By Kang Seung-woo
Hana, KB, Standard Charted (SC) and Korea Development Bank (KDB) posted the steepest drops among financial groups in their Bank for International Settlements (BIS) ratio in the second quarter from the first.
The Financial Supervisory Service (FSS) announced Monday that Hana’s capital adequacy ratio weakened 0.75 percentage points from three months earlier, KB declined 0.59 percentage points and the two other holding firms each lost 0.33 percentage points. The average ratio of seven financial services companies logged 13.26 percent as of the end of June, down 0.27 percentage points from the preceding quarter, marking the first setback since the third quarter of 2008.
Woori Financial Group lost 0.3 percentage points, while Shinhan Financial Group shed just 0.13 percentage points.
The financial watchdog said that sluggish earnings of the holding firms resulted in the April-to-June period denting their capital bases.
The FSS said the equity capital of the companies decreased 0.5 percent, or 500 billion won, due to diminution of net profits and subordinated bonds.
Also, the growth of risk-weighted assets, which soared 2.5 percent, or 20.6 trillion won, from the previous quarter, affected by an increase in won-based lending and the currency’s weakness against the U.S. dollar, translated into the weakening of the banking groups’ financial soundness.
The BIS ratio measures the financial soundness of a bank holding firm’s by comparing its capital and risk-weighted assets.
In the second quarter of 2010, which saw most companies come up with poor performances due to the accumulation of loan-loss provisions, Hana notched a net profit of 180.7 billion won, down 39.9 percent from the earlier quarter, while KB made a net loss of 335 billion won, down from 573 billion won during the first three months. Woori also suffered about 40 billion won in losses.
Meanwhile, the Tier 1 ratio, another solvency measurement focused on more liquid capital classes, rose by 0.01 percent points to 7.06 percent from the preceding quarter.
Hana also recorded the sharpest decline of 0.45 percentage points, followed by KB and KDB at 0.29 percentage points and 0.25 percentage points, respectively.
The FSS said that although the BIS ratio dropped, the financial holding firms’ readings are not enough to worry about.
“Despite the first fall in seven quarters, they remain above 12 percent in the BIS ratio and 8 percent in the Tier 1, the bottom lines for financial soundness,” an official said.