KB FinancialGroup Inc. plans to raise its stakes in three acquired nonbankunits to boost gains from the holdings, while looking for more dealopportunities to accelerate a shift away from the lending business and weathera prolonged period of low interest rates.
The company is looking topurchase more shares in KBInsurance Co. Ltd., Hyundai Securities Co. Ltd. and KB Capital Co. Ltd., KB Financial CFO Huh Jung-soo said during a July 21 earnings call.
The group bought controllingstakes in the businesses over the past two years. KB Financial willcontinue to seek to buy nonbank financial firms, Huh said.
As of June 30, KB Financial held a 52.02% in consumerfinance unit KB Capital, which became part of the group in March 2014. The companyowns 33.29% of KB Insurance,which it acquired in June 2015.
For Hyundai Securities, KB Financial in Juneraised its holding to29.62% after acquiring a 22.56% stake in May. The group spent 107.15billion won for the additional share purchase, which was for the company tocomply with South Korean financial holding company law. The transaction is akey reason KB Financial's common equity Tier 1 capital ratio fell to13.34% as of June 30 from 13.55% three months earlier, Huh said.
KB Financial is looking to diversify as record-low interest rates make it difficult forSouth Korean banks to boost profit from loans. KB Financial reported a 20.1% year-over-year jumpin first-half net income, but net interest income shrank as its net interestmargin contracted.
The group expects the to cut rates at leastone time in the third quarter, Huh said. The last time the central bank loweredborrowing costs was in June.
Any further rate cut will have an impact on KBFinancial's NIM from the start of 2017, the CFO said.
Low rates, coupled with a looming rule , are also clouding theoutlook for the group's insurance business.
Under the International Financial Reporting Standard 4Phase II, which will take effect in 2020, South Korean insurers will berequired to apply interest rate changes to the assessments of liability values.After the new rules come into force, declines in interest rates will raisecapital requirements for insurers to cover high-yield products sold in the past.
"We are paying close attention to minimize thepossible negative impact on our life and property and casualty insuranceunits," Huh said.
KB Financial, on the otherhand, is trying to cut costs. It aims to cut its cost-income-ratio to less than50% from the current 56.6%, he said.
As of July 20, US$1 was equivalent to 1,141.58 SouthKorean won.