | — | |||||||||||||||
Transfer to lifetime expected credit losses | (16,932 | ) | 17,195 | (263 | ) | (975 | ) | 1,705 | (729 | ) | ||||||||||||||
Impairment | (422 | ) | (1,516 | ) | 1,938 | (24 | ) | (280 | ) | 304 | ||||||||||||||
Provision (reversal) for credit losses | (21,171 | ) | 18,036 | 45 | (1,763 | ) | 4,584 | (893 | ) | |||||||||||||||
Others (change of exchange rate, etc.) | 324 | 237 | — | 274 | 259 | 122 | ||||||||||||||||||
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(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 to12-month expected credit losses | 25,562 | (24,067 | ) | (1,494 | ) | 660 | (661 | ) | — | |||||||||||||||
Transfer to lifetime expected credit losses | (11,053 | ) | 11,381 | (327 | ) | (913 | ) | 1,055 | (141 | ) | ||||||||||||||
Impairment | (481 | ) | (1,333 | ) | 1,815 | (6 | ) | (87 | ) | 93 | ||||||||||||||
Provision (reversal) for credit losses | (5,932 | ) | 19,374 | 1,141 | (14,702 | ) | (10,069 | ) | (897 | ) | ||||||||||||||
Others (change of exchange rate, etc.) | 293 | 158 | — | 408 | 243 | 183 | ||||||||||||||||||
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Ending | ||||||||||||||||||||||||
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1 | Restated in accordance with Korean IFRS 1109. |
167
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
Changes in provisions for financial guarantee contracts for the years ended December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | 2018 | ||||||
Beginning1 | ||||||||
Provision (reversal) | 1,865 | (582 | ) | |||||
Others | (77 | ) | — | |||||
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Ending | ||||||||
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1 | The beginning balance for 2018 has been restated in accordance with Korean IFRS 1109. |
Changes in provisions for restoration cost for the years ended December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | 2018 | ||||||
Beginning | ||||||||
Provision | 7,037 | 7,301 | ||||||
Reversal | (7,178 | ) | (2,055 | ) | ||||
Used | (5,211 | ) | (3,627 | ) | ||||
Unwinding of discount | 2,237 | 2,507 | ||||||
Effects of changes in discount rate | 15,455 | 8,680 | ||||||
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Ending | ||||||||
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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.
168
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
Changes in other provisions for the years ended December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | |||||||||||||||||||||||
Membership rewards program | Dormant accounts | Litigations | Greenhouse gas emission liabilities | Others1 | Total | |||||||||||||||||||
Beginning | ||||||||||||||||||||||||
Increase | 56,758 | 2,378 | 23,863 | — | 38,025 | 121,024 | ||||||||||||||||||
Decrease | (54,743 | ) | (3,176 | ) | (16,363 | ) | — | (58,855 | ) | (133,137 | ) | |||||||||||||
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Ending | ||||||||||||||||||||||||
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1 | As of December 31, 2019, the Group’s provision on incomplete sales on cardssurance are |
(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 | ) | ||||||||||||
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Ending | ||||||||||||||||||||||||
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1 | As of December 31, 2018, the Group’s provision on incomplete sales on cardssurance are |
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.
169
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
Changes in the net defined benefit liabilities for the years ended December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | |||||||||||
Present value of defined benefit obligation | Fair value of plan assets | Net defined benefit liabilities | ||||||||||
Beginning | ||||||||||||
Current service cost | 226,788 | — | 226,788 | |||||||||
Past service cost | 2,276 | — | 2,276 | |||||||||
Interest cost (income) | 48,795 | (43,250 | ) | 5,545 | ||||||||
Remeasurements: | ||||||||||||
Actuarial gains and losses by changes in demographic assumptions | (3,122 | ) | — | (3,122 | ) | |||||||
Actuarial gains and losses by changes in financial assumptions | 61,547 | — | 61,547 | |||||||||
Actuarial gains and losses by experience adjustments | 7,458 | — | 7,458 | |||||||||
Return on plan assets (excluding amounts included in interest income) | — | 11,116 | 11,116 | |||||||||
Contributions | — | (288,420 | ) | (288,420 | ) | |||||||
Payments from plans (benefit payments) | (141,820 | ) | 141,798 | (22 | ) | |||||||
Payments from the Group | (32,556 | ) | — | (32,556 | ) | |||||||
Transfer in | 7,775 | (7,425 | ) | 350 | ||||||||
Transfer out | (7,517 | ) | 7,517 | — | ||||||||
Effect of exchange rate changes | (2 | ) | — | (2 | ) | |||||||
Others | (129 | ) | 1 | (128 | ) | |||||||
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| |||||||
Ending1 | ||||||||||||
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1 | The net defined benefit liabilities of |
(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 | |||||||||
Others | 6,095 | (2 | ) | 6,093 | ||||||||
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Ending | ||||||||||||
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170
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
Details of the net defined benefit liabilities as of December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | 2018 | ||||||
Present value of defined benefit obligation | ||||||||
Fair value of plan assets | (2,088,710 | ) | (1,910,047 | ) | ||||
|
|
|
| |||||
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, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | 2018 | ||||||
Current service cost | ||||||||
Past service cost1 | 2,276 | 7,912 | ||||||
Net interest expenses of net defined benefit liabilities | 5,545 | 3,833 | ||||||
Gain or loss on settlement | — | (1,000 | ) | |||||
|
|
|
| |||||
Post-employment benefits2 | ||||||||
|
|
|
|
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, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | 2018 | ||||||
Remeasurements: | ||||||||
Return on plan assets (excluding amounts included in interest income) | ||||||||
Actuarial gains and losses | (65,883 | ) | (167,973 | ) | ||||
Income tax effects | 21,172 | 52,377 | ||||||
|
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| |||||
Remeasurements after income tax | ||||||||
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|
|
|
171
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
The details of fair value of plan assets as of December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | |||||||||||
Assets quoted in an active market | Assets not quoted in an active market | Total | ||||||||||
Cash and due from financial institutions | ||||||||||||
Investment fund | — | 849 | �� | 849 | ||||||||
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(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 | |||||||||
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172
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
Key actuarial assumptions used as of December 31, 2019 and 2018, are as follows:
2019 | 2018 | |||||||
Discount rate (%) | 1.60~2.00 | 2.00~2.30 | ||||||
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 2019.
The sensitivity of the defined benefit obligation to changes in the weighted principal assumptions as of December 31, 2019, 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. | 4.22 decrease | 4.48 increase | |||
Salary increase rate (%) | 0.5 p. | 1.86 increase | 6.18 decrease | |||
Turnover (%) | 0.5 p. | 0.75 decrease | 0.67 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, 2019 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 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 ~ 11.7 years.
Expected contribution to plan assets for periods after December 31, 2019 is estimated to beW 215,290 million.
173
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
25. Other Liabilities
Details of other liabilities as of December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | 2018 | ||||||
Other financial liabilities | ||||||||
Other payables | ||||||||
Prepaid card and debit card | 27,555 | 25,831 | ||||||
Accrued expenses | 3,066,445 | 2,986,210 | ||||||
Financial guarantee liabilities | 46,428 | 43,395 | ||||||
Deposits for letter of guarantees and others | 862,968 | 685,451 | ||||||
Domestic exchange settlement credits | 2,079,636 | 1,689,908 | ||||||
Foreign exchanges settlement credits | 114,316 | 102,187 | ||||||
Borrowings from other business accounts | 256 | 13,166 | ||||||
Other payables from trust accounts | 5,216,460 | 5,285,108 | ||||||
Liability incurred from agency relationships | 771,609 | 605,076 | ||||||
Account for agency businesses | 407,475 | 460,949 | ||||||
Dividend payables | 473 | 2,019 | ||||||
Lease liabilities | 544,439 | — | ||||||
Others | 5,930 | 18,120 | ||||||
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|
|
| |||||
22,629,587 | 19,828,307 | |||||||
|
|
|
| |||||
Othernon-financial liabilities | ||||||||
Other payables | 283,771 | 319,267 | ||||||
Unearned revenue | 465,501 | 378,792 | ||||||
Accrued expenses | 716,180 | 744,863 | ||||||
Deferred revenue on credit card points | 206,188 | 187,459 | ||||||
Withholding taxes | 158,992 | 137,236 | ||||||
Separate account liabilities | 5,047,080 | 5,401,192 | ||||||
Others | 229,960 | 203,880 | ||||||
7,107,672 | 7,372,689 | |||||||
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174
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
26. Equity
26.1 Share Capital
Details of share capital and number of issued shares of the Parent Company as of December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | 2018 | ||||||
Type of share | Ordinary share | Ordinary share | ||||||
Number of authorized shares | 1,000,000,000 | 1,000,000,000 | ||||||
Par value per share(In millions of Korean won) | ||||||||
Number of issued shares | 415,807,920 | 418,111,537 | ||||||
Share capital1 |
1 | Due to the retirement of shares deducted through profits, it is different from the total par value of the shares issued. |
Changes in outstanding shares for the years ended December 31, 2019 and 2018, are as follows:
(In number of shares) | 2019 | 2018 | ||||||
Beginning | ||||||||
Increase | — | — | ||||||
Decrease | (5,916,962 | ) | (3,486,286 | ) | ||||
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| |||||
Ending | ||||||||
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26.2 Hybrid Securities
Details of hybrid securities classified as equity as of December 31, 2019 and 2018 are as follows:
(In millions of Korean won) | Issuance date | Maturity | Interest rate (%) | 2019 | 2018 | |||||||||||||||
The1-1st Hybrid securities | May 2, 2019 | Perpetual bond | 3.23 | |||||||||||||||||
The1-2nd Hybrid securities | May 2, 2019 | Perpetual bond | 3.44 | 49,896 | — | |||||||||||||||
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The above hybrid securities are early redeemable by the Group after 5 or 10 years from the issuance date. On the other hand, hybrid securities ofW 574,580 million issued by KB Kookmin Bank are recognized asnon-controlling interests and are early redeemable every five years after the issuance date.
175
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
26.3 Capital Surplus
Details of capital surplus as of December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | 2018 | ||||||
Share premium | ||||||||
Loss on sales of treasury shares | (481,332 | ) | (481,332 | ) | ||||
Other capital surplus | 4,413,835 | 4,412,718 | ||||||
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| |||||
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|
|
26.4 Accumulated Other Comprehensive Income
Details of accumulated other comprehensive income as of December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | 2018 | ||||||
Remeasurements of net defined benefit liabilities | ||||||||
Exchange differences on translating foreign operations | 31,793 | (5,784 | ) | |||||
Net gains on financial instruments at fair value through other comprehensive income | 487,331 | 450,694 | ||||||
Shares of other comprehensive income of associates and joint ventures | 3,318 | (4,377 | ) | |||||
Cash flow hedges | (27,333 | ) | 5,849 | |||||
Losses on hedges of a net investment in a foreign operation | (41,992 | ) | (33,092 | ) | ||||
Other comprehensive income arising from separate account | 18,381 | 15,017 | ||||||
Fair value changes on financial liabilities designated at fair value due to own credit risk | (20,326 | ) | (8,954 | ) | ||||
Net overlay adjustments | 187,077 | (7,146 | ) | |||||
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| |||||
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|
|
26.5 Retained Earnings
Details of retained earnings as of December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | 2018 | ||||||
Legal reserves1 | ||||||||
Voluntary reserves | 982,000 | 982,000 | ||||||
Unappropriated retained earnings | 18,244,738 | 15,910,225 | ||||||
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| |||||
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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. |
176
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
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, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | 2018 | ||||||
Regulatory reserve for credit losses attributable to: | ||||||||
Shareholders of the Parent Company | ||||||||
Non-controlling interests | 1,478 | 1,354 | ||||||
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|
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| |||||
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|
|
The adjustments to the regulatory reserve for credit losses for the year ended December 31, 2019 and 2018, are as follows:
(In millions of Korean won, except earnings per share) | 2019 | 2018 | ||||||
Provision of regulatory reserve for credit losses1 | ||||||||
Adjusted profit after provision of regulatory reserve for credit losses2,3 | 3,017,944 | 2,705,828 | ||||||
Adjusted basic earnings per share after provision of regulatory reserve for credit losses2 | 7,716 | 6,824 | ||||||
Adjusted diluted earnings per share after provision of regulatory reserve for credit losses2 | 7,659 | 6,785 |
1 | The amount expected to be appropriated for the year ended December 31, 2018 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. |
3 | After deducting dividends on hybrid securities. |
26.6 Treasury Shares
Changes in treasury shares outstanding for the years ended December 31, 2019 and 2018, are as follows:
(In number of shares and millions of Korean won) | 2019 | |||||||||||||||
Beginning | Acquisition | Retirement | Ending | |||||||||||||
Number of treasury shares1 | 22,560,240 | 5,916,962 | (2,303,617 | ) | 26,173,585 | |||||||||||
Carrying amount1 |
177
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
1 | For the year ended December 31, 2019, the treasury stock trust agreement of |
(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 |
27. Net Interest Income
Details of interest income and interest expense for the years ended December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | 2018 | ||||||
Interest income | ||||||||
Deposits at fair value through profit or loss | ||||||||
Securities measured at fair value through profit or loss | 668,377 | 713,058 | ||||||
Loans measured at fair value through profit or loss | 33,001 | 26,066 | ||||||
Securities measured at fair value through other comprehensive income | 774,864 | 718,327 | ||||||
Loans measured at fair value through other comprehensive income | 14,708 | 2,373 | ||||||
Deposits at amortized cost | 150,635 | 109,155 | ||||||
Equity instruments at amortized cost | 599,519 | 604,709 | ||||||
Loans at amortized cost | 12,247,493 | 11,431,359 | ||||||
Other | 147,905 | 120,286 | ||||||
|
|
|
| |||||
14,639,187 | 13,734,569 | |||||||
|
|
|
| |||||
Interest expenses | ||||||||
Deposits | 3,481,121 | 3,041,739 | ||||||
Debts | 596,425 | 544,562 | ||||||
Debentures | 1,240,566 | 1,148,729 | ||||||
Other | 124,288 | 94,611 | ||||||
|
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| |||||
5,442,400 | 4,829,641 | |||||||
|
|
|
| |||||
Net interest income | ||||||||
|
|
|
|
Interest income recognized on impaired loans isW 54,033 million andW 48,974 million for the years ended December 31, 2019 and 2018, respectively.
178
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
28. Net Fee and Commission Income
Details of fee and commission income, and fee and commission expense for the years ended December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | 2018 | ||||||
Fee and commission income | ||||||||
Banking activity fees | ||||||||
Lending activity fees | 83,916 | 74,340 | ||||||
Credit & Debit card related fees and commissions | 1,316,636 | 1,360,515 | ||||||
Agent activity fees | 172,211 | 149,585 | ||||||
Trust and other fiduciary fees | 388,352 | 363,767 | ||||||
Fund management related fees | 153,798 | 132,657 | ||||||
Guarantee fees | 48,122 | 44,104 | ||||||
Foreign currency related fees | 134,145 | 124,201 | ||||||
Commissions from transfer agent services | 145,846 | 167,071 | ||||||
Other business account commission on consignment | 36,813 | 36,947 | ||||||
Commissions received on securities business | 445,987 | 518,309 | ||||||
Lease fees | 428,195 | 246,537 | ||||||
Others | 310,714 | 291,244 | ||||||
|
|
|
| |||||
3,879,247 | 3,717,720 | |||||||
|
|
|
| |||||
Fee and commission expense | ||||||||
Trading activity related fees1 | 28,869 | 31,889 | ||||||
Lending activity fees | 26,040 | 25,734 | ||||||
Credit & Debit card related fees and commissions | 892,391 | 907,831 | ||||||
Outsourcing related fees | 190,312 | 164,594 | ||||||
Foreign currency related fees | 42,902 | 43,053 | ||||||
Others | 343,729 | 301,243 | ||||||
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|
| |||||
1,524,243 | 1,474,344 | |||||||
|
|
|
| |||||
Net fee and commission income | ||||||||
|
|
|
|
1 | The fees from financial assets/liabilities at fair value through profit or loss. |
179
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
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, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | 2018 | ||||||
Gains related to financial instruments held for trading | ||||||||
Financial assets held for trading | ||||||||
Debt securities | ||||||||
Equity securities | 428,646 | 571,404 | ||||||
|
|
|
| |||||
2,042,592 | 2,116,296 | |||||||
|
|
|
| |||||
Derivatives held for trading | ||||||||
Interest rate | 2,685,998 | 2,328,576 | ||||||
Currency | 5,251,597 | 3,764,985 | ||||||
Stock or stock index | 2,612,422 | 1,383,446 | ||||||
Credit | 41,548 | 38,461 | ||||||
Commodity | 15,240 | 8,285 | ||||||
Other | 212,731 | 92,947 | ||||||
|
|
|
| |||||
10,819,536 | 7,616,700 | |||||||
|
|
|
| |||||
Financial liabilities held for trading | 46,750 | 72,410 | ||||||
|
|
|
| |||||
Other financial instruments | 5,811 | 22 | ||||||
|
|
|
| |||||
|
|
|
| |||||
Losses related to financial instruments held for trading | ||||||||
Financial assets held for trading | ||||||||
Debt securities | ||||||||
Equity securities | 315,743 | 475,968 | ||||||
|
|
|
| |||||
1,068,742 | 1,326,097 | |||||||
|
|
|
| |||||
Derivatives held for trading | ||||||||
Interest rate | 2,758,205 | 2,610,305 | ||||||
Currency | 5,118,095 | 3,499,356 | ||||||
Stock or stock index | 1,585,086 | 1,626,007 | ||||||
Credit | 42,172 | 36,747 | ||||||
Commodity | 9,437 | 10,456 | ||||||
Other | 190,979 | 117,741 | ||||||
|
|
|
| |||||
9,703,974 | 7,900,612 | |||||||
|
|
|
| |||||
Financial liabilities held for trading | 94,426 | 134,287 | ||||||
|
|
|
| |||||
Other financial instruments | 5,704 | 60 | ||||||
|
|
|
| |||||
10,872,846 | 9,361,056 | |||||||
|
|
|
| |||||
Net gains or losses on financial instruments held for trading | ||||||||
|
|
|
|
180
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
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, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | 2018 | ||||||
Revenue from financial instruments designated at fair value through profit or loss | ||||||||
Financial liabilities designated at fair value through profit or loss | ||||||||
|
|
|
| |||||
555,749 | 667,508 | |||||||
|
|
|
| |||||
Expense from financial instruments designated at fair value through profit or loss | ||||||||
Financial liabilities designated at fair value through profit or loss | 1,953,720 | 760,577 | ||||||
|
|
|
| |||||
1,953,720 | 760,577 | |||||||
|
|
|
| |||||
Net gains or losses on financial instruments designated at fair value through profit or loss | ||||||||
|
|
|
|
181
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
30. Other Operating Income and Expenses
Details of other operating income and expenses for the years ended December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | 2018 | ||||||
Other operating income | ||||||||
Revenue related to financial instruments at fair value through other comprehensive income | ||||||||
Gain on redemption of financial instruments at fair value through other comprehensive income | ||||||||
Gain on sale of financial instruments at fair value through other comprehensive income | 222,371 | 134,875 | ||||||
|
|
|
| |||||
223,167 | 135,134 | |||||||
|
|
|
| |||||
Revenue related to financial assets at amortized cost | ||||||||
Gain on sale of loans at amortized cost | 80,746 | 46,877 | ||||||
|
|
|
| |||||
80,746 | 46,877 | |||||||
|
|
|
| |||||
Gain on foreign exchange transactions | 2,183,703 | 1,600,161 | ||||||
Dividend income | 54,768 | �� | 83,930 | |||||
Others | 321,244 | 260,709 | ||||||
|
|
|
| |||||
|
|
|
| |||||
Other operating expenses | ||||||||
Expenses related to financial instruments measured at fair value through other comprehensive income | ||||||||
Losses on redemption of financial instruments measured at fair value through other comprehensive income | ||||||||
Losses on sale of financial instruments measured at fair value through other comprehensive income | 16,975 | 35,864 | ||||||
|
|
|
| |||||
16,975 | 35,881 | |||||||
|
|
|
| |||||
Expenses related to financial assets at amortized cost Loss on sale of loans at amortized cost | 19,439 | 9,006 | ||||||
|
|
|
| |||||
19,439 | 9,006 | |||||||
|
|
|
| |||||
Loss on foreign exchanges transactions | 1,970,294 | 1,539,837 | ||||||
Others | 1,920,244 | 1,672,123 | ||||||
|
|
|
| |||||
3,926,952 | 3,256,847 | |||||||
|
|
|
| |||||
Net other operating expenses | ||||||||
|
|
|
|
182
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
31. General and Administrative Expenses
31.1 General and Administrative Expenses
Details of general and administrative expenses for the years ended December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | 2018 | ||||||
Employee Benefits | ||||||||
Salaries and short-term employee benefits—salaries | ||||||||
Salaries and short-term employee benefits—others | 848,421 | 870,356 | ||||||
Post-employment benefits—defined benefit plans | 231,913 | 217,085 | ||||||
Post-employment benefits—defined contribution plans | 27,924 | 21,056 | ||||||
Termination benefits | 239,790 | 242,010 | ||||||
Share-based payments | 49,418 | 10,930 | ||||||
|
|
|
| |||||
3,955,287 | 3,874,382 | |||||||
|
|
|
| |||||
Depreciation and amortization | 784,431 | 408,771 | ||||||
|
|
|
| |||||
Other general and administrative expenses | ||||||||
Rental expense | 109,745 | 361,344 | ||||||
Tax and dues | 238,670 | 214,683 | ||||||
Communication | 48,749 | 46,661 | ||||||
Electricity and utilities | 29,161 | 28,823 | ||||||
Publication | 15,136 | 16,018 | ||||||
Repairs and maintenance | 23,947 | 22,432 | ||||||
Vehicle | 11,537 | 12,495 | ||||||
Travel | 21,452 | 19,393 | ||||||
Training | 31,451 | 30,310 | ||||||
Service fees | 227,631 | 210,081 | ||||||
Electronic data processing expenses | 258,456 | 189,007 | ||||||
Advertising | 228,826 | 217,244 | ||||||
Others | 286,538 | 266,868 | ||||||
|
|
|
| |||||
1,531,299 | 1,635,359 | |||||||
|
|
|
| |||||
|
|
|
|
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 ofpre-specified targets over the vesting period.
183
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
Details of stock grants linked to long-term performance as of December 31, 2019, are as follows:
(In number of shares) | Grant date | Number of granted shares1 | Vesting conditions2 | |||||||
KB Financial Group Inc. | ||||||||||
Series 18 | Jul. 17, 2017 | 7,826 | Services fulfillment, market performance3 30~50% andnon-market performance4 50~70% | |||||||
Series 19 | Nov. 21, 2017 | 46,890 | Services fulfillment, market performance3 35% andnon-market performance5 65% | |||||||
Series 20 | Jan. 01, 2018 | 38,826 | Services fulfillment, market performance3 30~50% andnon-market performance4 50~70% | |||||||
Series 21 | Jan. 01, 2019 | 28,926 | Services fulfillment, market performance3 30% andnon-market performance4 70% | |||||||
Series 22 | Apr. 01, 2019 | 3,227 | Services fulfillment, market performance3 30% andnon-market performance4 70% | |||||||
Series 23 | May 27, 2019 | 1,392 | Services fulfillment, market performance3 30% andnon-market performance4 70% | |||||||
Series 24 | Jul. 17, 2019 | 11,224 | Services fulfillment, market performance3 30% andnon-market performance4 70% | |||||||
Deferred grant | 2015 | 10,043 | Satisfied | |||||||
2016 | 12,093 | Satisfied | ||||||||
2017 | 45,728 | Satisfied | ||||||||
2018 | 8,057 | Satisfied | ||||||||
|
| |||||||||
214,232 | ||||||||||
|
| |||||||||
Kookmin Bank | ||||||||||
Series 72 | Aug. 28, 2017 | 6,742 | Services fulfillment, market performance3 30~50% andnon-market performance4 50~70% | |||||||
Series 73 | Nov. 21, 2017 | 27,786 | Services fulfillment, market performance3 30% andnon-market performance6 70% |
184
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
Series 74 | Jan. 01, 2018 | 134,465 | Services fulfillment, market performance3 30~50% andnon-market performance4 50~70% | |||||||
Series 75 | Jan. 01, 2019 | 192,170 | Services fulfillment, market performance3 30~50% andnon-market performance4 50~70% | |||||||
Series 76 | Apr. 01, 2019 | 5,380 | Services fulfillment, market performance3 30~50% andnon-market performance4 50~70% | |||||||
Series 77 | May 27, 2019 | 5,569 | Services fulfillment, market performance3 30~50% andnon-market performance4 50~70% | |||||||
Series 78 | Nov. 21, 2019 | 36,443 | Services fulfillment, market performance3 30% andnon-market performance6 70% | |||||||
Deferred grant | 2015 | 4,756 | Satisfied | |||||||
Deferred grant | 2016 | 65,419 | Satisfied | |||||||
Deferred grant | 2017 | 95,697 | Satisfied | |||||||
Deferred grant | 2018 | 97,244 | Satisfied | |||||||
|
| |||||||||
671,671 | ||||||||||
|
| |||||||||
Other subsidiaries |
| |||||||||
Stock granted in 2010 | — | 106 | Services fulfillment, market performance3 10~50% andnon-market performance4, 50~90% | |||||||
Stock granted in 2011 | — | 146 | ||||||||
Stock granted in 2012 | — | 420 | ||||||||
Stock granted in 2013 | — | 1,007 | ||||||||
Stock granted in 2014 | — | 1,223 | ||||||||
Stock granted in 2015 | — | 4,456 | ||||||||
Stock granted in 2016 | — | 23,474 | ||||||||
Stock granted in 2017 | — | 83,459 | ||||||||
Stock granted in 2018 | — | 257,064 | ||||||||
Stock granted in 2019 | — | 241,226 | ||||||||
|
| |||||||||
612,581 | ||||||||||
|
| |||||||||
1,498,484 | ||||||||||
|
|
1 | Granted shares represent the total number of shares initially granted to executives and employees that have residual shares at the end of reporting period (Deferred grants are residual shares as of December 31, 2019). |
185
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
2 | 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. |
3 | Relative TSR (Total Shareholders Return): [(Fair value at the end of the contract—Fair value at the beginning of the contract) + (Total amount of dividend per share paid during the contract period)] / Fair value at the beginning of the contract |
4 | Accomplishment of subsidiaries’ performance and accomplishment of performance results. |
5 | EPS, Asset Quality, HCROI, Profit fromnon-banking segment |
6 | EPS, Asset Quality |
Details of stock grants linked to short-term performance as of December 31, 2019, are as follows:
Estimated number of vested shares1 | Vesting conditions | |||||||
KB Financial Group Inc. | ||||||||
Stock granted in 2015 | 9,690 | Satisfied | ||||||
Stock granted in 2016 | 11,783 | Satisfied | ||||||
Stock granted in 2017 | 12,273 | Satisfied | ||||||
Stock granted in 2018 | 20,664 | Satisfied | ||||||
Stock granted in 2019 | 30,504 | Proportional to service period | ||||||
Kookmin Bank | ||||||||
Stock granted in 2015 | 15,831 | Satisfied | ||||||
Stock granted in 2016 | 52,855 | Satisfied | ||||||
Stock granted in 2017 | 55,490 | Satisfied | ||||||
Stock granted in 2018 | 109,296 | Satisfied | ||||||
Stock granted in 2019 | 112,445 | Proportional to service period | ||||||
Other subsidiaries | ||||||||
Stock granted in 2015 | 16,922 | Satisfied | ||||||
Stock granted in 2016 | 94,201 | Satisfied | ||||||
Stock granted in 2017 | 238,115 | Satisfied | ||||||
Stock granted in 2018 | 457,006 | Satisfied | ||||||
Stock granted in 2019 | 284,888 | Proportional to service period | ||||||
|
| |||||||
1,521,963 | ||||||||
|
|
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. |
186
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
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, 2019, 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 18 | 1.34 | 40,362~44,034 | 43,659~47,631 | |||||||||
Series 19 | 1.34 | 38,220~41,775 | 42,493~46,445 | |||||||||
Series 20 | 1.34 | 41,135~45,035 | 43,659~47,631 | |||||||||
Series 21 | 1.34 | 41,489~46,021 | 42,336~47,631 | |||||||||
Series 22 | 1.34 | 41,070~44,926 | 41,070~44,926 | |||||||||
Series 23 | 1.34 | 41,070~44,926 | 41,070~44,926 | |||||||||
Series 24 | 1.34 | 41,070~44,926 | 41,070~44,926 | |||||||||
Deferred grant in 2015 | 1.34 | — | 38,616~47,631 | |||||||||
Deferred grant in 2016 | 1.34 | — | 42,336~47,631 | |||||||||
Deferred grant in 2017 | 1.34 | — | 43,659~47,631 | |||||||||
Deferred grant in 2018 | 1.34 | — | 42,336~47,631 | |||||||||
(Kookmin Bank) | ||||||||||||
Series 72 | 1.34 | 43,659~47,631 | 43,659~47,631 | |||||||||
Series 73 | 1.34 | 41,253~43,741 | 43,803~46,445 | |||||||||
Series 74 | 1.34 | 41,279~45,035 | 43,659~47,631 | |||||||||
Series 75 | 1.34 | 41,506~46,021 | 42,336~47,631 | |||||||||
Series 76 | 1.34 | 41,070~44,926 | 41,070~44,926 | |||||||||
Series 77 | 1.34 | 41,070~44,926 | 41,070~44,926 | |||||||||
Series 78 | 1.34 | 38,303~41,900 | 41,070~44,926 | |||||||||
Grant deferred in 2015 | 1.34 | — | 44,926~47,631 | |||||||||
Grant deferred in 2016 | 1.34 | — | 42,336~47,631 | |||||||||
Grant deferred in 2017 | 1.34 | — | 42,336~47,631 | |||||||||
Grant deferred in 2018 | 1.34 | — | 42,336~47,631 | |||||||||
(Other subsidiaries) | ||||||||||||
Share granted in 2010 | 1.34 | — | 46,281 | |||||||||
Share granted in 2011 | 1.34 | — | 46,281 | |||||||||
Share granted in 2012 | 1.34 | — | 44,926~46,281 | |||||||||
Share granted in 2013 | 1.34 | — | 44,926~47,631 | |||||||||
Share granted in 2014 | 1.34 | — | 40,065~46,766 | |||||||||
Share granted in 2015 | 1.34 | — | 41,070~47,676 |
187
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
Share granted in 2016 | 1.34 | — | 39,801~47,631 | |||||||||
Share granted in 2017 | 1.34 | 35,863~46,817 | 38,616~47,631 | |||||||||
Share granted in 2018 | 1.34 | 37,446~45,240 | 39,801~47,631 | |||||||||
Share granted in 2019 | 1.34 | 39,878~47,631 | 41,070~47,631 | |||||||||
Linked to short-term performance | ||||||||||||
(KB Financial Group Inc.) | ||||||||||||
Share granted in 2015 | 1.34 | — | 38,616~47,631 | |||||||||
Share granted in 2016 | 1.34 | — | 39,801~47,631 | |||||||||
Share granted in 2017 | 1.34 | — | 42,336~47,631 | |||||||||
Share granted in 2018 | 1.34 | — | 42,336~47,631 | |||||||||
Share granted in 2019 | 1.34 | — | 43,659~46,281 | |||||||||
(Kookmin Bank) | ||||||||||||
Share granted in 2015 | 1.34 | — | 42,336~47,631 | |||||||||
Share granted in 2016 | 1.34 | — | 41,070~47,631 | |||||||||
Share granted in 2017 | 1.34 | — | 42,336~47,631 | |||||||||
Share granted in 2018 | 1.34 | — | 42,336~47,631 | |||||||||
Share granted in 2019 | 1.34 | — | 43,659~46,281 | |||||||||
(Other subsidiaries) | ||||||||||||
Share granted in 2015 | 1.34 | — | 38,616~47,631 | |||||||||
Share granted in 2016 | 1.34 | — | 38,616~47,631 | |||||||||
Share granted in 2017 | 1.34 | — | 38,616~47,631 | |||||||||
Share granted in 2018 | 1.34 | — | 38,616~47,631 | |||||||||
Share granted in 2019 | 1.34 | — | 39,801~46,281 |
The Group used the volatility of the stock price over the previous year as the expected volatility, 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, and usedone-year risk-free interest rate in order to calculate fair value.
As of December 31, 2019 and 2018, the accrued expenses related to share-based payments including share grants amounted toW 124,853 million andW 111,058 million, respectively, and the compensation costs from share grants amounting toW 49,418 million andW 10,930 million were incurred during the years ended 2019 and 2018, respectively.
