[1mm Financial Talk] Ahead of Record-Breaking Earnings... Banks Strengthen Win-Win Cooperation

As the third-quarter earnings announcements of the four major financial holding companies (KB, Shinhan, Hana, Woori) approach, the banking sector is drawing attention by significantly strengthening various social contribution projects. This is interpreted as a proactive move toward win-win activities, as their combined net profit is estimated to approach 5 trillion won amid the high-interest rate environment.

Since 2018 until June of this year, a total of 14,426 ATMs have been removed from banks over approximately six years. On the 24th, ATMs from commercial banks are installed on a street in Seoul. Banks are rapidly withdrawing ATMs, citing maintenance costs such as ATM management and heating and cooling expenses. Photo by Yongjun Cho jun21@

According to the financial sector on the 22nd, the third-quarter earnings announcements of bank-affiliated financial holding companies are expected to begin on the 24th with KB Financial Group. On the 25th, Shinhan and Woori Financial Groups will release their results, followed by Hana Financial Group on the 26th.

The earnings outlook is bright. The financial sector estimates that the combined net profit of the four major financial groups for the third quarter will reach 4.7 trillion won. On an annual basis, it is expected to reach 16 to 17 trillion won, surpassing the previous peak of 15.6 trillion won in 2022. Although net interest margins have decreased due to falling market interest rates amid rising expectations of central banks lowering benchmark rates, the financial sector interprets that interest income has increased due to loan asset growth caused by phenomena such as the concentration of household loans following the postponement of the implementation of the second phase of the Debt Service Ratio (DSR) stress regulation.

As the annual net profit is expected to exceed the levels of 2022-2023, when there was widespread social pressure for win-win finance, the financial sector is actively engaging in social contribution projects. Moreover, as authorities have recently begun managing household debt, the interest rate spread between deposits and loans in the banking sector appears to be widening again.

In the case of KB Financial Group, since changing the direction of its social contribution activities in August to focus on national critical issues such as low birth rates and self-employed business problems, it has continued related activities. Recently, it established the 'Small Business Research Center' directly under the KB Management Research Institute to support self-employed and small business owners. KB Financial Group is also planning to hold the '2024 Starcon Festa,' a public-private cooperation project to discover and nurture star small business owners, together with the Ministry of SMEs and Startups and the Korea Economic Association from the 28th to the 31st of this month.

Shinhan Financial Group is recently supporting credit improvement and financial cost reduction for medium-credit customers. This project converts personal credit loans held by salaried customers trading with Shinhan Savings Bank, with principal within 50 million won and a total Debt Service Ratio (DSR) of 70% or less, into refinancing products exclusively offered by Shinhan Bank.

To this end, Shinhan Financial Group operates a refinancing loan limit of 200 billion won exclusively for savings bank customers. The entire process is conducted fully online, and the number of customers expected to benefit is estimated to be about 12,000. Although Shinhan Savings Bank is effectively giving up its high-quality customers, Shinhan Financial Group envisions a virtuous cycle effect by attracting excellent savings bank customers to the bank overall.

Hana Financial Group has recently begun developing a ‘pre-settlement linked financial service’ to support liquidity for small business owners and SMEs, and continues its ‘100th daycare center construction project’ by opening the 98th public Yeongdeok Hana Daycare Center in Yeongdeok, Gyeongbuk. Woori Financial Group is also operating a 'Youth Transportation Expense Support Program' that provides up to 20,000 won in transportation expenses to 100,000 youth customers aged 14 to 18 nationwide (on a first-come, first-served basis). From November to December, this program offers up to 20,000 won in cash support for payments made with the 'Woori Tintin Card' on all buses, subways, intercity buses, and the Seoul Metropolitan Area Express Train (GTX) nationwide.

A financial sector official said, "Since 2022, the full-fledged high-interest rate period, demands for win-win cooperation have repeatedly arisen, whether voluntarily or involuntarily, and this has become a year-round norm." He added, "On the other hand, companies (banks) that had net profits around 1 trillion won about 15 years ago are now earning 2 to 3 trillion won annually at the low end, and up to 4 to 5 trillion won at the high end, so it is natural to think that they should share this with society in some way."