KB Bank signals strategic shift in Indonesia with profit rebound
With profits up, bank weighs naming first local chief
KB Kookmin Bank is expected to push for a breakthrough at its long-struggling Indonesian subsidiary, KB Bank, with a change in leadership this year. Accelerating the shift, the unit returned to profitability in the first quarter.
KB Bank President Director Lee Woo-yeol is set to step down at the holding company's shareholder meeting scheduled for May 28 at its Seoul headquarters.
The bank is reportedly considering appointing an Indonesian national as Lee's successor. If confirmed, it would mark the first time a local figure has led the unit since KB Kookmin Bank fully acquired the Indonesian lender in 2020.
Lee, who previously served as Chief Information Officer at KB Kookmin Bank, was appointed to the role to oversee the digital transformation of the unit through the Next Generation Banking System project.
On April 21, KB Bank announced the successful launch of NGBS and completion of its system migration.
'The successful migration to NGBS reflects our commitment to delivering banking services that are relevant to today's and future banking needs. Customers can now enjoy a faster and more secure transaction experience, seamlessly across all KB Bank service channels, both online and at branch offices,' Lee said in a press statement.
Adding momentum to the restructuring efforts, KB Bank reported a consolidated net profit of 352 billion rupiahs ($21 million) in the first quarter, a sharp turnaround from a net loss of 827 billion rupiahs during the same period last year.
With an 11.19 percent increase in net interest income, the unit returned to profit after recording a net loss in the previous quarter.
'These figures are preliminary, based on local standards. They will be finalized once included in the group's consolidated financial statement. But overall, KB Bank has returned to profitability in the first quarter,' a KB Financial Group official said.
'The goal is to post a full-year profit,' the official added.
The unit also reported 'notable improvement' in asset quality, with its loan-at-risk ratio falling to 23.41 percent from 34.33 percent. The nonperforming loan ratio improved to 9.1 percent from 9.92 percent.
Liquidity also strengthened, with third-party funds growing 10.86 percent on-year, driven by an increase in low-cost deposits.
'This performance underscores the tangible progress of our strategic transformation under the stewardship of KB Financial Group, South Korea's largest financial institution,' the unit said in a social media post.
The Indonesian unit had long been a drag on KB Kookmin Bank's global expansion strategy. With the recent turnaround, the lender is expected to report a profit in its overseas operations.
While KB Kookmin Bank posted a 96.2 billion won net profit from global operations in the first quarter of 2023, it fell into a net loss of 2.56 billion won during the same period last year, primarily due to losses from the Indonesian unit.
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