188
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
31.2.2 Mileage Stocks
Details of Mileage stock as of December 31, 2019, are as follows:
(in number of shares) | Grant date | Number of granted shares1 | Expected exercise period (years)2 | Remaining shares | ||||||||||
Stock granted in 2017 | Jan. 09, 2017 | 28,925 | 0.00~0.02 | 11,365 | ||||||||||
Feb. 03, 2017 | 43 | 0.00~0.09 | 28 | |||||||||||
Apr. 03, 2017 | 82 | 0.00~0.25 | 61 | |||||||||||
May 22, 2017 | 20 | 0.00~0.39 | 20 | |||||||||||
Jul. 03, 2017 | 52 | 0.00~0.50 | 52 | |||||||||||
Aug. 07, 2017 | 29 | 0.00~0.60 | 19 | |||||||||||
Aug. 08, 2017 | 5 | 0.00~0.60 | 2 | |||||||||||
Aug. 16, 2017 | 204 | 0.00~0.62 | 151 | |||||||||||
Aug. 17, 2017 | 40 | 0.00~0.63 | 24 | |||||||||||
Aug. 24, 2017 | 387 | 0.00~0.65 | 288 | |||||||||||
Sept. 08, 2017 | 83 | 0.00~0.69 | 73 | |||||||||||
Nov. 01, 2017 | 120 | 0.00~0.84 | 103 | |||||||||||
Nov. 06, 2017 | 106 | 0.00~0.85 | 101 | |||||||||||
Dec. 06, 2017 | 105 | 0.00~0.93 | 83 | |||||||||||
Dec. 26, 2017 | 255 | 0.00~0.99 | 175 | |||||||||||
Dec. 29, 2017 | 114 | 0.00~0.99 | 58 | |||||||||||
Stock granted in 2018 | Jan. 10, 2018 | 19,197 | 0.00~1.03 | 15,430 | ||||||||||
Feb. 12, 2018 | 9 | 0.00~1.12 | 7 | |||||||||||
Apr. 02, 2018 | 115 | 0.00~1.25 | 99 | |||||||||||
Apr. 30, 2018 | 86 | 0.00~1.33 | 62 | |||||||||||
May 08, 2018 | 170 | 0.00~1.35 | 150 | |||||||||||
Jun. 01, 2018 | 140 | 0.00~1.42 | 121 | |||||||||||
Jul. 02, 2018 | 180 | 0.00~1.50 | 123 | |||||||||||
Aug. 07, 2018 | 194 | 0.00~1.60 | 175 | |||||||||||
Aug. 09, 2018 | 47 | 0.00~1.61 | 38 | |||||||||||
Aug. 14, 2018 | 30 | 0.00~1.62 | 30 | |||||||||||
Aug. 16, 2018 | 130 | 0.00~1.62 | 112 | |||||||||||
Sept. 07, 2018 | 106 | 0.00~1.68 | 82 | |||||||||||
Oct. 04, 2018 | 129 | 0.00~1.76 | 106 | |||||||||||
Nov. 01, 2018 | 258 | 0.00~1.84 | 248 | |||||||||||
Nov. 06, 2018 | 236 | 0.00~1.85 | 206 | |||||||||||
Dec. 03, 2018 | 132 | 0.00~1.92 | 132 | |||||||||||
Dec 04, 2018 | 21 | 0.00~1.93 | 21 | |||||||||||
Dec. 07, 2018 | 91 | 0.00~1.93 | 91 | |||||||||||
Dec. 12, 2018 | 64 | 0.00~1.95 | 57 | |||||||||||
Dec. 18, 2018 | 271 | 0.00~1.96 | 271 | |||||||||||
Dec. 19, 2018 | 42 | 0.00~1.97 | 42 | |||||||||||
Dec. 31, 2018 | 127 | 0.00~2.00 | 127 | |||||||||||
Stock granted in 2019 | Jan. 11, 2019 | 26,580 | 0.00~2.03 | 25,563 |
189
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
| Feb. 01, 2019 | 12 | 0.00~2.09 | 12 | ||||||||||||
Apr. 01, 2019 | 167 | 0.00~2.25 | 167 | |||||||||||||
Apr. 18, 2019 | 105 | 0.00~2.30 | 105 | |||||||||||||
Apr. 22, 2019 | 33 | 0.00~2.31 | 33 | |||||||||||||
Jul. 01, 2019 | 109 | 0.00~2.50 | 109 | |||||||||||||
Aug. 29, 2019 | 39 | 0.00~2.66 | 39 | |||||||||||||
Sept. 02, 2019 | 50 | 0.00~2.67 | 50 | |||||||||||||
Nov. 01, 2019 | 119 | 0.00~2.84 | 119 | |||||||||||||
Nov. 08, 2019 | 14 | 0.00~2.85 | 14 | |||||||||||||
Dec. 05, 2019 | 56 | 0.00~2.93 | 56 | |||||||||||||
Dec. 06, 2019 | 84 | 0.00~2.93 | 84 | |||||||||||||
Dec. 31, 2019 | 87 | 0.00~3.00 | 87 | |||||||||||||
|
|
|
| |||||||||||||
79,800 | 56,771 | |||||||||||||||
|
|
|
|
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, 2019. These shares are vested immediately at grant date. |
As of December 31, 2019 and 2018, the accrued expenses for share-based payments in regards to mileage stock amounted toW 2,705 million andW 2,283 million, respectively, and the compensation costs amounting toW 1,334 million andW 1,350 million were recognized for the year ended December 31, 2019 and 2018, respectively.
32. Net OtherNon-operating Income and Expenses
Details of othernon-operating income and expenses for the years ended December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | 2018 | ||||||
Othernon-operating income | ||||||||
Gain on disposal of property and equipment | ||||||||
Rent received | 85,720 | 55,321 | ||||||
Profit on disposal ofnon-current assets held for sale | 2,731 | 118,716 | ||||||
Others | 84,793 | 37,122 | ||||||
|
|
|
| |||||
208,991 | 245,397 | |||||||
|
|
|
| |||||
Othernon-operating expenses | ||||||||
Loss on disposal in property and equipment | 8,587 | 6,131 | ||||||
Donation | 102,711 | 130,249 | ||||||
Restoration cost | 2,902 | 4,386 | ||||||
Management cost for special bonds | 3,382 | 3,338 | ||||||
Others | 64,523 | 91,502 | ||||||
|
|
|
| |||||
182,105 | 235,606 | |||||||
|
|
|
| |||||
Net othernon-operating income | ||||||||
|
|
|
|
190
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
33. Income Tax Expense
Income tax expense for the years ended December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | 2018 | ||||||
Tax payable | ||||||||
Current tax expense | ||||||||
Adjustments recognized in the period for current tax of prior years | (51,130 | ) | 22,925 | |||||
|
|
|
| |||||
991,917 | 1,119,525 | |||||||
|
|
|
| |||||
Changes in deferred income tax assets (liabilities) | 285,820 | 114,345 | ||||||
|
|
|
| |||||
Income tax recognized directly in equity | ||||||||
Remeasurements of net defined benefit liabilities | 21,172 | 52,377 | ||||||
Exchange difference in foreign operation | (5,714 | ) | (13,087 | ) | ||||
Financial assets measured at fair value through other comprehensive income | (13,168 | ) | (33,329 | ) | ||||
Shares of other comprehensive income of associates and joint ventures | (3,147 | ) | 1,374 | |||||
Cash flow hedges | 10,537 | 400 | ||||||
Hedges of a net investment in a foreign operation | 3,194 | 10,292 | ||||||
Other comprehensive income of separate account | (1,301 | ) | (10,864 | ) | ||||
Profit or loss related with credit risk change of financial liabilities designated at fair value through profit or loss | 4,294 | (563 | ) | |||||
Net overlay adjustments | (72,817 | ) | (884 | ) | ||||
|
|
|
| |||||
(56,950 | ) | 5,716 | ||||||
|
|
|
| |||||
Tax expense | ||||||||
|
|
|
|
An analysis of the net profit before income tax and income tax expense for the years ended December 31, 2019 and 2018, follows:
(In millions of Korean won) | 2019 | 2018 | ||||||||||||||
Tax rate (%) | Amount | Tax rate (%) | Amount | |||||||||||||
Net profit before income tax | ||||||||||||||||
Tax at the applicable tax rate1 | 27.27 | 1,236,484 | 27.26 | 1,172,559 | ||||||||||||
Non-taxable income | (0.52 | ) | (23,601 | ) | (0.28 | ) | (11,888 | ) | ||||||||
Non-deductible expense | 0.42 | 19,086 | 0.64 | 27,551 | ||||||||||||
Tax credit and tax exemption | (0.01 | ) | (627 | ) | (0.01 | ) | (637 | ) | ||||||||
Temporary difference for which no deferred tax is recognized | (0.11 | ) | (4,860 | ) | 0.29 | 12,260 | ||||||||||
Deferred tax relating to changes in recognition and measurement | — | (100 | ) | (0.06 | ) | (2,692 | ) | |||||||||
Income tax refund for tax of prior years | (0.2 | ) | (9,105 | ) | (0.19 | ) | (8,135 | ) | ||||||||
Income tax expense of overseas branch | 0.11 | 5,004 | 0.09 | 3,882 | ||||||||||||
Effects from change in tax rate | — | — | (0.03 | ) | (1,470 | ) | ||||||||||
Others | (0.03 | ) | (1,494 | ) | 1.12 | 48,156 | ||||||||||
Average effective tax rate and tax expense | 26.93 | 28.82 | ||||||||||||||
|
|
|
|
1 | Applicable income tax rate for |
191
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
34. Dividends
The dividends paid to the shareholders of the Parent Company in 2019 and 2018 wereW 759,736 million (W 1,920 per share) andW 766,728 million (W 1,920 per share) , respectively. The dividend to the shareholders in respect of the year ended December 31, 2019 of 2,210 per share, amounting to total dividends ofW 861,092 is to be proposed at the annual general meeting on March 20, 2020. The Group’s financial statements as of December 31, 2019, do not reflect this dividend payable.
35. Accumulated Other Comprehensive Income
Details of changes in accumulated other comprehensive income for the years ended December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | |||||||||||||||||||||||
Beginning | 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 | (5,784 | ) | 37,938 | 5,353 | — | (5,714 | ) | 31,793 | ||||||||||||||||
Other comprehensive income related with financial assets at fair value through profit or loss | 450,694 | 106,984 | (82,662 | ) | 25,483 | (13,168 | ) | 487,331 | ||||||||||||||||
Other comprehensive income related with investments in associates and joint ventures | (4,377 | ) | 10,842 | — | — | (3,147 | ) | 3,318 | ||||||||||||||||
Cash flow hedges | 5,849 | (65,323 | ) | 21,604 | — | 10,537 | (27,333 | ) | ||||||||||||||||
Hedges of a net investment in a foreign operation | (33,092 | ) | (13,410 | ) | 1,316 | — | 3,194 | (41,992 | ) | |||||||||||||||
Other comprehensive income related with separate account assets | 15,017 | 21,029 | (16,364 | ) | — | (1,301 | ) | 18,381 | ||||||||||||||||
Profit or loss related with credit risk change of Financial liabilities designated at fair value through profit or loss | (8,954 | ) | (15,666 | ) | — | — | 4,294 | (20,326 | ) | |||||||||||||||
Net overlay adjustment | (7,146 | ) | 269,643 | (2,603 | ) | — | (72,817 | ) | 187,077 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
192
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
(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 overlay adjustment | (7,559 | ) | 24,458 | (23,161 | ) | — | (884 | ) | (7,146 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
1 | Restated in accordance with Korean IFRS 1109. |
193
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
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, 2019 and 2018.
Weighted average number of ordinary shares outstanding:
(in number of shares) | 20191 | 2018 | ||||||||||||||
Number of shares | Accumulated amount | Number of shares | Accumulated amount | |||||||||||||
Number of issued ordinary shares | 415,807,920 | 152,564,638,665 | 418,111,537 | 152,610,711,005 | ||||||||||||
Number of treasury shares | (26,173,585 | ) | (9,801,574,522 | ) | (22,560,240 | ) | (7,888,226,378 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Average number of ordinary shares outstanding | 389,634,335 | 142,763,064,143 | 395,551,297 | 144,722,484,627 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Number of days | 365 | 365 | ||||||||||||||
Weighted average number of ordinary shares outstanding | 391,131,683 | 396,499,958 |
1 | Initial date of treasury stock that was deducted by the retirement is December 12, 2019. |
Basic earnings per share:
(In Korean won and in number of shares) | 2019 | 2018 | ||||||
Profit attributable to shareholders of the Parent Company | ||||||||
Deduction: Dividends on hybrid securities | 6,512,500,000 | — | ||||||
|
|
|
| |||||
Profit attributable to the ordinary equity holders of the Parent Company (A) | ||||||||
Weighted average number of ordinary shares outstanding (B) | 391,131,683 | 396,499,958 | ||||||
Basic earnings per share (A / B) |
194
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
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 Group’s 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 Group’s outstanding shares for the year) based on the monetary value of Stock Grants. The number of shares calculated above is compared with the number of shares that would have been issued assuming the settlement of Stock Grants.
Adjusted profit for diluted earnings per share for the years ended December 31, 2019 and 2018, are as follows:
(In Korean won) | 2019 | 2018 | ||||||
Profit attributable to ordinary equity holders of the Parent Company | ||||||||
Adjustment | — | — | ||||||
|
|
|
| |||||
Adjusted profit for diluted earnings | ||||||||
|
|
|
|
Adjusted weighted average number of ordinary shares outstanding to calculate diluted earnings per share for the years ended December 31, 2019 and 2018, are as follows:
(In number of shares) | 2019 | 2018 | ||||||
Weighted average number of ordinary shares outstanding | 391,131,683 | 396,499,958 | ||||||
Adjustment | ||||||||
Stock Grants | 2,890,513 | 2,307,630 | ||||||
Adjusted weighted average number of ordinary shares outstanding for diluted earnings per share | 394,022,196 | 398,807,588 |
Diluted earnings per share for the years ended December 31, 2019 and 2018, are as follows:
(in Korean won and in number of shares) | 2019 | 2018 | ||||||
Adjusted profit for diluted earnings per share | ||||||||
Adjusted weighted average number of ordinary shares outstanding for diluted earnings per share | 394,022,196 | 398,807,588 | ||||||
Diluted earnings per share |
195
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
37. Insurance Contracts
37.1 Insurance Assets
Details of deferred acquisition costs included in other assets as of December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | 2018 | ||||||
Non-life insurance | ||||||||
Life insurance | 134,739 | 119,293 | ||||||
|
|
|
| |||||
|
|
|
|
Changes in the deferred acquisition costs for the years ended December 31, 2019 and 2018, are as follows
2019 | ||||||||||||||||
(In millions of Korean won) | Beginning | Increase | Depreciate | Ending | ||||||||||||
Non-life insurance | ||||||||||||||||
Life insurance | 119,293 | 117,808 | (102,362 | ) | 134,739 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
|
|
|
|
|
|
|
| |||||||||
2018 | ||||||||||||||||
(In millions of Korean won) | Beginning | Increase | Depreciate | Ending | ||||||||||||
Non-life insurance | ||||||||||||||||
Life insurance | 130,393 | 102,552 | (113,652 | ) | 119,293 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
|
|
|
|
|
|
|
|
Details of reinsurance assets included in other assets as of December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | 2018 | ||||||||
Non-life insurance | Reserve for outstanding claims | |||||||||
General insurance | ||||||||||
Automobile insurance | 16,555 | 18,057 | ||||||||
Long-term insurance | 130,758 | 109,751 | ||||||||
Unearned premium reserve | ||||||||||
General insurance | 208,820 | 171,240 | ||||||||
Automobile insurance | 19,952 | 30,864 | ||||||||
|
|
|
| |||||||
737,150 | 690,909 | |||||||||
|
|
|
| |||||||
Life insurance | Reserve for outstanding claims | 1,639 | 1,912 | |||||||
Unearned premium reserve | 408 | 448 | ||||||||
|
|
|
| |||||||
2,047 | 2,360 | |||||||||
|
|
|
| |||||||
Others | Reserve for outstanding claims | 2,563 | 3,417 | |||||||
Unearned premium reserve | 844 | 983 | ||||||||
|
|
|
| |||||||
3,407 | 4,400 | |||||||||
|
|
|
| |||||||
Total reinsurance assets | 742,604 | 697,669 | ||||||||
Allowance for impairment | 1,953 | 1,916 | ||||||||
|
|
|
| |||||||
Total reinsurance assets, net | ||||||||||
|
|
|
|
196
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
The changes in reinsurance assets included in other assets for the years ended December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | |||||||||||||
Beginning | Net increase (decrease) | Ending | ||||||||||||
Non-life insurance | Reserve for outstanding claims | |||||||||||||
General insurance | ||||||||||||||
Automobile insurance | 18,057 | (1,502 | ) | 16,555 | ||||||||||
Long-term insurance | 109,751 | 21,007 | 130,758 | |||||||||||
Unearned premium reserve | ||||||||||||||
General insurance | 171,240 | 37,580 | 208,820 | |||||||||||
Automobile insurance | 30,864 | (10,912 | ) | 19,952 | ||||||||||
|
|
|
|
|
| |||||||||
690,909 | 46,241 | 737,150 | ||||||||||||
|
|
|
|
|
| |||||||||
Life insurance | Reserve for outstanding claims | 1,912 | (273 | ) | 1,639 | |||||||||
Unearned premium reserve | 448 | (40 | ) | 408 | ||||||||||
|
|
|
|
|
| |||||||||
2,360 | (313 | ) | 2,047 | |||||||||||
|
|
|
|
|
| |||||||||
Others | Reserve for outstanding claims | 3,417 | (854 | ) | 2,563 | |||||||||
Unearned premium reserve | 983 | (139 | ) | 844 | ||||||||||
|
|
|
|
|
| |||||||||
4,400 | (993 | ) | 3,407 | |||||||||||
|
|
|
|
|
| |||||||||
Total reinsurance assets | 697,669 | 44,935 | 742,604 | |||||||||||
Allowance for impairment | 1,916 | 37 | 1,953 | |||||||||||
|
|
|
|
|
| |||||||||
Total reinsurance assets, net | ||||||||||||||
|
|
|
|
|
|
(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 | ||||||||||||||
|
|
|
|
|
|
197
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
37.2 Insurance Liabilities
Details of insurance liabilities presented within other liabilities as of December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | |||||||||||||||
Non-life insurance | Life insurance | Others | Total | |||||||||||||
Long-term Insurance premium reserve | ||||||||||||||||
Reserve for outstanding claims | 2,297,256 | 101,690 | 2,563 | 2,401,509 | ||||||||||||
Unearned premium reserve | 1,522,827 | 4,603 | 845 | 1,528,275 | ||||||||||||
Reserve for participating policyholders’ dividends | 117,094 | 29,745 | — | 146,839 | ||||||||||||
Unallocated Divisible Surplus to Future Policyholders | 46,901 | 4,202 | — | 51,103 | ||||||||||||
Reserve for compensation for losses on dividend-paying insurance contracts | 20,090 | 5,784 | — | 25,874 | ||||||||||||
Guarantee reserve | — | 22,229 | — | 22,229 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
|
|
|
|
|
|
|
|
(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 | 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 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
|
|
|
|
|
|
|
|
198
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
The changes in insurance liability for the years ended December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | |||||||||||||
Beginning | Net increase (decrease)2 | Ending | ||||||||||||
Non-life insurance | General insurance | |||||||||||||
Automobile insurance | 1,492,294 | 131,552 | 1,623,846 | |||||||||||
Long-term insurance | 23,386,279 | 1,619,799 | 25,006,078 | |||||||||||
Long-term investment contract | 110,256 | (1,318 | ) | 108,938 | ||||||||||
Life insurance | Pure endowment insurance | 5,233,491 | 2,637 | 5,236,128 | ||||||||||
Death insurance | 500,571 | 142,392 | 642,963 | |||||||||||
Joint insurance | 1,621,460 | (350,605 | ) | 1,270,855 | ||||||||||
Group insurance | 735 | (211 | ) | 524 | ||||||||||
Other1 | 8,640 | 391 | 9,031 | |||||||||||
Others | 4,400 | (993 | ) | 3,407 | ||||||||||
|
|
|
|
|
| |||||||||
Total | ||||||||||||||
|
|
|
|
|
|
(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 | ||||||||||||||
|
|
|
|
|
|
1 | Including policyholder’s profit dividend reserve and Reserve for compensation for losses on dividend-paying insurance contracts |
2 | Including currency translation effect and decrease in liability related to investment contract |
199
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
37.3 Liability adequacy test
37.3.1Non-life insurance
Assumptions and basis for the insurance liability adequacy test as of December 31, 2019 and 2018, are as follows:
Assumptions (%) | ||||||
2019 | 2018 | Basis | ||||
Long-term insurance | ||||||
Discount rate | 2.47~10.55 | 0.55~7.32 | Applied risk-free rate curve plus liquidity premium presented by Financial Supervisory Service | |||
Expense ratio | 6.60 | 6.43 | Reflected future expense plan based on the most recentone-year data | |||
Lapse ratio | 1.51~34.13 | 1.50~31.40 | Based on the most recent five years data | |||
Risk rate | 13.10~1037.3 | 9.00~724.00 | The rate of insurance claim payments to risk premiums based on historical data for the latest seven years | |||
General insurance | ||||||
Expense ratio | 11.38 | 10.42 | Ratio of maintenance costs incurred to earned premiums by the types of contracts for the most recent year | |||
Loss adjustment expense ratio | 4.54 | 4.63 | Ratio of loss adjustment expenses incurred to insurance claim payments by the type of contracts within for the most recent three years | |||
Claim settlement ratio | 64.95 | 63.77 | Ratio of insurance claims incurred to earned premiums by the type of contracts for the most recent five years | |||
Automobile insurance | ||||||
Expense ratio | 9.94 | 10.11 | Ratio of maintenance costs incurred to earned premiums by the type of collaterals for the most recent year | |||
Loss adjustment expense ratio | 8.84 | 9.09 | Ratio of loss adjustment expenses incurred to insurance claims paid by the type of collaterals for the most recent three years | |||
Claim settlement ratio | 78.44 | 77.51 | Ratio of insurance claims incurred to earned premiums by the type of collaterals for the most recent five years |
The results of liability adequacy test as of December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | |||||||||||
Recognized liabilities1 | Estimated adequate liabilities | Shortfall (surplus) | ||||||||||
General insurance | ||||||||||||
Automobile insurance | 1,123,450 | 1,071,076 | (52,374 | ) | ||||||||
Long-term insurance | 19,743,658 | 9,741,865 | (10,001,793 | ) | ||||||||
|
|
|
|
|
| |||||||
|
|
|
|
|
| |||||||
(In millions of Korean won) | 2018 | |||||||||||
Recognized liabilities1 | Estimated adequate liabilities | Shortfall (surplus) | ||||||||||
General insurance | ||||||||||||
Automobile insurance | 1,020,861 | 967,236 | (53,625 | ) | ||||||||
Long-term insurance | 18,419,316 | 7,471,174 | (10,948,142 | ) | ||||||||
|
|
|
|
|
| |||||||
|
|
|
|
|
|
1 | Long-term insurance is for premium reserves and unearned premium reserves; the premium reserve is the amount deducted from the unearned premiums and insurance contract loans in accordance with Article6-3 of the Insurance Supervisory Regulation. |
200
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
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, 2019 and 2018, are as follows:
Assumptions (%) | ||||||
2019 | 2018 | Basis | ||||
Surrender rate | 0~65.39 | 0~64.95 | 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 | 11~132 | 8~122 | 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 | (2.61)~15.53 | (1.82)~13.71 | 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 Group’s regulations.
The results of liability adequacy test as of December 31, 2019 and 2018 are as follows:
(In millions of Korean won) | 2019 | |||||||||||||||
Recognized liabilities | Estimated adequate liabilities | Shortfall (surplus) | ||||||||||||||
Fixed interest type | Participating | |||||||||||||||
Non-participating | 180,058 | 43,196 | (136,862 | ) | ||||||||||||
|
|
|
|
|
| |||||||||||
Variable interest type | Participating | 1,037,148 | 1,056,841 | 19,693 | ||||||||||||
Non-participating | 5,335,572 | 4,966,835 | (368,737 | ) | ||||||||||||
|
|
|
|
|
| |||||||||||
Variable type | (36,500 | ) | (148,878 | ) | (112,378 | ) | ||||||||||
|
|
|
|
|
| |||||||||||
Total | ||||||||||||||||
|
|
|
|
|
|
201
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
(In millions of Korean won) | 2018 | |||||||||||||
Recognized liabilities | Estimated adequate liabilities | Shortfall (surplus) | ||||||||||||
Fixed interest type | Participating | |||||||||||||
Non-participating | 133,784 | 92,856 | (40,928 | ) | ||||||||||
|
|
|
|
|
| |||||||||
Variable interest type | Participating | 1,087,049 | 1,088,218 | 1,169 | ||||||||||
Non-participating | 5,544,265 | 5,052,604 | (491,661 | ) | ||||||||||
|
|
|
|
|
| |||||||||
Variable type | (31,235 | ) | (119,511 | ) | (88,276 | ) | ||||||||
|
|
|
|
|
| |||||||||
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, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | 2018 | ||||||||
Insurance Income | ||||||||||
Premium income | ||||||||||
Reinsurance income | 850,871 | 873,053 | ||||||||
Reversal of policy reserves | 993 | 344 | ||||||||
Separate account income | 216,429 | 360,664 | ||||||||
Income of change in reinsurance assets | 42,432 | — | ||||||||
Other insurance income | 33,090 | 10,782 | ||||||||
|
|
|
| |||||||
12,317,182 | 11,975,070 | |||||||||
|
|
|
| |||||||
Insurance Expense | ||||||||||
Insurance claims paid | 5,046,772 | 4,415,760 | ||||||||
Dividend expense | 9,902 | 9,400 | ||||||||
Refunds of surrender value | 2,870,543 | 2,855,573 | ||||||||
Reinsurance expense | 1,018,007 | 947,560 | ||||||||
Provision of policy reserves | 1,547,264 | 1,608,519 | ||||||||
Separate account expenses | 139,810 | 276,412 | ||||||||
Insurance operating expenses | 453,016 | 418,646 | ||||||||
Deferred acquisition costs | 679,279 | 606,073 | ||||||||
Expenses of change in reinsurance assets | 314 | 89,621 | ||||||||
Claim survey expenses paid | 52,123 | 38,782 | ||||||||
Other insurance expenses | 200,640 | 218,608 | ||||||||
|
|
|
| |||||||
12,017,670 | 11,484,954 | |||||||||
|
|
|
| |||||||
Net insurance income | ||||||||||
|
|
|
|
202
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
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.
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 contract’s 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 Group’s exposure to insurance price risk as of December 31, 2019 and 2018, as follows:
2019 | ||||||||||||||||
(In millions of Korean won) | Direct insurance | Inward reinsurance | Outward reinsurance | Total | ||||||||||||
General | ||||||||||||||||
Automobile | 2,101,780 | — | (40,067 | ) | 2,061,713 | |||||||||||
Long-term | 2,550,236 | — | (367,904 | ) | 2,182,332 | |||||||||||
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|
|
| |||||||||
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|
|
| |||||||||
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 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
|
|
|
|
|
|
|
|
203
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
37.5.4 Concentration of Insurance risk
The Group is selling generalnon-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-termnon-life, property damage, injury, driver, savings, illness, nursing and pension) and various other insurances. The Group’s 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.
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, 2019 and 2018, are as follows:
<2019>
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) | ||||||||||||||||||||
2015.1.1 ~ 2015.12.31 | ||||||||||||||||||||
2016.1.1 ~ 2016.12.31 | 145,618 | 167,818 | 171,205 | 178,265 | — | |||||||||||||||
2017.1.1 ~ 2017.12.31 | 168,409 | 200,704 | 204,538 | — | — | |||||||||||||||
2018.1.1 ~ 2018.12.31 | 200,280 | 237,111 | — | — | — | |||||||||||||||
2019.1.1 ~ 2019.12.31 | 220,474 | — | — | — | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
859,942 | 750,198 | 522,774 | 325,881 | 148,995 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Gross cumulative claim payments (B) | ||||||||||||||||||||
2015.1.1 ~ 2015.12.31 | 93,443 | 129,765 | 137,157 | 141,218 | 143,985 | |||||||||||||||
2016.1.1 ~ 2016.12.31 | 108,098 | 151,283 | 162,059 | 170,353 | — | |||||||||||||||
2017.1.1 ~ 2017.12.31 | 132,430 | 184,333 | 193,811 | — | — | |||||||||||||||
2018.1.1 ~ 2018.12.31 | 153,770 | 216,705 | — | — | — | |||||||||||||||
2019.1.1 ~ 2019.12.31 | 185,832 | — | — | — | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
673,573 | 682,086 | 493,027 | 311,571 | 143,985 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Difference(A-B) | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
204
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
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) | ||||||||||||||||||||||||||||
2013.1.1 ~ 2013.12.31 | ||||||||||||||||||||||||||||
2014.1.1 ~ 2014.12.31 | 1,174,611 | 1,193,832 | 1,205,524 | 1,212,025 | 1,212,162 | 1,214,524 | — | |||||||||||||||||||||
2015.1.1 ~ 2015.12.31 | 1,227,106 | 1,245,780 | 1,256,058 | 1,263,044 | 1,267,142 | — | — | |||||||||||||||||||||
2016.1.1 ~ 2016.12.31 | 1,276,939 | 1,281,381 | 1,287,728 | 1,294,735 | — | — | — | |||||||||||||||||||||
2017.1.1 ~ 2017.12.31 | 1,342,998 | 1,348,828 | 1,358,867 | — | — | — | — | |||||||||||||||||||||
2018.1.1 ~ 2018.12.31 | 1,468,784 | 1,471,807 | — | — | — | — | — | |||||||||||||||||||||
2019.1.1 ~ 2019.12.31 | 1,591,793 | — | — | — | — | — | — | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
9,214,176 | 7,698,163 | 6,279,145 | 4,949,262 | 3,658,627 | 2,394,038 | 1,180,458 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Gross cumulative claim payments(B) | ||||||||||||||||||||||||||||
2013.1.1 ~ 2013.12.31 | 939,569 | 1,114,063 | 1,145,110 | 1,161,624 | 1,168,617 | 1,175,681 | 1,178,158 | |||||||||||||||||||||
2014.1.1 ~ 2014.12.31 | 969,211 | 1,150,462 | 1,180,953 | 1,196,387 | 1,204,580 | 1,208,421 | — | |||||||||||||||||||||
2015.1.1 ~ 2015.12.31 | 1,020,975 | 1,198,241 | 1,228,357 | 1,245,779 | 1,254,187 | — | — | |||||||||||||||||||||
2016.1.1 ~ 2016.12.31 | 1,052,830 | 1,235,656 | 1,264,651 | 1,282,346 | — | — | — | |||||||||||||||||||||
2017.1.1 ~ 2017.12.31 | 1,104,158 | 1,306,235 | 1,335,962 | — | — | — | — | |||||||||||||||||||||
2018.1.1 ~ 2018.12.31 | 1,224,820 | 1,428,973 | — | — | — | — | — | |||||||||||||||||||||
2019.1.1 ~ 2019.12.31 | 1,332,849 | — | — | — | — | — | — | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
7,644,412 | 7,433,630 | 6,155,033 | 4,886,136 | 3,627,384 | 2,384,102 | 1,178,158 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
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 | After 6 years | After 7 years | |||||||||||||||||||||
Estimate of gross ultimate claims (A) | ||||||||||||||||||||||||||||
2013.1.1 ~ 2013.12.31 | 709,602 | 965,587 | 997,607 | 1,003,646 | 1,006,025 | 1,007,041 | 1,008,589 | |||||||||||||||||||||
2014.1.1 ~ 2014.12.31 | 789,087 | 1,083,048 | 1,114,821 | 1,119,206 | 1,122,192 | 1,123,240 | — | |||||||||||||||||||||
2015.1.1 ~ 2015.12.31 | 885,476 | 1,219,393 | 1,256,051 | 1,266,881 | 1,270,967 | — | — | |||||||||||||||||||||
2016.1.1 ~ 2016.12.31 | 1,064,744 | 1,437,573 | 1,485,839 | 1,500,403 | — | — | — | |||||||||||||||||||||
2017.1.1 ~ 2017.12.31 | 1,184,224 | 1,614,903 | 1,670,929 | — | — | — | — | |||||||||||||||||||||
2018.1.1 ~ 2018.12.31 | 1,372,706 | 1,881,046 | — | — | — | — | — | |||||||||||||||||||||
2019.1.1 ~ 2019.12.31 | 1,626,481 | — | — | — | — | — | — | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
7,632,320 | 8,201,550 | 6,525,247 | 4,890,136 | 3,399,184 | 2,130,281 | 1,008,589 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Gross cumulative claim payments(B) | ||||||||||||||||||||||||||||
2013.1.1 ~ 2013.12.31 | 671,500 | 953,494 | 989,957 | 999,944 | 1,003,715 | 1,005,796 | 1,007,865 | |||||||||||||||||||||
2014.1.1 ~ 2014.12.31 | 744,944 | 1,065,792 | 1,104,468 | 1,114,341 | 1,119,531 | 1,122,378 | — | |||||||||||||||||||||
2015.1.1 ~ 2015.12.31 | 836,471 | 1,205,130 | 1,248,475 | 1,262,528 | 1,269,557 | — | — | |||||||||||||||||||||
2016.1.1 ~ 2016.12.31 | 1,017,243 | 1,424,948 | 1,477,415 | 1,496,556 | — | — | — | |||||||||||||||||||||
2017.1.1 ~ 2017.12.31 | 1,130,868 | 1,599,227 | 1,682,978 | — | — | — | — | |||||||||||||||||||||
2018.1.1 ~ 2018.12.31 | 1,319,613 | 1,868,434 | — | — | — | — | — | |||||||||||||||||||||
2019.1.1 ~ 2019.12.31 | 1,574,696 | — | — | — | — | — | — | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
7,295,335 | 8,117,025 | 6,483,293 | 4,873,369 | 3,392,803 | 2,128,174 | 1,007,865 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Difference(A-B) | 336,985 | 84,525 | 41,954 | 16,767 | 6,381 | 2,107 | 724 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
205
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
<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) | ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
206
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
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 | — | — | — | — | |||||||||||||||
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5,296,237 | 5,354,917 | 3,856,711 | 2,386,087 | 1,122,192 | ||||||||||||||||
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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 | — | — | — | — | |||||||||||||||
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5,049,139 | 5,295,097 | 3,830,358 | 2,376,869 | 1,119,531 | ||||||||||||||||
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Difference(A-B) | ||||||||||||||||||||
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37.5.5 Sensitivity analysis of insurance risk
The Group manages insurance risk by performing sensitivity analysis based on discount rate, loss ratio and insurance operating expenses ratio which are considered to have significant influence on future cash flow, timing and uncertainty. According to result of sensitivity analysis there is no material influence on the equity and net profit before tax.
