Monday, March 30, 2020
Business Conditions of S. Korean Financial Holding Companies Deteriorating
Bumpy Road Ahead
Business Conditions of S. Korean Financial Holding Companies Deteriorating
  • By Yoon Young-sil
  • February 3, 2020, 12:50
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With low interest rates continuing, the net interest margin (NIM) of Korean financial groups is likely to fall approximately 10 basis points this year.

Hana Financial Group’s earnings announcement is scheduled for Feb. 4 and Shinhan, KB and Woori Financial Groups announce their 2019 earnings for the next three days. According to market research firms, Shinhan’s current net profit is estimated at 3,467.3 billion won, up 9.8 percent from a year ago, and KB’s is estimated at 3,324.9 billion won, up 8.3 percent from a year ago.

When it comes to Hana, the estimate is 2,458.8 billion won, up 10 percent from a year earlier. The group's net profit increased 10 percent in the preceding year. The rosy outlook is based on the company’s business diversification efforts in the non-banking sector and overseas markets. Meanwhile, Woori Financial Group, which is highly dependent on Woori Bank, is predicted to come up with a current net profit of 1,965.9 billion won.

The road ahead is rather bumpy for the financial groups, which managed to post record performances for years despite low interest rates and strengthening regulations on household loans. With low interest rates continuing, their net interest margin (NIM) is likely to fall approximately 10 basis points this year. Although experts are predicting a NIM rebound in the second quarter of this year on condition of no downward benchmark rate adjustment, the market rate has already begun to fall in the wake of the Wuhan coronavirus.

Tighter regulations on the real estate sector are another hurdle. At present, even security deposit loans are subject to stronger regulations, and this is predicted to have an adverse impact on those groups’ financial soundness and growth potentials.