Korean Financial Groups Report Increased Q3 Profits Despite Challenges
The combined net profit of Koreas four major financial holding companies—KB, Shinhan, Hana, and Woori—has reportedly increased in the third quarter of this year compared to the same period last year. Although interest income has declined due to lending regulations and currency fluctuations have resulted in unavoidable foreign exchange losses, the robust performance of the stock market has led to a steady increase in commission income from non-banking subsidiaries such as securities firms.
According to financial information provider FnGuide, the estimated net profit for these four financial holding companies in the third quarter is approximately 4.98 trillion won. This marks a 0.1% increase from last years third quarter, which recorded a net profit of 4.98 trillion won as well. The combined net profit of these financial groups has shown growth compared to the previous year for six consecutive quarters since the second quarter of last year.
However, it is expected that interest income, a key revenue source, will decline. This is due to stringent household loan suppression policies, such as the June 27th lending regulations, which have made it challenging for credit growth. KB Financials interest income is projected to decrease by 4.2%, falling from 7.64 trillion won in last years third quarter to an estimated 7.32 trillion won this quarter. Similarly, Hana Financial is expected to see a 6.1% decrease, while Woori Financials interest income is projected to drop by 6.8%. The estimated interest income for Shinhan Financial has not yet been reported.
The steep rise in the won-dollar exchange rate in the second half of the year has also likely negatively impacted the net profits of these financial holding companies. When the exchange rate increases, the value of foreign assets in won terms diminishes, resulting in foreign exchange losses. The won-dollar exchange rate rose from 1,350 won at the end of June to 1,402.90 won by the end of September. Analyst Kim Do-ha from Hanwha Investment & Securities estimated that Hana Financial and Woori Financial would incur foreign exchange losses of between 30 billion to 50 billion won in the third quarter.
Despite the unavoidable declines in interest income and foreign exchange losses, the increase in net profit for the financial holding companies can be attributed to the thriving domestic stock market.
According to financial information provider FnGuide, the estimated net profit for these four financial holding companies in the third quarter is approximately 4.98 trillion won. This marks a 0.1% increase from last years third quarter, which recorded a net profit of 4.98 trillion won as well. The combined net profit of these financial groups has shown growth compared to the previous year for six consecutive quarters since the second quarter of last year.
However, it is expected that interest income, a key revenue source, will decline. This is due to stringent household loan suppression policies, such as the June 27th lending regulations, which have made it challenging for credit growth. KB Financials interest income is projected to decrease by 4.2%, falling from 7.64 trillion won in last years third quarter to an estimated 7.32 trillion won this quarter. Similarly, Hana Financial is expected to see a 6.1% decrease, while Woori Financials interest income is projected to drop by 6.8%. The estimated interest income for Shinhan Financial has not yet been reported.
The steep rise in the won-dollar exchange rate in the second half of the year has also likely negatively impacted the net profits of these financial holding companies. When the exchange rate increases, the value of foreign assets in won terms diminishes, resulting in foreign exchange losses. The won-dollar exchange rate rose from 1,350 won at the end of June to 1,402.90 won by the end of September. Analyst Kim Do-ha from Hanwha Investment & Securities estimated that Hana Financial and Woori Financial would incur foreign exchange losses of between 30 billion to 50 billion won in the third quarter.
Despite the unavoidable declines in interest income and foreign exchange losses, the increase in net profit for the financial holding companies can be attributed to the thriving domestic stock market.
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