KB Financial Group Inc., South Korea's No. 2 banking group by assets, said Friday it plans to wrap up its acquisition of LIG Insurance Co. next week in a move that is anticipated to bolster its non-banking profit.

KB Financial said in a statement that it plans to close the deal in a temporary shareholder meeting scheduled for June 24 and rename the insurer KB Insurance.

The plan comes after the U.S. Federal Reserve Board approved the group the right to operate as a financial holding company in the United States.

The approval is a prerequisite for KB Financial to continue to operate LIG Insurance's U.S. branches.

The new KB affiliate is expected to become the group's second-largest affiliate in terms of assets after flagship unit Kookmin Bank. With the acquisition, the portion of profit by non-banking units is forecast to rise to nearly 40 percent.

In March, KB Financial's board of directors approved the group's long-delayed takeover of a 19.47 percent stake in LIG Insurance for 645 billion won ($585 million).

The two companies initially signed the deal in June but had been in talks over price mismatches, with KB Financial demanding a cut in the price, citing LIG's poor earnings.

As of end-March, LIG Insurance ranked as the country's fourth-largest non-life insurer with its assets totaling 24 trillion won. It employed 3,250 people in addition to some 13,000 sales managers.

Shares of KB Financial slumped 2.43 percent from the previous close to 36,150 won on Friday, while the benchmark index, the KOSPI, gained 0.25 percent to 2,046.96.

The takeover comes as local banks are facing tougher market competition and a fall in interest rates, their biggest source of profit, which led them to shutter branches and launch voluntary retirement programs to cut costs.

Lending rates at some banks have fallen below the 3 percent threshold following four rounds of rate cuts by the central bank since August.

Earlier this month, the Bank of Korea slashed its policy rate by a quarter percentage point to a fresh record low of 1.5 percent amid a protracted slump in private spending caused by the outbreak of Middle East Respiratory Syndrome. (Yonhap)