Financial Holding Companies Boost Earnings with Bank Interest... 'Profit-Making' Securities Firms Wobble (Comprehensive)

Net Income of Top 5 Financial Holding Companies 5.2362 Trillion KRW
Interest Income Up 16%, Non-Interest Income Down 21%
Impact of Rising Interest Rates and Increased Corporate Loans at Banks
Brokerages See Decrease in Net Income Compared to Same Period Last Year

[Asia Economy Reporter Song Seung-seop] The five major financial holding companies?KB, Shinhan, Hana, Woori, and NH Nonghyup Financial Group?have continued strong performance based on interest income from their core affiliates, the banks. Although all financial holding companies emphasized "non-interest income" and "diversification of revenue structure" at the end of last year, they have actually generated profits from the interest income segment since early this year. Securities firms, which were the profit drivers last year, have seen a consecutive decline in net income.

According to disclosures from each company on the 22nd, the total net income of the five major financial holding companies in the first quarter reached 5.2362 trillion KRW, up 667.1 billion KRW (14.6%) from 4.5691 trillion KRW in the first quarter of the previous year. KB Financial recorded the largest scale, increasing from 1.2701 trillion KRW to 1.4531 trillion KRW. The steepest growth was seen at Woori Financial Group, which rose from 667.1 billion KRW to 884.2 billion KRW, an increase of 217.1 billion KRW (32.54%). Shinhan Financial posted 1.4004 trillion KRW, Hana Financial 902.2 billion KRW, and NH Nonghyup Financial 596.3 billion KRW.

Interest income of the five major financial holding companies increased rapidly. Interest income, which was 9.758 trillion KRW in the first quarter of 2021, decreased to 11.3385 trillion KRW. This represents a 16.2% (1.5805 trillion KRW) increase, which is steeper than the net income growth rate. KB Financial recorded interest income of 2.658 trillion KRW, growing 18.5%, followed by Shinhan with 2.4876 trillion KRW. Hana Financial and Woori Financial posted 2.0203 trillion KRW and 1.9877 trillion KRW, respectively. NH Nonghyup Financial showed a 6.3% increase in interest income to 2.1949 trillion KRW despite a decline in net income.

Each financial holding company cited an increase in assets centered on corporate loans and an expansion of net interest margin (NIM) as the reasons behind the rapid growth in interest income. Some groups also noted the impact of core low-cost deposits.

In particular, interest income from banks, the core affiliates of financial holding companies, surged sharply. Bank interest income, which was 7.5482 trillion KRW, jumped over 17.6% to 8.8805 trillion KRW. Based on this, banks achieved net income of 3.7153 trillion KRW, an increase of about 31.1%.

Non-Interest Income Declined Despite Calls for Strengthening

On the other hand, non-interest income recorded a decline. Non-interest income of 4.1465 trillion KRW decreased by 21.3% to 3.2619 trillion KRW. NH Nonghyup Financial experienced the largest drop in non-interest income, shrinking 47.2% from 594.9 billion KRW to 313.9 billion KRW. KB Financial and Shinhan Financial also recorded 1.0757 trillion KRW (-23.7%) and 986.3 billion KRW (-24.1%), respectively.

Securities firms, which experienced rapid growth last year riding the Donghak Ant Movement and the "Yeongkkeul" (investing by borrowing to the limit) trend, saw net income fall across the board. The net income of securities firms under the groups totaled 440.5 billion KRW, down 43.7% from 783.5 billion KRW a year ago. Woori Financial Group, which does not have a securities firm, emphasized in a conference call after the earnings announcement that "acquiring a securities firm is the top priority" and that "it can generate the greatest group synergy," according to Lee Sung-wook, Vice President of the Finance Division.

Shareholder-friendly policies such as regular quarterly dividends by holding companies are being strengthened. KB Financial Group decided to regularize quarterly dividends through its board of directors ahead of the earnings announcement held that day. Shinhan Financial Group also announced dividends for the first quarter. Hana Financial decided to cancel 150 billion KRW worth of treasury shares. Woori Financial Group reaffirmed its stance to raise the dividend payout ratio to 30% in the mid to long term.

The total loan loss provisions accumulated by each holding company to prepare for crises amounted to 9.7606 trillion KRW.

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