Record earnings, yet KB Financial opts for generational change over Yang's reappointment

Despite record-breaking earnings, KB Financial Group Chairman Yang Jong-hee will not be reappointed. The chairman search committee has instead selected Lee Jae-geun — head of KB Financial Group's Global, Wealth Management and SME divisions and the youngest person ever to lead KB Kookmin Bank — as its final candidate. Industry observers say the committee placed greater weight on governance reform and generational change than on financial performance.

Should Lee be formally appointed as the next chairman, a broad reshuffling of KB Financial's subsidiary leadership at year-end is widely expected. Having served as president of KB Kookmin Bank and as a group-level division head, Lee is expected to place executives he has worked closely with in key positions.

Sources in the financial industry and political circles say KB Financial's search committee was acutely aware of regulators' push for stronger governance. After the Financial Supervisory Service's inspection of Hana Financial Group flagged problems with CEO succession procedures, age-limit rule changes and post-retirement advisory arrangements, KB is understood to have paid close attention to procedural fairness and equal treatment of candidates throughout its own selection process.

A ruling-party official said the committee had examined the Hana Financial inspection findings in detail, adding that it appeared to have wrestled with how to reduce the built-in advantage enjoyed by the incumbent candidate and the corresponding disadvantage faced by outside contenders.

The Financial Supervisory Service publicly disclosed seven management-advisory notices and 20 improvement recommendations stemming from its regular inspection of Hana Financial. Among the issues cited were a change to internal rules made just before the candidate pool was finalized, insufficient vetting procedures for external candidates, and the lack of objective criteria governing the post-retirement advisory system.

Against that backdrop, political observers believe KB may have grown more conscious of the fairness and independence of its own succession process. KB Financial said it launched this year's succession process more than a month earlier than in previous years and focused on reducing factors that could disadvantage outside candidates. The search committee applied five evaluation categories and 25 detailed criteria — covering work experience, expertise, leadership and integrity, among others — in selecting the final candidate.

An unscheduled tax audit of KB Kookmin Bank under way since last month is also cited in financial circles as a complicating factor. The Seoul Regional Tax Office's Investigation Bureau 4 dispatched auditors to KB Kookmin Bank on Aug. 13, securing accounting records and other documents; the audit is expected to continue through year-end. The specific grounds for the investigation have not been disclosed.

Political considerations are also thought to have played a role. A ruling-party official said lawmakers had considered summoning KB executives as witnesses at the upcoming parliamentary national audit. KB may have been mindful that a controversy over the chairman appointment, if it spilled into the national audit, could reignite governance concerns and damage the group's reputation. Financial regulators, however, were reportedly caught off guard by the outcome.

Many in the financial industry argue that Yang's departure cannot be explained by management performance alone, given that he showed no obvious weakness in earnings or business results. The prevailing view is that the search committee factored in the broader environment — the regulatory push for governance reform, the KB Kookmin Bank tax audit and the threat of parliamentary scrutiny — alongside its assessment of the candidates.

The surprise of Yang's non-reappointment is inseparable from KB Financial's track record. Under his tenure, the group posted consecutive record profits, and annual net profit of 6 trillion won ($4.48 billion) was being discussed as a realistic target for this year. The fact that a sitting chairman was passed over in favor of an internal candidate — at a time when the heads of other major financial holding companies had secured reappointment one after another — struck the industry as highly unusual.

The search committee's stated rationale was "change" and "generational renewal." Committee Chairman Jo Hwa-jun said the panel concluded that "bold change and a generational shift are needed at this juncture — not to rest on the group's current strong performance, but to strengthen its core competitiveness and secure future growth engines."

Lee joined Housing Bank in 1993 and went on to serve as head of KB Financial Group's financial planning division, chief financial officer of the holding company, CFO of KB Kookmin Bank and head of its retail banking group, among other roles. He was appointed president of KB Kookmin Bank in 2022 and led the bank for three years before moving to KB Financial Group in 2025 to oversee the Global, Wealth Management and SME divisions.

WM and SME are areas KB Financial has been cultivating as future growth engines. Lee has been consistently mentioned as an internal candidate for generational succession not only because of his banking experience but also because he has directly overseen the group's forward-looking businesses at the holding-company level.

The search committee noted that Lee had experience across both banking and non-banking operations and a strong grasp of finance, strategy and global affairs. Jo said the panel "judged that the results and management capabilities he demonstrated as bank president and as a group division head were more than sufficient to lead the group."

If Lee is formally appointed at an extraordinary shareholders' meeting scheduled for Nov. 20, KB Financial will transition from the Yang Jong-hee era to the Lee Jae-geun era. His term would run three years from Nov. 21.

Market attention is now turning to year-end personnel changes at KB's subsidiaries. Given that Lee served three years as KB Kookmin Bank president and has since overseen key group divisions, changes in the KB Kookmin Bank presidency and the leadership of major affiliates are widely anticipated. Particular attention is focused on how sweeping the reshuffle will be, as some executives who worked under Lee during his time as bank president currently hold senior positions across the group.

Among the most pressing tasks awaiting Lee after he takes office is expanding what the group calls productive finance. KB Financial has committed to supplying a total of 110 trillion won ($82.2 billion) by 2030 — 93 trillion won in productive finance and 17 trillion won in inclusive finance. Of the productive finance total, 10 trillion won is earmarked for a national growth fund, 15 trillion won for direct investment through asset management, securities and investment units, and 68 trillion won for corporate lending to strategic industries. Shifting the group's funding focus away from household and real estate lending toward corporations and advanced industries means Lee's execution record in this area will be closely watched throughout his term.

Reducing reliance on banking and building a stronger non-banking earnings base is another priority. KB Financial posted a record first-half net profit of 3.88 trillion won, and non-banking affiliates' contribution to group profit rose to 44 percent. With the non-banking share already substantially higher than before, the key question going forward is how much additional synergy can be extracted across securities, insurance and asset management subsidiaries.

The WM and SME businesses that Lee has directly overseen at the holding-company level are also seen as core priorities. KB Financial has been working to capture customer assets migrating toward capital markets by strengthening its wealth management, retirement pension and asset management capabilities, while also expanding a group-wide asset management platform that links banking, securities, asset management and insurance. A parallel strategy to redesign operations on an AI-driven basis is also under way.

Global business rounds out the agenda. Having directly overseen the group's international operations as a division head, Lee will find the performance of those businesses difficult to separate from any future assessment of his leadership. With KB Financial having secured its position as the country's leading financial group domestically, expanding the profitability and scale of its overseas operations is expected to be a central medium- to long-term challenge for the incoming leadership.