Edgar Filing: KOOKMIN BANK

Form 6-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 6-K

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16 UNDER

THE SECURITIES EXCHANGE ACT OF 1934

For the month of November 2006

Kookmin Bank

(Translation of registrant’s name into English)

9-1, 2-Ga, Namdaemun-Ro, Jung-Gu, Seoul, Korea 100-703

(Address of principal executive office)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

Form 20-F X Form 40-F

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):

Note: Regulation S-T Rule 101(b)(1) only permits the submission in paper of a Form 6-K if submitted solely to provide an attached annual report to security holders.

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):

Note: Regulation S-T Rule 101(b)(7) only permits the submission in paper of a Form 6-K if submission to furnish a report or other document that the registration foreign private issuer must furnish and make public under the laws of the jurisdiction in which the registrant is incorporated, domiciled or legally organized (the registrant’s “home country”), or under the rules of the home country exchange on which the registrant’s securities are traded, as long as the report or other document is not a press release, is not required to be and has not been distributed to the registrant’s security holders, and if discussing a material event, has already been the subject of a Form 6-K submission or other Commission filing on EDGAR.

Indicate by check mark whether by furnishing the information contained in this Form, the registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes No X

Index


1. Summary of 2006 Third Quarter Business Report		4
2. Exhibit 99.1-Kookmin Bank Review Report for the Third Quarter of 2006

TABLE OF CONTENTS


1.	Introduction to the Bank	5

1.1.	Business Purposes	5

1.2.	History	5

1.3.	Capital Structure	7

1.4.	Dividend	8

2.	Business	9

2.1.	Source and Use of Funds	9

2.2.	Principal Banking Activities	12

2.3.	Branch Networks	16

2.4.	Other Information for Investment Decision	17

3.	Financial Information	19

3.1.	Non-Consolidated Condensed Financial Statements	19

3.2.	Other Financial Information	19

4.	Independent Public Accountant	20

4.1.	Audit & Audit related Fees	20

4.2.	Non-Audit Services	20

5.	Corporate Governance and Affiliated Companies	21

5.1.	Board of Directors & Committees under the Board	21

5.2.	Compensation	22

5.3.	Affiliated Companies	29

6.	Directors, Senior Management and Employees	30

6.1.	Executive Directors	30

6.2.	Non-Executive Directors	30

6.3.	Senior Management	31

6.4.	Employees	31

7.	Major Stockholders and Related Party Transactions	32

7.1.	Major Stockholders	32

7.2.	Investments in Affiliates	33

7.3.	Related Party Transactions	34

Summary of 2006 Third Quarter Business Report

On November 14, 2006, pursuant to the Securities and Exchange Act of Korea, Kookmin Bank filed its business report for the third quarter of 2006 (the “Business Report”) to the Financial Supervisory Commission of Korea and the Korea Exchange. This is a summary of the Business Report translated into English.

All financial information contained in this summary (and in the attached review report) have been prepared in accordance with generally accepted accounting principles in Korea, which differ in certain important respects from generally accepted accounting principles in the United States.

All references to “Kookmin Bank” mean Kookmin Bank on a non-consolidated basis, and all references to “we”, “us” or the “Bank” mean Kookmin Bank and, as the context may require, its subsidiaries. In addition, all references to “Won” in this document are to the currency of the Republic of Korea.

1. Introduction to the Bank

1.1. Business Purposes

The business purpose of the Bank is to engage in the following business activities:

The banking business as prescribed by the Banking Act,

The trust business as prescribed by the Banking Trust Act,

The credit card business as prescribed by the Specialized Credit Financial Business Act, and

Other business permitted by the Bank Act or other relevant Korean laws and regulations

1.2. History

November 1, 2001

Incorporated and listed on the New York Stock Exchange

November 9, 2001

Listed on the Korea Stock Exchange

September 23, 2002

Integrated IT platforms of old Kookmin Bank and H&CB

December 4, 2002

Entered into a strategic alliance agreement with ING Bank N.V. Amsterdam, which replaced the prior investment agreement with H&CB

September 30, 2003

Completed the merger with Kookmin Credit Card

December 16, 2003

Completed a strategic investment in Bank Internasional Indonesia (BII) by investing in a 25% stake in Sorak Financial Holdings, a consortium with other investors

December 19, 2003

Fully privatized through the entire disposition of Korean government’s stake in Kookmin Bank

April 29, 2004

Established a subsidiary, KB Life Insurance Co. Ltd., to engage in insurance business

July 22, 2004

Entered into an alliance with China Construction Bank in connection with the foreign currency business

August 31, 2004

ING Bank N.V. Amsterdam entered into a contract with KB for a strategic investment in KB Life Insurance

October 29, 2004

Appointed Mr. Chung Won Kang as the President & CEO in an extraordinary general shareholders’ meeting

December 31, 2004

The largest shareholder of Kookmin Bank changed from ING Bank N.V. Amsterdam to Euro-Pacific Growth Fund

January 01, 2005

Integrated three labor unions (former Kookmin Bank, former H&CB, former Kookmin Credit Card) into a single KB labor union

March 02, 2005

Opened KB Satellite Broad Casting System for the first time in Korea

March 21, 2005

The largest shareholder of Kookmin Bank changed from Euro-Pacific Growth Fund to ING Bank N.V. Amsterdam

June 16, 2005

Disposed of 27,423,761 shares of treasury stock by means of a combination of domestic over-the-counter-sales and an international issuance of depository receipts

July 26, 2005

Obtained an approval from FSS to use the Market Risk Internal Model for the first time among domestic financial institutions

October 14, 2005

The largest shareholder of Kookmin Bank changed from ING Bank N.V. Amsterdam to Euro-Pacific Growth Fund

February 2, 2006

Established the “Basel II system to calculate credit risk weighted asset and New BIS Capital adequacy ratio” for the first time among domestic financial institutions

March 24, 2006

Selected as the preferred bidder for the acquisition of Korea Exchange Bank

April 3, 2006

Established 100% computerization of bank accounts for the first time among domestic financial institutions

May 19, 2006

Entered into a share purchase agreement with respect to acquiring Korea Exchange Bank stock

September 8, 2006

Implemented SOD (Segregation of Duties)

1.3. Capital Structure

1.3.1. Common Shares

Kookmin Bank has the authority to issue a total of 1,000,000,000 shares of capital stock according to its Articles of Incorporation. Kookmin Bank’s Articles of Incorporation also provide that it is authorized to issue shares of preferred stock up to one-half of all of Kookmin Bank’s issued and outstanding shares of common stock. Upon completion of the merger between the former Kookmin Bank and H&CB, Kookmin Bank issued 299,697,462 common shares.

Upon the resolution of a shareholders’ meeting held on March 22, 2002, Kookmin Bank issued an additional 17,979,954 common shares in connection with a stock dividend of 6%.

On November 25, 2002 Goldman Sachs Capital Koryo, L.P. converted all of its convertible bonds into common shares. According to this conversion on November 30, 2002, Kookmin Bank issued 10,581,269 common shares and distributed them to Goldman Sachs Capital Koryo, L.P.

With respect to the merger between Kookmin Bank and Kookmin Credit Card on September 30, 2003, Kookmin Bank issued an additional 8,120,431 common shares on October 1, 2003. Accordingly, as of September 30, 2006, a total of 336,379,116 common shares were issued.

Number of Shares

(Unit: share)


	Type
	Common Stock	Total
Share Issued (A)	336,379,116	336,379,116
Treasury Stock (B)	—	—
Share Outstanding (A-B)	336,379,116	336,379,116

Capital Increase

(Unit: Won, share)


Issue Date	Type	Number	Face Value	Issue Price	Remarks
2001.10.31	Common Stock	299,697,462	5,000	—	M&A into a new entity
2002.3.22	Common Stock	17,979,954	5,000	5,000	Stock dividend
2002.11.30	Common Stock	10,581,269	5,000	22,124	CB conversion
2003.10.01	Common Stock	8,120,431	5,000	38,100	M&A with KCC

1.3.2. Treasury Stock

(Unit: share)


Date	Details	Number of shares
December 31, 2005	Outstanding Treasury Shares	217,935
January 13, 2006	Disposition due to exercise of stock option by grantees	217,935
September 30, 2006	Outstanding Treasury Shares	0

1.3.3. Employee Stock Ownership Association

(Unit: share)


Type	Beginning Balance (January 1, 2006)	Increase	Decrease	Ending Balance (September 30, 2006)	Remarks
Registered common stock	2,868,596	—	70,032	2,798,564	—

Total	2,868,596	—	70,032	2,798,564	—

1.4. Dividend

The following table shows our dividend related information for the last three years. The Board of Directors of Kookmin Bank passed a resolution to pay dividend for the fiscal year of 2005, and shareholders of Kookmin Bank approved of the dividend payout for that year at the general shareholders’ meeting held on March 24, 2006

(Unit: in millions of Won unless indicated otherwise)


	September 2006	2005		2004
Net (loss) income for the period	—	2,252,218		360,454
Diluted (loss) earnings per share (Won)	—	6,977	¹	1,176
Total dividend amount	—	184,889		168,574
Dividend payout ratio (%)	—	8.21	²	46.77
Cash dividend per common share (Won)	—	550		550
Stock dividend per common share (%)	—	—		—
Dividend per preferred share (Won)	—	—		—
Dividend yield ratio (%)	—	0.72	³	1.42

¹	Earnings per share = net income (2,252,218,097,725 Won) / weighted average number of shares (322,785,751 shares).

²	Dividend payout ratio = total dividend amount for common shares (184,888,649,550 Won) / net income (2,252,218,097,725 Won).

³	Dividend yield ratio = dividend per share (550 Won) / average closing price for a week based on business day prior to market closing date of December 31, 2005 (76,000 Won).

2. Business

2.1. Source and Use of Funds

2.1.1. Source of Funds

(Unit: in millions of Won)

September 30, 2006

December 31, 2005

December 31, 2004

Average
balance

Interest
rate (%)

Average
balance

Interest rate
(%)

Average
balance

Interest rate
(%)

Won currency

Deposits

111,022,278

2.87

114,394,983

2.82

118,017,849

3.29

Certificate of deposit

7,703,070

4.44

5,008,378

3.69

6,108,179

4.06

Borrowings

2,594,294

3.33

2,674,268

3.02

3,053,890

3.43

Call money

2,590,462

4.03

931,968

3.24

1,117,576

3.55

Other

27,193,829

5.07

24,315,388

5.08

23,376,439

5.61

Subtotal

151,103,933

3.37

147,324,985

3.23

151,673,933

3.68

Foreign currency

Deposits

1,456,674

2.27

1,473,811

1.61

1,777,402

0.61

Borrowings

3,530,593

3.29

3,231,480

2.06

2,796,300

0.94

Call money

643,733

4.68

285,573

3.48

145,809

1.43

Finance debentures issued

1,377,477

4.39

765,723

4.09

824,745

2.28

Other

56,219

—

52,592

—

40,383

—

Subtotal

7,064,696

3.39

5,809,179

2.26

5,584,639

1.04

Other

Total Shareholders Equity

13,802,573

—

11,369,246

—

9,284,477

—

Allowances

1,012,029

—

677,036

—

459,124

—

Other

11,884,267

—

12,041,392

—

12,773,040

—

Subtotal

26,658,869

—

24,087,674

—

22,516,641

—

Total

184,827,498

2.89

177,221,838

2.76

179,775,213

3.14

2.1.2. Use of Funds

(Unit: in millions of Won)

September 30, 2006

December 31, 2005

December 31, 2004

Average
balance

Interest

rate (%)

Average
balance

Interest

rate (%)

Average
balance

Interest rate
(%)

Won currency

Due from banks

246,585

3.79

304,662

2.97

184,593

0.83

Securities

31,742,840

4.54

27,676,964

4.58

23,930,678

5.14

Loans

119,219,161

6.43

120,539,476

6.24

125,504,672

6.64

Advances for customers

12,844

2.11

23,947

8.64

71,213

2.01

Call loan

825,216

4.13

1,473,725

3.43

1,661,772

3.78

Private placement corporate bonds

5,229,157

5.48

1,887,514

6.95

1,322,470

6.58

Credit card accounts

7,600,084

24.96

7,321,906

26.93

9,581,330

26.80

Other

291,668

—

267,061

—

172,783

—

Allowance for credit losses ( - )

-2,351,332

—

-3,034,841

—

-3,844,940

—

Subtotal

162,816,223

7.01

156,460,414

7.06

158,584,571

7.81

Foreign currency

Due from banks

485,922

4.25

598,015

2.88

632,526

1.34

Securities

784,160

6.99

858,565

6.15

1,208,124

3.88

Loans

6,239,658

3.91

4,745,013

2.97

4,011,351

2.73

Call loan

301,559

4.69

132,210

3.24

114,606

1.63

Bills bought

1,314,409

5.43

1,037,144

4.64

568,502

4.07

Other

1,815

—

2,209

—

4,812

—

Allowance for credit losses ( - )

-61,707

—

-64,290

—

-94,501

—

Subtotal

9,065,816

6.82

7,308,866

3.68

6,445,420

3.03

Other

Cash

956,328

—

956,471

—

965,852

—

Fixed assets held for business

2,392,973

—

2,508,879

—

3,084,589

—

Other

9,569,158

—

9,987,208

—

10,694,781

—

Subtotal

12,945,459

—

13,452,558

—

14,745,222

—

Total

184,827,498

6.40

177,221,838

6.38

179,775,213

7.00

2.1.3. Fee Transactions

(Unit: in millions of Won)


	September 30, 2006	September 30, 2005	December 31, 2005
Fee Revenue (A)
Won currency
Guarantees	4,382	3,975	5,336
Commissions received	688,929	590,669	804,933
Credit card	94,564	74,181	104,930
National Housing Fund Mgt.	123,756	128,703	179,540
Foreign currency
Guarantees	4,093	3,005	4,227
Others	59,384	57,790	78,715

Subtotal	975,108	858,323	1,177,681

Fee Expense (B)
Won & foreign currency
Commissions paid in Won	120,826	77,934	119,539
Credit card	176,163	152,885	210,315
Others	21,823	16,281	22,692

Subtotal	318,812	247,100	352,546

Fee Income (A-B)	656,296	611,223	825,135

2.2. Principal Banking Activities

2.2.1. Deposits

The following table shows the average balances of our deposits for the periods ended and ending balances as of the dates indicated.

(Unit: in millions of Won)

September 30, 2006

December 31, 2005

December 31, 2004

Average

balance

Ending

balance

Average

balance

Ending

balance

Average

balance

Ending

balance

Deposits in Won

Demand deposits

16,621,893

18,671,975

14,985,812

17,946,067

12,994,946

14,338,784

Time & savings deposits

89,302,950

89,572,005

92,463,027

91,863,790

96,637,551

94,723,601

Mutual installment deposits

4,432,395

3,979,243

5,674,807

5,120,668

6,682,928

6,306,923

Mutual installment for housing

4,317,457

4,038,389

4,942,334

4,582,031

5,453,713

5,295,274

Certificate of deposit

7,703,070

10,745,697

5,008,378

5,389,543

6,108,179

4,911,891

Subtotal

122,377,765

127,007,309

123,074,358

124,902,099

127,877,317

125,576,473

Deposits in foreign currency

1,456,674

1,483,371

1,473,811

1,379,133

1,769,828

1,434,061

Trust deposits

Money trust

8,776,806

9,844,473

7,114,352

7,405,675

7,701,447

7,028,835

Property trust

8,862,515

8,000,410

11,032,320

9,854,012

16,297,382

12,534,329

Subtotal

17,639,321

17,844,883

18,146,672

17,259,687

23,998,829

19,563,164

Total

141,473,760

146,335,563

142,694,841

143,540,919

153,645,974

146,573,698

2.2.2. Average Deposit per Domestic Branch

The following table shows the average balances of our deposits per domestic branch as of the dates indicated.

(Unit: in millions of Won)


	September 30, 2006	December 31, 2005	December 31, 2004
Deposits	123,647	123,532	123,945
Deposits in Won	122,460	122,358	122,585

2.2.3. Average Deposit per Employee

The following table shows the average balances of our deposits per employee as of the dates indicated.

(Unit: in millions of Won)


	September 30, 2006	December 31, 2005	December 31, 2004
Deposits	7,733	7,725	7,232
Deposits in Won	7,659	7,652	7,152

2.2.4. Loan Balances

The following table shows the average balances of our loans for the periods ended and ending balances as of the dates indicated.

(Unit: in millions of Won)

September 30, 2006

December 31, 2005

December 31, 2004

Average

balance

Ending

balance

Average

balance

Ending

balance

Average

balance

Ending

balance

Loans in Won

119,212,299

122,690,626

120,532,216

118,565,341

125,496,237

122,721,898

Loans in foreign currency

6,239,658

7,660,726

4,745,013

5,314,883

4,011,351

3,860,828

Advances for customers

12,844

10,553

23,947

11,321

73,801

32,120

Subtotal

125,464,801

130,361,905

125,301,176

123,891,545

129,581,389

126,614,846

Trust account loans

343,412

364,725

334,404

328,127

429,054

361,906

Total

125,808,213

130,726,630

125,635,580

124,219,672

130,010,443

126,976,752

2.2.5. Loan Balances as of September 30, 2006 by Maturity

(Unit: in millions of Won)


	1 year & Less	More than 1 year~ 3 years	More than 3 years~ 5 years	More than 5 years	Total
Loans in Won	61,779,820	21,452,867	8,226,490	31,231,449	122,690,626
Loans in foreign currency	5,204,282	1,347,832	749,392	359,220	7,660,726

2.2.6. Loan Balances by Types

The following table shows the banking account balances of our loans in Won by uses as of the dates indicated.

(Unit: in millions of Won)


	September 30, 2006	December 31, 2005	December 31, 2004
Loans to enterprise
Loans for operations	33,123,378	30,498,328	31,678,117
Loans for facility	5,536,178	5,073,050	6,286,747
Loans to households	44,989,618	42,771,264	42,790,337
Loans to public sector & others
Loans for operations	739,946	643,141	673,456
Loans for facility	4,351	34,157	40,383
Loans on property formation savings	1,115	6,748	9,719
Loans for housing	38,294,500	39,535,441	41,234,086
Inter-bank loans	147	1,274	6,114
Others	1,393	1,938	2,939

Total	122,690,626	118,565,341	122,721,898

2.2.7. Loan to Deposit Ratio¹

The following table shows loan to deposit ratio as of indicated dates.

(Unit: in millions of Won, %)


	September 30, 2006	December 31, 2005	December 31, 2004
Loans (A)	119,212,299	120,532,216	125,496,237
Deposits (B)	122,377,765	123,074,358	127,877,317
Loan to deposit ratio (A/B)	97.41	97.93	98.14

2.2.8. Guarantees

(Unit: in millions of Won)


	September 30, 2006	December 31, 2005	December 31, 2004
Determined	2,585,508	1,789,560	975,788
Contingent	2,277,457	1,972,192	1,311,774

Total	4,862,965	3,761,752	2,287,562

¹	Average balance of loans in Won / (average balance of deposits in Won + average balance of certificate of deposits)

2.2.9. Securities Investment

The following table shows the average balances of our securities for the periods ended and ending balances as of the indicated dates.

(Unit: in millions of Won)

September 30, 2006

December 31, 2005

December 31, 2004

Average

balance

Ending

balance

Average

balance

Ending

balance

Average

balance

Ending

balance

Securities in Won (Banking account)

Monetary stabilization bonds

12,351,593

12,757,046

10,667,229

11,570,306

7,150,535

10,524,835

Government and public bonds

9,944,637

10,110,257

6,950,886

8,933,401

4,753,135

4,675,093

Debentures

11,168,851

13,608,259

7,334,555

9,184,403

7,013,765

6,152,749

Stocks

1,551,447

1,924,303

1,243,781

1,707,816

1,003,131

1,282,050

Others

1,955,469

1,860,640

3,368,027

2,105,353

5,332,583

5,583,539

Subtotal

36,971,997

40,260,505

29,564,478

33,501,279

25,253,149

28,218,266

Securities in Won (Trust account)

Monetary stabilization bonds

1,154,314

1,519,117

999,522

981,949

1,222,004

1,152,621

Government and public bonds

1,073,837

1,152,584

993,450

1,013,355

922,790

837,080

Debentures

1,962,829

1,917,322

1,979,588

2,017,298

2,363,630

2,312,459

Stocks

726,325

824,934

514,568

542,731

564,538

510,650

Others

4,051,413

3,399,025

2,745,143

3,311,235

2,101,832

2,324,393

Subtotal

8,968,718

8,812,982

7,232,271

7,866,568

7,174,794

7,137,203

Securities in foreign currency (Trust Account)

136,452

34,315

289,665

184,115

662,549

449,415

Securities in foreign currency (Banking account)

Foreign securities

545,503

626,982

579,561

525,892

894,722

745,352

Off-shore foreign securities

238,657

234,714

279,003

252,994

313,402

205,455

Subtotal

784,160

861,696

858,564

778,886

1,208,124

950,807

Total

46,861,327

49,969,498

37,944,978

42,330,848

34,298,616

36,755,691

2.2.10. Trust Account

(Unit: in millions of Won)

September 30, 2006

December 31, 2005

December 31, 2004

Average

amount trusted

Trust

fees

Average

amount trusted

Trust

fees

Average

amount trusted

Trust

fees

Return-guaranteed trust

326

7,792

335

43,088

369

8,365

Performance trust

17,638,995

49,931

18,146,337

77,756

23,998,460

93,856

Total

17,639,321

57,723

18,146,672

120,844

23,998,829

102,221

2.2.11. Credit Card

(Unit: in millions of Won unless indicated otherwise)


	As of or for the years ended of indicated dates
	September 30, 2006	December 31, 2005	December 31, 2004
Number of card holders (Person)
Corporate	173,519	159,047	182,109
Individual	8,996,768	9,342,552	11,362,173
Number of merchants	1,581,814	1,506,979	1,491,730
Sales volume¹	47,494,251	62,475,085	66,918,805
Fee revenue	1,624,380	2,090,253	2,807,557

2.3. Branch Networks

As of September 30, 2006, we have 1,067 branches and 52 sub-branches in Korea, the largest number of branches among Korean commercial banks. 440 branches out of the total branches are located in Seoul.

We also have three overseas branches in Tokyo, New York and Auckland, and one overseas office in Guangzhou in China.

¹	Includes lump-sum & installment purchase, cash advances, check card & purchasing card transactions

2.4. Other Information for Investment Decision

2.4.1. BIS Risk-adjusted Capital Ratios


	(Unit: in millions of Won, %)
	September 30, 2006¹	December 31, 2005	December 31, 2004
Risk-adjusted capital (A)	19,211,323	15,682,535	13,334,531
Risk-weighted assets (B)	127,996,832	121,072,676	121,081,735
BIS ratios (A/B)	15.01	12.95	11.01

2.4.2. Non-Performing Loans²

(Unit: in millions of Won unless indicated otherwise)

September 30, 2006

December 31, 2005

Change

Amount

NPL to total loans

Amount

NPL to total loans

Amount

NPL to total loans

1,599,800

1.08

1,946,362

1.42

-346,562

-0.34

2.4.3. Loan Loss Allowances

The following table shows the balance of our loan loss allowances as of the dates indicated.

(Unit: in millions of Won)


	September 30, 2006	December 31, 2005	December 31, 2004
Loan losses allowance
Domestic	2,211,933	2,496,655	3,181,433
Foreign	4,745	4,122	4,662

Total	2,216,678	2,500,777	3,186,095

Write-Off	1,003,538	2,014,834	3,382,130

¹	Tentative ratio

²	Non-performing loans are defined as those loans that are past due more than 90 days or that are placed non-accrual status according to the Financial Supervisory Service’s guidelines.

2.4.4. Changes of Loan Loss Allowances for Recent Three Years

(Unit: in millions of Won)


	September 30, 2006		December 31, 2005		December 31, 2004
Beginning balance	2,500,777		3,186,095		3,948,736	⁴
Net Write-Off	(707,838	)	(1,738,406	)	(3,830,889	)
Write-Off	(1,003,538	)	(2,014,834	)	(3,382,130	)
Recovery	342,605		452,959		286,464
Other	(46,905	)	(176,531	)	(735,223	)
Provision for loan losses	423,739		1,053,088		3,068,248
Ending balance	2,216,678	¹	2,500,777	²	3,186,095	³

¹	Includes present value discounts and allowance for other assets amounting to 12,664 million Won and 36,145 million Won respectively

²	Includes present value discounts and allowances for other assets amounting to 20,015 million Won and 47,502 million Won respectively

³	Includes present value discounts and allowance for other assets amounting to 22,111 million Won and 67,320 million Won respectively

⁴	Include present value discounts and allowance for other assets amounting to 22,780 million Won and 38,692 million Won respectively

3. Financial Information

3.1. Non-Consolidated Condensed Financial Statements

(Unit: in millions of Won)


	As of or for the 9 months ended September 30, 2006	As of or for the year ended December 31, 2005
Cash and due from banks	5,444,386	5,867,417
Securities	34,360,772	30,550,299
Loans	145,401,053	135,738,407
Fixed assets	2,373,990	2,436,702
Other assets	10,636,082	5,000,824
Total assets	198,216,283	179,593,649

Deposits	128,490,681	126,281,232
Borrowings	16,145,164	13,737,336
Debentures	24,258,799	16,547,987
Other liabilities	14,692,931	10,653,494
Total liabilities	183,587,575	167,220,049

Capital stocks	1,681,896	1,681,896
Capital surplus	6,258,297	6,254,786
Retained earnings	6,002,890	3,929,948
Capital adjustments	685,625	506,970
Total shareholders’ equity	14,628,708	12,373,600

Liabilities and Shareholders’ Equity	198,216,283	179,593,649

Operating revenue	14,568,653	17,855,258
Operating income	2,759,238	3,015,822
Continuing (loss) income before income taxes	3,113,790	3,228,253
Net (loss) income	2,258,101	2,252,218

3.2. Other Financial Information

See the Exhibit 99.1 Kookmin Bank Review Report by our independent auditors for our full- financial statements and relevant notes. The Review Report is also available at our website www.kbstar.com.

4. Independent Public Accountant

4.1. Audit & Audit related Fees

Deloitte Anjin LLC has reviewed our financial statements for the third quarter of 2006. The aggregate contract fee for the audit and review fees for the year 2006 is 1,350 million Won.

4.2. Non-Audit Services

The following is a description of non-audit services rendered by our independent auditor for the recent three years.

(Unit: in millions of Won unless indicated otherwise)


Year	Service description	Amount of payment
3Q 2006	- Comfort Letter issue		40
	- Confirmation of BIS ratio and confirmation affirming that Kookmin Bank is not a Non-Financial Operator		10
2005	- LOC (Letter of Comfort)		30
2004	- Tax compliance		230
	- Due Diligence regarding the possible acquisition of DITC/ KITC		300
	- US GAAP calculation of provision for the third quarter of 2004		100
	- US GAAP conversion for 2004	USD	3,600 thousand

5. Corporate Governance and Affiliated Companies

5.1. Board of Directors & Committees under the Board

The board of directors, currently consisting of executive directors and non-executive directors, holds regular meetings quarterly. Additional extraordinary meetings may also be convened at the request of any director or any committee that serves under the board of directors.

The board of directors resolves following matters:

Matters relating to general shareholders meeting

Matters relating to general management

Matters relating to organization and directors of the company

Matters relating to funding and capital

Other related matters

We currently have six management committees that serve under the board:

The Board Steering Committee

The Management Strategy Committee

The Risk Management Committee

The Audit Committee

The Evaluation & Compensation Committee

The Non Executive Director Nominating Committee

For the list of our directors, see 6. Directors, Senior Management and Employees, 6.1. Executive Directors and 6.2. Non-Executive Directors.

5.2. Compensation

5.2.1. Compensation to Directors

The following table shows information regarding the remuneration paid to the Directors for the third quarter of 2006.

(Unit: in millions of Won)


	The aggregate remuneration paid (From Jan to Sep)	Limit for the remuneration resolved by shareholders’ meeting (For the year 2006)	Average amount of the payment per person (From Jan to Sep)
1) Executive Directors (Except chief audit executive and non-executive directors)	2,896	8,000	956
2) Non Executive Directors (Except members of audit committee)	220		44
3) Members of Audit Committee (Including chief audit executive)	800		160

Total	3,889	8,000	299

5.2.2. Stock Option

The following table is the breakdown of stock options Kookmin Bank has granted to the directors and employees as of September 30, 2006.

