Call for Boosting Performance Records

Chairman Euh cites need for KB Financial Group to improve productivity on its 3rd anniversary

KB Financial Group celebrated its third anniversary on Sept. 29 at its headquarters in Myeong-dong, downtown Seoul.
Chairman Euh Yoon-dae in his congratulatory speech said the group should be prepared to lead the age of smart finance with segregated asset management services and integrated services for real estate dealings among its new strategies for its future growth and to keep its position as a globally-oriented leading financial group in Korea.
He pointed to Itau Unibanco of Brazil as the group's model to follow by benchmarking its management strategies, as the bank was formed following the merger of Brazil's top two banks in terms of assets.
Euh noted that the Brazilian bank has stronger brand power than the Bank of America and that the group should spur the growth of its brand power and borrow at lower interest rates from foreign banks in order to provide loans to their domestic customers at lower rates.
Euh also said that the group should boost its productivity to a higher level than its rivals, namely Shinhan Financial Group, saying that the group had fallen behind rivals in that area in the first half. KB Financial also fell behind in net income per employee, not to speak of share prices and market capitalization, and catching up to their rivals was not going to be an easy task, he said.
In the first half, the group posted 2.156 trillion won in operating profit, while personnel wages totaled 865.5 billion won with the operating profit ratio versus personnel expenses standing at 2.49 times, compared to Shinhan Financial Group's 3.11 times, Hana Financial Group's 2.99 times, and even Woori Financial Group's 2.64 times, despite KB Bank having 3,224 employees on early retirement last year.
The group fell behind its rivals in terms of share price on the stock exchange at around the 40,000 won per share level, falling 37 percent from 64,100 won per share on Oct. 23, last year. Market capitalization came to 15.6 trillion won, compared to Shinhan Financial's 19.9 trillion won.
"We have got to have a preemptive strategy for expanding the current financial market," Euh said.
KB Financial Group is Korea's leading financial institution with the largest customer base and the most extensive branch network in the country. With total assets exceeding US$313 billion, the group wields a solid capital prowess and enjoys a strong brand loyalty. As of June 2011, the group had nine domestic subsidiaries in the banking, credit card, securities, life insurance, real estate trust, venture capital, credit information, and data systems businesses, and four overseas subsidiaries in Hong Kong, England, and Cambodia.
KB Financial Group was established in September 2008 with extensive stock transfers from major subsidiary companies. The group's establishment was to better deal with such fundamental changes in the financial markets at home and abroad as the rapid globalization of financial services, a declining profitability of traditional banking operations, new industry regulations, and an increasing demand for comprehensive financial services.
The group's long-term strategy is to solidify its group infrastructure into a growth base, strengthen comprehensive financial service competencies, and cultivate future growth engines.
By expanding its non-banking operations and thus diversifying its financial products and services, KB Financial Group continues to improve customer satisfaction, maximize synergy creation, and increase its corporate value
Chairman Euh said the group is interested in taking over a life insurance firm during a media meeting held at the Westin-Chosun Hotel in Seoul on July 5 on the occasion of his first year as head of the financial group on July 5.
He said the spinning off of KB Card cut the non-banking sector's revenue by some 20 percent and in order to recoup the loss, the group plans to take over a life insurance firm, while spurring the growth of KB Life Insurance to cover at least 10 percent of the lost revenue.
The top manager said the group tried to pick up ING Life, learning that it was looking for a new owner, but they were told that the life insurer was not for sale. But, he said, the group will continue to try to get the company if it is put on the market. Euh said KB Financial is interested in taking over Woori Investment and Securities, but the financial authorities prefer to sell Woori Financial Group in a package to an investor, rather than breaking the group up and selling piecemeal.
Euh said the group and Kookmin Bank each will have an executive in charge of risk management in a bid to keep the risky financial assets and losses from the assets at the minimum levels.
Since taking over the helm of the group on July 13, last year, Euh focused on the reform of the group's structure. He managed to get 3,244 officers and staff take honorary retirement. nw

Chairman Euh Yoon-dae of KB Financial Group.

Photo on courtesy of KB Financial Group