KB Financial solidifies lead in H1 on strong non-life insurance business

KB Financial Group headquarters. [Courtesy of KB Financial Group]

South Korea’s four major financial groups reported robust earnings in the first half of this year even after setting aside record reserves for potential losses, highlighting their ability to balance strong loss-buffering capability while generating profit.

Shinhan Financial Group, Hana Financial Group, and Woori Financial Group on Thursday disclosed their earnings for the first half of the year.

Shinhan Financial Group’s net profit stood at 2.62 trillion won ($2.4 billion), Hana Financial Group 2.02 trillion won, and Woori Financial Group 1.54 trillion won.

KB Financial Group disclosed its earnings on July 25. Its net profit amounted to 2.99 trillion won in the first six months of the year.

The combined net profit of the four financial groups stood at 9.18 trillion won. They bolstered their loss-absorbing capacity by increasing the amount of new provisions from 1.73 trillion won in the first quarter to 2.19 trillion won in the second quarter.

Among the four financial companies, the insurance segment dominated the first half of the year in terms of net income.

KB Financial Group posted solid earnings of 525.2 billion won from KB Insurance Co., 249.6 billion won from KB Securities Co., and 217.7 billion won from KB Life Insurance Co.

Shinhan Financial Group saw strong performances from Shinhan Card Co. with 316.9 billion, Shinhan Life Insurance Co. with 311.7 billion won, and Shinhan Investment & Securities Co. with 241.9 billion won. Shinhan EZ General Insurance Ltd., however, logged a loss of 1.1 billion won.

Hana Financial Group and Woori Financial Group, on the other hand, reported minimal non-bank profits, falling significantly behind KB and Shinhan Financial.

The disparity in their performance is evident with KB Financial’s successful acquisition of LIG Insurance and following governance restructuring in 2015, shortly after the current KB Financial Group Chairman Yoon Jong-kyoo took office.

Regarding individual bank earnings, Hana Bank made outstanding progress.

During the first half of the year, KB Kookmin Bank posted a net profit of 1.85 trillion won, followed by Hana Bank with 1.83 trillion won, and Shinhan Bank with 1.68 trillion won.

Shinhan Financial posted 5.26 trillion won in interest income and 2.03 trillion won in non-interest income. However, increased expenses due to additional provisions, digital investments, and higher inflation caused a decline of 4.6 percent on year in net profit to 1.23 trillion won in the second quarter.

The company is actively addressing concerns of non-performing loans, particularly in real estate project financing (PF) and vulnerable borrowers, by accumulating additional provisions.

As part of its shareholder return program, Shinhan Financial will pay a quarterly dividend of 525 won per share with a buy-back of its shares worth 100 billion won.

Hana Financial recorded an interest income of 4.4 trillion won, and a non-interest income of 1.37 trillion won over the same period. Although the net interest margin (NIM) for the second quarter declined slightly by 0.04 percentage points to 1.84 percent, higher non-interest income, including mark-to-market gains from trading related to foreign exchange derivatives, compensated for the loss in the non-banking segment.

Hana Financial will also distribute a quarterly cash dividend of 600 won per share.

Woori Financial said its interest and non-interest incomes stood at 4.41 trillion won and 610 billion won, respectively, with an announcement of a profit distribution plan for a cash dividend of 180 won per share.

The company saw its non-interest income for the first quarter fall by 22 percent on year from 783 billion won.

“Despite the efforts to ensure soundness in an uncertain global economy, Woori Financial ended up facing quarterly earnings that fell short of the target, and the blame should fall upon the management,” said Woori Financial Group Chairman Yim Jong-yong.