KB Monetary Group Chairman Yang Jong-hee speaks throughout an occasion on the Korea Federation of Banks constructing in central Seoul, Sept. 24. Joint Press Corps
Progress of family, company loans offsets impression of margin compression
By Jun Ji-hye
Main home monetary teams have achieved record-high web earnings, exceeding 4 trillion received ($2.9 billion) by the third quarter of this yr, in accordance with trade officers, Sunday.
Though curiosity margins have contracted as a consequence of expectations of home and worldwide benchmark fee cuts, general curiosity earnings has elevated, pushed by an increase in family and company loans within the context of upper home costs and company funding challenges.
Moreover, the strain from monetary authorities to curb family loans has led banks to boost mortgage spreads, which has considerably helped maintain their profitability.
The cumulative web earnings for KB Monetary Group and Shinhan Monetary Group, the highest two gamers within the trade, have each set document highs by the third quarter of this yr.
KB’s web revenue for the primary three quarters reached an all-time excessive of 4.39 trillion received.
The third-quarter web revenue alone was 1.6 trillion received, a 17.9 % enhance from 1.36 trillion received in the identical quarter final yr, marking the very best third-quarter revenue since its founding.
For Shinhan, cumulative web revenue by the third quarter was 3.98 trillion received, a 4.4 % enhance over the identical interval final yr when it reported 3.81 trillion received in web revenue.
Shinhan Monetary Group Chairman Jin Okay-dong speaks throughout an occasion on the Korea Federation of Banks constructing in central Seoul, Sept. 24. Joint Press Corps
The agency’s highest-ever cumulative third-quarter web revenue was recorded in 2022 at 4.31 trillion received, however throughout this time, a one-time acquire of 322 billion received from the sale of a securities unit constructing was included. Excluding this one-time acquire, this yr’s revenue marks a brand new document.
Furthermore, contemplating {that a} lack of 135 billion received from unauthorized futures buying and selling, which occurred in August, was mirrored within the third quarter, the corporate’s web revenue considerably surpassed earlier data.
Woori Monetary Group’s cumulative web revenue for the third quarter reached 2.65 trillion received, a 9.1 % enhance year-on-year. This practically matches the document excessive of two.66 trillion received for the third quarter of 2022, falling quick by simply 3 billion received.
The third quarter of this yr noticed a transparent drop in market rates of interest, as expectations for fee cuts by the U.S. Federal Reserve and the Financial institution of Korea had been mirrored prematurely.
Usually, falling rates of interest negatively impression financial institution profitability, as a result of mortgage rates of interest have a tendency to say no sooner than deposit rates of interest, decreasing the loan-deposit rate of interest margin.
“In an rate of interest downturn cycle, banks sometimes expertise a decline of their web curiosity margin (NIM),” an official from a serious financial institution stated.
Shinhan’s NIM for the third quarter was 1.9 %, down 0.05 proportion factors from the second quarter and 0.09 proportion factors decrease than the third quarter of final yr.
Equally, KB’s NIM for the third quarter was 1.95 %, representing a lower of 0.13 proportion factors from the second quarter and a decline of 0.14 proportion factors in comparison with the third quarter of final yr.
Regardless of the deterioration in profitability indicators, Shinhan’s web curiosity earnings for the third quarter reached 2.85 trillion received, reflecting a 3.3 % enhance from the earlier yr. KB’s curiosity earnings for the third quarter was 3.16 trillion received, up 1.3 % from the earlier yr.
The rise in curiosity earnings — regardless of the decline in NIM — will be attributed to the rising quantity of family and company mortgage property, which offset the impression of margin compression.
Particularly, throughout the third quarter, hovering housing costs within the Seoul metropolitan space led to a surge in family loans.
Mockingly, the family mortgage restriction insurance policies applied since July have considerably contributed to enhancing the earnings of monetary teams. By elevating the spreads added to the essential mortgage charges, banks had been in a position to restrict the anticipated discount in loan-deposit rate of interest margins.
