KB Financial Group Regains No.1 Position After 3 Years... Mixed Fortunes Amid Lime Provisions

KB Regains No.1 in Finance After 3 Years... Shinhan Hampered by Private Equity Loan Loss Provisions
Debt Investment Boom Drives Record Earnings... Loan Loss Provisions Separate 1st and 2nd Place
Woori Financial Sees Net Profit Decline Only

[Asia Economy Reporter Kwangho Lee] Among the four major financial holding companies last year, the 'leading finance' was KB Financial Group. While Shinhan, Hana, and Woori Financial Groups were hampered by private equity fund scandals, KB Financial, which avoided these issues, surpassed Shinhan Financial to take the top spot after three years.

Despite the adverse conditions of the prolonged COVID-19 pandemic and low interest rate environment, all except Woori Financial recorded record-breaking performances fueled by the debt-financed investment (Bitt-u) and all-in investment (Yeongkkeul) trends.

◆ Top spot changes after 3 years... KB swaps places with Shinhan = According to the financial sector on the 7th, KB Financial recorded a net profit of 3.4552 trillion KRW last year. During the same period, Shinhan Financial posted 3.4146 trillion KRW, making KB Financial's figure 10.6 billion KRW higher. This is the first time in three years that KB Financial has overtaken Shinhan Financial.

The decisive factors behind the change in rankings between these two companies are analyzed to be the private equity fund scandals and the provisioning for reserves. Due to the Lime Asset Management fund scandal, provisions had to be set aside for preemptive compensation. Shinhan Financial's annual provisioning amount was 1.3906 trillion KRW, while KB Financial's was 1.0434 trillion KRW, 350 billion KRW less than Shinhan. KB Financial was not involved in various fund scandals, including the Lime fund incident, among the four major financial groups, resulting in almost no related losses.

The two financial holding companies have been engaged in a neck-and-neck competition. In the first quarter of last year, Shinhan Financial led, while KB Financial took the lead in the second and third quarters. Both companies saw increased interest income due to loan growth and achieved strong performances in securities and card businesses. Their steady investments in non-banking sectors, including overseas expansion, also paid off. In fact, KB Financial expanded its size last year by acquiring Prudential Life Insurance and other entities. KB Kookmin Bank acquired global banks such as Prasac in Cambodia.

[Image source=Yonhap News]

◆ Record-breaking performance except Woori amid debt-financed investment boom = Hana Financial Group also posted a record net profit of 2.6372 trillion KRW last year, a 10.3% increase from the previous year. Although it set aside 847.3 billion KRW in loan loss provisions, the group's core earnings, combining interest income (5.8143 trillion KRW) and fee income (2.2557 trillion KRW), increased by 1.8% compared to the previous year.

On the other hand, Woori Financial Group was the only one among the four major financial holding companies that did not smile. Woori Financial recorded a net profit of 1.3073 trillion KRW last year, a 30.2% decrease from the previous year. While net operating income, a key revenue indicator including interest and non-interest income, remained around 6.8 trillion KRW, the lack of a securities company, which was a core contributor to other financial groups' performance, was a negative factor. It also set aside 784.4 billion KRW in loan loss provisions.

As a result, the four major financial groups earned a total net profit of 10.8143 trillion KRW last year. Although slightly down from 10.9959 trillion KRW the previous year, it is evaluated as a solid performance amid COVID-19 and private equity fund scandals.

However, due to recommendations from financial authorities, most financial groups lowered their dividend payout ratios compared to the previous year. The Financial Services Commission recommended a 'dividend payout ratio within 20%' guideline considering the ongoing domestic and international economic uncertainties due to the prolonged COVID-19 pandemic. Except for Shinhan Financial and Woori Financial, which did not disclose their dividend policies, both KB Financial and Hana Financial lowered their dividend payout ratios to around 20%.

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