Kookmin Bank profitability to decline on higher costs and narrowing NIM

It faces increasing delinquencies of SME loans, Moody’s said.

Kookmin Bank is expected to enjoy solid capitalisation and good funding over the next 12-18 months, despite rising credit costs of loans to small businesses.

The South Korean bank’s profitability is expected to decline to 0.55% in 2025, from 0.64% in 2024, on the back of narrowing net interest margin and higher credit costs, according to Moody’s Ratings.

It also faces a “modest” rise in its problem loan ratio over the same period on the back of increasing delinquencies of loans to small and medium enterprises (SMEs).

“Asset quality also remains sluggish for the bank’s overseas subsidiaries,” the ratings agency stated. These include PRASAC Microfinance Institution in Cambodia; and PT Bank KB Bukopin Tbk in Indonesia.

Tangible common equity to risk-weighted assets (TCE to RWA) ratio is expected to remain stable at 15% over the next 12 to 18 months.

“This is based on our expectation that the bank will curtain its loan growth to mid-single digit percentages and will rebalance its portfolio to reduce high-risk assets with thin margins,” Moody’s said.

However, Kookmin Bank's funding profile is expected to remain stable, thanks to its reportedly strong retail deposit base which also limits its reliance on market funds.

“We expect the bank to maintain around a 5-percentage point buffer on liquidity coverage ratio against the regulatory minimum,” Moody’s said.