Financial Holding Companies: Asset Growth Slows... Net Profit Maintained
It was found that 10 domestic financial holding companies recorded a net profit of approximately KRW 21.5 trillion last year. The supervisory authorities stated that while key management indicators such as capital adequacy of financial holding companies remain at a stable level, there is a need to prepare for the possibility of increased credit risk due to the expansion of non-performing loans, and they decided to promote continuous risk management and soundness enhancement.
On the 9th, the Financial Supervisory Service (FSS) announced that the combined net profit (provisional) of 10 domestic financial holding companies (KB, Shinhan, Hana, Woori, NH Nonghyup, BNK, DGB, JB, Korea Investment, Meritz) last year recorded KRW 21.5246 trillion on a consolidated basis. This is an increase of 0.04% (KRW 77.6 billion) compared to the previous year (KRW 21.447 trillion).
According to the FSS, the number of subsidiaries and affiliated companies under these 10 financial holding companies increased by 4.1% (13 companies) to 329 companies. This was due to 25 companies being incorporated as subsidiaries during the year and 12 companies being liquidated.
Total assets increased by 3.3% (KRW 112.6 trillion) from KRW 3,418.1 trillion at the end of the previous year to KRW 3,530.7 trillion. The proportion of total assets by sector showed banks at the highest with 74.9%, up 0.1 percentage points (p) from the previous year, followed by financial investment (10.3%), insurance companies (6.8%), and credit finance companies, etc. (6.7%). In terms of asset changes, banks, financial investment, and credit finance companies increased by 3.2% (KRW 81.1 trillion), 13.3% (KRW 42.8 trillion), and 2.4% (KRW 5.6 trillion) respectively, while insurance decreased by 9.1% (KRW 24 trillion).
Also, the proportion of net profit by sector (individual basis) was highest for banks at 61.9%, followed by insurance (13.5%), financial investment (11.2%), and credit finance companies, etc. (11.0%). Regarding changes in net profit, banks increased by 5.4% (KRW 786.3 billion), insurance by 43.6% (KRW 1.0146 trillion), but financial investment decreased by 37.9% (KRW 1.6986 trillion), and credit finance companies decreased by about 24.6% (KRW 890.2 billion).
The total capital, core capital, and common equity tier 1 capital ratios of bank-affiliated holding companies (KB, Shinhan, Hana, Woori, NH Nonghyup, BNK, DGB, JB) all exceeded regulatory ratios, showing a stable trend. Their total capital, core capital, and common equity tier 1 capital ratios were 15.83%, 14.56%, and 12.90%, respectively, each increasing by 0.22 to 0.31 percentage points compared to the previous year.
Regarding asset soundness indicators of these financial holding companies, the ratio of non-performing loans (NPL) increased by 0.23 percentage points from 0.49% at the end of the previous year to 0.72%. The loan loss provision coverage ratio decreased by 19.9 percentage points from 170.5% at the end of the previous year to 150.6%.
Additionally, the debt ratio decreased by 1.8 percentage points from 29.0% at the end of the previous year to 27.2%. The double leverage ratio decreased by 0.1 percentage points from 114.3% at the end of the previous year to 114.2%. The double leverage ratio refers to the total amount of investments in subsidiaries relative to total capital and is used as an indicator of the capacity to invest in subsidiaries.
The FSS evaluated that regarding the financial holding companies' performance last year, asset growth slowed down and net profit has maintained a similar level since 2021. While key management indicators such as capital adequacy remain stable, it was diagnosed that there is a need to prepare for the possibility of increased credit risk as the NPL ratio rises.
The FSS stated, "We will continuously monitor, analyze, and respond to potential risks of financial holding groups amid ongoing domestic and international uncertainties in the financial market," and added, "We will also encourage strengthening the controlling functions of holding companies to manage risks and enhance soundness related to overseas investments of subsidiaries, joint investments in real estate project financing (PF), and others."
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