Bo-eun leads the digital content team. She has covered foreign affairs, North Korea, tech, economy and gender issues at The Korea Times. She did a short stint at the South China Morning Post in Hong Kong, where she obtained a new perspective on news production and life. Small sources of joy for her are lounging in the sun, having a good latte and swimming.
Non-banking earnings determine financial groups' ranking
KB Financial Group Chairman Yoon Jong-kyoo addresses a meeting in this photo provided by the group. KB took over the leading group title in the second quarter, backed by earnings from its brokerage and card affiliates. / Courtesy of KB Financial Group
By Kim Bo-eun
By Kim Bo-eun
Amid banks' poor net profits in the second quarter of the year as they set aside greater loan loss reserves due to the COVID-19 pandemic, non-banking units' earnings determined financial groups' rankings for the quarter, according to their recent filings. KB's reclaiming of the No. 1 financial group position is attributed to solid income from its brokerage and card units.
KB Securities' earnings increased to 150.2 billion won in the second quarter from the previous quarter, backed by commission income from increased stock trading and its investment banking businesses. KB Kookmin Card's net profit amounted to 81.7 billion won, based on growth of commission income from increased card expenditures.
“Financial groups have been centered on their bank units and it has been a mid-to long-term plan for groups to strengthen their non-banking units and overseas business to raise competitiveness,” a KB group official said.
“We are aiming for our non-banking affiliates ― brokerage, card firm and insurer ― to become among the top players in each sector. KB's acquisition of Prudential Life Insurance is set to bolster the group's life insurance unit.”
Shinhan saw earnings of its bank shrink in the second quarter from the previous year, but its non-banking affiliates' earnings grew. Shinhan Card's net profit for the second quarter was 175.64 billion won, up 17.93 percent from the same period last year. Shinhan's insurance units ― Shinhan Life and Orange Life ― each saw their net profit grow 30 percent.
Hana Financial Group said it posted the greatest earnings in the first two quarters since 2012, backed by strong performance of its non-banking units. Earnings from non-banking affiliates accounted for 30.3 percent of the group's earnings, up 5.3 percentage points from 25 percent of the same period of 2019.
The group said earnings from its non-banking units grew 35.5 percent year-on-year to 407.9 billion won. Hana Financial Investment posted 125.7 billion won in net profit in the second quarter, a 39.22 percent year-on-year growth.
Meanwhile, for Woori Financial Group, strengthening its non-banking affiliates has become an urgent task. The group saw a 142 billion net profit in the second quarter, a drop of 77 percent from last year. This was based on Woori Bank's securing of reserves to cover potential loan losses from the coronavirus-driven economic fallout. Woori group has the highest reliance on its bank unit for revenue among financial groups.
Woori group chairman Son Tae-seung has vowed to build up the group's non-banking affiliates. Woori has been seeking to add a brokerage and insurer to its portfolio.
“In the case of other financial groups, their brokerage units pulled up the groups' earnings. It is our priority to acquire a securities firm,” a Woori official said.
“Building up non-banking affiliates has become a key task for financial groups in a low interest era, in which banks see their net interest margins fall.”
Banks' net profits were also hit as they secured reserves to cover for possible compensation payouts to investors for losses incurred from private equity funds the lenders mis-sold.