*Profit just one third of expectations on provisioning costs
*Earnings recovery looms next yr as restructuring weighs
SEOUL, Oct 29 (Reuters) - KB Financial Group (105560.KS) the parent of South Korea’s largest bank Kookmin, posted an unexpected drop in quarterly net profit, dented by additional provisions against soured construction loans.
Following its first ever loss in the prior quarter, the company logged a net profit of 81 billion won ($72.1 million) in the July-September quarter, compared with 174 billion won a year earlier, the financial holding company said.
The results were just a third of the average forecast of 248 billion won by nine analysts polled by Thomson Reuters.
It set aside 685 billion won in loan-loss reserve for the July-September period, compared with 552 billion won a year ago.
By aggressively setting aside provision reserves, the country’s No.2 financial group by market value is likely to begin recovering next year, analysts said.
Its banking unit’s net interest margin was down by 6 basis points to 2.63 percent from the previous quarter.
However, in the short term next quarter’s results may be clouded by the company’s ongoing restructuring with massive costs and more write-offs for bad loans.
KB has been lagging behind its domestic rivals such as Shinhan Financial Group (055550.KS) and Hana Financial Group (086790.KS) due to low profitability and heavy exposure to the sluggish housing market and weak small-sized companies.
Since Chairman Euh Yoon-dae, a professor-turned-businessman, took office in July, KB has vowed to reform itself to reclaim its top spot in the banking sector.
As part of its effort to slim down, KB is laying off more than 3,000 out of a total 26,000 staff at the bank in November via a voluntary retirement scheme.
The largest-ever job losses are expected to result in massive retirement expenses in the fourth quarter, which analysts said would hurt the fourth quarter earnings.
“It the scheme is successful, you can trust KB in many ways...This will provide more vitality,” Euh told Reuters in a September interview.
Also, the group is set to spin off its credit card operation from into a separate entity in order to boost profitability. [ID:nTOE68Q06X]
Reporting by Ju-min Park; Editing by David Chance