KB Financial Group Inc. (NYSE:KB) Q1 2023 Earnings Call Transcript
KB Financial Group Inc. (NYSE:KB) Q1 2023 Earnings Call Transcript May 1, 2023
Unidentified Company Representative : Thank you very much, Mr. Lee for all those questions. Just give us one moment to prepare for the answer. Just one moment please.
Oh Byung Joo: Yes, hello, I am Oh Byung Joo, managing director from KB Financial Group. You asked about your 2022 CSM, for KB Insurance in terms of CSM movement, and also the difference of the size of the expected versus actual. Now regarding this specific question, we will provide you with the details through our IR division. Just to provide an overall high-level picture regarding this question from KB Insurance over the past three years, we have focused on selling high-margin medical products -- health insurance products. And in the recent three years, we were able to further strengthen and expand our market position. And as a result, we've been able to further expand the size of the CSM. And if you look at Q1 numbers, previous year, KB Insurance was about KRW7.9 trillion.
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And as of Q1 end, it reported a trillion about KRW120 billion so there has been about an increase of KRW250 billion. Now, this is actually an outperformance of the business plan that we have initially set for ourselves. You also asked about regarding the new business for Q1 like drivers and children's insurance. You asked about the CSM conversion ratio and amortization. But as mentioned before, KB Insurance in terms of competition, especially if you get children's insurance product, which Intel's high margin we've been able to successfully sell that into the market through the GA channel. And in Q1 we were able to expand our market share through the GA channel. Looking at drivers like insurance, if you look at CSM conversion is about 18%, for children's insurance, it's above 20%.
So that is the figures that I can share with you at this point. Thank you.
Operator: We will take the next question Kim Jae-woo from Samsung Securities.
Kim Jae-woo: I have some questions and first question is about your provisioning. It says here you had some preemptive provisioning. So, can you tell us about what was one-off and what wasn't? Along with this looking at the credit costs for this year. Can you give us some guidance for this year? Thank you very much. Second question. So, for other operating income, well, it seems that there have been some changes. And can you tell us about the increase and can you tell us about the background? Because I think some will be linked to the rate, and some may be stabilized because of other reasons. So, can you give us some color into the background behind this? Thank you very much.
Unidentified Company Representative: We will soon answer your question. Please hold. I would like to answer your question. First, it is about provisioning. As we aforementioned, for general provision, which is unspecified provisioning, in Q1, it was about KRW320 billion. So, it was provisioned through the Bank. The reason behind this was that in Q1, we had the credit cost that actually surged, and second is the guidance for credit cost. We believe that, the market interest rate, well, there is NPL and credit cost, which is deeply linked, and this is the main reason for that. And the Group's business, Research Institute says that, for Q2 and Q3 for interest rate, it will have ups and downs. And from 2024, it will continuously drop.
So, based on those projections, looking at the NPL ratio and credit cost ratio, if we make assumptions, it seems that until now through our IR sessions, we have been saying that, the Group credit cost from the mid-30s to 40-s is what said. But in 2023, we believe that this will keep in line with our guidance. We don't believe that, the credit cost will fluctuate greatly. And for credit cost, for our guidance, I believe what I can -- this is what I can say and for other operating income, you test about whether it is stable or not. And I couldn't really catch your question perfectly, because I couldn't hear the sound clearly, but for other operating income, we have a prop trading and insurance income. So those two are the parts. And for the insurance part of our income, in Q1, we had not only one-off in Q1, but we believe that in Q2, Q3, and Q4, we will have a stable contribution by the insurance for the Group's earnings.
Secondly, for securities, we believe that going forward, for securities for FX and for derivative, the earnings and income from that in Q2 will greatly -- has greatly increased, and I believe as you had asked, we will need to see the interrogate situation to see whether this will hold. But in 2022 for the Group, we have all the prop trading-related groups that were completely revamped during the year. And as a result, we have the best and the stable traders that have been rooted. So, we believe that, there will be some trading income changes according to the changes in the market that we believe, compared to our competitors, it will be a Stabler and less volatile. Thank you very much.
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