South Korea’s KB Financial Group Inc. posted a record net profit in the first quarter of 2025 after shaking off its losses from equity-linked securities (ELS) tied to the Hong Kong H-Index.

KB Financial announced on Thursday that its first-quarter 2025 net profit attributable to controlling interests was 1.7 trillion won ($1.19 billion), up 62.9 percent from the same period a year ago. This is the company’s highest-ever first-quarter result, which even exceeds the market consensus of 1.58 trillion won.

The biggest contributor to the strong performance was the absence of losses from the ELS fallout in 2024. KB Kookmin Bank had the largest exposure to Hong Kong H-index ELS products, which it was criticized for mis-selling. The bank set aside a large 862 billion won as provisions for compensation in the first quarter of 2024, causing a sharp drop in its net profit.

With these one-off costs gone, profits surged in the first quarter of 2025 while the group’s overall business portfolio also showed balanced growth. Non-interest income, including gains from securities and foreign exchange, increased by 4.9 percent to 1.29 trillion won and significantly contributed to the improved results.

“Despite a tough business environment, the share of the non-bank segment in group profit increased to 42 percent as the bank and non-bank affiliates delivered complementary results,” KB Financial Chief Financial Officer (CFO) Na Sang-rok said.

Core affiliate KB Kookmin Bank recorded a net profit of 1.03 trillion won in the first quarter of 2025, a 163.5 percent increase year-on-year. Its net interest income rose 2.9 percent to 3.26 trillion won despite a downward trend in interest rates. Although its interest income from lending was subdued, an increase in core deposits from households and businesses reduced its funding costs.

KB Financial’s and KB Kookmin Bank’s net interest margins (NIM) stood at 2.01 percent and 1.76 percent respectively - down just 0.1 and 0.11 percentage points from the first quarter of 2024 - demonstrating resilience.

However, results from major non-bank affiliates were generally weaker. KB Securities Co.’s net profit fell 9.1 percent year-on-year to 179.9 billion won as a sluggish stock market led to reduced trading activity, while KB Kookmin Card Co.’s net profit dropped 39.3 percent to 84.5 billion won as it was hit by lower merchant fee rates.

KB Financial also announced plans to boost shareholder returns on Thursday.

Prior to the earnings release, it held a board meeting and approved a cash dividend of 912 won per share and a 300 billion won share buyback and cancellation.

“We will continue to play a leading role as a model company by managing capital ratios, profitability, and governance,” a KB Financial official said.

Other financial holding groups are also expected to show marked improvement.

The combined first-quarter 2025 net profit of the country’s four major financial groups (KB, Shinhan, Hana, and Woori) was initially projected at 4.89 trillion won, but is now expected to surpass 5 trillion won thanks to KB Financial’s stronger-than-expected results.

Shinhan, Hana, and Woori Financial Groups will release their first-quarter earnings on Friday.

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