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Major Korean banking groups post stronger-than-expected Q3 earnings

Brokerages, not banking units, see greatest gains over stock market rally

Four major South Korean banking groups posted better-than-expected third quarter net profit, bolstered by nonbanking businesses amid coronavirus woes, data provided by the firms as of Thursday showed.

In terms of quarterly net profit, KB Financial Group maintained the top spot for two consecutive quarters, having gained 24.1 percent on-year to 1.16 trillion won ($1 billion).

Shinhan Financial Group, which relinquished the crown to KB last quarter, still posted an impressive net profit of 1.14 trillion won in the July-September period and gained 16.6 percent on-year. But in terms of accumulated net profit so far this year, Shinhan surpassed KB with 2.95 trillion won. KB posted 2.87 trillion won in accumulated net profit for the January-September period.

This is the first time both Shinhan and KB saw their quarterly net profit surpass the 1 trillion won mark.

Their industry rival Hana Financial Group saw its third quarter net profit decline 9.15 percent on-year to 760.1 billion won, but its accumulated net profit for the January-September period gained 3.2 percent from the previous year to 2.1 trillion won.

Despite the quarterly loss, Kim Soo-hyun, analyst at Shinhan Financial Investment, said Hana’s net profit was still noteworthy, as “it seems to have given the best performance after the third quarter last year, when it was bolstered by the sale of the former Korea Exchange Bank headquarters.”

Woori Financial Group shed 1.13 percent on-year to 479.8 billion won in the third quarter, but posted above market expectations.

Banking groups cited the stock market rally this year -- highlighted by a healthy pipeline of initial public offerings such as SK Biopharmaceuticals and Big Hit Entertainment -- as the deciding factor that made their brokerage businesses profitable.

Their flagship banking units, meanwhile, are struggling with record-low borrowing costs prompted by the Bank of Korea’s decision to slash its benchmark interest rate to a record low of 0.5 percent this year to combat coronavirus risks.

Among the big four, those that gained the most from their brokerage businesses were the top two by net profit.

Shinhan’s brokerage unit, Shinhan Investment, saw its net profit jump 115 percent on-year to 127.5 billion won in the third quarter. Its credit card business Shinhan Card’s third quarter net profit increased 19.9 percent to 167.6 billion won in the cited period. But Shinhan Bank saw its net profit drop 10.1 percent in the same period.

KB Securities’ third quarter net profit nearly quadrupled on-year to 210 billion won, as compared with 56 billion won in the same period last year.

“With the decline in interest rate putting pressure on the lenders’ profitability, the growth in brokerage commission and improvement in investment banking has allowed us to maintain our revenues at a stable level,” a KB Securities official said.

By Jung Min-kyung (mkjung@heraldcorp.com)
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