The Four Major Financial Holding Companies Earned a Record High of 14.5 Trillion KRW Last Year

33.76%↑ vs 10.8 Trillion Last Year
KB & Shinhan Estimated to Surpass 4 Trillion
Woori Soars 90% to 2.5 Trillion
Impact of Affiliate Performance Improvement

[Asia Economy Reporter Song Hwajeong] The net profit of the four major financial holding companies is expected to surpass 14 trillion won last year, recording the largest performance ever.

According to financial information firm FnGuide on the 26th, the market consensus for the net profit of the four major financial holding companies?KB Financial Group, Shinhan Financial Group, Hana Financial Group, and Woori Financial Group?last year is 14.4653 trillion won. This represents a 33.76% increase compared to 10.8143 trillion won the previous year.

KB Financial and Shinhan Financial are estimated to have both exceeded 4 trillion won. KB Financial's net profit is expected to be 4.4568 trillion won, up 28.99% from the previous year, while Shinhan Financial is projected to increase by 23.77% to 4.2264 trillion won. Hana Financial is estimated to have grown 24.87% to 3.293 trillion won, and Woori Financial is expected to have surged 90.40% to 2.4891 trillion won.

The record-breaking performance of these financial holding companies is due to the strong results of their affiliates, including banks. With rising interest rates, banks expanded their net interest margins, and loan assets increased significantly. According to the Korea Institute of Finance, household loans increased last year, and funding support for small and medium-sized enterprises and small business owners expanded, leading to a substantial increase in banks' loan assets, which in turn resulted in higher net profits. Additionally, most profitability indicators such as net interest margin (NIM), return on assets (ROA), and return on equity (ROE) improved. Furthermore, thanks to loan maturity extensions, principal and interest repayment deferrals, and the economic recovery trend, delinquency rates and non-performing loan ratios reached historically low levels.

Last year's stock market boom also led securities firms to record their highest-ever performance, and insurance and card companies improved their results due to the impact of COVID-19.

This year, the positive trend in performance is expected to continue. First, NIM, a key profitability indicator for banks, is likely to improve further this year. Jeong Taejun, a researcher at Yuanta Securities, said, "The annual NIM this year will improve by an additional 4 basis points compared to last year. However, quarterly, it is expected to peak in the second quarter and then gradually decline in the second half." This is because the base interest rate hike is expected to end in the first quarter. The end of the base rate hike puts downward pressure on NIM due to the stagnation of loan interest rates, which precede monetary policy, and the rise in deposit interest rates, which lag behind monetary policy. Kim Jaewoo, a researcher at Samsung Securities, said, "Considering that NIM improvement usually occurs over 3 to 6 months after an interest rate hike, bank NIM is expected to show steady improvement until the second to third quarter this year." Loan growth rates are also expected to be decent. Samsung Securities forecasts next year's loan growth rate to be around 7%. Researcher Kim said, "Despite strengthened household debt regulations, household loan growth is expected to slow to around 5%. Corporate loan growth is expected to be around 8 to 9%, so loan growth of about 7% this year is possible, which will be the foundation for interest income growth this year," he analyzed.

The net profit of the four major financial holding companies is expected to exceed 15 trillion won this year. Hi Investment & Securities estimated the combined net profit of the four major financial holding companies this year to be 15.6 trillion won, a 7.9% increase from the previous year. However, uncertainties are expected to increase in the second half. Kim Hyunki, a researcher at Hi Investment & Securities, said, "There will be a stagnation period for NIM in the second half, and as the 2022 economic growth forecast remains low, uncertainty about additional base rate hikes will increase. There is also a risk of defaults due to the end of financial sector support measures."