Banking group stocks to continue upward trend amid record profit, rate hikes

Seen above are the headquarters of Korea's four major financial holding firms ― KB, Shinhan, Hana and Woori. Courtesy of each firm

By Lee Min-hyung

Stocks of Korean financial holding firms are expected to regain momentum for an additional rally, as their earnings performance will remain robust this year amid interest rate hikes.

Starting from KB Financial Group, the nation's top financial firms will unveil their 2021 earnings reports this week. The market here expects the so-called big four firms ― KB, Shinhan, Hana and Woori ― to have generated a combined net profit last year of 14.47 trillion won, up 33.9 percent from the previous year, according to data from market tracker Wise Report.

This was driven by their expanded loan-deposit margin after the Bank of Korea (BOK) increased the key rate by 25 basis points last August. The central bank made an additional rate hike in November, which helped banks chalk up more revenue throughout last year.

Notably, Korean financial players will be able to keep up the solid earnings momentum this year, at a time when the U.S. Federal Reserve is set to end its near-zero rate policy and take a similar move to the BOK sometime as early as March. The BOK is also sending repeated signals for another rate hike, citing the urgent need to tame inflation and reduce financial imbalances here.

Data from the market tracker also showed that Shinhan Financial Group, which maintains a neck-and-neck rivalry with KB, achieved an estimated net profit of 4.22 trillion won in 2021, up 23.8 percent from a year earlier.

Hana Financial Group is also widely expected to have raked in 3.3 trillion won in net profit, up 25.3 percent during the same period.

Woori Financial Group is the financial holding firm that achieved the biggest yearly earnings growth with an estimated net profit of 2.48 trillion won, up 90.3 percent from the previous year.

Shinhan and Woori are scheduled to share their earnings reports on Wednesday, and Hana will announce its own on Thursday.

“A widespread view is that banks will be able to attain better earnings in 2022, as the BOK will likely increase the key rate at least a couple of times this year after the Fed's planned rate hikes in March,” a financial industry source said.

This month, shares of the aforementioned financial firms are on the rise amid hopes that their cash-cow banking arms will be able to achieve another profit record this year due to the rapid monetary policy shifts by the Fed and the BOK.

The stock price of Woori Financial Group is increasing sharply on expectations for improvements to its corporate management after the company was completely privatized late last year. Woori's shares were traded at around 15,000 won as of Tuesday afternoon, recovering from their poor performance a year earlier when their valuation failed to top 10,000 won per share.