(In millions of Korean won) | ||||||||
Assumption | 2019 | |||||||
change | Effect on LAT | |||||||
Surrenders and termination rates | +10 | % | ||||||
-10 | % | (541,208 | ) | |||||
Loss ratio | +10 | % | 4,319,256 | |||||
-10 | % | (4,319,256 | ) | |||||
Insurance operating expenses ratio | +10 | % | 326,915 | |||||
-10 | % | (326,915 | ) | |||||
Discount rate | +0.5 | % | (1,426,729 | ) | ||||
-0.5 | % | 1,732,166 |
(In millions of Korean won) | ||||||||
Assumption | 2018 | |||||||
change | Effect on LAT | |||||||
Surrenders and termination rates | +10 | % | ||||||
-10 | % | (658,755 | ) | |||||
Loss ratio | +10 | % | 4,348,655 | |||||
-10 | % | (4,348,655 | ) | |||||
Insurance operating expenses ratio | +10 | % | 347,179 | |||||
-10 | % | (347,179 | ) | |||||
Discount rate | +0.5 | % | (1,295,369 | ) | ||||
-0.5 | % | 1,554,782 |
207
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
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 reserve’s maturity structure as of December 31, 2019 and 2018, as follows:
20191 | ||||||||||||||||||||||||
(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 | 527,467 | 2,578,004 | 2,085,054 | 777,340 | 13,336,668 | 19,304,533 | ||||||||||||||||||
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584,999 | 2,836,440 | 2,169,403 | 820,481 | 13,462,290 | 19,873,613 | |||||||||||||||||||
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Annuity | ||||||||||||||||||||||||
Non-linked | 10 | 543 | 2,244 | 3,714 | 1,075 | 7,586 | ||||||||||||||||||
Linked | 273 | 70,180 | 367,710 | 1,245,176 | 2,227,054 | 3,910,393 | ||||||||||||||||||
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283 | 70,723 | 369,954 | 1,248,890 | 2,228,129 | 3,917,979 | |||||||||||||||||||
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Asset-linked | ||||||||||||||||||||||||
Linked | 27,389 | — | — | — | — | 27,389 | ||||||||||||||||||
Total | ||||||||||||||||||||||||
Non-linked | 57,542 | 258,979 | 86,593 | 46,855 | 126,697 | 576,666 | ||||||||||||||||||
Linked | 555,129 | 2,648,184 | 2,452,764 | 2,022,516 | 15,563,722 | 23,242,315 | ||||||||||||||||||
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1 | Includes long-term investment contract amounting to |
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 | ||||||||||||||||||
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447,351 | 3,076,833 | 2,264,364 | 767,988 | 11,996,236 | 18,552,772 | |||||||||||||||||||
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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 | ||||||||||||||||||
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205 | 58,433 | 341,941 | 1,179,904 | 2,195,708 | 3,776,191 | |||||||||||||||||||
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| |||||||||||||
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 | ||||||||||||||||||
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1 | Includes long-term investment contract amounting to |
208
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
37.5.7 Credit risk of insurance contract
Credit risk of insurance contract is the economic loss arising fromnon-performing contractual obligations due to decline in credit ratings or default. Through strict internal review, only the insurers rated aboveBBB- of S&P rating are accepted for the insurance contracts.
As of December 31, 2019, there are 153 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 | 64.14 | % | AA | |||
SWISS RE | 10.81 | % | AAA | |||
SCOR RE | 2.77 | % | AAA |
Exposures to credit risk related to reinsurance as of December 31, 2019 and 2018 as follows:
(In millions of Korean won) | 2019 | 2018 | ||||||
Reinsurance assets1 | ||||||||
Net receivables from reinsurers2 | 328,177 | 398,575 | ||||||
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| |||||
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1 | Net carrying amounts after impairment loss |
2 | Net carrying amounts of after allowance for loan losses |
37.5.8 Interest risk of insurance contract
The interest rate risk exposure from the Group’s insurance contracts is the risk of unexpected losses in net interest income or net assets arising from changes in interest rates and it is managed to minimize unexpected loss. For long-term,non-life insurance contracts, the Group calculates exposure of interest-bearing assets and interest-bearing liabilities. Liabilities exposure is premium reserves less costs of termination deductions plus unearned premium reserve. 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, 2019 and 2018, are as follows:
i) Exposure to interest rate risk
(In millions of Korean won) | 2019 | |||
Liabilities | ||||
Fixed interest rate | ||||
Variable interest rate | 21,911,393 | |||
|
| |||
22,445,629 | ||||
|
| |||
Assets | ||||
Due from financial institutions at amortized cost and cash equivalents | 108,559 | |||
Financial assets at fair value through profit or loss | 4,560,512 | |||
Financial assets at fair value through other comprehensive income | 2,984,738 | |||
Financial assets at amortized cost | 8,163,485 | |||
Loans at amortized cost | 6,924,597 | |||
|
| |||
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209
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
(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 and cash equivalents | 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 | |||
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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 portfolio’s profit ratio.
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:
210
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
The Group’s 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.
The maximum exposures to insurance price risk as of December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | |||||||
Before reinsurance mitigation | After reinsurance mitigation | |||||||
Death | ||||||||
Disability | 754 | 424 | ||||||
Hospitalization | 1,260 | 642 | ||||||
Operation and diagnosis | 4,419 | 2,211 | ||||||
Actual losses for medical expense | 1,053 | 396 | ||||||
Others | 1,066 | 411 | ||||||
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| |||||
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| |||||
(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 | ||||||
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| |||||
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|
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, 2019 and 2018, were 57.8 % and 67.6%, respectively.
211
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
The exposure of market risk arising from embedded derivatives included in host insurance contracts as of December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | ||||||||||||||||
2019 | 2018 | |||||||||||||||
Policyholders reserve1 | Guarantee reserve | Policyholders reserve1 | Guarantee reserve | |||||||||||||
Variable annuity | ||||||||||||||||
Variable universal | 91,988 | 3,095 | 84,783 | 4,129 | ||||||||||||
Variable saving | 734,661 | 516 | 542,035 | 396 | ||||||||||||
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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 Article6-12 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.
37.6.5 Premium reserves and unearned premium reserves residual maturity
Premium reserve’s maturity structure as of December 31, 2019 and 2018, as follows:
(In millions of Korean won) | ||||||||||||||||||||||||||||
2019 | ||||||||||||||||||||||||||||
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) | ||||||||||||||||||||||||||||
2018 | ||||||||||||||||||||||||||||
Less than 3 years | 3-5 years | 5-10 years | 10-15 years | 15-20 years | 20 years or more | Total | ||||||||||||||||||||||
Premium reserves |
212
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
37.6.6 Sensitivity analysis of insurance risk
The Group manages insurance risk by performing sensitivity analysis based on surrender rate, rate of claim, expense rate, discount rate and others which are considered to have significant influence on future cash flow, timing and uncertainty.
(In millions of Korean won) | ||||||||
Assumption | 2019 | |||||||
change | Effect on LAT | |||||||
Surrender rate | +10 | % | ||||||
-10 | % | (56,115 | ) | |||||
Rate of claim | +10 | % | 22,786 | |||||
-10 | % | (23,456 | ) | |||||
Expense rate | +10 | % | 31,315 | |||||
-10 | % | (31,315 | ) | |||||
Discount rate | +10 | % | (370,094 | ) | ||||
-10 | % | 424,632 | ||||||
(In millions of Korean won) | ||||||||
Assumption | 2018 | |||||||
change | Effect on LAT | |||||||
Surrender rate | +10 | % | ||||||
-10 | % | (47,157 | ) | |||||
Rate of claim | +10 | % | 20,223 | |||||
-10 | % | (20,540 | ) | |||||
Expense rate | +10 | % | 24,671 | |||||
-10 | % | (24,671 | ) | |||||
Discount rate | +10 | % | (316,446 | ) | ||||
-10 | % | 382,418 |
213
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
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, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | 2018 | ||||||
Financial assets at fair value through profit or loss | ||||||||
Due from financial institutions | ||||||||
Debt securities | 7,955,286 | 7,044,081 | ||||||
Equity securities | 52,250 | 81,949 | ||||||
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| |||||
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|
|
Changes of net overlay adjustments for the years ended December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | |||
Beginning | ||||
Recognization of other comprehensive income due to acquisition and valuation | 196,110 | |||
Reclassification to profit or loss due to disposal | (1,887 | ) | ||
|
| |||
Ending | 187,077 | |||
|
| |||
(In millions of Korean won) | 2018 | |||
Beginning1 | ||||
Recognization of other comprehensive loss due to acquisition and valuation | 17,205 | |||
Reclassification to profit or loss due to disposal | (16,792 | ) | ||
|
| |||
Ending | (7,146 | ) | ||
|
|
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, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | 2018 | ||||||||||||||
Total assets | Operating revenues | Total assets | Operating revenues | |||||||||||||
Consolidated | ||||||||||||||||
Unconsolidated | 51,685,885 | 2,206,184 | 47,644,193 | 1,609,587 | ||||||||||||
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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. |
214
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
Significant transactions between the Group and the trust accounts for the years ended December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | 2018 | ||||||
Revenues | ||||||||
Fees and commissions from trust accounts | ||||||||
Interest income from loans on trust accounts | 4,261 | 5,586 | ||||||
Commissions from early termination in trust accounts | 119 | 88 | ||||||
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Expenses | ||||||||
Interest expenses due to trust accounts | ||||||||
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| |||||
Receivables | ||||||||
Accrued trust fees | ||||||||
Due from trust accounts | 92,866 | 109,357 | ||||||
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Payables | ||||||||
Due to trust accounts | ||||||||
Accrued interest on due to trust accounts | 10,136 | 10,547 | ||||||
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39. Supplemental Cash Flow Information
Cash and cash equivalents as of December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | 2018 | ||||||
Cash | ||||||||
Checks with other banks | 383,500 | 872,166 | ||||||
Due from Bank of Korea | 8,607,911 | 9,098,891 | ||||||
Due from other financial institutions | 9,535,049 | 8,117,398 | ||||||
|
|
|
| |||||
20,837,878 | 20,274,490 | |||||||
|
|
|
| |||||
Due from financial institutions at fair value through profit or loss | 216,367 | 381,718 | ||||||
|
|
|
| |||||
21,054,245 | 20,656,208 | |||||||
|
|
|
| |||||
Restricted cash from financial institutions | (13,372,966 | ) | (12,347,627 | ) | ||||
Due from financial institutions with original maturities over three months | (1,557,554 | ) | (1,665,765 | ) | ||||
|
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| |||||
(14,930,520 | ) | (14,013,392 | ) | |||||
|
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| |||||
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|
215
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
Significantnon-cash transactions for the years ended December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | 2018 | ||||||
Decrease in loans due to the write-offs | ||||||||
Changes in financial instruments due to conversion of investment | 104,815 | 22,286 | ||||||
Changes in accumulated other comprehensive income due to valuation of financial investments at fair value through other comprehensive income | 35,490 | 119,182 | ||||||
Decrease in accumulated other comprehensive income from measurement of investment securities in associates | 7,695 | (3,733 | ) | |||||
Changes in other payables due to treasury stock trust agreement, etc | — | 6,678 |
Cash inflows and outflows from income tax, interests and dividends for the years ended December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | Activity | 2019 | 2018 | |||||||||
Income tax paid | Operating | |||||||||||
Interest received | Operating | 14,936,705 | 13,958,806 | |||||||||
Interest paid | Operating | 5,365,595 | 4,369,345 | |||||||||
Dividends received | Operating | 185,846 | 235,243 | |||||||||
Dividends paid | Financial | 766,249 | 766,728 |
Changes in liabilities arising from financing activities
Changes in liabilities and assets that arising from financing activities for the year ended December 31, 2019 are as follows:
(In millions of Korean won)
2019 | ||||||||||||||||||||||||||||||||
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 | 86,283,531 | 2,537,391 | — | 397,571 | 67,297 | (602,388 | ) | 71,041 | 88,754,443 | |||||||||||||||||||||||
Other payables from trust accounts | 5,285,108 | (68,648 | ) | — | — | — | — | — | 5,216,460 | |||||||||||||||||||||||
Change ofNon-controlling equity | 9,110 | 574,580 | — | 345 | — | — | 1,372 | 585,407 | ||||||||||||||||||||||||
Others | 167,128 | (95,723 | ) | 766,259 | 35,591 | — | — | (4,699 | ) | 868,556 | ||||||||||||||||||||||
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1. | Derivatives held for hedging purposes are the net amount after offsetting liabilities from assets |
216
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
The net cash outflow associated with the change of the subsidiaries for the year ended December 31, 2019 wasW 91,592 million.
40. Contingent Liabilities and Commitments
Details of payment guarantees as of December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | 2018 | ||||||
Confirmed payment guarantees | ||||||||
Confirmed payment guarantees in Korean won | ||||||||
Payment guarantees for KB purchasing loan | ||||||||
Other payment guarantees | 746,823 | 597,636 | ||||||
|
|
|
| |||||
908,137 | 794,153 | |||||||
|
|
|
| |||||
Confirmed payment guarantees in foreign currency | ||||||||
Acceptances of letter of credit | 155,151 | 208,926 | ||||||
Letter of guarantees | 49,754 | 53,210 | ||||||
Bid bond | 37,765 | 51,528 | ||||||
Performance bond | 718,097 | 604,311 | ||||||
Refund guarantees | 1,022,646 | 592,925 | ||||||
Other payment guarantees in foreign currency | 2,935,939 | 2,539,900 | ||||||
|
|
|
| |||||
4,919,352 | 4,050,800 | |||||||
|
|
|
| |||||
Financial guarantees | ||||||||
Payment guarantees for mortgage | 47,384 | 50,497 | ||||||
Overseas debt guarantees | 406,680 | 311,796 | ||||||
International financing guarantees in foreign currencies | 231,685 | 110,070 | ||||||
Other financing payment guarantees | 230,000 | 270,000 | ||||||
|
|
|
| |||||
915,749 | 742,363 | |||||||
|
|
|
| |||||
6,743,238 | 5,587,316 | |||||||
|
|
|
| |||||
Unconfirmed acceptances and guarantees | ||||||||
Guarantees of letter of credit | 1,845,508 | 1,745,340 | ||||||
Refund guarantees | 654,497 | 686,843 | ||||||
|
|
|
| |||||
2,500,005 | 2,432,183 | |||||||
|
|
|
| |||||
|
|
|
|
217
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
Payment guarantees that are exposed to credit risk as of December 31, 2019, are as follows:
(In millions of Korean won) | ||||||||||||||||
The financial instruments applying 12-month expected credit losses | The financial instruments applying lifetime expected credit losses | |||||||||||||||
Non-impaired | Impaired | Total | ||||||||||||||
Confirmed payment guarantees |
| |||||||||||||||
Grade 1 | ||||||||||||||||
Grade 2 | 2,105,637 | 38,271 | — | 2,143,908 | ||||||||||||
Grade 3 | 93,074 | 81,317 | — | 174,391 | ||||||||||||
Grade 4 | 18,773 | 172,440 | — | 191,213 | ||||||||||||
Grade 5 | — | 2,873 | 10,111 | 12,984 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
6,437,530 | 295,597 | 10,111 | 6,743,238 | |||||||||||||
|
|
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|
|
|
|
| |||||||||
Unconfirmed acceptances and guarantees |
| |||||||||||||||
Grade 1 | 1,228,258 | 1,289 | — | 1,229,547 | ||||||||||||
Grade 2 | 1,121,159 | 32,413 | — | 1,153,572 | ||||||||||||
Grade 3 | 17,091 | 20,957 | — | 38,048 | ||||||||||||
Grade 4 | 4,236 | 62,964 | — | 67,200 | ||||||||||||
Grade 5 | — | 170 | 11,468 | 11,638 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
2,370,744 | 117,793 | 11,468 | 2,500,005 | |||||||||||||
|
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|
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|
| |||||||||
|
|
|
|
|
|
|
|
Acceptances and guarantees by counterparty as of December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | |||||||||||||||
Confirmed guarantees | Unconfirmed guarantees | Total | Proportion (%) | |||||||||||||
Corporations | 85.10 | |||||||||||||||
Small companies | 650,612 | 397,539 | 1,048,151 | 11.34 | ||||||||||||
Public and others | 130,622 | 198,120 | 328,742 | 3.56 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
100.00 | ||||||||||||||||
|
|
|
|
|
|
|
| |||||||||
(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 | �� | |||||||||||
|
|
|
|
|
|
|
| |||||||||
100.00 | ||||||||||||||||
|
|
|
|
|
|
|
|
218
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
Acceptances and guarantees by industry as of December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | |||||||||||||||
Confirmed guarantees | Unconfirmed guarantees | Total | Proportion (%) | |||||||||||||
Financial institutions | 3.08 | |||||||||||||||
Manufacturing | 3,373,220 | 1,627,840 | 5,001,060 | 54.11 | ||||||||||||
Service | 1,187,516 | 88,158 | 1,275,674 | 13.80 | ||||||||||||
Whole sale & Retail | 1,126,976 | 597,998 | 1,724,974 | 18.66 | ||||||||||||
Construction | 467,114 | 20,590 | 487,704 | 5.28 | ||||||||||||
Public sector | 107,481 | 81,895 | 189,376 | 2.05 | ||||||||||||
Others | 219,957 | 59,525 | 279,482 | 3.02 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
100.00 | ||||||||||||||||
|
|
|
|
|
|
|
| |||||||||
(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 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
100.00 | ||||||||||||||||
|
|
|
|
|
|
|
|
Commitments as of December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | 2018 | ||||||
Commitments | ||||||||
Corporate loan commitments | ||||||||
Retail loan commitments | 42,582,736 | 41,335,454 | ||||||
Credit line on credit cards | 60,667,219 | 54,488,133 | ||||||
Purchase of other security investment and others | 6,617,253 | 5,426,058 | ||||||
|
|
|
| |||||
151,797,615 | 138,590,372 | |||||||
|
|
|
| |||||
Financial Guarantees | ||||||||
Credit line | 2,340,141 | 2,447,369 | ||||||
Purchase of security investment | 591,500 | 436,800 | ||||||
|
|
|
| |||||
2,931,641 | 2,884,169 | |||||||
|
|
|
| |||||
|
|
|
|
219
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
Other Matters (including litigation)
a) The Group has filed 102 lawsuits as a plaintiff (excluding minor lawsuits in relation to the collection or management of loans), involving aggregate claims ofW 458,195 million, and faces 207 lawsuits (as a defendant) (excluding minor lawsuits in relation to the collection or management of loans) involving aggregate damages ofW 193,002 million, which arose in the normal course of the business and are still pending as of December 31, 2019.
b) Kookmin bank made a construction contract building the integrated company building, amounting toW 155,546 million; for the year ended December 31, 2019, the Bank has paidW 41,598 million.
c) As at December 31, 2019, Kookmin Bank has entered into construction contracts amounting toW 250,458 million related to the construction of The K Project(IT infrastructure construction business needed KB’s Digital Transformation to cope with change of IT technology and finance environment), and payments made up to December 31, 2019 amount toW 60,462 million.
d) The face value of the securities which Kookmin Bank sold to general customers through the bank tellers amounts toW 372 million andW 372 million as of December 31, 2019 and 2018, respectively.
e) 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 11 and 113 legal claims filed as a defendant, with an aggregate claim ofW 444 million andW 6,906 million as of December 31, 2019. A provision liability ofW 2,549 million andW 9,888 million have been recognized for these pending lawsuits. In addition, the Group took out the personal information protection liability insurance. On the other hand, the further appeals can be filed against the Group, however, the final outcome cannot be reasonably measured.
f) As of December 31, 2019, the Group is not able to dispose, transfer or collateralize the shares of a joint-venture lease company or the right of shares to a third party without the written consent of Kolao Holdings for five years (the restriction period for the disposal of its equity) from the date of initial investment for KB KOLAO LEASING Co., LTD. Each party of the joint venture lease company may transfer all or part of its equity, as determined separately, after the restriction period for the disposal of its equity has expired. Meanwhile, according to the agreement, KB KOLAO LEASING Co., LTD. disposes affiliated receivables, which are overdue for more than three months, of Kolao Holdings to Lanexang Leasing Co., Ltd.
g) KB Securities is a professional private equity investment firm which sells private investment funds that loans capital to corporations (borrowers) who invest in rental apartment of disables in Australia. KB Securities soldW 326,500 million in funds and trusts to individuals and institutional investors. However, KB Securities is in probable of a loss of investment principal because the operation of the funds became impossible due to a contract breach of a local borrower. In this regard, one lawsuit has been filed with the Group and there is a possibility of further lawsuits as of December 31, 2019. The expected loss from the lawsuit is reflected as provision and the result of the lawsuit is unpredictable as of now.
220
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
h) Regarding Lime Asset Management, KB Securities is holding PIS(Portfolio Index Swap) contract in related to Lime Thetis Qualified Investor Private Investment Trust No.2 and Lime Pluto FI Qualified Investor Private Investment TrustNo.D-1, which are suspended to repurchase in fourth quarter of 2019 and KB Securities holds beneficiary certificates and TRS contracts as underlying asset amount toW 403,700 million. On the other hand, KB Securities has sold feeder fund of applicable funds amounts toW 68,100 million. Lime Asset Management conducted a due diligence on the assets of the suspended fund through an external evaluation agency and adjusted the base price based on the results of the due diligence. The Group measured the fair values of the fund and linked TRS based on the fund base price, which is adjusted by Lime Asset Management reflecting the results of the due diligence. Lime Asset Management has a repurchase and management plan in place, however, at the current status, either the availability or timing of repurchase of the fund cannot be predicted. There is possibility of lawsuit to be filed in the future, but the impact on the financial statements is unpredictable as of now.
i) Kookmin Bank signed a contract to take over a 70 percent share in Prasak(PRASAC Microfinance Institution Limited), a microcreditary finance company in Cambodia, for US$ 603 million from an existing stockholder on January 6, 2020. The Group is required to report this contract to the domestic and foreign financial authorities for approval in order to complete the contract.
The Group has signed an agreement with the existing shareholders of PRASAC. Existing shareholders of PRASAC have the right of put option to sell 30% of the remaining shares to the Group, and they are entitled to exercise their rights at the exercise price calculated on the basis of the adjustment book amount at the end of 2021 within six months from the issue date of the audit report or date when the adjusted book amount is confirmed. If existing shareholders do not exercise put option within the exercise period, the Group has the right of call option to buy the shares of existing shareholders within six months of the end of the put option exercisable period. All stockholders are restricted from selling shares or additional pledge before exercising the put option and call option.
j) KB Kookmin Card signed a stock sale agreement to acquire 80% of the shares of PT. Finansia Multi Finance, Indonesian financial company, for US$ 81 million in December 2019 and paid US$ 16 million in December 2019. In addition, KB Kookmin Card entered into a contract to acquire bonds, which includes the right to exchange 5% of PT. Finansia Multi Finance shares, issued by PT. Finansia Multi Finance shareholders for US$ 5 million.
221
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
41. Subsidiaries
Details of subsidiaries as of December 31, 2019, 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. | 100.00% | Korea | Dec. 31 | Non-life insurance | ||||||
KB Kookmin Card Co., Ltd. | 100.00% | Korea | Dec. 31 | Credit card and installment finance | ||||||
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 Life Insurance Co., Ltd. | 100.00% | Korea | Dec. 31 | Life insurance | ||||||
KB Real Estate Trust Co., Ltd. | 100.00% | Korea | Dec. 31 | Real estate trust management | ||||||
KB Savings Bank Co., Ltd. | 100.00% | Korea | Dec. 31 | Savings banking | ||||||
KB Investment Co., Ltd. | 100.00% | Korea | Dec. 31 | Capital investment | ||||||
KB Data System Co., Ltd. | 100.00% | Korea | Dec. 31 | Software advisory, development, and supply | ||||||
KB Credit Information Co., Ltd. | 100.00% | Korea | Dec. 31 | Collection of receivables or credit investigation | ||||||
Kookmin Bank | Kookmin Bank Cambodia PLC. | 100.00% | Cambodia | Dec. 31 | Banking and foreign exchange transaction | |||||
Kookmin Bank Int’l Ltd. (London)6 | 100.00% | United Kingdom | 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% | Myanmar | Dec. 31 | Other credit granting n.e.c. | ||||||
KBD Tower 1st L.L.C. and 39 others2 | — | Korea | Dec. 31 | Asset-backed securitization | ||||||
KB Haeoreum private securities investment trust 83(Bond) | 99.94% | Korea | Dec. 31 | Capital investment |
222
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
Investor | Investee | Ownership interests (%) | Location | Date of financial statements | Industry | |||||
Kiwoom Frontier Private placement fund 10[Bond] | 99.90% | Korea | Dec. 31 | Capital investment | ||||||
Tong Yang Safe Plus Qualified Private TrustS-8 | 99.96% | 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 1USD(BOND) | 77.78% | Korea | Dec. 31 | Capital investment | ||||||
KB KBSTARMid-Long Term KTB Active ETF3 | 87.53% | Korea | Dec. 31 | Capital investment | ||||||
Samsung KODEX 10YF-SKTB Inverse | 98.56% | Korea | Dec. 31 | Capital investment | ||||||
KB Global Private Real Estate Debt Fund 3rd(USD) | 99.50% | Korea | Dec. 31 | Capital investment | ||||||
KB Europe Renewable Specialized Investment NO.2(EUR)(SOC- FoFs)3 | 50.00% | Korea | Dec. 31 | Capital investment | ||||||
KB Korea Short Term Premium Private Securities 10 (USD)(BOND)3 | 50.00% | Korea | Dec. 31 | Capital investment | ||||||
AIP US Red Private Real Estate Trust NO.10 | 99.97% | 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 | 99.70% | Vietnam | Dec. 31 | Investment advisory and securities dealing activities | ||||||
Able NS Co., Ltd and 64 others2 | — | Korea | Dec. 31 | Asset-backed securitization | ||||||
KB NA COMPASS Energy Private Special Asset Fund3 | 29.67% | Korea | Dec. 31 | Capital investment | ||||||
Hyundai Smart Index Alpha Securities Feeder Investment Trust No.1 | 98.86% | Korea | Dec. 31 | Capital investment | ||||||
Hyundai Strong Korea Equity Trust No.1 | 99.51% | Korea | Dec. 31 | Capital investment | ||||||
Hyundai Kidzania Equity Feeder Trust No.1 | 79.67% | Korea | Dec. 31 | Capital investment | ||||||
Hyundai Value Plus Equity Feeder Trust No.1 | 99.64% | 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 |
223
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
Investor | Investee | Ownership interests (%) | Location | Date of financial statements | Industry | |||||
Heungkuk Global Highclass Private Real Estate Trust No. 23 | 100.00% | Korea | Dec. 31 | Capital investment | ||||||
Hyundai Dynamic Mix Securities 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 | ||||||
HyundaiKon-tiki Specialized Privately Placed Fund No.1 | 82.06% | Korea | Dec. 31 | Capital investment | ||||||
DGB Private real estate Investment Trust No.8 | 98.77% | Korea | Dec. 31 | Capital investment | ||||||
Aquila Global Real Assets Fund No.1 LP | 99.96% | Cayman islands | Dec. 31 | Capital investment | ||||||
Mangrove Feeder Fund | 100.00% | Cayman islands | Dec. 31 | Capital investment | ||||||
LB Ireland Private Real Estate Investment Trust 8 | 96.64% | Korea | Dec. 31 | Capital investment | ||||||
KTB Aircraft Private Investment TrustNo.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 | 54.84% | Korea | Dec. 31 | Capital investment | ||||||
Hyundai Strong-small Corporate Trust[Stock] | 91.61% | Korea | Dec. 31 | Capital investment | ||||||
Capstone US Professional Investment Private Fund #6 | 99.79% | Korea | Dec. 31 | Capital investment | ||||||
JB Dry Street Private Fund1 | 100.00% | Korea | Dec. 31 | Capital investment | ||||||
JB Australia108 Private Fund1 | 100.00% | Korea | Dec. 31 | Capital investment | ||||||
JB Forge Private Fund1 | 100.00% | Korea | Dec. 31 | Capital investment | ||||||
JB Hall Street Private Fund1 | 100.00% | Korea | Dec. 31 | Capital investment | ||||||
JB Margaret Street Private Fund1 | 100.00% | Korea | Dec. 31 | Capital investment | ||||||
LB UK Private Real Estate Investment Trust No.18 | 100.00% | Korea | Dec. 31 | Capital investment | ||||||
LB UK Private Real Estate Investment Trust No.19 | 100.00% | Korea | Dec. 31 | Capital investment | ||||||
KB Insurance Co., Ltd. | 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 Claims Survey & Adjusting | 100.00% | Korea | Dec. 31 | Claim service | ||||||
KB Sonbo CNS | 100.00% | Korea | Dec. 31 | Management service | ||||||
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 |
224
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
Investor | Investee | Ownership interests (%) | Location | Date of financial statements | Industry | |||||
KB CHILE SOLAR FUND | 80.00% | Korea | Dec. 31 | Capital investment | ||||||
Meritz Private Specific Real Estate Fund1-2 | 87.21% | Korea | Dec. 31 | Capital investment | ||||||
KB Global Private Real Estate Debt Fund 13 | 50.00% | Korea | Dec. 31 | Capital investment | ||||||
Hana Landchip Real estate Private Fund 58th | 99.99% | Korea | Dec. 31 | Financial investment | ||||||
Hyundai Power Professional Investment Type Private Investment Fund No.4 | 99.79% | Korea | Dec. 31 | Financial investment | ||||||
KB U.S. LongShort Private Securities Fund 1 | 99.37% | Korea | Dec. 31 | Financial investment | ||||||
Hyundai Infra Professional Investment Type Private Investment Trust No.5 | 99.82% | Korea | Dec. 31 | Financial investment | ||||||
KB SAUDI SEPCO II Private Special Asset Fund | 80.00% | Korea | Dec. 31 | Financial investment | ||||||
Meritz Private Real Estate Fund 8 | 99.36% | Korea | Dec. 31 | Financial investment | ||||||
Hyundai Star Private Real Estate Investment Trust No. 14 | 99.98% | Korea | Dec. 31 | Financial investment | ||||||
Vogo debt strategy private real estate fund VII | 99.25% | 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 Investment Private Fund | 99.08% | 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 AU Infigen Energy Private Special Asset Fund 23 | 47.37% | Korea | Dec. 31 | Capital investment | ||||||
KB North American Loan Specialty Private Real Estate Investment Trust 3rd3 | 36.12% | Korea | Dec. 31 | Capital investment | ||||||
Multi Asset Global Private Debt Fund 6 | 99.62% | Korea | Dec. 31 | Capital investment | ||||||
KB Kookmin Card Co., Ltd. | KB DAEHAN SPECIALIZED BANK PLC. | 90.00% | Cambodia | Dec. 31 | Banking | |||||
KB Kookmin Card 3rd Securitization Co., Ltd. and 3 others2 | 0.50% | Korea | Dec. 31 | Asset-backed securitization | ||||||
Heungkuk Life Insurance Money Market Trust | 100.00% | Korea | Dec. 31 | Trust asset management | ||||||
KB Asset Management Co., Ltd. | KBAM Shanghai Advisory Services Co.,Ltd | 100.00% | China | Dec. 31 | General advisory | |||||
KB Star Office Private Real Estate Feeder fund3-2 | 88.00% | Korea | Dec. 31 | Capital investment | ||||||
KB Asset Management Singapore Pte, Ltd. | 100.00% | Singapore | Dec. 31 | Collective investment | ||||||
KB Global Multiasset Income Securities Feeder Fund(Bond Mixed-FoFs)3 | 36.56% | Korea | Dec. 31 | Capital investment | ||||||
KB Active Investor Securities Investment Trust(Derivatives Mixed) | 71.16% | Korea | Dec. 31 | Capital investment |
225
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
Investor | Investee | Ownership interests (%) | Location | Date of financial statements | Industry | |||||
KB G2 Plus Korea Securities Fund(Equity) | 52.51% | Korea | Dec. 31 | Capital investment | ||||||
KB Hedge Fund Solution Mixed Asset Fund(FoFs) | 97.62% | Korea | Dec. 31 | Capital investment | ||||||
KB OCIO Global Asset Allocation Private Fund 1 | 83.69% | Korea | Dec. 31 | Capital investment | ||||||
KB Global Big data Research Securities Feeder Fund(Equity)(H) | 99.49% | Korea | Dec. 31 | Capital investment | ||||||
KB Long-term Total Return Performance Fee Securities Investment Trust(Equity-mixed) | 56.94% | Korea | Dec. 31 | Capital investment | ||||||
KB GLOBAL ESG SECURITIES FEEDER FUND(USD)(EQUITY) | 53.80% | Korea | Dec. 31 | Capital investment | ||||||
KB Star Office Private Real Estate Investment Trust 53 | 37.11% | Korea | Dec. 31 | Capital investment | ||||||
KB Global Core REITs Real Estate Self-Investment Trust(H) C-F | 50.36% | Korea | Dec. 31 | Capital investment | ||||||
KB Global Core REITs Real Estate Self-Investment Trust (UH)C-F | 85.52% | Korea | Dec. 31 | Capital investment | ||||||
