Rivalry Between KB and Shinhan, Neck-and-Neck Q1 Earnings

KB, Net Profit 1.27 Trillion KRW · Shinhan, Net Profit 1.91 Trillion KRW... Record Quarterly Earnings

[Asia Economy reporters Kwangho Lee and Sunmi Park] KB Financial Group and Shinhan Financial Group, both competing for the top spot in the industry, each posted record-breaking quarterly results in their first earnings announcements of the year. Thanks to strong performances in non-bank sectors such as securities and credit cards in Q1, both groups recorded net profits exceeding 1 trillion KRW, marking an 'earnings surprise.' With promising results expected in Q2 as well, the 'leading financial competition' is set to intensify further.

Balanced Growth in Banking and Non-Banking Sectors and Diversification of Revenue Base

◆ KB Maintains Position as Leading Bank in Q1 = Since its establishment as a holding company in September 2009, KB Financial has achieved its highest-ever quarterly performance. KB Financial announced on the 22nd that its Q1 net profit reached 1.2701 trillion KRW, a 74.1% (729.5 billion KRW) increase compared to the same period last year.

Driven by the acquisition of Prudential Life and steady loan growth in the banking sector, net interest income rose 12.5% year-on-year to 2.6423 trillion KRW. Net fee income increased by 44.3% to 967.2 billion KRW, boosted by a booming stock market which sharply increased securities brokerage fees, improved bank trust profits, and a rise in card merchant fees due to consumer recovery trends.

Other operating income turned from a 277.3 billion KRW loss to a 33.9 billion KRW profit, as large losses related to marketable securities, derivatives, and foreign exchange that occurred due to sharp financial market volatility in Q1 last year disappeared.

The group's total assets grew 1.7% from the end of last year to 620.9 trillion KRW. The non-performing loan (NPL) ratio stood at 0.42%, the Basel III (BIS) capital adequacy ratio at 16.00%, and the common equity tier 1 (CET1) ratio at 13.75%, maintaining stable asset soundness and capital adequacy.

The most notable aspect of KB Financial's Q1 results is the clear fruits of business diversification through mergers and acquisitions (M&A). As key affiliates in securities and insurance enhanced their core competitiveness and profit capacity, the share of non-bank sectors in the group's net profit expanded from 19.7% to approximately 48.6%. This balanced growth between banking and non-banking sectors and diversification of the revenue base significantly strengthened the group's profit-generating power.

By affiliate, KB Kookmin Bank posted a net profit of 688.6 billion KRW, up 17.4%, driven by M&A effects including overseas acquisitions of Prasac and Bukopin Bank and solid loan growth. KB Securities recorded a net profit of 221.1 billion KRW, achieving its highest-ever quarterly performance thanks to a booming stock market and a significant increase in stock trading volume. KB Insurance posted a net profit of 68.8 billion KRW, benefiting from a decline in loss ratios and improved investment income. KB Kookmin Card and Prudential Life also contributed with net profits of 141.5 billion KRW and 112.1 billion KRW, respectively.

Improvement in Bank Net Interest Margin... Stable Growth in Non-Banking Sector

◆ Largest Quarterly Earnings Since Establishment = During the same period, Shinhan Financial also recorded a net profit of approximately 1.2 trillion KRW, marking its largest quarterly earnings since its founding. Analysts attribute the earnings growth to an increase in the bank's net interest margin (NIM), improved performance in the non-banking sector, and cost-cutting efforts, reflecting portfolio diversification.

Shinhan Financial announced on the 23rd that its Q1 net profit reached 1.1919 trillion KRW, a 27.8% increase from 932.4 billion KRW a year earlier. The group's total assets grew 7.0% year-on-year to 618.8 trillion KRW from 578.2 trillion KRW. The NPL ratio was 0.56%, the BIS capital adequacy ratio 15.9%, and the CET1 ratio 13.0%, similarly maintaining stable asset soundness and capital adequacy like KB Financial.

A Shinhan Financial official explained, "The group's net profit has leveled up based on the fundamental strength of both banking and non-banking sectors. The banking sector's performance improved through an early asset growth strategy and a net interest margin improvement for the first time in two years. The consistent non-banking growth strategy pursued over the past four years has begun to show visible results."

In particular, the banking sector saw a quarterly NIM improvement (+5 basis points) for the first time since Q3 2018, and expanded stable financial support to small and medium-sized enterprises and small business owners, establishing a solid operating profit base and securing fundamental strength to respond to the post-COVID-19 environment.

The non-banking sector demonstrated stable performance through active collaboration among group companies based on the One Shinhan strategy. Notably, the core non-bank affiliates such as card and capital companies showed solid growth, and the securities sector, which faced difficulties last year due to investment product-related costs, achieved remarkable results with a 260% increase compared to a year ago, significantly contributing to the improvement of non-bank sector profitability.

Furthermore, the group's new growth engines in key market areas such as global and capital markets continue to show qualitative growth each quarter.

Meanwhile, based on the results of the Lime Asset Management Credit Insured (CI) Fund Dispute Mediation Committee held on the 19th, Shinhan Financial recognized expenses amounting to approximately 65% (previously about 30%) of the expected loss to faithfully fulfill the responsibilities of the sales company.

The official added, "We will continue efforts to resolve uncertainties going forward. Through this, we plan to restore market trust and strive to become a sustainable growth company."