2001 Bank Operating Results (Feb. 7, 2002)
2002-02-15On February 6, 2001, the board of directors of Kookmin Bank has approved the audited non-consolidated financial statements in accordance with Korean GAAP for the fiscal year 2001. The following selected numbers have been released to the press.
In order to facilitate proper analysis of Kookmin Bank’s 2001 earnings result, we offer the following summary of accounting and financial statement rules new Kookmin Bank has adopted:
1.1.1. According to Korean rules and regulations relating to business combination, Kookmin Bank’s official accounting method relies on purchase accounting, which accounts for an acquisition using market value for the consolidation of the two entities’ net assets on the balance sheet. Here are the details:
• Former Kookmin Bank purchases the assets and liabilities of former H&CB at fair value as of October 31, 2001.
• An acquisition cost of former H&CB is a sum of the total value of stocks outstanding for former H&CB (closing price on October 31, 2001 of 33,766 won x number of stocks outstanding of 119,922,229) and the fair value of former H&CB’s stock options (18 billion won).
• The fair value of former H&CB’s net assets is 3,362 billion won:
| (Million won) | Assets | Liabilities | Capital |
|---|---|---|---|
| Book Value | 67,700 | 64,381 | 3,319 |
| Fair Value | 67,743 | 64,381 | 3,362 |
• Goodwill is created by taking the difference of the purchase price and fair value of net assets of former H&CB. Goodwill of 705 billion won will be amortized over nine years, using a straight-line accounting method.
1.1.2. The financial statements as of and for the years ended December 31, 2001 are filed using the purchase accounting method. For the purpose of comparison, however, we will present figures of purchase accounting and figures derived through simple arithmetic summation of two banks’ past earnings, excluding the inter-bank transaction amounts.
• 2001 Balance Sheet states former Kookmin Bank’s assets and liabilities outstanding as of December 31, 2001 and reflects the fair value of former H&CB’s net assets.
• 2001 Income Statement states former Kookmin Bank’s revenues and expenses for full 12 months, as well as former H&CB’s November and December results.
• A formal presentation of the comparative financial statement states the results based on purchase accounting method, which preserves former Kookmin Bank as an ongoing entity having acquired former H&CB on November 1, 2001. Respectively, an official comparison shall be based on the financial statements of former Kookmin Bank.
• Notwithstandin g the above, we have combined the income statements of former Kookmin Bank and former H&CB, excluding their inter-bank transactions, to present pro forma comparisons.
Kookmin Bank will release full year earnings on February 7, 2002. Respectively, we offer the following overview in advance to assist your analytical preparation.
For the 12 months ended December 31, 2001, Kookmin Bank delivered W741 billion in net profits using the purchase method. The pro forma statements of the bank, however, reported net income of W1,486 billion, a 19.5% increase from the same prior year period. Below are highlights of Kookmin Bank’s performance for the 12 months ended December 31, 2001.
• Income before taxes and provisions recorded W2,188 billion based on purchase method and W3,704 billion based on simple consolidation method, which states an increase of 24.0% from the same prior year period.
• Net interest income recorded W2,596 billion based on purchase method and W3,861 billion based on simple consolidation method, which shows an increase of 10.4% from the same prior year period.
• Non-interest revenue recorded W938 billion based on the purchase method and W1,986 based on the simple consolidation method. Again the latter method reported a 58.8% growth compared to same prior year period.
• Net-interest margin for the period ended December 31, 2001 was 3.10% based on the purchase method and 3.42% based on the simple consolidation method. Based on the latter method, our net interest margin improved by 17 bps over the same prior year period.
The total assets of bank balance sheet increased by W14,936 billion to W156,894 billion, up 10.5% from the same prior year period.
• Total loans outstanding, including credit card loans of W4,706 billion, increased by W11,626 billion to W107,030 billion, up 12.2% from the same prior year period.
• Total deposits increased by W11,749 billion to W115,161 billion, up 11.4% from the same prior year period.
The ratio of substandard and below loans to total loans outstanding went down to 3.56%, lower by 2.53% points over the same prior year period and the ratio of precautionary and below loans also came down from 11.40% to 7.65%, lower by 3.75% points over the same prior year period.
• Our NPL came down to 2.62% for the period ended December 31, 2001, which is lower by 1.3% points over the same prior year period.
