In the High-Interest Era, Four Major Holding Companies Earned 14 Trillion Won in Net Profit...Criticism of 'Interest Business'

[Asia Economy Reporter Bu Aeri] As the era of high interest rates arrives, the four major financial holding companies?KB, Shinhan, Hana, and Woori Financial Groups?achieved a combined net income approaching 5 trillion KRW in the third quarter of this year. With interest income increasing due to rising interest rates, the financial holding companies recorded record-breaking performances. The proportion of banks in the net income of each holding company averaged 70% among the four major groups, leading to criticism that they once again profited primarily from "interest business."

Four Major Financial Groups' Q3 Net Income Approaches 5 Trillion KRW... Cumulative Net Income Around 14 Trillion KRW

According to the four major financial holding companies on the 29th, their combined net income for the third quarter totaled 4.8876 trillion KRW, an 18.6% increase compared to last year. The cumulative net income of the four major groups up to the third quarter this year reached 13.8544 trillion KRW. Shinhan Financial Group surpassed KB Financial by reflecting gains from the sale of its securities building in the third quarter results, ranking first in cumulative net income.

Shinhan Financial Group's net income for the third quarter was recorded at 1.5946 trillion KRW, a 42.9% increase compared to the same period last year. The cumulative net income from the first to the third quarter this year also rose by 21.2% year-on-year to 4.3154 trillion KRW. This is the highest cumulative net income for Shinhan Financial in the third quarter in its history.

KB Financial Group posted a net income of 1.2713 trillion KRW in the third quarter this year, down 2.1% year-on-year and 2.5% quarter-on-quarter. KB Financial explained, "The base effect of a one-time gain of about 123 billion KRW from the sale of property by the non-life insurance business in the second quarter" and added, "Excluding this, the performance increased by 7.7% compared to the previous quarter." The cumulative net income for the first three quarters was 4.0279 trillion KRW, up 6.8% (255.5 billion KRW) year-on-year. KB Financial added that loan growth and an expansion of net interest margin (NIM) increased net interest income, reflecting the fruits of thorough cost management.

Hana Financial performed well again in the third quarter, with net income exceeding 1 trillion KRW. The third-quarter net income rose 20.8% year-on-year to 1.1219 trillion KRW. Hana Financial's cumulative net income through the third quarter was 2.8494 trillion KRW, a 6.3% increase compared to the previous year.

Woori Financial recorded a third-quarter net income of 899.8 billion KRW, a 5.8% increase year-on-year. The cumulative net income for the first to third quarters reached a record high of 2.6617 trillion KRW, up 21.1% year-on-year. Woori Financial explained that interest income improved based on loan growth centered on corporate loans and active management of funding costs.

[Image source=Yonhap News]

Continued Dependence on Interest Income

Some critics point out that financial holding companies still heavily depend on interest income. The net interest income of the four major financial groups in the third quarter was 10.1534 trillion KRW, surpassing 10 trillion KRW with an increase of more than 400 billion KRW compared to the second quarter (9.7279 trillion KRW). This significant increase in interest income was driven by loan growth and high interest rates.

The proportion of interest income in the profits of the four major financial groups in the third quarter reached 85%. According to the Korea Institute of Finance, the average proportion of interest income among the world's top 100 financial companies is about 59%. There are criticisms that domestic financial companies excessively rely on interest income while neglecting revenue diversification. Oh Ki-hyung, a member of the National Assembly's Political Affairs Committee from the Democratic Party of Korea, stated, "Banks are falling into moral hazard," and urged, "Financial authorities should prepare measures to reduce the proportion of variable-rate loans."

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