KB Global Alpha Opportunity Securities Investor Trust (Mixed-Redirect)3 | 33.66% | Korea | Dec. 31 | Capital investment | ||||||
KB Best More Dream Mixed Assets Self-Investment Trust | 79.73% | Korea | Dec. 31 | Capital investment | ||||||
KB Korea Equity EMP Solution Securities Fund(Equity-FoFs)3 | 45.26% | Korea | Dec. 31 | Capital investment | ||||||
KB Investment Co., Ltd. | 2011KIF-KB IT Venture Fund4 | 43.33% | Korea | Dec. 31 | Capital investment | |||||
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 Fund4 | 20.00% | Korea | Dec. 31 | Capital investment | ||||||
KB Culture & Global Digital Contents Fund Limited partnership4 | 22.50% | Korea | Dec. 31 | Capital investment | ||||||
KB Gross Capital Fund4 | 32.30% | Korea | Dec. 31 | Capital investment | ||||||
Kookmin Bank, KB Investment Co., Ltd. | KB12-1 Venture Investment | 100.00% | Korea | Dec. 31 | Capital investment | |||||
KBStart-up Creation Fund | 62.50% | Korea | Dec. 31 | Capital investment | ||||||
KB Intellectual Property Fund4 | 34.00% | Korea | Dec. 31 | Capital investment | ||||||
Kookmin Bank, KB Securities Co., Ltd., KB Insurance Co., Ltd., | KB Global Infra Private Special Asset Fund No.53 | 45.46% | Korea | Dec. 31 | Capital investment |
226
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
Investor | Investee | Ownership interests (%) | Location | Date of financial statements | Industry | |||||
Kookmin Bank, KB Securities Co., Ltd., KB Insurance Co., Ltd., | KB Global Infra Private Special Asset Fund No.63 | 45.46% | Korea | Dec. 31 | Capital investment | |||||
Kookmin Bank, KB Insurance Co., Ltd., KB life Insurance Co., Ltd., KB Investment Co., Ltd. | KB High-tech Company Investment Fund | 100.00% | Korea | Dec. 31 | Capital investment | |||||
Kookmin Bank, KB Securities Co., Ltd., KB Insurance Co., Ltd., KB Kookmin Card Co., Ltd., KB Capital Co., Ltd., KB Life Insurance Co., Ltd.. | KB digital innovation&growth New Technology Business Investment Fund | 100.00% | Korea | Dec. 31 | Capital investment | |||||
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 Insurance Co., Ltd., KB Investment Co., Ltd., KB Capital Co., Ltd. | KB Digital Innovation Investment Fund Limited partnership | 62.51% | Korea | Dec. 31 | Capital investment | |||||
Kookmin Bank, KB Securities Co., Ltd., KB Insurance Co., Ltd., KB Kookmin Card Co., Ltd., KB Capital Co., Ltd., KB Investment Co., Ltd. | KB Global Platform Fund | 100.00% | Korea | Dec. 31 | Capital investment | |||||
Kookmin Bank, KB Securities Co., Ltd., KB Life Insurance Co., Ltd., KB real estimate trust co., Ltd. | KB Wise Star Private Real Estate Feeder Fund 1st. | 100.00% | Korea | Dec. 31 | Investment trust | |||||
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 KBSTARMid-Long Term KTB Active ETF3 | 37.59% | Korea | Dec. 31 | Capital investment | |||||
Kookmin Bank, KB Insurance Co., Ltd., | KOREIT BIEN Specialized Private Equity Private Investment Trust No. 1 | 100% | Korea | Dec. 31 | Capital investment | |||||
Kookmin Bank, KB Insurance Co., Ltd. | KB Mezzanine Private Security Investment Trust No.33 | 25.33% | Korea | Dec. 31 | Capital investment | |||||
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., KB life Insurance Co., Ltd. | KB New Renewable Energy Private Special Asset Fund 1 | 100.00% | Korea | Dec. 31 | Capital investment | |||||
Kookmin Bank, KB Insurance Co., Ltd., KB life Insurance Co., Ltd., KB Asset Management Co., Ltd. | KB Core Blind Private Estate Fund 1st | 100.00% | Korea | Dec. 31 | Capital investment | |||||
Kookmin Bank, KB life Insurance Co., Ltd., | KB Mezzanine Private Security Investment Trust No.23 | 40.74% | Korea | Dec. 31 | Capital investment | |||||
Kookmin Bank, 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 |
227
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
Investor | Investee | Ownership interests (%) | Location | Date of financial statements | Industry | |||||
Kookmin Bank, KB Securities Co., Ltd. | Meritz Private Real Estate Fund9-2 | 100.00% | Korea | Dec. 31 | Capital investment | |||||
Kookmin Bank, KB Securities Co., Ltd., KB Insurance Co., Ltd., KB life Insurance Co., Ltd. KB Asset Management Co., Ltd. | KB Global Core Bond Securities Fund Master Fund(Bond) | 77.30% | Korea | 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 Neo Paradigm Agriculture Venture4 | 50.00% | Korea | Dec. 31 | Capital investment | |||||
. | KB New Paradigm Fisheries Venture Fund4 | 33.33% | Korea | Dec. 31 | Capital investment | |||||
KB Securities Co., Ltd., KB Asset Management Co., Ltd. | KB Onkookmin Life Income RIF 20feeder Fund(Fofs) | 99.04% | Korea | Dec. 31 | Capital investment | |||||
KB Onkookmin Life Income RIF 40feeder Fund(Fofs) | 99.23% | Korea | Dec. 31 | Capital investment | ||||||
KB Onkookmin TDF 2030 Master Fund(Fofs) 3 | 27.82% | Korea | Dec. 31 | Capital investment | ||||||
KB Onkookmin TDF 2045 Master Fund(Fofs) 3 | 32.68% | Korea | Dec. 31 | Capital investment | ||||||
KB Securities Co., Ltd., KB life Insurance Co. | KB AU Infigen Energy Private Special Asset Fund | 100.00% | Korea | Dec. 31 | Capital investment | |||||
KB Securities Co., Ltd., KB Asset Management Co., Ltd., KB Star Office Private Real Estate Investment Trust No.5 | KB Wise Star Private Real Estate Feeder Fund 2nd | 88.23% | Korea | Dec. 31 | Capital investment | |||||
KB Insurance Co., Ltd., KB life Insurance Co., Ltd | KB North American Loan Specialty Private Real Estate Investment Trust 1st | 100.00% | 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 | |||||
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 | |||||
KB Wise Star Private Real Estate Feeder Fund 1st., KB Securities Co., KB Asset Management Co., Ltd. | KB Star Office Private Real Estate Investment Trust 3 | 52.31% | Korea | Dec. 31 | Capital investment | |||||
Hyundai Strong Korea Equity Trust No.1 | Hyundai Strong Korea Equity Trust No.1[Master] | 66.56% | Korea | Dec. 31 | Capital investment | |||||
Mangrove Feeder Fund | Mangrove Master Fund | 100.00% | Cayman islands | Dec. 31 | Capital investment | |||||
KBFG Securities Hongkong Ltd. | Global Investment Opportunity Limited | 100.00% | Malaysia | Dec. 31 | Finance and Real Estate Investment | |||||
Hyundai Smart Index Alpha Securities Feeder Inv Trust 1 | Hyundai Smart Index Alpha Securities Master Investment Trust | 99.86% | Korea | Dec. 31 | Capital investment |
228
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
Investor | Investee | Ownership interests (%) | Location | Date of financial statements | Industry | |||||
Hyundai Value Plus Securities Feeder Investment Trust 1 and Hyundai Kidzania Equity Feeder Trust No.1 | 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 | 98.48% | Korea | Dec. 31 | Capital investment | |||||
Hyundai Quant Long Short Securities Feeder Investment Trust 1 | Hyundai Quant Long Short Securities Master Investment Trust | 100.00% | Korea | Dec. 31 | Capital investment | |||||
Aquila Global Real Assets Fund No.1 LP | AGRAF Real Estate No.1, Senningerberg | 100.00% | Luxemburg | Dec. 31 | Asset-backed securitization | |||||
AGRAF Real Estate No.1, Senningerberg | AGRAF Real Estate Holding No.1, Senningerberg | 100.00% | Luxemburg | Dec. 31 | Asset-backed securitization | |||||
AGRAF Real Estate Holding No.1, Senningerberg | Vierte CasaLog GmbH & Co. KG | 100.00% | Germany | Dec. 31 | Real estate investment | |||||
AGRAF Real Estate Holding No.1, Senningerberg | HD1 Grundstucksgesellschaft mbH & Co. KG | 100.00% | Germany | Dec. 31 | Real estate investment | |||||
AGRAF Real Estate Holding No.1, Senningerberg | Sechste Casalog KG | 100.00% | Germany | Dec. 31 | Real estate 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 investment | |||||
ABLE NJ DSM INVESTMENT REIT | ABLE NJ DSM, LLC | 100.00% | United States of America | Dec. 31 | Real estate investment | |||||
Heungkuk Global Highclass Private Real Estate Trust 23 | HYUNDAI ABLE INVESTMENT REIT | 99.90% | United States of America | Dec. 31 | Real estate investment | |||||
HYUNDAI ABLE INVESTMENT REIT | HYUNDAI ABLE PATRIOTS PARK, LLC | 100.00% | United States of America | Dec. 31 | Real estate investment | |||||
LB Ireland Private Real Estate Investment Trust 8 | BECKETT ACQUISITION LIMITED | 100.00% | Ireland | Dec. 31 | Real estate investment | |||||
KB Global Multiasset Income Securities Feeder Fund(Bond Mixed-FoFs) | KB Global Multiasset Income Securities Master Fund(Bond Mixed-FoFs) | 87.00% | Korea | Dec. 31 | Capital investment | |||||
KB Onkookmin Life Income RIF 20feeder Fund(Fofs) | KB Onkookmin Life Income RIF 20 Master Fund(Fofs) | 86.00% | Korea | Dec. 31 | Capital investment | |||||
KB Onkookmin Life Income RIF 40feeder Fund(Fofs) | KB Onkookmin Life Income RIF 40 Master Fund(Fofs) | 86.00% | Korea | Dec. 31 | Capital investment | |||||
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 | |||||
Mirae Asset Triumph Global Privately placed feeder Investment Trust 1 | Mirae Asset Triumph Global Privately placed Master Investment Trust 2 | 100.00% | Korea | Dec. 31 | Capital investment | |||||
KB Global Core Bond Securities feeder Fund(Bond) | KB Global Core Bond Securities Master Fund(Bond) | 100.00% | Korea | Dec. 31 | Capital investment |
229
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
Investor | Investee | Ownership interests (%) | Location | Date of financial statements | Industry | |||||
KB Global Big data Research Securities Master Fund(Equity)(H) | KB Global Big data Research Securities Master Fund(Equity)(H) | 100.00% | Korea | Dec. 31 | Capital investment | |||||
KB Global Good Investment ESG Securities feeder Fund(Equity)(H), KB Best More Dream Mixed Assets Self-Investment Trust | KB GLOBAL ESG SECURITIES FEEDER FUND(USD) | 100.00% | Korea | Dec. 31 | Capital investment | |||||
KB Global Core REITs Real Estate Self-Investment Trust (Redirect) (H), KB Global Core REITs Real Estate Self-Investment Trust (Redirect) (UH)C-F, KB Best More Dream Mixed Assets Self-Investment Trust | KB Global Core REITs Real Estate Investment Fund (Indirect) | 100.00% | Korea | Dec. 31 | Capital investment | |||||
KB Global Alpha Opportunity Securities Investor Trust (Mixed-Redirect), KB Best More Dream Mixed Assets Self-Investment Trust | KB Global Alpha Opportunity Securities Parent Investment Trust (Mixed-Redirect) | 100.00% | Korea | Dec. 31 | Capital investment | |||||
KB Hedge Fund Solution Mixed Asset Parent Investment Trust (Private Investment Indirect), KB Best More Dream Mixed Assets Self-Investment Trust | KB Hedge Fund Solution Mixed Asset Parent Investment Trust (Private Investment Indirect) | 100.00% | Korea | Dec. 31 | Capital investment | |||||
KB Wise Star Private Real Estate Feeder Fund 1st, KB Wise Star Private Real Estate Feeder Fund 2nd | KB Wise Star Jongno Tower Real Estate Master Fund | 100.00% | Korea | Dec. 31 | Capital investment | |||||
KB Core Blind Private Estate Fund 1st | KB Wise Star Private Real Estate Feeder Fund 3rd3 | 46.90% | Korea | Dec. 31 | Capital investment | |||||
Kookmin Bank | Personal pension trusts and 10 other trusts1 | — | Korea | Dec. 31 | Trust | |||||
Vestas Qualified Investors Private Real Estate Fund Investment Trust No.38 | Lumen International Developments | 100.00% | Luxemburg | Dec. 31 | Capital investment | |||||
Lumen International Developments | VREF Shaftesbury ScSp | 100.00% | Luxemburg | Dec. 31 | Capital investment | |||||
LB UK Private Real Estate Investment Trust No.18, etc | Hillswood Finco Ltd. | 100.00% | Jersey | Dec. 31 | Capital investment | |||||
LB UK Private Real Estate Investment Trust No.18, etc | Hillswood Holdings Ltd. | 100.00% | Jersey | Dec. 31 | Capital investment | |||||
LB UK Private Real Estate Investment Trust No.18, etc | Hillswood Holding Property Unit Trust | 100.00% | Jersey | Dec. 31 | Capital investment |
230
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
Investor | Investee | Ownership interests (%) | Location | Date of financial statements | Industry | |||||
Hillswood Holding Property Unit Trust, etc | Hillswood Property Unit Trust | 100.00% | Jersey | Dec. 31 | Capital investment | |||||
Hyundai Strong-small Corporate Trust No.1 | Hyundai Strong-small Corporate Master Trust | 80.43% | Korea | Dec. 31 | Capital investment |
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 investee’s 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 investee’s 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 investee’s 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 investee’s 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 Int’l 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 |
Structured companies that hold more than half of their ownership percentage but do not have the strength to related activities in accordance with agreements with trust and other related parties are excluded from the consolidation.
231
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
The condensed financial information of major subsidiaries as of December 31, 2019 and 2018, and for the years ended December 31, 2019 and 2018, is as follows:
(In millions of Korean won)
2019 | ||||||||||||||||||||||||
Assets | Liabilities | Equity | Operating income | Profit (loss) for the year | Total comprehensive income (loss) for the year | |||||||||||||||||||
Kookmin Bank1 | ||||||||||||||||||||||||
KB Securities Co., Ltd.1,2 | 47,816,512 | 43,131,858 | 4,684,654 | 8,053,363 | 257,893 | 261,639 | ||||||||||||||||||
KB Insurance Co., Ltd.1,2 | 36,552,368 | 32,689,460 | 3,862,908 | 12,661,927 | 234,327 | 366,362 | ||||||||||||||||||
KB Kookmin Card Co., Ltd.1 | 22,990,114 | 18,925,195 | 4,064,919 | 3,102,186 | 316,546 | 306,251 | ||||||||||||||||||
KB Asset Management Co., Ltd.1 | 310,018 | 114,776 | 195,242 | 148,780 | 48,899 | 48,490 | ||||||||||||||||||
KB Capital Co., Ltd.1, | 11,190,568 | 10,036,077 | 1,154,491 | 931,694 | 117,028 | 115,524 | ||||||||||||||||||
KB Life Insurance Co., Ltd.1, 2 | 9,801,905 | 9,186,567 | 615,338 | 1,506,417 | 15,963 | 63,107 | ||||||||||||||||||
KB Real Estate Trust Co., Ltd. | 377,938 | 85,132 | 292,806 | 119,899 | 61,713 | 61,672 | ||||||||||||||||||
KB Savings Bank Co., Ltd. | 1,361,032 | 1,148,625 | 212,407 | 92,435 | 16,301 | 15,433 | ||||||||||||||||||
KB Investment Co., Ltd.1 | 756,972 | 542,221 | 214,751 | 99,822 | 11,311 | 11,310 | ||||||||||||||||||
KB Data System Co., Ltd. | 41,690 | 20,999 | 20,691 | 158,067 | 4,664 | 4,282 | ||||||||||||||||||
KB Credit Information Co., Ltd. | 27,834 | 12,936 | 14,898 | 38,278 | (256 | ) | (337 | ) |
232
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
(In millions of Korean won)
2018 | ||||||||||||||||||||||||
Assets | Liabilities | Equity | Operating income | Profit (loss) for the year | Total comprehensive income (loss) for the year | |||||||||||||||||||
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 |
1 | Financial information is based on its consolidated financial statements. |
2 | The amount includes the fair value adjustments due to the merger. |
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 24 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. |
233
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
Changes in subsidiaries
The subsidiaries newly included in consolidation during the year ended December 31, 2019, are as follows:
Company | Description | |
KBAM Shanghai Advisory Services Co.,Ltd and 38 others | Holds over than a majority of the ownership interests | |
KBH the 5th L.L.C and 70 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 New Renewable Energy Private Special Asset Fund 1 and 15 others | Holds the power to determine the operation of the trust and exposed to variable returns by holding significant amount of ownership interests | |
KB Culture & Global Digital Contents Fund Limited partnership and 2 others | 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, 2019, are as follows:
Company | Description | |
KH the 4th L.L.C and 59 others | Lost the right of variable returns due to the releasing debt | |
KB Evergreen Private Securities Fund 98(Bond) and 6 others | Liquidation | |
Hyundai China Index Plus Securities Investment Trust No.1 and 13 others | Disposal | |
KB Everyone TDF 2035 Securities Investment Trust—Bond Balanced-Fund of Funds and 7 others | Ownership decrease |
234
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
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 | |||
Structured financing | Granting PF loans and stocks to SOC and real estate Granting loans and stocks to ships/aircrafts SPC Project financing, such as mergers and acquisitions | Construction of SOC and real estate Building ships/ construction and purchase of aircrafts Mergers and acquisitions | Loan commitments through Credit Line, providing lines of credit and investment agreements | |||
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 | |||
Trusts | 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 | |||
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 |
235
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
Details of scale of unconsolidated structured entities and nature of the risks associated with the Group’s interests in unconsolidated structured entities as of December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | |||||||||||||||||||
Structured financing | Investment funds | Trusts | Asset-backed securitization and others | Total | ||||||||||||||||
Total assets of unconsolidated structured entity | ||||||||||||||||||||
Carrying amount on financial statements | ||||||||||||||||||||
Assets | ||||||||||||||||||||
Financial assets at fair value through profit or loss | 132,685 | 9,846,278 | — | 2,405,228 | 12,384,191 | |||||||||||||||
Derivative financial assets | — | — | — | 2,959 | 2,959 | |||||||||||||||
Loans at amortized cost | 4,775,723 | 293,221 | 266,974 | 920,863 | 6,256,781 | |||||||||||||||
Financial investments | — | — | — | 5,166,578 | 5,166,578 | |||||||||||||||
Investment in associates | — | 352,488 | — | — | 352,488 | |||||||||||||||
Other assets | 1,876 | 69,353 | 93,613 | 9,181 | 174,023 | |||||||||||||||
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4,910,284 | 10,561,340 | 360,587 | 8,504,809 | 24,337,020 | ||||||||||||||||
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Liabilities | ||||||||||||||||||||
Deposits | 523,086 | 90,131 | — | 409,246 | 1,022,463 | |||||||||||||||
Derivative financial liabilities | — | — | — | 228 | 228 | |||||||||||||||
Other liabilities | 1,362 | 78 | — | 16,169 | 17,609 | |||||||||||||||
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524,448 | 90,209 | — | 425,643 | 1,040,300 | ||||||||||||||||
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Maximum exposure to loss1 | ||||||||||||||||||||
Holding assets | 4,910,284 | 10,561,340 | 360,587 | 8,504,809 | 24,337,020 | |||||||||||||||
Purchase and investment commitments | 38,650 | 3,980,356 | — | 945,598 | 4,964,604 | |||||||||||||||
Unused credit | 654,203 | 2,900 | 28,427 | 1,927,902 | 2,613,432 | |||||||||||||||
Payment guarantee and loan commitments | 1,816,411 | 7,188 | — | 600,664 | 2,424,263 | |||||||||||||||
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Methods of determining the maximum exposure to loss | | Loan commitments /investment agreements / purchase commitments and acceptances and guarantees | | | Investments / loans and capital commitments | | Dividends by results trust: Total amount of trust exposure | | | Providing lines of credit/ purchase commitments/ loan commitments and acceptances and guarantees | |
236
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
(In millions of Korean won) | 2018 | |||||||||||||||||||
Structured financing | Investment funds | Trusts | Asset-backed securitization and others | Total | ||||||||||||||||
Total assets of unconsolidated structured entity | ||||||||||||||||||||
Carrying amount on financial statements | ||||||||||||||||||||
Assets | ||||||||||||||||||||
Financial assets at fair value through profit or loss | 129,367 | 7,934,662 | — | 3,846,725 | 11,910,754 | |||||||||||||||
Derivative financial assets | — | 23,794 | — | 4,089 | 27,883 | |||||||||||||||
Loans at amortized cost | 3,987,339 | 391,665 | 34,000 | 635,840 | 5,048,844 | |||||||||||||||
Financial investments | — | 8,636 | — | 6,040,008 | 6,048,644 | |||||||||||||||
Investment in associates | — | 258,594 | — | — | 258,594 | |||||||||||||||
Other assets | 1,719 | 48,872 | 109,357 | 17,046 | 176,994 | |||||||||||||||
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Liabilities | ||||||||||||||||||||
Deposits | ||||||||||||||||||||
Derivative financial liabilities | — | 6,232 | — | 1,285 | 7,517 | |||||||||||||||
Other liabilities | 1,334 | 59 | — | 28,373 | 29,766 | |||||||||||||||
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Maximum exposure to loss1 | ||||||||||||||||||||
Holding assets | ||||||||||||||||||||
Purchase and investment commitments | — | 3,345,947 | — | 1,094,489 | 4,440,436 | |||||||||||||||
Unused credit | 6,789 | 1,450 | — | 2,211,226 | 2,219,465 | |||||||||||||||
Payment guarantee and loan commitments | 1,582,943 | — | — | 519,633 | 2,102,576 | |||||||||||||||
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Methods of determining the maximum exposure to loss | | Loan commitments /investment agreements / purchase commitments and acceptances and guarantees | | | Investments / loans and capital commitments | | Dividends by results trust: Total amount of trust exposure | | | Providing lines of credit/ purchase commitments/ loan commitments and acceptances and guarantees | |
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. |
237
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
43. Lease
43.1 The amounts recognized in the consolidated statement of financial position
The amounts related to lease recognized in statement of financial position as of December 31, 2019 and January 1, 2019, are as follows:
(In millions of Korean won) | December 31, 2019 | January 1, 2019 | ||||||
Right-of-use property and equipment1 | ||||||||
Real estate | ||||||||
Vehicles | 13,542 | 17,557 | ||||||
Others | 18,543 | 17,268 | ||||||
Right-of-use intangible assets1 | 9,698 | 21,063 | ||||||
|
|
|
| |||||
|
|
|
| |||||
Lease liabilities1 | ||||||||
|
|
|
|
1 | It is included in property and equipment, intangible assets and other liabilities. |
43.2 The amounts recognized in the consolidated statement of comprehensive income
The amount related to lease recognized in the consolidated statement of comprehensive income for the years ended December 31, 2019 is as follows:
(In millions of Korean won) | 2019 | |||
Depreciation and amortization ofright-of-use assets | ||||
Real estate | ||||
Vehicles | 19,594 | |||
Others | 10,345 | |||
Intangible asset | 9,893 | |||
|
| |||
|
| |||
Interest expenses on the lease liabilities | ||||
Expense relating to short-term leases | 2,209 | |||
Expense relating to leases oflow-value assets that are not short-term leases | 5,416 | |||
Expense relating to variable lease payments not included in lease liabilities (included in administrative expenses) | 15 |
The total cash outflow for leases in 2019 wasW 228,312 million.
238
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
43.3 Finance lease - 2018
43.3.1 The Group as a finance lessee
The future minimum lease payments classified as a finance lease as at December 31, 2018 is as follows:
(In millions of Korean won) | 2018 | |||
Net carrying amount of finance lease assets | ||||
|
| |||
Minimum lease payment | ||||
Within 1 year | 6,827 | |||
1-5 years | 3,553 | |||
|
| |||
|
| |||
Present value of minimum lease payment | ||||
Within 1 year | 6,705 | |||
1-5 years | 3,456 | |||
|
| |||
|
|
43.3.2 The Group as a finance lessor
Total lease investment and the present value of minimum lease payments as of December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | |||||||
Total lease investment | Present value of minimum lease payment | |||||||
Within 1 year | ||||||||
1-5 years | 1,085,208 | 569,939 | ||||||
Later than 5 years | 773 | 748 | ||||||
|
|
|
| |||||
|
|
|
|
(In millions of Korean won) | 2018 | |||||||
Total lease investment | Present value of minimum lease payment | |||||||
Within 1 year | ||||||||
1-5 years | 1,225,265 | 565,152 | ||||||
|
|
|
| |||||
|
|
|
|
239
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
Unearned interest income of finance lease as of December 31, 2019 and 2018 is as follows:
(In millions of Korean won) | 2019 | 2018 | ||||||
Total lease investment | ||||||||
Net lease investment | ||||||||
Present value of minimum lease payment | 938,624 | 952,873 | ||||||
Present value ofNon-guaranteed residual value | 639,075 | 786,359 | ||||||
|
|
|
| |||||
1,577,699 | 1,739,232 | |||||||
|
|
|
| |||||
Unearned interest income | ||||||||
|
|
|
|
43.4 Operating lease
43.4.1 The Group as a operating lessee
The future minimum lease payments arising from thenon-cancellable lease contracts as of December 31 2018, are as follows:
(In millions of Korean won) | 2018 | |||
Minimum lease payment | ||||
Within 1 year | ||||
1-5 years | 299,900 | |||
Over 5 years | 111,906 | |||
|
| |||
|
| |||
Minimum sublease payment |
The lease payment reflected in profit or loss for the years ended December 31, 2018, is as follows:
(In millions of Korean won) | 2018 | |||
Lease payment reflected in profit or loss | ||||
Minimum lease payment | ||||
Sublease payment | (1,804 | ) | ||
|
| |||
|
|
43.4.2 The Group as a operating lessor
The future minimum lease receipts arising from thenon-cancellable lease contracts as of December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | 2018 | ||||||
Minimum lease receipts | ||||||||
Within 1 year | ||||||||
1-5 years | 1,432,354 | 985,097 | ||||||
Over 5 years | 682,165 | 280,084 | ||||||
|
|
|
| |||||
|
|
|
|
240
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
44. Related Party Transactions
Profit and loss arising from transactions with related parties for the years ended December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | 2018 | ||||||||
Associates and joint ventures | ||||||||||
Balhae Infrastructure Fund | Fee and commission income | |||||||||
Korea Credit Bureau Co., Ltd. | Interest expense | 21 | 127 | |||||||
Fee and commission income | 1,056 | 1,194 | ||||||||
Insurance income | 3 | — | ||||||||
Fee and commission expense | 2,541 | 1,909 | ||||||||
Other operating expense | — | 4 | ||||||||
KoFC KBIC Frontier Champ2010-5(PEF) 1 | Fee and commission income | — | 197 | |||||||
KB GwS Private Securities Investment Trust | Fee and commission income | 851 | 851 | |||||||
Incheon Bridge Co., Ltd. | Interest income | 8,612 | 9,426 | |||||||
Interest expense | 483 | 296 | ||||||||
Fee and commission income | — | 9 | ||||||||
Fee and commission expense | 7 | 2 | ||||||||
Insurance income | 284 | 365 | ||||||||
Gains on financial assets/liabilities at fair value through profit or loss | 4,975 | 2,655 | ||||||||
Reversal for credit losses | 5 | 6 | ||||||||
Provision for credit losses | 1 | 1 | ||||||||
KoFC POSCO HANHWA KB Shared Growth Private Equity Fund No. 2 | Fee and commission income | 178 | 210 | |||||||
Aju Good Technology Venture Fund | Interest expense | 22 | 30 | |||||||
KB Star Office Private Real Estate Investment Trust No.1 | Interest income | 370 | 370 | |||||||
Interest expense | 208 | 93 | ||||||||
Fee and commission income | 435 | 435 | ||||||||
RAND Bio Science Co., Ltd. | Interest expense | 5 | 3 | |||||||
Othernon-operating expense | 843 | — | ||||||||
Inno Lending Co., Ltd. 1 | Fee and commission income | — | 1 | |||||||
SY Auto Capital Co., Ltd. | Interest income | 1,016 | 1,279 | |||||||
Interest expense | 1 | — | ||||||||
Fee and commission income | 34 | 73 | ||||||||
Fee and commission expense | 389 | 840 | ||||||||
Insurance income | 32 | 33 | ||||||||
Other operating income | 689 | 621 | ||||||||
Other operating expense | 288 | 415 | ||||||||
Reversal for credit losses | 13 | — | ||||||||
Provision for credit losses | — | 14 | ||||||||
Food Factory Co., Ltd. | Interest income | 41 | 9 | |||||||
Insurance income | 4 | 5 |
241
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
Fee and commission expense | 12 | 1 | ||||||||
Gains on financial assets/liabilities at fair value through profit or loss | 60 | 30 | ||||||||
Reversal for credit losses | — | 1 | ||||||||
Provision for credit losses | 1 | 1 | ||||||||
KB Pre IPO Secondary Venture Fund 1st | Interest expense | 7 | 27 | |||||||
Fee and commission income | 110 | 110 | ||||||||
Builton Co., Ltd. 1 | Interest income | 1 | 4 | |||||||
Insurance income | 1 | 2 | ||||||||
Losses on financial assets/liabilities at fair value through profit or loss | — | 1 | ||||||||
KB Private Equity Fund III | Fee and commission income | 480 | 521 | |||||||
Wise Asset Management Co., Ltd. | Interest expense | 2 | 9 | |||||||
Acts Co., Ltd. | Interest income | 1 | — | |||||||
Insurance income | 1 | 2 | ||||||||
Gains on financial assets/liabilities at fair value through profit or loss | 30 | — | ||||||||
Losses on financial assets/liabilities at fair value through profit or loss | — | 1,851 | ||||||||
Othernon-operating expense | — | 1,246 | ||||||||
Dongjo Co., Ltd. | Reversal for credit losses | — | 31 | |||||||
Insurance income | 2 | 2 | ||||||||
A-PRO Co., Ltd. | Interest income | 19 | — | |||||||
Interest expense | 4 | 1 | ||||||||
Fee and commission expense | 17 | — | ||||||||
Insurance income | 4 | 5 | ||||||||
POSCO-KB Shipbuilding Fund | Fee and commission income | 490 | 490 | |||||||
Interest expense | — | 81 | ||||||||
Dae-A Leisure Co., Ltd. | Interest expense | 8 | 9 | |||||||
Paycoms Co., Ltd. | Interest income | 10 | 10 | |||||||
Insurance income | 1 | 1 | ||||||||
Gains on financial assets/liabilities at fair value through profit or loss | 125 | 125 | ||||||||
Bungaejangter Inc. 1 | Interest income | — | 60 | |||||||
Big Dipper Co., Ltd. | Reversal for credit losses | — | 2 | |||||||
KB-KDBC New Technology Business Investment Fund | Interest expense | 58 | 39 | |||||||
Fee and commission income | 449 | 322 | ||||||||
KBTS Technology Venture Private Equity Fund | Fee and commission income | 730 | 305 | |||||||
KB-SJ Tourism Venture Fund | Fee and commission income | 422 | 314 | |||||||
JLK INSPECTION Inc. 1 | Interest income | — | 6 | |||||||
Interest expense | 1 | — | ||||||||
TESTIAN Inc.1 | Interest income | 3 | 4 |
242
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
Gains on financial assets/liabilities at fair value through profit or loss | — | 83 | ||||||||
Rainist Co., Ltd. | Fee and commission income | 39 | — | |||||||
Interest expense | — | 2 | ||||||||
IWON ALLOY CO.,LTD. | Insurance income | 2 | 1 | |||||||
RMGPBio-Pharma Investment Fund, L.P. | Othernon-operating income | 33 | 10 | |||||||
Gains on financial assets/liabilities at fair value through profit or loss | 947 | — | ||||||||
Losses on financial assets/liabilities at fair value through profit or loss | 2,120 | — | ||||||||
Hasys. | Gains on financial assets/liabilities at fair value through profit or loss | 136 | — | |||||||
Losses on financial assets/liabilities at fair value through profit or loss | — | 136 | ||||||||
Insurance income | 50 | 4 | ||||||||
KB-Brain KOSDAQScale-up New Technology Business Investment Fund | Losses on financial assets/liabilities at fair value through profit or loss | 72 | — | |||||||
Interest expense | 89 | 21 | ||||||||
Fee and commission income | 735 | 108 | ||||||||
Spark Biopharma, Inc1. | Interest expense | 59 | 25 | |||||||
KB No.8 Special Purpose Acquisition Company1 | Interest expense | — | 17 | |||||||
Losses on financial assets/liabilities at fair value through profit or loss | — | 2,330 | ||||||||
KB No.9 Special Purpose Acquisition Company1 | Interest expense | (23 | ) | 43 | ||||||
Losses on financial assets/liabilities at fair value through profit or loss | — | 2,256 | ||||||||
Gains on financial assets/liabilities at fair value through profit or loss | — | 48 | ||||||||
KB No.10 Special Purpose Acquisition Company1 | Interest expense | 18 | 30 | |||||||
Gains on financial assets/liabilities at fair value through profit or loss | 3,066 | 121 | ||||||||
KB No.11 Special Purpose Acquisition Company1 | Interest expense | 9 | 12 | |||||||
Gains on financial assets/liabilities at fair value through profit or loss | 118 | 56 | ||||||||
KB No.17 Special Purpose Acquisition Company | Fee and commission income | 175 | — | |||||||
Gains on financial assets/liabilities at fair value through profit or loss | 1,384 | — |
243
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
Interest expense | 28 | — | ||||||||
KB No.18 Special Purpose Acquisition Company | Fee and commission income | 263 | — | |||||||
Gains on financial assets/liabilities at fair value through profit or loss | 1,898 | — | ||||||||
Interest expense | 28 | — | ||||||||
KB No.19 Special Purpose Acquisition Company | Fee and commission income | 150 | — | |||||||
Gains on financial assets/liabilities at fair value through profit or loss | 1,044 | — | ||||||||
Interest expense | 8 | — | ||||||||
KB No.20 Special Purpose Acquisition Company | Interest expense | 3 | — | |||||||
KB SPROTT Renewable Private Equity Fund I | Fee and commission income | 490 | — | |||||||
KB-Stonebridge Secondary Private Equity Fund1 | Fee and commission income | 1,444 | — | |||||||
Losses on financial assets/liabilities at fair value through profit or loss | 32 | — | ||||||||
KOSESEUJITO CO., LTD | Losses on financial assets/liabilities at fair value through profit or loss | 5 | — | |||||||
CWhy Inc | Insurance income | 3 | — | |||||||
Stratio, Inc. | Interest expense | 1 | — | |||||||
NEXOLON CO.,LTD.1 | Interest expense | 2 | — | |||||||
CellinCells Co., Ltd | Interest expense | 19 | — | |||||||
Bomapp Inc. | Interest expense | 1 | — | |||||||
Insurance income | 1 | — | ||||||||
KB Social Impact Investment Association | Fee and commission income | 121 | — | |||||||
KB-Solidus Global Healthcare Fund | Fee and commission income | 81 | — | |||||||
BNF Corporation Ltd. | Interest income | 7 | — | |||||||
Gains on financial assets/liabilities at fair value through profit or loss | 158 | — | ||||||||
Provision for credit losses | 1 | — | ||||||||
KB Cape No.1 Private Equity Fund | Fee and commission income | 97 | — | |||||||
ALS Co., Ltd.1 | Interest income | 194 | — | |||||||
Hyundai-Tongyang Agrifood Private Equity Fund 1 | Fee and commission income | — | 151 | |||||||
Keystone-Hyundai Securities No. 1 Private Equity Fund | Fee and commission income | 90 | 116 | |||||||
MJT&I Co., Ltd. | Insurance income | 1 | — |
244
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
Doosung Metal Co., Ltd. | Insurance income | — | 1 | |||||||
Other | ||||||||||
Retirement pension | Fee and commission income | 939 | 876 | |||||||
Interest expense | 4 | 3 |
1 | Excluded from the Group’s related party as of December 31, 2019. |
Meanwhile, the Group purchased installment financial assets from SY Auto Capital Co., Ltd. amounts toW 1,393,346 million andW 881,502 million for the years ended December 31, 2019 and 2018.
