Financial groups post handsome profits

By Nam Hyun-woo

Korean financial groups posted sound earnings last year despite challenges including corporate restructuring and low interest rates.

KB Financial Group had 2.14 trillion won ($1.87 billion) in net profit last year, up 26.2 percent from a year earlier. It was the third consecutive year that net profit has increased, the company said Thursday.

It said an increase in net interest profit led the surge, despite harsh conditions that included a cut in key rates. Net interest profit last year was 6.4 trillion won, up 3.2 percent from a year earlier.

KB’s flagship unit, KB Kookmin Bank, posted net profit of 964.3 billion won in 2016, down 12.9 percent from a year earlier because of employee retirement costs of 807.2 billion won.

Shinhan Financial Group had net profit of 2.78 trillion won last year, up 17.2 percent from 2.37 trillion won in 2015. It was the largest net profit since 2011 when the group recorded 3.1 trillion won.

The group said the result meant it retained No. 1 position among domestic financial groups in terms of net profit for the ninth consecutive year.

The surge was led by its flagship unit Shinhan Bank’s sound performance last year. The bank’s 2016 net profit was 1.94 trillion won, up a whopping 30.2 percent from a year earlier. The group attributed the rise to its stabilized net interest margin and an increase in loan volumes.

Buoyed by the profits, the group’s board meeting on Wednesday decided to pay a dividend of 1,450 won a share, the largest in its history.

Woori Bank also had a profitable year. It posted 1.26 trillion won in net profit last year, up 19.1 percent from a year earlier. The bank said it is the best performance since 2013, despite spending 178 billion won on retirement costs last year.

The bank attributed its improved earnings to a 3.3 percent increase in loans, which resulted in a 5.4 percent increase in interest profit.

Hana Financial Group raked in 1.35 trillion won in net profit last year, a 47.9 percent increase from a year earlier. The group said it was the best earnings since 2012, when it acquired Korea Exchange Bank.

However, it is uncertain whether the financial groups’ rally will continue. The Korea Institute of Finance said in its report that banks’ loans this year will increase by 3 to 5 percent, compared with 7.3 percent last year.

The projection came amid the government’s move to tighten loan regulations to contain the big rise in the country’s household debt.

“It will not be easy for financial firms to enjoy a surge in net profits because the increase in loans will likely slow this year while the loan loss ratio may rise,” said Hana Financial Investment analyst Han Jeong-tae.