• Our delinquency ratio also improved by 1.19% points yoy basis bringing the rate down to 2.51%.
Notwithstanding a long and arduous processes experienced prior to the merger date, Kookmin Bank, upon its merger on November 1, 2001, has proceeded at full speed to revamp the implementation of successful integration of two merged banks. While we have launched various programs to merge the two systems without any customer attrition, we focused our efforts on integrating the headquarters organization and improving our asset quality to its highest standard. Having stated that, we note that our November and December earnings have been expensed fully to write off bad debts and provision according to higher provisioning policy of two banks. We present you with below summary table of incremental provisions accrued
since the merger:
| Large corporates | Amounts in bil won |
|---|---|
| Hynix |
392 |
| Kohap |
84 |
| Ssangyong Motor |
46 |
| Korea Data System |
43 |
| Incheon Oil Refinery |
30 |
| New Provision Policy | Amounts in bil won |
| Forward Looking Criteria |
40 |
| Adoption of higher provision |
46 |
| Subordinate bond classification redefined |
63 |
| Total incremental provisions | 744 billion won |
| As of (W bn) |
00/12/31 Old Kookmin |
01/12/31 New Kookmin |
Growth (YoY) | |
|---|---|---|---|---|
| Amount | % | |||
| Total assets | 81,522 | 156,894 | 75,372 | 92.5 |
| Cash and due from banks | 6,355 | 7,504 | 1,148 | 18.1 |
| Trading securities | 2,458 | 6,414 | 3,956 | 161.0 |
| Investment securities | 16,894 | 27,003 | 10,110 | 59.8 |
| Loans | 50,570 | 107,030 | 56,459 | 111.6 |
| (Allowances for loan losses) | (1,827) | (2,271) | (445) | 24.3 |
| (Present value discounts) | (168) | (59) | 109 | (64.9) |
| Properties, premises and equipments |
1,272 | 2,925 | 1,652 | 129.9 |
| Other assets | 3,972 | 6,019 | 2,046 | 51.5 |
| Total liabilities | 77,265 | 147,980 | 70,715 | 91.5 |
| Deposits | 56,522 | 115,161 | 58,639 | 103.7 |
| Borrowings | 7,066 | 12,556 | 5,490 | 77.7 |
| Debentures | 6,675 | 9,076 | 2,401 | 36.0 |
| Other liabilities | 7,002 | 11,187 | 4,185 | 59.8 |
| Total shareholders' equity | 4,257 | 8,914 | 4,657 | 109.4 |
| Paid-in capital | 1,698 | 1,499 | (200) | (11.8) |
| Capital surplus | 1,601 | 5,684 | 4,083 | 255.1 |
| Retained earnings | 875 | 1,428 | 552 | 63.1 |
| Capital adjustments | 83 | 304 | 221 | 266.5 |
| Total liabilities and shareholders' equity | 81,522 | 156,894 | 75,372 | 92.5 |
| As of (W bn) |
Former Kookmin + H&CB | Growth (YoY) | ||
|---|---|---|---|---|
| 00/12/31 | 01/12/3 | Amount | % | |
| Total assets | 141,958 | 156,894 | 14,936 | 10.5 |
| Cash and due from banks | 8,713 | 7,504 | (1,209) | (13.9) |
| Trading securities | 4,887 | 6,414 | 1,527 | 31.2 |
| Investment securities | 25,006 | 27,003 | 1,998 | 8.0 |
| Loans | 95,404 | 107,030 | 11,626 | 12.2 |
| (Allowances for loan losses) | (2,988) | (2,271) | 717 | (24.0) |
| (Present value discounts) | (314) | (59) | 255 | (81.2) |
| Properties, premises and equipments | 2,164 | 2,925 | 761 | 35.1 |
| Other assets | 5,785 | 6,019 | 234 | 4.0 |
| Total liabilities | 135,158 | 147,980 | 12,822 | 9.5 |
| Deposits | 103,413 | 115,161 | 11,749 | 11.4 |
