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Shorter interval between buybacks is positive

Maintain Buy and TP of W120,000

We maintain our Buy rating and target price of W120,000 on KB Financial Group (KBFG). KBFG recently announced a W300bn share buyback, deviating from its previously disclosed shareholder return plan. Although the move is unlikely to meaningfully change total shareholder returns in 2025, we view the shorter gap between buybacks as a positive development. We expect additional share buybacks worth W410bn in 2H25, bringing the total buyback amount for the year to approximately W1.23tr. We estimate the shareholder return ratio (dividends + buybacks) for 2025 at 45.1%.

For 1Q25, KBFG reported net profit attributable to owners of the parent of W1.7tr, above our estimate (W1.57tr) and the consensus (W1.59tr), thanks to stronger-than-expected non-interest income and non-operating profit. Meanwhile, interest income was in line with our estimate, while credit costs were higher than expected.

Interest income grew 2.9% YoY and 0.6% QoQ, in line with our estimate. Won-denominated loans expanded 0.9% QoQ, and NIM rebounded on improved funding costs (rising 3bps QoQ for the group and 4bps QoQ for the bank). That said, we expect NIM to decline again from 2Q25.

Non-interest income increased 4.9% YoY and 208% QoQ, beating our estimate, mainly driven by improved gains on marketable securities (amid falling yields). However, fee/commission income was sluggish, declining 5.7% YoY and 6.3% QoQ.

Credit costs increased 53.1% YoY and 16% QoQ, exceeding our estimate, due to roughly W80bn in additional one-off provisioning (related to Homeplus, etc.). The credit cost ratio was 54bps (+16bps YoY, +6bps QoQ).

The CET1 ratio rose 14bps QoQ to 13.67%. With management planning to cap risk-weighted asset growth at 1.5-2% in 1H25, we forecast the CET1 ratio to rise further to 13.81% in 2Q25.