(Unit: in Won, share)

Grant date

Name of the grantee

Position when granted

Exercise period

Exercise

price

Number
of granted
options¹

Number of
exercised
options

Number of
exercisable
options

From

28-Feb-00

Kuk Ju Kwon

Non Executive Director

01-Mar-03

28-Feb-06

27,600

4,800

28-Feb-00

Joon Park

Non Executive Director

01-Mar-03

28-Feb-06

27,600

4,800

28-Feb-00

Heung Soon Chang

Non Executive Director

01-Mar-03

28-Feb-06

27,600

2,486

28-Feb-00

Moon Soul Chung

Non Executive Director

01-Mar-03

28-Feb-06

27,600

7,000

28-Feb-00

Sung Hee Jwa

Non Executive Director

01-Mar-03

28-Feb-06

27,600

4,800

28-Feb-00

Jan Op de Beeck

Director&Executive Vice President

01-Mar-03

28-Feb-06

27,600

22,490

28-Feb-00

Hack Yeon Jeong

Employee

01-Mar-03

28-Feb-06

27,600

10,000

28-Feb-00

Jong Hwan Byun

Employee

01-Mar-03

28-Feb-06

27,600

10,000

28-Feb-00

Sang Young Lee

Employee

01-Mar-03

28-Feb-06

27,600

6,821

28-Feb-00

Won Gi Kim

Employee

01-Mar-03

28-Feb-06

27,600

6,821

15-Mar-01

Sang Hoon Kim

Chairman&CEO

16-Mar-04

15-Mar-09

28,027

29,614

15-Mar-01

Young Seok Kim

Non Executive Director

16-Mar-04

15-Mar-09

28,027

1,870

15-Mar-01

In Kie Kim

Non Executive Director

16-Mar-04

15-Mar-09

28,027

2,961

15-Mar-01

Ji Hong Kim

Non Executive Director

16-Mar-04

15-Mar-09

28,027

2,961

15-Mar-01

Se Woong Lee

Non Executive Director

16-Mar-04

15-Mar-09

28,027

2,961

15-Mar-01

Jong Min Lee

Chief Audit Executive

16-Mar-04

15-Mar-09

28,027

14,807

2,807

12,000

15-Mar-01

Seung Heon Han

Non Executive Director

16-Mar-04

15-Mar-09

28,027

1,870

15-Mar-01

Duk Hyun Kim

Executive Vice President

16-Mar-04

15-Mar-09

28,027

11,845

2,845

9,000

15-Mar-01

Byung Sang Kim

Executive Vice President

16-Mar-04

15-Mar-09

28,027

11,845

5,845

6,000

15-Mar-01

Byung Jin Kim

Executive Vice President

16-Mar-04

15-Mar-09

28,027

11,845

9,845

2,000

15-Mar-01

Bock Woan Kim

Executive Vice President

16-Mar-04

15-Mar-09

28,027

11,845

15-Mar-01

Yoo Hwan Kim

Executive Vice President

16-Mar-04

15-Mar-09

28,027

11,845

15-Mar-01

Ok Hyun Yoon

Executive Vice President

16-Mar-04

15-Mar-09

28,027

11,845

7,845

4,000

15-Mar-01

Dong Soon Park

Employee

16-Mar-04

15-Mar-09

28,027

2,961

15-Mar-01

Hoo Sang Jang

Employee

16-Mar-04

15-Mar-09

28,027

2,961

15-Mar-01

Sang Hoon Lee

Employee

16-Mar-04

15-Mar-09

28,027

2,961

1,961

1,000

15-Mar-01

Jae In Suh

Employee

16-Mar-04

15-Mar-09

28,027

2,961

15-Mar-01

Sung Hyun Chung

Employee

16-Mar-04

15-Mar-09

28,027

2,961

15-Mar-01

Jong Hwa Lee

Employee

16-Mar-04

15-Mar-09

28,027

2,961

15-Mar-01

Sang Won Lee

Employee

16-Mar-04

15-Mar-09

28,027

2,961

15-Mar-01

Yun Keun Jung

Employee

16-Mar-04

15-Mar-09

28,027

592

15-Mar-01

Joon Ho Park

Employee

16-Mar-04

15-Mar-09

28,027

592

15-Mar-01

Sung Wan Choi

Employee

16-Mar-04

15-Mar-09

28,027

370

15-Mar-01

Jeong Haing Lee

Employee

16-Mar-04

15-Mar-09

28,027

592

15-Mar-01

Tae Joo Yoon

Employee

16-Mar-04

15-Mar-09

28,027

15-Mar-01

Jang Hwan Bae

Employee

16-Mar-04

15-Mar-09

28,027

592

15-Mar-01

Si An Her

Employee

16-Mar-04

15-Mar-09

28,027

370

15-Mar-01

Seok Won Choi

Employee

16-Mar-04

15-Mar-09

28,027

592

15-Mar-01

Yong Soo Shin

Employee

16-Mar-04

15-Mar-09

28,027

370

15-Mar-01

Jun Bo Cho

Employee

16-Mar-04

15-Mar-09

28,027

592

15-Mar-01

Byong Doo Ahn

Employee

16-Mar-04

15-Mar-09

28,027

592

15-Mar-01

Ki Hyun Kim

Employee

16-Mar-04

15-Mar-09

28,027

592

15-Mar-01

Sung Shin Cho

Employee

16-Mar-04

15-Mar-09

28,027

592

¹	Some numbers of the granted options have been adjusted due to the merger and the early retirement of the grantees.

Grant date

Name of the grantee

Position when granted

Exercise period

Exercise
price

Number
of granted
options¹

Number of
exercised
options

Number of
exercisable
options

From

15-Mar-01

Young Mo Lee

Employee

16-Mar-04

15-Mar-09

28,027

592

15-Mar-01

Sung Gil Lee

Employee

16-Mar-04

15-Mar-09

28,027

370

22-Mar-01

Cheol Ho Kim

Former KCC Officer

23-Mar-04

22-Mar-11

71,538

4,429

22-Mar-01

Jun Chae Song

Former KCC Officer

23-Mar-04

22-Mar-11

71,538

6,644

22-Mar-01

Myoung Woo Lee

Former KCC Officer

23-Mar-04

22-Mar-11

71,538

4,429

22-Mar-01

Han Kyoung Lee

Former KCC Officer

23-Mar-04

22-Mar-11

71,538

6,644

24-Mar-01

Jae Kyu Lee

Non Executive Director

25-Mar-04

24-Mar-07

25,100

2,318

1,518

800

24-Mar-01

Young Il Kim

Executive Vice President

25-Mar-04

24-Mar-07

25,100

30,000

24-Mar-01

Jong In Park

Executive Vice President

25-Mar-04

24-Mar-07

25,100

19,333

11,500

7,833

24-Mar-01

Gyu Ho Lee

Employee

25-Mar-04

24-Mar-07

25,100

3,275

16-Nov-01

Sang Hoon Kim

Chairman

17-Nov-04

16-Nov-09

51,200

150,000

16-Nov-01

Jung Tae Kim

President & CEO

17-Nov-04

16-Nov-09

51,200

500,000

22-Mar-02

Sun Jin Kim

Non Executive Director

23-Mar-05

22-Mar-10

57,100

3,000

22-Mar-02

Ji Hong Kim

Non Executive Director

23-Mar-05

22-Mar-10

57,100

3,321

22-Mar-02

Keun Shik Oh

Non Executive Director

23-Mar-05

22-Mar-10

57,100

3,321

421

2,900

22-Mar-02

Kyung Hee Yoon

Non Executive Director

23-Mar-05

22-Mar-10

57,100

3,000

22-Mar-02

Choul Ju Lee

Chief Audit Executive

23-Mar-05

22-Mar-10

57,100

9,963

22-Mar-02

Dong Soo Chung

Non Executive Director

23-Mar-05

22-Mar-10

57,100

10,000

22-Mar-02

Moon Soul Chung

Non Executive Director

23-Mar-05

22-Mar-10

57,100

3,000

22-Mar-02

Henry Cornell

Non Executive Director

23-Mar-05

22-Mar-10

57,100

3,321

22-Mar-02

Timothy Hartman

Non Executive Director

23-Mar-05

22-Mar-10

57,100

3,321

22-Mar-02

Byung Sang Kim

Executive Vice President

23-Mar-05

22-Mar-10

57,100

9,498

22-Mar-02

Bock Woan Kim

Executive Vice President

23-Mar-05

22-Mar-10

57,100

13,339

22-Mar-02

Ki Sup Shin

Executive Vice President

23-Mar-05

22-Mar-10

57,100

26,405

2,405

24,000

22-Mar-02

Jong Kyoo Yoon

Executive Vice President

23-Mar-05

22-Mar-10

57,100

20,522

22-Mar-02

Sung Hyun Chung

Executive Vice President

23-Mar-05

22-Mar-10

57,100

19,525

22-Mar-02

Bong Hwan Cho

Executive Vice President

23-Mar-05

22-Mar-10

57,100

9,498

22-Mar-02

Bum Soo Choi

Executive Vice President

23-Mar-05

22-Mar-10

57,100

13,339

3,339

10,000

22-Mar-02

Ki Taek Hong

Executive Vice President

23-Mar-05

22-Mar-10

57,100

19,525

22-Mar-02

Jong Young Yoon

Employee

23-Mar-05

22-Mar-10

57,100

14,712

5,000

9,712

22-Mar-02

Jae Il Song

Employee

23-Mar-05

22-Mar-10

57,100

9,762

22-Mar-02

Hyung Goo Sim

Employee

23-Mar-05

22-Mar-10

57,100

14,712

22-Mar-02

Jeong Haing Lee

Employee

23-Mar-05

22-Mar-10

57,100

9,762

22-Mar-02

Joon Sup Chang

Employee

23-Mar-05

22-Mar-10

57,100

9,762

22-Mar-02

Young No Lee

Employee

23-Mar-05

22-Mar-10

57,100

14,712

22-Mar-02

Dong Soon Park

Employee

23-Mar-05

22-Mar-10

57,100

5,000

22-Mar-02

Sung Bin Kim

Employee

23-Mar-05

22-Mar-10

57,100

9,762

22-Mar-02

Sung Bok Park

Employee

23-Mar-05

22-Mar-10

57,100

14,712

22-Mar-02

Yun Keun Jung

Employee

23-Mar-05

22-Mar-10

57,100

15,000

22-Mar-02

Man Soo Song

Employee

23-Mar-05

22-Mar-10

57,100

9,762

22-Mar-02

Jeong Young Kim

Employee

23-Mar-05

22-Mar-10

57,100

5,000

22-Mar-02

Hack Yeon Jeong

Employee

23-Mar-05

22-Mar-10

57,100

5,000

22-Mar-02

Jong Hwan Byun

Employee

23-Mar-05

22-Mar-10

57,100

5,000

22-Mar-02

Jae Han Kim

Employee

23-Mar-05

22-Mar-10

57,100

2,500

22-Mar-02

Jong Ok Na

Employee

23-Mar-05

22-Mar-10

57,100

2,500

29-Mar-02

Boung Hak Kim

Former KCC Officer

30-Mar-04

29-Mar-11

129,100

3,330

29-Mar-02

Jang Ok Kim

Former KCC Officer

30-Mar-04

29-Mar-11

129,100

3,330

29-Mar-02

Sun Lee

Former KCC Officer

30-Mar-04

29-Mar-11

129,100

3,330

26-Jul-02

Donald H. MacKenzie

Executive Vice President

27-Jul-05

26-Jul-10

58,800

23,899

21-Mar-03

Ki Hong Kim

Non Executive director

22-Mar-06

21-Mar-11

58,600

10,000

21-Mar-03

Sun Jin Kim

Non Executive director

22-Mar-06

21-Mar-11

43,800

6,678

21-Mar-03

Eun Joo Park

Non Executive director

22-Mar-06

21-Mar-11

42,200

3,351

21-Mar-03

Kyung Bae Suh

Non Executive director

22-Mar-06

21-Mar-11

42,200

3,351

Grant date

Name of the grantee

Position when granted

Exercise period

Exercise
price

Number
of granted
options¹

Number of
exercised
options

Number of
exercisable
options

From

21-Mar-03

Cheol Soo Ahn

Non Executive director

22-Mar-06

21-Mar-11

42,200

3,351

21-Mar-03

Kyung Hee Yoon

Non Executive director

22-Mar-06

21-Mar-11

43,800

6,678

21-Mar-03

Moon Soul Chung

Non Executive director

22-Mar-06

21-Mar-11

43,800

6,678

21-Mar-03

Suk Yong Cha

Non Executive director

22-Mar-06

21-Mar-11

58,600

10,000

21-Mar-03

Bernard S. Black

Non Executive director

22-Mar-06

21-Mar-11

43,800

6,678

21-Mar-03

Richard Elliott Lint

Non Executive director

22-Mar-06

21-Mar-11

43,800

6,678

21-Mar-03

Sung Chul Kim

Executive Vice President

22-Mar-06

21-Mar-11

35,500

9,443

4,443

5,000

21-Mar-03

See Young Lee

Executive Vice President

22-Mar-06

21-Mar-11

35,500

7,024

21-Mar-03

Woo Jung Lee

Executive Vice President

22-Mar-06

21-Mar-11

35,500

9,443

21-Mar-03

Won Suk Oh

Employee

22-Mar-06

21-Mar-11

35,500

9,730

21-Mar-03

Sung Dae Min

Employee

22-Mar-06

21-Mar-11

35,500

9,730

21-Mar-03

Kyong Jae Jeong

Employee

22-Mar-06

21-Mar-11

35,500

9,730

21-Mar-03

Chul Hee Kim

Employee

22-Mar-06

21-Mar-11

35,500

14,343

21-Mar-03

In Do Lee

Employee

22-Mar-06

21-Mar-11

35,500

9,730

21-Mar-03

Maeng Soo Ryang

Employee

22-Mar-06

21-Mar-11

35,500

9,730

27-Aug-03

Jin Baek Cheong

Executive Vice President

28-Aug-06

27-Aug-11

40,500

5,091

09-Feb-04

Young Il Kim

Senior Executive Vice President

10-Feb-07

09-Feb-12

46,100

7,125

09-Feb-04

Sang Jin Lee

Senior Executive Vice President

10-Feb-07

09-Feb-12

46,100

7,125

09-Feb-04

Jeung Lak Lee

Senior Executive Vice President

10-Feb-07

09-Feb-12

46,100

7,452

09-Feb-04

Yun Keun Jung

Senior Executive Vice President

10-Feb-07

09-Feb-12

46,100

5,000

09-Feb-04

Kuk Shin Kang

Employee

10-Feb-07

09-Feb-12

46,100

5,000

09-Feb-04

Kyung Soo Kang

Employee

10-Feb-07

09-Feb-12

46,100

3,837

09-Feb-04

Yang Jin Kim

Employee

10-Feb-07

09-Feb-12

46,100

5,000

09-Feb-04

Dong Hwan Cho

Employee

10-Feb-07

09-Feb-12

46,100

5,000

09-Feb-04

Dong Sook Kang

Employee

10-Feb-07

09-Feb-12

46,100

5,000

09-Feb-04

Young Han Kim

Employee

10-Feb-07

09-Feb-12

46,100

5,000

09-Feb-04

De Oak Shin

Employee

10-Feb-07

09-Feb-12

46,100

5,000

09-Feb-04

Chang Ho Kim

Employee

10-Feb-07

09-Feb-12

46,100

5,000

09-Feb-04

Dal Soo Lee

Employee

10-Feb-07

09-Feb-12

46,100

5,000

09-Feb-04

Byong Doo Ahn

Employee

10-Feb-07

09-Feb-12

46,100

5,000

23-Mar-04

Young Soon Cheon

Non Executive Director

24-Mar-07

23-Mar-12

48,500

5,000

23-Mar-04

Dong Soo Chung

Non Executive Director

24-Mar-07

23-Mar-12

48,500

5,000

23-Mar-04

Wang Ha Cho

Non Executive Director

24-Mar-07

23-Mar-12

48,800

5,000

23-Mar-04

Woon Youl Choi

Non Executive Director

24-Mar-07

23-Mar-12

48,800

5,000

23-Mar-04

Jung Young Kang

Senior Executive Vice President

24-Mar-07

23-Mar-12

47,200

10,000

01-Nov-04

Chung Won Kang

President & CEO

02-Nov-07

01-Nov-12

X¹

700,000

18-Mar-05

Hyung Duk Chang

Chief Audit Executive

19-Mar-08

18-Mar-13

X²

30,000

Exercise price = 37,600 Won x (1 + the increase rate of KOSPI Banking Industry Index x 0.4). The increase rate of KOSPI Banking Industry Index = (KOSPI Banking Industry Index as of the starting date of exercise period - KOSPI Banking Industry Index as of the grant date) / KOSPI Banking Industry Index as of the grant date.

Exercise price = 46,800 Won x (1 + the increase rate of KOSPI Banking Industry Index x 0.4). The increase rate of KOSPI Banking Industry Index = (KOSPI Banking Industry Index as of the starting date of exercise period - KOSPI Banking Industry Index as of the grant date) / KOSPI Banking Industry Index as of the grant date.

Grant date

Name of the grantee

Position when granted

Exercise period

Exercise
price

Number
of granted
options¹

Number of
exercised
options

Number of
exercisable
options

From

18-Mar-05

Kap Shin

Senior Executive Vice President

19-Mar-08

18-Mar-13

46,800

30,000

18-Mar-05

Dong Won Kim

Senior Executive Vice President

19-Mar-08

18-Mar-13

46,800

30,000

18-Mar-05

Yun Keun Jung

Senior Executive Vice President

19-Mar-08

18-Mar-13

46,800

8,759

18-Mar-05

Nam Sik Yang

Senior Executive Vice President

19-Mar-08

18-Mar-13

46,800

30,000

18-Mar-05

Hyo Sung Won

Senior Executive Vice President

19-Mar-08

18-Mar-13

46,800

30,000

18-Mar-05

Yong Kook Oh

Senior Executive Vice President

19-Mar-08

18-Mar-13

46,800

30,000

18-Mar-05

Sang Jin Lee

Senior Executive Vice President

19-Mar-08

18-Mar-13

46,800

8,759

18-Mar-05

Ahn Sook Koo

Senior Executive Vice President

19-Mar-08

18-Mar-13

46,800

8,759

18-Mar-05

Jung Young Kang

Senior Executive Vice President

19-Mar-08

18-Mar-13

46,800

30,000

18-Mar-05

Young Han Choi

Senior Executive Vice President

19-Mar-08

18-Mar-13

46,800

30,000

18-Mar-05

Dong Soo Choe

Senior Executive Vice President

19-Mar-08

18-Mar-13

46,800

30,000

18-Mar-05

Seong Kyu Lee

Senior Executive Vice President

19-Mar-08

18-Mar-13

46,800

8,759

18-Mar-05

Jun Bo Cho

Senior Executive Vice President

19-Mar-08

18-Mar-13

46,800

8,759

18-Mar-05

Jeong Min Kim

Senior Executive Vice President

19-Mar-08

18-Mar-13

46,800

30,000

18-Mar-05

Sung Soo Jung

Employee

19-Mar-08

18-Mar-13

46,800

4,379

18-Mar-05

Hye Young Kim

Employee

19-Mar-08

18-Mar-13

46,800

4,379

18-Mar-05

Ki Hyun Kim

Employee

19-Mar-08

18-Mar-13

46,800

4,379

18-Mar-05

Jae Sam Jung

Employee

19-Mar-08

18-Mar-13

46,800

15,000

18-Mar-05

Chang Ho Kim

Employee

19-Mar-08

18-Mar-13

46,800

4,379

18-Mar-05

Dong Sook Kang

Employee

19-Mar-08

18-Mar-13

46,800

4,379

18-Mar-05

De Oak Shin

Employee

19-Mar-08

18-Mar-13

46,800

15,000

18-Mar-05

Dal Soo Lee

Employee

19-Mar-08

18-Mar-13

46,800

15,000

18-Mar-05

Byong Doo Ahn

Employee

19-Mar-08

18-Mar-13

46,800

4,379

18-Mar-05

Byung Kun Oh

Employee

19-Mar-08

18-Mar-13

46,800

15,000

18-Mar-05

Won Sik Yeo

Employee

19-Mar-08

18-Mar-13

46,800

15,000

18-Mar-05

Dong Su Ryo

Employee

19-Mar-08

18-Mar-13

46,800

15,000

18-Mar-05

Kyoung Ho Lee

Employee

19-Mar-08

18-Mar-13

46,800

15,000

18-Mar-05

Jeung Ho Lee

Employee

19-Mar-08

18-Mar-13

46,800

15,000

18-Mar-05

Kwang Suk Lee

Employee

19-Mar-08

18-Mar-13

46,800

15,000

18-Mar-05

Tae Gon Kim

Employee

19-Mar-08

18-Mar-13

46,800

15,000

18-Mar-05

Hyeog Kwan Kwon

Employee

19-Mar-08

18-Mar-13

46,800

15,000

18-Mar-05

Kyu Hyung Jung

Employee

19-Mar-08

18-Mar-13

46,800

15,000

18-Mar-05

Dong Hwan Cho

Employee

19-Mar-08

18-Mar-13

46,800

15,000

18-Mar-05

Man Hee Lee

Employee

19-Mar-08

18-Mar-13

46,800

15,000

18-Mar-05

Il Soo Moon

Employee

19-Mar-08

18-Mar-13

46,800

15,000

18-Mar-05

Yong Seung Lee

Employee

19-Mar-08

18-Mar-13

46,800

15,000

18-Mar-05

Suk Yong Cha

Non Executive director

19-Mar-08

18-Mar-13

61,000

5,091

18-Mar-05

Ki Hong Kim

Non Executive director

19-Mar-08

18-Mar-13

60,300

5,077

18-Mar-05

Young Soon Cheon

Non Executive director

19-Mar-08

18-Mar-13

15,000

Grant date

Name of the grantee

Position when granted

Exercise period

Exercise
price

Number

of granted
options¹

Number of
exercised
options

Number of
exercisable
options

From

18-Mar-05

Dong Soo Chung

Non Executive director

19-Mar-08

18-Mar-13

15,000

18-Mar-05

Chang Kyu Lee

Non Executive director

19-Mar-08

18-Mar-13

15,000

18-Mar-05

Hun Namkoong

Non Executive director

19-Mar-08

18-Mar-13

61,000

5,091

18-Mar-05

Doo Hwan Song

Non Executive director

19-Mar-08

18-Mar-13

15,000

18-Mar-05

Dam Cho

Non Executive director

19-Mar-08

18-Mar-13

15,000

18-Mar-05

Nobuya Takasugi

Non Executive director

19-Mar-08

18-Mar-13

15,000

27-Apr-05

Kyung Wook Kang

Employee

28-Apr-08

27-Apr-13

45,700

15,000

22-Jul-05

Donald H. MacKenzie

Senior Executive Vice President

23-Jul-08

22-Jul-13

49,200

30,000

23-Aug-05

Youn Soo Kim

Executive Vice President

24-Aug-08

23-Aug-13

53,000

15,000

24-Mar-06

Dong Soo Chung

Non Executive director

25-Mar-09

24-Mar-14

20,000

24-Mar-06

Doo Hwan Song

Non Executive director

25-Mar-09

24-Mar-14

10,000

24-Mar-06

Chang Kyu Lee

Non Executive director

25-Mar-09

24-Mar-14

10,000

24-Mar-06

Dam Cho

Non Executive director

25-Mar-09

24-Mar-14

10,000

24-Mar-06

Nobuya Takasugi

Non Executive director

25-Mar-09

24-Mar-14

10,000

24-Mar-06

Young Soon Cheon

Non Executive director

25-Mar-09

24-Mar-14

5,000

24-Mar-06

Kee Young Chung

Non Executive director

25-Mar-09

24-Mar-14

30,000

24-Mar-06

Bo Kyung Byun

Non Executive director

25-Mar-09

24-Mar-14

30,000

24-Mar-06

Bae Kin Cha

Non Executive director

25-Mar-09

24-Mar-14

30,000

24-Mar-06

Hyung Duk Chang

Chief Audit Executive

25-Mar-09

24-Mar-14

20,000

24-Mar-06

Ki Hong Kim

Chief Executive Vice President

25-Mar-09

24-Mar-14

210,000

24-Mar-06

Kap Joe Song

Senior Executive Vice President

25-Mar-09

24-Mar-14

45,000

24-Mar-06

Dal Soo Lee

Senior Executive Vice President

25-Mar-09

24-Mar-14

20,000

24-Mar-06

Won Sik Yeo

Senior Executive Vice President

25-Mar-09

24-Mar-14

20,000

24-Mar-06

De Oak Shin

Senior Executive Vice President

25-Mar-09

24-Mar-14

20,000

24-Mar-06

Choong Won Cho

Employee

25-Mar-09

24-Mar-14

30,000

24-Mar-06

Yook Sang Kwon

Employee

25-Mar-09

24-Mar-14

30,000

24-Mar-06

Haing Hyun Choi

Employee

25-Mar-09

24-Mar-14

30,000

24-Mar-06

In Gyu Choi

Employee

25-Mar-09

24-Mar-14

30,000

24-Mar-06

Kwang Chun Shon

Employee

25-Mar-09

24-Mar-14

30,000

24-Mar-06

Han Mok Cho

Employee

25-Mar-09

24-Mar-14

30,000

24-Mar-06

Soon Hyun Kim

Employee

25-Mar-09

24-Mar-14

30,000

24-Mar-06

Seung Joo Baik

Employee

25-Mar-09

24-Mar-14

30,000

24-Mar-06

Kwang Mook Park

Employee

25-Mar-09

24-Mar-14

30,000

24-Mar-06

Se Yoon Hong

Employee

25-Mar-09

24-Mar-14

30,000

24-Mar-06

Sang Rak Jang

Employee

25-Mar-09

24-Mar-14

30,000

24-Mar-06

Jin Sun Paeng

Employee

25-Mar-09

24-Mar-14

30,000

24-Mar-06

Shin Og Joo

Employee

25-Mar-09

24-Mar-14

30,000

24-Mar-06

Young Hee Jeon

Employee

25-Mar-09

24-Mar-14

30,000

24-Mar-06

Bae Young Lee

Employee

25-Mar-09

24-Mar-14

30,000

³	Exercise price = 75,200 Won x (1 + TRS of the three major competitors x 0.4)

Grant date

Name of the grantee

Position when granted

Exercise period

Exercise
price

Number

of granted
options¹

Number of
exercised
options

Number of
exercisable
options

From

28-Apr-06

Young Mo Lee

Employee

29-Apr-09

28-Apr-14

⁴

30,000

Total

4,027,090

756,037

3,271,053

⁴	Exercise price = 81,900 Won x (1 + TRS of the three major competitors x 0.4)

5.3. Affiliated Companies

5.3.1. List of Affiliates¹

Affiliated companies of Kookmin Bank and its ownership as of September 30, 2006 are as follows.

KB Investment Co., Ltd. (99.99%)

KB Asset Management Co., Ltd. (80.00%)

KB Real Estate Trust Co., Ltd. (99.99%)

KB Credit Information Co., Ltd. (99.73%)

KB Data Systems Corporation (99.99%)

KB Futures Co., Ltd. (99.98%)

KB Life Insurance Co., Ltd. (51.00%)

ING Life Korea Ltd. (20.00%)

Kookmin Bank International (London) Ltd. (100.00%)

Kookmin Bank Hong Kong Ltd. (100.00%)

Sorak Financial Holdings Pte. Ltd. (25.00%)

¹	Excludes Jooeun Industry and Jangeun Securities which are under liquidation procedures. Kookmin Singapore Ltd. and Kookmin Finance Asia Limited are also under liquidation procedures.

6. Directors, Senior Management and Employees

6.1. Executive Directors

Our 4 executive directors consist of the President & CEO, Chief Audit Executive, Chief Executive Vice President and Senior Executive Vice President.

The names and positions of our directors, and Kookmin Bank’s common stocks they own are set forth below as of September 30, 2006.


