JB overtakes DGB in Q1 earnings amid COVID-19

By Park Jae-hyuk

JB Financial Group has become the only provincial banking group whose net income increased in the first quarter of 2020, as both BNK and DGB financial groups suffered decreases in their net earnings due to the rapid spread of COVID-19 in southeastern Korea, their regulatory filings showed Sunday.

The North Jeolla Province-based JB posted a 96.5 billion won ($79 million) net income in the first quarter, up 4.3 percent from a year earlier. It overtook the Daegu-based DGB which earned 88.2 billion won, down 15 percent year-on-year.

The Busan-based BNK maintained the top spot, but its net income dropped 22 percent to 137.7 billion won.

JB's earnings increase is mostly attributed to JB Woori Capital, its credit loan unit whose net income rose 32.1 percent to 25.8 billion won.

Its benchmark Jeonbuk and Kwangju banks posted 29.6 billion won and 46.7 billion won in net incomes, respectively, showing 13.8 percent and 3.1 percent increases from a year earlier.

DGB's benchmark Daegu Bank posted a net income of 78.7 billion won, down 10.4 percent from the previous year. The group cited a decrease in net interest margin which followed the interest rate cut.

Its non-banking subsidiaries ― HI Investment & Securities, DGB Life Insurance and DGB Capital

― earned 13.1 billion won, 9.2 billion won and 7.6 billion won, respectively.

BNK's benchmark Busan and Kyongnam banks posted 87.4 billion won and 47.4 billion won in net incomes, respectively, down 22.7 percent and 24.2 percent.

BNK Saving Bank earned 4.2 billion won, a 26.3 percent decline from a year earlier. BNK Securities' net income dropped 2.9 percent to 6.8 billion won.

The outcome has been predictable since the coronavirus was spreading widely in the southeastern region between February and March.

Moody's Investors Service said in its March 31 report that rising asset risks are most pronounced among regional banks, because of their concentrated exposure both to coronavirus-affected regions in Korea and vulnerable industries, including tourism, services, food, beverage, retail and trade.

“Daegu Bank's operations are primarily concentrated in Daegu and North Gyeongsang Province, which so far account for around 90 percent of confirmed coronavirus cases in Korea. These two areas accounted for 25 percent of Daegu Bank's loans and 37 percent of its deposits at the end of October 2019,” Moody's senior credit officer Sophia Lee said in the report.

“These regions are now undertaking strong social distancing measures, which are likely to lead to a contraction in consumer spending. Daegu Bank also has high exposure to small- and medium-sized enterprises, which accounted for 64 percent of total loans and 90 percent of corporate loans at the end of September 2019.”