"Reduce Poor Loans"... Savings Banks Take Steps to Strengthen Fundamentals (Comprehensive)

Global Economic Recession, COVID-19 Impact
Market Uncertainty Grows, Conservative Management

[Asia Economy Reporter Kim Min-young] Major savings banks have set conservative management goals for this year, including lowering their expected net income targets. This is interpreted as a result of the challenging management environment due to increased market uncertainties such as difficult domestic and international economic conditions, the spread of COVID-19, and pressure to reduce loan interest rates.

According to the savings bank industry on the 12th, Welcome Savings Bank set its management goals for this year as total assets of 4.0943 trillion KRW and net profit of 74 billion KRW. While total assets were set ambitiously with a goal to increase by about 1 trillion KRW from 2.3908 trillion KRW in 2018 to 3.0694 trillion KRW last year, the net profit target was 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 its highest-ever performance last year with 31.5 billion KRW, 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 recklessly increasing loans, they plan 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 nearly 2 trillion KRW asset growth 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 5.4 billion KRW.

The lowering of management targets by savings banks is interpreted as reflecting a sense of crisis about the economy due to the global economic situation being unfavorable and the domestic economy shrinking due to COVID-19. Savings banks appear to be focusing on qualitative growth, such as filtering 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 a factor 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 eventually increase delinquency risks.”

Meanwhile, SBI Savings Bank, the industry leader, plans to hold an executive candidate recommendation committee meeting today to select the next CEO candidate. While the reappointment of co-CEOs Lim Jin-gu and Jung Jin-moon is expected to proceed smoothly, the new CEO will be appointed at the shareholders’ meeting on the 17th, where this year’s management goals will also be finalized.

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