Kookmin Bank Q2 net up on lending, sees higher margin

By Kim Yeon-hee

SEOUL (Reuters) - Kookmin Bank 060000.KS, South Korea's top retail lender, beat forecasts as quarterly profits more than doubled thanks to stronger-than-expected lending growth, and forecast interest margins would improve.

Driven by heavy demand from conglomerates and small-sized firms, Kookim grew lending by 10.9 percent versus a year ago in the first half, above its previously stated target of about 8 percent growth for the full-year.

But a softening economy and inflation near 10-year highs could crimp loan growth in coming months and spur more delinquencies, prompting lenders to take more charges against potential loan losses, analysts say.

"Kookmin's second half earnings will really depend on how much it manages to lift its NIM (net interest margin), and how much it has to set aside for bad debt allowance, meaning its earnings will fluctuate depending on external economic conditions," said Ku Yong-uk, an analyst at Daewoo Securities.

Kookmin's (KB.N) earnings were 644.4 billion won ($640.7 million) in the quarter ended June, against 236.3 billion won a year earlier which had included heavy back taxes.

The results topped an average forecast for 621 billion won by a Reuters poll of 12 analysts, and compared with 631.5 billion won in the first quarter.

Lending totalled 169 trillion won for the first half of 2008.

NIM, a key measure of banking profitability, fell to 2.98 percent in the second quarter from 3.08 percent in the first quarter and 3.48 percent in the June quarter of 2007.

Kookmin forecast the margin would pick up towards the end of this year, with a focus on wider-margin assets and new funding from asset securitisation.

"We do expect to see (margins in the) third quarter ... stablise and pick up slightly, and perhaps slightly more in the fourth quarter," Donald MacKenzie, Kookmin's chief financial officer, told a teleconference.

Kookmin shares trimmed losses to close down 0.7 percent before the results announcement, compared with a flat broader market .

Kookmin's full-year earnings are forecast to slip to 2.6 trillion won from 2.8 trillion won a year ago, according to a survey of analysts by Reuters Estimates ahed of the second quarter results.

This would include the sale of a $378 million stake in Indonesia's PT Bank Internasional (BNII.JK) to Malayan Banking Bhd (MBBM.KL) in the current quarter, analysts said.

PROVISIONING COSTS UP

Kookmin, with assets of $244 billion, put aside 171.1 billion won in charges against loan losses in the June quarter, up from the previous year's 62 billion won but less than the first quarter's 249.4 billion won.