Banks' Profits Rise on Higher Net Interest Margins
South Korea’s nine financial holding companies rang up a net profit of 11.64 trillion won (US$10.26 billion) in 2018, hitting a 7-year high. The figure represented an increase of 744.50 billion won (US$655.95 million), or 6.8 percent, from a year earlier. The net profit in the banking and financial investment sectors increased, while that of credit financial business affiliates, such as insurance and card firms, decreased.
The banking sector saw its net profit rise 1.16 trillion won (US$1.03 billion), or 15.1 percent, thanks to higher net interest margins, while the net profits in the financial investment sector increased 416.90 billion won (US$367.31 million) with an increase in profits from fees, according to the Financial Supervisory Service (FSS) on April 1. However, insurance companies saw its net profit fall 486.80 billion won (US$428.90 million), or 48.8 percent due to a decrease in the income of saving insurance premiums and an increase in the loss rate from car insurance products. The net profit of credit financial business affiliates also dropped 274.80 billion won (US$242.11 million), or 13.4 percent, because of the absence of card companies’ one-time profit growth factors.
The reversal of allowance for bad debts temporarily boosted the net profits after the implementation of the Internal Ratings Based Approach in 2017 but the net profits fell as the reversal effect disappeared last year.
The nine financial holding firms included KB, Shinhan, Nonghyup, Hana, BNK, DGB, Korea Investment & Securities, Meritz and JB and excluded Woori Finance Holdings which was established in January this year. The total assets of the nine financial holding companies came to 2,068 trillion won (US$1.83 trillion), up 166.70 trillion won (US$147.13 billion), or 8.8 percent, from the end of 2017. By sector of affiliates, banking showed an increase of 97.40 trillion won (US$85.97 billion), or 6.8 percent, financial investment 43.50 trillion won (US$38.39 billion), or 23.5 percent, insurance 10.10 trillion won (US$8.91 billion), or 5.9 percent, and credit financial business 12.60 trillion won (US$11.12 billion), or 5.7 percent. Banks took up the most of assets with 73.8 percent, followed by financial investment companies with 11 percent, insurance companies with 8.8 percent and credit financial firms with 5.7 percent.