KB Financial Group's headquarters in Seoul / Courtesy of KB Financial Group

KB Financial Group's net profit for the first quarter of 2024 decreased 30.5 percent year-on-year, due to voluntary compensation paid to investors who incurred losses from equity-linked securities (ELS) tied to the Hang Seng China Enterprises Index.

The financial group announced Thursday that its first-quarter net profit reached 1.049 trillion won ($763 million).

The decline was attributed to compensation payments at KB Kookmin Bank, a major subsidiary, which markedly inflated non-operating losses in the group's financial statements. The bank allocated approximately 862 billion won as provisions for liabilities to address those compensation costs.

However, excluding the one-off costs from the voluntary ELS compensation, the underlying financial performance of the company remained strong.

The group's total operating income increased 0.9 percent year-over-year to 4.41 trillion won. KB also said profitability improved at its non-banking subsidiaries, including those in securities, property insurance and card services.

"Excluding such one-off costs, net profit stood at approximately 1.59 trillion won, demonstrating the company's robust earnings capacity," KB explained.

Market observers predict that KB's performance will significantly improve from the second quarter, as the uncertainties surrounding the ELS compensation have now been resolved.

Still, doubts linger regarding the group's ability to sustain its position as the industry leader, especially considering that both the volume of ELS sales and the subsequent compensation amounts are the highest in the industry.

Market tracker FnGuide estimated that Shinhan Financial Group would reap approximately 1.24 trillion won in net profit for the first quarter of 2024, despite losses from voluntary compensations. Along with Shinhan, other financial groups such as Hana and Woori are scheduled to announce their earnings results on Friday.

Meanwhile, the board of KB also recently introduced a shareholder return policy, which they call equity quarterly dividends based on the total dividend amount. The new dividend policy will dictate the per-share cash dividend, which will be calculated based on the total dividend amount, ensuring it is at least 1.2 trillion won. For the first quarter of this year, they resolved to distribute a cash dividend of 784 won per share.

"Additionally, the group plans to adjust its buyback and cancellation of treasury shares each year based on profit levels. This strategy ensures that, even if the total dividend amount remains constant, the per-share dividend will naturally increase," a KB official said.