By Park Hyong-ki
KB Financial Group faces losing its sector leadership to Shinhan Financial Group after the company posted weaker-than-expected profit in 2018.
KB Financial's consolidated net profit was 3.07 trillion won ($2.7 billion) last year, down 242.5 billion won, or 7.3 percent, from the year before, according to the group.
|KB Financial Chairman Yoon Jong-kyoo|
But the increasing cost of financing severance payments has weighed on profit, along with weak nonbank businesses, the group and analysts said.
Costs amounted to 286 billion won, compared with the market projection of 200 billion won.
"Due to the one-off costs and losses from its stock portfolio, the group's profit came short of expectations," KB Financial said.
"However, the group's fundamentals remain strong. The group will continue to achieve stable profits through risk management in the face of an economic slowdown."
Analysts say KB Financial's KB Kookmin Bank's profit remained stable, but the weak profitability of its nonbanks may have put the brakes on the group's leadership.
"KB Securities and KB Insurance had weaker-than-expected profits," said Baek Doo-san, an analyst at Korea Investment & Securities.
If Shinhan Financial posts 3.2 trillion won in profit on Feb. 12, in line with the market consensus, the group will regain top spot in the sector.
Shinhan lost to KB in 2017.
|Shinhan Financial Group Cho Yong-byoung|
With Shinhan Financial's acquisition of Orange Life, the group is expected to see a further increase in profit this year.
Last year, KB Financial Chairman Yoon Jong-kyoo urged its 12 subsidiaries to further maximize synergy to widen the gap with the market's second player Shinhan Financial.
He said this was especially important as it faces growing competition from internet banks and other financial companies and startups at home and abroad.
This requires KB to reinforce its nonbanks such as insurance, securities and credit cards to become competitive to the point that it can threaten the market's No. 1 players in their respective sectors.
The chairman also stressed the need to speed up its expansion in Southeast Asian markets such as Vietnam, Indonesia and Cambodia.