Due to the Impact of COVID-19... Savings Banks Lowered Their Performance Targets for This Year

Conservative Management Amid Growing Market Uncertainty for Welcome and JT Chin-ae

[Asia Economy Reporter Kim Min-young] Major savings banks have decided to adopt a conservative approach this year by significantly revising their management goals, including lowering their net profit targets. This is interpreted as a response to the challenging domestic and international economic conditions, the spread of the novel coronavirus infection (COVID-19), and pressure to reduce loan interest rates, which have increased market uncertainties and made the management environment difficult.

According to the savings bank industry on the 12th, Welcome Savings Bank set its management goals for this year at total assets of 4.0943 trillion KRW and net profit of 74 billion KRW. While the total assets target was set high, aiming to increase by about 1 trillion KRW compared to the growth of 678.6 billion KRW from 2.3908 trillion KRW in 2018 to 3.0694 trillion KRW last year, the net profit target is significantly reduced compared to the 103.2 billion KRW earned last year. Welcome Savings Bank stated that along with digital innovation, it will “strengthen proactive risk management and company-wide internal controls.”

JT Chin-Ae Savings Bank, which recorded a record high net profit of 31.5 billion KRW last year, also set a net profit target of 30.1 billion KRW for this year. The management of this savings bank presented improving profitability, enhancing soundness, and increasing efficiency as tasks to achieve the goal. Rather than indiscriminately increasing loans, they intend to generate profits through a conservative approach.

OK Savings Bank, the second largest in asset size in the industry, set a management goal of achieving total assets of 8.4 trillion KRW. This represents a growth target of 1.1081 trillion KRW, which is a lower target compared to the nearly 2 trillion KRW asset increase recorded last year with total assets of 7.2919 trillion KRW. OK Savings Bank pursued a ‘No. 1 in the industry’ strategy early last year but is focusing on strengthening fundamentals this year by expanding assets centered on high-quality assets. To this end, it plans to focus on maximizing operational efficiency. Business goals include minimizing funding cost increases through channel diversification, expanding mid-interest rate product handling, and refining internal controls.

Eugene Savings Bank, which posted an operating profit of 62.6 billion KRW last year, set its target at 67 billion KRW. This is 4.4 billion KRW higher than last year’s earnings but about 1 billion KRW lower than the previous year’s target of 6.4 billion KRW.

The reason savings banks have lowered their management targets is interpreted as reflecting a sense of crisis about the economy, as the global economic situation remains unfavorable and the domestic economy has contracted due to COVID-19. Savings banks appear to be focusing on qualitative growth, such as weeding out non-performing loans, rather than quantitative growth by significantly increasing loans to individuals or small and medium-sized enterprises.

A savings bank official said, “There was an aspect where last year’s reversal of provisions was reflected in net profit,” but added, “Since the main customers of savings banks, such as small business owners and micro-entrepreneurs, have been directly hit by the spread of COVID-19, it is highly likely that they will not be able to operate normally until the first half of this year, which will ultimately increase delinquency risks.”

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