As earnings soar, lenders face scrutiny over dividends, buybacks

ATMs operated by major commercial banks in Seoul (Yonhap)
ATMs operated by major commercial banks in Seoul (Yonhap)

South Korea’s four major banking groups — KB, Shinhan, Hana and Woori — posted record earnings in the July-September period, with their combined net profit for the year nearing 16 trillion won ($12 billion).

Their cumulative net profit reached 15.81 trillion won as of September, up 10.4 percent from a year earlier, while third-quarter profit rose 10.2 percent on-year to 5.48 trillion won, marking all-time highs for both quarterly and year-to-date figures.

KB led the pack with a net profit of 1.69 trillion won in the third quarter and 5.12 trillion won year-to-date. Shinhan and Hana followed with record third-quarter profits of 1.42 trillion won and 1.13 trillion won, bringing their cumulative totals to 4.46 trillion won and 3.43 trillion won, respectively.

Woori also achieved a milestone, exceeding 1 trillion won in quarterly earnings for the first time. Its third-quarter profit surged 37.6 percent on-year to 1.24 trillion won, bringing its cumulative total to 2.8 trillion won. The sharp rise was largely attributed to the inclusion of its newly acquired insurance arms, Tongyang Life Insurance and ABL Life Insurance, which bolstered noninterest income.

Noninterest revenue also underpinned profits across other groups. Hana and Shinhan, in particular, saw higher securities commission income as capital markets recovered.

Despite expectations that profits from lending would ease amid the Bank of Korea’s gradual monetary loosening, interest income remained robust as the government maintained tight control over household debt. Combined interest income reached 10.79 trillion won in the third quarter and 31.88 trillion won in the first nine months, up 3.2 percent and 2 percent, respectively, from a year earlier.

With solid third-quarter results, analysts expect the four groups to post a combined record annual net profit of about 18 trillion won this year, roughly 10 percent higher than last year’s 16.53 trillion won.

Amid criticism that banks are relying too heavily on lending rather than diversifying, the groups emphasized shareholder returns when announcing their results. KB approved a cash dividend of 930 won per share, up 135 won from last year, for a total payout of 335.7 billion won. Hana announced a 150 billion won share buyback and cancellation plan alongside a 920 won quarterly dividend. Shinhan and Woori set dividends of 570 won and 200 won per share, respectively.

“The pressure to enhance shareholder returns is stronger than ever,” an industry official said. “The key challenge is ensuring these payouts remain sustainable while maintaining capital strength.”


silverstar@heraldcorp.com