| Borrowings | 10,197 | 12,556 | 2,359 | 23.1 |
| Debentures | 9,869 | 9,076 | (793) | (8.0) |
| Other liabilities | 11,680 | 11,187 | (493) | (4.2) |
| Total shareholders' equity | 6,800 | 8,914 | 2,114 | 31.1 |
| Paid-in capital | 2,540 | 1,499 | (1,041) | (41.0) |
| Capital surplus | 2,378 | 5,684 | 3,306 | 139.0 |
| Retained earnings | 1,858 | 1,428 | (431) | (23.2) |
| Capital adjustments | 24 | 304 | 280 | 1169.9 |
| Total liabilities and shareholders' equity | 141,958 | 156,894 | 14,936 | 10.5 |
| Year to date at (Wbn) |
00/12/31 | 01/12/3 | Growth (YoY) | |
|---|---|---|---|---|
| Amount | % | |||
| Operating revenue | 8,852 | 10,994 | 2,142 | 24.2 |
| Interest income | 6,405 | 7,317 | 911 | 14.2 |
| Fees and commissions | 332 | 621 | 289 | 87.0 |
| Other operating income | 2,115 | 3,056 | 942 | 44.5 |
| Operating expenses | 7,958 | 10,148 | 2,190 | 27.5 |
| Interest expenses | 4,253 | 4,721 | 468 | 11.0 |
| Fees and commissions paid | 51 | 139 | 88 | 172.4 |
| Other operating expenses | 2,644 | 3,830 | 1,186 | 44.9 |
| Administrative expenses | 1,011 | 1,459 | 448 | 44.3 |
| Operating income | 894 | 846 | (48) | (5.4) |
| Non-operating revenue | 443 | 619 | 176 | 39.8 |
| Non-operating expenses | 297 | 372 | 75 | 25.3 |
| Ordinary income | 1,039 | 1,092 | 53 | 5.1 |
| Income before income tax expenses | 1,039 | 1,092 | 53 | 5.1 |
| Income tax expense | 320 | 352 | 32 | 10.0 |
| Net income | 720 | 741 | 21 | 2.9 |
| Year to date at (Wbn) |
00/12/31 | 01/12/31 | Growth (YoY) | |
|---|---|---|---|---|
| Amount | % | |||
| Operating revenue | 14,838 | 16,660 | 1,822 | 12.3 |
| Interest income | 11,134 | 11,495 | 361 | 3.2 |
| Fees and commissions | 1,045 | 1,582 | 537 | 51.3 |
| Other operating income | 2,659 | 3,583 | 924 | 34.8 |
| Operating expenses | 13,196 | 14,618 | 1,422 | 10.8 |
| Interest expenses | 7,636 | 7,639 | 3 | 0.0 |
| Fees and commissions paid | 127 | 248 | 121 | 95.5 |
| Other operating expenses | 3,514 | 4,424 | 910 | 25.9 |
| Administrative expenses | 1,919 | 2,308 | 389 | 20.3 |
| Operating income | 1,642 | 2,042 | 399 | 24.3 |
| Non-operating revenue | 638 | 861 | 223 | 34.9 |
| Non-operating expenses | 488 | 719 | 231 | 47.3 |
| Ordinary income | 1,792 | 2,183 | 391 | 21.8 |
| Income before income tax expenses | 1,792 | 2,183 | 391 | 21.8 |
| Income tax expense | 549 | 697 | 148 | 27.0 |
| Net income | 1,244 | 1,486 | 243 | 19.5 |
| As of (W bn) |
FY 2000 | FY 2001 | Growth (YoY) | |
|---|---|---|---|---|
| Amount | % | |||
| Total | 103,524 | 112,920 | 9,396 | 9.1% |
| Normal |
91,720 | 104,284 | 12,565 | 13.7% |
| Precautionary |
5,502 | 4,621 | (881) | -16.0% |
| Substandard |
4,168 | 2,484 | (1,684) | -40.4% |
| Doubtful |
1,654 | 1,222 | (432) | -26.1% |
| Estimated loss |
481 | 309 | (172) | -35.8% |
| Loan loss provision | 3,639 | 2,505 | (1,134) | -31.2% |
| Precautionary and below | 11,804 | 8,635 | (3,169) | -26.8% |
| Coverage ratio |
30.83% | 29.01% | - | -1.8% |
| Substandard and below | 6,303 | 4,015 | (2,288) | -36.3% |
| Coverage ratio |
57.74% | 62.40% | - | 4.7% |
| Non- performing loan ratio | 3.92% | 2.62% | - | -1.3% |
| Delinquency ratio | 3.70% | 2.51% | - | -1.2% |