Tags: South | Korea | KB | earnings

As South Korea Slows, KB Earnings Grow

By    |   Tuesday, 29 Nov 2011 12:11 PM

KB Financial Group (KB), owner of Korean financial institution Kookmin Bank, is reporting gains in earnings despite slowing growth rates in the South Korean economy.

Operating revenue for the third quarter of 2011 came to $6.4 billion, up 28 percent from the same period a year earlier, while net profits hit $492 million, up more than 500 percent from the same quarter in 2010, the company says in a Securities and Exchange Commission filing.

News agencies report the jump in profits reflects a weak third quarter in 2010, when the bank had to set aside provisions for bad construction-related loans.

Looking ahead, the Standard and Poor's ratings agency says it's keeping an eye on the Korean financial sector's risk profile.

The good news, the ratings agency says of the country's banks, is that South Korea has a diversified economy that is not overly dependent on one particular industry, a curse typical of an oil-rich country, for example. A healthy export sector also keeps the economy diversified and competitive.

Exports, however, have room to improve.

"We have a relatively modest outlook for exports, considering external factors such as a slowdown in demand for exports from developed economies, which could also pressure growth in domestic demand and lead to smaller gains in household income," Standard and Poor's analysts write of the country's banking sector.

Paying down debts

Furthermore, both corporations and households have run up debts and will eventually need to pay them down, in line with worldwide borrowing trends.

"We believe the corporate sector's high leverage is partly due to relatively strong focus on capital-intensive industries for exports. We also note that household debt levels have steadily increased in recent years amid financial turmoil, and this could pressure the banking system's asset quality in the event of sharp interest rate hikes, which cannot be ruled out in the current inflationary environment," S&P analysts contend.

The International Monetary Fund is predicting the South Korean economy to grow 3.9 percent in 2011 and then pick up again and grow 4.4 percent in 2012.

The company reports fourth-quarter earnings on Jan. 27.

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KB Financial Group (KB), owner of Korean financial institution Kookmin Bank, is reporting gains in earnings despite slowing growth rates in the South Korean economy. Operating revenue for the third quarter of 2011 came to $6.4 billion, up 28 percent from the same period a...
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2011-11-29
Tuesday, 29 Nov 2011 12:11 PM
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