Moody’s reaffirms KB Financial Group’s Strong Credit Profile

Moody’s Investors service has reaffirmed KB Financial Group’s (KBFG) long-term credit rating at ‘A1’ and its short-term rating at ‘P-1’,maintaining a ‘stable’ outlook.This decision underscores the group’s robust capital adequacy, consistent profitability, and the perceived high likelihood of governmental support in times of financial distress.

Key Strengths Underpinning the Rating

The affirmation reflects the strength of KBFG’s core banking operations, notably Kookmin Bank, alongside contributions from subsidiaries like KB Kookmin Card, KB Insurance, KB Securities, and KB Capital. Moody’s highlighted the diversified portfolio and sound financial metrics of these entities as positive factors. As of the end of 2024, KBFG’s Double Leverage ratio stood at 107.5%, remaining below Moody’s threshold of 115%, thus avoiding a downward revision based on this metric.

The average financial soundness and portfolio diversification of major subsidiaries such as Kookmin Bank, KB Kookmin Card, KB Insurance, KB Securities, and KB Capital have had a positive impact.

Moody’s Investors Service

Non-Banking Sector: A Growing Concern

Despite the overall positive assessment, Moody’s has flagged concerns regarding the performance of KBFG’s non-banking affiliates, which constitute approximately 25% of the group’s total assets. The current economic slowdown and tightening credit cycles are impacting this segment. Notably, KB Kookmin Card’s creditworthiness has been revised to ‘negative’ due to declining asset quality.

This situation mirrors broader trends in the South Korean financial sector, where non-bank financial institutions are facing increased scrutiny due to rising household debt and potential vulnerabilities in asset portfolios. Recent data from the Bank of Korea indicates a rise in delinquency rates among credit card companies, signaling potential headwinds for KB Kookmin Card and similar entities.

Government Support: A Critical Factor

A significant factor bolstering KBFG’s credit rating is the perceived high likelihood of government intervention in case of financial difficulty. Moody’s cites KBFG’s systemic importance to the south Korean economy, historical precedents of government bailouts for financial institutions, and relevant legal frameworks as justification for this assessment.This expectation of government support acts as a crucial upward driver in the rating calculation.

The possibility of support for the Korean government was evaluated at a very high level due to the systematic importance of KB Financial Group, the past government’s financial group relief experience, and related legislation.

Moody’s Investors Service

Future Outlook and Potential Triggers

Looking ahead, Moody’s suggests that upgrades for KBFG’s major subsidiaries hinge on improvements in financial soundness and stable management of double leverage. Conversely,factors that could negatively impact the rating include a weakening of the government’s commitment to support,a downgrade of South korea’s sovereign credit rating,deterioration in the credit profiles of major subsidiaries,or a significant increase in leverage.

Kookmin Bank’s Rating Also Affirmed

In a related proclamation, Moody’s also affirmed Kookmin Bank’s long-term deposit and senior unsecured bond ratings at ‘AA3’, its short-term rating at ‘P-1’, and its baseline credit assessment at ‘A3’, with a ‘stable’ outlook. The bank’s strong retail finance base and a Common equity Tier 1 (CET1) ratio of approximately 15% contribute to its stable liquidity and capital strength.