Financial Holding Savings Banks Surge in Performance by Diving into Mid- to High-Interest Loans

[Asia Economy Reporter Song Seung-seop] The first-quarter performance of savings banks affiliated with financial holding companies has significantly improved. This is due to their focused targeting of mid- to high-interest financial consumers, a segment that commercial banks have not been able to capture, supported by the expansion of the mid-interest rate market. It is evaluated that the savings banks, which were reluctantly acquired during the 2011 insolvency crisis, have started to become profit drivers.

According to the five major financial holding companies (KB, Shinhan, Hana, Woori, NH Nonghyup) on the 17th, the net income of their affiliated savings banks in the first quarter was 27.6 billion KRW. KB Savings Bank and NH Savings Bank each earned 6.4 billion KRW, the highest amounts, while Shinhan and Hana Savings Banks recorded 5.4 billion KRW and 5.2 billion KRW, respectively. Woori Financial Savings Bank, incorporated in March, posted a net income of 4.2 billion KRW.

The increase in net income this time was steeper than last year. The largest growth was seen at Hana Savings Bank, which surged 174.9% (3.3 billion KRW) from 1.9 billion KRW in the first quarter of last year. During the same period, KB and NH Savings Banks grew by 88.2% and 23.0%, from 3.4 billion KRW and 5.2 billion KRW, respectively. The only institution with a decrease in net income was Shinhan Savings Bank, which fell by 13.7% from 5.4 billion KRW.

Asset size also grew rapidly. KB Savings Bank’s assets increased by 680.8 billion KRW (48.5%) over one year, reporting total assets of 2.0842 trillion KRW. Shinhan and NH Savings Banks grew by 28.9% (459 billion KRW) and 26.6% (373.8 billion KRW), reaching 2.0459 trillion KRW and 1.7772 trillion KRW, respectively.

This contrasts sharply with just a few years ago when they struggled to avoid deficits. The majority of the industry views the financial holding company-affiliated savings banks as having been reluctantly acquired to overcome the 2011 insolvency crisis. They were considered burdensome as they were tied up with non-performing loans and unable to generate profits.

Market analysis suggests that, along with linked operations with affiliated commercial banks, the expansion of mid-interest loans has secured a stable source of income. Savings banks have successfully penetrated the niche left by commercial banks, which find it difficult to execute loans to financially vulnerable groups due to high interest rates.

Operations through their own mobile applications (apps) or via the mobile platforms of group affiliates are also expanding. KB Savings Bank is widely praised for increasing both loans and interest income centered around the newly launched ‘Kiwi Bank’ last year. Woori Financial Savings Bank also resolved a plan for a 100 billion KRW capital increase on the 11th to expand its mid-interest loan portfolio and strengthen digital capabilities.

An industry insider from the savings bank sector said, "Financial holding company-affiliated savings banks can engage in cross-selling with commercial banks," adding, "The trust and stability that a large brand name provides to consumers is also a strength."

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