Four Major Financial Holding Firms Nearly Hit 5 Trillion Won in Q1 Net Profit... Record Earnings Despite Rate Cuts (Comprehensive)

KB, Shinhan, Hana, and Woori Post 4.9 Trillion Won in Net Profit
Exceeding Market Expectations... Record-High First-Quarter Results
Interest Income Improves Despite Rate Cuts

The combined net profit of the four major financial holding companies in South Korea for the first quarter of this year approached 5 trillion won. Despite increasing financial uncertainties such as lower interest rates and a high exchange rate, they set a new record for first-quarter earnings.

(From left) Yang Jonghee, Chairman of KB Financial Group; Jin Okdong, Chairman of Shinhan Financial Group; Ham Youngjoo, Chairman of Hana Financial Group; Im Jongryong, Chairman of Woori Financial Group.

According to the financial industry on April 25, the four major financial holding companies?KB Financial, Shinhan Financial, Hana Financial, and Woori Financial?reported a combined net profit of 4.9289 trillion won for the first quarter of this year. This represents a 16.7% increase compared to the same period last year (4.2364 trillion won) and exceeded the securities firms' consensus estimate of 4.8864 trillion won.

KB Financial posted a net profit of 1.6973 trillion won for the first quarter, up 62.9% from the same period last year (1.042 trillion won). Although this falls short of the record quarterly profit set in the second quarter of last year (1.7322 trillion won), it marks the highest first-quarter figure in the company's history. Na Sangrok, CFO of KB Financial, explained, "The base effect from the bank's ELS loss provision in the first quarter of last year has disappeared, and on the back of a balanced group portfolio, profits from non-banking subsidiaries have generally increased, driving the group's overall performance."

Despite a decline in market interest rates due to the base rate cut, net interest income reached 3.2622 trillion won, up 0.6% from the previous quarter. While interest income decreased, net interest income was maintained thanks to reduced funding costs, such as through low-cost funding. The net interest margin (NIM) rose by 0.03 percentage points from the previous quarter to 2.01%.

Shinhan Financial also set a new record for first-quarter earnings. Net profit reached 1.4883 trillion won, a 12.6% increase from the same period last year. A Shinhan Financial representative explained, "Despite various negative factors, including heightened domestic and international economic volatility, the bank's solid performance, as well as normalization efforts at non-banking subsidiaries such as securities and asset trusts, which underperformed last year, led to robust overall results."

First-quarter net interest income was 2.8549 trillion won, up 1.4% year-on-year but down 1.9% from the previous quarter. The NIM was 1.91%, up 0.05 percentage points from 1.86% in the fourth quarter of last year. However, compared to the first quarter of last year (2.00%), it was 0.09 percentage points lower. A Shinhan Financial official stated, "We defended the net interest margin by reducing funding costs even as market interest rates fell," and added, "Although the group NIM declined year-on-year, interest income increased due to cumulative asset growth over the year."

Hana Financial also achieved its highest first-quarter performance since the integration of Hana Bank and Korea Exchange Bank in 2015. Net profit was 1.1277 trillion won, up 9.1% from the same period last year (1.034 trillion won). Despite growing uncertainties in domestic and international financial markets, the group's core profits, including interest income, increased, leading to improved performance.

First-quarter net interest income was 2.2728 trillion won, up 2.3% year-on-year. Core profits, including fee income (521.6 billion won), totaled 2.7944 trillion won, a 2.2% increase over the same period. The NIM was 1.69%, down 0.08 percentage points from the first quarter of last year.

Woori Financial recorded a net profit of 615.6 billion won for the first quarter, a decrease of about 25.3% compared to the same period last year (824 billion won). Woori Financial explained that this was due to retirement benefits, which are usually reflected at year-end, being booked in the first quarter this year, as well as one-off factors such as the launch of a securities company and increased investments in future growth areas such as digital and information technology (IT). As a result, profits declined by about 200 billion won.

In fact, first-quarter net interest income was 2.252 trillion won, a decrease of 53.8 billion won year-on-year, while non-interest income, including fees, was 357.5 billion won, up 6.8 billion won. The NIM was 1.7%, down 0.04 percentage points from a year ago, but up 0.04 percentage points compared to the end of last year, despite the decline in market interest rates.

The Common Equity Tier 1 (CET1) ratio, a key indicator of soundness and the basis for shareholder returns, rose for all four companies compared to the fourth quarter of last year: KB Financial at 13.67%, Shinhan Financial at 13.27%, Hana Financial at 13.23%, and Woori Financial at 12.42%.