Financial Holding Companies Surpass ELS Hurdle... Dual Drive in Corporate and Household Loans

The five major financial holding companies in South Korea recorded a net profit exceeding 6 trillion won in the second quarter. This marks a recovery from the turmoil caused by losses in Hong Kong H-Share Index (Hang Seng China Enterprises Index·HSCEI)-based equity-linked securities (ELS) within just one quarter. Although net interest margin (NIM) declined due to falling market interest rates, the increase in corporate and household loans and the expansion of non-interest income compensated for this.

Since 2018 until June of this year, a total of 14,426 ATMs have been removed from banks over approximately six years. On the 24th, ATMs from commercial banks are installed on a street in Seoul. Banks are rapidly withdrawing ATMs, citing maintenance costs such as ATM management and heating and cooling expenses. Photo by Jo Yongjun jun21@

According to the financial sector on the 29th, the net profit of the five major domestic financial holding companies (KB, Shinhan, Hana, Woori, NH Nonghyup) in the second quarter was 6.2266 trillion won. This represents a 23.54% increase compared to the same period last year (5.04 trillion won). The net profit for the first half of the year also rose by 1.9% year-on-year to 11.1064 trillion won. Both quarterly and half-year results are at record highs.

By company, KB Financial recorded 1.7324 trillion won in the second quarter, up 19.55%, reclaiming its position as the leading bank. Shinhan Financial posted 1.4255 trillion won, up 15.12%; Hana Financial 1.0347 trillion won, up 12.63%; Woori Financial 931.4 billion won, up 48.98%; and NH Nonghyup Financial 1.1026 trillion won, up 45.33%, each showing improved performance. Notably, KB, Woori, and NH Nonghyup Financial each recorded their highest-ever quarterly net profits. On a half-year basis, Shinhan, Hana, Woori, and NH Nonghyup achieved record-high results.

Due to the impact of the Hong Kong H-Share Index ELS loss incident, the five major financial groups recorded a net profit of 4.8978 trillion won in the first quarter, down 16.42% year-on-year. This was due to the five major commercial banks, which are core to the five financial holding companies, setting aside approximately 1.665 trillion won in provisions for compensation related to the ELS incident. However, after absorbing the ELS impact through provision setting in the first quarter, some of the provisions (about 270 billion won) were reversed due to the rise in the Hong Kong H-Share Index, contributing to improved performance.

In particular, the growth in corporate and household loans led the overall upward trend. Regarding NIM, due to the decline in market interest rates, KB Financial (2.10%→2.08% quarter-on-quarter), Shinhan Financial (2.00%→1.95%), Hana Financial (1.84%→1.69%), Woori Financial (1.88%→1.74%), and Nonghyup Financial (2.01%→1.92%) all showed a general downward trend, but the expansion of loan assets offset the NIM decline.

For example, Shinhan Financial’s group NIM fell by 0.05% quarter-on-quarter, but loan assets increased by 2.4%, resulting in a 0.2% rise in interest income. Shinhan Financial stated, "As of the first half of the year, household loans at Shinhan Bank increased by 2.1% compared to the end of last year, corporate loans rose by 9.9%, and total won-denominated loans grew by 6.4%."

Growth in global and non-interest income also drove overall performance improvement. For instance, Woori Financial’s non-interest income in the first half increased by 45% year-on-year due to improvements in corporate finance in the banking sector, global investment banking (IB) business, and subsidiaries in the card and leasing sectors. Shinhan Financial’s global profits rose by 32.4%, supported by growth in Japan and Vietnam.

Meanwhile, based on these results, Shinhan and Woori Financial attracted attention by announcing plans to enhance corporate value (value-up). Shinhan Financial plans to invest 3 trillion won plus alpha by 2027 to repurchase and cancel treasury shares, reducing the number of shares by 50 million. Woori Financial aims to achieve a Common Equity Tier 1 (CET1) ratio of 12.5% by next year and, in the medium to long term, targets a CET1 ratio of 13% and a shareholder return ratio of 50%.

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