KB Financial Launches Mid- to Long-Term Strategy Ahead of Next Chairman Appointment: "Reform to Be Decided Within Three Years"

Mid- to Long-Term Strategy Task Force Launched in Late April

Targeting an Increased Share of Non-Interest Income

Full-Scale Shift Toward a WM and CIB-Centric Business Structure

KB Financial Group, which has initiated the process to select its next chairman, has begun drafting its mid- to long-term management strategy for the first time in three years. With Chairman Yang Jonghee’s reappointment considered highly likely as his term is set to expire in November 2026, KB Financial regards the next three years as a “golden window” to become a leading financial group. The new strategy will include reform tasks such as restructuring the business portfolio and innovating the earnings structure.

According to the financial industry on June 10, KB Financial has been operating a “Mid- to Long-Term Management Strategy Task Force” since April 27. This task force, which includes major affiliates such as the bank, securities, insurance, card, and capital companies, is overseen by Cho Youngseo, Vice President and Chief Strategy Officer (CSO) of KB Financial Group.

KB Financial typically establishes its mid- to long-term management strategies on a three-year cycle. This year, the timing of formulating the next strategy coincides with the decision on whether Chairman Yang will be reappointed. Previously, during former Chairman Yoon Jongkyu’s tenure, the group began work on the strategy in June 2023 and finalized it early the following year. Considering this precedent, the current strategic overhaul is also likely to be completed around October, when the outline of the next chairman will become clear. KB Financial has already announced that it will confirm the final candidate for the next chairman by September 11.

The industry expects Chairman Yang’s reappointment to be highly probable, given that KB Financial has posted record-high earnings each quarter. However, as the financial authorities are currently discussing governance reforms, including measures to limit the long-term tenure of financial holding group chairmen, there is a strong sense that the group must achieve significant organizational changes during Chairman Yang’s term, which is marked by a strong reform drive. Restructuring the business model to focus on wealth management (WM) and corporate investment banking (CIB), as well as expanding non-interest income, are considered urgent tasks for securing future growth engines. Therefore, it is essential to accelerate these changes during Chairman Yang’s tenure.

The core focus of the new mid- to long-term strategy is expected to be strengthening WM and CIB. As the government tightens regulations on household lending, a loan-centric growth strategy has become difficult. KB Financial aims to expand non-interest income centered on WM and CIB to restructure its earnings model. Currently, non-interest income accounts for about 33% of KB Financial’s total revenue. Internally, the group aims to increase this ratio to 40% in the mid- to long-term.

KB Financial also plans to bolster its WM capabilities to target the ultra-high-net-worth market. According to the KB Research Institute, there are about 470,000 individuals in Korea with financial assets of at least 1 billion KRW, and about 50,000 with over 10 billion KRW. While KB Financial has grown under the "Kookmin Bank" brand, the group recognizes the need to actively secure these wealthy clients and expand customized services for them going forward.

Integrating WM and CIB is another key task. The plan is to have the corporate investment banking division identify high-quality deals, which the wealth management division can then distribute and sell to clients, thereby increasing fee-based income. Rather than simply expanding loans, the group is considering providing comprehensive financial services that combine advisory, wealth management, and investment product sales.

This strategy is also closely tied to improving capital efficiency. Unlike loans, WM can generate fee income without the need for capital input, resulting in a high Return on Risk-Weighted Assets (RoRWA). Furthermore, government regulations on household lending have already made it difficult to pursue growth strategies centered on real estate-backed loans. In response, KB Financial plans to increase the proportion of CIB business, focusing on advisory, equity capital markets (ECM), and debt capital markets (DCM) services, which can generate fee income rather than relying solely on lending.

Underlying these plans is the recognition that, for the Korean financial market to advance, the capital markets must fulfill their original role. Companies, too, should move away from depending solely on bank loans and instead raise capital through IPOs, rights offerings, and corporate bond issuances.

A KB Financial official commented, “Like the saying ‘a monk cannot shave his own head,’ in reality, we should have shifted to a WM and CIB-centric model much earlier. However, as government regulations have made it difficult to pursue a growth strategy centered on real estate-backed loans, this could serve as an opportunity to accelerate the group’s structural transformation.”

This content was produced with the assistance of AI translation services.