Shinhan set to regain title as Korea's leading financial group

The headquarters of Shinhan Financial Group and KB Financial Group in Seoul / Courtesy of each firm

By Lee Min-hyung

Shinhan Financial Group is forecast to regain its title as Korea's leading banking group in 2022 after ceding the position to archrival KB Financial Group for the past two years.

According to data from market tracker FnGuide, Shinhan is estimated to have chalked up a net profit of 1.5 trillion won ($1.04 billion) in the third quarter, the largest among local financial firms. KB came in second with 1.26 trillion won.

Shinhan's rally was driven by a one-off profit from the sale of the headquarters of Shinhan Securities. Shinhan sold the office building to IGIS Asset Management for 640 billion won in July. The financial holding firm is estimated to have generated a profit of 320 billion won through the deal.

KB Financial Group maintained its leading position until the first half of this year when its net profit reached 2.75 trillion won. Shinhan's earnings fell slightly behind at 2.72 trillion won during the same period.

But Shinhan is expected to get ahead of KB in terms of annual earnings. According to the market watcher, Shinhan's estimated net profit in 2022 will top 5.16 trillion won, while that of KB was forecast at around 4.91 trillion won. No local financial firm has so far reported an annual net profit of more than 5 trillion won.

Both financial firms enjoyed soaring interest profits for the past year on the rapid pace of the rate hikes by the Bank of Korea.

Even if both Shinhan and KB generated decent earnings from their banking arms, Shinhan was able to make a difference with its non-banking growth.

The securities sector was the key driving force behind Shinhan's possible rise to the top spot among financial firms here. While Shinhan's brokerage arm made massive earnings contributions to its holding firm, KB Securities ended up losing momentum throughout this year. The KB subsidiary reported a net profit of 182 billion won in the first half of 2022, down 51.4 percent from a year earlier. Shinhan Securities outpaced KB Securities by chalking up 189.1 billion won in net profit during the same period.

Market analysts picked Shinhan Financial Group as the most promising stock in the industry.

“Shinhan is expected to report the highest profit growth rate within the industry,” Meritz Securities analyst Cho Ah-hae said. Given that Shinhan's market capitalization lags behind that of KB, the former has more valuation growth potential in line with its estimated earnings rise this year, according to the analyst. Shinhan Financial Group was valued at 18.64 trillion won as of Friday, while KB's market capitalization was still the highest, with 18.78 trillion won, among major financial holding firms here.