Financial Holding Companies with Raised Performance Expectations, Report Cards Released Starting Next Week

KB Financial to Announce Earnings on 23rd... Shinhan Financial and Woori Financial on 26th
Q2 Net Profit Consensus at KRW 4.5237 Trillion... Estimates Up in One Month
KB Financial Likely to Reclaim 'Leading Finance' Status... Estimated Net Profit KRW 1.4726 Trillion
Woori Financial Estimates Revised Downward... Net Profit Expected Below KRW 800 Billion

Market expectations are rising ahead of the second-quarter earnings announcements of the four major financial holding companies: KB Financial Group, Shinhan Financial Group, Hana Financial Group, and Woori Financial Group. With the timing of interest rate cuts delayed more than expected and loan demand remaining steady, there are observations that earnings may surpass consensus estimates. In particular, KB Financial, which lost its position as the 'leading financial group' in the first quarter, is expected to reclaim the top spot by easing burdens such as provisions for equity-linked securities (ELS).

According to major financial holding companies on the 16th, the four major financial groups will consecutively announce their second-quarter earnings starting with KB Financial on the 23rd. Shinhan Financial and Woori Financial are scheduled to announce their earnings on the 26th, and Hana Financial will hold an earnings announcement and investor relations (IR) session sometime next week.

The combined earnings of the four major financial holding companies for the second quarter are expected to exceed 4.5 trillion won. According to FnGuide, a financial information provider, as of July, the estimated net income for the second quarter of the four major financial groups is 4.5237 trillion won, a 5.7% increase compared to the same period last year. Considering that the estimated net income for these financial groups was 4.5041 trillion won as of mid-June, this represents an increase of nearly 20 billion won.

KB Financial is expected to surpass Shinhan Financial by about 170 billion won and reclaim the leading financial group position it lost in the first quarter. The consensus estimate for KB Financial's second-quarter net income is 1.4726 trillion won, a 1.8% decrease compared to the same period last year. Shinhan Financial's net income is estimated to increase by 5.4% to 1.3046 trillion won.

Although the consensus estimates for Hana Financial and Woori Financial's second-quarter net income fall short of 1 trillion won, they are expected to increase by 4.5% and 25.8% respectively compared to the same period last year. Hana Financial's estimated net income for the second quarter is 960.1 billion won, and Woori Financial's is 786.4 billion won. Woori Financial's net income estimate has significantly declined since June, falling below 800 billion won.

The operating profits of these financial holding companies for the second quarter are also estimated to improve by 2.8% year-on-year to 6.1942 trillion won. KB Financial's operating profit consensus is 1.9835 trillion won, down 3.4% from last year, while Shinhan Financial's is 1.8054 trillion won, up 4%. Hana Financial and Woori Financial's operating profits are estimated at 1.3172 trillion won and 1.0881 trillion won respectively, with year-on-year changes of -1.7% and 21.5%.

The heightened earnings expectations for the four major financial holding companies reflect steady loan growth in the second quarter, a more limited-than-expected scale of additional provisions related to real estate project financing (PF), and partial reversals of ELS provisions due to a rebound in the Hong Kong H-Share Index (Hang Seng China Enterprises Index, HSCEI). For KB Kookmin, Shinhan, and Hana Banks, provisions were calculated based on the Hong Kong H-Share Index at around 5100, but with the current index exceeding 6400, it is estimated that at least 30% of the provisions will be reversed.

Loan growth rates are expected to record the largest increase since 2020. In particular, corporate loan growth rates at Shinhan Bank and Hana Bank are expected to exceed 6%. Choi Jung-wook, a researcher at Hana Securities, explained, "The average loan growth rate for banks in the second quarter is about 2.8%, and the loan growth rate for the four major banks is expected to exceed 3.3%, marking the largest growth rate in the past four years. Household loan growth for the four major commercial banks is about 2%, indicating a significant increase in household loans, and corporate loan growth is expected to approach 4.5%, supported by increased loans to large corporations."

Moreover, contrary to concerns, the scale of additional provisions related to PF is not large, and the reversal effect related to Hong Kong ELS is expected to be added, according to financial industry observations. Jeong Tae-joon, a researcher at Mirae Asset Securities, analyzed KB Financial, stating, "Although additional provisions related to PF will be made following the PF soft-landing plan announced by financial authorities in May, the scale will be smaller than that of other banks. The increase in the loan loss cost ratio is expected to be only 0.02 percentage points." Park Hye-jin, a researcher at Daishin Securities, explained, "Not only KB Financial but most financial holding companies are expected to have favorable earnings, which is attributed to the easing of loan loss cost burdens."