Korea’s Big 4 finance groups’ combined profit at $12.6 billion last year

Shinhan Financial Group [Photo by MK DB]

South Korea’s four largest Korean financial holdings groups posted a combined net income of almost 16 trillion won ($12.6 billion) in 2022, enabling them to strengthen shareholder returns and set aside more provisions to prepare for potential surges in delinquency.

Interest rates on mortgage loans are nearing 3 percent in an effort to bring down interest rates, as the four giants are conscious of the criticism they face concerning their interest-generated profits.

Among the big four, Shinhan Financial Group posted the largest net income of a record 4.64 trillion won for the year, according to a group announcement on its performance last year on Wednesday. The figure was up 15.5 percent year-on-year. The group’s fourth quarter net income was 326.9 billion won, falling 28.9 percent year-on-year as it compensated to investors related to a loss in an investment product and aggressively set aside provisions to brace for an economic slowdown.

The financial group will pay a dividend of 865 won per share, which brings its total annual payout to 2,065 won, with its dividend payout ratio for common stocks at 22.8 percent, a 2.4 percent fall from a year before. The group’s treasury stocks worth a total of 150 billion won was retired. The ratio of the group’s total shareholder return stood at 30 percent. The group announced its plan to return more to its shareholders in the future if they its common equity tier-1 capital ratio exceed 12 percent.

Shinhan also set aside 517.9 billion won in provisions in 2022. The group’s provisions totaled 1.1 trillion over the past three years to respond to potential economic downturns.

“Poor performance in securities due to economic uncertainties was offset by growth in commercial loan assets,”Shinhan said. “The sale of our securities firm building helped the company report higher net income.”

Woori Financial Group [Photo by Park Hyung-ki]

Woori Financial Group Inc. also saw a record net income last year at 3.16 trillion won, increasing 22.4 percent form a year ago. Its core affiliate Woori Bank’s net income topped 2.91 trillion won and Woori Card at 204.4 billion won.

Woori Group’s net operating revenue also rose 18.0 percent, to 9.85 trillion won.

“Interest profits saw steady growth as commercial loans grew and non-interest profits saw a 16.2 percent growth from a year before, with good performance in the trust and lease businesses,” the group said.

Woori plans to pay out year-end dividends of 980 won per share. Total dividend payout for the year is 1,130 won per share. The group’s dividend payout ratio is 26.0 percent.

Earlier, KB Financial Group Inc. said it posted a net income of 4.41 trillion won last year. Hana Financial Group Inc.’s net income is estimated to be around 3.67 trillion won. Hana Group will announce its 2022 earnings Thursday.

Shinhan Financial Group, KB Financial Group, Hana Financial Group and Woori Financial Group are usually grouped as the Big Four in the Korean financial scene.

Smaller banks also enjoyed good performances last year. KakaoBank Corp. announced on Wednesday that its net income grew 28.9 percent year-on-year, to a record 263.1 billion won. Industrial Bank of Korea also had record net income of 2.79 trillion won in 2022.

As of Wednesday, interest rates on mortgage loans at five big banks were 4.89 percent to 6.89 percent of yearly floating rates, and between 4.08 percent to 6.13 percent for blended rates, moving toward 3 percent yearly rates. Mortgage loan rates among internet-only banks even hit the 3 percent range.

KBank’s blended mortgage loan rates were at 3.97 percent to 4.96 percent and KakaoBank’s stood between 4.115 percent and 5.116 percent, seeing potential 3 percent yearly rates if yields on 5-year blended bank bonds see a downward trend. The downward trend among mortgage loan interest rates seems to be continuing for a while, with the lower interest rate standing at around 3 percent among the five big banks.