Hana Financial Research Institute Publishes '2025 Financial Industry Outlook' Report
Since COVID-19, the banking industry, which had been experiencing growth, is expected to see a slowdown in loan growth next year as loan regulations continue to tighten. However, profitability is anticipated to remain at a similar level to this year due to improvements in non-interest income such as fees. Additionally, while the growth potential of the capital market is expected to improve slightly, the growth of capital companies and savings banks is projected to be limited.
Hana Bank's Hana Financial Research Institute announced on the 30th that it published the "2025 Financial Industry Outlook" report containing these insights.
The institute expects that the household and large corporate sectors, which drove loan growth this year, will see only slight growth due to continued household loan management and increased demand in the direct financial market. Furthermore, demand for time deposits, which had increased due to perceptions of peak interest rates, is expected to slow down as interest rates begin to decline, while inflows into low-cost deposits are anticipated to rise due to increased demand for investment standby funds and short-term funds.
Research Fellow Lee Soo-young said, "Although the environment faces a continued decline in net interest margin (NIM) and a slowdown in loan growth leading to reduced interest income, the banking industry's profitability is expected to maintain a similar level to this year due to improvements in non-interest income such as fees and a decrease in loan loss costs resulting from credit risk mitigation."
The growth potential of the capital market sector, including securities, is expected to improve slightly, but the growth of capital companies and savings banks is anticipated to face constraints. The securities industry is expected to recover performance as falling interest rates improve conditions for domestic and international stock investments, bond management, and corporate bond issuance, but a full recovery will take time due to the continued sluggishness of the real estate project financing (PF) market. Despite ongoing weakness in real asset alternative investments, the asset management industry is expected to continue growth centered on traditional funds such as bond funds and overseas ETFs, as well as discretionary assets, driven by expectations of declining interest rates.
The life insurance industry is expected to continue efforts to expand capital, such as issuing hybrid capital securities and subordinated bonds, to offset increased capital burdens caused by rising liabilities due to falling interest rates. The non-life insurance industry is expected to grow centered on long-term insurance, which easily secures insurance service contract margins (CSM), while the influence of fintech companies is projected to expand. Additionally, due to population aging, senior-related businesses in life insurance and senior-targeted products such as dementia, nursing care, and chronic illness insurance in non-life insurance are expected to act as new growth drivers.
The profitability of the credit card industry is expected to improve somewhat as the cost burden of issuing commercial paper decreases, but downward pressure from the recalculation of eligible costs also exists. Furthermore, while dependence on financial sectors such as card loans for revenue is expected to deepen, there are concerns that growth will be further constrained if total volume regulations are introduced. On the other hand, the capital industry is expected to see a decline in leasing and installment growth as vehicle purchase demand remains subdued for the time being, and profitability downward pressure will increase due to the cleanup of non-performing loans.
Hana Financial Research Institute forecasts that as the growth of the financial industry reaches its limits and uncertainties persist due to the accumulation of household debt and delays in resolving real estate PF issues, urgent measures for cost reduction are needed. Savings banks, which are struggling with real estate PF difficulties, are expected to continue a policy of strengthening soundness management next year, conducting selective and conservative operations. In the case of real estate trust businesses, the resolution of PF defaults is expected to take a long time due to bottlenecks in auctions and sales, difficulties in securing buyers, and restructuring of funding structures, while soundness improvement is expected to be delayed due to continued sluggishness in local sales markets and weakened demand for non-residential properties.
Moreover, the value-up effect is expected to expand from existing financial holding companies and banks to securities firms and others. In terms of shareholder returns, it is anticipated that companies will actively expand profits beyond traditional methods such as share buybacks and dividends.
Research Fellow Kim Sang-jin stated, "With the policy authorities driving value-up initiatives, financial companies may be required to actively enhance profitability, necessitating strengthened efforts in venture capital (VC), private equity (PE) investments, and mergers and acquisitions (M&A)."
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