Q1 Net Profit of 5 Major Financial Groups Totaling 5.2362 Trillion KRW
Loan Interest Rates Surge Due to Chain Effect from Base Rate Hike
Interest Income Rises Across Banks
Shareholder Return Policies Including Quarterly Dividends and Treasury Stock Cancellation
[Asia Economy Reporter Shim Nayoung] The combined quarterly profits of the five major financial institutions (KB Kookmin, Shinhan, Hana, Woori, NH Nonghyup) exceeded 5 trillion won for the first time ever. This was due to a significant increase in banks' interest income as interest rates rose. Financial groups are implementing shareholder return policies, including quarterly dividends and treasury stock cancellations.
According to the Financial Supervisory Service disclosure on the 24th, the net profit of the five major financial groups in the first quarter (based on controlling interest net profit) totaled 5.2362 trillion won. This is the largest scale ever for first-quarter results. Looking at each group individually: ▲ KB Financial 1.4531 trillion won ▲ Shinhan Financial 1.4004 trillion won ▲ Hana Financial 902.2 billion won ▲ Woori Financial 884.2 billion won ▲ NH Nonghyup Financial 596.3 billion won.
Record High First Quarter Performance
Compared to the first quarter of last year, net profits of KB, Shinhan, and Woori Financial increased by 14.4%, 17.5%, and 32.5% respectively, setting quarterly records. Hana Financial also rose by 8.0% compared to a year ago. NH Nonghyup Financial decreased by about 1.34% due to additional provisions related to COVID-19.
The sharp increase in profits of major financial groups was due to increased interest income. Since August last year, the base interest rate was raised four times, causing a chain reaction with market interest rates and loan interest rates rising, which increased the interest banks receive on loans. Although household loans have turned to a declining trend this year, the large increase last year made it easy to generate profits.
Recently, due to sluggish real estate, stock, and cryptocurrency markets, money has flowed into demand deposits and similar accounts that banks can attract with low interest rates, further increasing margins. In the first quarter, interest income of each financial group was ▲ KB Financial 2.648 trillion won ▲ Shinhan Financial 2.4876 trillion won ▲ Hana Financial 2.0203 trillion won ▲ Woori Financial 1.9877 trillion won ▲ NH Nonghyup Financial 2.1949 trillion won, increasing by 18.6%, 17.4%, 17.3%, 22.7%, and 6.3% respectively compared to the first quarter of last year.
Net Interest Margin Also Rising
The net interest margin (NIM) is also continuously increasing. NIM is a measure of financial institutions' profitability, calculated by subtracting funding costs from income generated by asset management and dividing the remainder by total managed assets. A higher NIM means greater bank profits but also increases the likelihood of criticism for attracting customer deposits at low interest rates while issuing high-interest loans.
For KB Financial Group and KB Kookmin Bank, the first quarter NIMs were 1.91% and 1.66%, respectively. These rose by 0.06 percentage points and 0.05 percentage points from 1.85% and 1.61% in the fourth quarter of last year. Shinhan Financial Group recorded 1.89% and Shinhan Bank 1.51%, each up 0.06 percentage points from 1.83% and 1.45% in the fourth quarter of last year.
Continued Shareholder Return Policies
Major financial groups, having been cautious about increasing dividends due to regulatory emphasis on soundness after the COVID-19 crisis, have now approved shareholder return policies such as quarterly dividends.
KB Financial Group's board of directors resolved to regularize quarterly dividends starting this year. The first-quarter dividend was set at 500 won per common share.
Shinhan Financial Group decided on a dividend of 400 won per common share for the first quarter. The dividend is scheduled to be paid in early May, with a high possibility of continuous dividends for the remaining quarters of this year as well.
Hana Financial Group's board resolved to cancel treasury stock worth 150 billion won. This is the first treasury stock cancellation since the establishment of Hana Financial Group in 2005.
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