Four Major Financial Groups Post Record First-Half Net Profit Over 10 Trillion Won Despite Rate Cuts

KB, Shinhan, Hana, and Woori Post 10.3 Trillion Won in Net Profit
Record-High Half-Year Results
Loan Growth and Strong Interest Income Despite Rate Cuts
Hong Kong ELS Risk Eases, Non-Interest Income Improves

The combined net profit of the four major financial holding companies in South Korea surpassed 10 trillion won for the first time in the first half of this year. Despite headwinds such as the interest rate cut cycle and the financial authorities’ tighter management of household loan growth, these groups achieved the highest half-yearly net profit on record. The improvement in performance was driven by the disappearance of one-off costs, such as loss provisions for Hong Kong H-Index equity-linked securities (ELS) accumulated last year, as well as an increase in non-interest income including fees.

(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 sector on July 25, the combined net profit of the four major financial holding companies?KB Financial, Shinhan, Hana, and Woori?for the first half of this year was 10.3254 trillion won, up 10.48% from the same period last year (9.3456 trillion won). This is the first time quarterly net profit has surpassed 10 trillion won, exceeding the previous record of 9.3526 trillion won in the first half of last year.

By group, KB Financial posted 3.4357 trillion won, Shinhan 3.0374 trillion won, Hana 2.3010 trillion won, and Woori 1.5513 trillion won. KB Financial, Shinhan, and Hana all recorded their highest-ever half-yearly results.

The significant improvement in performance was mainly due to increased lending, which helped defend interest income even as rates fell, and a rise in non-interest income driven by expanded fee income and a drop in exchange rates. The four groups earned a combined 21.0924 trillion won in net interest income in the first half. Although the base rate fell from 3.00% at the beginning of the year to 2.50%, and market rates also declined, interest income either decreased only slightly or even increased. This was the result of both an increase in cumulative loan assets and efforts to reduce funding costs.

In particular, a sharp rise in non-interest income led the improvement in results. The four groups’ non-interest income for the first half was tallied at 7.2122 trillion won. KB Financial surpassed 1 trillion won in net fee income for the first time, as sales fees and securities brokerage commissions increased despite a decrease in merchant fees. Other operating profit reached 757.3 billion won, up 38.8% from a year earlier. Hana Financial also saw non-interest income rise by 10% to 1.3982 trillion won in the same period. In addition, the risk from provisioning for Hong Kong ELS losses disappeared, enabling record-high results.

The combined net profit of the four groups for the second quarter was 5.9532 trillion won, up 15.95% from the same period last year (5.1339 trillion won). Net interest income was 9.3565 trillion won. The most notable improvement was in non-interest income, such as fees. As the growth in interest income, which had previously driven results, began to slow due to risks such as lower market rates and tighter household loan caps, the groups all focused on expanding non-interest income, leading to a significant improvement in results. Shinhan Financial’s non-interest income for the second quarter was 1.265 trillion won, up 34.7% from the previous quarter. Woori Financial’s non-interest income rose 46.8% to 527 billion won.

The Common Equity Tier 1 (CET1) ratio, a soundness indicator used as a benchmark for shareholder returns, rose for all four groups at the end of June compared to the first quarter: KB Financial at 13.74%, Shinhan at 13.59%, Hana at 13.39%, and Woori at 12.76%.

The combined net profit of the four major affiliated banks for the first half was 8.0968 trillion won, up 15.9% from the same period last year (6.9838 trillion won). By bank, Shinhan posted 2.2668 trillion won, KB Kookmin 2.1876 trillion won, Hana 2.0851 trillion won, and Woori 1.5573 trillion won. In particular, KB Kookmin Bank, which had set aside the largest Hong Kong ELS provisions last year, saw its net profit rise 45.3% year-on-year as one-off costs disappeared.

The combined net profit of the four banks for the second quarter was 4.3151 trillion won: KB Kookmin 1.1612 trillion won, Shinhan 1.1387 trillion won, Hana 1.0922 trillion won, and Woori 923 billion won. This was up 7% from the same period last year (4.0329 trillion won). Despite the interest rate cut cycle, second-quarter net interest margin (NIM) remained at 1.55% for Shinhan Bank and 1.48% for Hana Bank. Woori Bank’s NIM was 1.45%, up 0.01 percentage points from the previous quarter. KB Kookmin Bank’s NIM was 1.73%, down 0.03 percentage points.