Name	Date of Birth	Position	Common Stocks Owned
Chung Won Kang	12/19/1950	President & CEO	—
Hyung Duk Chang	08/13/1950	Chief Audit Executive	—
Ki Hong Kim	01/10/1957	Chief Executive Vice President	—
Kap Shin	09/04/1955	CFO & Senior EVP	—

6.2. Non-Executive Directors

Our non-executive directors are selected based on the candidates’ talents and skills in diverse areas, such as law, finance, economy, management and accounting. As of September 30, 2006, there are 9 non-executive directors.

Our current non-executive directors, and Kookmin Bank’s shares they own are as follows.


Name	Date of Birth	Position	Common Stocks Owned
Dong Soo Chung	09/24/1945	Non-Executive Director	2,240
Nobuya Takasugi	09/03/1942	Non-Executive Director	—
Kee Young Chung	09/07/1948	Non-Executive Director	—
Doo Hwan Song	05/29/1949	Non-Executive Director	—
Chang Kyu Lee	05/20/1950	Non-Executive Director	—
Dam Cho	08/01/1952	Non-Executive Director	—
Bo Kyung Byun	08/09/1953	Non-Executive Director	—
Baek In Cha	07/23/1958	Non-Executive Director	—
Young Soon Cheon	02/01/1961	Non-Executive Director	1,910

6.3. Senior Management

In addition to the executive directors who are also our executive officers, we currently have the following 13 executive officers as of September 30, 2006.


Name	Date of Birth	Position	Common Shares Owned
Nam Sik Yang	05/08/1954	Senior Executive Vice President	582
Won Sik Yeo	01/30/1953	Senior Executive Vice President	—
Dal Soo Lee	02/15/1952	Senior Executive Vice President	—
Yong Kook Oh	09/30/1949	Senior Executive Vice President	—
Hyo Sung Won	07/29/1960	Senior Executive Vice President	—
De Oak Shin	01/09/1951	Senior Executive Vice President	8,618
Jung Young Kang	01/29/1951	Senior Executive Vice President	—
Young Han Choi	09/24/1958	Senior Executive Vice President	—
Dong Soo Choe	03/10/1955	Senior Executive Vice President	—
Jeong Min Kim	05/08/1951	Senior Executive Vice President	94
Donald H. MacKenzie	12/20/1948	Senior Executive Vice President	—
Kap Joe Song	07/20/1947	Senior Executive Vice President	—
Dong Won Kim	03/01/1953	Senior Executive Vice President	—

6.4. Employees

The following table shows the breakdown of our employees as of September 30, 2006.

(Unit: in millions of Won)

Number of Employees¹

Average Tenure of
the Full-time
Employees (years)²

Total Payment
for the three
quarters of
2006³

Average Payment

per Person

Full-time

Contractual

Total

Male

12,797

1,380

14,177

17 years and
2 months

710,037

50.1

Female

4,341

6,134

10,475

14 years and
4 months

355,608

33.9

Total

17,138

7,514

24,652

16 years and
6 months

1,065,645

43.2

¹	Number of employees are calculated based on an arithmetic mean from January 31, 2006 to September 30, 2006 and local employees in overseas branches are excluded

²	Based on only full-time employees as of September 30, 2006

³	Based on personnel expense and welfare cost as of September 30, 2006

7. Major Stockholders and Related Party Transactions

7.1. Major Stockholders¹

The following table presents information regarding the selected major ownership of our shares.

(Unit: Shares, %)


Name	Number of Shares of Common Stock	Percentage of Total Issued Shares
The Bank of New York²	51,175,814	15.21
Euro-Pacific Growth Fund	16,659,610	4.95

¹	Information based on December 31, 2005

²	Depositary of ADRs

7.2. Investments in Affiliates¹

(Unit: in millions of Won)

Name

Relation with
the Bank

Account

Beginning

Balance

(Jan 1, 2006)

Increase

Decrease

Ending

Balance

(Sep 30,

2006)

KB Real Estate Trust

Affiliate

Equity Securities
of Affiliate

79,999

—

79,999

KB Investment

Affiliate

Equity Securities
of Affiliate

44,756

—

44,756

KB Asset Management

Affiliate

Equity Securities
of Affiliate

30,670

—

30,670

KB Futures

Affiliate

Equity Securities
of Affiliate

19,996

—

19,996

KB Data Systems Corp.

Affiliate

Equity Securities
of Affiliate

7,999

—

7,999

KB Credit Information

Affiliate

Equity Securities
of Affiliate

6,245

—

6,245

KB Life Insurance

Affiliate

Equity Securities
of Affiliate

15,300

—

15,300

Jooeun Industry¹

Affiliate

Equity Securities
of Affiliate

9,999

—

9,999

Jangeun Securities¹

Affiliate

Equity Securities
of Affiliate

24,274

—

24,274

ING Life Korea

Affiliate

Equity Securities
of Affiliate

14,000

—

14,000

Kookmin Bank Hong Kong Ltd.

Affiliate

Equity Securities
of Affiliate

20,260

—

1,356

18,904

Kookmin Bank International (London) Ltd.

Affiliate

Equity Securities
of Affiliate

34,935

531

—

35,466

¹	Jooeun Industry and Jangeun Securities are under liquidation procedures

7.3. Related Party Transactions

(Unit: in millions of Won unless indicated otherwise)

Name

Relation with the Bank

Transactions

Account

Purchase

Disposal

Volume

Gains
/
Losses

DSME Co.

Related party of

Non-executive director, Dong Soo Chung

Equity
securities

2,686

2,625

5,311

LG International

Related party of

Non-executive director,

Kee Young Chung

Equity
securities

4,929

4,019

8,948

(303

)

Total

7,615

6,644

14,259

(205

)

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


	Kookmin Bank
	(Registrant)

Date: November 14, 2006	By:	/s/ Kap Shin
		(Signature)

	Name:	Kap Shin
	Title:	CFO / Senior EVP
		Executive Director

Exhibit 99.1

KOOKMIN BANK

NON-CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005

AND INDEPENDENT ACCOUNTANTS’ REVIEW REPORT

Independent Accountants’ Review Report

English Translation of a Report Originally Issued in Korean

To the Shareholders and Board of Directors of

Kookmin Bank:

We have reviewed the accompanying non-consolidated balance sheet of the bank accounts of Kookmin Bank (the “Bank”) as of September 30, 2006, and the related non-consolidated statements of income and cash flows for the nine months ended September 30, 2006 and 2005, all expressed in Korean Won. These financial statements are the responsibility of the Bank’s management. Our responsibility is to issue a report on these financial statements based on our reviews.

We conducted our reviews in accordance with standards for review of interim financial statements in the Republic of Korea. Those standards require that we plan and perform the review to obtain moderate assurance as to whether the financial statements are free of material misstatement. A review is limited primarily to inquiries of the Bank’s personnel and analytical procedures applied to financial data, and this provides less assurance than an audit. We have not performed an audit and, accordingly, we do not express an audit opinion.

Based on our reviews, nothing has come to our attention that causes us to believe that the accompanying financial statements are not presented fairly, in all material respects, in accordance with accounting principles generally accepted in the Republic of Korea.

We have previously audited, in accordance with auditing standards generally accepted in the Republic of Korea, the non-consolidated balance sheet of the Bank as of December 31, 2005, and the related non-consolidated statements of income, appropriations of retained earnings and cash flows for the year then ended (not presented herein) and in our report dated February 24, 2006, we expressed an unqualified opinion on those non-consolidated financial statements. The accompanying balance sheet as of December 31, 2005, which is comparatively presented, does not differ in material respects from such audited non-consolidated balance sheet.

Accounting principles and review standards and their application in practice vary among countries. The accompanying financial statements are not intended to present the financial position, results of operations and cash flows in accordance with accounting principles and practices generally accepted in countries other than the Republic of Korea. In addition, the procedures and practices utilized in the Republic of Korea to review such financial statements may differ from those generally accepted and applied in other countries. Accordingly, this report and the accompanying financial statements are for use by those knowledgeable about Korean accounting procedures and review standards and their application in practice.

October 31, 2006

Notice to Readers

This report is effective as of October 31, 2006, the accountants’ review report date. Certain subsequent events or circumstances may have occurred between the accountants’ review report date and the time the accountants’ review report is read. Such events or circumstances could significantly affect the accompanying financial statements and may result in modifications to the accountants’ review report.

KOOKMIN BANK

NON-CONSOLIDATED BALANCE SHEETS

AS OF SEPTEMBER 30, 2006 AND DECEMBER 31, 2005


	Korean Won
	2006		2005
	(In millions)
ASSETS

Cash and due from banks (Notes 3, 20 and 21)	(Won)	5,444,386	(Won)	5,867,417
Securities (Notes 4, 20 and 21)		34,360,772		30,550,299
Loans (Notes 5, 6, 7, 20 and 21)		145,401,053		135,738,407
Fixed assets (Note 8)		2,373,990		2,436,702
Other assets (Note 9)		10,636,082		5,000,824

	(Won)	198,216,283	(Won)	179,593,649

LIABILITIES AND SHAREHOLDERS’ EQUITY

LIABILITIES:
Deposits (Notes 10, 20 and 21)	(Won)	128,490,681	(Won)	126,281,232
Borrowings (Notes 11, 20 and 21)		16,145,164		13,737,336
Debentures (Notes 12, 20 and 21)		24,258,799		16,547,987
Other liabilities (Notes 13, 14, 15 and 16)		14,692,931		10,653,494

		183,587,575		167,220,049

SHAREHOLDERS’ EQUITY (Notes 17 and 18):
Common stock		1,681,896		1,681,896
Capital surplus		6,258,297		6,254,786
Retained earnings
(Net income of (Won)2,258,101 million for the nine months ended September 30, 2006 and (Won)2,252,218 million for the year ended December 31, 2005)		6,002,890		3,929,948
Capital adjustments		685,625		506,970

		14,628,708		12,373,600

	(Won)	198,216,283	(Won)	179,593,649

See accompanying notes to non-consolidated financial statements.

KOOKMIN BANK

NON-CONSOLIDATED STATEMENTS OF INCOME

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005


	Korean Won
	2006		2005
	(In millions except per share amounts)
OPERATING REVENUE:
Interest income:
Interest on due from banks (Note 21)	(Won)	22,419	(Won)	18,432
Interest on securities (Note 21)		1,011,654		808,414
Interest on loans (Note 21)		7,826,252		7,572,251
Other interest income		22,460		21,309

		8,882,785		8,420,406

Commission income		975,126		858,334

Other operating income:
Gain on disposal of trading securities		39,320		75,779
Gain on valuation of trading securities (Note 4)		33,060		—
Dividends on trading securities		2,857		4,821
Dividends on available-for-sale securities		4,587		3,259
Foreign exchange trading income		179,200		203,246
Fees and commissions from trust accounts (Note 26)		71,707		103,113
Gain on financial derivatives trading		3,154,456		2,822,447
Gain on valuation of financial derivatives (Note 19)		1,140,527		891,765
Gain on valuation of fair value hedged items (Note 19)		8,510		43,449
Other operating income		76,518		44,498

		4,710,742		4,192,377

Total operating revenues		14,568,653		13,471,117


OPERATING EXPENSES:
Interest expenses:
Interest on deposits (Note 21)		2,497,749		2,422,243
Interest on borrowings (Note 21)		491,815		260,151
Interest on debentures (Note 21)		799,298		801,698
Other interest expenses		37,590		25,085

		3,826,452		3,509,177

Commission expenses		318,812		247,100

Other operating expenses:
Loss on disposal of trading securities		40,633		54,457
Loss on valuation of trading securities (Note 4)		—		13,258
Provision for possible loan losses (Note 7)		423,739		967,867
Provision for acceptances and guarantees losses		4,089		1,415
Foreign exchange trading losses		252,539		175,267
Loss on financial derivatives trading (Note 19)		2,975,852		2,708,392
Loss on valuation of financial derivatives (Note 19)		1,039,575		922,694
Loss on valuation of fair value hedged items(Note 19)		77,193		—
Other operating expenses		436,737		406,128

		5,250,357		5,249,478

General and administrative expenses (Note 22)		2,413,794		2,090,343

Total operating expenses		11,809,415		11,096,098

(Continued)

KOOKMIN BANK

NON-CONSOLIDATED STATEMENTS OF INCOME (CONTINUED)

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005


	Korean Won
	2006		2005
	(In millions except per share amounts)
OPERATING INCOME	(Won)	2,759,238	(Won)	2,375,019

NON-OPERATING INCOME (Note 23)		514,804		617,247

NON-OPERATING EXPENSES (Note 23)		160,252		389,372

ORDINARY INCOME		3,113,790		2,602,894

EXTRA ORDINARY ITEM		—		—

INCOME BEFORE INCOME TAX		3,113,790		2,602,894
INCOME TAX EXPENSE (Note 24)		855,689		774,375

NET INCOME	(Won)	2,258,101	(Won)	1,828,519

ORDINARY INCOME PER SHARE (In currency units) (Note 25)	(Won)	6,713	(Won)	5,745

NET INCOME PER SHARE (In currency units) (Note 25)	(Won)	6,713	(Won)	5,745

DILUTED ORDINARY INCOME PER SHARE (In currency units) (Note 25)	(Won)	6,713	(Won)	5,741

DILUTED NET INCOME PER SHARE (In currency units) (Note 25)	(Won)	6,713	(Won)	5,741

See accompanying notes to non-consolidated financial statements.

KOOKMIN BANK

NON-CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005


	Korean Won
	2006			2005
	(In millions)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	(Won)	2,258,101		(Won)	1,828,519


Adjustments to reconcile net income to net cash provided by operating activities:
Loss on disposal of trading securities		40,633			54,457
Loss on valuation of trading securities		—			13,258
Provision for possible loan losses		423,739			967,867
Loss on financial derivatives trading		2,975,852			2,708,392
Loss on valuation of financial derivatives		1,039,575			922,694
Loss on valuation of fair value hedged items		77,193			—
Loss on valuation of securities accounted for using the equity method		1,612			8,466
Provision for severance benefits		103,864			89,090
Depreciation and amortization		224,615			244,280
Loss on disposal of available-for-sale securities		13,220			17,210
Loss on impairment of available-for-sale securities		53,463			26,144
Loss on disposal of tangible assets		1,629			3,764
Loss on sale of loans		—			2,096
Gain on disposal of trading securities		(39,320	)		(75,779	)
Gain on valuation of trading securities		(33,060	)		—
Gain on financial derivatives trading		(3,154,456	)		(2,822,447	)
Gain on valuation of financial derivatives		(1,140,527	)		(891,765	)
Gain on valuation of fair value hedged items		(8,510	)		(43,449	)
Gain on valuation of securities accounted for using the equity method		(76,077	)		(71,700	)
Gain on disposal of available-for-sale securities		(136,165	)		(282,431	)
Gain on disposal of tangible assets		(2,339	)		(9,475	)
Gain on sale of loans		(36,311	)		(79,935	)
Others, net		(28,168	)		308,418

		300,462			1,089,155

(Continued)

KOOKMIN BANK

NON-CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005


	Korean Won
	2006			2005
	(In millions)
Changes in assets and liabilities resulting from operations:
Net decrease (increase) in trading securities	(Won)	405,955		(Won)	(163,752	)
Net increase in accounts receivable		(4,951,270	)		(1,900,734	)
Net decrease (increase) in accrued income		(212,004	)		13,869
Net decrease (increase) in prepaid expenses		(37,123	)		160,132
Net decrease (increase) in deferred income tax assets		105,778			(87,652	)
Net increase in accounts payable		4,676,614			1,338,980
Net increase (decrease) in accrued expenses		(400,142	)		505,420
Net increase (decrease) in advances from customers		(212,931	)		307,114
Payment of severance benefits		(13,187	)		(58,379	)
Decrease (increase) in severance insurance deposits		(35,780	)		23,726
Others, net		230,888			840,482

		(443,202	)		979,206

Net cash provided by operating activities		2,115,361			3,896,880


CASH FLOWS FROM INVESTING ACTIVITIES:
Net increase in restricted due from banks		(81,914	)		(1,061,711	)
Net decrease (increase) in available-for-sale securities		(2,743,303	)		3,669,749
Net increase in held-to-maturity securities		(957,793	)		(4,881,838	)
Net decrease in securities accounted for using the equity method		14,914			24,047
Net decrease (increase) in loans		(10,082,755	)		671,960
Disposal of fixed assets		10,619			22,199
Purchase of fixed assets		(151,863	)		(74,194	)
Net decrease (increase) in other assets		(468,067	)		250,007

Net cash used in investing activities		(14,460,162	)		(1,379,781	)


CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in deposits		2,208,755			(2,534,016	)
Net increase (decrease) in debentures		7,621,929			(5,463,311	)
Net increase in borrowings		2,434,144			4,600,693
Net increase (decrease) in other liabilities		(250,703	)		86,837
Others, net		(174,269	)		1,085,075

Net cash provided by financing activities		11,839,856			(2,224,722	)


NET INCREASE (DECREASE) IN CASH AND DUE FROM BANKS		(504,945	)		292,377

CASH AND DUE FROM BANKS, BEGINNING OF PERIOD		3,624,831			3,319,349


CASH AND DUE FROM BANKS, END OF PERIOD (Note 30)	(Won)	3,119,886		(Won)	3,611,726

See accompanying notes to non-consolidated financial statements.

KOOKMIN BANK

NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005

1. GENERAL:

Kookmin Bank (the “Bank”) was established in 1963 under the Citizens National Bank Act to provide and administer funds for financing to the general public and small businesses. Pursuant to the repeal of the Citizens National Bank Act, effective January 5, 1995, the Bank has conducted its operations in accordance with the provisions of the General Banking Act.

The Bank merged with Korea Long Term Credit Bank on December 31, 1998 and with Daegu, Busan, Jeonnam Kookmin Mutual Savings & Finance Co., Ltd. on August 22, 1999. Also, under the decision of the Financial Supervisory Commission in accordance with the Structural Improvement of the Financial Industry Act, the Bank purchased certain assets, including loans classified as normal or precautionary, and assumed most of the liabilities of Daedong Bank on June 29, 1998. Also, the Bank completed the legal consolidation with Housing and Commercial Bank (“H&CB”) on October 31, 2001 and merged with Kookmin Credit Card Co., Ltd., a majority-owned subsidiary, on September 30, 2003.

The Bank’s shares have been listed on the Korea Stock Exchange since September 1994. As a result of the business combination with H&CB, the former shareholders of the Bank and H&CB received new common shares of the Bank on the basis of a pre-determined ratio. The new common shares of the Bank were listed on the Korea Stock Exchange on November 9, 2001. In addition, the Bank listed its American Depository Shares (“ADS”) on the New York Stock Exchange (“NYSE”) as of November 1, 2001 following the consolidation with H&CB. H&CB listed its ADS on the NYSE as of October 3, 2000 prior to the business combination. As of September 30, 2006, the Bank’s paid-in capital is (Won)1,681,896 million.

The Bank is engaged in the banking, trust and other relevant businesses according to the provisions of the General Banking Act and the Trust Business Act, and operates through 1,118 domestic branches and offices (excluding 213 automated teller machine stations) and three overseas branches (excluding two subsidiaries and one office) as of September 30, 2006.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Basis of Non-consolidated Financial Statement Presentation

The Bank maintains its official accounting records in Korean Won and prepares statutory non-consolidated financial statements in the Korean language (Hangul) in conformity with the accounting principles and banking accounting standards generally accepted in the Republic of Korea. Certain accounting principles and banking accounting standards applied by the Bank that conform with financial accounting standards and accounting principles in the Republic of Korea may not conform with generally accepted accounting principles and banking accounting practices in other countries. Accordingly, these financial statements are intended for use by those who are informed about Korean accounting principles and practices. The accompanying financial statements have been condensed, restructured and translated into English (with certain expanded descriptions) from the Korean language financial statements. Certain information included in the Korean language financial statements, but not required for a fair presentation of the Bank’s financial position, results of operations or cash flows, is not presented in the accompanying financial statements.

The significant accounting policies followed by the Bank in preparing the accompanying non-consolidated financial statements are summarized below.

Interest Income Recognition

The Bank applies the accrual basis in recognizing interest income related to deposits, loans and securities, except for non-secured uncollectible receivables. Interest on loans, whose principal or interest is past due at the balance sheet date, is generally not accrued, with the exception of interest on certain loans secured by guarantee of governments or government agencies, or collateralized by bank deposits. When a loan is placed on non-accrual status, previously accrued interest is generally reversed and deducted from current interest income; and future interest income is recognized on the cash basis in accordance with the banking industry accounting standards. As of September 30, 2006 and December 31, 2005, the principal amount of loans and securities of which the accrued interest income was not recorded in the accompanying financial statements based on the above criteria amounted to (Won)7,211,985 million and (Won)7,875,123 million, respectively, and the related accrued interest income not recognized amounted to (Won)533,631 million and (Won)462,799 million, respectively.

Classification of Securities

At acquisition, the Bank classifies securities into one of the following categories: trading, available-for-sale, held-to-maturity and securities accounted for using the equity method, depending on marketability, purpose of acquisition and ability to hold. Debt and equity securities that are bought and held for the purpose of selling them in the near term and actively traded are classified as trading securities. Debt securities with fixed and determinable payments and fixed maturity that the Bank has the positive intent and ability to hold to maturity are classified as held-to-maturity securities. Securities that should be accounted for under the equity method are classified as securities accounted for using the equity method. Debt and equity securities not classified as the above are categorized as available-for-sale securities.

If the objective and ability to hold securities of the Bank change, available-for-sale securities can be reclassified to held-to-maturity securities and held-to-maturity securities can be reclassified to available-for-sale securities. Whereas, if the Bank sells held-to-maturity securities or exercises early redemption right of securities to issuer in the current year or the proceeding two years, and if it reclassifies held-to-maturity securities to available-for-sale securities, all debt securities that are owned or purchased cannot be classified as held-to-maturity securities. On the other hand, trading securities cannot be recategorized to available-for-sale securities or held-to-maturity securities and vice versa. Nevertheless, trading securities are reclassified to available-for-sale securities only when the trading securities lose their marketability.

Valuation of Securities

(1)	Valuation of Trading Securities

Trading equity and debt securities are initially recognized at acquisition cost plus incidental expenses determined by the individual moving average method (the specified identification method for debt securities). When the face value of trading debt securities differs from their acquisition cost, the effective interest method is applied to amortize the difference over the remaining term of the securities. After initial recognition, if the fair value of trading securities differs from the book value, trading securities are stated at fair value and the resulting valuation gain or loss is included in current operations.

(2)	Valuation of Available-for-sale Securities

Available-for-sale securities are initially recognized at acquisition cost plus incidental expenses, determined by the individual moving average method (the specified identification method for debt securities). The effective interest method is applied to amortize the difference between the face value and the acquisition cost over the remaining term of the debt security. After initial recognition, available-for-sale securities are stated at fair value, with the net unrealized gain or loss presented as gain or loss on valuation of available-for-sale securities in capital adjustments. Accumulated capital adjustments of securities are charged to current operations in a lump sum at the time of disposal or impairment recognition. Non-marketable equity securities are stated at acquisition cost on the financial statements if the fair value of the securities is not reliably determinable.

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If the fair value of equity securities (net asset fair value in case of non-marketable equity securities stated at acquisition cost) is below the acquisition cost and the pervasive evidence of impairment exists, the carrying value is adjusted to fair value and the resulting valuation loss is charged to current operations. If the collectible value of debt securities is below the amortized cost and the pervasive evidence of impairment exists, the carrying value is adjusted to collectible value and the resulting valuation loss is charged to current operations. With respect to impaired securities, any unrealized valuation gain or loss of securities previously included in the capital adjustment account is reversed.

(3)	Valuation of Held-to-maturity Securities

Held-to-maturity securities are stated at acquisition cost plus incidental expenses, determined by the specific identification method. When the face value of held-to-maturity securities differs from its acquisition cost, the effective interest method is applied to amortize the difference over the remaining term of the securities. If collectible value is below the amortized cost and the pervasive evidence of impairment exists, the carrying value is adjusted to collectible value and the resulting valuation loss is charged to current operations.

(4)	Valuation of Securities Accounted for using the Equity Method

Equity securities held for investment in companies in which the Bank is able to exercise significant influence over the investees (in accordance with the Banking Act, if the Bank holds more than 15 percent of the total issued shares, the Bank is considered being able to exercise significant influence) are accounted for using the equity method. The Bank’s share in net income or net loss of investees is included in current operations. Changes in the retained earnings of investee are reflected in the retained earnings. Changes in the capital surplus or other capital accounts of investee are reflected as gain or loss on valuation of securities accounted for using the equity method in capital adjustments.

When the book value of equity securities accounted for using the equity method is less than zero due to the cumulative losses of the investees, the Bank discontinues applying the equity method and does not provide for additional losses. If the investee subsequently reports net income, the Bank resumes applying the equity method only after its share of that net income equals the share of net losses not recognized during the period that the equity method was suspended.

In addition, any gains or loss from the disposal of equity securities of certain consolidated subsidiaries are accounted for as capital adjustments resulting from applying the equity method in the balance sheets if the subsidiaries are still consolidated even after the Bank disposes of a portion of equity securities.

(5)	Reversal of Loss on Impairment of Available-for-sale Securities and Held-to-maturity Securities

If the reasons for impairment losses of available-for-sale securities no longer exist, the recovery is recorded in current operations under non-operating income up to amount of the previously recognized impairment loss as reversal of loss on impairment of available-for-sale securities and any excess is included in capital adjustments as gain on valuation of available-for-sale securities. However, if the increases in the fair value of the impaired securities are not regarded as the recovery of the impairment, the increases in the fair value are recorded as gain on valuation of available-for-sale securities in capital adjustments. For non-marketable equity securities, which were impaired based on the net asset fair value, the recovery is recorded up to their acquisition cost.

For held-to-maturity securities, the recovery is recorded in current operations under non-operating income within the amount of amortized cost that would have been recorded according to the original schedule if the impairment losses had not been recognized as reversal of loss on impairment of held-to-maturity securities.

(6)	Reclassification of Securities

When held-to-maturity securities are reclassified to available-for-sale securities, those securities are accounted for at fair value on the reclassification date and the difference between the fair value and book value is reported in capital adjustment as gain or loss on valuation of available-for-sale securities. When available-for-sale securities are reclassified to held-to-maturity securities, gain or loss on valuation of available-for-sale securities, which had been recorded until the reclassification date, continue to be included in capital adjustments and be amortized using the effective interest rate method and the amortized amount is charged to interest income until maturity. The difference between the fair value at the reclassification date

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and face value of the reclassified securities to held-to-maturity securities is amortized using effective interest rate method and the amortized amount is charged to interest income. In addition, when certain trading securities lose their marketability, such securities are reclassified as available-for-sale securities at fair market value as of reclassification date.

Transfer of Securities

When the realization, expiration or sale of the right to obtain the economic benefits arises and the control of securities is lost from the sale of the securities, the unrealized valuation gain or loss of securities included in the capital adjustment account is added to or deducted from the gain or loss on disposal of securities. The gain or loss is the difference between the net proceeds receivable or received and its carrying value. When securities are transferred without losing control of the securities, the transaction is recorded as secured borrowing transaction.

Allowance for Possible Losses on Credits

The Supervisory Regulation of Banking Business (the “Supervisory Regulation”) legislated by the Financial Supervisory Commission (FSC) requires the Bank to classify all credits into five categories as normal, precautionary, substandard, doubtful, or estimated loss based on borrowers’ repayment capability and historical financial transaction records. The Supervisory Regulation also requires the Bank to provide the minimum rate of loss provision for each category balance using the prescribed minimum percentages as described below.

As required by the Supervisory Regulation, the Bank classifies corporate credits (loans, confirmed acceptances and guarantees) based on borrowers’ capability to repay in consideration of borrowers’ business operation, financial position and future cash flows (Forward Looking Criteria) as well as past due period and status of any bankruptcy proceedings (Historical Repayment Criteria). However, credits to small companies and to households are classified not by evaluating the debt repayment capability of a borrower or customer but by past due period and status of bankruptcy proceedings. The Bank generally classifies all credits to a single borrower in the same category of classification but credits guaranteed or credits collateralized by bank deposits, real estate and other assets may be classified differently based on the guarantor’s capability to service such guarantee or based on the value of collateral securing such credits.

