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Hedge fund fiasco becomes game changer in top-tier competitionBy Choi Jae-hee
Published : July 26, 2020 - 15:56
Taking a hit from the private equity debacle, Shinhan Financial Group failed to prolong its solid earnings streak in the second quarter and handed over the industry’s top position to rival KB Financial Group, data showed.
For the three months that ended June 30, Shinhan posted a net profit of 873.1 billion won ($725.9 million), down 6.4 percent from a quarter earlier and 12.3 percent from a year earlier, the company said in a statement Friday.
The latest result came in line with outlooks suggested by local brokerages but fell behind that of KB Financial Group, which logged 981.8 billion won in second-quarter net profit. KB’s performance was up 34.6 percent on-quarter and 0.94 percent on-year.
Shinhan attributed the decline in second-quarter earnings to massive loan loss provisions to compensate investor losses in relation to two large-scale hedge fund scandals. The group’s banking and securities units reportedly sold some 400 billion won of products related to the disputed Lime Asset Management and Singapore’s Banjaran Asset Management that managed “German Heritage” derivatives-linked securities.
“In the second quarter, (Shinhan Financial) set aside a total of 201.6 billion won as loss reserves. Without this one-time cost, the company would have surpassed KB in terms of profitability,” said a Shinhan Financial Group official.
In terms of accumulated half-year net profit, however, Shinhan retained the title of the nation’s leading financial group with 1.81 trillion won, surpassing KB’s net profit of 1.71 trillion won in the same period. The group also remained ahead of KB in total assets, with 578 trillion won over 570 trillion won.
The two top-tier banking groups’ neck-and-neck race for the top post is likely to escalate throughout the rest of the year, with each struggling to expand nonbanking revenue resources and diversify business portfolios amid the economic fallout of COVID-19.
The next likely move is expected from KB, which earlier purchased a 100 percent stake in Prudential Life Insurance of Korea. The related acquisition process, to be completed within the third quarter upon the financial regulator’s approval, will bring more than 100 billion won in net profit per year.
Meanwhile, Shinhan Financial, which generated 734.2 billion won in the nonbanking sector in the first quarter, will also ramp up expanding life insurance business alongside digital transformation of traditional banking services, officials said.
By Choi Jae-hee (firstname.lastname@example.org)
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