Details of receivables and payables, and related allowances for loan losses arising from the related party transactions as of December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | 2018 | ||||||||
Associates and joint ventures | ||||||||||
Balhae Infrastructure Fund | Other assets | |||||||||
Korea Credit Bureau Co., Ltd. | Loans at amortized cost (Gross amount) | 43 | 22 | |||||||
Deposits | 17,966 | 15,674 | ||||||||
Provisions | 1 | — | ||||||||
Insurance contract liabilities | 2 | — | ||||||||
Other liabilities | — | 98 | ||||||||
KB GwS Private Securities Investment Trust | Other assets | 641 | 641 | |||||||
Incheon Bridge Co., Ltd. | Financial assets at fair value through profit or loss | 37,857 | 32,882 | |||||||
Loans at amortized cost (Gross amount) | 147,707 | 158,206 | ||||||||
Allowances for loan losses | 12 | 15 | ||||||||
Other assets | 520 | 736 | ||||||||
Deposits | 45,447 | 43,666 | ||||||||
Provisions | 10 | 10 | ||||||||
Insurance contract liabilities | 108 | 113 | ||||||||
Other liabilities | 346 | 24 | ||||||||
KoFC POSCO HANHWA KB Shared Growth Private Equity Fund No. 2 | Other assets | 89 | 90 | |||||||
Jungdo Co., Ltd. | Deposits | 4 | 4 | |||||||
Dongjo Co., Ltd. | Insurance contract liabilities | 1 | 2 | |||||||
Dae-A Leisure Co., Ltd. | Deposits | 753 | 1,229 | |||||||
Other liabilities | 14 | 7 | ||||||||
Aju Good Technology Venture Fund | Deposits | 5,456 | 6,439 | |||||||
Other liabilities | 2 | 2 | ||||||||
Doosung Metal Co., Ltd. | Deposits | — | 3 | |||||||
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 | 4 | ||||||||
Other assets | 136 | 136 | ||||||||
Deposits | 8,293 | 7,946 |
245
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
Other liabilities | 66 | 58 | ||||||||
KBTS Technology Venture Private Equity Fund | Financial assets at fair value through profit or loss | 3,540 | — | |||||||
KB-Brain KOSDAQScale-up New Technology Business Investment Fund | Financial assets at fair value through profit or loss | 2,678 | — | |||||||
Deposits | 13,118 | 18,813 | ||||||||
Other liabilities | 4 | 7 | ||||||||
KB-Stonebridge Secondary Private Equity Fund | Financial assets at fair value through profit or loss | 713 | — | |||||||
KB IGen Private Equity Fund No.1 | Deposits | 147 | 148 | |||||||
KB Cape No.1 Private Equity Fund | Financial assets at fair value through profit or loss | 2,000 | — | |||||||
RAND Bio Science Co., Ltd. | Deposits | 4,452 | 232 | |||||||
Loans at amortized cost (Gross amount) | 1 | 1 | ||||||||
SY Auto Capital Co., Ltd. | Loans at amortized cost (Gross amount) | 41,990 | 48,356 | |||||||
Allowances for loan losses | 4 | 18 | ||||||||
Other assets | 63 | 94 | ||||||||
Deposits | 8 | 5 | ||||||||
Provisions | 13 | 11 | ||||||||
Insurance contract liabilities | 13 | 6 | ||||||||
Other liabilities | 70 | 102 | ||||||||
Food Factory Co., Ltd. | Financial assets at fair value through profit or loss | 590 | 530 | |||||||
Loans at amortized cost (Gross amount) | 1,992 | 200 | ||||||||
Allowances for loan losses | 2 | 1 | ||||||||
Other assets | 1 | 1 | ||||||||
Deposits | 1,073 | 68 | ||||||||
Insurance contract liabilities | 4 | 3 | ||||||||
Other liabilities | 1 | — | ||||||||
KB Pre IPO Secondary Venture Fund 1st | Deposits | 2,955 | 1,115 | |||||||
Other liabilities | 1 | 1 | ||||||||
Builton Co., Ltd. 1 | Other assets | — | 1 | |||||||
Financial assets at fair value through profit or loss | — | 399 | ||||||||
Loans at amortized cost (Gross amount) | — | 2 | ||||||||
Deposits | — | 7 | ||||||||
Insurance contract liabilities | — | 1 | ||||||||
Wise Asset Management Co., Ltd. | Deposits | 21 | 696 | |||||||
Other liabilities | — | 2 | ||||||||
Acts Co., Ltd. | Intangible assets | — | 530 | |||||||
Deposits | 1 | 29 | ||||||||
Other liabilities | 100 | 530 | ||||||||
Paycoms Co., Ltd. | Other assets | 1 | 1 | |||||||
Financial assets at fair value through profit or loss | 1,157 | 1,032 |
246
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
Deposits | 1 | 1 | ||||||||
Big Dipper Co., Ltd. | Loans at amortized cost (Gross amount) | 11 | 5 | |||||||
Deposits | 6 | 182 | ||||||||
KB-KDBCPre-IPO New Technology Business Investment Fund | Deposits | 7,054 | 7,088 | |||||||
Other liabilities | 4 | 3 | ||||||||
A-PRO Co., Ltd. | Loans at amortized cost (Gross amount) | 2,019 | — | |||||||
Insurance contract liabilities | 2 | 2 | ||||||||
Deposits | 3,201 | 2,201 | ||||||||
Other liabilities | 1 | — | ||||||||
JLK Inspection, Inc. 1 | Financial assets at fair value through profit or loss | — | 7,300 | |||||||
TESTIAN Inc. 1 | Other assets | — | 1 | |||||||
Financial assets at fair value through profit or loss | — | 615 | ||||||||
IWON ALLOY CO.,LTD. | Insurance contract liabilities | 1 | 2 | |||||||
CARLIFE CO.,LTD. | Deposits | — | 2 | |||||||
COMPUTERLIFE CO.,LTD. | Deposits | 1 | 1 | |||||||
RMGPBio-Pharma Investment Fund, L.P. | Financial assets at fair value through profit or loss | 3,419 | 3,051 | |||||||
Other liabilities | 2 | 35 | ||||||||
RMGPBio-Pharma Investment, L.P. | Financial assets at fair value through profit or loss | 8 | 4 | |||||||
Hasys. | Financial assets at fair value through profit or loss | 6,000 | 5,864 | |||||||
Insurance contract liabilities | 37 | 29 | ||||||||
SKYDIGITAL INC | Deposits | 25 | 16 | |||||||
Rainist Co., Ltd. | Financial assets at fair value through profit or loss | 7,504 | 2,504 | |||||||
Deposits | — | 1 | ||||||||
Spark Biopharma, Inc. 1 | 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 | 250 | |||||||
Stratio, Inc. | Financial assets at fair value through profit or loss | 1,000 | 1,000 | |||||||
Deposits | 726 | 516 | ||||||||
Honest Fund, Inc. | Financial assets at fair value through profit or loss | 3,999 | — | |||||||
CellinCells Co., Ltd. | Financial assets at fair value through profit or loss | 2,000 | — | |||||||
Loans at amortized cost (Gross amount) | 4 | — | ||||||||
Deposits | 1,545 | — | ||||||||
Other liabilities | 1 | — | ||||||||
Joyang Industry Co., Ltd. | Deposits | 2 | — |
247
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
KB No.9 Special Purpose Acquisition Company1 | Financial assets at fair value through profit or loss | — | 2,481 | |||||||
Deposits | — | 2,275 | ||||||||
Other liabilities | — | 42 | ||||||||
KB No.10 Special Purpose Acquisition Company1 | Financial assets at fair value through profit or loss | — | 2,025 | |||||||
Derivative financial assets | — | 1,659 | ||||||||
Deposits | — | 1,666 | ||||||||
Other liabilities | — | 11 | ||||||||
KB No.11 Special Purpose Acquisition Company1 | Financial assets at fair value through profit or loss | — | 737 | |||||||
Derivative financial assets | — | 873 | ||||||||
Deposits | — | 658 | ||||||||
Other liabilities | — | 2 | ||||||||
KB No.17 Special Purpose Acquisition Company | Financial assets at fair value through profit or loss | 2,683 | — | |||||||
Deposits | 1,742 | — | ||||||||
Other liabilities | 27 | — | ||||||||
KB No.18 Special Purpose Acquisition Company | Financial assets at fair value through profit or loss | 3,786 | — | |||||||
Deposits | 2,140 | — | ||||||||
Other liabilities | 28 | — | ||||||||
KB No.19 Special Purpose Acquisition Company | Financial assets at fair value through profit or loss | 2,043 | — | |||||||
Deposits | 1,093 | — | ||||||||
Other liabilities | 7 | — | ||||||||
KB No.20 Special Purpose Acquisition Company | Financial assets at fair value through profit or loss | 1,499 | — | |||||||
Deposits | 1,984 | |||||||||
Other liabilities | 3 | |||||||||
KOSESEUJITO CO., LTD. | Financial assets at fair value through profit or loss | 2,930 | — | |||||||
CWhy Inc. | Financial assets at fair value through profit or loss | 2,000 | — | |||||||
Bomapp Inc. | Financial assets at fair value through profit or loss | 1,999 | — | |||||||
Insurance contract liabilities | 2 | — | ||||||||
ZOYI corporation INC. | Financial assets at fair value through profit or loss | 2,000 | — | |||||||
MitoImmune Therapeutics | Financial assets at fair value through profit or loss | 5,000 | — | |||||||
KB-Solidus Global Healthcare Fund | Financial assets at fair value through profit or loss | 10,405 | — | |||||||
KB Social Impact Investment Association | Other assets | 73 | — | |||||||
Fabric Types CO.,LTD. | Financial assets at fair value through profit or loss | 1,845 | — | |||||||
Deposits | 395 | — | ||||||||
Other liabilities | 2 | — | ||||||||
BNF Corporation Ltd. | Financial assets at fair value through profit or loss | 2,259 | — |
248
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
Loans at amortized cost (Gross amount) | 1,400 | — | ||||||||
Other assets | 2 | — | ||||||||
Deposits | 947 | — | ||||||||
Other liabilities | 6 | — | ||||||||
Key management | Loans at amortized cost (Gross amount) | 3,538 | 2,404 | |||||||
Allowances for loan losses | 1 | — | ||||||||
Other assets | 3 | 2 | ||||||||
Deposits | 15,339 | 13,818 | ||||||||
Insurance contract liabilities | 1,984 | 1,092 | ||||||||
Other liabilities | 289 | 233 | ||||||||
Other | ||||||||||
Retirement pension | Other assets | 366 | 331 | |||||||
Other liabilities | 17,620 | 16,388 |
1 | Excluded from the Group’s related party as of December 31, 2019. |
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.
249
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
Significant lending transactions with related parties for the years ended December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | |||||||||||||||
Beginning | Increase | Decrease | Ending | |||||||||||||
Associates | ||||||||||||||||
Korea Credit Bureau Co., Ltd. | ||||||||||||||||
Incheon Bridge Co., Ltd. | 191,088 | 4,982 | (10,506 | ) | 185,564 | |||||||||||
KB Star Office Private Real Estate Investment Trust No.1 | 10,000 | — | — | 10,000 | ||||||||||||
KBTS Technology Venture Private Equity Fund | — | 3,540 | — | 3,540 | ||||||||||||
KB-Brain KOSDAQScale-up New Technology Business Investment Fund | — | 2,678 | — | 2,678 | ||||||||||||
KB-Stonebridge Secondary Private Equity Fund | — | 713 | — | 713 | ||||||||||||
KB Cape No.1 Private Equity Fund | — | 2,000 | — | 2,000 | ||||||||||||
RAND Bio Science Co., Ltd. | 1 | 1 | (1 | ) | 1 | |||||||||||
SY Auto Capital Co., Ltd. | 48,356 | 28,088 | (34,454 | ) | 41,990 | |||||||||||
Food Factory Co., Ltd. | 730 | 1,872 | (20 | ) | 2,582 | |||||||||||
Builton Co., Ltd.2 | 401 | — | (401 | ) | — | |||||||||||
Acts Co., Ltd. | — | 68 | (68 | ) | — | |||||||||||
Paycoms Co., Ltd. | 1,032 | 125 | — | 1,157 | ||||||||||||
Big Dipper Co., Ltd. | 5 | 11 | (5 | ) | 11 | |||||||||||
A-PRO Co., Ltd. | — | 2,019 | — | 2,019 | ||||||||||||
JLK INSPECTION Inc.2 | 7,300 | (7,300 | ) | — | — | |||||||||||
TESTIAN Inc.2 | 615 | 24 | (639 | ) | — | |||||||||||
RMGPBio-Pharma Investment Fund, L.P. | 3,051 | 368 | — | 3,419 | ||||||||||||
RMGPBio-Pharma Investment, L.P. | 4 | 4 | — | 8 | ||||||||||||
Hasys. | 5,864 | 136 | — | 6,000 | ||||||||||||
Rainist Co., Ltd. | 2,504 | 5,000 | — | 7,504 | ||||||||||||
Spark Biopharma, Inc.2 | 6,500 | (6,500 | ) | — | — | |||||||||||
HEYBIT, Inc., | 250 | — | — | 250 | ||||||||||||
Stratio, Inc. | 1,000 | — | — | 1,000 | ||||||||||||
Honest Fund, Inc. | — | 3,999 | — | 3,999 | ||||||||||||
CellinCells Co., Ltd. | — | 2,004 | — | 2,004 | ||||||||||||
KB No.9 Special Purpose Acquisition Company2 | 2,481 | — | (2,481 | ) | — | |||||||||||
KB No.10 Special Purpose Acquisition Company2 | 2,025 | — | (2,025 | ) | — | |||||||||||
KB No.11 Special Purpose Acquisition Company2 | 737 | — | (737 | ) | — | |||||||||||
KB No.17 Special Purpose Acquisition Company | — | 2,683 | — | 2,683 | ||||||||||||
KB No.18 Special Purpose Acquisition Company | — | 3,786 | — | 3,786 |
250
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
KB No.19 Special Purpose Acquisition Company | — | 2,043 | — | 2,043 | ||||||||||||
KB No.20 Special Purpose Acquisition Company | — | 1,499 | — | 1,499 | ||||||||||||
KOSESEUJITO CO., LTD. | — | 2,930 | — | 2,930 | ||||||||||||
CWhy Inc. | — | 2,000 | — | 2,000 | ||||||||||||
Bomapp Inc. | — | 1,999 | — | 1,999 | ||||||||||||
ZOYI corporation INC. | — | 2,000 | — | 2,000 | ||||||||||||
MitoImmune Therapeutics | — | 5,000 | — | 5,000 | ||||||||||||
KB-Solidus Global Healthcare Fund | — | 10,405 | — | 10,405 | ||||||||||||
Fabric Types CO.,LTD | — | 1,845 | — | 1,845 | ||||||||||||
BNF Corporation Ltd. | — | 3,659 | — | 3,659 | ||||||||||||
Key management | 2,404 | 2,006 | (872 | ) | 3,538 |
1 | Transactions from operating activities with related parties (i.e. such as settlement, daily overdraft loans, etc) are excluded. |
2 | Excluded from the Group’s related party as of December 31, 2019. |
251
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
(In millions of Korean won) | 2018 | |||||||||||||||
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. 2 | 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. 2 | — | 7,300 | — | 7,300 | ||||||||||||
TESTIAN Inc. 2 | — | 615 | — | 615 | ||||||||||||
RMGPBio-Pharma Investment Fund, L.P. | — | 3,051 | — | 3,051 | ||||||||||||
RMGPBio-Pharma Investment, L.P. | — | 4 | — | 4 | ||||||||||||
Hasys. | — | 6,000 | (136 | ) | 5,864 | |||||||||||
Rainist Co., Ltd. | — | 2,504 | — | 2,504 | ||||||||||||
Spark Biopharma, Inc. 2 | — | 6,500 | — | 6,500 | ||||||||||||
HEYBIT, Inc., | — | 250 | — | 250 | ||||||||||||
Stratio, Inc. | — | 1,000 | — | 1,000 | ||||||||||||
KB No.8 Special Purpose Acquisition Company2 | 2,296 | — | (2,296 | ) | — | |||||||||||
KB No.9 Special Purpose Acquisition Company2 | 2,356 | 2,481 | (2,356 | ) | 2,481 | |||||||||||
KB No.10 Special Purpose Acquisition Company2 | 1,603 | 2,025 | (1,603 | ) | 2,025 | |||||||||||
KB No.11 Special Purpose Acquisition Company2 | 697 | 737 | (697 | ) | 737 | |||||||||||
Key management | 1,665 | 1,509 | (836 | ) | 2,338 |
1 | Transactions from operating activities with related parties (i.e. such as settlement, daily overdraft loans, etc) are excluded. |
2 | Excluded from the Group’s related party as of December 31, 2019. |
252
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
Significant borrowing transactions with related parties for the years ended December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | |||||||||||||||||||
Beginning | Borrowing | Repayment | Others1 | Ending | ||||||||||||||||
Associates | ||||||||||||||||||||
Korea Credit Bureau Co., Ltd. | ||||||||||||||||||||
Incheon Bridge Co., Ltd. | 43,666 | 25,260 | (5,260 | ) | (18,219 | ) | 45,447 | |||||||||||||
Doosung Metal Co., Ltd | 3 | — | — | (3 | ) | — | ||||||||||||||
Jungdo Co., Ltd. | 4 | — | — | — | 4 | |||||||||||||||
Dae-A Leisure Co., Ltd. | 1,229 | — | — | (476 | ) | 753 | ||||||||||||||
CARLIFE CO.,LTD. | 2 | — | — | (2 | ) | — | ||||||||||||||
COMPUTERLIFE CO.,LTD., | 1 | — | — | — | 1 | |||||||||||||||
SKYDIGITAL INC | 16 | — | — | 9 | 25 | |||||||||||||||
Joyang Industry Co., Ltd. | — | — | — | 2 | 2 | |||||||||||||||
Aju Good Technology Venture Fund | 6,439 | — | — | (983 | ) | 5,456 | ||||||||||||||
KB-KDBC New Technology Business Fund | 7,088 | 15,000 | (10,000 | ) | (5,034 | ) | 7,054 | |||||||||||||
KB-Brain KOSDAQScale-up New Technology Business Investment Fund | 18,813 | — | — | (5,695 | ) | 13,118 | ||||||||||||||
KB Star Office Private Real Estate Investment Trust No.1 | 7,946 | 5,018 | (5,072 | ) | 401 | 8,293 | ||||||||||||||
SY Auto Capital Co., Ltd. | 5 | — | — | 3 | 8 | |||||||||||||||
KB No.9 Special Purpose Acquisition Company2 | 2,275 | — | (2,266 | ) | (9 | ) | — | |||||||||||||
KB No.10 Special Purpose Acquisition Company2 | 1,666 | — | (1,618 | ) | (48 | ) | — | |||||||||||||
KB No.11 Special Purpose Acquisition Company2 | 658 | — | (530 | ) | (128 | ) | — | |||||||||||||
KB No.17 Special Purpose Acquisition Company | — | 1,500 | — | 242 | 1,742 | |||||||||||||||
KB No.18 Special Purpose Acquisition Company | — | 2,200 | (100 | ) | 40 | 2,140 | ||||||||||||||
KB No.19 Special Purpose Acquisition Company | — | 1,000 | — | 93 | 1,093 | |||||||||||||||
KB No.20 Special Purpose Acquisition Company | — | 1,500 | — | 484 | 1,984 | |||||||||||||||
RAND Bio Science Co., Ltd. | 232 | 1,900 | — | 2,320 | 4,452 | |||||||||||||||
Wise Asset Management Co., Ltd. | 696 | — | (682 | ) | 7 | 21 | ||||||||||||||
Builton Co., Ltd.2 | 7 | — | — | (7 | ) | — | ||||||||||||||
Food Factory Co., Ltd. | 68 | — | — | 1,005 | 1,073 | |||||||||||||||
Acts Co., Ltd. | 29 | — | — | (28 | ) | 1 | ||||||||||||||
Paycoms Co., Ltd. | 1 | — | — | — | 1 | |||||||||||||||
Big Dipper Co., Ltd. | 182 | — | — | (176 | ) | 6 | ||||||||||||||
A-PRO Co., Ltd. | 2,201 | — | — | 1,000 | 3,201 | |||||||||||||||
Rainist Co., Ltd. | 1 | — | — | (1 | ) | — | ||||||||||||||
Spark Biopharma, Inc.2 | 2,630 | 17,000 | (9,000 | ) | (10,630 | ) | — | |||||||||||||
Stratio, Inc. | 516 | — | — | 210 | 726 | |||||||||||||||
NEXOLON CO.,LTD.2 | — | — | (200 | ) | 200 | — | ||||||||||||||
CellinCells Co., Ltd. | — | — | — | 1,545 | 1,545 |
253
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
KB IGen Private Equity Fund No.1 | 148 | — | — | (1 | ) | 147 | ||||||||||||||
KB Pre IPO Secondary Venture Fund 1st | 1,115 | — | — | 1,840 | 2,955 | |||||||||||||||
Fabric Types CO.,LTD. | — | — | — | 395 | 395 | |||||||||||||||
BNF Corporation Ltd. | — | — | — | 947 | 947 | |||||||||||||||
Key management | 13,818 | 13,520 | (14,611 | ) | 2,611 | 15,338 |
1 | Transactions from operating activities with related parties (i.e. such as settlement, daily overdraft loans, etc) are excluded. |
2 | Excluded from the Group’s related party as of December 31, 2019. |
(In millions of Korean won) | 2018 | |||||||||||||||||||
Beginning | Borrowing | Repayment | 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 KOSDAQScale-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 Company2 | 2,339 | — | (2,300 | ) | (39 | ) | — | |||||||||||||
KB No.9 Special Purpose Acquisition Company2 | 2,309 | 2,266 | (2,234 | ) | (66 | ) | 2,275 | |||||||||||||
KB No.10 Special Purpose Acquisition Company2 | 1,698 | 1,618 | (1,618 | ) | (32 | ) | 1,666 | |||||||||||||
KB No.11 Special Purpose Acquisition Company2 | 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. 2 | 26 | — | — | (19 | ) | 7 | ||||||||||||||
Food Factory Co., Ltd. | 1 | — | — | 67 | 68 | |||||||||||||||
Acts Co., Ltd. | 4 | — | — | 25 | 29 | |||||||||||||||
Paycoms Co., Ltd. | — | — | — | 1 | 1 |
254
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
Big Dipper Co., Ltd. | 473 | — | — | (291 | ) | 182 | ||||||||||||||
A-PRO Co., Ltd. | — | — | — | 2,201 | 2,201 | |||||||||||||||
Rainist Co., Ltd. | — | — | — | 1 | 1 | |||||||||||||||
Spark Biopharma, Inc. 2 | — | 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 management | 8,260 | 7,587 | (5,283 | ) | 264 | 10,828 |
1 | Transactions from operating activities with related parties (i.e. such as settlement, deposit on demend, etc) are netted. |
2 | Excluded from the Group’s related party as of December 31, 2019. |
Significant investment and collection transaction with related parties for the years ended December 31, 2019 and 2018 is as follows:
(In millions of Korean won) | 2019 | |||||||
Equity investments | Withdrawal and others | |||||||
Korea Credit Bureau Co., Ltd. | ||||||||
Balhae Infrastructure Company | 592 | 6,855 | ||||||
KoFC KBIC Frontier Champ2010-5(PEF)1 | — | 138 | ||||||
KB GwS Private Securities Investment Trust | — | 7,276 | ||||||
Aju Good Technology Venture Fund | 1,960 | — | ||||||
POSCO-KB Shipbuilding Fund | 2,500 | — | ||||||
KB-KDBCPre-IPO New Technology Business Fund | 5,000 | — | ||||||
KBTS Technology Venture Private Equity Fund | 7,840 | 2,240 | ||||||
KB-SJ Tourism Venture Fund | 1,500 | — | ||||||
KB-Brain KOSDAQScale-up New Technology Business Investment Fund | 14,000 | — | ||||||
KB-UTC Inno-Tech Venture Fund | 450 | — | ||||||
KB-Solidus Global Healthcare Fund | 10,400 | 13,520 | ||||||
KB Star office Private real estate Investment Trust No.1 | — | 1,275 | ||||||
KB Cape No.1 Private Equity Fund | 2,000 | — | ||||||
KB No.9 Special Purpose Acquisition Company1 | — | 16 | ||||||
KB No.17 Special Purpose Acquisition Company | 1 | — | ||||||
KB No.18 Special Purpose Acquisition Company | 1 | — | ||||||
KB No.19 Special Purpose Acquisition Company | 1 | — | ||||||
KB No.20 Special Purpose Acquisition Company | 1 | — | ||||||
KB SPROTT Renewable Private Equity Fund | 1,667 | — | ||||||
KB-Stonebridge Secondary Private Equity Fund | 7,070 | 1,855 | ||||||
KBSP 4th Private Investment Partnership | 6,100 | — | ||||||
KB Social Impact Investment Association | 1,500 | — |
1 | Excluded from the Group’s related party as of December 31, 2019. |
255
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
(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 Champ2010-5(PEF) 1 | — | 4,800 | ||||||
KB GwS Private Securities Investment Trust | — | 6,386 | ||||||
Aju Good Technology Venture Fund | 9,808 | — | ||||||
KB-KDBCPre-IPO New Technology Business Fund | 10,000 | — | ||||||
KBTS Technology Venture Private Equity Fund | 14,224 | — | ||||||
KB-Brain KOSDAQScale-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.21 | 1,300 | 1,300 | ||||||
UNION Media Commerce Fund | 1,000 | — |
1 | Excluded from the Group’s related party as of December 31, 2019. |
256
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
Unused commitments to related parties as of December 31, 2019 and 2018, are as follows:
(In millions of Korean won) (US Dollar) | 2019 | 2018 | ||||||||
Associates and joint ventures | ||||||||||
Balhae Infrastructure Fund | Purchase of security investment | |||||||||
Korea Credit Bureau Co., Ltd. | Unused commitments of credit card | 557 | 108 | |||||||
KoFC KBIC Frontier Champ2010-5(PEF)1 | Purchase of security investment | — | 2,150 | |||||||
Preferred loss allowance agreement | — | 10,000 | ||||||||
KB GwS Private Securities Investment Trust | Purchase of security investment | 876 | 876 | |||||||
Aju Good Technology Venture Fund | Purchase of security investment | 1,154 | 1,960 | |||||||
Incheon Bridge Co., Ltd. | Loan commitments in Korean won | 20,000 | 20,000 | |||||||
Unused commitments of credit card | 93 | 94 | ||||||||
KoFC POSCO HANHWA KB Shared Growth Private Equity Fund No. 2 | Purchase of security investment | 12,550 | 12,550 | |||||||
Preferred loss allowance agreement | 10,000 | 10,000 | ||||||||
SY Auto Capital Co., Ltd. | Loan commitments in Korean won | 8,100 | 6,700 | |||||||
Unused commitments of credit card | 60 | 94 | ||||||||
KB No.9 Special Purpose Acquisition Company1 | Unused commitments of credit card | — | 1 | |||||||
KB No.10 Special Purpose Acquisition Company1 | Unused commitments of credit card | — | 5 | |||||||
KB No.18 Special Purpose Acquisition Company | Unused commitments of credit card | 15 | — | |||||||
KB No.19 Special Purpose Acquisition Company | Unused commitments of credit card | 1 | — | |||||||
CellinCells Co., Ltd | Unused commitments of credit card | 20 | — | |||||||
RAND Bio Science Co., Ltd. | Unused commitments of credit card | 24 | 24 | |||||||
Builton Co., Ltd. 1 | Unused commitments of credit card | — | 3 | |||||||
Food Factory Co., Ltd. | Unused commitments of credit card | 25 | 11 | |||||||
Big Dipper Co., Ltd. | Unused commitments of credit card | 89 | 95 | |||||||
KB Pre IPO Secondary Venture Fund 1st | Preferred loss allowance agreement | 1,671 | 1,671 | |||||||
POSCO-KB Shipbuilding Fund | Purchase of security investment | 5,000 | 7,500 | |||||||
KB-KDBC New Technology Business Investment Fund | Purchase of security investment | — | 5,000 | |||||||
KBTS Technology Venture Private Equity Fund | Purchase of security investment | 5,936 | 13,776 | |||||||
KB-SJ Tourism Venture Fund | Purchase of security investment | 2,000 | 3,500 | |||||||
KB-Brain KOSDAQ Scale-up New Technology Business Investment Fund | Purchase of security investment | 18,000 | 32,000 | |||||||
KB SPROTT Renewable Private Equity Fund I | Purchase of security investment | 22,833 | — | |||||||
KB-Stonebridge Secondary Private Equity Fund | Purchase of security investment | 27,930 | — | |||||||
KB Social Impact Investment Association | Purchase of security investment | 3,000 | — | |||||||
BNF Corporation Ltd. | Loan commitments in Korean won | 360 | — | |||||||
A-PRO Co., Ltd. | Unused commitments of credit card | 96 | — | |||||||
KB-UTC Inno-Tech Venture Fund | Purchase of security investment | 22,050 | — | |||||||
KB-Solidus Global Healthcare Fund | Purchase of security investment | 24,700 | — | |||||||
RMGPBio-Pharma Investment Fund, L.P. | Purchase of security investment | USD 8,911,002 | USD 10,271,257 | |||||||
RMGPBio-Pharma Investment, L.P. | Purchase of security investment | USD 13,150 | USD 15,847 | |||||||
Key management | Loan commitments in Korean won | 1,695 | 1,832 |
1 | Excluded from the Group’s related party as of December 31, 2019. |
257
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
Compensation to key management for the years ended December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | |||||||||||||||
Short-term employee benefits | Post- employment benefits | Share-based payments | Total | |||||||||||||
Registered directors (executive) | ||||||||||||||||
Registered directors(non-executive) | 1,030 | — | — | 1,030 | ||||||||||||
Non-registered directors | 9,157 | 360 | 7,510 | 17,027 | ||||||||||||
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258
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
(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 | ||||||||||||
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Collateral received from related parties as of December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | 2018 | ||||||||
Associates | ||||||||||
KB Star Office Private Real Estate Investment Trust No.1 | Real estate | |||||||||
Key management | Time deposits and others | 192 | 401 | |||||||
Real estate | 2,922 | 3,182 |
As of December 31, 2019, Incheon Bridge Co., Ltd., a related party, provides fund management account, insurance for civil engineering completion, and management rights as senior collateral amounting toW611,000 million to a financial syndicate that consists of the Group and five other institutions, and as subordinated collateral amounting toW384,800 million to subordinated debt holders that consist of the Group and two other institutions. Also, it provides certificate of credit guarantee amounting toW400,000 million as collateral to a financial syndicate consisting of the Group and five other institutions.
45. Changes in Accounting Policies—Implementation of Korean IFRS 1116Leases
The Group applied Korean IFRS 1116 retrospectively as of January 1, 2019. However, the financial statements for the year ended 2018 was not restated using the method allowed by transitional provisions. Therefore reclassification and adjustments under the new IFRS were recognized in the financial statements beginning on January 1, 2019.
A lessee shall apply this standard to its leases either:
• | retrospectively to each prior reporting period presented applying Korean IFRS 1008Accounting Policies, Changes in Accounting Estimates and Errors (Full retrospective application); or |
• | retrospectively with the cumulative effect of initially applying the standard recognized at the date of initial application. |
The Group applied Korean IFRS 1116 retrospectively with recognizing the cumulative effect of initial adoption of the standard as at January 1, 2019. The Group did not restate any comparative financial statements.
259
KB Financial Group Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2019 and 2018
For leases previously classified as ‘finance leases’, the Group recognized the carrying amount of the lease asset and lease liability immediately before transition as the carrying amount of theright-of-use asset and the lease liability at the date of initial application. The measurement principles of Korean IFRS 1116 are only applied after that date. The remeasurements to the lease liabilities were recognized as adjustments to the relatedright-of-use assets immediately after the date of initial application.
(In millions of Korean won) | January 1, 2019 | |||
Right-of-use asset | ||||
Operating lease commitments disclosed at December 31, 20181 | ||||
Add : Finance lease asset recognized at December 31, 2018 | 34,002 | |||
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| |||
Right-of use asset recognized as of the date of initial application | ||||
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Lease liability | ||||
Operating lease commitments disclosed at December 31, 2018 | ||||
Discounted amount using the lessee’s incremental borrowing rate2 at the date of initial application | 544,475 | |||
Add : Finance lease liability recognized at December 31, 2018 | 10,161 | |||
|
| |||
Lease liabilities recognized as of the date of initial application | ||||
|
|
1 | The amount included lease contract related provisions for asset retirement obligation and other assets/liabilities according to the adoption of Korean IFRS. |
2 | The incremental borrowing rate is 1.45%~6.95%. |
The difference between the amount of theright-of-use asset and the lease liability is adjusted by the amount of any prepaid or accrued lease payments relating to that lease recognized in the consolidated statement of financial position immediately before the date of initial application.
46. Approval of Issuance of the Financial Statements
The issuance of the Group’s consolidated financial statements as of and for the year ended December 31, 2019, was initially approved on February 6, 2020 andre-approved due to revision on March 4, 2020 by the Board of Directors.
260
KB Financial Group Inc.
Index
December 31, 2019 and 2018
Page(s) | ||||
1~3 | ||||
Separate Financial Statements | ||||
4 | ||||
5 | ||||
6 | ||||
7 | ||||
8~74 | ||||
Report of Independent Auditor’s Audit of Internal Control over Financial Reporting | 75~76 | |||
Operating Status Report of the Internal Control over Financial Reporting | 77 |
(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, 2019 and 2018 and the separate statements of comprehensive income, changes in equity and cash flows for the years then ended, and notes to the separate financial statements, including a summary of significant accounting policies and other explanatory information.