Based on the Bank’s corporate credit evaluation model, credits to a borrower are classified into 12 grades from AAA to D (AAA, AA, A, A - , BBB, BB, B, B - , CCC, CC, C and D). Credits of grades of AAA to B are classified as normal, credits of grade B - to CCC as precautionary, credits of grade CC as substandard, credits of grade C as doubtful and credits of grade D as estimated loss. Credits are finally classified reflecting past due period and bankruptcy considerations. An allowance is then calculated on the category balances using the prescribed percentages of 0.5 ~ 1.9 percent for normal, 2 ~ 19.9 percent for precautionary, 20 ~ 49.9 percent for substandard, 50 ~ 99.9 percent for doubtful and 100 percent for estimated loss. However, the Bank does not provide allowances for call loans, bonds bought under resale agreements and inter-bank loans that are classified as normal, as it is not required by the Accounting Standards for the Banking Industry.

In addition, as required by the Supervisory Regulation, based on the classification of household loans and credit card receivables by past due period and status of bankruptcy proceedings, allowance for household loans and credit card receivables are calculated on the category balances using the prescribed percentages of 0.75 ~ 7.9 percent and 1 ~ 11.9 percent for normal, 8 ~19.9 percent and 12 ~ 19.9 percent for precautionary, 20 ~ 54.9 and 20 ~ 59.9 percent for substandard, 55 ~ 99.9 percent and 60 ~ 99.9 percent for doubtful, and 100 percent for estimated loss. Furthermore, as required by the Financial Supervisory Service, for the secured household loans newly placed after September 9, 2002, if the ratio of loans to collateral value (loan to value; LTV) exceeds 70 percent, the Bank provides an allowance for possible loan losses of 1 percent for normal and 10 percent for precautionary, instead of providing 0.75 percent for normal and 8 percent for precautionary.

In addition, when an allowance for possible loan losses required by the Supervisory Regulation is less than the amount calculated based on the historical loss rate, which is estimated through objective and reasonable method in accordance with the accounting principle in the Republic of Korea, historical loss rate is reflected in the provision for possible loan losses.

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The method and data used for determining the allowances for loan losses based on historical loss rate by the Bank’s lending portfolios are determined as follows:


Lending portfolios	Methodology	Period of historical loss rate	Period of recovery ratio
Impaired corporate loans	DCF & Migration	N/A	N/A
Non-impaired corporate loans	Migration analysis	1 year	5 years
Consumer loans	Migration analysis	1 year	5 years
Credit card loans	Roll-rate analysis	1 year	5 years

Based on the loan portfolios’ nature, lending period, recovery period and other economic factors, the Bank determines the appropriate data period used in assessing its historical loss rate and recovery ratio.

Pursuant to the Supervisory Regulation of Banking Business, the Bank provides allowance for possible losses on confirmed acceptances and guarantees, unconfirmed acceptances and guarantees, and notes endorsed based on the credit classification, minimum rate of loss provision prescribed by Financial Supervisory Service and the cash conversion factor. In addition, the Bank provides other allowances for the unused credit limit of credit card and unused credit line of consumer and corporate loans based on the cash conversion factor and minimum rate of loss provision prescribed by Financial Supervisory Service.

Restructuring of Loans

The equity interest in the debtors, net of real estates and/or other assets received as full or partial satisfaction of the Bank’s loans, collected through reorganization proceedings, court mediation or debt restructuring agreements of parties concerned, is recorded at fair value at the time of the restructuring. In cases where the fair value of the assets received are less than the book value of the loan (book value before allowances), the Bank offsets first the book value against allowances for loan losses and then recognizes provisions for loan losses. Impairment losses for loans that were restructured in a troubled debt restructuring involving a modification of terms are computed by the difference between the present value of future cash flows under debt restructuring agreements discounted at effective interest rates at the time when loans are originated and the book value before allowances for loan losses. If the amount of allowances already established is less than the impairment losses, the Bank establishes additional allowances for the difference. Otherwise, the Bank reverses the allowances for loan losses.

Deferred Loan Origination Fees and Costs

The Bank defers loan origination fees associated with originating loans and loan origination costs that have future economic benefits. Loan balances are reported net of these loan origination fees and costs. The deferred loan origination fees and costs are amortized using the effective interest method with the amortization recognized as adjustments to other interest income.

Valuation of Receivables and Payables at Present Value

Receivables and payables incurred through long-term installment transactions, long-term borrowing and lending transactions, and other similar transactions are stated at the present value of expected future cash flows, and the gain or loss on valuation of related receivables and payables is reflected in current operations, unless the difference between nominal value and present value is immaterial. Present value discount or premium is amortized using the effective interest rate method and credited or charged to interest income or interest expense.

Tangible Assets and Related Depreciation

Tangible assets included in fixed assets are recorded at cost or production cost including incidental expenses. Routine maintenance and repairs are expensed as incurred. Expenditures that result in the enhancement of the value or the extension of the useful lives of the facilities involved are capitalized as additions to tangible assets.

- 5 -

Depreciation is computed by using the declining-balance method (Straight-line method for building and structures) based on the estimated useful lives of the assets as follows:


Tangible assets	Depreciation method	Estimated useful life
Buildings and structures	Straight-line	40 years
Leasehold improvements	Declining balance	4-5 years
Equipment and vehicles	Declining balance	4-5 years

Intangible Assets and Related Amortization

Intangible assets included in fixed assets are recorded at the production costs or purchase costs plus incidental expenses less accumulated amortization. Intangible assets are amortized using the straight-line method over the estimated economic useful lives of the related assets or the activity method as follows:


Intangible assets	Depreciation method	Estimated useful life
Goodwill	Straight-line	9 years
Trademarks	Straight-line	5-20 years
Others	Straight-line	3-30 years

The Bank recorded goodwill as a result of the merger with H&CB, as the cost of the merger exceeded the fair value of the net assets acquired. Expenditures incurred in conjunction with the development of new products or technology and others, in which the elements of costs can be individually identified and future economic benefits are probably exerted, are capitalized as development costs. The Bank estimates the useful lives of endowment assets that are beneficial upon usage based on the term of the contract and are classified under other intangible assets.

Valuation Allowance for Non-Business Use Property

Non-business use property included in fixed assets is recorded when the Bank acquires collateral by foreclosure on the mortgage for loans. If the latest auction price is lower than book value, the difference is provided as a valuation allowance and the valuation loss is charged to current operations. In addition, the difference between the selling price and book value is recorded as a disposition gain or loss.

Recognition of Impairment of Assets

When the book value of assets (other than securities and assets valued at present value) exceeds the collective value of the assets due to obsolescence, physical damage or a sharp decrease in market value and the difference is material, the book value are adjusted to collective value in the balance sheet and the resulting impairment loss is charged to current operations. If the collective value of the assets increases in subsequent years, the increase in value is credited to operations as gain until the collective value equals the book value of assets that would have been determined had no impairment loss been recognized. The Bank assessed the collective value based on expected selling price or appraisal value.

Amortization of Discounts (Premiums) on Debentures

Discounts or premiums on debentures issued are amortized over the period from issuance to maturity using the effective interest rate method. Amortization of discounts or premiums is recognized as interest expense on the debentures.

Bonds under Resale or Repurchase Agreements

Bonds purchased under resale agreements are recorded as loans and bonds sold under repurchase agreements are recorded as borrowings when the Bank purchases or sells securities under such agreements.

- 6 -

Contingent Liabilities

A possible obligation that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Bank is recognized as contingent liabilities when it is probable that an outflow of resources embodying economic benefits required and the amount of the obligation can be measured with sufficient reliability. Where the effect of the time value of money is material, the amount of the liabilities is the present value of the expenditures expected to be required to settle the obligation. In addition, as some or all expenditures required to settle a provision is expected to be reimbursed by another party, the reimbursement is recognized as separate assets in the balance sheet and related income may be offset against expense in the income statement.

Accrued Severance Benefits

Employees and directors and temporary employees with at least one year of service as of September 30, 2006 are entitled to receive a lump-sum payment upon termination of their employment with the Bank, based on their length of service and rate of pay at the time of termination. The accrued severance benefits that would be payable assuming all eligible employees and directors were to resign are included in other liabilities.

The Bank has purchased severance benefits insurance, which meets the funding requirement for tax purposes, and made deposits with Kyobo Life Insurance Co., Ltd and others. Withdrawal of these deposits is restricted to the payment of severance benefits. These are presented as a deduction from the accrued severance benefits.

Accounting for Derivative Instruments

The Bank accounts for derivative instruments pursuant to the Interpretations on Financial Accounting Standards 53-70 on accounting for derivative instruments. Derivative instruments are classified as used for trading activities or for hedging activities according to their transaction purpose. All derivative instruments are accounted for at fair value with the valuation gain or loss recorded as an asset or liability. If the derivative instrument is not part of a transaction qualifying as a hedge, the adjustment to fair value is reflected in current operations.

The accounting for derivative transactions that are part of a qualified hedge based both on the purpose of the transaction and on meeting the specified criteria for hedge accounting differs depending on whether the transaction is a fair value hedge or a cash flow hedge. Fair value hedge accounting is applied to a derivative instrument designated as hedging the exposure to changes in the fair value of an asset or a liability or a firm commitment (hedged item) that is attributable to a particular risk. The gain or loss both on the hedging derivative instruments and on the hedged item attributable to the hedged risk is reflected in current operations. Cash flow hedge accounting is applied to a derivative instrument designated as hedging the exposure to variability in expected future cash flows of an asset or a liability or a forecasted transaction that is attributable to a particular risk. The effective portion of gain or loss on a derivative instrument designated as a cash flow hedge is recorded as a capital adjustment and the ineffective portion is recorded in current operations. The effective portion of gain or loss recorded as a capital adjustment is reclassified to current earnings in the same period during which the hedged forecasted transaction affects earnings. If the hedged transaction results in the acquisition of an asset or the incurrence of a liability, the gain or loss in capital adjustment is added to or deducted from the asset or the liability.

Accounting for Stock Options

In accordance with the Interpretations on Financial Accounting Standards 39-35 on the accounting for the stock option, the Bank records stock compensation costs as a capital adjustment in case that the Bank can choose to settle the vested stock option by issuing new shares or treasury stock, or payment of cash equivalent to the difference between the market price and the exercise price at the exercise date. However, the compensation cost of certain options that is certain to be settled by cash payment is recorded in other liabilities (accrued expenses).

National Housing Fund

The Bank, as designated by the Korean government under the Housing Law (former Housing Construction Promotion Law), manages the sources and uses of funds of the National Housing Fund (the “NHF”) and records the related NHF account in other liabilities. In addition, the Bank pays interest to NHF, which is computed by multiplying the average balance of the NHF account by the passbook deposit interest rate.

- 7 -

Accounting for Trust Accounts

The Bank separately maintains the books of accounts and financial statements in connection with the trust operations (the trust accounts) from those of the bank accounts in accordance with the Trust Business Act. When surplus funds are generated through the management of trust assets, such funds are deposited with the Bank and are recorded as due to trust accounts of the bank accounts. Also, the borrowings from the bank account are recorded as due from trust accounts of the bank accounts. The Bank receives fees for operation and management of the trust business and accounts for them as fees and commissions from trust accounts.

With respect to certain trust account products, the Bank guarantees the repayment of the principal of the trust accounts and, in certain cases, a fixed rate of return. If income from such trust accounts is insufficient to pay the guaranteed amount, such a deficiency is satisfied by using special reserves maintained in the trust accounts, offsetting trust fee payable to the bank accounts and receiving compensation contributions from the bank accounts of the Bank. If the Bank pays compensating contributions to the guaranteed return trusts to cover such deficiencies, these contributions are reflected as other operating expense of the bank accounts and as other income of the trust accounts.

Income Tax Expense

Income tax expense is the amount currently payable for the period added to or deducted from the changes in deferred income taxes. However, deferred income tax assets are recognized only if the future tax benefits from accumulated temporary differences and any tax loss carryforwards are realizable. The difference between the amount currently payable for the period and income tax expense is accounted for as deferred income tax assets or liabilities, which will be charged or credited to income tax expense in the period the related temporary difference reverses in the future. Deferred income tax assets or liabilities are calculated based on the expected tax rate to be applied at the reversal period of the related assets or liabilities. Tax payable and deferred income tax assets or liabilities regarding to certain items are charged or credited directly to related components of shareholders’ equity.

Accounting for Foreign Currency Transactions and Translation

The Bank maintains its accounts in Korean Won. Transactions in foreign currencies are recorded in Korean Won based on the basic rate of exchange on the transaction date. The Korean Won equivalent of assets and liabilities denominated in foreign currencies are translated in these financial statements based on the basic rate ((Won)945.20 and (Won)1,013.00 to US$ 1.00 at September 30, 2006 and December 31, 2005, respectively) announced by Seoul Money Brokerage Service, Ltd. or cross rates for other currencies other than U.S. Dollars at the balance sheet dates. Translation gains and losses are credited or charged to operations. Financial statements of overseas branches are translated based on the basic rate at balance sheet dates.

Application of the Statement of Korea Accounting Standards

The Korea Accounting Standard Board (KASB) under the Korea Accounting Institute (KAI) issued the Statements of Korea Accounting Standards (SKAS) for achieving a set of Korean accounting standards that should be internationally acceptable and comparable based on SKAS Act 92. The Bank adopted SKAS No.1 (Accounting Changes and Error Corrections) through SKAS No. 17 (Provisions, Contingent Liabilities and Contingent Assets) (SKAS No. 11 and No. 14 excluded) as of or before December 31, 2005. SKAS No. 18 (Interests in Joint Ventures), No. 19 (Lease) and No. 20 (Related Party Disclosures) have been adopted since January 1, 2006.

Reclassification

Certain accounts of the prior period were reclassified to conform to the current period’s presentation for comparative purposes; however, such reclassifications had no effect on the previously reported prior period’s net income or shareholders’ equity of the Bank.

- 8 -

3.	CASH AND DUE FROM BANKS:

(1)	Cash and due from banks in Won and foreign currencies as of September 30, 2006 and December 31, 2005 consisted of (Unit: In millions):


	2006		2005
Cash and checks	(Won)	2,445,798	(Won)	2,683,479
Foreign currencies		160,403		150,402
Due from banks in Won		2,272,472		2,495,595
Due from banks in foreign currencies		565,713		537,941

	(Won)	5,444,386	(Won)	5,867,417

(2)	Due from banks as of September 30, 2006 and December 31, 2005 consisted of (Unit: In millions):


Financial institution	Interest (%)	2006		2005
Due from banks in Won:

BOK	—	(Won)	2,259,909	(Won)	2,189,339
Woori Bank and others	0.00~2.20		8,671		302,873
Korea Stock Exchange and others	—		3,892		3,383

		(Won)	2,272,472	(Won)	2,495,595

Due from banks in foreign currencies:

BOK	—	(Won)	57,176	(Won)	46,501
Korea Exchange Bank and others	0.00~5.32		89,814		78,136
Woori Bank and others	5.31~5.86		418,723		413,304

		(Won)	565,713	(Won)	537,941

(3)	Restricted due from banks in Won and foreign currencies as of September 30, 2006 and December 31, 2005 consisted of (Unit: In millions):


Financial institution	2006		2005		Reason for restriction
Due from banks in Won:
BOK	(Won)	2,259,909	(Won)	2,189,339	BOK Act
Woori Bank		4,130		4,029	Escrow account
Korea Stock Exchange and others		2,737		2,237	Futures margin accounts/others
Due from banks in foreign currencies:
BOK		57,176		46,501	BOK Act
J.P. Morgan Chase & Co. and others		548		480	Futures margin accounts/others

	(Won)	2,324,500	(Won)	2,242,586

(4)	Due from banks by financial institution as of September 30, 2006 and December 31, 2005 consisted of (Unit: In millions):


Financial institution	2006		2005
Due from banks in Won:

BOK	(Won)	2,259,909	(Won)	2,189,339
Banks		8,671		302,873
Others		3,892		3,383

		2,272,472		2,495,595

Due from banks in foreign currencies:
BOK		57,176		46,501
Banks		488,707		490,960
Others		19,830		480

		565,713		537,941

	(Won)	2,838,185	(Won)	3,033,536

- 9 -

(5)	Term structure of due from banks as of September 30, 2006 was as follows (Unit: In millions):


	Due in 3 months or less		Due after 3 months through 6 months		Due after 6 months through 1 year		Due after 1 year through 3 years		More than 3 years		Total
Due from banks in Won	(Won)	2,268,342	(Won)	—	(Won)	4,029	(Won)	101	(Won)	—	(Won)	2,272,472
Due from banks in foreign currencies		546,649		19,064		—		—		—		565,713

	(Won)	2,814,991	(Won)	19,064	(Won)	4,029	(Won)	101	(Won)	—	(Won)	2,838,185

Term structure of due from banks as of December 31, 2005 was as follows (Unit: In millions):


	Due in 3 months or less		Due after 3 months through 6 months		Due after 6 months through 1 year		Due after 1 year through 3 years		More than 3 years		Total
Due from banks in Won	(Won)	2,491,566	(Won)	—	(Won)	—	(Won)	4,029	(Won)	—	(Won)	2,495,595
Due from banks in foreign currencies		433,602		104,339		—		—		—		537,941

	(Won)	2,925,168	(Won)	104,339	(Won)	—	(Won)	4,029	(Won)	—	(Won)	3,033,536

4.	SECURITIES:

(1)	Securities as of September 30, 2006 and December 31, 2005 consisted of (Unit: In millions):


	2006		2005
Trading securities	(Won)	3,177,356	(Won)	3,551,425
Available-for-sale securities		19,329,726		16,180,784
Held-to-maturity securities		11,190,323		10,228,573
Securities accounted for using the equity method		663,367		589,517

	(Won)	34,360,772	(Won)	30,550,299

(2)	The valuation of securities excluding securities accounted for using the equity method as of September 30, 2006 consisted of (Unit: In millions):


Classification	Face value		Acquisition cost (*)		Adjusted by effective interest rate method		Book value
Trading securities:
Equity securities	(Won)	—	(Won)	80,061	(Won)	—	(Won)	82,931
Beneficiary certificates		99,743		100,398		—		101,760
Government and public bonds		738,434		726,734		728,761		737,898
Finance bonds		2,142,103		2,126,245		2,127,732		2,134,721
Corporate bonds		120,060		119,466		120,186		120,046

	(Won)	3,100,340	(Won)	3,152,904	(Won)	2,976,679	(Won)	3,177,356

- 10 -


Classification	Face value		Acquisition *cost ()**		Adjusted by effective interest rate method		Book value
Available-for-sale securities:
Equity securities	(Won)	—	(Won)	1,149,345	(Won)	—	(Won)	1,421,167
Equity investments		—		511		—		3,805
Beneficiary certificates		1,702,606		1,701,276		—		1,726,112
Government and public bond		2,824,370		2,812,216		2,813,903		2,817,323
Finance bonds		11,522,708		11,413,338		11,451,577		11,470,359
Foreign government bonds		5,671		6,436		5,683		5,680
Corporate bonds		1,083,009		1,044,837		1,025,825		1,026,965
Asset-backed securities		1,096,511		1,033,044		842,578		842,328
Other debt securities		19,044		7,346		—		15,987

	(Won)	18,253,919	(Won)	19,168,349	(Won)	16,139,566	(Won)	19,329,726

Held-to-maturity securities:
Government and public bonds	(Won)	6,614,665	(Won)	6,545,454	(Won)	6,555,037	(Won)	6,555,037
Finance bonds		2,798,000		2,798,040		2,798,217		2,798,217
Corporate bonds		1,499,779		1,511,576		1,502,109		1,502,109
Asset-backed securities		335,000		334,906		334,960		334,960

	(Won)	11,247,444	(Won)	11,189,976	(Won)	11,190,323	(Won)	11,190,323

(*)	Acquisition costs of equity securities in available-for-sale are the book value before valuation.

The valuation of securities excluding securities accounted for using the equity method as of December 31, 2005 consisted of (Unit: In millions):


Classification	Face value		Acquisition *cost ()**		Adjusted by effective interest rate method		Book value
Trading securities:
Equity securities	(Won)	—	(Won)	179,074	(Won)	—	(Won)	200,147
Beneficiary certificates		197		256		—		256
Government and public bonds		1,692,298		1,661,025		1,663,369		1,635,898
Finance bonds		1,607,663		1,601,395		1,603,586		1,594,839
Corporate bonds		120,000		119,407		119,690		120,285

	(Won)	3,420,158	(Won)	3,561,157	(Won)	3,386,645	(Won)	3,551,425

Available-for-sale securities:
Equity securities	(Won)	—	(Won)	778,421	(Won)	—	(Won)	1,156,629
Equity investments		—		511		—		3,723
Beneficiary certificates		2,051,178		2,052,680		—		2,075,933
Government and public bonds		2,725,370		2,721,469		2,705,844		2,687,671
Finance bonds		8,324,183		8,246,513		8,248,052		8,232,310
Foreign government bonds		9,117		10,144		9,382		9,328
Corporate bonds		1,171,960		1,128,128		1,103,350		1,106,282
Asset-backed securities		1,114,117		1,050,685		901,878		900,821
Other debt securities		40,835		5,633		—		8,087

	(Won)	15,436,760	(Won)	15,994,184	(Won)	12,968,506	(Won)	16,180,784

- 11 -


Classification	Face value		Acquisition *cost ()**		Adjusted by effective interest rate method		Book value
Held-to-maturity securities:
Government and public bonds	(Won)	4,621,429	(Won)	4,605,400	(Won)	4,609,832	(Won)	4,609,832
Finance bonds		3,570,159		3,543,074		3,564,988		3,564,988
Corporate bonds		1,714,780		1,705,750		1,718,819		1,718,819
Asset-backed securities		335,000		334,906		334,934		334,934

	(Won)	10,241,368	(Won)	10,189,130	(Won)	10,228,573	(Won)	10,228,573

(*)	Acquisition costs of equity securities in available-for-sale are the book value before valuation.

As a result of the fair valuation of trading securities, the Bank recognized (Won)33,060 million of valuation gain and (Won)13,258 million of valuation loss for the nine months ended September 30, 2006 and 2005, respectively.

The fair values of trading and available-for sale debt securities in Won were assessed by applying the average of base prices as of September 30, 2006, provided by the bond pricing service institutions.

(3)	Available-for-sale securities, which were not valuated at fair value as of September 30, 2006 and December 31, 2005, were as follows (Unit: In millions):


Company	2006		2005
Bad Bank Harmony (preferred stock)	(Won)	58,848	(Won)	12,279
Korea Asset Management Corp.		15,667		15,667
Samsung Life Insurance Co., Ltd.		7,479		7,479
Korea Highway Corp.		6,248		6,248
CLS		5,107		5,191
Kyobo Investment Trust Management Co., Ltd.		2,100		2,100
Korea Money Broker Corp.		1,291		1,291
Mercury		1,088		1,088
Tianjin Samsung Opto Electronics		923		989
Others		13,329		17,281

	(Won)	112,080	(Won)	69,613

(4)	The impairment loss and the reversal of impairment loss on available-for-sale securities recognized for the nine months ended September 30, 2006 and 2005 were as follows (Unit: In millions):


	2006				2005
	Impairment		Reversal		Impairment		Reversal
Equity securities	(Won)	10,980	(Won)	81,408	(Won)	4,215	(Won)	7,422
Equity investments		1		—		1		—
Corporate bonds		—		2,317		468		—
Asset-backed securities		42,482		—		21,460		—

	(Won)	53,463	(Won)	83,725	(Won)	26,144	(Won)	7,422

- 12 -

(5)	Structured notes relating to stock and interest rate and credit risk as of September 30, 2006 were as follows (Unit: In millions):


	Won		Foreign currencies		Total
Structured notes relating to stock:
Convertible bonds	(Won)	—	(Won)	24,463	(Won)	24,463

Structured notes relating to interest rate:
Long-term government bond floating rates notes (“FRN”)		493,022		—		493,022
Dual indexed FRN		19,862		—		19,862
Inverse FRN		20,292		—		20,292
Others		110,291		—		110,291

		643,467		—		643,467

Structured notes relating to Credit
Synthetic CDO		—		9,460		9,460
Bonds with call option		20,000		—		20,000

	(Won)	663,467	(Won)	33,923	(Won)	697,390

Structured notes relating to stock, interest rate and credit risk as of December 31, 2005 were as follows (Unit: In millions):


	Won		Foreign currencies		Total
Structured notes relating to stock:
Convertible bonds	(Won)	—	(Won)	60	(Won)	60

Structured notes relating to interest rate:
Long-term government bond FRN		564,456		—		564,456
Dual indexed FRN		19,874		—		19,874
Inverse FRN		20,753		—		20,753
Others		110,225		—		110,225

		715,308		—		715,308

Credit linked notes		—		40,559		40,559

Bonds with call option		20,000		—		20,000

	(Won)	735,308	(Won)	40,619	(Won)	775,927

(6)	Private beneficiary certificates included in beneficiary certificates of available-for-sale securities as of September 30, 2006 and December 31, 2005 were composed of (Unit: In millions):


	2006		2005
Stocks	(Won)	89,042	(Won)	7,353
Government and public bonds		215,847		38,018
Finance bonds		1,280,118		1,340,390
Corporate bonds		19,999		32,622
Asset-backed debt securities		—		—
Call loans		175,014		203,892
Others		128,854		412,962

Assets		1,908,874		2,035,237
Liabilities		82,757		11,081

	(Won)	1,826,117	(Won)	2,024,156

- 13 -

(7)	The portfolio of securities excluding securities accounted for using the equity method, by industry, as of September 30, 2006 and December 31, 2005 were as follows (Unit: In millions):


	2006			2005
By industry type	Amount		Percentage (%)	Amount		Percentage (%)
Trading securities:
Government and government-invested public companies	(Won)	857,944	27.00	(Won)	1,764,476	49.68
Financial institutions		2,245,412	70.67		1,631,869	45.95
Others		74,000	2.33		155,080	4.37

	(Won)	3,177,356	100.00	(Won)	3,551,425	100.00

Available-for-sale securities:
Government and government-invested public companies	(Won)	3,418,958	17.69	(Won)	3,347,229	20.69
Financial institutions		15,060,876	77.92		12,027,488	74.33
Others		849,892	4.39		806,067	4.98

	(Won)	19,329,726	100.00	(Won)	16,180,784	100.00

Held-to-maturity securities:
Government and government-invested public companies	(Won)	8,017,203	71.64	(Won)	6,298,716	61.58
Financial institutions		3,133,177	28.00		3,899,922	38.13
Others		39,943	0.36		29,935	0.29

	(Won)	11,190,323	100.00	(Won)	10,228,573	100.00

(8)	The portfolio of securities excluding securities accounted for using the equity method, by security type, as of September 30, 2006 and December 31, 2005 were as follows (Unit: In millions):


	2006			2005
By security type	Amount		Percentage (%)	Amount		Percentage (%)
Trading securities:

Stocks	(Won)	82,931	2.61	(Won)	200,147	5.64
Fixed rate bonds		2,860,363	90.02		3,230,737	90.97
Floating rate bonds		124,735	3.93		120,285	3.39
Subordinated bonds		7,567	0.24		—	0.00
Beneficiary certificates		101,760	3.20		256	0.00

	(Won)	3,177,356	100.00	(Won)	3,551,425	100.00

Available-for-sale securities:

Stocks	(Won)	1,421,167	7.35	(Won)	1,156,629	7.15
Fixed rate bonds		14,604,324	75.55		11,201,802	69.23
Floating rate bonds		684,220	3.54		861,368	5.32
Subordinated bonds		849,273	4.39		872,813	5.39
Convertible bonds		24,463	0.13		60	0.00
Beneficiary certificates		1,726,112	8.93		2,075,933	12.83
Others		20,167	0.11		12,179	0.08

	(Won)	19,329,726	100.00	(Won)	16,180,784	100.00

Held-to-maturity securities:

Fixed rate bonds	(Won)	11,000,323	98.30	(Won)	10,038,573	98.14
Floating rate bonds		60,000	0.54		60,000	0.59
Subordinated bonds		130,000	1.16		130,000	1.27

	(Won)	11,190,323	100.00	(Won)	10,228,573	100.00

- 14 -

The portfolio of securities excluding securities accounted for using the equity method, by country, as of September 30, 2006 and December 31, 2005 were as follows (Unit: In millions):


	2006			2005
By country type	Amount		Percentage (%)	Amount		Percentage (%)
Trading securities:

