Savings banks likely to turn profitable in Q1

[Photo by Yonhap]

South Korea’s eight savings banks that are affiliated with financial holding companies are expected to post profits in the first quarter of 2024, an improvement from the same period a year ago. The eight savings banks are BNK, IBK, KB, NH, Shinhan, Woori Finance, Hana, and Korea Investment.

According to business reports from each financial group on Sunday, the eight affiliated savings banks recorded a net profit of 27.9 billion won ($20.41 million) for the first quarter of 2024 under the Korean International Financial Reporting Standards (K-IFRS).

The figure is 7.3 times higher than the 3.8 billion won in the same period a year ago, with seven out of the eight saving banks in the black.

However, it is worth noting that the actual profit figures could decrease or turn into losses when the results are announced at the end of May under the Korean Generally Accepted Accounting Principles (K-GAAP), which will be used instead of K-IFRS. Industry analysts still expect that the eight savings banks would have posted a profit and performed better than the rest in the first quarter under the K-GAAP.

“These savings banks set aside substantial provisions ahead of time in 2023,” an official from the Korea Federation of Savings Banks noted. “It is estimated that the actual first-quarter results under K-GAAP will also reflect profits for the holding-affiliated savings banks, with a more noticeable improvement compared to other savings banks.”

The industry anticipates a first-quarter loss of around 100 billion won for the savings bank industry as a whole.

The affiliated savings banks have been increasing their profitability by setting aside provisions and proactively selling off non-performing loans since 2023. Maturing high-interest deposits from the previous year also helped reduce interest expenses, positively impacting on their performance.

“We generated about 8 billion won in profits from selling non-performing loans in the first quarter, and our net interest margin (NIM) also improved by about 1 percentage point from the end of 2023,” an official from one of the holding-affiliated savings banks said.