Tightened lending leads to record profits for ‘Big 4’ financial groups

A composite image shows the headquarters of the country's four largest financial holding companies, from left, Shinhan, Woori, KB Kookmin and Hana. Korea Times file

Korea’s top four financial groups posted a combined net profit of more than 18 trillion won ($12 billion) last year, aided paradoxically by aggressive government measures to curb household lending, market watchers said Friday.

The record figure came after the banks raised lending rates through higher discretionary add-ons in line with policy guidance to rein in loan growth, while keeping deposit rates below 3 percent. This effectively charged more on loans and paid less on savings.

Market conditions were favorable, notably due to a weak won relative to the U.S. dollar. However, the four firms recorded double-digit growth in non-interest income, driven by rising sales and management fees involving equity-related products amid the KOSPI rally.

Also strong were foreign exchange derivatives trading and bancassurance businesses, in which banks sell insurance products through their branch networks or digital channels.

According to financial market data, KB Financial recorded a net profit of over 5.8 trillion won last year, maintaining its position as the industry leader.

Shinhan Financial followed with over 4.9 trillion won in net income. Hana Financial posted over 4 trillion won, while Woori Financial logged over 3.1 trillion won.

Together, the four groups generated more than 18 trillion won, up roughly 15 percent from a year earlier.

This is similar to the combined annual profits of Hyundai Motor and its sister company Kia.

More than 70 percent of the profits came from net interest income, illustrating how banks still rely on interest margins rather than innovative product development.

KB’s gain was driven primarily by solid net interest income, supported by widened lending margins despite weak loan growth.

It also benefited from stable asset quality and improved profitability at securities and insurance subsidiaries, as market volatility boosted brokerage and insurance-related earnings.

Shinhan’s growth was boosted by fee-based income. Overseas operations helped offset weakness in tighter domestic lending, with non-bank affiliates contributing to overall results.

Hana saw a rebound in securities and card businesses. It also maintained relatively strong cost control, which amplified the impact of modest revenue gains.

Woori Financial Group’s annual net income reflected its solid earnings-generating capacity based on a more diversified revenue structure, supported further by the impact of newly consolidated insurance subsidiaries.

KB Financial delivered the strongest shareholder returns. Its total shareholder return payouts came at around 3.1 trillion won, including 1.58 trillion in cash dividends and large-scale share buybacks, translating to a shareholder return ratio above 50 percent.

Shinhan announced 800 billion won in share buybacks and maintained a mid-40 percent total shareholder return ratio.

Hana’s figure was 44 percent, achieved through higher dividends and larger buybacks.

Woori raised dividends but kept its return ratio of 36 percent as it focused on capital expansion.