Korea	(Won)	3,165,041	99.61	(Won)	3,551,425	100.00
Others		12,315	0.39		—	—

	(Won)	3,177,356	100.00	(Won)	3,551,425	100.00

Available-for-sale securities:

Korea	(Won)	19,240,007	99.53	(Won)	16,066,362	99.29
Russia		24,762	0.13		28,527	0.18
USA		17,169	0.09		46,876	0.29
India		9,836	0.05		393	0.00
Ireland		9,460	0.05		—	—
Philippines		9,004	0.05		9,675	0.06
The Republic of South Africa		5,680	0.03		6,240	0.04
Switzerland		5,107	0.03		5,191	0.03
Others		8,701	0.04		17,520	0.11

	(Won)	19,329,726	100.00	(Won)	16,180,784	100.00

Held-to-maturity securities:
Korea	(Won)	11,190,323	100.00	(Won)	10,228,573	100.00

(9)	Term structure of securities (except for stocks and equity investments) in available-for-sale and held-to-maturity securities as of September 30, 2006 were as follows (Unit: In millions):


	Due in 1 year or less		Due after 1 year through 5 years		Due after 5 years through 10 years		More than 10 years		Total
Available-for-sale securities:
Fair value	(Won)	9,518,999	(Won)	8,103,045	(Won)	265,994	(Won)	16,716	(Won)	17,904,754

Held-to-maturity securities:
Book value		3,696,543		5,300,772		2,193,008		—		11,190,323
Fair value		3,693,113		5,298,314		2,234,218		—		11,225,645

Term structure of securities (except for stocks and equity investments) in available-for-sale and held-to-maturity securities as of December 31, 2005 were as follows (Unit: In millions):


	Due in 1 year or less		Due after 1 year through 5 years		Due after 5 years through 10 years		More than 10 years		Total
Available-for-sale securities:
Fair value	(Won)	7,864,997	(Won)	6,962,888	(Won)	184,008	(Won)	8,539	(Won)	15,020,432

Held-to-maturity securities:
Book value		2,268,137		6,701,400		1,259,036		—		10,228,573
Fair value		2,264,029		6,589,801		1,195,982		—		10,049,812

- 15 -

(10)	Securities accounted for using the equity method as of September 30, 2006 were summarized as follows (Unit: In millions):


	No. of shares	Owner- ship (%)	Acquisition cost		Net asset value		Book value
Domestic stocks:
KB Investment Co., Ltd.	8,951,293	99.99	(Won)	155,384	(Won)	86,050	(Won)	86,050
KB Futures Co., Ltd.	3,999,200	99.98		19,996		27,677		27,677
KB Data System Co., Ltd.	799,960	99.99		8,001		16,241		13,304
KB Real Estate Trust	15,999,930	99.99		76,103		89,969		90,068
KB Asset Management	6,134,040	80.00		39,015		60,221		60,221
KB Credit Information	1,249,040	99.73		14,291		33,640		33,004
KB Life Insurance Co., Ltd.	3,060,000	51.00		15,426		18,144		—
KLB Securities Co., Ltd. (*1)	4,854,713	36.41		10,316		—		—
Jooeun Industrial Co., Ltd. (*1)	1,999,910	99.99		23,994		—		—
ING Life Insurance Korea	1,400,000	20.00		21,769		117,840		117,840
Balhae Infrastructure Fund (*2)	441,426	12.61		4,412		4,432		4,432
Korea Credit Bureau Co., Ltd. (*3)	180,000	9.00		4,500		3,801		3,801

				393,207		458,015		436,397

Foreign stocks:
Kookmin Bank Singapore Ltd. (*1)	30,000,000	100.00		17,862		—		1,641
Kookmin Finance Asia Ltd. (HK) (*1)	700,000	100.00		7,545		—		230
Kookmin Bank Int’l Ltd. (London)	20,000,000	100.00		34,900		53,657		53,657
Kookmin Bank Hong Kong Ltd.	2,000,000	100.00		50,153		71,231		71,231
Sorak Financial Holdings PTE Ltd.	1,422,216	25.00		72,680		87,234		87,234

				183,140		212,122		213,993

Equity investments:
KICO No. 2 Venture Investment Partnership (*1)	250	55.56		—		93		93
KICO No. 3 Venture Investment Partnership (*1)	—	69.23		—		117		117
Pacific IT Investment Partnership (*1)	700	50.00		6,252		2,617		2,617
NPC02-4 Kookmin Venture Fund	70	33.33		7,000		7,659		7,659
KB06-1 Venture Investment Partnership	50	50.00		2,500		2,491		2,491

				15,752		12,977		12,977

			(Won)	592,099	(Won)	683,114	(Won)	663,367

Securities accounted for using the equity method as of December 31, 2005 were summarized as follows (Unit: In millions):


	No. of shares	Owner- ship (%)	Acquisition cost		Net asset value		Book value
Domestic stocks:
KB Investment Co., Ltd.	8,951,293	99.99	(Won)	155,384	(Won)	85,462	(Won)	85,462
KB Futures Co., Ltd.	3,999,200	99.98		19,996		27,312		27,312
KB Data System Co., Ltd.	799,960	99.99		8,001		17,726		15,582
KB Real Estate Trust	15,999,930	99.99		76,103		80,975		81,068
KB Asset Management	6,134,040	80.00		39,015		52,485		52,485
KB Credit Information	1,249,040	99.73		14,291		28,629		27,837
KB Life Insurance Co., Ltd.	3,060,000	51.00		15,426		12,541		—
KLB Securities Co., Ltd. (*1)	4,854,713	36.41		10,316		—		—
Jooeun Industrial Co., Ltd. (*1)	1,999,910	99.99		23,994		—		—
ING Life Insurance Korea	1,400,000	20.00		21,769		77,529		77,529

				384,295		382,659		367,275

- 16 -


	No. of shares	Owner- ship (%)	Acquisition cost		Net asset value		Book value
Foreign stocks:
Kookmin Bank Singapore Ltd. (*1)	30,000,000	100.00		18,254		—		1,759
Kookmin Finance Asia Ltd. (HK) (*1)	700,000	100.00		8,086		—		246
Kookmin Bank Int’l Ltd. (London)	20,000,000	100.00		34,378		50,523		50,523
Kookmin Bank Hong Kong Ltd.	2,000,000	100.00		53,751		69,907		69,958
Sorak Financial Holdings PTE Ltd.	1,422,216	25.00		74,277		82,401		82,401

				188,746		202,831		204,887

Equity investments:
KICO No. 2 Venture Investment Partnership (*1)	250	55.56		—		130		130
KICO No. 3 Venture Investment Partnership (*1)	—	69.23		—		147		147
Pacific IT Investment Partnership (*1)	700	50.00		7,000		4,950		4,950
NPC02-4 Kookmin Venture Fund	100	33.33		10,000		12,128		12,128

				17,000		17,355		17,355

			(Won)	590,041	(Won)	602,845	(Won)	589,517

(*1)	KLB Securities Co., Ltd., Jooeun Industrial Co., Ltd., Kookmin Bank Singapore Ltd., Kookmin Finance Asia, Ltd., KICO No. 2 Venture Investment Partnership, KICO No. 3 Venture Investment Partnership and Pacific IT Investment Partnership are all in the process of liquidation as of September 30, 2006.

(*2)	The Bank may exercise its voting right at the board meeting or at an equally significant decision making body of the investee.

(*3)	The Bank has significant influence in electing the board member who may participate in the decision making process relating to the financial and business policy of the investee.

(11)	The valuation of securities accounted for using the equity method for the nine months ended September 30, 2006 was as follows (Unit: In millions):


	Book value before valuation		Increase (Decrease)		Dividend			Foreign currency translation gain (loss)		Equity gain (loss)on investment			Capital adjust- ments			Book value after valuation
Domestic stocks:
KB Investment Co., Ltd.	(Won)	85,462	(Won)	—	(Won)	(2,238	)	(Won)	—	(Won)	4,083		(Won)	(1,257	)	(Won)	86,050
KB Futures Co., Ltd.		27,312		—		(1,000	)		—		1,424			(59	)		27,677
KB Data System Co., Ltd. (*3)		15,582		—		(2,399	)		—		121			—			13,304
KB Real Estate Trust		81,068		—		—			—		9,000			—			90,068
KB Asset Management		52,485		—		(6,134	)		—		13,831			39			60,221
KB Credit Information (*1)		27,837		—		(624	)		—		5,791			—			33,004
KB Life Insurance Co., Ltd. (*2 and 3)		—		—		—			—		—			—			—
KLB Securities Co., Ltd. (*2)		—		—		—			—		—			—			—
Jooeun Industrial Co., Ltd. (*2)		—		—		—			—		—			—			—
ING Life Insurance Korea		77,529		—		—			—		27,673			12,638			117,840
Balhae Infrastructure Fund		—		4,412		(11	)		—		31			—			4,432
Korea Credit Bureau Co., Ltd.		—		4,500		—			—		(699	)		—			3,801

		367,275		8,912		(12,406	)		—		61,255			11,361			436,397

- 17 -


	Book value before valuation		Increase (Decrease)			Dividend			Foreign currency translation gain (loss)			Equity gain (loss)on investment			Capital adjust - ments			Book value after valuation
Foreign stocks
Kookmin Bank Singapore Ltd.		1,759		—			—			(118	)		—			—			1,641
Kookmin Finance Asia Ltd. (HK)		246		—			—			(16	)		—			—			230
Kookmin Bank Int’l Ltd. (London)		50,523		—			—			766			2,894			(526	)		53,657
Kookmin Bank Hong Kong Ltd.		69,958		—			—			(4,682	)		6,035			(80	)		71,231
Sorak Financial Holdings PTE Ltd.		82,401		—			(2,795	)		(1,737	)		4,488			4,877			87,234

		204,887		—			(2,795	)		(5,787	)		13,417			4,271			213,993

Equity Securities				—
KICO No. 2 Venture Investment Partnership		130		—			—			—			(37	)		—			93
KICO No. 3 Venture Investment Partnership		147		—			—			—			(30	)		—			117
Pacific IT Investment Partnership		4,950		(1,496	)		—			—			(837	)		—			2,617
NPC02-4 Kookmin Venture Fund		12,128		(3,000	)		(2,129	)		—			706			(46	)		7,659
KB06-1 Venture Investment Partnership		—		2,500			—			—			(9	)		—			2,491

		17,355		(1,996	)		(2,129	)		—			(207	)		(46	)		12,977

	(Won)	589,517	(Won)	6,916		(Won)	(17,330	)	(Won)	(5,787	)	(Won)	74,465		(Won)	15,586		(Won)	663,367

(*1)

Differences amounting to (Won)1,128 million between the purchase price and the Bank’s proportionate ownership of the net book value of KB Credit Information resulting from an additional purchase of 342,844 shares in October 2004 are credited to gain on valuation of securities accounted for using the equity method equally for five years. The Bank credited (Won)169 million to current operation for the nine months ended September 30, 2006 and the balance was (Won)677 million as of September 30, 2006.

(*2)

The equity method is no longer applied to securities of KLB Securities Co., Ltd. and Jooeun Industrial Co., Ltd. due to accumulated deficit, and to securities of KB Life Insurance Co., Ltd. due to unrealized income elimination, which led to a decrease in the book value to below zero. The unrecognized accumulated deficit and change due to the equity method are as follows as of September 30, 2006 (Unit: In millions):


	Deficit		Change due to equity method		Total
KLB Securities Co., Ltd.	(Won)	4,148	(Won)	—	(Won)	4,148
Jooeun Industrial Co., Ltd.		49,729		—		49,729
KB Life Insurance Co., Ltd.		24,997		789		24,208

	(Won)	78,874	(Won)	789	(Won)	78,085

(*3)	The significant unrealized income eliminated for the nine months ended September 30, 2006 was as follows (Unit: In millions):


	Related accounts	Amount
KB Data System Co., Ltd.	Tangible assets (sales)	(Won)	815
KB Life Insurance Co., Ltd.	Commissions (deferred acquisition cost)		1,378

		(Won)	2,193

- 18 -

(12)	Significant financial data of companies of which stocks were accounted for using the equity method as of and for the nine months ended September 30, 2006 were as follows (Unit: In millions):


	Assets		Liabilities		Sales		Net income (loss)
KB Investment Co., Ltd.	(Won)	87,914	(Won)	1,859	(Won)	8,923	(Won)	4,083
KB Futures Co., Ltd.		57,144		29,461		8,609		1,425
KB Data System Co., Ltd.		24,355		8,113		40,547		915
KB Real Estate Trust		203,993		114,023		43,508		8,994
KB Asset Management		82,628		7,351		33,060		17,289
KB Credit Information		43,662		9,932		53,919		5,650
KB Life Insurance Co., Ltd.		588,099		552,524		269,127		2,702
Jooeun Industrial Co., Ltd.		113,292		189,526		31,142		(1,313	)
ING Life Insurance Korea		8,809,585		8,220,387		2,321,392		138,363
Balhae Infrastructure Fund		35,338		179		536		249
Korea Credit Bureau Co., Ltd.		43,418		1,187		9,710		(46	)
Kookmin Bank Int’l Ltd. (London)		330,495		276,837		14,813		2,368
Kookmin Bank Hong Kong Ltd.		416,617		345,386		20,412		5,956
Sorak Financial Holdings PTE Ltd.		5,000,319		4,651,381		496,060		22,635
KICO No. 2 Venture Investment Partnership		166		—		—		(67	)
KICO No. 3 Venture Investment Partnership		169		—		—		(43	)
Pacific IT Investment Partnership		2,646		28		—		(837	)
NPC02-4 Kookmin Venture Fund		24,624		145		2,840		2,119
KB06-1 Venture Investment Partnership		5,016		34		16		(18	)

Unaudited financial statements as of September 30, 2006 were used for the equity method valuation. There was no material exception as a result of analytical review, such as analysis of major accounts to assess reliability of those financial statements. However, in case of ING Life Insurance Korea and Sorak Financial Holdings PTE Ltd., the unaudited financial statements as of August 31, 2006 were used for the equity method valuation. The significant events from the closing dates of the investees to that of the Bank were properly reflected in applying the equity method.

(13)	Changes in the gain (loss) on valuation of available-for-sale securities, held-to-maturity securities and securities accounted for using the equity method reflected in capital adjustments for the nine months ended September 30, 2006 were as follows (Unit: In millions):


	Beginning		Increase (Decrease)		Disposal			Ending
Gain (loss) on valuation of available-for-sale securities:

Equity securities	(Won)	454,250	(Won)	205,275	(Won)	(74,300	)	(Won)	585,225
Debt securities in Won		32,614		40,202		(10,431	)		62,385
Debt securities in foreign currencies		5,867		760		(3,217	)		3,410
Beneficiary certificates		16,858		17,004		(15,856	)		18,006
Others		1,779		4,486		—			6,265

	(Won)	511,368	(Won)	267,727	(Won)	(103,804	)	(Won)	675,291

Gain on valuation of held-to-maturity securities:
Debt securities in Won	(Won)	426	(Won)	—	(Won)	(273	)	(Won)	153

Gain on valuation of securities accounted for using the equity method	(Won)	948	(Won)	9,615	(Won)	(382	)	(Won)	10,181

- 19 -

(14)	Securities provided as collateral as of September 30, 2006 were as follows (Unit: In millions):


Provided to	Book value		Collateral amount		Provided for
Korea Securities Depository & others	(Won)	7,088,578	(Won)	7,118,000	Bonds sold under repurchase agreements
BOK		203,336		200,000	Borrowings from BOK
BOK		330,245		330,600	Overdrafts and settlement risk
Samsung Futures & others		280,767		293,500	Derivative settlement
Other		402		1,628	Other

	(Won)	7,903,328	(Won)	7,943,728

Securities provided as collateral as of December 31, 2005 were as follows (Unit: In millions):


Provided to	Book value		Collateral amount		Provided for
Korea Securities Depository & others	(Won)	6,571,036	(Won)	6,570,000	Bonds sold under repurchase agreements
BOK		953,153		950,000	Borrowings from BOK
BOK		183,994		183,200	Overdrafts and settlement risk
Samsung Futures & others		260,571		269,500	Derivative settlement
Other		1,628		1,628	Other

	(Won)	7,970,382	(Won)	7,974,328

(15)	Securities lent as of September 30, 2006 and December 31, 2005 were as follows (Unit: In millions):


	2006		2005		Provided to
Government and public bonds	(Won)	250,088	(Won)	98,625	Korea Securities Depository & Others
Finance bonds		30,263		35,241	Korea Securities Depository

	(Won)	280,351	(Won)	133,866

LOANS:

(1)	Loans as of September 30, 2006 and December 31, 2005 consisted of (Unit: In millions):


	2006			2005
Loans in Won	(Won)	122,690,626		(Won)	118,565,341
Loans in foreign currencies		7,660,726			5,314,883
Call loans		692,173			1,518,948
Bills bought in Won		15,829			18,563
Bills bought in foreign currencies		1,297,758			1,377,085
Advances for customers		10,553			11,321
Credit card receivables		8,311,344			7,571,605
Private placed bonds		6,761,431			3,729,867
Factoring receivables		30,958			32,044
Loans for debt-equity swap		1,968			—

		147,473,366			138,139,657
Allowance for possible loan losses		(2,180,533	)		(2,453,275	)
Deferred loan origination fees and costs		108,220			52,025

	(Won)	145,401,053		(Won)	135,738,407

- 20 -

(2)	Loans in Won and loans in foreign currencies as of September 30, 2006 and December 31, 2005 were as follows (Unit: In millions):


	2006		2005
Loans in Won:
Commercial
Working capital loans
General purpose loans	(Won)	26,896,788	(Won)	24,575,874
Notes discounted		687,546		1,106,112
Overdraft accounts		406,533		279,864
Trading notes		718,044		671,421
Others		4,414,467		3,865,057

		33,123,378		30,498,328

Facilities loans
General facilities loans		4,511,640		3,985,218
Others		1,024,538		1,087,832

		5,536,178		5,073,050

		38,659,556		35,571,378

Households
General purpose loans		44,394,917		42,082,535
Housing loans		38,294,500		39,535,441
Remunerations on mutual installment savings		154,158		232,556
Others		440,543		456,173

		83,284,118		82,306,705

Public sector
Public operation loans		739,946		643,141
Public facilities loans		4,351		34,157

		744,297		677,298

Other
Property formation loans		1,115		6,748
Inter-bank loans		147		1,274
Others		1,393		1,938

		2,655		9,960

	(Won)	122,690,626	(Won)	118,565,341

Loans in foreign currencies:
Domestic funding loans	(Won)	4,272,631	(Won)	2,208,125
Overseas funding loans		437,238		551,049
Inter-bank loans		1,588,132		1,229,064
Domestic usance bills		1,362,723		1,326,629
Government funding loans		2		16

	(Won)	7,660,726	(Won)	5,314,883

(3)	Loans in Won and loans in foreign currencies, classified by borrower type, as of September 30, 2006 were as follows (Unit: In millions):


By borrower type	Loans in Won		Loans in foreign currencies		Total		Percentage (%)
Large corporations	(Won)	3,724,632	(Won)	4,860,999	(Won)	8,585,631	6.59
Small and medium corporations		34,935,071		2,754,867		37,689,938	28.91
Households		83,286,626		44,860		83,331,486	63.93
Others		744,297		—		744,297	0.57

	(Won)	122,690,626	(Won)	7,660,726	(Won)	130,351,352	100.00

- 21 -

Loans in Won and loans in foreign currencies, classified by borrower type, as of December 31, 2005 were as follows (Unit: In millions):


By borrower type	Loans in Won		Loans in foreign currencies		Total		Percentage (%)
Large corporations	(Won)	3,510,892	(Won)	3,070,368	(Won)	6,581,260	5.31
Small and medium corporations		32,061,760		2,187,626		34,249,386	27.65
Households		82,315,391		56,889		82,372,280	66.49
Others		677,298		—		677,298	0.55

	(Won)	118,565,341	(Won)	5,314,883	(Won)	123,880,224	100.00

(4)	Loans classified by borrower’s country as of September 30, 2006 were as follows (Unit: In millions):


By country	Loans in Won		Loans in foreign currencies		Others		Total		Percentage (%)
Korea	(Won)	122,690,626	(Won)	6,988,818	(Won)	16,991,315	(Won)	146,670,759	99.45
Southeast Asia		—		29,516		—		29,516	0.02
China		—		177,253		57,893		235,146	0.16
Japan		—		185,522		66		185,588	0.13
Central and South America		—		5,616		13		5,629	0.00
Others		—		274,001		72,727		346,728	0.24

	(Won)	122,690,626	(Won)	7,660,726	(Won)	17,122,014	(Won)	147,473,366	100.00

Loans classified by borrower’s country as December 31, 2005 were as follows (Unit: In millions):


By country	Loans in Won		Loans in foreign currencies		Others		Total		Percentage (%)
Korea	(Won)	118,565,341	(Won)	4,343,365	(Won)	14,134,599	(Won)	137,043,305	99.21
Southeast Asia		—		77,018		— —		77,018	0.05
China		—		362,468		5,065		367,533	0.27
Japan		—		270,131		72		270,203	0.19
Central and South America		—		7,524		19		7,543	0.01
Others		—		254,377		119,678		374,055	0.27

	(Won)	118,565,341	(Won)	5,314,883	(Won)	14,259,433	(Won)	138,139,657	100.00

(5)	Loans classified by industry as of September 30, 2006 were as follows (Unit: In millions):


By industry	Loans in Won		Loans in foreign currencies		Others		Total		Percentage (%)
Corporations:
Finance and insurance	(Won)	1,136,256	(Won)	1,636,334	(Won)	1,485,342	(Won)	4,257,932	2.89
Manufacturing		11,382,532		2,760,128		3,397,861		17,540,521	11.89
Services		21,914,251		1,931,282		2,262,650		26,108,183	17.70
Others		4,851,574		1,084,031		1,725,592		7,661,197	5.20
Households		83,286,626		44,860		7,235,549		90,567,035	61.41
Public sector		119,387		204,091		1,015,020		1,338,498	0.91

	(Won)	122,690,626	(Won)	7,660,726	(Won)	17,122,014	(Won)	147,473,366	100.00

- 22 -

Loans classified by industry as of December 31, 2005 were as follows (Unit: In millions):


By industry	Loans in Won		Loans in foreign currencies		Others		Total		Percentage (%)
Corporations:
Finance and insurance	(Won)	1,071,914	(Won)	1,286,271	(Won)	2,155,247	(Won)	4,513,432	3.27
Manufacturing		11,468,385		1,825,795		2,469,266		15,763,446	11.41
Services		19,163,721		1,057,966		1,630,228		21,851,915	15.82
Others		4,127,593		1,069,625		979,344		6,176,562	4.47
Households		82,315,391		56,889		6,525,160		88,897,440	64.35
Public sector		418,337		18,337		500,188		936,862	0.68

	(Won)	118,565,341	(Won)	5,314,883	(Won)	14,259,433	(Won)	138,139,657	100.00

(6)	Loans to financial institutions as of September 30, 2006 were as follows (Unit: In millions):


	Bank		Other financial institutions		Total
Loans in Won	(Won)	147	(Won)	1,136,109	(Won)	1,136,256
Loans in foreign currencies		1,588,131		48,203		1,636,334
Others		724,415		760,927		1,485,342

	(Won)	2,312,693	(Won)	1,945,239	(Won)	4,257,932

Loans to financial institutions as of December 31, 2005 were as follows (Unit: In millions):


	Bank		Other financial institutions		Total
Loans in Won	(Won)	1,274	(Won)	1,070,640	(Won)	1,071,914
Loans in foreign currencies		1,229,064		57,207		1,286,271
Others		1,599,471		555,776		2,155,247

	(Won)	2,829,809	(Won)	1,683,623	(Won)	4,513,432

(7)	Loans applicable to the Corporate Restructuring Promotion Act

As of September 30, 2006, the Bank provided loans amounting to (Won)74,287 million to companies such as Daewoo Electronics Corp. subject to the Corporate Restructuring Promotion Act, and provided an allowance of (Won)27,141 million for possible loan losses. The actual collection amounts from those loans may differ from management’s current estimation.

- 23 -

(8)	The classification of asset quality for loans as of September 30, 2006 is summarized as follows (Unit: In millions):


	Normal		Precautionary		Substandard		Doubtful		Estimated loss		Total
Loans in Won	(Won)	119,337,051	(Won)	1,687,793	(Won)	831,247	(Won)	468,655	(Won)	365,880	(Won)	122,690,626
Loans in foreign currencies		7,511,101		101,489		18,705		23,642		5,789		7,660,726
Call loans		692,173		—		—		—		—		692,173
Bills bought		1,300,546		2,273		301		7,068		3,399		1,313,587
Advances for customers		820		916		1,725		1,670		5,422		10,553
Credit card receivables		7,869,031		248,204		59,650		92,045		42,414		8,311,344
Privately placed bonds		6,758,781		1,500		650		500		—		6,761,431
Factoring receivables		30,958		—		—		—		—		30,958
Loans to be swapped to equity		—		—		—		1,968		—		1,968

	(Won)	143,500,461	(Won)	2,042,175	(Won)	912,278	(Won)	595,548	(Won)	422,904	(Won)	147,473,366

The classification of asset quality for loans as of December 31, 2005 is summarized as follows (Unit: In millions):


	Normal		Precautionary		Substandard		Doubtful		Estimated loss		Total
Loans in Won	(Won)	113,720,332	(Won)	2,784,972	(Won)	937,477	(Won)	758,344	(Won)	364,216	(Won)	118,565,341
Loans in foreign currencies		5,197,617		60,553		24,285		31,648		780		5,314,883
Call loans		1,518,948		—		—		—		—		1,518,948
Bills bought		1,388,538		5,009		136		288		1,677		1,395,648
Advances for customers		1,201		439		1,394		2,049		6,238		11,321
Credit card receivables		7,068,006		337,624		895		122,365		42,715		7,571,605
Privately placed bonds		3,727,026		967		1,874		—		—		3,729,867
Factoring receivables		30,990		—		1,054		—		—		32,044

	(Won)	132,652,658	(Won)	3,189,564	(Won)	967,115	(Won)	914,694	(Won)	415,626	(Won)	138,139,657

- 24 -

(9)	The term structure of loans as of September 30, 2006 was as follows (Unit: In millions):


	Loans in Won		Loans in foreign currencies		Others		Total
Due in 3 months or less	(Won)	19,393,343	(Won)	2,967,593	(Won)	8,427,500	(Won)	30,788,436
Due after 3 months through 6 months		13,242,879		864,050		1,056,134		15,163,063
Due after 6 months through 1 year		29,143,598		1,372,639		1,341,365		31,857,602
Due after 1 year through 2 years		10,579,446		288,274		1,619,989		12,487,709
Due after 2 years through 3 years		10,873,421		1,059,558		3,099,401		15,032,380
Due after 3 years through 4 years		4,907,122		66,671		99,943		5,073,736
Due after 4 years through 5 years		3,319,368		682,721		618,074		4,620,163
More than 5 years		31,231,449		359,220		859,608		32,450,277

	(Won)	122,690,626	(Won)	7,660,726	(Won)	17,122,014	(Won)	147,473,366

The term structure of loans as of December 31, 2005 was as follows (Unit: In millions):


	Loans in Won		Loans in foreign currencies		Others		Total
Due in 3 months or less	(Won)	16,824,261	(Won)	2,032,241	(Won)	8,176,341	(Won)	27,032,843
Due after 3 months through 6 months		16,013,982		1,133,825		731,058		17,878,865
Due after 6 months through 1 year		32,977,463		978,607		1,379,070		35,335,140
Due after 1 year through 2 years		13,682,894		236,590		1,038,570		14,958,054
Due after 2 years through 3 years		10,237,525		327,997		1,499,611		12,065,133
Due after 3 years through 4 years		4,314,197		77,561		42,542		4,434,300
Due after 4 years through 5 years		5,254,662		234,017		191,646		5,680,325
More than 5 years		19,260,357		294,045		1,200,595		20,754,997

	(Won)	118,565,341	(Won)	5,314,883	(Won)	14,259,433	(Won)	138,139,657

(10)	Disposal of loans

The Bank disposed loans amounting to (Won)324,052 million of principal to KB 7^th Securitization Specialty Co., Ltd., and recognized a gain of (Won)36,311 million for the nine months ended September 30, 2006.

