Financial holding firms’ net profit up on strong lending, insurance businesses

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South Korea’s 10 largest financial holding companies saw their net profits surge 10.1 percent in the first half of this year, reaching an all-time high on the back of strong lending and insurance businesses. Concerns, however, rise over accelerating delinquency rates, with authorities emphasizing the need for risk management.

According to data from the Financial Supervisory Service on Tuesday, the consolidated net profit of the country’s top 10 financial holding companies stood at 13.62 trillion won ($10.1 billion) in the first six months of the year, up 10.1 percent from the same period a year ago.

The figure combines the earnings of 319 companies under Korea’s top 10 financial holding companies – KB, Shinhan, NH NongHyup, Hana, Woori, BNK, DGB, JB, Korea Investment Holdings, and Meritz.

The net profit generated by banks increased 16.7 percent in the first six months of this year from the same period a year ago to 9.2 trillion won. The net profit of the financial investment business soared 78.7 percent to 3.4 trillion won and insurance businesses 41.7 percent to 2.2 trillion won.

The financial holding companies’ specialized credit finance companies, on the other hand, saw their net profits decline by 25.1 percent to 1.7 trillion won.

While profits soared, asset quality continued to worsen.

The non-performing loan (NPL) ratio at financial holding companies came to 0.63 percent at the end of June, up 0.14 percentage point from 0.49 percent at the end of 2022.

With an increased proportion of NPLs, the rate of reserves to fill in the allowance for bad debts fell by 17.6 percentage points to 152.9 percent from 170.5 percent at the end of the previous year.

“The banking, financial investment, and insurance sectors performed well on the back of a significant increase in non-interest income,” the FSS said. “Yet, it needs to be noted that the increase in NPLs across the financial sector widened the rise in the NPL ratio, which headed upward at the end of last year.”