8 Major Commercial Banks' Q4 Performance? Net Profit of 2.4 Trillion Won 'Favorable'

[Asia Economy Reporter Kangwook Cho] The combined net profit of eight major domestic commercial banks in the fourth quarter of last year was forecasted to be 2.4 trillion KRW, which is generally considered a favorable level.

According to the financial investment industry on the 11th, Korea Investment & Securities estimated that the combined net profit of the eight banks in the fourth quarter would be 2.4 trillion KRW, a 40% decline compared to the previous quarter. It is explained that the fourth quarter typically tends to perform poorly compared to the previous quarter due to costs such as voluntary retirement, excess performance bonuses, seasonal expenses, and provisions.

However, the fourth quarter net profit was estimated to have increased by 51% compared to the same period last year, when one-time expenses were high. In the fourth quarter of 2018, various one-time expenses including voluntary retirement were higher than the normal level, and due to increased volatility in the capital market, the banks’ non-interest income and non-bank subsidiaries’ performance were significantly weak.

Specifically, Shinhan Financial Group’s fourth quarter net profit was forecasted at 539.8 billion KRW, 9% below consensus. This is because voluntary retirement costs including those related to credit cards are expected to increase to 150 billion KRW from 113 billion KRW the previous year.

Compared to the previous quarter, the bank’s NIM (Net Interest Margin) is estimated to have fallen by 5 basis points, and bank loans increased by 2.2%. The group’s loan loss ratio is estimated at 0.4%, and a recovery in the credit card business is expected to continue. Additionally, the full acquisition of Orien Life as a subsidiary in the first quarter of this year is expected to generate an additional annual profit of 120 billion KRW, and the improvement in Shinhan Card’s business, which accounts for a large portion of profits, is also positively evaluated.

KB Financial Group’s fourth quarter net profit was forecasted at 593.7 billion KRW, exceeding consensus by 5%. Although the bank’s NIM fell by 6 basis points compared to the previous quarter, loans increased by 3%. The costs for voluntary retirement and additional performance bonuses in the fourth quarter were estimated at 160 billion KRW and 30 billion KRW respectively, significantly lower than those in the fourth quarter of 2018. The group’s loan loss ratio is estimated at 0.29%, and all subsidiaries except the insurance sector recorded favorable results considering seasonality.

Hana Financial Group’s fourth quarter net profit was expected to meet consensus at 456.3 billion KRW. The bank’s NIM is expected to decline by 7 basis points compared to the previous quarter, but loans are forecasted to increase by 1.1%. Voluntary retirement costs of 170 billion KRW (369 employees) and DLF (Derivative Linked Fund) provisions of 40 billion KRW are anticipated, but foreign exchange gains of 86 billion KRW are expected to partially offset these expenses.

Woori Financial Group’s fourth quarter net profit was forecasted at 340.7 billion KRW, exceeding consensus by 12%. The gain from the discounted purchase of Lotte Card was expected to be 100 billion KRW, higher than the initially expected 60 billion KRW. Voluntary retirement costs of 140 billion KRW (300 employees) and estimated DLF provisions of 40 billion KRW were also considered. The bank’s NIM is expected to decline by 4 basis points compared to the previous quarter, and loans are forecasted to have increased by 0.2%.

Industrial Bank of Korea’s fourth quarter net profit was forecasted at 295.9 billion KRW, 11% below consensus. Considering the year-end, the bank’s loan loss ratio was conservatively estimated at 0.88%. The bank’s NIM is estimated to have fallen by 5 basis points compared to the previous quarter, and loans are expected to have increased by 1.2%.

BNK Financial Group’s fourth quarter net profit was forecasted at 59.7 billion KRW, exceeding consensus by 8 billion KRW. This is because the loan loss ratio is estimated at 0.59%, somewhat better than the consensus-embedded loan loss ratio of 0.65%. The bank’s NIM is estimated to have declined by 6 basis points compared to the previous quarter, and loans are expected to have increased by 0.6%.

DGB Financial Group’s fourth quarter net profit was forecasted at 48.8 billion KRW, 5% below consensus. Although a gain of 25 billion KRW from the sale of Hi Asset/Hi Futures occurred, voluntary retirement costs of approximately 10 billion KRW at DGB Life were estimated. The bank’s NIM is estimated to have fallen by 9 basis points compared to the previous quarter, and loans are expected to have increased by 3.1%.

JB Financial Group’s fourth quarter net profit was forecasted at 38.8 billion KRW, in line with consensus. Despite some provisions and personnel expenses, the overall figure is considered favorable. The bank’s NIM is estimated to have declined by 6 basis points compared to the previous quarter, and loans are expected to have increased by 1.3%.

This content was produced with the assistance of AI translation services.