(11)	Credit card receivables as collateral

The Bank offers the credit card receivables amounting to (Won)690,589 million (before deducting the allowance) as collateral for the transaction of credit card receivables to SPC as of September 30, 2006.

(12)	The changes in loan origination costs for the nine months ended September 30, 2006 were as follows (Unit: In millions):

Beginning

Increase

Decrease

Ending

Loan origination costs

(Won)

52,025

(Won)

78,354

(Won)

22,159

(Won)

108,220

- 25 -

6.	RESTRUCTURED LOANS:

(1)	The loans that were restructured by means of principal reduction, debt-equity swap, interest reduction because of workouts for the nine months ended September 30, 2006 were as follows (Unit: In millions):


	Amount before restructuring		Principal exemption		Conversion to equity securities		Interest reduction		Extension of maturity
Composition	(Won)	6,178	(Won)	—	(Won)	—	(Won)	—	(Won)	6,178
Workout plan		157,840		301		4,083		12,591		138,971

		164,018		301		4,083		12,591		145,149

(2)	Changes in the present value discounts relating to the outstanding restructured loans for the nine months ended September 30, 2006 were as follows (Unit: In millions):


	Discount rates (%)	Amount		Present value discounts
	Discount rates (%)	Amount		Beginning balance		Addition		Deduction		Ending balance
Court receivership	5.90~20.98	(Won)	11,661	(Won)	2,035	(Won)	—	(Won)	251	(Won)	1,784
Composition	4.90~25.00		14,659		2,238		1,073		1,908		1,403
Workout plan	0.21~28.89		112,031		11,371		7,848		12,983		6,236
Others	9.50		32,604		4,371		6		1,136		3,241

		(Won)	170,955	(Won)	20,015	(Won)	8,927	(Won)	16,278	(Won)	12,664

If the loans are restructured by means of reduction of interest rates, cash flows of fixed rate loans are discounted by effective interest rates originally agreed upon and cash flows of floating rate loans are discounted by interest rates determined by adding a credit risk premium, which is calculated at the restructuring date, assuming that debtors’ credit at the origination date is effective to the restructuring date, to a benchmark interest rate. The difference between the book value and the present value is presented as an allowance for possible loan losses.

7.	ALLOWANCE FOR POSSIBLE LOAN LOSSES:

(1)	The allowance for possible loan losses as of September 30, 2006 is summarized as follows (Unit: In millions):


	Normal		Precautionary		Substandard		Doubtful		Estimated loss		Total
Loans in Won	(Won)	803,689	(Won)	165,855	(Won)	190,772	(Won)	311,836	(Won)	365,880	(Won)	1,838,032
Loans in foreign currencies		29,757		3,549		6,771		14,839		5,789		60,705
Bills bought		6,503		147		60		3,620		3,399		13,729
Advances for customers		4		18		345		990		5,422		6,779
Credit card receivables		82,414		29,784		11,930		55,227		42,414		221,769
Privately placed bonds		33,794		150		139		250		—		34,333
Factoring receivables		3,238		—		—		—		—		3,238
Loans for debt-equity swap		—		—		—		1,948		—		1,948

	(Won)	959,399	(Won)	199,503	(Won)	210,017	(Won)	388,710	(Won)	422,904	(Won)	2,180,533

- 26 -

The allowance for possible loan losses as of December 31, 2005 is summarized as follows (Unit: In millions):


	Normal		Precautionary		Substandard		Doubtful		Estimated loss		Total
Loans in Won	(Won)	777,038	(Won)	293,589	(Won)	198,047	(Won)	493,880	(Won)	364,216	(Won)	2,126,770
Loans in foreign currencies		20,048		2,665		7,264		19,904		780		50,661
Bills bought		6,943		228		27		180		1,677		9,055
Advances for customers		6		9		279		1,469		6,238		8,001
Credit card receivables		77,680		40,515		179		73,419		42,715		234,508
Privately placed bonds		18,635		217		918		—		—		19,770
Factoring receivables		4,299		—		211		—		—		4,510

	(Won)	904,649	(Won)	337,223	(Won)	206,925	(Won)	588,852	(Won)	415,626	(Won)	2,453,275

(2)	The changes in allowance for possible loan losses for the nine months ended September 30, 2006 and the year ended December 31, 2005 were as follows (Unit: In millions):


	2006			2005
Beginning balance (*1)	(Won)	2,500,777		(Won)	3,186,095
Provision for possible loan losses		423,739			1,053,088
Reclassification from other allowances (*2)		24,992			17,501
Collection of previously written-off loans		342,605			452,959
Repurchase of NPLs sold		6,064			15,863
Sales of loans		(57,507	)		(181,914	)
Loans written-off		(1,003,538	)		(2,014,834	)
Conversion to equity securities		—			(11,444	)
Exemption of loans		(3,179	)		(9,570	)
Changes in exchange rates and others		(17,275	)		(6,967	)

Ending balance (*1)	(Won)	2,216,678		(Won)	2,500,777

(*1)	Allowance for possible loan losses includes present value discounts amounting to (Won)12,664 million and (Won)20,015 million as of September 30, 2006 and December 31, 2005, respectively, and allowances for other assets amounting to (Won)36,145 million and (Won) 47,502 million, respectively.

(*2)

Other allowances for credit lines to Kookmin Card 16^th Securitization Specialty Co., Ltd. and FNSTAR 4^th Securitization Special Co., Ltd. amounting to (Won)24,908 million and (Won)84 million, respectively, were transferred to allowances for loan losses for the nine months ended September 30, 2006. Other allowances for credit lines to Kookmin Card 16^th Securitization Specialty Co., Ltd. amounting to (Won)17,501 million were transferred to allowances for loan losses for the year ended December 31, 2005.

(3)	The allowance for possible losses on other assets as of September 30, 2006 and December 31, 2005 is summarized as follows (Unit: In millions):


	2006		2005
Account receivables	(Won)	221	(Won)	659
Suspense receivables		12,599		20,447
Uncollected guarantee deposits for rent		4,794		8,269
Settlement costs for financial accident		16,099		15,844
Derivative instruments		2,432		2,283

	(Won)	36,145	(Won)	47,502

- 27 -

(4)	The allowance for possible loan losses compared to total loans, net of present value discount, is summarized as follows (Unit: In millions):


	Loans		Allowance for possible loan losses		Percentage (%)
September 30, 2006	(Won)	147,473,366	(Won)	2,180,533	1.48
December 31, 2005		138,139,657		2,453,275	1.78
December 31, 2004		138,839,212		3,118,775	2.25
December 31, 2003		145,040,449		3,910,044	2.70

8.	FIXED ASSETS:

(1)	Fixed assets as of September 30, 2006 and December 31, 2005 consisted of (Unit: In millions):


	2006			2005
Tangible assets	(Won)	3,720,021		(Won)	3,670,603
Less: accumulated depreciation		(1,686,676	)		(1,620,892	)
accumulated impairment loss		(14,520	)		(11,466	)
Intangible assets		354,835			398,104
Non-business use property		499			583
Less: valuation allowance		(169	)		(230	)

	(Won)	2,373,990		(Won)	2,436,702

(2)	Tangible assets as of September 30, 2006 consisted of (Unit: In millions):


	Acquisition cost		Accumulated depreciation		Accumulated impairment losses		Book value
Land	(Won)	986,772	(Won)	—	(Won)	6,908	(Won)	979,864
Buildings		964,076		175,731		7,612		780,733
Leasehold improvements		214,813		165,831		—		48,982
Equipment and vehicles		1,544,248		1,345,114		—		199,134
Construction in progress		10,112		—		—		10,112

	(Won)	3,720,021	(Won)	1,686,676	(Won)	14,520	(Won)	2,018,825

Tangible assets as of December 31, 2005 consisted of (Unit: In millions):


	Acquisition cost		Accumulated depreciation		Accumulated impairment losses		Book value
Land	(Won)	986,522	(Won)	—	(Won)	7,109	(Won)	979,413
Buildings		939,204		160,328		4,357		774,519
Leasehold improvements		190,109		145,746		—		44,363
Equipment and vehicles		1,554,613		1,314,818		—		239,795
Construction in progress		155		—		—		155

	(Won)	3,670,603	(Won)	1,620,892	(Won)	11,466	(Won)	2,038,245

- 28 -

(3)	The changes in book value of tangible assets for the nine months ended September 30, 2006 were as follows (Unit: In millions):


	Beginning		Acquisition		Replacement			Disposal		Depreciation		Impairment		Change in foreign currencies			Ending
Land	(Won)	979,413	(Won)	2,425	(Won)	1,967		(Won)	3,829	(Won)	—	(Won)	82	(Won)	(30	)	(Won)	979,864
Buildings		774,519		2,919		28,232			5,002		16,196		3,641		(98	)		780,733
Leasehold improvements		44,363		—		26,658			79		21,942		—		(18	)		48,982
Equipment and vehicles		239,795		79,705		—			1,002		119,297		—		(67	)		199,134
Construction in progress		155		66,814		(56,857	)		—		—		—		—			10,112

	(Won)	2,038,245	(Won)	151,863	(Won)	—		(Won)	9,912	(Won)	157,435	(Won)	3,723	(Won)	(213	)	(Won)	2,018,825

(4)	The published value of the land was (Won)1,185,098 million and (Won) 1,059,377 million as of September 30, 2006 and December 31, 2005, respectively, based on the Laws on Disclosure of Land Price and Valuation of Land

(5)	Tangible assets, which have been insured as of September 30, 2006, were as follows (Unit: In millions):


Type of insurance	Asset insured	Insured amount		Insurance company
Property composite	Buildings	(Won)	627,928	Samsung Fire & Marine Insurance Co., Ltd. & others
	Leasehold improvements		40,277
	Equipment and vehicles		121,804

		(Won)	790,009

(6)	Intangible assets as of September 30, 2006 consisted of (Unit: In millions):


	Acquisition cost		Accumulated amortization		Book value
Goodwill	(Won)	705,108	(Won)	385,198	(Won)	319,910
Others		59,344		24,419		34,925

	(Won)	764,452	(Won)	409,617	(Won)	354,835

(7)	The changes in intangible assets for the nine months ended September 30, 2006 were as follows (Unit: In millions):


	Beginning		Increase		Amortization		Ending
Goodwill	(Won)	378,669	(Won)	—	(Won)	58,759	(Won)	319,910
Others		19,435		23,911		8,421		34,925

	(Won)	398,104	(Won)	23,911	(Won)	67,180	(Won)	354,835

(8)	Non-business use properties as of September 30, 2006 consisted of (Unit: In millions):


	Acquisition cost		Valuation allowance		Book value
Non-business use land	(Won)	18	(Won)	12	(Won)	6
Non-business use building		481		157		324

	(Won)	499	(Won)	169	(Won)	330

- 29 -

9.	OTHER ASSETS:

(1)	Other assets as of September 30, 2006 and December 31, 2005 consisted of (Unit: In millions):


	2006			2005
Guarantee deposits paid	(Won)	1,173,272		(Won)	1,164,533
Accounts receivable		5,417,707			466,442
Accrued income		1,210,358			998,354
Prepaid accounts		55,438			65,519
Prepaid expenses		80,389			43,266
Deferred income tax assets (Note 24)		160,402			353,214
Derivatives assets		1,389,572			1,202,063
Domestic exchange settlement debits		1,153,322			720,433
Sundry assets		31,767			34,502
Allowances for possible loan losses		(36,145	)		(47,502	)

	(Won)	10,636,082		(Won)	5,000,824

(2)	Sundry assets as of September 30, 2006 and December 31, 2005 consisted of (Unit: In millions):


	2006		2005
Receivables on cash sent to other banks	(Won)	—	(Won)	350
Supplies		15,678		14,468
Deposit money to court (*)		16,026		19,514
Asset disposal receivables		—		170
Others		63		—

	(Won)	31,767	(Won)	34,502

(*)	Securities is included in deposit money to court of which book value, face value and fair value are (Won)9,617million, (Won) 10,250million and (Won)11,951million, respectively.

10.

DEPOSITS:

(1)	Deposits as of September 30, 2006 and December 31, 2005 consisted of (Unit: In millions):


	2006		2005
Deposits in Won	(Won)	116,261,613	(Won)	119,512,556
Deposits in foreign currencies		1,483,371		1,379,133
Negotiable certificates of deposits		10,745,697		5,389,543

	(Won)	128,490,681	(Won)	126,281,232

(2)	Deposits as of September 30, 2006 and December 31, 2005 consisted of (Unit: In millions):


	Interest rate (%)	2006		2005
Demand deposits in Won:

Checking deposits	—	(Won)	205,661	(Won)	190,629
Household checking deposits	0.00~0.10		419,472		478,851
Temporary deposits	—		3,879,390		3,668,420
Passbook deposits	0.00~0.10		13,858,455		13,403,993
Public fund deposits	0.10		275,546		176,397
National Treasury deposits	—		13,279		2,879
Nonresident’s deposit in Won	0.10		20,173		24,898

		(Won)	18,671,976	(Won)	17,946,067

- 30 -


	Interest rate (%)	2006			2005
Time deposits and savings deposits in Won:

Time deposits	2.60~3.90	(Won)	56,644,839		(Won)	57,387,089
Installment savings deposits	3.40~4.10		1,184,582			1,218,956
Property formation savings	8.50		547			955
Workers’ savings for housing	8.50 ~11.50		2			27
Time and savings deposits of non residents in Won	2.60 ~ 3.90		199,334			213,436
General savings deposits	0.00 ~ 3.30		19,509,669			20,151,013
Corporate savings deposits	0.00 ~ 3.20		8,531,984			9,391,238
Long-term savings deposits for workers	11.50 ~ 12.00		4,649			7,388
Long-term housing savings deposits	4.30		2,873,770			2,390,596
Long-term savings for households	11.00		4,318			7,377
Workers’ preferential savings deposits	5.35		619,751			1,097,848
Mutual installment deposits	3.20~4.10		3,979,243			5,120,668
Mutual installment for housing	2.50~3.80		4,038,389			4,582,031

			97,591,077			101,568,622

			116,263,053			119,514,689
Loss (gain) on valuation of fair value hedged item (current period portion)			693			(2,133	)
Loss (gain) on valuation of fair value hedged item (prior year portion)			(2,133	)		—

			116,261,613			119,512,556

Demand deposits in foreign currencies:
Checking deposits	0.00~3.50		45,411			51,185
Passbook deposits	0.05~0.10		767,910			701,514
Notice deposits	0.47~6.21		205			241
Temporary deposits	—		1,969			1,300

			815,495			754,240

Time deposits and savings deposits in foreign currencies:
Time deposits	0.10~7.60		665,093			622,887
Installment savings deposits	5.00~6.50		580			643
Others	—		2,203			1,363

			667,876			624,893

			1,483,371			1,379,133

Negotiable certificates of deposits	3.60~4.15		10,745,697			5,389,543

		(Won)	128,490,681		(Won)	126,281,232

(3)	Deposits with financial institutions as of September 30, 2006 and December 31, 2005 were as follows (Unit: In millions):


	Financial institutions	2006		2005
Deposits in Won	Banks	(Won)	646,275	(Won)	1,023,544
	Others		4,156,741		5,201,307

			4,803,016		6,224,851

Deposits in foreign currencies	Banks		49,525		84,972
	Others		24,245		27,171

			73,770		112,143

Negotiable certificates of deposits	Banks		4,442		—
	Others		4,377,862		1,531,287

			4,382,304		1,531,287

		(Won)	9,259,090	(Won)	7,868,281

- 31 -

(4)	Term structure of deposits as of September 30, 2006 was as follows (Unit: In millions):


	Due in 3 months or less		Due after 3 months through 6 months		Due after 6 months through 1 year		Due after 1 year through 3 years		More than 3 years		Total
Deposits in Won	(Won)	70,760,843	(Won)	10,793,295	(Won)	24,330,074	(Won)	7,287,973	(Won)	3,089,428	(Won)	116,261,613
Deposits in foreign currencies		1,333,102		120,690		25,464		4,115		—		1,483,371
Negotiable certificate of deposits		5,735,675		3,910,654		1,098,877		491		—		10,745,697

	(Won)	77,829,620	(Won)	14,824,639	(Won)	25,454,415	(Won)	7,292,579	(Won)	3,089,428	(Won)	128,490,681

Term structure of deposits as of December 31, 2005 was as follows (Unit: In millions):


	Due in 3 months or less		Due after 3 months through 6 months		Due after 6 months through 1 year		Due after 1 year through 3 years		More than 3 years		Total
Deposits in Won	(Won)	72,722,858	(Won)	11,074,041	(Won)	25,280,674	(Won)	7,752,630	(Won)	2,682,353	(Won)	119,512,556
Deposits in foreign currencies		1,189,235		146,190		37,613		6,095		—		1,379,133
Negotiable certificate of deposits		2,346,463		2,351,554		690,927		599		—		5,389,543

	(Won)	76,258,556	(Won)	13,571,785	(Won)	26,009,214	(Won)	7,759,324	(Won)	2,682,353	(Won)	126,281,232

11.	BORROWINGS:

(1)	Borrowings as of September 30, 2006 and December 31, 2005 consisted of (Unit: In millions):


	2006		2005
Borrowings in Won	(Won)	2,025,034	(Won)	2,608,515
Borrowings in foreign currencies		4,040,273		3,186,803
Bonds sold under repurchase agreements		7,078,424		6,384,308
Bills sold		467,198		296,722
Due to BOK in foreign currencies		—		542
Call money		2,534,235		1,260,446

	(Won)	16,145,164	(Won)	13,737,336

(2)	Borrowings in Won as of September 30, 2006 and December 31, 2005 consisted of (Unit: In millions):


Account	Financial institution	Annual interest rate (%)	2006		2005
Borrowings from the BOK	BOK	2.75	(Won)	155,131	(Won)	646,308
Borrowings from the Korean government	Ministry of Finance and Economy, and others	0.00 ~ 6.50		581,812		636,948
Borrowings from banking institutions	Industrial Bank of Korea	3.40 ~ 4.25		82,280		115,437
Borrowings from National Housing Fund	National Housing Fund	8.00		1,445		2,004
Borrowings from non-banking financial institutions	Korea Development Bank	2.00 ~ 4.00		4,711		4,353
Other borrowings	Small Business Corporation and others	1.20 ~ 5.10		1,199,655		1,203,465

			(Won)	2,025,034	(Won)	2,608,515

- 32 -

(3)	Borrowings in foreign currencies as of September 30, 2006 and December 31, 2005 consisted of (Unit: In millions):


Account	Financial institution	Annual interest rates (%)	2006		2005
Due to banks	Bank of NovaScotia and others	—	(Won)	50,245	(Won)	42,954
Borrowings from banking institutions	Industrial and Commercial Bank of China and others	0.34 ~ 5.57		2,891,113		1,857,330
Off-shore borrowings in foreign currencies	United Overseas Bank NY IBF and others	5.28 ~ 5.88		273,973		401,197
Other borrowings from banking institutions	IBRD	6.11		6,959		10,466
Other borrowings in foreign currencies	Person, group & corporations	—		817,983		874,856

			(Won)	4,040,273	(Won)	3,186,803

(4)	Bonds sold under repurchase agreements, bills sold and due to BOK in foreign currencies as of September 30, 2006 and December 31, 2005 consisted of the following (Unit: In millions):


Account	Financial institution	Annual interest rates (%)	2006		2005
Bonds sold under repurchase agreements in Won	Person, group & corporations	3.12 ~ 4.40	(Won)	7,078,424	(Won)	6,384,308
Bills sold	Teller’s Sales	3.50 ~ 4.05		467,198		296,722
Due to the Bank of Korea in foreign currencies	BOK	—		—		542

			(Won)	7,545,622	(Won)	6,681,572

(5)	Call money as of September 30, 2006 and December 31, 2005 consisted of (Unit: In millions):


Account	Financial institution	Annual interest rates (%)	2006		2005
Won	Hana Bank and others	4.15 ~ 4.47	(Won)	2,267,500	(Won)	984,100
Foreign currencies	State Bank of India and others	5.20 ~ 5.39		266,735		276,346

			(Won)	2,534,235	(Won)	1,260,446

(6)	Borrowings in Won, borrowings in foreign currencies and others with financial institutions as of September 30, 2006 were as follows (Unit: In millions):


	Won		Foreign currencies		Due to BOK & call money		Total
BOK	(Won)	155,131	(Won)	—	(Won)	—	(Won)	155,131
Banks		82,280		3,215,331		843,735		4,141,346
Others		4,711		6,959		1,690,500		1,702,170

	(Won)	242,122	(Won)	3,222,290	(Won)	2,534,235	(Won)	5,998,647

- 33 -

Borrowings in Won, borrowings in foreign currencies and others with financial institutions as of December 31, 2005 were as follows (Unit: In millions):


	Won		Foreign currencies		Due to BOK & call money		Total
BOK	(Won)	646,308	(Won)	—	(Won)	542	(Won)	646,850
Banks		115,437		2,301,481		276,346		2,693,264
Others		4,353		10,466		984,100		998,919

	(Won)	766,098	(Won)	2,311,947	(Won)	1,260,988	(Won)	4,339,033

(7)	Term structure of borrowings as of September 30, 2006 was as follows (Unit: In millions):


	Due in 3 months or less		Due after 3 months through 6 months		Due after 6 months through 1 year		Due after 1 year through 3 years		More than 3 years		Total
Borrowings in Won	(Won)	230,816	(Won)	66,536	(Won)	149,626	(Won)	684,917	(Won)	893,139	(Won)	2,025,034
Borrowings in foreign currencies		1,017,371		863,372		1,562,059		579,461		18,010		4,040,273
Bonds sold under repurchase agreements		4,026,794		1,778,109		1,271,678		1,843		—		7,078,424
Bills sold		364,853		99,851		2,494		—		—		467,198
Call money		2,534,235		—		—		—		—		2,534,235

	(Won)	8,174,069	(Won)	2,807,868	(Won)	2,985,857	(Won)	1,266,221	(Won)	911,149	(Won)	16,145,164

Term structure of borrowings as of December 31, 2005 was as follows (Unit: In millions):


	Due in 3 months or less		Due after 3 months through 6 months		Due after 6 months through 1 year		Due after 1 year through 3 years		More than 3 years		Total
Borrowings in Won	(Won)	711,978	(Won)	71,183	(Won)	151,966	(Won)	712,198	(Won)	961,190	(Won)	2,608,515
Borrowings in foreign currencies		1,369,440		1,009,506		463,420		315,981		28,456		3,186,803
Bonds sold under repurchase agreements		3,391,564		1,415,535		1,562,596		14,613		—		6,384,308
Bills sold		89,094		207,482		146		—		—		296,722
Due to the BOK in foreign currencies		426		116		—		—		—		542
Call money		1,260,446		—		—		—		—		1,260,446

	(Won)	6,822,948	(Won)	2,703,822	(Won)	2,178,128	(Won)	1,042,792	(Won)	989,646	(Won)	13,737,336

12.	DEBENTURES:

(1)	Debentures as of September 30, 2006 and December 31, 2005 consisted of (Unit: In millions):


	2006			2005
Debentures in Won	(Won)	22,754,370		(Won)	15,528,273
Less: Discount on debentures		(179,338	)		(35,368	)
Debentures in foreign currencies		1,682,203			1,051,990
Addition: Premiums on debentures		1,564			3,092

	(Won)	24,258,799		(Won)	16,547,987

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(2)	Debentures in Won as of September 30, 2006 and December 31, 2005 consisted of (Unit: In millions):


	Annual interest rate (%)	2006			2005
Hybrid debentures	6.00 ~ 7.00	(Won)	903,668		(Won)	903,668
Structured debentures	4.29 ~ 8.62		1,498,830			208,131
Subordinated fixed rate debentures in Won	4.19 ~ 15.02		6,690,111			5,794,072
KCC subordinated fixed rate debentures	7.10 ~ 8.00		205,000			205,000
KCC fixed rate debentures	5.53 ~ 5.87		200,000			390,000
Fixed rate debentures	3.14 ~ 6.44		13,233,851			8,068,146

			22,731,460			15,569,017
Loss (gain) on valuation of fair value hedged items (current period portion)			63,654			(44,494	)
Loss (gain) on valuation of fair value hedged items (prior year portion)			(40,744	)		3,750

			22,754,370			15,528,273
Discounts on debentures			(179,338	)		(35,368	)

		(Won)	22,575,032		(Won)	15,492,905

(3)	Hybrid debentures and subordinated debentures as of September 30, 2006 and December 31, 2005 were as follows (Unit: In millions):


	Issued date	Expiration date	Annual interest rate (%)	2006		2005
Subordinated fixed rate debentures in Won	Feb-98 ~ Dec-00	Feb-03 ~ Feb-06	—	(Won)	18,713	(Won)	1,009,529
	Nov-98	Nov-09	15.02		90,900		104,900
	Nov-00	Nov-10 ~ Dec-10	9.57 ~ 9.65		162,051		162,051
	May-01	Feb-07	7.60 ~ 7.65		200,000		200,000
	Jun-01	Mar-08 ~ Mar-09	7.68 ~ 7.86		377,529		377,529
	Aug-01	Aug-07	6.69 ~ 6.73		100,000		100,000
	Sep-01	Mar-08	6.69 ~ 6.73		150,000		150,000
	Mar-02	Jan-08	7.06 ~ 7.10		241,684		241,684
	Jul-02	Jan-08	6.96 ~ 7.00		302,399		302,399
	Sep-02	Mar-08 ~ Mar-13	6.27 ~ 6.70		500,000		500,000
	Nov-02	May-08 ~ May-13	6.07 ~ 6.55		558,775		558,775
	Dec-02	Jan-08	8.00		110,000		110,000
	Dec-02	Jun-08 ~ Dec-14	6.20 ~ 6.65		180,370		180,370
	Jan-03	Feb-08	7.65		50,000		50,000
	Mar-03	Apr-08	7.10		45,000		45,000
	Oct-03	Jan-09 ~ Jan-14	5.18 ~ 5.60		449,051		449,051
	Feb-04	Aug-09 ~ Aug-14	5.65 ~ 6.16		700,000		700,000
	Sep-04	Dec-18	5.12		57,784		57,784
	Dec-04	Jun-10	4.19 ~ 4.20		700,000		700,000
	Mar-06	Jan-12	5.67 ~ 5.70		1,900,855		—

					6,895,111		5,999,072

Hybrid debentures	Jun-03	Jun-33	6.00		105,145		105,145
	Aug-03	Aug-33	7.00		533,355		533,355
	Oct-03	Oct-33	6.80		265,168		265,168

					903,668		903,668

				(Won)	7,798,779	(Won)	6,902,740

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(4)	Debentures in foreign currencies as of September 30, 2006 and December 31, 2005 were as follows (Unit: In millions):


	Annual interest rate (%)	2006			2005
Floating rates debentures	0.18 ~ 6.00	(Won)	1,210,753		(Won)	550,365
Fixed rates debentures	2.37 ~ 4.63		482,723			517,234

			1,693,476			1,067,599
Loss (gain) on valuation of fair value hedged items (current period portion)			4,336			(8,181	)
Gain on valuation of fair value hedged items (prior year portion)			(15,609	)		(7,428	)

			1,682,203			1,051,990
Premiums on debentures			2,317			4,076
Discounts on debentures			(753	)		(984	)

		(Won)	1,683,767		(Won)	1,055,082

(5)	Term structure of debentures as of September 30, 2006 was as follows (Unit: In millions):


	Due in 3 months or less		Due after 3 months through 6 months		Due after 6 months through 1 year		Due after 1 year through 3 years		More than 3 years		Total
Debentures in Won	(Won)	1,346,465	(Won)	1,989,259	(Won)	4,382,519	(Won)	9,071,550	(Won)	5,964,577	(Won)	22,754,370
Debentures in foreign currencies		24,067		231,768		359,275		741,511		325,582		1,682,203

	(Won)	1,370,532	(Won)	2,221,027	(Won)	4,741,794	(Won)	9,813,061	(Won)	6,290,159	(Won)	24,436,573

Term structure of debentures as of December 31, 2005 was as follows (Unit: In millions):


	Due in 3 months or less		Due after 3 months through 6 months		Due after 6 months through 1 year		Due after 1 year through 3 years		More than 3 years		Total
Debentures in Won	(Won)	1,825,117	(Won)	2,924,111	(Won)	3,532,030	(Won)	3,215,630	(Won)	4,031,385	(Won)	15,528,273
Debentures in foreign currencies		20,381		48,994		42,995		593,743		345,877		1,051,990

