Surpassing 4 Trillion Won in Net Profit for 2 Consecutive Quarters
Interest Income Rises Amid Rate Hikes Despite Loan Decline
Somewhat Sluggish Outlook for Second Half
[Asia Economy Reporter Minwoo Lee] The four major financial holding companies are expected to continue their strong performance in the second quarter of this year. Despite a decrease in household loans, interest income is anticipated to increase due to the benefits of interest rate hikes. However, in the second half of the year, the upward trend is expected to slow down somewhat due to the expansion of loan loss provisions and the possibility of a reduction in additional loan interest rates.
According to financial information analysis firm FnGuide on the 24th, the market consensus for the net profit of the four major financial groups?KB, Shinhan, Hana, and Woori?in the second quarter of this year is 4.5849 trillion KRW. This represents an approximately 11% increase compared to the same period last year. Following the record-high net profit of 4.6399 trillion KRW in the first quarter, the net profit is again expected to exceed 4 trillion KRW.
In particular, Hana Financial Group is projected to see an increase in net profit not only compared to the same period last year but also compared to the previous quarter, unlike other holding companies. The net profit forecast for the second quarter is 999 billion KRW, bringing the achievement of the first-ever quarterly net profit of 1 trillion KRW within sight.
This is attributed to the continued rise in net interest margin (NIM) in conjunction with the interest rate hikes. Furthermore, the sharp increase in interest rates has led to a decrease in corporate bond issuance, with demand shifting towards loans, which has acted as a positive factor. Researcher Baeseung Jeon of Ebest Investment & Securities explained, "With the base interest rate hikes, market interest rates such as government bonds have also risen sharply, resulting in strong performance in the banking sector. Due to the interest rate hike effects that began in the second half of last year, the average NIM of major banks in the first quarter of this year rose by 0.1 percentage points to 1.56% compared to the annual NIM of last year."
However, there are also forecasts that performance may slow down somewhat in the second half of the year. This is because household loans are showing a declining trend due to high interest rates and a sluggish stock market. The outstanding balance of household loans at the five major commercial banks?KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup?stood at 701.0615 trillion KRW at the end of last month, down by 1.3302 trillion KRW from the previous month. This marks a decline for five consecutive months this year. Even mortgage loans, which had withstood the decline in household loans amid a shaky real estate market, have decreased. The outstanding balance of mortgage loans at the five major banks last month was 506.6524 trillion KRW, down by 165.7 billion KRW from the previous month. This is the first monthly decrease in mortgage loan balances since March 2017.
Criticism of high loan interest rates and pressure from authorities are also expected to weigh on performance in the second half. Researcher Junseop Jeong of NH Investment & Securities said, "Recently, Financial Supervisory Service Governor Bokhyun Lee criticized banks for excessive profit-seeking during a meeting with bank CEOs and emphasized the need to consider vulnerable groups when calculating loan interest rates. A reduction in additional loan interest rates is expected in the future, and with concerns over economic downturns, financial authorities are also demanding an expansion of loan loss provisions, so there is a possibility that the upward trend in performance will slow down in the second half."
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