Lee Hyo-jin covers the Bank of Korea, the banking industry and broader financial news. Her previous beats include foreign affairs, North Korea and general reporting on Korean society.
Financial groups post record earnings, boost shareholder returns
A composite image shows the headquarters of Korea's four largest financial holding companies. From left are Shinhan, Woori, KB and Hana. Courtesy of each company
By Lee Hyo-jin
Woori Financial stages turnaround as Tongyang Life acquisition supports growth
Korea’s major financial groups extended their strong earnings momentum in the second quarter, as KB, Shinhan and Hana posted record quarterly and first-half profits, industry officials said Friday. Woori Financial Group also staged a turnaround in the second quarter, delivering year-on-year growth in first-half net profit despite market forecasts for a decline.
The four largest groups' combined first-half of the year net profit of more than 11 trillion won ($7.5 billion) was supported by higher interest rates and a strong stock market rally.
The strong performance prompted the companies to announce enhanced shareholder return plans, including larger share buybacks and higher cash dividends.
According to company filings, KB Financial Group reported a record quarterly net profit of 1.99 trillion won in the second quarter, up 14.6 percent from a year earlier. First-half net profit also hit a record 3.88 trillion won, increasing 13.1 percent year-on-year.
Its nonbanking affiliates accounted for 44 percent of first-half earnings, with KB Securities contributing about one-fifth of total profit.
The results allowed KB to retain its position as the country's largest financial holding company by earnings.
Shinhan Financial Group posted a record quarterly net profit of 1.82 trillion won in the second quarter, up 17.5 percent from a year earlier. First-half net profit also hit a record 3.44 trillion won, rising 13.3 percent year-on-year.
Hana Financial Group also posted a record-high second-quarter net profit of 1.19 trillion won, up 1.7 percent from a year earlier. Its first-half net profit reached a record 2.40 trillion won, rising 4.4 percent year-on-year.
Meanwhile, Woori Financial Group's second-quarter net profit jumped 66 percent quarter-on-quarter to 1 trillion won. The company staged a second-quarter turnaround, posting first-half net profit growth as the acquisition of Tongyang Life Insurance started to contribute significantly to noninterest income.
The group reported first-half net profit of 1.61 trillion won, up 3.67 percent from a year earlier and beating market expectations for a decline.
Earlier in the day, Woori Financial's board approved the incorporation of Tongyang Life as a wholly owned subsidiary through a comprehensive stock exchange. Tongyang Life’s shareholders also approved the share swap the same day.
The exchange is scheduled for Aug. 11, with new shares of Woori Financial to be listed on Aug. 31. Once Tongyang Life is delisted from the Korea Exchange following the completion of the process, it will become a wholly owned subsidiary of Woori Financial.
Industry officials said the financial groups' stronger-than-expected earnings were largely driven by a stock market boom as the benchmark KOSPI index surged nearly 90 percent in the first half of the year.
Brokerage subsidiaries across the financial groups reported strong profit growth.
KB Securities more than doubled its first-half net profit to 796.3 billion won. Shinhan Securities reported net profit of 577.7 billion won, up from 258.9 billion won a year earlier, while Hana Securities posted a 155.7 percent increase to 273.1 billion won.
Buoyed by strong earnings, the financial groups are stepping up shareholder returns.
KB Financial said it returned a cumulative 2.71 trillion won to shareholders through share buybacks, cancellations and cash dividends in the first half. It plans to buy back and cancel an additional 700 billion won worth of shares in the second half, bringing total shareholder returns for the year to 3.7 trillion won.
Shinhan Financial said it plans to return more than 2.8 trillion won to shareholders this year.
Hana Financial approved an additional 250 billion won share buyback and cancellation for the third quarter, while Woori Financial announced an additional 150 billion won of share repurchases and cancellation for the second half of the year.