	(Won)	1,845,498	(Won)	2,973,105	(Won)	3,575,025	(Won)	3,809,373	(Won)	4,377,262	(Won)	16,580,263

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13.	OTHER LIABILITIES:

Other liabilities as of September 30, 2006 and December 31, 2005 consisted of (Unit: In millions):


	2006			2005
Accrued severance benefits (Note 15)	(Won)	478,158		(Won)	387,491
Less: Severance insurance deposits (Note 15)		(272,309	)		(236,529	)
Allowance for possible losses on acceptances and guarantees (Note 14)		13,986			10,141
Due to trust accounts		1,238,549			1,059,469
Guarantees deposits received		97,732			109,454
Accounts payable		5,511,124			834,510
Accrued expenses		4,487,146			4,872,756
Advances from customers		147,835			360,766
Unearned revenues		90,057			79,652
Withholding taxes		67,795			83,262
Accounts for agency business		124,901			110,982
Domestic exchange settlement loans		120,738			538,799
Derivatives liabilities		1,185,574			1,070,996
Agency		237,959			272,838
Sundry liabilities (Note 16)		1,163,686			1,098,907

	(Won)	14,692,931		(Won)	10,653,494

14.	ACCEPTANCES AND GUARANTEES AND ALLOWANCES FOR POSSIBLE LOSSES:

(1)	Acceptances and guarantees as of September 30, 2006 and December 31, 2005 were as follows (Unit: In millions):


Types	2006		2005
Confirmed acceptances and guarantees in Won:
Payment guarantee for issuance of debentures	(Won)	873	(Won)	768
Payment guarantee for loans		38,608		34,527
Others		855,469		352,946

		894,950		388,241

Confirmed acceptances and guarantees in foreign currencies:
Acceptances on letters of credit		89,088		86,170
Acceptances for letters of guarantee for importers		64,120		68,272
Guarantees for performance of contracts		72,835		68,692
Guarantees for bids		3,256		4,004
Guarantees for borrowings		44,668		48,091
Guarantees for repayment of advances		958,484		761,489
Others		458,107		364,601

		1,690,558		1,401,319

		2,585,508		1,789,560

Unconfirmed acceptances and guarantees:
Letters of credit		1,234,638		1,092,825
Others		1,042,819		879,367

		2,277,457		1,972,192

Bills endorsed		7,563		10,910

	(Won)	4,870,528	(Won)	3,772,662

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(2)	Acceptances and guarantees, by customer, as of September 30, 2006 were as follows (Unit: In millions):


By customer	Confirmed		Unconfirmed		Bills endorsed		Total		Percentage (%)
Large corporations	(Won)	2,057,480	(Won)	1,572,901	(Won)	556	(Won)	3,630,937	74.55
Small and medium corporations		510,073		666,634		6,869		1,183,576	24.30
Public sector and others		17,955		37,922		138		56,015	1.15

	(Won)	2,585,508	(Won)	2,277,457	(Won)	7,563	(Won)	4,870,528	100.00

Acceptances and guarantees, by customer, as of December 31, 2005 were as follows (Unit: In millions):


By customer	Confirmed		Unconfirmed		Bills endorsed		Total		Percentage (%)
Large corporations	(Won)	1,383,240	(Won)	1,354,723	(Won)	470	(Won)	2,738,433	72.59
Small and medium corporations		401,455		612,302		10,149		1,023,906	27.14
Public sector and others		2,652		5,088		291		8,031	0.21
Foreign customer		2,213		79		—		2,292	0.06

	(Won)	1,789,560	(Won)	1,972,192	(Won)	10,910	(Won)	3,772,662	100.00

(3)	Acceptances and guarantees, by industry, as of September 30, 2006 were as follows (Unit: In millions):


By industry	Confirmed		Unconfirmed		Bills endorsed		Total		Percentage (%)
Public sector	(Won)	110	(Won)	165,249	(Won)	—	(Won)	165,359	3.40
Finance		684,476		175		—		684,651	14.06
Service		560,592		73,240		—		633,832	13.01
Manufacturing		973,856		1,656,736		2,509		2,633,101	54.06
Others		366,474		382,057		5,054		753,585	15.47

	(Won)	2,585,508	(Won)	2,277,457	(Won)	7,563	(Won)	4,870,528	100.00

Acceptances and guarantees, by industry, as of December 31, 2005 were as follows (Unit: In millions):


By industry	Confirmed		Unconfirmed		Bills endorsed		Total		Percentage (%)
Public sector	(Won)	707,759	(Won)	867,544	(Won)	—	(Won)	1,575,303	41.76
Finance		389,019		10,311		—		399,330	10.58
Service		277,569		403,005		4,228		684,802	18.15
Manufacturing		298,596		663,200		6,350		968,146	25.66
Others		116,617		28,132		332		145,081	3.85

	(Won)	1,789,560	(Won)	1,972,192	(Won)	10,910	(Won)	3,772,662	100.00

(4)	Acceptances and guarantees, by country, as of September 30, 2006 were as follows (Unit: In millions):


By country	Confirmed		Unconfirmed		Bills endorsed		Total		Percentage (%)
Korea	(Won)	2,254,589	(Won)	2,277,457	(Won)	7,563	(Won)	4,539,609	93.21
Japan		64		—		—		64	0.00
France		321,368		—		—		321,368	6.60
Others		9,487		—		—		9,487	0.19

	(Won)	2,585,508	(Won)	2,277,457	(Won)	7,563	(Won)	4,870,528	100.00

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Acceptances and guarantees, by country, as of December 31, 2005 were as follows (Unit: In millions):


By country	Confirmed		Unconfirmed		Bills endorsed		Total		Percentage (%)
Korea	(Won)	1,455,270	(Won)	1,972,113	(Won)	10,910	(Won)	3,438,293	91.14
France		293,770		—		—		293,770	7.79
USA		40,520		—		—		40,520	1.07
Others		—		79		—		79	0.00

	(Won)	1,789,560	(Won)	1,972,192	(Won)	10,910	(Won)	3,772,662	100.00

(5)	Allowance for possible losses on acceptances and guarantees and others as of September 30, 2006 was as follows (Unit: In millions):


	Confirmed acceptances and guarantees				Unconfirmed acceptances and guarantees		Bills endorsed		Total
	Won		Foreign currencies		Unconfirmed acceptances and guarantees		Bills endorsed		Total
Normal	(Won)	891,210	(Won)	1,685,150	(Won)	2,253,098	(Won)	7,367	(Won)	4,836,825
Precautionary		3,327		1,050		7,937		189		12,503
Substandard		339		3,896		8,959		7		13,201
Doubtful		—		57		1,200		—		1,257
Estimated loss		74		405		6,263		—		6,742

	(Won)	894,950	(Won)	1,690,558	(Won)	2,277,457	(Won)	7,563	(Won)	4,870,528
Allowance for possible losses		2,424		5,383		6,137		42		13,986

Ratio (%)		0.27		0.32		0.27		0.56		0.29

Allowance for possible losses on acceptances and guarantees and others as of December 31, 2005 were as follows (Unit: In millions):


	Confirmed acceptances and guarantees				Unconfirmed acceptances and guarantees		Bills endorsed		Total
	Won		Foreign currencies		Unconfirmed acceptances and guarantees		Bills endorsed		Total
Normal	(Won)	382,574	(Won)	1,387,575	(Won)	1,943,043	(Won)	10,572	(Won)	3,723,764
Precautionary		3,658		11,335		12,573		299		27,865
Substandard		50		2,194		8,445		—		10,689
Doubtful		1,888		209		1,198		39		3,334
Estimated loss		71		6		6,933		—		7,010

	(Won)	388,241	(Won)	1,401,319	(Won)	1,972,192	(Won)	10,910	(Won)	3,772,662
Allowance for possible losses		1,395		3,640		5,028		78		10,141

Ratio (%)		0.36		0.26		0.25		0.71		0.27

(6)	The percentage of allowance for possible losses on acceptances and guarantees and others as of September 30, 2006 and December 31, 2005, 2004 and 2003 was as follows (Unit: In millions):


	Guarantees and acceptances and others		Allowance		Percentage (%)
September 30, 2006 (*)	(Won)	4,870,528	(Won)	13,986	0.29
December 31, 2005 (*)		3,772,662		10,141	0.27
December 31, 2004		975,788		1,150	0.12
December 31, 2003		800,297		1,074	0.13

(*)	Pursuant to the amended Supervisory Regulation of Banking Business, the Bank has extended the scope of allowance for possible losses since 2005.

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15.	ACCRUED SEVERANCE BENEFITS:

The changes in accrued severance benefits for the nine months ended September 30, 2006 were as follows (Unit: In millions):


	Beginning			Provision			Payment			Other changes			Ending
Accrued severance benefits	(Won)	387,491		(Won)	103,864		(Won)	13,187		(Won)	(10	)	(Won)	478,158
Severance insurance deposits		(236,529	)		(37,405	)		(1,625	)		—			(272,309	)

	(Won)	150,962		(Won)	66,459		(Won)	11,562		(Won)	(10	)	(Won)	205,849

As of September 30, 2006, part of severance benefits was contributed to pension funds of Kyobo Life Insurance Co., Ltd. and others in which the beneficiary is a respective employee.

16.	SUNDRY LIABILITIES:

(1)	Sundry liabilities as of September 30, 2006 and December 31, 2005 consisted of (Unit: In millions):


	2006		2005
Borrowings for others’ business	(Won)	116,379	(Won)	128,567
Foreign currency bills payable		87,665		38,645
Prepaid card and debit card liabilities		17,764		8,540
Subscription deposits		78,988		45,904
Other allowances		861,938		875,835
Others		952		1,416

	(Won)	1,163,686	(Won)	1,098,907

(2)	Other allowances as of September 30, 2006 and December 31, 2005 consisted of (Unit: In millions):


	2006		2005
Loss on branch closure	(Won)	140	(Won)	167
Mileage rewards		86,155		85,876
Credit commitments to SPC (Note 19)		291,994		384,724
KAMCO loans sold (Note 19)		249		241
Dormant accounts		18,268		27,035
KP Chemical loans sold		4,130		4,029
Unused credit limit		347,936		342,281
Others		113,066		31,482

	(Won)	861,938	(Won)	875,835

The unused credit limit for other allowances amounts to (Won)72,286,095 million as of September 30, 2006.

17.	SHAREHOLDERS’ EQUITY:

(1)	Capital stock

As of September 30, 2006 and December 31, 2005, the Bank has 1 billion common shares authorized with a par value per share of (Won)5,000 and 336,379,116 shares issued. The Bank’s major shareholders were Euro-Pacific Growth Fund (16,659,610 shares, 4.95 percent) and ING Bank N.V. Amsterdam (13,650,001 shares, 4.06 percent) as of September 30, 2006.

As a result of the legal consolidation with H&CB, the registered shareholders of both the Bank and H&CB, as of October 31, 2001, received 179,775,233 shares and 119,922,229 shares, respectively. The new shares were distributed based on an exchange ratio of one new Bank share each for 1.688346 old Bank shares and one new Bank share for one H&CB share. The new shares were listed on the Korea Stock Exchange on November 9, 2001. Furthermore, as a result of the merger with Kookmin Credit Co., Ltd., the Bank issued 8,120,431 shares.

- 40 -

Under the General Banking Act, if a single entity, other than the government or a foreign investor, owns more than 4 percent of total outstanding voting shares, that entity’s voting rights are limited to 4 percent shareholding.

(2)	Capital surplus

The capital surplus as of September 30, 2006 and December 31, 2005 were as follows (Unit: In millions):


	2006		2005
Paid-in-capital in excess of par value	(Won)	5,655,840	(Won)	5,655,840
Gain on business combination		397,669		397,669
Revaluation increment		177,229		177,229
Gain on disposal of treasury stock		27,559		24,048

	(Won)	6,258,297	(Won)	6,254,786

The gain on business combination was due to the difference between the business combination consideration and the net asset value acquired from the merger with KLB on December 31, 1998.

(3)	Retained earnings

1)	Appropriations of retained earnings for the year ended December 31, 2005 as resolved at the general meeting of shareholders on March 24, 2006 are summarized as follows (Unit: In millions):


	Amount
Retained earnings before appropriations:
Accumulated deficits carried over from prior years	(Won)	(194,772	)
Net income		2,252,218

Appropriations:
Legal reserve		225,300
Discretionary appropriated retained earnings		1,646,500
Other reserves		698
Cash dividends		184,889

Inappropriate retained earnings carried forward to the subsequent year	(Won)	59

2)	Legal reserve

The Korean Banking Law requires a bank to appropriate at least 10 percent of net income after income tax to legal reserve, until such reserve equals 100 percent of its paid-in capital. This reserve is not available for payment of cash dividends; however, it can be used to reduce deficit or be transferred to capital.

3)	Reserve for financial structure improvement (voluntary reserve)

In 2002, the Finance Supervisory Service recommended banks to appropriate at least 10 percent of net income after accumulated deficit to reserve for financial structure improvement, until simple capital ratio equals 5.5 percent. This reserve is not available for payment of cash dividends; however, it can be used to reduce deficit or be transferred to capital.

4)	Retained earnings appropriated for accumulated deficit

The Bank appropriated voluntary reserve amounting to (Won)754,900 million to offset accumulated deficit, pursuant to the approval at the shareholders’ meeting on March 23, 2004.

- 41 -

(4)	Capital adjustments

1)	Capital adjustments as of September 30, 2006 and December 31, 2005 were as follows (Unit: In millions):


	2006			2005
Treasury stock	(Won)	—		(Won)	(9,660	)
Gain on valuation of available-for-sale securities		675,291			511,368
Gain on valuation of held-to-maturity securities		153			426
Gain on valuation of securities using the equity method		17,811			13,282
Loss on valuation of securities using the equity method		(7,630	)		(12,334	)
Stock options		—			3,888

	(Won)	685,625		(Won)	506,970

2)	The changes of capital adjustments for the nine months ended September 30, 2006 were as follows (Unit: In millions):


	Beginning balance			Changes		Disposal or realization			Ending balance
Treasury stock	(Won)	(9,660	)	(Won)	—	(Won)	9,660		(Won)	—
Gain on valuation of available-for-sale securities		511,368			267,727		(103,804	)		675,291
Gain on valuation of held-to-maturity securities		426			—		(273	)		153
Change due to the equity method		948			9,615		(382	)		10,181
Stock options		3,888			—		(3,888	)		—

	(Won)	506,970		(Won)	277,342	(Won)	(98,687	)	(Won)	685,625

18.	STOCK OPTIONS:

(1)

The Bank granted stock options to executives including the president over the years. When the stock options are exercised, the Bank has the option to settle either through issuance of new shares or treasury stock, or through payment of cash equivalent to the difference between the market price and the exercise price. In accordance with the resolution of the Board of Directors on August 23, 2005, the Bank has changed the settlement method from granting the treasury stock to paying cash equivalent to the difference between the market price and the exercise price only after the remaining treasury stock is exhausted. Accordingly, stock options against 217,935 shares of treasury stock, which the Bank owned as of December 31, 2005, were recorded using the fair value method accounting, and the other stock options were recorded using intrinsic value method accounting. Stock options that are settled through the issuance of shares were entirely exercised in 2006, and the remaining stock options as of September 30, 2006 are entirely those that are settled through payment of cash equivalent to the difference between the market price and the exercise price.

The details of the stock options as of September 30, 2006 were as follows:


		Granted shares
	Grant date	Granted	Forfeited	Exercised	Outstanding	Exercise price		Exercise period
Series 2	01.03.15	214,975	16,882	108,525	89,568	(Won)	28,027	04.03.16 ~ 09.03.15
Series 4	00.02.28	267,000	65,218	201,782	—		27,600	03.03.01 ~ 06.02.28
Series 6	01.03.24	111,000	38,624	63,743	8,633		25,100	04.03.25 ~ 07.03.24
Series 7	01.11.16	850,000	200,000	500,000	150,000		51,200	04.11.17 ~ 09.11.16
Series 8-1 (*1)	02.03.22	132,000	89,753	13,384	28,863		57,100	05.03.23 ~ 10.03.22
Series 8-2 (*2)	02.03.22	490,000	180,691	45,744	263,565		57,100	05.03.23 ~ 10.03.22
Series 9 (*2)	02.07.26	30,000	6,101	—	23,899		58,800	05.07.27 ~ 10.07.26
Series 10-1(*1)	03.03.21	140,000	76,557	20,029	43,414		46,962	06.03.22 ~ 11.03.21
Series 10-2 (*2)	03.03.21	180,000	91,097	13,886	75,017		35,500	06.03.22 ~ 11.03.21
Series 11(*2)	03.08.27	30,000	24,909	—	5,091		40,500	06.08.28 ~ 11.08.27

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		Granted shares
	Grant date	Granted	Forfeited	Exercised	Outstanding	Exercise price	Exercise period
Series 12 (*2)	04.02.09	85,000	9,461	—	75,539	46,100	07.02.10 ~ 12.02.09
Series 13-1(*1)	04.03.23	20,000	—	—	20,000	48,650	07.03.24 ~ 12.03.23
Series 13-2 (*2)	04.03.23	10,000	—	—	10,000	47,200	07.03.24 ~ 12.03.23
Series 14 (*1, 2)	04.11.01	700,000	—	—	700,000	50,400	07.11.02 ~ 12.11.01
Series 15-1(*1)	05.03.18	165,000	29,741	—	135,259	58,667	08.03.19 ~ 13.03.18
Series 15-2 (*2)	05.03.18	765,000	184,931	—	580,069	46,800	08.03.19 ~ 13.03.18
Series 16 (*2)	05.04.27	15,000	—	—	15,000	45,700	08.04.28 ~ 13.04.27
Series 17 (*2)	05.07.22	30,000	—	—	30,000	49,200	08.07.23 ~ 13.07.22
Series 18 (*2)	05.08.23	15,000	—	—	15,000	53,000	08.08.24 ~ 13.08.23
Series 19 (*1)	06.03.24	940,000	—	—	940,000	76,600	07.03.25 ~ 14.03.24
Series 20 (*1)	06.04.28	30,000	—	—	30,000	81,900	09.04.29 ~ 14.04.28
Kookmin Credit Card-1 (*3)	01.03.22	22,146	—	—	22,146	71,538	04.03.23 ~ 11.03.22
Kookmin Credit Card -2 (*1, 3)	02.03.29	9,990	—	—	9,990	129,100	04.03.30 ~ 11.03.29

		5,252,111	1,013,965	967,093	3,271,053

(*1)	The exercise price is adjusted by reflecting the increase in average stock price index of banking industry as of September 30, 2006.

(*2)

As the actual number of exercisable granted shares is determined in accordance with the management performance for the contract period of service, the number of granted shares used for the calculation of compensation cost is computed based on the assumption that the performance result falls into the highest level in the bracket.

(*3)	The Bank took over the stock options granted by Kookmin Credit Card Co., Ltd. of which the exercise price and number of shares were adjusted in proportion to the merger ratio.

(2)	The compensation costs as of September 30, 2006 were as follows (Unit: In millions):


	Amount
Total compensation cost of stock options	(Won)	59,955
Reflected compensation cost		44,272

Compensation cost to be reflected	(Won)	15,683

The Bank recognized (Won)14,532 million of compensation cost for the nine months ended September 30, 2006.

19.	CONTINGENCIES AND COMMITMENTS:

(1)	The Bank holds written-off loans, of which the claim for borrowers and guarantors have not been terminated , amounting to (Won)8,225,138 million and (Won)7,743,273 million as of September 30, 2006 and December 31, 2005, respectively.

(2)

As of September 30, 2006, the Bank has entered into commitments to provide credit line of (Won)2,202,750 million and to purchase commercial papers amounting to (Won)1,168,700 million with several special purpose companies. Under these commitments, the Bank extended (Won)134,224 million of loans to the companies and recognized (Won)291,994 million of expected loss as other allowance. The Bank has no balance of commitment to purchase commercial papers as of September 30, 2006. In addition, the Bank has entered into commitment amounting to (Won)321,657 million to provide foreign currency loans as of September 30, 2006 and under these commitments, the balance of loans amounts to (Won)151,127 million.

(3)	The Bank entered into the business cooperation agreements with Woori Bank, Citibank and Nonghyup regarding the credit card business. Accordingly, the Bank shares the related revenue from such business operation.

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(4)	As of September 30, 2006, the Bank has provided allowances of (Won)249 million for losses in relation to the possible future repurchase of loans, which the Bank sold to Korea Asset Management Corporation (“KAMCO”) for (Won)669 million.

(5)	As of September 30, 2006 and December 31, 2005, the Bank recorded receivables amounting to (Won)5,178,233 million and (Won)383,838 million, respectively and payables amounting to (Won)5,178,040 million and (Won)383,550 million for unsettled foreign currency spot transactions, respectively.

(6)

As of September 30, 2006, the Bank faces 138 pending legal actions involving aggregate damages of (Won)380,878 million. Moreover, the Bank has filed 173 lawsuits, which are still pending, with aggregate claims of (Won)511,593 million. Management believes that the actions against the Bank are without merit and that the ultimate liability, if any, will not materially affect the Bank’s financial position.

(7)	Financial derivatives

The notional amounts outstanding for derivative contracts as of September 30, 2006 and December 31, 2005 were as follows (Unit: In millions):


Type	2006						2005
Type	Trading		Hedge		Total		Trading		Hedge		Total
Interest rate:
Interest rate forwards	(Won)	378,080	(Won)	—	(Won)	378,080	(Won)	303,250	(Won)	—	(Won)	303,250
Interest rate futures		1,674,494		—		1,674,494		695,443		—		695,443
Interest rate swaps		41,091,372		3,637,896		44,729,268		33,487,799		1,581,097		35,068,896
Interest rate options purchased		207,260		—		207,260		300,650		—		300,650
Interest rate options sold		347,260		—		347,260		640,650		—		640,650

		43,698,466		3,637,896		47,336,362		35,427,792		1,581,097		37,008,889

Currency:
Currency forwards		95,546,471		—		95,546,471		58,354,822		—		58,354,822
Currency futures		2,350,461		—		2,350,461		2,419,652		—		2,419,652
Currency swaps		7,058,974		—		7,058,974		4,796,740		—		4,796,740
Currency options purchased		146,611		—		146,611		119,345		—		119,345
Currency options sold		101,502		—		101,502		73,056		—		73,056

		105,204,019		—		105,204,019		65,763,615		—		65,763,615

Stock:
Stock index futures		77,340		—		77,340		13,567		—		13,567
Stock options purchased		583,396		—		583,396		2,746,364		—		2,746,364
Stock options sold		994,295		—		994,295		2,754,603		—		2,754,603
Stock swaps		68,426		—		68,426		—		—		—

		1,723,457		—		1,723,457		5,514,534		—		5,514,534

Other:
Gold index options purchased		—		—		—		146,268		—		146,268
Gold index options sold		—		—		—		146,268		—		146,268

		—		—		—		292,536		—		292,536

	(Won)	150,625,942	(Won)	3,637,896	(Won)	154,263,838	(Won)	106,998,477	(Won)	1,581,097	(Won)	108,579,574

(*)

For transaction between Won and foreign currencies, unsettled amount of transaction is presented using the basic foreign exchange rate based on the contract amount in foreign currencies. For transaction between foreign currencies and foreign currencies, unsettled amount is presented using the basic foreign exchange rate based on foreign currencies purchased at balance sheet dates.

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The details of financial derivatives as of September 30, 2006 and the valuation of financial derivatives for the nine months ended September 30, 2006 were as follows (Unit: In millions):


Type	Gain on valuation (P/L)						Loss on valuation (P/L)						Gain (loss) on valuation(B/S)
Type	Trading		Hedge		Total		Trading		Hedge		Total		Assets		Liability
Interest rate:

Interest rate forwards	(Won)	9	(Won)	—	(Won)	9	(Won)	22	(Won)	—	(Won)	22	(Won)	9	(Won)	22
Interest rate swaps		170,254		77,193		247,447		245,550		8,510		254,060		223,771		214,991
Interest rate options purchased		1,704		—		1,704		952		—		952		3,365		—
Interest rate options sold		1,386		—		1,386		220		—		220		—		698

		173,353		77,193		250,546		246,744		8,510		255,254		227,145		215,711

Currency:
Currency forwards		631,025		—		631,025		645,207		—		645,207		659,123		684,954
Currency swaps		218,896		—		218,896		123,686		—		123,686		452,926		242,215
Currency options purchased		349		—		349		892		—		892		42		1,532
Currency options sold		457		—		457		13		—		13		128		432

		850,727		—		850,727		769,798		—		769,798		1,112,219		929,133

Stock:
Stock option purchased		28,793		—		28,793		5,502		—		5,502		48,713		—
Stock option sold		9,123		—		9,123		7,786		—		7,786		—		39,235
Stock swaps		1,338		—		1,338		1,235		—		1,235		1,495		1,495

		39,254		—		39,254		14,523		—		14,523		50,208		40,730

	(Won)	1,063,334	(Won)	77,193	(Won)	1,140,527	(Won)	1,031,065	(Won)	8,510	(Won)	1,039,575	(Won)	1,389,572	(Won)	1,185,574

The details of financial derivatives as of December 31, 2005 and the valuation of financial derivatives for the nine months ended September 30, 2005 were as follows (Unit: In millions):


Type	Gain on valuation (P/L)						Loss on valuation (P/L)						Gain (loss) on valuation(B/S)
Type	Trading		Hedge		Total		Trading		Hedge		Total		Assets		Liability
Interest rate

Interest rate forwards	(Won)	9	(Won)	—	(Won)	9	(Won)	3	(Won)	—	(Won)	3	(Won)	6	(Won)	3
Interest rate swaps		326,664		—		326,664		275,462		43,449		318,911		231,275		242,745
Interest rate options purchased		348		—		348		2,732		—		2,732		2,778		—
Interest rate options sold		3,087		—		3,087		545		—		545		—		2,179

		330,108		—		330,108		278,742		43,449		322,191		234,059		244,927

Currency:
Currency forwards		471,104		—		471,104		469,226		—		469,226		607,398		584,155
Currency swaps		59,349		—		59,349		102,247		—		102,247		298,431		179,250
Currency options purchased		1,242		—		1,242		550		—		550		117		1,011
Currency options sold		389		—		389		760		—		760		618		42

		532,084		—		532,084		572,783		—		572,783		906,564		764,458

Stock:
Stock option purchased		13,458		—		13,458		13,507		—		13,507		61,345		—
Stock option sold		14,647		—		14,647		12,834		—		12,834		—		61,516

		28,105		—		28,105		26,341		—		26,341		61,345		61,516

Other:
Gold index options purchased		712		—		712		672		—		672		95		—
Gold index options sold		756		—		756		707		—		707		—		95

		1,468		—		1,468		1,379		—		1,379		95		95

	(Won)	891,765	(Won)	—	(Won)	891,765	(Won)	879,245	(Won)	43,449	(Won)	922,694	(Won)	1,202,063	(Won)	1,070,996

- 45 -

The Bank uses various derivative instruments for its trading activities, including interest rate and foreign exchange swaps, futures, forwards and options, to manage the interest rate characteristics of certain assets or liabilities and to economically hedge against the effects of fluctuations in interest rates or foreign exchange rates.

The Bank holds derivative instruments accounted for as fair value hedges applied to debentures, subordinated bonds, structured bonds and structured deposits. As of September 30, 2006, the Bank recognized (Won)8,510 million of gains and (Won)77,193 million of losses on valuation of fair value hedged items. In addition, the interest rate swap covers the fair value changes of the hedged items resulted from the fluctuation in interest rate and foreign exchange rate.

(8)	The Bank sold the Credit Default Swap to BNP Paribas to earn profits such as commission income as of September 30, 2006, and the details of the contract are as follows (Unit: In USD thousands):


Date of contract	Date of maturity	Amount	Reference entity
2006.8.24	2013.12.20	10,000	116 Global Bonds

Loss can be incurred in relation to the sale of the credit default swap as a result of the credit events such as the default of the reference entity.

