Despite Record Results for Financial Holding Firms... Non-Banking Real Estate PF Drags Down Performance

The four major financial holding companies-KB, Shinhan, Hana, and Woori Financial Group-collectively posted record-breaking results last year, with their combined net profit approaching 18 trillion won. However, the real estate project financing (PF) risk within their non-banking subsidiaries emerged as a weak link in their performance. While the banks supported overall group earnings with solid interest income, non-banking sectors such as trusts, capital, and cards were directly impacted by the sluggish construction market and high interest rates, leading to massive provisions for loan losses.

Front view of the headquarters of KB Financial Group, Shinhan Financial Group, Hana Financial Group, and Woori Financial Group.

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According to the financial industry on March 5, KB Real Estate Trust, a subsidiary of KB Financial Group, recorded a net loss of 78.7 billion won in 2025, marking the biggest deficit among the group’s affiliates. This is attributed to the realization of risks in completion-guaranteed trust projects. In this business model, if construction is not completed within a specified period, the trust company assumes responsibility, making it vulnerable to the recent downturn in the construction sector.

KB Savings Bank also posted a net loss of 4.8 billion won, marking its third consecutive year of losses. In 2025 alone, KB Savings Bank set aside 61 billion won in provisions for credit losses. These provisions represent amounts set aside from profits in anticipation of possible loan defaults. As the possibility of recovering PF loans diminished due to worsening construction market conditions, it became inevitable to accumulate provisions to absorb potential losses.

Other non-banking financial sectors-such as card and capital-also faced significant burdens. KB Financial Group’s total group credit loss provisions for 2025 amounted to 2.363 trillion won, a 15.6% increase from the previous year’s 2.044 trillion won. Of this, KB Kookmin Card reserved 765 billion won and KB Capital set aside 267 billion won as provisions. These increases were driven by heightened delinquency risk among vulnerable borrowers in a high interest rate environment.

Woori Financial Group also saw significant pressure from its non-banking subsidiaries. Woori Asset Trust recorded a net loss of 220.6 billion won in 2025. The prolonged slump in the real estate market directly impacted profits due to PF loan defaults. Woori Financial Capital also accumulated 145 billion won in bad debt expenses, up 27.7% from the previous year. During a conference call in February, Woori Financial Group explained, "We disposed of potentially impaired assets early as part of our asset cleanup policy." The group’s overall bad debt expenses exceeded 2 trillion won, rising more than 20% from a year earlier as provisions were significantly increased to address non-banking sector losses, such as real estate PF. While the banking sector defended profits, the deficits and cost burdens of trusts and capital divisions constrained the group’s overall earnings.

Shinhan Financial Group’s non-banking sector performance was also weighed down by PF risks, compounded by high interest rates. Shinhan Capital’s provisions for bad debts in 2025 soared to 238.9 billion won, up 57.6% year-on-year. As the risk of loan defaults in PF and loans to marginal companies increased, losses were proactively recognized on the books. Shinhan Capital’s annual net profit dropped 7.4% from the previous year to 108.3 billion won.

Shinhan Card took a direct hit from the prolonged high interest rate environment. Its net profit in 2025 fell 16.7% year-on-year to 476.7 billion won. That year, provisions for bad debts reached 911.8 billion won, and the burden of interest payments also rose sharply due to increased funding costs. Interest expenses paid out in 2025 amounted to 1.1203 trillion won, up 6.4% from the previous year. A significant portion of earnings was consumed by interest and provisions. During a February conference call, Shinhan Financial Group stated, "Pressure on the funding and provision fronts persisted," adding, "Specialized finance companies within the group, such as card and capital, are working to improve fundamentals through asset rebalancing and various self-help efforts."

In the case of Hana Financial Group, losses from overseas alternative investments in the non-banking sector weighed on its performance. Hana Securities’ net profit for 2025 was 212 billion won, down 5.8% year-on-year. Although commission income rose 18.8% to 44.4 billion won thanks to a booming stock market, the decline in the value of overseas alternative investment assets dragged down overall earnings.

Hana Capital’s net profit also plunged 54.4% from the previous year to 53.1 billion won. During a February conference call, Hana Financial Group explained, "The non-banking securities division recognized significant valuation losses on alternative assets in the fourth quarter, and capital profits also declined year-on-year due to the same factors." This means that the group had to reflect valuation losses on the books as the values of overseas alternative investment assets-such as commercial buildings and infrastructure in the United States and Europe, acquired during previous boom years-declined.

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