In our opinion, the accompanying separate financial statements present fairly, in all material respects, the separate financial position of the Company as at December 31, 2019 and 2018, and its separate financial performance and cash flows for the years then ended in accordance with International Financial Reporting Standards as adopted by the Republic of Korea (Korean IFRS).
We also have audited, in accordance with Korean Standards on Auditing, the Company’s Internal Control over Financial Reporting as of December 31, 2019, based on Conceptual Framework for Designing and Operating Internal Control over Financial Reporting and our report dated March 5, 2020 expressed an unqualified opinion.
Basis for Opinion
We conducted our audits in accordance with Korean Standards on Auditing. Our responsibilities under those standards are further described in theAuditor’s 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.
1
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.
In preparing the financial statements, management is responsible for assessing the Company’s 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 Company’s financial reporting process.
Auditor’s 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 auditor’s 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 |
• | Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. |
• | Conclude on the appropriateness of management’s 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 Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s 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 auditor’s 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. |
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.
2
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 financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s 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 auditor’s report is Yeob Yu, Certified Public Accountant.
/s/ Samil PricewaterhouseCoopers
Seoul, Korea
March 5, 2020
This report is effective as of March 5, 2020, 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. |
3
KB Financial Group Inc.
Separate Statements of Financial Position
December 31, 2019 and December 31, 2018
(In millions of Korean won) | Notes | December 31, 2019 | December 31, 2018 | |||||||||
Assets | ||||||||||||
Cash and due from financial institutions | 4,5,6,28 | |||||||||||
Financial assets at fair value through profit or loss | 4,5,7 | 413,909 | 289,179 | |||||||||
Loans at amortized cost | 4,5,8 | 120,000 | 50,000 | |||||||||
Investments in subsidiaries | 9 | 24,162,116 | 24,062,116 | |||||||||
Property and equipment | 10 | 4,170 | 2,185 | |||||||||
Intangible assets | 11 | 11,092 | 9,646 | |||||||||
Deferred income tax assets | 12 | 7,526 | 8,184 | |||||||||
Other assets | 4,5,13 | 609,286 | 857,462 | |||||||||
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| |||||||||
Total assets | ||||||||||||
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| |||||||||
Liabilities | ||||||||||||
Debts | 4,5,14 | |||||||||||
Debentures | 4,5,15 | 5,543,446 | 5,373,266 | |||||||||
Net defined benefit liabilities | 16 | 437 | 183 | |||||||||
Current income tax liabilities | 417,414 | 691,909 | ||||||||||
Other liabilities | 4,5,17 | 203,440 | 186,481 | |||||||||
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| |||||||||
Total liabilities | 6,164,737 | 6,551,839 | ||||||||||
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| |||||||||
Equity | ||||||||||||
Share capital | 18 | 2,090,558 | 2,090,558 | |||||||||
Hybrid securities | 18 | 399,085 | — | |||||||||
Capital surplus | 18 | 14,742,814 | 14,742,814 | |||||||||
Accumulated other comprehensive income | 18 | (7,664 | ) | (7,144 | ) | |||||||
Retained earnings | 18 | 3,093,294 | 3,213,556 | |||||||||
Treasury shares | 18 | (1,136,188 | ) | (968,549 | ) | |||||||
|
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|
| |||||||||
Total equity | 19,181,899 | 19,071,235 | ||||||||||
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| |||||||||
Total liabilities and equity | ||||||||||||
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|
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The above separate statements of financial position should be read in conjunction with the accompanying notes.
4
KB Financial Group Inc.
Separate Statements of Comprehensive Income
Year Ended December 31, 2019 and December 31, 2018
(In millions of Korean won, except per share amounts) | Notes | 2019 | 2018 | |||||||
Interest income | ||||||||||
Interest expense | (126,065 | ) | (122,451 | ) | ||||||
|
|
|
| |||||||
Net interest expense | 20 | (118,045 | ) | (115,835 | ) | |||||
|
|
|
| |||||||
Fee and commission income | 847 | 788 | ||||||||
Fee and commission expense | (7,130 | ) | (5,996 | ) | ||||||
|
|
|
| |||||||
Net fee and commission expense | 21 | (6,283 | ) | (5,208 | ) | |||||
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|
|
| |||||||
Net gains on financial assets at fair value through profit or loss | 22 | 15,947 | 18,319 | |||||||
|
|
|
| |||||||
Net other operating income | 23 | 926,934 | 1,089,556 | |||||||
|
|
|
| |||||||
General and administrative expenses | 24 | (71,171 | ) | (57,845 | ) | |||||
|
|
|
| |||||||
Operating profit before provision for credit losses | 747,382 | 928,987 | ||||||||
Operating profit | 747,382 | 928,987 | ||||||||
|
|
|
| |||||||
Netnon-operating expense | 25 | (541 | ) | (259 | ) | |||||
|
|
|
| |||||||
Profit before income tax | 746,841 | 928,728 | ||||||||
Income tax expense | 26 | (854 | ) | (2,823 | ) | |||||
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|
| |||||||
Profit for the year | 745,987 | 925,905 | ||||||||
|
|
|
| |||||||
Items that will not be reclassified to profit or loss: | ||||||||||
Remeasurements of net defined benefit liabilities | (520 | ) | (1,911 | ) | ||||||
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|
| |||||||
Other comprehensive loss for the year, net of tax | (520 | ) | (1,911 | ) | ||||||
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|
|
| |||||||
Total comprehensive income for the year | ||||||||||
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| |||||||
Earnings per share | ||||||||||
Basic earnings per share | 27 | 2,335 | ||||||||
Diluted earnings per share | 27 | 1,877 | 2,322 |
The above separate statements of comprehensive income should be read in conjunction with the accompanying notes.
5
KB Financial Group Inc.
Separate Statements of Changes in Equity
Year Ended December 31, 2019 and December 31, 2018
(In millions of Korean won) | Share Capital | Hybrid Securities | Capital Surplus | Accumulated Other Comprehensive Income | Retained Earnings | Treasury Shares | Total Equity | |||||||||||||||||||||
Balance at January 1, 2018 | ||||||||||||||||||||||||||||
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| |||||||||||||||
Comprehensive income | ||||||||||||||||||||||||||||
Profit for the year | — | — | — | — | 925,905 | — | 925,905 | |||||||||||||||||||||
Remeasurements of net defined benefit liabilities | — | — | — | (1,911 | ) | — | — | (1,911 | ) | |||||||||||||||||||
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|
|
|
|
|
|
|
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|
| |||||||||||||||
Total comprehensive income | — | — | — | (1,911 | ) | 925,905 | — | 923,994 | ||||||||||||||||||||
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| |||||||||||||||
Transactions with shareholders | ||||||||||||||||||||||||||||
Annual dividends | — | — | — | — | (766,728 | ) | — | (766,728 | ) | |||||||||||||||||||
Acquisition of treasury shares | — | — | — | — | — | (212,576 | ) | (212,576 | ) | |||||||||||||||||||
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| |||||||||||||||
Total transactions with shareholders | — | — | — | — | (766,728 | ) | (212,576 | ) | (979,304 | ) | ||||||||||||||||||
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| |||||||||||||||
Balance at December 31, 2018 | ||||||||||||||||||||||||||||
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Balance at January 1, 2019 | ||||||||||||||||||||||||||||
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| |||||||||||||||
Comprehensive income | ||||||||||||||||||||||||||||
Profit for the year | — | — | — | — | 745,987 | — | 745,987 | |||||||||||||||||||||
Remeasurements of net defined benefit liabilities | — | — | — | (520 | ) | — | — | (520 | ) | |||||||||||||||||||
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|
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|
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|
|
|
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| |||||||||||||||
Total comprehensive income | — | — | — | (520 | ) | 745,987 | — | 745,467 | ||||||||||||||||||||
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| |||||||||||||||
Transactions with shareholders | ||||||||||||||||||||||||||||
Annual dividends | — | — | — | — | (759,736 | ) | — | (759,736 | ) | |||||||||||||||||||
Issuance of hybrid securities | — | 399,085 | — | — | �� | — | — | 399,085 | ||||||||||||||||||||
Dividends on hybrid securities | — | — | — | — | (6,513 | ) | — | (6,513 | ) | |||||||||||||||||||
Acquisition and Retirement of treasury shares | — | — | — | — | (100,000 | ) | (167,639 | ) | (267,639 | ) | ||||||||||||||||||
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|
|
|
|
|
|
|
|
| |||||||||||||||
Total transactions with shareholders | — | 399,085 | — | — | (866,249 | ) | (167,639 | ) | (634,803 | ) | ||||||||||||||||||
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|
|
|
|
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|
|
|
| |||||||||||||||
Balance at December 31, 2019 | ||||||||||||||||||||||||||||
|
|
|
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|
|
|
|
|
|
|
|
|
The above separate statements of changes in equity should be read in conjunction with the accompanying notes.
6
KB Financial Group Inc.
Separate Statements of Cash Flows
Year Ended December 31, 2019 and December 31, 2018
(In millions of Korean won) | Note | 2019 | 2018 | |||||||||
Cash flows from operating activities | ||||||||||||
Profit for the period | ||||||||||||
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|
|
| |||||||||
Adjustment fornon-cash items | ||||||||||||
Depreciation and amortization | 5,093 | 864 | ||||||||||
Share-based payments | 4,259 | 551 | ||||||||||
Net interest expense | 4,727 | 5,198 | ||||||||||
Net gains on valuation on financial assets at fair value through profit or loss | (2,322 | ) | (4,694 | ) | ||||||||
Net other expenses | 2,209 | 2,118 | ||||||||||
|
|
|
| |||||||||
13,966 | 4,037 | |||||||||||
|
|
|
| |||||||||
Changes in operating assets and liabilities | ||||||||||||
Deferred income tax assets | 854 | 2,782 | ||||||||||
Other assets | (4,270 | ) | (1,046 | ) | ||||||||
Other liabilities | (10,824 | ) | (7,016 | ) | ||||||||
|
|
|
| |||||||||
(14,240 | ) | (5,280 | ) | |||||||||
|
|
|
| |||||||||
Net cash inflow from operating activities | 745,713 | 924,662 | ||||||||||
|
|
|
| |||||||||
Cash flows from investing activities | ||||||||||||
Acquisition of financial assets at fair value through profit or loss | (2,180,000 | ) | — | |||||||||
Disposal of financial assets at fair value through profit of loss | 2,057,592 | — | ||||||||||
Acquisition of subsidiaries | (100,000 | ) | — | |||||||||
Increase in loans at amortized cost | (70,000 | ) | (40,000 | ) | ||||||||
Acquisition of property and equipment | (4,771 | ) | (1,991 | ) | ||||||||
Disposal of property and equipment | 13 | — | ||||||||||
Acquisition of intangible assets | (1,848 | ) | (866 | ) | ||||||||
Disposal of intangible assets | 41 | 34 | ||||||||||
Net increase in guarantee deposits paid | (1,265 | ) | (375 | ) | ||||||||
Other investing activities | (371 | ) | (356 | ) | ||||||||
|
|
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| |||||||||
Net cash outflow from investing activities | (300,609 | ) | (43,554 | ) | ||||||||
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|
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| |||||||||
Cash flows from financing activities | ||||||||||||
Increase in debts | 418,705 | 298,321 | ||||||||||
Decrease in debts | (717,026 | ) | (298,485 | ) | ||||||||
Increase in debentures | 1,037,656 | 897,872 | ||||||||||
Decrease in debentures | (868,154 | ) | (688,486 | ) | ||||||||
Dividends paid to shareholders | (759,736 | ) | (766,728 | ) | ||||||||
Principal elements of lease payments | (569 | ) | — | |||||||||
Acquisition of treasury shares | (274,317 | ) | (224,700 | ) | ||||||||
Issuance of hybrid securities | 399,085 | — | ||||||||||
Dividends paid on hybrid securities | (6,513 | ) | — | |||||||||
|
|
|
| |||||||||
Net cash outflow from financing activities | (770,869 | ) | (782,206 | ) | ||||||||
|
|
|
| |||||||||
Net increase (decrease) in cash and cash equivalents |
| (325,765 | ) | 98,902 | ||||||||
Cash and cash equivalents at the beginning of the period | 28 | 344,299 | 245,397 | |||||||||
|
|
|
| |||||||||
Cash and cash equivalents at the end of the period | 28 | |||||||||||
|
|
|
|
The above separate statements of cash flows should be read in conjunction with the accompanying notes.
7
KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2019 and 2018
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 are located at 26,Gukjegeumyung-ro-8-gil,Yeongdeungpo-gu, Seoul. The Company’s share capital as of December 31, 2019, isW 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. 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 after 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 Company’s 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 Company’s 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.
8
KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2019 and 2018
The separate financial statements were prepared in accordance with Korean IFRS 1027,Separate Financial Statements.
2.1.1 New and amended standards and interpretations adopted by the Company
The Company has applied the following standards and amendments for the first time for their annual reporting period commencing January 1, 2019.
• | Enactment of Korean IFRS 1116Leases |
Korean IFRS 1116Leases replaces Korean IFRS 1017Leases. Under Korean IFRS 1116, with implementation of a single lease model, lessee is required to recognize assets and liabilities for all lease which lease term is over 12 months and underlying assets are not low value assets. A lessee is required to recognize a right-of-use asset and a lease liability representing its obligation to make lease payments.
With implementation of Korean IFRS 1116Lease, the Company has changed accounting policy. The Company has adopted Korean IFRS 1116 retrospectively, as permitted under the specific transitional provisions in the standard, and recognized the cumulative impact of initially applying the standard as of January 1, 2019, the date of initial application. The Company has not restated comparatives for the 2018 reporting period. The impact of the adoption of the leasing standard and the new accounting policies are disclosed in Note 31.
• | Amendments to Korean IFRS 1109Financial Instruments |
The narrow-scope amendments made to Korean IFRS 1109Financial 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. The amendment does not have a significant impact on the Company’s financial statements.
• | Amendments to Korean IFRS 1019Employee 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. The amendment does not have a significant impact on the Company’s financial statements.
• | Amendments to Korean IFRS 1028Investments 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 entity’s net investment in an associate or joint venture. The amendment does not have a significant impact on the Company’s financial statements.
• | Enactment of Interpretation of Korean IFRS 2123Uncertainty over Income Tax Treatments |
The Interpretation explains how to recognize and measure deferred and current income tax assets and liabilities where there is uncertainty over a tax treatment, and includes guidance on how to determine whether each uncertain tax treatment is considered separately or together. It also presents examples of circumstances where a judgement or estimate is required to be reassessed. The enactment does not have a significant impact on the Company’s financial statements.
• | Annual Improvements to Korean IFRS 1103 Business Combination |
9
KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2019 and 2018
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. The amendments have no significant effect on the Company’s financial statements.
• | Annual Improvements to Korean IFRS 1111Joint 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. The amendments have no significant effect on the Company’s financial statements.
• | Annual Improvements to Paragraph 57A of Korean IFRS 1012Income 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. The amendments have no significant effect on the Company’s financial statements.
• | Annual Improvements to Korean IFRS 1023Borrowing 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. The amendments have no significant effect on the Company’s financial statements.
2.1.2 New and amended standards and interpretations not yet adopted by the Company
Certain new accounting standards and interpretations that have been published but are not mandatory for the reporting period commencing January 1, 2019 and have not been early adopted by the Company are set out below.
• | Amendments to Korean IFRS 1001Presentation of Financial Statements and Korean IFRS 1008 Accounting policies, changes in accounting estimates and errors – Definition of Material |
The amendments clarify the explanation of the definition of material and amended Korean IFRS 1001 and Korean IFRS 1008 in accordance with the clarified definitions. Materiality is assessed by reference to omission or misstatement of material information as well as effects of immaterial information, and to the nature of the users when determining the information to be disclosed by the Company. These amendments should be applied for annual periods beginning on or after January 1, 2020, and earlier application of permitted. The Company does not expect that these amendments have a significant impact on the financial statements.
• | Amendments to Korean IFRS 1103Business Combination – Definition of a Business |
To consider the integration of the required activities and assets as a business, the amended definition of a business requires an acquisition to include an input and a substantive process that together significantly contribute to the ability to create outputs and excludes economic benefits from the lower costs. An entity can apply a concentration test, an optional test, where substantially all of the fair value of gross assets acquired is concentrated in a single asset or a group of similar assets, the assets acquired would not represent a business. These amendments should be applied for annual periods beginning on or after January 1, 2020, and earlier application of permitted. The Company does not expect that these amendments have a significant impact on the financial statements.
10
KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2019 and 2018
• | IFRS Interpretation Committee’s agenda decisions - Lease Term |
On December 16, 2019, the IFRS Interpretations Committee announced an interpretation of the “lease term and useful life of leasehold improvements”. This interpretation deals with how to determine the lease term of a cancellable lease or a renewable lease and whether the useful life ofnon-removable leasehold improvements is limited by the relevant lease term. According to this interpretation, the Company should identify factors to consider the broader economic penalty, reflect identified factors to accounting policies, and calculate lease term again based on accounting policy.
However, due to the large number of lease contracts held by the Company and varying terms of the contract, the Company determined that sufficient time would be required to set up items to be included in the review of extensive economic penalty and to establish procedures for collecting and analyzing necessary information. Therefore, the effect of the changes in accounting policy for the lease term is not reflected in the separate financial statements for the current reporting period.
If the accounting policy for the lease term is changed in the annual periods beginning on or after January 1, 2020, the amount of the relatedright-of-use assets and lease liabilities may increase, and the separate financial statements may need to be retroactively restated to reflect this effect.
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 Company’s 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). Management’s estimates of outcomes may differ from actual outcomes if management’s estimates and assumptions based on management’s 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 separate financial statements are as follows:
2.4.1 Income taxes
The Company 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.
11
KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2019 and 2018
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 Company 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 Company’s 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 3.1, ‘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 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 16).
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 arm’s 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 arm’s length transaction.
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KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2019 and 2018
3.1.2 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 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 arm’s 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 arm’s 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 commonover-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 statement 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
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KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2019 and 2018
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 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.
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KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2019 and 2018
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 considerswrite-off if significant financial difficulties of the debtor, or delinquency in interest or principal payments is indicated. Thewrite-off decision is made in accordance with internal regulations and may require approval from external institution, if necessary. After thewrite-off, the Company can collect thewritten-off loans continuously according to the internal policy. Recovered amounts of financial assets previouslywritten-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 statement 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.
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.
3.3Non-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.
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KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2019 and 2018
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 dealer’s 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.
3.3.3 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.
16
KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2019 and 2018
The Company uses the following three measurement techniques in accordance with Korean IFRS:
• | General approach: for financial assets andoff-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. 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 and measures the expected credit losses.
17
KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2019 and 2018
The Company assumes the risk components have a certain correlation with the economic cycle, and uses statistical methodologies to estimate the relation between key macroeconomic variables and risk components for the expected credit losses. 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 | (-) | |
Rate of change in housing transaction price index | (-) | |
Interest rate spread | (+) | |
Private consumption growth rate | (-) |
Forward-looking information used in calculation of expected credit losses is based on the macroeconomic forecasts utilized by management of the Company for its business plan taking into account reliable external agency’s forecasts and others. The forward-looking information is generated by KB Research under KB Financial Group with comprehensive approach to capture the possibility of various economic forecast scenarios that are derived from the internal and external viewpoints of the macroeconomic situation. The Company determines the macroeconomic variables to be used in forecasting future condition of the economy, taking into account the direction of the forecast scenario and the significant relationship between macroeconomic variables and time series data. And there are some changes compared to the macroeconomic variables used in the previous year.
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 asset’s carrying amount and the present value of estimated future cash flows discounted at the financial asset’s 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).
Individual assessment of impairment
Individual assessment of impairment losses are calculated using management’s 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.
18
KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2019 and 2018
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).
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.
19
KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2019 and 2018
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 borrower’s 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 |
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.
20
KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2019 and 2018
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 theday-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 asset’s 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 financialyear-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.
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 |
21
KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2019 and 2018
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 ofNon-financial Assets
The Company assesses at the end of each reporting period whether there is any indication that anon-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 asset’s 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 apre-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.
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.
3.11.1 Ordinary share
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares are deducted, net of tax, from the equity.
22
KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2019 and 2018
3.11.2 Hybrid Securities
The financial instruments can be classified as either financial liabilities or equity in accordance with the terms of the contract. The Company classifies hybrid securities as an equity if the Company has the unconditional right to avoid any contractual obligation to deliver financial assets such as cash in relation to the financial instruments.
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.
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.
23
KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2019 and 2018
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 distribute newly issued shares or treasury shares, or compensate in cash based on the share 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 employee’s employment as a result of either (a) the Company decision to terminate an employee’s employment before the normal retirement date; or (b) an employee’s 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.
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.
24
KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2019 and 2018
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.
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.
25
KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2019 and 2018
3.15 Leases
As explained in Note 2 above, the Company has changed its accounting policy for leases. The impact of the new accounting policies is disclosed in Note 31.
Lease income from operating leases where the Company is a lessor is recognized in income on a straight-line basis over the lease term. Initial direct costs incurred in obtaining an operating lease are added to the carrying amount of the underlying asset and recognized as expense over the lease term on the same basis as lease income. The respective leased assets are included in the statement of financial position based on their nature. The Company did not need to make any adjustments to the accounting for assets held as a lessor as a result of adopting the new leasing standard.
At inception of a contract, the Company is required to assess whether the contract is, or contains, a lease. Also, at the date of initial application, the Company has assessed whether the contract is, or contains, a lease in accordance with the standard. However, the Company did not reassess all contracts as the Company elected to apply the practical expedient not to apply the standard to contracts that were not previously identified as containing a lease. On the basis of the date of initial application, the Company assesses whether the contract is, or contains, a lease.
A lessee is required to recognize a right-of-use asset (lease assets) representing its right to use the underlying leased asset and a lease liability representing its obligation to make lease payments. Assets and liabilities arising from a lease are initially measured on a present value basis.
Lease liabilities include the net present value of the following lease payments:
• | Fixed payments (including in-substance fixed payments), less any lease incentives receivable |
• | Variable lease payment that are based on an index or a rate |
• | Amounts expected to be payable by the lessee under residual value guarantees |
• | The exercise price of a purchase option if the lessee is reasonably certain to exercise that option, and |
• | Payments of penalties for terminating the lease, if the lease term reflects the lessee exercising that option |
The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be determined, the lessee’s incremental borrowing rate is used, being the rate that the lessee would have to pay to borrow the funds necessary to obtain an asset of similar value in a similar economic environment with similar terms and conditions.
Right-of-use assets are measured at cost comprising the following:
• | The amount of the initial measurement of lease liability |
• | Any lease payments made at or before the commencement date less any lease incentives received |
• | Any initial direct costs, and |
• | Restoration costs |
26
KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2019 and 2018
However, short-term lease (lease that, at the commencement date, has a lease term of 12 months or less) and lease oflow-value assets (For example, underlying leased asset under $ 5,000) are permitted to elect exceptional conditions.
Theright-of-use asset is depreciated over the shorter of the asset’s useful life and the lease term.
Related to sale and leaseback, an entity (seller-lessee) is required to applying 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, the Company has not reassessed sale and leaseback transactions entered into before the date of initial application.
3.16 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 Company’s 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 Company’s long-term strategy and business decisions efficiently. Credit risk, market risk and liquidity risk have been recognized as the Company’s 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 Company’s 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 Company’s 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 Company’s risk management.
Risk Management Division
The Risk Management Division is responsible for conducting detailed policies, procedures and working processes relating to the Company’s risk management.
27
KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2019 and 2018
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 counterparty’s default, breach of contract and deterioration in the credit quality of the counterparty. For risk management reporting purposes, the individual borrower’s 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 Company’s maximum exposures of financial instruments to credit risk without consideration of collateral values as of December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | 2018 | ||||||
Due from financial institutions | ||||||||
Loans at amortized cost | 120,000 | 50,000 | ||||||
Loans at fair value through profit or loss | 122,408 | — | ||||||
Other financial assets | 19,814 | 17,116 | ||||||
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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 statements using other comprehensive income.
28
KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2019 and 2018
Credit risk exposure
Loans as of December 31, 2019 and 2018, are classified as follows:
(In millions of Korean won) | 2019 | |||||||||||||||||||||||
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 incurred expected credit losses | Total | ||||||||||||||||||||
Non-impaired | Impaired | |||||||||||||||||||||||
Financial assets at amortized cost |
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Grade 2 | — | — | — | — | — | — | ||||||||||||||||||
Grade 3 | — | — | — | — | — | — | ||||||||||||||||||
Grade 4 | — | — | — | — | — | — | ||||||||||||||||||
Grade 5 | — | — | — | — | — | — | ||||||||||||||||||
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(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 incurred expected credit losses | Total | ||||||||||||||||||||
Non-impaired | Impaired | |||||||||||||||||||||||
Financial assets at amortized cost |
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Grade 2 | — | — | — | — | — | — | ||||||||||||||||||
Grade 3 | — | — | — | — | — | — | ||||||||||||||||||
Grade 4 | — | — | — | — | — | — | ||||||||||||||||||
Grade 5 | — | — | — | — | — | — | ||||||||||||||||||
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Credit quality of loans graded according to the probability of default as of December 31, 2019 and 2018, are 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 ~ |
29
KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2019 and 2018
4.2.5 Credit risk of due from financial institutions
The credit quality of due from financial institutions as of December 31, 2019 and 2018, are classified as follows:
(In millions of Korean won) | 2019 | |||||||||||||||||||
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 | |||||||||||||||||||
Financial assets at amortized cost |
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Due from financial institutions |
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Grade 1 | ||||||||||||||||||||
Grade 2 | — | — | — | — | — | |||||||||||||||
Grade 3 | — | — | — | — | — | |||||||||||||||
Grade 4 | — | — | — | — | — | |||||||||||||||
Grade 5 | — | — | — | — | — | |||||||||||||||
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(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 | |||||||||||||||||||
Financial assets at amortized cost |
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Due from financial institutions |
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Grade 2 | — | — | — | — | — | |||||||||||||||
Grade 3 | — | — | — | — | — | |||||||||||||||
Grade 4 | — | — | — | — | — | |||||||||||||||
Grade 5 | — | — | — | — | — | |||||||||||||||
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4.2.6 Credit risk concentration analysis
Details of the Company’s loans by country as of December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | |||||||||||||||
Corporate loans | % | Allowances | Carrying amount | |||||||||||||
Korea | 100.00 | |||||||||||||||
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Corporate loans | % | Allowances | Carrying amount | |||||||||||||
Korea | 100.00 | |||||||||||||||
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30
KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2019 and 2018
Details of the Company’s corporate loans by industry as of December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | |||||||||||||||
Corporate loans | % | Allowances | Carrying amount | |||||||||||||
Financial institutions | 100.00 | |||||||||||||||
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Corporate loans | % | Allowances | Carrying amount | |||||||||||||
Financial institutions | 100.00 | |||||||||||||||
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Details of the Company’s due from financial institutions by industry as of December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | |||||||||||||||
Corporate loans | % | Allowances | Carrying amount | |||||||||||||
Due from financial institutions at amortized cost |
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Financial institutions | 100.00 | |||||||||||||||
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Corporate loans | % | Allowances | Carrying amount | |||||||||||||
Due from financial institutions at amortized cost |
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Financial institutions | 100.00 | |||||||||||||||
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Details of the Company’s due from financial institutions by country as of December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | |||||||||||||||
Corporate loans | % | Allowances | Carrying amount | |||||||||||||
Due from financial institutions at amortized cost |
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Korea | 100.00 | |||||||||||||||
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Corporate loans | % | Allowances | Carrying amount | |||||||||||||
Due from financial institutions at amortized cost |
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31
KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2019 and 2018
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, assets and liabilities related to the other cash flow, andoff-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
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, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | |||||||||||||||||||||||||||
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 | 122,408 | — | — | — | — | 291,501 | 413,909 | |||||||||||||||||||||
Loans at amortized cost | — | — | 71,523 | 51,098 | — | — | 122,621 | |||||||||||||||||||||
Other financial assets | — | 925 | — | 15,660 | — | — | 16,585 | |||||||||||||||||||||
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Debentures | ||||||||||||||||||||||||||||
Lease liabilities | — | 44 | 85 | 249 | 215 | — | 593 | |||||||||||||||||||||
Other financial liabilities | — | 1,819 | — | — | — | — | 1,819 | |||||||||||||||||||||
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32
KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2019 and 2018
(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 | — | — | — | — | — | 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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Debts | ||||||||||||||||||||||||||||
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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2 | Hybrid securities included in financial assets at fair value through profit or loss are included in the ‘Over 5 years’ category since the point of disposal 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 may occur due to changes in interest rates; such as, the value (fair value) change risk in statement of financial position line items and cash flow change risk in interest income and expense arising from investing and financing activities.
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 for the interest rate.
33
KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2019 and 2018
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, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | 2018 | ||||||
Interest rate VaR |
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 8.0%(2018: 7.125%), a minimum Tier 1 ratio of 9.5%(2018: 8.625%) and a minimum Total Regulatory Capital ratio of 11.5%(2018: 10.625%) as of December 31, 2019.
The Company’s 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.
34
KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2019 and 2018
The Risk Management Council of the Company determines the Company’s 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.
Details of the Company’s capital adequacy calculation in line with Basel III, as of December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | 2018 | ||||||
Equity Capital: | ||||||||
Tier 1 Capital | 35,420,184 | 32,993,826 | ||||||
Common Equity Tier 1 Capital | 34,703,953 | 32,993,826 | ||||||
Additional Tier 1 Capital | 716,231 | — | ||||||
Tier 2 Capital | 1,568,821 | 1,482,346 | ||||||
Risk-weighted assets: | 255,382,302 | 236,099,017 | ||||||
Equity Capital (%): | 14.48 | 14.60 | ||||||
Tier 1 Capital (%) | 13.87 | 13.97 | ||||||
Common Equity Tier 1 Capital (%) | 13.59 | 13.97 |
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, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | |||||||
Carrying amount | Fair value | |||||||
Financial assets | ||||||||
Financial assets at fair value through profit or loss | ||||||||
Financial assets at amortized cost | ||||||||
Due from financial institutions | 18,537 | 18,537 | ||||||
Loans | 120,000 | 120,000 | ||||||
Other financial assets | 19,814 | 19,814 | ||||||
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572,260 | 572,260 | |||||||
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Financial liabilities | ||||||||
Financial liabilities at amortized cost | ||||||||
Debentures | 5,543,446 | 5,631,217 | ||||||
Other financial liabilities | 14,940 | 14,940 | ||||||
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35
KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2019 and 2018
(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 | ||||||
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700,597 | 700,597 | |||||||
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Financial liabilities | ||||||||
Financial liabilities at amortized cost | ||||||||
Debts | 300,000 | 300,000 | ||||||
Debentures | 5,373,266 | 5,398,656 | ||||||
Other financial liabilities | 19,953 | 19,953 | ||||||
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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 arm’s 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 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 | DCF model is used to determine the fair value of debts, but in the case of short-term maturity, the carrying amount is used as the fair value. | |
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, 2019 and 2018
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 statement of financial position are appropriate. However, the fair values of the financial instruments recognized in the statement 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.
When the inputs used to measure the fair value of an asset or a liability might be categorized within different levels of the fair value hierarchy, the fair value measurement is categorized in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement. Assessing the significance of a particular input to the entire measurement requires judgment, taking into account factors specific to the asset or liability. 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, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | |||||||||||||||
Fair value hierarchy | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Financial assets | ||||||||||||||||
Financial assets at fair value through profit or loss | ||||||||||||||||
Hybrid securities | ||||||||||||||||
Loans | — | 122,408 | — | 122,408 | ||||||||||||
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(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 | ||||||||||||||||
Hybrid securities | ||||||||||||||||
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37
KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2019 and 2018
Valuation techniques and inputs of financial assets and liabilities at fair value in the statements of financial position and classified as Level 2 as of December 31, 2019, are as follows:
2019 | ||||||||||||
Fair value | Valuation techniques | Inputs | ||||||||||
Financial assets | ||||||||||||
Financial assets at fair value through profit or loss | ||||||||||||
Loans | DCF model | Interest, Discount rate, etc |
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, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | |||||||||||||||
Fair value hierarchy | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Financial assets | ||||||||||||||||
Cash and due from financial institutions1 | ||||||||||||||||
Loans at amortized cost2 | — | — | 120,000 | 120,000 | ||||||||||||
Other financial assets3 | — | — | 19,814 | 19,814 | ||||||||||||
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— | 18,537 | 139,814 | 158,351 | |||||||||||||
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Financial liabilities | ||||||||||||||||
Debentures | — | 5,631,217 | — | 5,631,217 | ||||||||||||
Other financial liabilities3 | — | — | 14,940 | 14,940 | ||||||||||||
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(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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— | 284,302 | 127,116 | 411,418 | |||||||||||||
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Financial liabilities | ||||||||||||||||
Debts4 | — | 300,000 | — | 300,000 | ||||||||||||
Debentures | — | 5,398,656 | — | 5,398,656 | ||||||||||||
Other financial liabilities3 | — | — | 19,953 | 19,953 | ||||||||||||
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1 | Because due from financial institutions classified as level 2 are deposits on demand, carrying amounts are reasonable approximations of fair values. And 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 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 | Since the remaining maturity of debts classified as level 2 is less than a year, carrying amounts are reasonable approximations of fair values. |
38
KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2019 and 2018
Valuation techniques and inputs used in the fair value measurement
For financial assets and liabilities whose carrying amount is a reasonable approximation of fair value, we do not 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, 2019 and 2018, are as follows:
(In millions of Korean won) | Fair value | Valuation Techniques | Inputs | |||||||||||||
2019 | 2018 | |||||||||||||||
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 valuer’s valuation to determine the fair value of the Company’s 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, 2019 and 2018, are as follows:
(In millions of Korean won) | Financial assets at fair value through profit or loss | |||
2019 | ||||
Beginning balance | ||||
Total gains or losses | ||||
- Profit or loss for the year | 2,322 | |||
- Other comprehensive income | — | |||
Purchases | — | |||
Sales | — | |||
Issues | — | |||
Settlements | — | |||
Transfers into Level 3 | — | |||
Transfers out of Level 3 | — | |||
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Ending balance | ||||
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39
KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2019 and 2018
(In millions of Korean won) | Financial assets at fair value through profit or loss | |||
2018 | ||||
Beginning balance | ||||
Total gains or losses | ||||
- Profit or loss for the year | 4,694 | |||
- Other comprehensive income | — | |||
Purchases | — | |||
Sales | — | |||
Issues | — | |||
Settlements | — | |||
Transfers into Level 3 | — | |||
Transfers out of Level 3 | — | |||
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Ending balance | ||||
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In relation to changes in Level 3 of the fair value hierarchy, total gains or losses recognized in profit or loss for the year, and profit or loss from financial instruments held at the end of the reporting period in the statement of comprehensive income for the year ended December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | 2018 | ||||||||||||||||||||||
Gains from financial investments at fair value through profit or loss | Other operating income | Net interest income | Gains 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 year | ||||||||||||||||||||||||
Total gains or losses for the year 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, 2019 and 2018
5.2.3 Sensitivity analysis of changes in unobservable inputs
Information about fair value measurements using unobservable inputs as of December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | |||||||||||||||
Fair value | Valuation technique | Inputs | Unobservable | Range of unobservable inputs (%) | Relationship of unobservable inputs to fair value | |||||||||||
Financial assets | ||||||||||||||||
Financial assets at fair value through profit or loss | ||||||||||||||||
Hybrid securities | Hull and White Model, Monte Carlo Simulation | Matrix YTM, Additional spread by grade, Risk spread of company, Valid credit rating, Disclosed information of securities, Interest rate estimation variability | Discount rate
Volatility of interest rate |
| 2.05 ~ 4.45
0.50 |
| 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) | 2018 | |||||||||||||||
Fair value | Valuation technique | Inputs | Unobservable | Range of unobservable inputs (%) | Relationship of unobservable inputs to fair value | |||||||||||
Financial assets | ||||||||||||||||
Financial assets at fair value through profit or loss | ||||||||||||||||
Hybrid securities | Hull and White Model, Monte Carlo Simulation | Matrix YTM, Additional spread by grade, Risk spread of company, Valid credit rating, Disclosed information of securities, Interest rate estimation variability | 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 |
41
KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2019 and 2018
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 hybrid securities whose fair value changes are recognized in profit or loss.
