Banks Continue to Show Performance Improvement in Q1 This Year

Q1 Net Profit Up 4.71% to 4.1514 Trillion
Shinhan Surpasses KB... Woori Shows Significant Growth

[Asia Economy Reporter Song Hwajeong] Banks that recorded their highest-ever performance last year are expected to continue their strong performance in the first quarter of this year.

According to financial information company FnGuide on the 17th, the combined net profit forecast for the first quarter of the four major financial holding companies is 4.1514 trillion KRW, expected to increase by 4.71% compared to the same period last year. The four major financial holding companies recorded their highest quarterly performance in the first quarter of last year, and this year their net profits are expected to increase further. However, the outlook varies somewhat by company. Shinhan Financial Group's first-quarter net profit forecast is 1.2637 trillion KRW, a 6.02% increase compared to the same period last year, expected to surpass KB Financial Group (1.2474 trillion KRW, a 1.78% decrease). Researcher Park Hyejin of Daishin Securities analyzed, "Shinhan Financial Group underperformed compared to competitors last year due to significant costs related to voluntary retirement and provisions," adding, "With uncertainties related to private equity funds resolved, there is a high likelihood of change this year."

Woori Financial Group is expected to show the largest growth in performance. Woori Financial's first-quarter net profit forecast is 766 billion KRW, expected to increase by 14.83% compared to the same period last year, making it the only one among the four major financial holding companies to record a double-digit growth rate. Hana Financial Group's first-quarter net profit forecast is 874.3 billion KRW, expected to increase by 4.62%.

In particular, interest income (revenue) is expected to continue its upward trend. The first-quarter interest income forecasts for KB, Hana, and Woori, for which forecasts exist, are 4.216 trillion KRW, 2.996 trillion KRW, and 2.744 trillion KRW respectively, representing increases of 16.31%, 24.28%, and 17.91% compared to the same period last year.

The expansion of the interest rate spread between loans and deposits appears to have driven this strong performance. According to the Bank of Korea, the loan-deposit interest rate spread based on new transactions in January this year was 1.80 percentage points, an increase of 0.25 percentage points compared to December last year. This is the highest since August last year (1.84 percentage points). The loan-deposit interest rate spread based on outstanding balances also expanded by 0.03 percentage points to 2.24 percentage points compared to the previous month, the largest since July 2019.

Researcher Kim Eungap of IBK Investment & Securities explained, "The loan-deposit interest rate spread based on outstanding balances is expected to rise further, making the increase in banks' interest income more evident in the first quarter's performance," adding, "Since the interest rate hike was significant, performance improvement will be shown solely by the net interest margin (NIM) increase effect without an increase in loan growth rate." He also added, "Expectations for further NIM increases after the first quarter may continue."

Hana Financial Investment forecasted that the average bank NIM in the first quarter will rise by 3 basis points (1bp = 0.01%). Researcher Choi Jungwook of Hana Financial Investment said, "Most banks' NIM in February is expected to maintain a slight increase compared to January, and the average bank NIM in the first quarter will rise by about 3bp," adding, "The average annual bank NIM this year could increase by more than 10bp."

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