20.	ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES:

Significant assets and liabilities denominated in foreign currencies as of September 30, 2006 and December 31, 2005 were as follows:


	2006				2005
	USD equivalent (In thousands)		KRW equivalent (In millions)		USD equivalent (In thousands)		KRW equivalent (In millions)
Assets:
Foreign currencies	US$	169,703	(Won)	160,403	US$	148,473	(Won)	150,402
Due from banks-foreign currencies		598,511		565,713		531,036		537,941
Securities-foreign currencies		911,655		861,696		768,890		778,887
Loans in foreign currencies		8,104,873		7,660,726		5,246,674		5,314,883
Bills bought in foreign currencies		1,372,998		1,297,758		1,359,412		1,377,085
Call loans in foreign currencies		76,358		72,173		49,307		49,948
Liabilities:
Deposits-foreign currencies	US$	1,569,373	(Won)	1,483,371	US$	1,361,435	(Won)	1,379,133
Borrowings-foreign currencies		4,274,516		4,040,273		3,145,906		3,186,803
Due to BOK in foreign currencies		—		—		535		542
Call money in foreign currencies		282,200		266,735		272,800		276,346
Debentures-foreign currencies		1,779,732		1,682,203		1,038,490		1,051,990
Foreign exchange remittance pending		92,747		87,665		38,149		38,645

(*)	Foreign currencies other than U.S. dollars were translated into U.S. dollars at the basic rates of exchange at balance sheet dates.

- 46 -

21.	INTEREST REVENUE AND EXPENSES:

The average balance of the interest bearing assets and liabilities, and the related interest revenue and expenses as of and for the nine months ended September 30, 2006 and 2005 were as follows (Unit: In millions):


	2006					2005
	Average balance		Interest revenue /expense		Interest rate (%)	Average balance		Interest revenue /expense		Interest rate (%)
Interest revenue
Due from banks(*)	(Won)	732,508	(Won)	22,419	4.09	(Won)	895,950	(Won)	18,432	2.75
Securities		28,815,374		1,011,654	4.69		22,957,376		808,414	4.71
Loans		140,895,240		7,826,252	7.43		137,352,157		7,572,251	7.37

	(Won)	170,443,122	(Won)	8,860,325	6.95	(Won)	161,205,483	(Won)	8,399,097	6.97

Interest expense
Deposits	(Won)	123,834,439	(Won)	2,497,749	2.70	(Won)	124,693,317	(Won)	2,422,243	2.60
Borrowings		16,796,910		491,815	3.91		11,656,272		260,151	2.98
Debentures		20,011,565		799,298	5.34		19,655,937		801,698	5.45

	(Won)	160,642,914	(Won)	3,788,862	3.15	(Won)	156,005,526	(Won)	3,484,092	2.99

(*)	Excluding the average balance of reserve deposits with BOK

22.	GENERAL AND ADMINISTRATIVE EXPENSES:

(1)	General and administrative expenses for the nine months ended September 30, 2006 and 2005 were as follows (Unit: In millions):


	2006		2005
Salaries	(Won)	1,160,460	(Won)	975,155
Provision for severance benefits		103,864		89,090
Other employee benefits		360,814		288,601
Rent		65,900		64,505
Depreciation and amortization		224,615		244,280
Taxes and dues		96,295		88,654
Advertising		63,282		34,696
Development expenses		102,237		99,001
Other general and administrative expenses		236,327		206,361

	(Won)	2,413,794	(Won)	2,090,343

(2)	Other general and administrative expenses for the nine months ended September 30, 2006 and 2005 were as follows (Unit: In millions):


	2006		2005
Communication	(Won)	30,700	(Won)	24,952
Electricity and utilities		13,047		12,774
Publication		15,950		14,545
Repairs maintenance		10,565		12,045
Vehicle		20,701		20,318
Travel		3,075		2,595
Training		17,224		12,993
Others		125,065		106,139

	(Won)	236,327	(Won)	206,361

- 47 -

23.	NON-OPERATING INCOME AND EXPENSES:

(1)	Non-operating income and expenses for the nine months ended September 30, 2006 and 2005 consisted of (In millions):


	2006		2005
Non-operating income:
Gain on disposal of tangible assets	(Won)	2,339	(Won)	9,475
Reversal of tangible assets impairment loss		962		—
Rental income		2,378		2,463
Gain on valuation of securities accounted for using the equity method		76,077		71,700
Gain on disposal of available-for-sale securities		136,165		282,431
Gain on disposal of held-to-maturity securities		—		216
Reversal of impairment loss on available-for-sale securities		83,725		7,422
Gain on sale of loans		36,311		79,935
Others		176,847		163,605

	(Won)	514,804	(Won)	617,247

Non-operating expenses:
Loss on disposal of tangible assets	(Won)	1,629	(Won)	3,764
Impairment loss on tangible assets		4,685		—
Loss on valuation of securities accounted for using the equity method		1,612		8,466
Loss on disposal of available-for-sale securities		13,220		17,210
Impairment loss on available-for-sale securities		53,463		26,144
Severance benefits for voluntary resignation		3,806		255,581
Loss on sale of loans		—		2,096
Others		81,837		76,111

	(Won)	160,252	(Won)	389,372

24.	INCOME TAX EXPENSE:

(1)	The differences between pretax accounting income and taxable income pursuant to Korean Corporate Income Tax Law for the nine months ended September 30, 2006 and 2005 are summarized as follows (Unit: In millions):


	2006						2005
Income before income tax				(Won)	3,113,790					(Won)	2,602,894
Taxable and non-deductible items:
Temporary difference	(Won)	1,764,847					(Won)	3,119,600
Permanent difference		947,200			2,712,047			408,716			3,528,316

Deductible and non-taxable items:
Temporary difference		(2,247,898	)					(2,103,782	)
Permanent difference		(640,596	)		(2,888,494	)		(743,308	)		(2,847,090	)

Taxable income				(Won)	2,937,343					(Won)	3,284,120

- 48 -

(2)	Reconciliation items between accounting income and taxable income pursuant to the Corporate Income Tax Law of Korea for the nine months ended September 30, 2006 and 2005 are as follows (Units: In millions):


Accounts	2006				2005
Accounts	Temporary difference		Permanent difference		Temporary difference		Permanent difference
Taxable and non-deductible items:
Loss (Gain) on fair value hedges	(Won)	68,294	(Won)	—	(Won)	3,502	(Won)	—
Allowance for loan losses		—		—		27,275		—
Accrued interest		349,024		—		309,506		—
Tangible asset impairment losses		14,520		—		1,267		—
Deferred loan organization fee and cost		52,025		—		48,889		—
Interest on ELD		13,966		—		80,229		—
Stock options		44,272		—		18,602		—
Allowance for possible losses on acceptances and guarantees		13,986		—		2,562		—
Loss (Gain) on valuation of financial derivatives		94,654		—		137,573		—
Goodwill		58,759		—		58,759		—
Present value discount		1,422		—		823		—
Dividends from SPC		15,993		—		129,022		—
Others		1,037,932		947,200		2,301,591		408,716

	(Won)	1,764,847	(Won)	947,200	(Won)	3,119,600	(Won)	408,716

Deductible and non-taxable items:
Loss (Gain)on fair value hedges	(Won)	—	(Won)	—	(Won)	37,324	(Won)	—
Allowance for loan losses		37,626		—		88,580		—
Accrued interest		359,772		—		84,836		—
Tangible asset impairment losses		11,466		—		2,296		—
Deferred loan organization fee and cost		96,465		—		50,921		—
Interest on ELD		24,928		—		41,937		—
Stock options		46,905		—		29,613		—
Allowance for possible losses on acceptances and guarantees		10,141		—		1,150		—
Present value discount		1,713		—		4,279		—
Loss (Gain) on valuation of financial derivatives		181,938		—		35,244		—
Dividends from SPC		70,674		—		—		—
Others		1,406,270		640,596		1,727,602		743,308

	(Won)	2,247,898	(Won)	640,596	(Won)	2,103,782	(Won)	743,308

- 49 -

(3)	Changes in cumulative temporary differences for the nine months ended September 30, 2006, and deferred income tax assets (liabilities) as of September 30, 2006 are as follows (Unit: In millions):


	2006
	Beginning balance (*)			Deduction			Addition			Ending balance
(Deductible temporary differences)
Loss (Gain) on fair value hedges	(Won)	(58,096	)	(Won)	—		(Won)	68,294		(Won)	10,198
Allowance for loan losses		37,626			37,626			—			—
Tangible asset impairment losses		11,466			11,466			14,520			14,520
Interest on ELD		31,108			24,928			13,966			20,146
Stock options		46,905			46,905			44,272			44,272
Allowance for possible losses on acceptances and guarantees		10,141			10,141			13,986			13,986
Present value discount		1,713			1,713			1,422			1,422
Dividends from SPC		268,685			70,674			15,993			214,004
Allowance for repurchase SPC		80,204			—			—			80,204
Others		1,353,334			983,313			1,076,901			1,446,922

		1,783,086		(Won)	1,186,766		(Won)	1,249,354			1,845,674

The exclusion of deferred income tax assets:
Dividends from SPC		268,685									214,004
Allowance for repurchase SPC		80,204									80,204
Others		57,611									67,686

		1,376,586									1,483,780
Statutory tax rate		27.5	%								27.5	%

Deferred income tax assets	(Won)	378,561								(Won)	408,040

(Taxable temporary differences)
Accrued interest	(Won)	(349,024	)	(Won)	(349,024	)	(Won)	(359,772	)	(Won)	(359,772	)
Deferred loan organization fee and cost		(52,025	)		(52,025	)		(96,465	)		(96,465	)
Loss (Gain) on valuation of financial derivatives		(94,654	)		(94,654	)		(181,938	)		(181,938	)
Goodwill		(378,669	)		(58,759	)		—			(319,910	)
Others		138,626			369,401			(92,525	)		(323,300	)

		(735,746	)	(Won)	(185,061	)	(Won)	(730,700	)		(1,281,385	)

The exclusion of deferred income tax liabilities:
Goodwill		(378,669	)								(319,910	)
Others		(44,567	)								(60,973	)

		(312,510	)								(900,502	)
Statutory tax rate		27.5	%								27.5	%

Deferred income tax liabilities	(Won)	(85,940	)							(Won)	(247,638	)

Net deferred income tax assets	(Won)	292,621								(Won)	160,402

(*)	The adjustment based on the final tax return was reflected in the beginning deferred income tax assets.

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Changes in cumulative temporary differences for the nine months ended September 30, 2005, and deferred income tax assets (liabilities) as of September 30, 2005 are as follows (Unit: In millions):


	2005
	Beginning balance (*)			Deduction			Addition			Ending balance
(Deductible temporary differences)
Allowance for loan losses	(Won)	116,934		(Won)	88,580		(Won)	27,275		(Won)	55,629
Tangible asset impairment losses		2,296			2,296			1,267			1,267
Interest on ELD		41,937			41,937			80,229			80,229
Stock options		29,613			29,613			18,602			18,602
Allowance for possible losses on acceptances and guarantees		1,150			1,150			2,562			2,562
Present value discount		4,279			4,279			823			823
Dividends from SPC		131,186			—			129,022			260,208
Others		2,237,186			1,700,636			1,517,855			2,054,405

		2,564,581		(Won)	1,868,491		(Won)	1,777,635			2,473,725

The exclusion of deferred income tax assets:
Dividends from SPC		131,186									260,208
Others		458									57,014

		2,432,937									2,156,503
Statutory tax rate		27.5	%								27.5	%

Deferred income tax assets	(Won)	669,058								(Won)	593,038

(Taxable temporary differences)
Loss (Gain) on fair value hedges	(Won)	(3,502	)	(Won)	(3,502	)	(Won)	(37,324	)	(Won)	(37,324	)
Accrued interest		(309,506	)		(309,506	)		(84,836	)		(84,836	)
Deferred loan organization fee and cost		(48,889	)		(48,889	)		(50,921	)		(50,921	)
Loss (Gain) on valuation of financial derivatives		(137,573	)		(137,573	)		(35,244	)		(35,244	)
Goodwill		(457,014	)		(58,759	)		—			(398,255	)
Others		(660,197	)		(495,669	)		(7,594	)		(172,122	)

		(1,616,681	)	(Won)	(1,053,898	)	(Won)	(215,919	)		(778,702	)

The exclusion of deferred income tax liabilities:
Loss on valuation on investment securities		(444,481	)								—
Goodwill		(457,014	)								(398,255	)
Others		—									(38,412	)

		(715,186	)								(342,035	)
Statutory tax rate		27.5	%								27.5	%

Deferred income tax liabilities	(Won)	(196,676	)							(Won)	(94,060	)

Net deferred income tax assets	(Won)	472,382								(Won)	498,978

(*)	The final tax return was reflected in the beginning deferred income tax assets

(4)	Prepaid income tax and income tax payable as of September 30, 2006 and December 31, 2005 are as follows (Unit: In millions):


	2006		2005
Prepaid income tax	(Won)	368,738	(Won)	129,956
Income tax payable		807,369		1,032,011

Net income tax payable	(Won)	438,631	(Won)	902,055

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(5)	Income tax expense for the nine months ended September 30, 2006 and 2005 is summarized as follows (Unit: In millions):


	2006			2005
Income tax currently payable	(Won)	807,369		(Won)	902,291
Changes in deferred tax assets		132,219			(26,597	)
Retained earnings and other capital surplus adjustments		(87,028	)		(104,745	)
Income tax expense of overseas branch		3,129			3,426

	(Won)	855,689		(Won)	774,375

(6)

The statutory income tax rates applicable to the Bank, including resident tax surcharges, are 27.5 percent for the nine months ended September 30, 2006 and 2005, respectively. However, due to tax adjustments, the effective tax rates for the nine months ended September 30, 2006 and 2005 are 27.48 percent and 29.75 percent, respectively.

25.	EARNINGS PER SHARE:

(1)	Ordinary income per share and net income per share

Ordinary income per share and net income per share were calculated for common stock by dividing ordinary income and net income available to common shareholders by the weighted average number of outstanding common stock. In the event the stock options are exercised during the nine months ended September 30, 2006 and 2005, the outstanding common shares are calculated on the assumption that the treasury stock are disposed of on the exercised date.

Ordinary income per share and net income per share for common stock for the nine months ended September 30, 2006 and 2005 were computed as follows:

1)	Outstanding capital stock for the nine months ended September 30, 2006 was as follows:


	Number of shares		Number of shares x number of days
Number of common shares outstanding-beginning balance	336,379,116		91,831,498,668
Number of treasury stock outstanding-beginning balance	(217,935	)	(59,496,255	)
Sale of treasury stock	217,935		57,298,711

	336,379,116		91,829,301,124

Weighted average number of common shares outstanding: 91,829,301,124 ÷ 273 days = 336,371,066 shares

Outstanding capital stock for the nine months ended September 30, 2005 was as follows:


	Number of shares		Number of shares x number of days
Number of common shares outstanding-beginning balance	336,379,116		91,831,498,668
Number of treasury stock outstanding-beginning balance	(29,881,209	)	(8,157,570,057	)
Sale of treasury stock	29,611,471		3,219,897,918

	336,109,378		86,893,826,529

Weighted average number of common shares outstanding: 86,893,826,529 ÷ 273 days = 318,292,405 shares

- 52 -

2)	The basic net income per share for the nine months ended September 30, 2006 and 2005 was as follows (Unit: In Won)


	2006		2005
Net income (ordinary income)	(Won)	2,258,100,586,934	(Won)	1,828,518,771,839
Weighted average number of common shares outstanding		336,371,066		318,292,405

Net income per share	(Won)	6,713	(Won)	5,745

Ordinary income per share	(Won)	6,713	(Won)	5,745

The ordinary income for the nine months ended September 30, 2006 and 2005 equals to net income because there is no extraordinary item.

Basic net income (ordinary income) per share for the year ended December 31, 2005 was (Won) 6,977.

(2)	Diluted ordinary income per share and diluted net income per share

Diluted net income and ordinary income per share for the nine months ended September 30, 2006 and 2005 represent diluted net income and diluted ordinary income divided by the number of common shares and diluted securities. The ordinary income for the nine months ended September 30, 2006 and 2005 equals to net income because there is no extraordinary item.

Diluted net income (ordinary income) per share for the nine months ended September 30, 2006 and 2005 was computed as follows (Unit: In Won):


	2006		2005
Diluted net income (ordinary income) (*1)	(Won)	2,258,100,586,934	(Won)	1,828,246,561,654
Weighted average number of common shares outstanding and diluted securities (*2)		336,374,358		318,438,553

Diluted net income per share	(Won)	6,713	(Won)	5,741

Diluted ordinary income per share	(Won)	6,713	(Won)	5,741

(*1)

For the nine months ended September 30, 2006, the stock options included in the diluted shares have no effect on net income because the contracted service period has expired. For the nine months ended September 30, 2005, the stock option right expired and the accumulated compensation cost was reversed, therefore, the related cost was deducted from net income.

(*2)	The treasury stocks combined with stock options rendered are included in diluted shares.

Diluted net income (ordinary income) per share for the year ended December 31, 2005 was (Won) 6,973.

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26.	TRUST ACCOUNTS:

(1)	Major financial information related to the trust accounts as of and for the nine months ended September 30, 2006 and 2005 were as follows (Unit: In millions):


	2006		*2005()**
Operating revenue of trust operation:
Trust fees and commissions from trust accounts	(Won)	71,707	(Won)	103,113
Commissions from early redemption in trust accounts		18		11

	(Won)	71,725	(Won)	103,124

Operating expenses of trust operation:
Interest expense on borrowings from trust accounts	(Won)	32,866	(Won)	21,828

Assets:
Accrued receivable trust fees	(Won)	113,237	(Won)	64,480

Liabilities:
Borrowings from trust accounts	(Won)	1,238,549	(Won)	1,059,469

(*)	The amount of receivables and borrowings are as of December 31, 2005.

(2)	Trust accounts for which the Bank provided the guarantees for a fixed rate of return and/or the repayment of principal consisted of following (Unit: In millions):


	Name of fund	Book value		Fair value
Trust accounts guaranteeing the repayment of principal:	Old age pension (*1 & 2)	(Won)	15,226	(Won)	15,189
	Personal pension (*1 & 2)		2,297,327		2,283,756
	Pension trust		413,587		413,587
	Retirement trust		398,369		398,369
	New personal pension		67,856		67,856
	New old age pension		129,254		129,254

			3,321,619		3,308,011

Trust accounts guaranteeing a fixed rate of return and the repayment of principal:	Development money trust (*1)		66,942		66,906
	Unspecified monetary trust (*1)		155		155

			67,097		67,061

		(Won)	3,388,716	(Won)	3,375,072

(*1)	These funds were not stated at fair value but at book value.

(*2)	The book value is greater than the fair value, but the Bank is not obligated to pay the difference since these are yield-based dividend instruments.

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27.	SEGMENT INFORMATION:

(1)

As of September 30, 2006 and December 31, 2005, the Bank’s operating segments are consumer banking, corporate banking, credit card operation, treasury operation of investment in securities (including derivatives) and funding, and other operations of general administration and trust. Geographical segment are segregated into two segments: domestic and overseas operations.

As of and for the nine months ended September 30, 2006, financial information on the Bank’s operating segments was as follows (Unit: In millions):


	Consumer		Corporate		Credit card		Capital market			Other		Total
Securities	(Won)	—	(Won)	219,100	(Won)	202,819	(Won)	31,274,942		(Won)	2,663,911	(Won)	34,360,772
Loans		82,181,002		53,480,871		7,363,176		2,280,448			95,556		145,401,053

Operating income before provision		1,520,228		584,343		768,475		(51,447	)		411,664		3,233,263

As of December 31, 2005 and for the nine months ended September 30, 2005, financial information on the Bank’s operating segments was as follows (Unit: In millions):


	Consumer		Corporate		Credit card		Capital market		Other		Total
Securities	(Won)	—	(Won)	210,078	(Won)	142,527	(Won)	27,654,319	(Won)	2,543,375	(Won)	30,550,299
Loans		81,110,421		44,485,500		7,373,912		2,736,564		32,010		135,738,407

Operating income before provision		1,681,464		618,198		984,454		7,995		119,008		3,411,119

(2)	Financial information on the Bank’s geographical segments as of and for the nine months ended September 30, 2006 was as follows (Unit: In millions):


	Domestic		Overseas		Total
Securities	(Won)	34,360,772	(Won)	—	(Won)	34,360,772
Loans		145,008,740		392,313		145,401,053

Operating income before provision		3,220,581		12,682		3,233,263

Financial information on the Bank’s geographical segments as of December 31, 2005 and for the nine months ended September 30, 2005 was as follows (Unit: In millions):


	Domestic		Overseas		Total
Securities	(Won)	30,550,299	(Won)	—	(Won)	30,550,299
Loans		135,246,463		491,944		135,738,407

Operating income before provision		3,397,189		13,930		3,411,119

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28.	RELATED PARTY TRANSACTIONS:

(1)	The subsidiaries of the Bank as of September 30, 2006 and December 31, 2005 were as follows:


		Subsidiaries
Domestic		KB Investment Co., Ltd.
		KB Futures Co., Ltd.
		KB Data System Co., Ltd.
		KB Asset Management Co., Ltd.
		KB Real Estate Trust Co., Ltd.
		KB Credit Information Co., Ltd.
		KB Life Insurance Co., Ltd.
		NPC 02-4 Kookmin Venture Fund
Overseas		Kookmin Bank International Ltd. (London)
		Kookmin Bank Hong Kong Ltd.

(2)	The various employee benefits for the major directors for the nine months ended September 30, 2006 were as follows (Unit: In millions):


	Short-term employee benefits		Stock option		Total
Registered officers (Standing)	(Won)	3,505	(Won)	6,211	(Won)	9,716
Registered officers (Non-Standing)		428		592		1,020

	(Won)	3,933	(Won)	6,803	(Won)	10,736

(3)	Significant balances with related parties as of September 30, 2006 and December 31, 2005 were as follows (Unit: In millions):


	2006
	Assets		Allowance		Liabilities
Subsidiaries:
Trust accounts (trust accounts guaranteed a fixed rate of return and/or the repayment of principal)	(Won)	89,136	(Won)	—	(Won)	71,358
KB Investment Co., Ltd.		—		—		2,886
KB Futures Co., Ltd.		197		—		8,512
KB Data System Co., Ltd.		35		—		15,984
KB Asset Management Co., Ltd.		80		—		57,088
KB Real Estate Trust Co., Ltd.		19,846		99		717
KB Credit Information Co., Ltd.		68		—		27,365
KB Life Insurance Co., Ltd.		3,039		—		2,868
NPC 02-4 Kookmin Venture Fund		—		—		10,432
Kookmin Bank International Ltd. (London)		416,547		—		48,652
Kookmin Bank Hong Kong Ltd.		394,069		—		5,752

		923,017		99		251,614

Investee under the equity method:
Pacific IT Investment Partnership		—		—		58
Jooeun Industrial Co., Ltd.		65,891		26,501		—

		65,891		26,501		58

	(Won)	988,908	(Won)	26,600	(Won)	251,672

- 56 -


	2005
	Assets		Allowance		Liabilities
Subsidiaries:
Trust accounts (trust accounts guaranteed a fixed rate of return and/or the repayment of principal)	(Won)	57,658	(Won)	—	(Won)	128,147
KB Investment Co., Ltd.		—		—		20,096
KB Futures Co., Ltd.		1,874		—		13,899
KB Data System Co., Ltd.		50		—		14,021
KB Asset Management Co., Ltd.		114		—		21,861
KB Real Estate Trust Co., Ltd.		18,532		92		1,418
KB Credit Information Co., Ltd.		191		—		22,405
KB Life Insurance Co., Ltd.		1,620		—		793
NPC 02-4 Kookmin Venture Fund		—		—		19,327
Kookmin Bank International Ltd. (London)		247,919		—		54,436
Kookmin Bank Hong Kong Ltd.		123,460		51		24,641

		451,418		143		321,044

Investee under the equity method:
Pacific IT Investment Partnership		—		—		1,639
Jooeun Industrial Co., Ltd.		65,927		15,163		—

		65,927		15,163		1,639

	(Won)	517,345	(Won)	15,306	(Won)	322,683

(4)	Significant transactions with related parties for the nine months ended September 30, 2006 and 2005 were as follows (Unit: In millions):


	2006
	Revenue		Bad debt expenses			Expenses
Subsidiaries:
Trust accounts (trust accounts guaranteed a fixed rate of return and/or the repayment of principal)	(Won)	31,478	(Won)	—		(Won)	2,920
KB Investment Co., Ltd.		—		—			278
KB Futures Co., Ltd.		17		—			1,306
KB Data System Co., Ltd.		337		—			19,613
KB Asset Management Co., Ltd.		569		—			1,276
KB Real Estate Trust Co., Ltd.		1,273		7			—
KB Credit Information Co., Ltd.		129		—			49,712
KB Life Insurance Co., Ltd.		25,111		—			1
NPC 02-4 Kookmin Venture Fund		3		—			368
Kookmin Bank International Ltd. (London)		8,341		—			3,170
Kookmin Bank Hong Kong Ltd.		7,439		(47	)		1,571

		74,697		(40	)		80,215

Investee under the equity method:
Pacific IT Investment Partnership		—		—			7
Jooeun Industrial Co., Ltd.		—		11,338			—

		—		11,338			7

	(Won)	74,697	(Won)	11,298		(Won)	80,222

- 57 -


	2005
	Revenue		Bad debt expenses			Expenses
Subsidiaries:
Trust accounts (trust accounts guaranteed a fixed rate of return and/or the repayment of principal)	(Won)	62,546	(Won)	—		(Won)	3,137
KB Investment Co., Ltd.		—		—			442
KB Futures Co., Ltd.		18		—			1,023
KB Data System Co., Ltd.		68		—			14,085
KB Asset Management Co., Ltd.		694		—			836
KB Real Estate Trust Co., Ltd.		1,476		(145	)		—
KB Credit Information Co., Ltd.		141		—			50,111
KB Life Insurance Co., Ltd.		25,286		—			22
NPC 02-4 Kookmin Venture Fund		—		—			239
Kookmin Bank International Ltd. (London)		5,134		(47	)		3,855
Kookmin Bank Hong Kong Ltd.		4,550		—			1,505

		99,913		(192	)		75,255

Investee under the equity method:
Pacific IT Investment Partnership		—		—			5
Jooeun Industrial Co., Ltd.		—		103			—

		—		103			5

	(Won)	99,913	(Won)	(89	)	(Won)	75,260

29. EMPLOYEE BENEFITS:

The Bank has employee benefits programs, such as support for rent of houses, scholarship, medical insurance, accident compensation, compensated leave, gym facilities and other benefits.

30. CASH FLOWS:

(1)	Cash flows from operating activities are presented by the indirect method.

(2)	The cash and due from banks in the statements of cash flows for the nine months ended September 30, 2006 and 2005 were as follows (Unit : In millions):


	2006			2005
Cash on hand	(Won)	2,445,798		(Won)	2,347,767
Foreign currencies		160,403			147,800
Due from banks in Won		2,272,472			3,428,826
Due from banks in foreign currencies		565,713			573,050

		5,444,386			6,497,443
Restricted due from banks		(2,324,500	)		(2,885,717	)

	(Won)	3,119,886		(Won)	3,611,726

(3)	Significant transactions not involving cash inflows and outflows for the nine months ended September 30, 2006 and 2005 were as follows (Unit : In millions):


	2006		2005
Write-offs of loans and decrease of loans from principal reduction	(Won)	998,165	(Won)	1,512,153
Decrease in allowance for sale and repurchase of impaired loans		51,443		157,757
Changes in capital adjustments from valuation of securities		172,883		(363,123	)
Reclassification of available-for-sale securities to held-to-maturity securities		—		60,091

- 58 -

31. Share Purchase Agreement for Korea Exchange Bank:

The Bank has been chosen as the preferred bidder for the controlling majority stake of the Korea Exchange Bank (KEB) on March 23, 2006. On May 19, 2006, the Bank entered into a share purchase agreement with LSF-KEB Holding, SCA to purchase its controlling stake. The Bank will acquire 457,064,387 shares (70.87 percent of KEB’s outstanding shares) at (Won)15,200 per share for (Won)6,947,378 million subject to the completion of the government approval process. The Bank is currently negotiating for the extension of the agreement which expired on September 16, 2006. Therefore, the terms and conditions, timing and share purchase price of the transaction are still outstanding and open to change as of September 30, 2006.

- 59 -