The results of the sensitivity analysis from changes in inputs are as follows:
(In millions of Korean won) | 2019 | |||||||||||||||
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 | ||||||||||||||||
Hybrid securities1 | ||||||||||||||||
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1 | For equity securities,the changes in fair value are calculated by increasing or decreasing correlations between discount rate (2.05 ~ 4.45%) which are principal unobservable input parameters. And, the changes in fair value are calculated by increasing or decreasing the correlation coefficient between short-term and long-term interests or volatility of the interest rates, which are unobservable inputs, by 1%. |
(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 | ||||||||||||||||
Hybrid securities1 | ||||||||||||||||
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1 | For equity securities, the changes in fair value are calculated by increasing or decreasing correlations between discount rate (2.43 ~ 4.80%) which are principal unobservable input parameters. And, the changes in fair value are calculated by increasing or decreasing the correlation coefficient between short-term and long-term interests or volatility of the interest rates, which are unobservable inputs, by 1%. |
42
KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2019 and 2018
6. Due from Financial Institution
Details of due from financial institution as of December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | Financial Institution | Interest rate (%) (As of December 31, 2019) | 2019 | 2018 | ||||||||||||
Due from financial institution in Korean won | Due from banks | Kookmin Bank | 0.00 ~ 1.20 | |||||||||||||
Standard Chartered Bank | — | — | 41,350 | |||||||||||||
The Korea Securities Finance Corporation | — | — | 100,000 | |||||||||||||
BNK Busan Bank | — | — | 133,331 | |||||||||||||
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Details of a maturity analysis of due from financial institution, excluding restricted cash, as of December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | |||||||||||||||||||||||
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) | 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 |
Restricted cash from financial institution as of December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | Financial Institution | 2019 | 2018 | Reason for restriction | ||||||||||
Due from financial institution in Korean won | Kookmin Bank | Pledged as collateral for the overdraft establishment | ||||||||||||
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43
KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2019 and 2018
7. Financial Assets at Fair Value through Profit or Loss
Details of financial assets at fair value through profit or loss as of December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | 2018 | ||||||
Financial assets at fair value through profit or loss |
| |||||||
Hybrid securities | ||||||||
Loans | 122,408 | — | ||||||
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8. Loans at Amortized Cost
Details of loans at amortized cost as of December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | 2018 | ||||||
Financial assets at fair value through profit or loss |
| |||||||
Loans at amortized cost | ||||||||
Less: Allowances for loan losses | — | — | ||||||
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Carrying amount | ||||||||
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Details of loan types and customer types of loans to customers, other than banks, as of December 31, 2019, are as follows:
(In millions of Korean won) | 2019 | |||||||||||||||
Retail | Corporate | Credit card | Total | |||||||||||||
Reverse repurchase agreements | ||||||||||||||||
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— | 120,000 | — | 120,000 | |||||||||||||
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Proportion (%) | — | 100.00 | — | 100.00 | ||||||||||||
Less: Allowances | — | — | — | — | ||||||||||||
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(In millions of Korean won) | 2018 | |||||||||||||||
Retail | Corporate | Credit card | Total | |||||||||||||
Reverse repurchase agreements | ||||||||||||||||
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— | 50,000 | — | 50,000 | |||||||||||||
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Proportion (%) | — | 100.00 | — | 100.00 | ||||||||||||
Less: Allowances | — | — | — | — | ||||||||||||
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44
KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2019 and 2018
9. Investments in Subsidiaries
Details of subsidiaries as of December 31, 2019, 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 Asset Management Co., Ltd. | Investment advisory and collective investment | Korea | ||
KB Capital Co., Ltd. | Financial leasing | Korea | ||
KB Life Insurance Co., Ltd. | Life insurance | Korea | ||
KB Real Estate Trust Co., Ltd. | Real estate trust management | Korea | ||
KB Savings Bank Co., Ltd. | Savings banking | Korea | ||
KB Investment Co., Ltd. | Capital investment | Korea | ||
KB Data System Co., Ltd. | System software, development and supply | Korea | ||
KB Credit Information Co., Ltd. | Collection of receivables and credit investigation | Korea |
Investments in subsidiaries as of December 31, 2019 and 2018, 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, 2019 | 2019 | 2018 | |||||||||||||
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 Asset Management Co., Ltd. | �� | 7,667,550 | 100.00 | 96,312 | 96,312 | |||||||||||
KB Capital Co., Ltd.1 | 23,349,208 | 100.00 | 623,811 | 573,811 | ||||||||||||
KB Life Insurance Co., Ltd. | 91,200,000 | 100.00 | 485,314 | 485,314 | ||||||||||||
KB Real Estate Trust Co., Ltd. | 16,000,000 | 100.00 | 121,553 | 121,553 | ||||||||||||
KB Savings Bank Co., Ltd. | 8,001,912 | 100.00 | 157,544 | 157,544 | ||||||||||||
KB Investment Co., Ltd. 1 | 22,525,328 | 100.00 | 154,910 | 104,910 | ||||||||||||
KB Data System Co., Ltd. | 800,000 | 100.00 | 6,334 | 6,334 | ||||||||||||
KB Credit Information Co., Ltd. | 1,252,400 | 100.00 | 23,621 | 23,621 | ||||||||||||
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1 | Carrying amount of investments in KB Capital Co., Ltd. Increased ¥ 500,000 in million due topaid-in capital increase and KB investment Co., Ltd. increased |
45
KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2019 and 2018
Changes in accumulated impairment losses on investments in subsidiaries for the years ended December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | |||||||||||||||
Beginning | Impairment | Others | Ending | |||||||||||||
Accumulated impairment losses on investments in subsidiaries |
(In millions of Korean won) | 2018 | |||||||||||||||
Beginning | Impairment | Others | Ending | |||||||||||||
Accumulated impairment losses on investments in subsidiaries |
10. Property and Equipment
Details of property and equipment as of December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | |||||||||||||||
Acquisition cost | Accumulated depreciation | Accumulated impairment losses | Carrying amount | |||||||||||||
Leasehold improvements | ||||||||||||||||
Equipment and others | 4,818 | (2,946 | ) | — | 1,872 | |||||||||||
Right-of-use property and equipment - Buildings | 683 | (490 | ) | — | 193 | |||||||||||
Right-of-use property and equipment- Vehicles | 904 | (624 | ) | — | 280 | |||||||||||
Right-of-use property and equipment - Others | 36 | (21 | ) | — | 15 | |||||||||||
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(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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The changes in property and equipment for the years ended December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | |||||||||||||||||||
Beginning1 | Acquisition2 | Disposal3 | Depreciation | Ending | ||||||||||||||||
Leasehold improvements | ||||||||||||||||||||
Equipment and others | 1,993 | 1,165 | (34 | ) | (1,252 | ) | 1,872 | |||||||||||||
Right-of-use assets - Buildings | 263 | 432 | (6 | ) | (496 | ) | 193 | |||||||||||||
Right-of-use assets - Vehicles | 406 | 521 | (20 | ) | (627 | ) | 280 | |||||||||||||
Right-of-use assets - Others | 15 | 21 | — | (21 | ) | 15 | ||||||||||||||
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| |||||||||||
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1 | Right-of-use assets are restated based on Korean IFRS 1116. |
2 | Increase inright-of-use assets during the year. |
3 | Decrease inright-of-use assets during the year. |
46
KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2019 and 2018
(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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11. Intangible Assets
Details of intangible assets as of December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | |||||||||||||||
Acquisition cost | Accumulated amortization | Accumulated impairment losses | Carrying amount | |||||||||||||
Software | ||||||||||||||||
Membership rights | 9,765 | — | (1,786 | ) | 7,979 | |||||||||||
Other intangible assets | 5,451 | (4,086 | ) | — | 1,365 | |||||||||||
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(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 | |||||||||||
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The changes in intangible assets for the years ended December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | |||||||||||||||||||||||
Beginning | Acquisition | Disposal | Amortization | Impairment1 | Ending | |||||||||||||||||||
Software | ||||||||||||||||||||||||
Membership rights | 7,809 | 215 | (41 | ) | — | (4 | ) | 7,979 | ||||||||||||||||
Other intangible assets | 906 | 815 | — | (356 | ) | — | 1,365 | |||||||||||||||||
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(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 | |||||||||||||||||
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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. |
47
KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2019 and 2018
The changes in accumulated impairment losses on intangible assets for the years ended December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | |||||||||||||||
Beginning | Impairment | Disposal | Ending | |||||||||||||
Accumulated impairment losses on intangible assets |
(In millions of Korean won) | 2018 | |||||||||||||||
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, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | |||||||||||
Assets | Liabilities | Net amounts | ||||||||||
Share-based payments | ||||||||||||
Membership rights | 491 | — | 491 | |||||||||
Defined benefit obligation | 2,888 | — | 2,888 | |||||||||
Plan assets | — | (2,888 | ) | (2,888 | ) | |||||||
Short-term employee benefits | 1,193 | — | 1,193 | |||||||||
Gains on valuation of financial assets at fair value through profit or loss | 2,337 | — | 2,337 | |||||||||
Others | 245 | — | 245 | |||||||||
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|
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|
|
| |||||||
10,414 | (2,888 | ) | 7,526 | |||||||||
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|
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|
|
| |||||||
Offsetting of deferred tax assets and liabilities | (2,888 | ) | 2,888 | — | ||||||||
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| |||||||
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|
(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 on valuation of financial assets at fair value through profit or loss | 2,976 | — | 2,976 | |||||||||
Others | 120 | — | 120 | |||||||||
|
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|
|
| |||||||
9,788 | (1,604 | ) | 8,184 | |||||||||
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| |||||||
Offsetting of deferred tax assets and liabilities | (1,604 | ) | 1,604 | — | ||||||||
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48
KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2019 and 2018
Unrecognized deferred income tax assets
No deferred income tax assets have been recognized for the deductible temporary difference ofW 2,896,164 million,W 66,162 million andW 51,742 million associated with investments in subsidiaries, tax loss carryforwards and impairment losses on investments in subsidiaries, respectively, as of December 31, 2019, 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 ofW 2,395,805 million associated with investments in subsidiaries as of December 31, 2019, 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, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | |||||||||||||||
Beginning | Decrease | Increase | Ending | |||||||||||||
Deductible temporary differences | ||||||||||||||||
Share-based payments | ||||||||||||||||
Membership rights | 1,814 | 32 | 4 | 1,786 | ||||||||||||
Investments in subsidiaries | 2,896,164 | — | — | 2,896,164 | ||||||||||||
Defined benefit obligation | 9,175 | 1,833 | 3,162 | 10,504 | ||||||||||||
Short-term employee benefits | 2,721 | 2,721 | 4,338 | 4,338 | ||||||||||||
Tax loss carryforwards | 66,162 | — | — | 66,162 | ||||||||||||
Impairment losses on investments in subsidiaries | 51,742 | — | — | 51,742 | ||||||||||||
Gains on valuation of financial assets at fair value through profit or loss | 10,822 | 2,323 | — | 8,499 | ||||||||||||
Others | 439 | 413 | 865 | 891 | ||||||||||||
|
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|
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|
| |||||||||
3,049,663 | 10,349 | 12,628 | 3,051,942 | |||||||||||||
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|
| |||||||||
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 | ||||||||||||||
|
|
|
| |||||||||||||
35,595 | 37,874 | |||||||||||||||
|
|
|
| |||||||||||||
Tax rate (%) | 27.5 | 27.5 | ||||||||||||||
|
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| |||||||||||||
Deferred income tax assets from deductible temporary differences | ||||||||||||||||
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|
| |||||||||||||
Taxable temporary differences | ||||||||||||||||
Investments in subsidiaries | (2,395,805 | ) | — | — | (2,395,805 | ) | ||||||||||
Plan assets | (5,835 | ) | (1,833 | ) | (6,502 | ) | (10,504 | ) | ||||||||
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| |||||||||
(2,401,640 | ) | (1,833 | ) | (6,502 | ) | (2,406,309 | ) | |||||||||
|
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|
|
| |||||||||
Unrecognized deferred income tax liabilities: | ||||||||||||||||
Investments in subsidiaries | (2,395,805 | ) | (2,395,805 | ) | ||||||||||||
|
|
|
| |||||||||||||
(5,835) | (10,504) | |||||||||||||||
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|
|
| |||||||||||||
Tax rate (%) | 27.5 | 27.5 | ||||||||||||||
|
|
|
| |||||||||||||
Deferred income tax liabilities from taxable temporary differences | (1,604 | ) | (2,888 | ) | ||||||||||||
|
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|
|
49
KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2019 and 2018
(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 on valuation of financial assets at fair value through profit or loss | 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 (%) | 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 (%) | 27.5 | 27.5 | ||||||||||||||
|
|
|
| |||||||||||||
Deferred income tax liabilities from taxable temporary differences | ||||||||||||||||
|
|
|
|
50
KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2019 and 2018
13. Other Assets
Details of other assets as of December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | 2018 | ||||||
Other financial assets | ||||||||
Receivables | ||||||||
Accrued income | 3,654 | 2,251 | ||||||
Guarantee deposits | 16,160 | 14,190 | ||||||
|
|
|
| |||||
19,814 | 17,116 | |||||||
Othernon-financial assets | ||||||||
Receivables | 588,765 | 838,450 | ||||||
Prepaid expenses | 556 | 1,763 | ||||||
Advanced payments | 151 | 133 | ||||||
|
|
|
| |||||
589,472 | 840,346 | |||||||
|
|
|
| |||||
|
|
|
|
14. Debts
Debts as of December 31, 2019 and 2018, consist of:
(In millions of Korean won) | 2019 | 2018 | ||||||
Borrowings |
Details of borrowings as of December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | Lender | Annual interest rates (%) As of December 31, 2019 | 2019 | 2018 | ||||||||||||
Borrowings in Korean won | Other borrowings | MERITZ Securities Co., Ltd | — | |||||||||||||
|
|
|
| |||||||||||||
|
|
|
|
The maturities of debts as of December 31, 2019 and 2018, are as follows:
2019 | ||||||||||||||||||||||||
(In millions of Korean won) | Up to 3 months | 3~6 months | 6~12 months | 1~3 years | Over 3 years | Total | ||||||||||||||||||
Borrowings in Korean won |
2018 | ||||||||||||||||||||||||
(In millions of Korean won) | 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, 2019 and 2018
15. Debentures
Details of debentures as of December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | Issued date | Expiration date | Annual interest rates (%) As of December 31, 2019 | 2019 | 2018 | |||||||||||
Unguaranteed debenturesNo. 3-3 | Aug. 13, 2013 | Aug. 13, 2020 | 3.65 | |||||||||||||
Unguaranteed debenturesNo. 5-1 | Mar. 19, 2014 | Mar. 19, 2019 | 3.31 | — | 80,000 | |||||||||||
Unguaranteed debenturesNo. 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. 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 debenturesNo. 12-2 | Nov. 27, 2015 | Nov. 27, 2020 | 2.26 | 110,000 | 110,000 | |||||||||||
Unguaranteed debenturesNo. 12-3 | Nov. 27, 2015 | Nov. 27, 2022 | 2.38 | 50,000 | 50,000 | |||||||||||
Unguaranteed debenturesNo. 14-1 | Dec. 09, 2015 | Dec. 09, 2020 | 2.27 | 140,000 | 140,000 | |||||||||||
Unguaranteed debenturesNo. 14-2 | Dec. 09, 2015 | Dec. 09, 2022 | 2.38 | 30,000 | 30,000 | |||||||||||
Unguaranteed debenturesNo. 15-1 | May 12, 2016 | May 12, 2019 | 1.61 | — | 180,000 | |||||||||||
Unguaranteed debenturesNo. 15-2 | May 12, 2016 | May 12, 2021 | 1.72 | 220,000 | 220,000 | |||||||||||
Unguaranteed debenturesNo. 15-3 | May 12, 2016 | May 12, 2026 | 2.01 | 200,000 | 200,000 | |||||||||||
Unguaranteed debenturesNo. 16-1 | May 27, 2016 | May 27, 2019 | 1.67 | — | 240,000 | |||||||||||
Unguaranteed debenturesNo. 16-2 | May 27, 2016 | May 27, 2021 | 1.78 | 60,000 | 60,000 | |||||||||||
Unguaranteed debenturesNo. 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 debenturesNo. 18-1 | July 25, 2016 | July 25, 2019 | 1.38 | — | 170,000 | |||||||||||
Unguaranteed debenturesNo. 18-2 | July 25, 2016 | July 25, 2021 | 1.45 | 110,000 | 110,000 | |||||||||||
Unguaranteed debenturesNo. 18-3 | July 25, 2016 | July 25, 2026 | 1.69 | 80,000 | 80,000 | |||||||||||
Unguaranteed debenturesNo. 19-2 | Aug. 25, 2016 | Aug. 25, 2021 | 1.46 | 100,000 | 100,000 | |||||||||||
Unguaranteed debenturesNo. 19-3 | Aug. 25, 2016 | Aug. 25, 2026 | 1.69 | 120,000 | 120,000 | |||||||||||
Unguaranteed debenturesNo. 20-1 | Nov. 28, 2016 | Nov. 28, 2019 | 2.13 | — | 50,000 | |||||||||||
Unguaranteed debenturesNo. 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 debenturesNo. 22-1 | Feb. 28, 2017 | Feb. 28, 2020 | 1.89 | 120,000 | 120,000 | |||||||||||
Unguaranteed debenturesNo. 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 debenturesNo. 25-1 | May 24, 2017 | May 24, 2019 | 1.79 | — | 150,000 | |||||||||||
Unguaranteed debenturesNo. 25-2 | May 24, 2017 | May 24, 2020 | 1.97 | 100,000 | 100,000 | |||||||||||
Unguaranteed debenturesNo. 25-3 | May 24, 2017 | May 24, 2022 | 2.23 | 270,000 | 270,000 | |||||||||||
Unguaranteed debenturesNo. 25-4 | May 24, 2017 | May 24, 2027 | 2.62 | 80,000 | 80,000 | |||||||||||
Unguaranteed debenturesNo. 26-1 | June 27, 2017 | June 27, 2022 | 2.18 | 50,000 | 50,000 | |||||||||||
Unguaranteed debenturesNo. 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 debenturesNo. 28-1 | Aug. 30, 2017 | Aug. 30, 2022 | 2.30 | 60,000 | 60,000 | |||||||||||
Unguaranteed debenturesNo. 28-2 | Aug. 30, 2017 | Aug. 30, 2024 | 2.43 | 30,000 | 30,000 | |||||||||||
Unguaranteed debenturesNo. 28-3 | Aug. 30, 2017 | Aug. 30, 2027 | 2.60 | 60,000 | 60,000 | |||||||||||
Unguaranteed debenturesNo. 29-1 | Sept. 19, 2017 | Sept. 19, 2022 | 2.29 | 150,000 | 150,000 | |||||||||||
Unguaranteed debenturesNo. 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 | 80,000 | |||||||||||
Unguaranteed debenturesNo. 31-1 | Feb. 28, 2018 | Feb. 26, 2021 | 2.57 | 150,000 | 150,000 | |||||||||||
Unguaranteed debenturesNo. 31-2 | Feb. 28, 2018 | Feb. 28, 2023 | 2.81 | 50,000 | 50,000 | |||||||||||
Unguaranteed debenturesNo. 31-3 | Feb. 28, 2018 | Feb. 28, 2028 | 3.02 | 60,000 | 60,000 | |||||||||||
Unguaranteed debenturesNo. 32-1 | Apr. 06, 2018 | Apr. 06, 2021 | 2.50 | 60,000 | 60,000 | |||||||||||
Unguaranteed debenturesNo. 32-2 | Apr. 06, 2018 | Apr. 06, 2023 | 2.71 | 80,000 | 80,000 | |||||||||||
Unguaranteed debenturesNo. 32-3 | Apr. 06, 2018 | Apr. 06, 2028 | 2.86 | 20,000 | 20,000 | |||||||||||
Unguaranteed debenturesNo. 33-1 | June 12, 2018 | June 12, 2023 | 2.81 | 100,000 | 100,000 | |||||||||||
Unguaranteed debenturesNo. 33-2 | June 12, 2018 | June 12, 2028 | 2.92 | 30,000 | 30,000 | |||||||||||
Unguaranteed debenturesNo. 34-1 | July 25, 2018 | July 23, 2021 | 2.41 | 40,000 | 40,000 | |||||||||||
Unguaranteed debenturesNo. 34-2 | July 25, 2018 | July 25, 2023 | 2.65 | 70,000 | 70,000 | |||||||||||
Unguaranteed debenturesNo. 34-3 | July 25, 2018 | July 25, 2025 | 2.71 | 20,000 | 20,000 | |||||||||||
Unguaranteed debenturesNo. 34-4 | July 25, 2018 | July 25, 2028 | 2.76 | 20,000 | 20,000 | |||||||||||
Unguaranteed debentures No. 35 | Oct. 05, 2018 | Oct. 05, 2023 | 2.52 | 120,000 | 120,000 | |||||||||||
Unguaranteed debenturesNo. 36-1 | Feb. 22, 2019 | Feb. 22, 2022 | 2.03 | 120,000 | — | |||||||||||
Unguaranteed debenturesNo. 36-2 | Feb. 22, 2019 | Feb. 22, 2024 | 2.11 | 230,000 | — | |||||||||||
Unguaranteed debenturesNo. 36-3 | Feb. 22, 2019 | Feb. 22, 2029 | 2.22 | 60,000 | — | |||||||||||
Unguaranteed debenturesNo. 37-1 | Mar. 15, 2019 | Mar. 15, 2024 | 2.06 | 140,000 | — | |||||||||||
Unguaranteed debenturesNo. 37-2 | Mar. 15, 2019 | Mar. 15, 2029 | 2.16 | 70,000 | — | |||||||||||
Unguaranteed debenturesNo. 38-1 | June. 19, 2019 | June 19, 2026 | 1.73 | 80,000 | — | |||||||||||
Unguaranteed debenturesNo. 38-2 | June. 19, 2019 | June 19, 2029 | 1.77 | 120,000 | — | |||||||||||
Unguaranteed debenturesNo. 39-1 | Oct. 15, 2019 | Oct. 15, 2024 | 1.60 | 80,000 | — | |||||||||||
Unguaranteed debenturesNo. 39-2 | Oct. 15, 2019 | Oct. 15, 2029 | 1.67 | 40,000 | — | |||||||||||
Unguaranteed debenturesNo. 40-1 | Dec. 04, 2019 | Dec. 04, 2024 | 1.76 | 70,000 | — | |||||||||||
Unguaranteed debenturesNo. 40-2 | Dec. 04, 2019 | Dec. 04, 2029 | 1.87 | 30,000 | — | |||||||||||
|
|
|
| |||||||||||||
5,550,000 | 5,380,000 | |||||||||||||||
Less: Bond Discounts | (6,554 | ) | (6,734 | ) | ||||||||||||
|
|
|
| |||||||||||||
|
|
|
|
52
KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2019 and 2018
The maturities of debentures as of December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | |||||||||||||||||||||||
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) | 2018 | |||||||||||||||||||||||
Up to 3 months | 3~6 months | 6~12 months | 1~3 years | Over 3 years | Total | |||||||||||||||||||
Debentures in Korean won |
Changes in debentures based on face value for the years ended December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | |||||||||||||||
Beginning | Issue | Repayment | Ending | |||||||||||||
Debentures in Korean won |
(In millions of Korean won) | 2018 | |||||||||||||||
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.
53
KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2019 and 2018
Changes in the defined benefit obligation for the years ended December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | |||||||||||
Present value of defined benefit obligation | Fair value of plan assets | Net defined benefit liabilities | ||||||||||
Beginning | ||||||||||||
Current service cost | 2,175 | — | 2,175 | |||||||||
Interest cost(income) | 466 | (462 | ) | 4 | ||||||||
Remeasurements: | ||||||||||||
Actuarial gains and losses by changes in demographic assumptions | (20 | ) | — | (20 | ) | |||||||
Actuarial gains and losses by changes in financial assumptions | 599 | — | 599 | |||||||||
Actuarial gains and losses by experience adjustments | (58 | ) | — | (58 | ) | |||||||
Return on plan assets (excluding amounts included in interest income) | — | 195 | 195 | |||||||||
Contributions | — | (2,688 | ) | (2,688 | ) | |||||||
Payments from plans (benefit payments) | (1,833 | ) | 1,833 | — | ||||||||
Payments from the Company | — | — | — | |||||||||
Transfer in | 1,302 | (1,255 | ) | 47 | ||||||||
Transfer out | (2,682 | ) | 2,682 | — | ||||||||
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Ending | ||||||||||||
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(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 | — | ||||||||
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Ending | ||||||||||||
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Details of the net defined benefit liabilities as of December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | 2018 | ||||||
Present value of defined benefit obligation | ||||||||
Fair value of plan assets | (19,875 | ) | (20,180 | ) | ||||
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| |||||
Net defined benefit liabilities | ||||||||
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Details of post-employment benefits recognized in profit or loss as employee compensation and benefits for the years ended December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | 2018 | ||||||
Current service cost | ||||||||
Net interest expenses(income) of net defined benefit liabilities | 4 | (6 | ) | |||||
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Post-employment benefits | ||||||||
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54
KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2019 and 2018
Remeasurements of the net defined benefit liabilities recognized as other comprehensive income for the years ended December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | 2018 | ||||||
Remeasurements | ||||||||
Return on plan assets (excluding amounts included in interest income) | ||||||||
Actuarial gains and losses | (521 | ) | (2,356 | ) | ||||
Income tax effects | 196 | 725 | ||||||
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Remeasurements after income tax | ||||||||
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Plan assets as of December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | |||||||||||
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) | 2018 | |||||||||||
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, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | 2018 | ||||||
Discount rate (%) | 2.00 | 2.30 | ||||||
Future salary increase rate (%) | 3.75 | 3.75 | ||||||
Turnover (%) | 1 | 1 |
Mortality assumptions are based on the experience-based mortality table(retirement pension) of Korea Insurance Development Institute of 2019.
The sensitivity of the defined benefit obligation to changes in the principal assumptions as of December 31, 2019, 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. | -4.86% | 5.20% | |||
Salary increase rate (%) | 0.5%p. | 5.32% | -5.02% | |||
Turnover (%) | 0.5%p. | -0.56% | 0.58% |
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.
55
KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2019 and 2018
Expected maturity analysis of undiscounted pension benefits (including expected future benefits) as of December 31, 2019, 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 10.2 years.
Expected contribution to plan assets for periods after December 31, 2019, is estimated to be approximatelyW 2,100 million.
17. Other Liabilities
Details of other liabilities as of December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | 2018 | ||||||
Other financial liabilities | ||||||||
Payables | ||||||||
Accrued expenses | 13,218 | 12,578 | ||||||
Lease liability | 588 | — | ||||||
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14,940 | 19,953 | |||||||
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Othernon-financial liabilities | ||||||||
Payables | 59,263 | 49,348 | ||||||
Accrued expenses | 128,824 | 116,800 | ||||||
Withholding taxes | 413 | 380 | ||||||
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188,500 | 166,528 | |||||||
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18. Equity
18.1 Share Capital
Details of share capital and number of issued shares as of December 31, 2019 and 2018, are as follows:
2019 | 2018 | |||||||
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 | 415,807,920 | 418,111,537 | ||||||
Share capital1 |
1 | In millions of Korean won. Due to the retirement of shares deducted through profits, it is different from the total par value of the shares issued. |
56
KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2019 and 2018
Changes in shares outstanding for the years ended December 31, 2019 and 2018, are as follows:
(In number of shares) | 2019 | 2018 | ||||||
Beginning | ||||||||
Increase | — | — | ||||||
Decrease | (5,916,962 | ) | (3,486,286 | ) | ||||
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Ending | ||||||||
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18.2 Hybrid Securities
Details of hybrid securities classified as equity as of December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | Issuance date | Maturity | Interest rate (%) | 2019 | 2018 | |||||||||||
The1-1st Hybrid securities | May 2, 2019 | Perpetual bond | 3.23 | |||||||||||||
The1-2nd Hybrid securities | May 2, 2019 | Perpetual bond | 3.44 | 49,881 | — | |||||||||||
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The above hybrid securities are early redeemable by the Company after 5 or 10 years from the issuance date
18.3 Capital Surplus
Details of capital surplus as of December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | 2018 | ||||||
Share premium | ||||||||
Other capital surplus | 1,465,893 | 1,465,893 | ||||||
Gain on sales of treasury share | 86,646 | 86,646 | ||||||
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18.4 Accumulated Other Comprehensive Income
Details of accumulated other comprehensive income as of December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | 2018 | ||||||
Remeasurements of net defined benefit liabilities | ||||||||
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Changes in accumulated other comprehensive income for the years ended December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | |||||||||||||||
Beginning | Changes | Tax effect | Ending | |||||||||||||
Remeasurements of net defined benefit liabilities | ||||||||||||||||
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(In millions of Korean won) | 2018 | |||||||||||||||
Beginning | Changes | Tax effect | Ending | |||||||||||||
Remeasurements of net defined benefit liabilities | ||||||||||||||||
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57
KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2019 and 2018
18.5 Retained Earnings
Details of retained earnings as of December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | 2018 | ||||||
Legal reserves | ||||||||
Voluntary reserves | 982,000 | 982,000 | ||||||
Regulatory reserve for credit losses | 4,458 | 2,374 | ||||||
Retained earnings before appropriation | 1,624,029 | 1,838,966 | ||||||
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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 profit for the year 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 2019: March 20, 2020)
(Date of appropriation for 2018: March 27, 2019)
(In millions of Korean won) | 2019 | 2018 | ||||||
Unappropriated retained earnings | ||||||||
Balance at the beginning of the year | ||||||||
Profit for the year | 745,987 | 925,905 | ||||||
Retirement of treasury shares | (100,000 | ) | — | |||||
Dividends of hybrid securities | (6,513 | ) | — | |||||
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1,624,029 | 1,838,966 | |||||||
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Transfers such as discretionary reserves | ||||||||
Regulatory reserve for credit losses | 283 | — | ||||||
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283 | — | |||||||
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Appropriation of retained earnings | ||||||||
Legal reserve | 74,599 | 92,591 | ||||||
Regulatory reserve for credit losses | — | 2,084 | ||||||
Cash dividends | 861,092 | 759,736 | ||||||
(Dividends per common share: (Dividends per common share: | ||||||||
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935,691 | 854,411 | |||||||
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Unappropriated retained earnings to be carried forward | ||||||||
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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.
58
KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2019 and 2018
Details of the regulatory reserve for credit losses as of December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | 2018 | ||||||
Beginning | ||||||||
Estimated amounts subject to provision(reversal) | (283 | ) | 2,084 | |||||
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Ending | ||||||||
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The adjustments to the regulatory reserve for credit losses for the years ended December 31, 2019 and 2018, are as follows:
(In millions of Korean won, except per share amounts) | 2019 | 2018 | ||||||
Provision(reversal) of regulatory reserve for credit losses | ||||||||
Adjusted profit after provision(reversal) of regulatory reserve for credit losses1,2 | 739,757 | 923,821 | ||||||
Adjusted basic earnings per share after provision of regulatory reserve for credit losses1 | 1,891 | 2,330 | ||||||
Adjusted diluted earnings per share after provision of regulatory reserve for credit losses1 |
1 | Adjusted profit after provision(reversal) of regulatory reserve for credit losses is not in accordance with Korean IFRS and calculated on the assumption that provision(reversal) of regulatory reserve for credit losses before income tax is adjusted to the profit for the year. |
2 | Amount after deducting dividends on hybrid securities. |
18.6 Treasury Shares
Changes in treasury shares outstanding for the years ended December 31, 2019 and 2018, are as follows:
(In millions of Korean won and in number of shares) | 2019 | |||||||||||||||
Beginning | Acquisition | Retirement | Ending | |||||||||||||
Number of treasury shares1 | 22,560,240 | 5,916,962 | (2,303,617 | ) | 26,173,585 | |||||||||||
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Carrying amount1 | ||||||||||||||||
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1 | For the year ended December 31, 2019, the treasury stock trust agreement of |
(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 | ||||||||||||
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Carrying amount1 | ||||||||||||||||
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1 | For the year ended December 31, 2018, the treasury stock trust agreement of |
19. Dividends
The dividends paid to the shareholders of the Company in 2019 and 2018 wereW 759,736 million (W 1,920 per share) andW 766,728 million(W 1,920 per share) respectively. The dividends to the shareholders of the Company for the year ended December 31, 2019, amounting toW 861,092 million (W 2,210 per share) is to be proposed at the annual general shareholder’s meeting on March 20, 2020. The Company’s financial statements as of December 31, 2019, do not reflect this dividend payable.
