Korea’s leading lender trails crosstown rivals in global operations

Headquarters of KB Financial Group in Yeouido, western Seoul (KB Financial Group)
Headquarters of KB Financial Group in Yeouido, western Seoul (KB Financial Group)

For KB Kookmin Bank, one of the nation's top four commercial lenders, normalizing its Indonesian unit remains a top priority in restoring its global operations to profitability.

In the first three quarters of last year, KB Kookmin Bank was the only major Korean lender to report losses in its global operations, posting a cumulative deficit of 78.8 billion won ($54.3 million) through its foreign subsidiaries.

In contrast, its competitors all recorded profits during the same period: Shinhan Bank earned 434.3 billion won, Woori Bank 154.6 billion won, and Hana Bank 120.4 billion won.

KB Kookmin Bank's losses primarily stemmed from its Indonesian unit, KB Bank, which was previously named Bank KB Bukopin before a rebranding in March.

The Korean lender first acquired a stake in the Indonesian unit in 2018, betting heavily on the country's fast economic growth, driven by its large and youthful population. Following the acquisition, Indonesia was designated as KB Financial Group’s hub for Southeast Asian expansion.

However, the Indonesian unit has consistently reported losses. It posted deficits of 8.8 billion won in 2018 and 5.9 billion won in 2019. With the onset of the COVID-19 pandemic, losses escalated to 43.4 billion won in 2020, 272.5 billion won in 2021, and 802.1 billion won in 2022. In 2023, the loss was reduced to 261.2 billion won, thanks in part to a paid-in capital increase from KB Kookmin Bank.

Since the acquisition, the lender has conducted three rounds of paid-in capital increases, injecting 296.6 billion won in 2020, 393.5 billion won in 2021, and 709 billion won in 2023. Following the latest capital injection, KB Financial announced that no further capital increases would be made.

The loss-making Indonesian unit has drawn criticism from political circles and the Financial Supervisory Service, South Korea’s top financial regulator, with allegations of improper management.

Former KB Kookmin Bank CEO Lee Jae-keun has been assigned the task of normalizing the unit. In December, he was appointed to oversee the group's global operations in a newly established role.

Previously, global operations were managed separately by KB Financial’s affiliates, as the holding company lacked an integrated head for international business.

While KB Financial has been a market leader among South Korea’s major financial groups in recent years, it has faced significant challenges in its overseas business, particularly with the lender’s struggles in Indonesia.

“Appointing Lee to lead the company’s global operations demonstrates its commitment to turning its overseas business around,” an official from the financial group said.

With Lee at the helm of global operations, the lender hopes to create synergies with other KB affiliates. In addition to KB Bank, six of KB Financial’s affiliates have expanded into Indonesia, including KB Securities, KB Insurance, KB Card, KB Asset Management, KB Capital and KB Data Systems.

Outside of Indonesia, KB Kookmin Bank operates four foreign subsidiaries across three countries: China, Myanmar and Cambodia.

Having faced difficulties in Indonesia, KB Kookmin Bank has recently shifted its focus to Cambodia for its overseas expansion.

In Cambodia, the lender operates KB Prasac Bank, established in February through a merger of two KB Financial affiliates: Prasac Microfinance Institution and Kookmin Bank Cambodia.

In the first three quarters of last year, KB Prasac Bank recorded a surplus of 87.5 billion won, helping to offset KB Kookmin Bank’s overall deficit from its overseas units.