59
KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2019 and 2018
20. Net Interest Income (expense)
Interest income(expense) and net interest income(expense) for the years ended December 31, 2019 and 2018, are as follows:
2019 | 2018 | |||||||
Interest income | ||||||||
Due from financial institutions | ||||||||
Loans at amortized cost | 2,333 | 619 | ||||||
Loans at fair value through profit or loss | 2,805 | — | ||||||
Other | 302 | 249 | ||||||
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8,020 | 6,616 | |||||||
Interest expense | ||||||||
Debts | 2,489 | 1,458 | ||||||
Debentures | 123,560 | 120,993 | ||||||
Other | 16 | — | ||||||
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126,065 | 122,451 | |||||||
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Net interest expense | ||||||||
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21. Net Fee and Commission Income (Expense)
Fee and commission income(expense) and net fee and commission income(expense) for the years ended December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | 2018 | ||||||
Fee and commission income | ||||||||
Fee and commission expense | ||||||||
Fees paid in Korean won | 6,891 | 5,867 | ||||||
Fees paid in foreign currency | 239 | 129 | ||||||
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7,130 | 5,996 | |||||||
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Net fee and commission expense | ||||||||
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22. Net Gains on Financial assets at Fair value through Profit or Loss
Net Gains on Financial assets at fair value through profit or loss consist of gains or losses related to financial instrument that includes dividend income and gains or losses arising from changes in the fair values, sales and redemptions. Details net gains on financial assets at fair value through profit or loss for the years ended December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | 2018 | ||||||
Gains related to financial instruments at fair value through profit or loss | ||||||||
Dividend income on financial assets designated at fair value through profit or loss | ||||||||
Gains on valuation on financial assets designated at fair value through profit or loss | 3,166 | 4,694 | ||||||
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16,791 | 18,319 | |||||||
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Losses related to financial instruments at fair value through profit or loss | 844 | — | ||||||
Financial assets at fair value through profit or loss | 844 | — | ||||||
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Net gains on financial instruments at fair value through profit or loss | ||||||||
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60
KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2019 and 2018
23. Net Other Operating Income
Other operating income or other operating expense for the years ended December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | 2018 | ||||||
Other operating income | ||||||||
Dividend income from subsidiaries | ||||||||
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Net other operating income | ||||||||
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24. General and Administrative Expenses
Details of general and administrative expenses for the years ended December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | 2018 | ||||||
Employee benefits | ||||||||
Salaries and other short-term employee benefits - Salaries | ||||||||
Salaries and other short-term employee benefits - Others | 4,778 | 4,508 | ||||||
Post employment benefits - defined benefit plans | 2,179 | 1,919 | ||||||
Post employment benefits - defined contribution plans | 286 | 85 | ||||||
Share-based payments | 4,259 | 551 | ||||||
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39,950 | 34,084 | |||||||
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Depreciation and amortization | ||||||||
Depreciation and amortization | 5,093 | 864 | ||||||
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Other general and administrative expenses | ||||||||
Travel | 1,158 | 833 | ||||||
Communications | 633 | 520 | ||||||
Tax and dues | 496 | 326 | ||||||
Publication | 367 | 250 | ||||||
Rental expense | 835 | 1,503 | ||||||
Vehicle | 150 | 153 | ||||||
Service fees | 12,236 | 10,122 | ||||||
Advertising | 894 | 909 | ||||||
Training | 1,591 | 1,130 | ||||||
Others | 7,768 | 7,151 | ||||||
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26,128 | 22,897 | |||||||
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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, 2019, are as follows:
(In number of shares) | Grant date | Number of granted shares1 | Vesting conditions2 | |||||||||
KB Financial Group Inc. |
| |||||||||||
Series 18 | Jul. 17, 2017 | 7,826 | | Service fulfillment, market performance3 30~50% and non-market performance4 50~70% |
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Series 19 | Nov. 21, 2017 | 46,890 | | Service fulfillment, market performance3 35% andnon-market performance5 65% |
| |||||||
Series 20 | Jan. 01, 2018 | 38,826 | | Service fulfillment, market performance3 30~50% andnon-market performance450~70% | |
61
KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2019 and 2018
Series 21 | Jan. 01, 2019 | 28,926 | Service fulfillment, market performance330% andnon-market performance470% | |||||||
Series 22 | Apr. 01, 2019 | 3,227 | Service fulfillment, market performance330% andnon-market performance470% | |||||||
Series 23 | May 27, 2019 | 1,392 | Service fulfillment, market performance330% andnon-market performance470% | |||||||
Series 24 | July 17, 2019 | 11,224 | Service fulfillment, market performance330% andnon-market performance470% | |||||||
Deferred grant in 2015 | — | 10,043 | Satisfied | |||||||
Deferred grant in 2016 | — | 12,093 | Satisfied | |||||||
Deferred grant in 2017 | — | 45,728 | Satisfied | |||||||
Deferred grant in 2018 | — | 8,057 | Satisfied | |||||||
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214,232 | ||||||||||
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Kookmin Bank | ||||||||||
Series 72 | Aug. 28, 2017 | 6,742 | Service fulfillment, market performance 3 30~50%, andnon-market performance4 50~70% | |||||||
Series 73 | Nov. 21, 2017 | 27,786 | Service fulfillment, market performance3 30%, andnon-market performance6 70% | |||||||
Series 74 | Jan. 1, 2018 | 134,465 | Service fulfillment, market performance3 30~50%, andnon-market performance4 50~70% | |||||||
Series 75 | Jan. 1, 2019 | 192,170 | Service fulfillment, market performance3 30~50%, andnon-market performance4 50~70% | |||||||
Series 76 | Apr. 1, 2019 | 5,380 | Service fulfillment, market performance3 30~50%, andnon-market performance4 50~70% | |||||||
Series 77 | May 27, 2019 | 5,569 | Service fulfillment, market performance3 30~50%, andnon-market performance4 50~70% | |||||||
Series 78 | Nov. 21, 2019 | 36,443 | Service fulfillment, market performance3 30%, andnon-market performance6 70% | |||||||
Deferred grant in 2015 | — | 4,756 | Satisfied | |||||||
Deferred grant in 2016 | — | 65,419 | Satisfied | |||||||
Deferred grant in 2017 | — | 95,697 | Satisfied | |||||||
Deferred grant in 2018 | — | 97,244 | Satisfied | |||||||
671,671 |
62
KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2019 and 2018
Other subsidiaries and associate |
| |||||||||
Stock granted in 2010 | — | 106 | Services fulfillment, market performance3 10~50% andnon-market performance4 50~90% | |||||||
Stock granted in 2011 | — | 146 | ||||||||
Stock granted in 2012 | — | 420 | ||||||||
Stock granted in 2013 | — | 1,007 | ||||||||
Stock granted in 2014 | — | 1,223 | ||||||||
Stock granted in 2015 | — | 4,456 | ||||||||
Stock granted in 2016 | — | 23,474 | ||||||||
Stock granted in 2017 | — | 83,459 | ||||||||
Stock granted in 2018 | — | 257,064 | ||||||||
Stock granted in 2019 | — | 241,226 | ||||||||
|
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612,581 | ||||||||||
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1,498,484 | ||||||||||
|
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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 the end of the contract - Fair value at the beginning of the contract) + (Total amount of dividend per share paid during the contract period)] / Fair value at the beginning of the contract) |
4 | Accomplishment of corporates’ and individuals’ performance results |
5 | EPS, Asset Quality, HCROI,Non-banking sector profit |
6 | EPS, Asset Quality |
63
KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2019 and 2018
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 ofpre-specified targets over the vesting period.
Details of stock grants linked to short-term performances as of December 31, 2019, are as follows:
Estimated number of vested shares1 | Vesting Conditions | |||||||
KB Financial Group Inc. | ||||||||
Stock granted in 2015 | 9,690 | Satisfied | ||||||
Stock granted in 2016 | 11,783 | Satisfied | ||||||
Stock granted in 2017 | 12,273 | Satisfied | ||||||
Stock granted in 2018 | 20,664 | Satisfied | ||||||
Stock granted in 2019 | 30,504 | Proportional to service period | ||||||
Kookmin Bank | ||||||||
Stock granted in 2015 | 15,831 | Satisfied | ||||||
Stock granted in 2016 | 52,855 | Satisfied | ||||||
Stock granted in 2017 | 55,490 | Satisfied | ||||||
Stock granted in 2018 | 109,296 | Satisfied | ||||||
Stock granted in 2019 | 112,445 | Proportional to service period | ||||||
Other subsidiaries | ||||||||
Stock granted in 2015 | 16,922 | Satisfied | ||||||
Stock granted in 2016 | 94,201 | Satisfied | ||||||
Stock granted in 2017 | 238,115 | Satisfied | ||||||
Stock granted in 2018 | 457,006 | Satisfied | ||||||
Stock granted in 2019 | 284,888 | Proportional to service period | ||||||
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| |||||||
1,521,963 | ||||||||
|
|
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. |
64
KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2019 and 2018
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, 2019, 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 18 | 1.34 | 40,362~44,034 | 43,659~47,631 | |||||||||
Series 19 | 1.34 | 38,220~41,775 | 42,493~46,445 | |||||||||
Series 20 | 1.34 | 41,135~45,035 | 43,659~47,631 | |||||||||
Series 21 | 1.34 | 41,489~46,021 | 42,336~47,631 | |||||||||
Series 22 | 1.34 | 41,070~44,926 | 41,070~44,926 | |||||||||
Series 23 | 1.34 | 41,070~44,926 | 41,070~44,926 | |||||||||
Series 24 | 1.34 | 41,070~44,926 | 41,070~44,926 | |||||||||
Deferred grant in 2015 | 1.34 | — | 38,616~47,631 | |||||||||
Deferred grant in 2016 | 1.34 | — | 42,336~47,631 | |||||||||
Deferred grant in 2017 | 1.34 | — | 43,659~47,631 | |||||||||
Deferred grant in 2018 | 1.34 | — | 42,336~47,631 | |||||||||
(Kookmin Bank) | ||||||||||||
Series 72 | 1.34 | 43,659~47,631 | 43,659~47,631 | |||||||||
Series 73 | 1.34 | 41,253~43,741 | 43,803~46,445 | |||||||||
Series 74 | 1.34 | 41,279~45,035 | 43,659~47,631 | |||||||||
Series 75 | 1.34 | 41,506~46,021 | 42,336~47,631 | |||||||||
Series 76 | 1.34 | 41,070~44,926 | 41,070~44,926 | |||||||||
Series 77 | 1.34 | 41,070~44,926 | 41,070~44,926 | |||||||||
Series 78 | 1.34 | 38,303~41,900 | 41,070~44,926 | |||||||||
Grant deferred in 2015 | 1.34 | — | 44,926~47,631 | |||||||||
Grant deferred in 2016 | 1.34 | — | 42,336~47,631 | |||||||||
Grant deferred in 2017 | 1.34 | — | 42,336~47,631 | |||||||||
Grant deferred in 2018 | 1.34 | — | 42,336~47,631 | |||||||||
(Other subsidiaries) |
| |||||||||||
Share granted in 2010 | 1.34 | — | 46,281 | |||||||||
Share granted in 2011 | 1.34 | — | 46,281 | |||||||||
Share granted in 2012 | 1.34 | — | 44,926~46,281 | |||||||||
Share granted in 2013 | 1.34 | — | 44,926~47,631 | |||||||||
Share granted in 2014 | 1.34 | — | 40,065~46,766 | |||||||||
Share granted in 2015 | 1.34 | — | 41,070~47,676 | |||||||||
Share granted in 2016 | 1.34 | — | 39,801~47,631 | |||||||||
Share granted in 2017 | 1.34 | 35,863~46,817 | 38,616~47,631 | |||||||||
Share granted in 2018 | 1.34 | 37,446~45,240 | 39,801~47,631 | |||||||||
Share granted in 2019 | 1.34 | 39,878~47,631 | 41,070~47,631 | |||||||||
Linked to short-term performance |
| |||||||||||
(KB Financial Group Inc.) | ||||||||||||
Share granted in 2015 | 1.34 | — | 38,616~47,631 | |||||||||
Share granted in 2016 | 1.34 | — | 39,801~47,631 | |||||||||
Share granted in 2017 | 1.34 | — | 42,336~47,631 | |||||||||
Share granted in 2018 | 1.34 | — | 42,336~47,631 | |||||||||
Share granted in 2019 | 1.34 | — | 43,659~46,281 |
65
KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2019 and 2018
(Kookmin Bank) | ||||||||||||
Share granted in 2015 | 1.34 | — | 42,336~47,631 | |||||||||
Share granted in 2016 | 1.34 | — | 41,070~47,631 | |||||||||
Share granted in 2017 | 1.34 | — | 42,336~47,631 | |||||||||
Share granted in 2018 | 1.34 | — | 42,336~47,631 | |||||||||
Share granted in 2019 | 1.34 | — | 43,659~46,281 | |||||||||
(Other subsidiaries) |
| |||||||||||
Share granted in 2015 | 1.34 | — | 38,616~47,631 | |||||||||
Share granted in 2016 | 1.34 | — | 38,616~47,631 | |||||||||
Share granted in 2017 | 1.34 | — | 38,616~47,631 | |||||||||
Share granted in 2018 | 1.34 | — | 38,616~47,631 | |||||||||
Share granted in 2019 | 1.34 | — | 39,801~46,281 |
The Company used the volatility of the stock price over the previous year as the expected volatility, 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, and usedone-year risk-free interest rate in order to calculate fair value.
Share-based payment arrangement for subsidiaries and associate was transferred to the Company in 2010, and the related compensation cost paid to the executives and employees of subsidiaries and associate is reimbursed by these companies. The accrued expenses representing share-based payments as of December 31, 2019 and 2018, areW 124,853 million andW 111,058 million, respectively, and the receivables to be reimbursed by the subsidiaries for the compensation costs areW 112,997 million andW100,434 million, respectively. In addition, the compensation costs from share-based payments that amount toW 4,259 million andW 551 million were recognized for the years ended December 31, 2019 and 2018, respectively.
25.Non-operating Income (Expense)
Details ofnon-operating income and expenses for the years ended December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | 2018 | ||||||
Non-operating income | ||||||||
Reversal of impairment losses on intangible assets | ||||||||
Others | 669 | 876 | ||||||
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669 | 926 | |||||||
Non-operating expenses | ||||||||
Loss on disposal of property, plant and equipment | 21 | — | ||||||
Impairment on intangible assets | 4 | — | ||||||
Donation | 1,177 | 1,184 | ||||||
Others | 8 | 1 | ||||||
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1,210 | 1,185 | |||||||
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Non-operating expenses | ||||||||
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26. Income Tax Expense
Details of income tax benefit for the years ended December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | 2018 | ||||||
Tax payable | ||||||||
Current tax expense | ||||||||
Change in deferred tax assets and liabilities | ||||||||
Origination and reversal of temporary differences | (658 | ) | (2,098 | ) | ||||
Tax expense recognized directly in equity | ||||||||
Remeasurements of net defined benefit liabilities | (196 | ) | (725 | ) | ||||
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Income tax expense | ||||||||
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66
KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2019 and 2018
The analysis of profit before tax and income tax benefit for the years ended December 31, 2019 and 2018, follows:
(In millions of Korean won) | 2019 | 2018 | ||||||||||||||
Tax rate (%) | Amount | Tax rate (%) | Amount | |||||||||||||
Profit before tax | ||||||||||||||||
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Tax at the applicable tax rate1 | 26.11 | 195,019 | 26.38 | 245,038 | ||||||||||||
Non-taxable income | (28.82 | ) | (215,265 | ) | (27.71 | ) | (257,323 | ) | ||||||||
Non-deductible expense | 0.11 | 786 | 0.08 | 739 | ||||||||||||
Consolidated tax effect | 2.69 | 20,116 | 1.47 | 13,644 | ||||||||||||
Other | 0.03 | 198 | 0.08 | 725 | ||||||||||||
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Average effective tax rate and tax benefit | 0.11 | 0.30 | ||||||||||||||
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1 | Applicable income tax rate for |
27. Earnings per Share
Calculations of basic earnings per share on the profit attributable to ordinary shares are as follows:
Weighted average number of ordinary shares outstanding:
(in number of shares) | 20191 | 2018 | ||||||||||||||
Number of shares | Accumulated amount | Number of shares | Accumulated amount | |||||||||||||
Number of issued ordinary shares | 415,807,920 | 152,564,638,665 | 418,111,537 | 152,610,711,005 | ||||||||||||
Number of treasury shares | (26,173,585 | ) | (9,801,574,522 | ) | (22,560,240 | ) | (7,888,226,378 | ) | ||||||||
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| |||||||||
Average number of ordinary shares outstanding | 389,634,335 | 142,763,064,143 | 395,551,297 | 144,722,484,627 | ||||||||||||
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Number of days | 365 | 365 | ||||||||||||||
Weighted average number of ordinary shares outstanding | 391,131,683 | 396,499,958 |
1 | Initial date of treasury stock that was deducted by the retirement is December 12, 2019. |
Basic earnings per share
(In Korean won and in number of shares)
(In millions of Korean won) | 2019 | 2018 | ||||||
Profit for the year | ||||||||
Deduction: Dividends on hybrid securities | 6,512,500,000 | — | ||||||
Profit attributable to the ordinary equity holders (A) | 739,474,400,731 | 925,904,728,413 | ||||||
Weighted average number of ordinary shares outstanding (B) | 391,131,683 | 396,499,958 | ||||||
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Basic earnings per share (A / B) | ||||||||
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67
KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2019 and 2018
Diluted earnings per share
Diluted earnings per share is calculated using the weighted average number of ordinary shares outstanding which is adjusted by the weighted average number of additional ordinary shares that would have been outstanding assuming the conversion of all dilutive potential ordinary shares. The Company’s 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 Company’s outstanding shares for the year) 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 to calculate diluted earnings per share:
(In Korean won) | 2019 | 2018 | ||||||
Profit attributable to the ordinary equity holders1 | ||||||||
Adjustment | — | — | ||||||
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Adjusted profit for diluted earnings per share | ||||||||
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1 | The amount is after deducting dividends on hybrid securities. |
Adjusted weighted average number of ordinary shares outstanding to calculate diluted earnings per share:
(in number of shares) | 2019 | 2018 | ||||||
Weighted average number of ordinary shares outstanding | 391,131,683 | 396,499,958 | ||||||
Adjustment Stock grants | 2,890,513 | 2,307,630 | ||||||
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Adjusted weighted average number of ordinary shares outstanding for diluted earnings per share | 394,022,196 | 398,807,588 | ||||||
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Diluted earnings per share:
(In Korean won and in number of shares) | 2019 | 2018 | ||||||
Adjusted profit for diluted earnings per share | ||||||||
Adjusted weighted average number of ordinary shares outstanding for diluted earnings per share | 394,022,196 | 398,807,588 | ||||||
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Diluted earnings per share | ||||||||
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28. Supplemental Cash Flow Information
Cash and cash equivalents as of December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | 2018 | ||||||
Due from financial institutions | ||||||||
Restricted cash from financial institutions | (3 | ) | (3 | ) | ||||
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68
KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2019 and 2018
Significantnon-cash transactions for the years ended December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | 2018 | ||||||
Changes in receivables and payables from consolidated tax | ||||||||
Changes in receivables and payables relating to stock grants | (12,564 | ) | (18,085 | ) | ||||
Other payables due to treasury stock trust agreement, etc | — | 6,678 |
Cash inflows and outflows due to interest and dividends for the years ended December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | Activity | 2019 | 2018 | |||||||
Prepaid income tax expense | Operating | |||||||||
Interest received | Operating | 6,384 | 5,868 | |||||||
Interest paid | Operating | 122,195 | 116,307 | |||||||
Dividends received | Operating | 940,560 | 1,103,182 | |||||||
Dividends paid | Finance | 766,249 | 766,728 |
Changes in liabilities arising from financing activities for the year ended December 31, 2019, are as follows:
(In millions of Korean won) | 2019 | |||||||||||||||
Opening balance | Net cash flows | Non-cash changes | Closing balance | |||||||||||||
Debts | ||||||||||||||||
Debentures | 5,373,266 | 169,502 | 678 | 5,543,446 | ||||||||||||
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29. Contingent Liabilities and Commitments
Commitments made with financial institutions as of December 31, 2019 and 2018, are as follows:
2019 | 2018 | |||||||||||||||
(In millions of Korean won) | Amount of commitment | Amounts borrowed | Amount of commitment | Amounts borrowed | ||||||||||||
KEB Hana Bank | ||||||||||||||||
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69
KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2019 and 2018
Other Matters
The Company has no pending lawsuit as the defendant.
30. Related Party Transactions
Significant related party transactions for the years ended December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | 2018 | ||||||||||
Subsidiaries | Kookmin Bank | Interest income | ||||||||||
Fee and commission income | 841 | 778 | ||||||||||
Net other operating income | 667,225 | 640,132 | ||||||||||
Netnon-operating income | 70 | — | ||||||||||
General and administrative expenses | 6,312 | 5,452 | ||||||||||
KB Securities Co., Ltd. | Net other operating income | 50,000 | 139,157 | |||||||||
General and administrative expenses | 1,119 | 1,196 | ||||||||||
Netnon-operating income | 14 | — | ||||||||||
KB Insurance Co., Ltd. | Net other operating income | — | 49,875 | |||||||||
General and administrative expenses | 1,871 | 1,031 | ||||||||||
Netnon-operating income | 7 | — | ||||||||||
KB Kookmin Card Co., Ltd. | Net other operating income | 200,008 | 180,044 | |||||||||
General and administrative expenses | 1,042 | 970 | ||||||||||
Netnon-operating income | 6 | 5 | ||||||||||
KB Life Insurance Co., Ltd. | General and administrative expenses | 238 | 79 | |||||||||
KB Asset Management Co., Ltd. | Net other operating income | — | 50,000 | |||||||||
KB Capital Co., Ltd | Net gains on financial assets at fair value through profit or loss | 15,947 | 18,319 | |||||||||
Net other operating income | — | 10,746 | ||||||||||
General and administrative expenses | 116 | — | ||||||||||
Netnon-operating income | 4 | — | ||||||||||
KB Savings Bank Co., Ltd. | Net other operating income | 5,000 | 8,802 | |||||||||
KB Real Estate Trust. Co., Ltd. | Net other operating income | 4,700 | 10,800 | |||||||||
Netnon-operating income | 13 | — | ||||||||||
KB Investment Co., Ltd. | Interest income | 2,333 | 615 | |||||||||
KB Data Systems Co., Ltd. | General and administrative expenses | 1,953 | 1,477 |
Significant receivables and payables, and related allowance for loan losses arising from the related party transactions as of December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | 2018 | ||||||||||
Subsidiaries | Kookmin Bank | Cash and due from financial institutions | ||||||||||
Other assets | 418,114 | 643,010 | ||||||||||
Other liabilities | 35 | 4,545 | ||||||||||
Property and Equipment | 152 | — | ||||||||||
KB Securities Co., Ltd. | Other assets | 52,068 | 62,993 | |||||||||
KB Insurance Co., Ltd. | Other assets | 14,492 | 12,774 | |||||||||
Other liabilities | 47,580 | 35,177 | ||||||||||
KB Kookmin Card Co., Ltd. | Other assets | 60,705 | 79,288 | |||||||||
Other liabilities | 1,394 | 664 | ||||||||||
KB Asset Management Co., Ltd. | Other assets | 15,590 | 10,666 | |||||||||
KB Capital Co., Ltd. | Financial assets at fair value through profit or loss | 291,501 | 289,179 | |||||||||
Other assets | 18,995 | 18,383 | ||||||||||
KB Life Insurance Co., Ltd. | Other assets | 3,956 | 3,991 | |||||||||
Other liabilities | 8,636 | 5,315 | ||||||||||
KB Real Estate Trust Co., Ltd. | Other assets | 13,979 | 14,259 |
70
KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2019 and 2018
KB Savings Bank Co., Ltd. | Other assets | 3,727 | 1,670 | |||||||||
KB Investment Co., Ltd. | Loans at amortized cost | 120,000 | 50,000 | |||||||||
Other assets | 2,904 | 1,198 | ||||||||||
Other liabilities | 59 | 486 | ||||||||||
KB Data Systems Co., Ltd. | Property and Equipment | 438 | 140 | |||||||||
Intangible assets | 1,145 | — | ||||||||||
Other assets | 2,721 | 3,357 | ||||||||||
Other liabilities | 333 | 137 | ||||||||||
KB Credit Information Co., Ltd. | Other assets | 849 | 985 | |||||||||
Other liabilities | 241 | — |
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 and associates, respectively.
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.
Right-of-use assets and lease liability with related parties as of December 31, 2019, are as follows:
(In millions of Korean won) | 2019 | |||||||
Subsidiary | Kookmin Bank | Right-of-use assets | ||||||
Lease liabilities |
Unused commitments by a related party as of December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | 2018 | ||||||||||
Subsidiary | KB Kookmin Card Co., Ltd. | Unused commitments of credit card |
Share transactions with related parties for the years ended December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | 2018 | ||||||||||
Subsidiary | KB Investment & Securities Co., Ltd. | Paid-in capital increase of ordinary shares | ||||||||||
KB Capital Co., Ltd. | Paid-in capital increase of ordinary shares |
Loan transactions with related parties for the years ended December 31, 2019 and 2018, are as follows:
(In millions of Korean won) | 2019 | |||||||||||||||||
Beginning | Loans | Repayments | Ending | |||||||||||||||
Subsidiary | KB Investment Co., Ltd. |
71
KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2019 and 2018
(In millions of Korean won) | 2018 | |||||||||||||||||||
Beginning | Loans | Repayments | Ending | |||||||||||||||||
Subsidiary | KB Investment Co., Ltd. |
Compensation to key management for the years ended December 31, 2019 and 2018, consists of:
(In millions of Korean won) | 2019 | |||||||||||||||
Short-term employee benefits | Post- employment benefits | Share-based payments | Total | |||||||||||||
Registered director (executive) | ||||||||||||||||
Registered director(non-executive) | 628 | — | — | 628 | ||||||||||||
Non-registered director | 3,344 | 147 | 3,275 | 6,766 | ||||||||||||
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(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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The Company paidW 255 million to KB Securities Co., Ltd., a subsidiary, for the underwriting and arrangement of debentures and hybrid securities.
31. Changes in Accounting Policies - Implementation of Korean IFRS 1116Leases
The Company applied Korean IFRS 1116 retrospectively as of January 1, 2019. However, the financial statements for the year ended 2018 was not restated using the method allowed by transitional provisions. Therefore reclassification and adjustments under the new IFRS were recognized in the financial statements beginning on January 1, 2019.
A lessee shall apply this standard to its leases either:
• | retrospectively to each prior reporting period presented applying Korean IFRS 1008Accounting Policies, Changes in Accounting Estimates and Errors (Full retrospective application); or |
• | retrospectively with the cumulative effect of initially applying the standard recognized at the date of initial application. |
The Company applied Korean IFRS 1116 retrospectively with recognizing the cumulative effect of initial adoption of the standard as of January 1, 2019. The Company did not restate any comparative financial statements.
72
KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2019 and 2018
For leases previously classified as ‘finance leases’, the Company recognized the carrying amount of the lease asset and lease liability immediately before transition as the carrying amount of theright-of-use asset and the lease liability at the date of initial application. The measurement principles of Korean IFRS 1116 are only applied after that date. The remeasurements to the lease liabilities were recognized as adjustments to the relatedright-of-use assets immediately after the date of initial application.
(In millions of Korean won) | January 1, 2019 | |||
Right-of-use asset | ||||
Discounts used lessee’s incremental borrowing rate at the date of current initial application | ||||
Add : Financial leased asset recognized at December 31, 2018 | — | |||
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Right-of use asset recognized as of the date of initial application | ||||
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Lease liability | ||||
Operating lease commitments disclosed at December 31, 2018 | ||||
Discounted amount using the lessee’s incremental borrowing rate1 at the date of initial application | 460 | |||
Add : Financial leased liability recognized at December 31, 2018 | — | |||
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Lease liability recognized as of the date of initial application | ||||
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1 | Incremental borrowing rate of interest is 1.88% to 2.21% |
The difference between the amount of theright-of-use asset and the lease liability is adjusted by the amount of any prepaid or accrued lease payments relating to that lease recognized in the statement of financial position immediately before the date of initial application.
• | Lessor accounting |
The Company did not need to make any adjustments to the accounting for assets held as lessor as a result of the adoption of Korean IFRS 1116.
The amounts recognized in statement of financial position
The amounts related to lease recognized in statement of financial position as of December 31, 2019 and January 1, 2019, are as follows:
(In millions of Korean won) | December 31, 2019 | January 1, 2019 | ||||||
Right-of-use assets1 | ||||||||
Real estate | ||||||||
Vehicles | 280 | 406 | ||||||
Others | 15 | 15 | ||||||
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488 | 684 | |||||||
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Lease liabilities2 |
1 | It is included in property and equipment of financial statements. |
2 | It is included in other liabilities of financial statements |
73
KB Financial Group Inc.
Notes to the Separate Financial Statements
December 31, 2019 and 2018
The amounts recognized in statement of profit or loss
The amount related to lease recognized in statement of profit or loss for the year ended December 31, 2019, is as follows:
(In millions of Korean won) | 2019 | |||
Amortization ofright-of-use assets | ||||
Real estate | ||||
Vehicles | 627 | |||
Others | 21 | |||
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1,144 | ||||
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Interest expenses on the lease liabilities | 16 | |||
Short-term lease payments | 23 | |||
Payments for leases oflow-value assets different from short-term leases |
The total cash outflow for leases in 2019 wasW 594 million.
32. Approval of Issuance of the Financial Statements
The issuance of the Company’s separate financial statements as of and for the year ended December 31, 2019, was initially approved on February 6, 2020 andre-approved due to revision on March 4, 2020 by the Board of Directors.
74
Report on Independent Auditor’s
Audit of Internal Control over Financial Reporting
(English Translation of a Report Originally Issued in Korean)
To the Board of Directors and Shareholders of KB Financial Group Inc.
Opinion on Internal Control over Financial Reporting
We have audited Internal Control over Financial Reporting of KB Financial Group Inc. (the Company) as of December 31, 2019, based on Conceptual Framework for Designing and Operating Internal Control over Financial Reporting.
In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2019, based on Conceptual Framework for Designing and Operating Internal Control over Financial Reporting.
We also have audited, in accordance with Korean Standards on Auditing, the financial statements of the Company, which comprise the statement of financial position as at December 31, 2019, and the statement of comprehensive income, statement of changes in equity and statement of cash flow for the year then ended, and notes to the financial statements including a summary of significant accounting policies, and our report dated March 5, 2020 expressed an unqualified opinion.
Basis for Opinion on Internal Control over Financial Reporting
We conducted our audit in accordance with Korean Standards on Auditing. Our responsibility under these standards are further described in the Auditor’s Responsibilities for the Audit of the Internal Control over Financial Reporting 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 internal control over financial reporting 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.
Responsibilities of Management and Those Charged with Governance for Internal Control over Financial Reporting
Management is responsible for designing, implementing and maintaining effective internal control over financial reporting, and for its assessment about the effectiveness of internal control over financial reporting, included in the accompanying Operating Status Report of the Internal Control over Financial Reporting.
Those charged with governance have the responsibilities for overseeing internal control over financial reporting.
Auditor’s Responsibilities for the Audit of Internal Control over Financial Reporting
Our responsibility is to express opinion on the Company’s internal control over financial reporting based on our audit. We conducted the audit in accordance with Korean Standards on Auditing. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.
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An audit of internal control over financial reporting involves performing procedures to obtain audit evidence about whether a material weakness exists. The procedures selected depend on the auditor’s judgment, including the assessment of the risks that a material weakness exists. An audit includes obtaining an understanding of internal control over financial reporting and testing and evaluating the design and operating effectiveness of internal control over financial reporting based on the assessed risk.
Definition and Inherent Limitations of Internal Control over Financial Reporting
An entity’s internal control over financial reporting is a process effected by those charged with governance, management, and other personnel, designed to provide reasonable assurance regarding the preparation of reliable financial statements in accordance with International Financial Reporting Standards as adopted by the Republic of Korea. An entity’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the entity; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with International Financial Reporting Standards as adopted by the Republic of Korea, and that receipts and expenditures of the entity are being made only in accordance with authorizations of management and those charged with governance; and (3) provide reasonable assurance regarding prevention, or timely detection and correction of unauthorized acquisition, use, or disposition of the entity’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent, or detect and correct, misstatements. Also, projections of any assessment 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.
The engagement partner on the audit resulting in this independent auditor’s report is Yeob Yu, Certified Public Accountant.
/s/ Samil PricewaterhouseCoopers
Seoul, Korea
March 5, 2020
This report is effective as of March 5, 2020, 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 Company’s internal control over financial reporting 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. |
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Operating Status Report 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 operating status of the Company’s Internal Control over Financial Reporting for the year ended December 31, 2019.
The Company’s management, including ourselves, is responsible for designing and operating ICFR.
We assessed whether the Company effectively designed and operated its ICFR to prevent and detect errors or frauds which may cause a misstatement in financial statements to ensure preparation and disclosure of reliable financial information.
We used the ‘Conceptual Framework for Designing and Operating Internal Control over Financial Reporting’ established by the Operating Committee of Internal Control over Financial Reporting in Korea (the “ICFR Committee”) as the criteria for design and operation of the Company’s ICFR. We also conducted an assessment of ICFR based on the ‘Management Guideline for Evaluating and Reporting Effectiveness of Internal Control over Financial Reporting’ established by the ICFR Committee.
Based on our assessment, we concluded that the Company’s ICFR is designed and operated effectively as of December 31, 2019, in all material respects, in accordance with the ‘Conceptual Framework for Designing and Operating Internal Control over Financial Reporting’.
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 statements which might cause material misunderstandings, and we have reviewed and verified this report with sufficient care.
February 24, 2020
Jong Kyoo Yoon,
Chief Executive Officer
Ki Hwan Kim,
Internal Control over Financial Reporting Officer
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